ENSERCH CORP, 10-K405, 1996-03-27

ENSERCH CORP
10-K405, 1996-03-27
NATURAL GAS TRANSMISISON & DISTRIBUTION

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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, 1995
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 15, 1996: $1,024,994,880.

Shares of the Registrant's Common Stock outstanding as of March 15,
1996: 68,626,602 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 29, 1996 (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)

===========================================================================

FORM 10-K
ANNUAL REPORT
For the Fiscal Year Ended December 31, 1995

TABLE OF CONTENTS

Page
PART I
<S> <C> <C>
ITEM 1. Business. . . . . . . . . . . . . . . . . . . . . 1
Business Segments . . . . . . . . . . . . . . . . 1
Natural Gas and Oil Exploration and Production. . 1
General . . . . . . . . . . . . . . . . . . . 1
Reorganization. . . . . . . . . . . . . . . . 1
Recent Developments . . . . . . . . . . . . . 2
DALEN Acquisition . . . . . . . . . . . . 2
EEX Common Stock Offering . . . . . . . . 2
Garden Banks Project. . . . . . . . . . . 2
Green Canyon Project. . . . . . . . . . . 3
Rocky Mountain Properties . . . . . . . . 3
International Operations. . . . . . . . . 3
Sales Information . . . . . . . . . . . . . . 4
Major Customers . . . . . . . . . . . . . . . 4
Competition . . . . . . . . . . . . . . . . . 4
Government Regulation4 . . . . . . . . . . . .
Environmental Matters . . . . . . . . . . 4
Other Laws and Regulations. . . . . . . . 6
Natural Gas Pipeline & GPM. . . . . . . . . . . . 6
Pipeline. . . . . . . . . . . . . . . . . . . 6
Gathering and Processing. . . . . . . . . . . 7
Gas Marketing . . . . . . . . . . . . . . . . 7
Competition . . . . . . . . . . . . . . . . . 8
Regulation. . . . . . . . . . . . . . . . . . 8
Natural Gas Distribution. . . . . . . . . . . . . 8
Competition . . . . . . . . . . . . . . . . . 9
Source and Availability of Raw Materials. . . 9
Regulation. . . . . . . . . . . . . . . . . .10
Power . . . . . . . . . . . . . . . . . . . . . .11
Clean Air Act . . . . . . . . . . . . . . . . . .12
Patents and Licenses. . . . . . . . . . . . . . .13
Employees . . . . . . . . . . . . . . . . . . . .13
Executive Officers of Registrant. . . . . . . . .13
ITEM 2. Properties. . . . . . . . . . . . . . . . . . . .14
ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . .17
ITEM 4. Submission of Matters to a Vote of Security Holders17

PART II

ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters.. . .. . . . . . . . . . . .17
ITEM 6. Selected Financial Data . . . . . . . . . . . . .17
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . .17
ITEM 8. Financial Statements and Supplementary Data . . .18
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . .18

PART III

ITEM 10. Directors and Executive Officers of the Registrant18
ITEM 11. Executive Compensation. . . . . . . . . . . . . .18
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . .18
ITEM 13. Certain Relationships and Related Transactions. .18

PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . .18
APPENDIX A Financial Information. . . . . . . . . . . . . A-1

</TABLE>

ITEM 1. Business

ENSERCH Corporation ("ENSERCH" or the "Corporation") is an integrated
company focused on natural gas. It is the successor to a company organized
in 1909 for the purpose of providing natural-gas service to North Texas.
The Corporation's operations include the following:

- Natural Gas and Oil Exploration and Production - Exploring for,
developing, producing and marketing natural gas and oil.
(Enserch Exploration, Inc. [83.4% owned] and related
operations.)

- Natural Gas Pipeline & Gathering, Processing and Marketing
(GPM) - Owning and operating interconnected natural-gas
transmission lines, underground storage reservoirs, compressor
stations and related properties, all within Texas; gathering
and processing natural gas to remove impurities and extract
liquid hydrocarbons for sale; and the wholesale and retail
marketing of natural gas in several areas of the U.S. (Lone
Star Pipeline Company, a division of the Corporation, Enserch
Processing Company, a division of the Corporation, Enserch
Processing, Inc., Enserch Energy Services, Inc., DGS Holdings
Corp. and related operations.)

- Natural Gas Distribution - Owning and operating some 550 local
gas utility distribution systems in Texas. (Lone Star Gas
Company, a division of the Corporation, and related
operations.)

- Power and Other - Developing, financing and operating electric-
power generating plants and cogeneration facilities and
operating thermal-energy plants for large building complexes,
such as universities and medical centers. (Enserch Development
Corporation, Lone Star Energy Company and related operations.)

BUSINESS SEGMENTS

Financial information required hereunder is set forth under "Summary
of Business Segments" included in Appendix A to this report.

NATURAL GAS AND OIL EXPLORATION AND PRODUCTION

General

Enserch Exploration, Inc. ("EEX"), an 83.4% owned subsidiary of
ENSERCH, has been engaged in the exploration for and the development,
production and sale of natural gas and crude oil since 1918. EEX is one of
the largest independent exploration and production companies in the United
States, with a reserve base of 1,792 billion cubic feet of natural gas
equivalent ("Bcfe") at January 1, 1996, as estimated by DeGolyer and
MacNaughton ("D&M"), independent petroleum consultants. Approximately 75%
of these reserves consist of natural gas. EEX has grown through
exploration, development and acquisition activities concentrated in major
production basins located offshore in the Gulf of Mexico and onshore in
East Texas, North Central Texas and the U.S. Gulf Coast.

Reorganization

EEX's gas and oil operations represent the gas and oil exploration
and production business of ENSERCH. From 1985 through December 30, 1994,
this business was conducted primarily through Enserch Exploration Partners,
Ltd. ("EP"), a limited partnership in which a minority interest (less than
1% since 1989), was held by the public. At year-end 1994, pursuant to a
plan for the reorganization of EP ("Reorganization"), EEX acquired, through
a series of transactions, all of the operating properties of EP Operating
Limited Partnership ("EPO"), EP's 99%-owned operating partnership, in
exchange for shares of EEX common stock. On December 30, 1994, the
Reorganization was consummated, EPO was merged into EEX, EP was liquidated
and the EEX common stock held by EP was distributed to EP's limited and
general partners in accordance with their partnership interests.

Upon the liquidation of EP and distribution of EEX common stock,
public unitholders of EP received 805,914 shares (.8%) and ENSERCH received
103,775,328 shares (99.2%) of EEX's 104,581,242 shares then outstanding.
Trading of EEX common stock began on the New York Stock Exchange under the
symbol "EEX" on January 3, 1995.

In 1995, EEX acquired ENSERCH's international and SACROC operations.

Recent Developments

DALEN Acquisition. On June 8, 1995, EEX acquired all of the capital
stock of DALEN Corporation ("DALEN"), an independent gas and oil company
engaged in the exploration for and the development and production of
natural gas and crude oil (the "DALEN Acquisition"). Through the DALEN
Acquisition, EEX acquired proved reserves totaling 397 Bcfe at June 30,
1995, and other assets for cash of $340 million and assumed DALEN's bank
debt of $115 million. The DALEN Acquisition was initially funded through
EEX's borrowings. DALEN's activities are oriented primarily toward natural
gas and are concentrated in selected major production regions, including
the Gulf Coast, the Gulf of Mexico and the Mid-Continent.

EEX Common Stock Offering. On September 26, 1995, EEX sold 20
million shares of its common stock to the public for net proceeds of
approximately $208 million after expenses, and ENSERCH's ownership was
reduced to 83.4%. Proceeds from the sale were used to reduce borrowings
incurred to finance the DALEN Acquisition.

Garden Banks Project. In the third quarter of 1995, an affiliate of
Mobil Corporation ("Mobil") acquired a 40% working interest in EEX's Garden
Banks Block 388 project, a six-block unit located 200 miles southwest of
New Orleans, Louisiana, in 2,200 feet of water. EEX received cash,
property interests and future work commitments on the project. In
addition, EEX was relieved of capital and operating lease obligations of
approximately $140 million as well as 40% of the capital expenditures
required to complete the project. EEX now owns a 60% working interest and
remains the operator of the project.

To date, two wells that had been drilled and completed prior to the
facility moving in are producing on Block 388, and a third well, which is
in progress, is expected to begin producing in the second quarter of 1996.
Two wells have been drilled on adjacent Block 387 and are planned for
subsea completion and tie-back to the production facility, which will allow
production to commence during the second quarter of 1996. EEX plans to
drill and complete a fourth well from the platform in 1996, bringing to six
the number of wells producing by year-end.

In January 1996, the combined flow rate from two wells previously
drilled on Block 388 was equivalent to 4,000 barrels ("Bbls") of oil per
day, down from the initial production rate, which was the equivalent of
approximately 9,000 Bbls of oil per day. While a decline in daily
production from the initial rate is normal, the magnitude of the decline is
being carefully evaluated. Development plans, which may include water-
injection wells, will be dictated by characteristics of formations and
reservoirs, including flow rates and declines, which become better defined
with each additional well and each additional month of operation. Gross
proved reserves attributed thus far to this project by D&M at the beginning
of 1996 were equivalent to 39 million barrels ("MMBbls") of oil.

On September 13, 1995, EEX, together with Mobil, submitted the
highest bids and was awarded exploration and development rights on ten
additional blocks in the Garden Banks area.

Green Canyon Project. In October 1995, another affiliate of Mobil
and an affiliate of Reading & Bates Corp. purchased a 40% and 20% working
interest, respectively, in EEX's Green Canyon Block 254 project, a four-block
unit located approximately 150 miles south of New Orleans, Louisiana,
in 2,200 to 3,400 feet of water. EEX received cash, an interest in a gas
and oil property and future work commitments. EEX now owns a 40% working
interest and remains the operator of the project.

Gross proved reserves attributed to this project thus far by D&M are
equivalent to nearly 72 MMBbls of oil, and work continues to further
delineate the extent of identified hydrocarbon-bearing formations. The
reserves are based on two wells and one sidetrack drilled prior to 1995 on
Block 254 and a third productive well drilled in late 1995 which flowed at
a rate equivalent to 3,000 Bbls of oil per day on a limited test. The next
confirmation well is being drilled on Block 298 and is planned to bottom on
Block 297 at 17,500 feet. The well, if successful, will extend the field
limits 3,000 feet to the south and add additional proved reserves.
Simultaneously, EEX and its partners are reviewing potential production
alternatives that are expected to lead to the ultimate design and sizing of
a production facility. Tentatively, the group is examining the merits of a
floating facility capable of handling the equivalent of 70,000 Bbls of oil
per day with wells connected by subsea templates and bundled flow lines.
First production is expected from Green Canyon in 1999.

On May 10, 1995, EEX, on behalf of its Green Canyon partners,
submitted the highest bids and was awarded seven additional blocks located
within ten miles of this project.

Rocky Mountain Properties. In December 1995, EEX announced plans to
offer for sale its Rocky Mountain area properties, which are in six states,
aggregate over 250,000 net acres and had proved reserves of 169 Bcfe at
January 1, 1996. These properties were mostly acquired as part of the
DALEN Acquisition and are not within the core area of EEX's other
properties. See "Financial Review - Natural Gas and Oil Exploration and
Production" in Appendix A.

International Operations. In 1995, EEX acquired the international
gas and oil operations of ENSERCH in exchange for 1,240,000 shares of EEX
common stock and $2.6 million in cash. The acquired operations consist of
concessions in Indonesia, Malaysia and Israel and had proved reserves of
5 MMBbls of oil at January 1, 1996, all on the Indonesian properties. EEX
had previously managed these properties for ENSERCH. In 1995, EEX
announced the conclusion of a Memorandum of Understanding to form a joint
venture with ONGC Videsh Ltd., a wholly owned subsidiary of The Oil and
Natural Gas Corporation of New Delhi, India, to explore and develop
hydrocarbon resources in India and other countries.

Sales Information

Sales data are set forth under "Natural Gas and Oil Exploration and
Production Operating Data" included in Appendix A to this report.

Major Customers

EEX sells its gas and oil under long- and short-term contracts. In
1995, Enserch Energy Services, Inc. ("EES"), the ENSERCH natural-gas
marketing subsidiary, was EEX's largest gas customer, purchasing gas under
two long-term variable-priced contracts. A division of ENSERCH, Lone Star
Gas Company, purchases gas under a long-term fixed-priced service contract.
In 1995, approximately 10% of EEX's natural-gas volumes was sold to Lone
Star Gas Company. The continuing maturity of gas markets is causing an
evolution in the gas marketing efforts of EEX. Unbundling of services by
interstate pipelines, deregulation efforts of many state regulatory bodies
and the explosion of financial instruments tied to gas markets have
radically altered marketing opportunities for producers. EEX has concluded
that it can achieve the greatest economic benefit from using the services
of gas marketing organizations rather than having its own large staff,
while maintaining a core staff to ensure market prices are being received.

Oil sales contracts are for one year or less, and prices generally
are based upon field posted prices plus negotiated bonuses.

EEX may utilize futures contracts, commodity price swaps and other
financial instruments to reduce exposure of EEX's gas and oil production to
price volatility. See "Financial Review - Natural Gas and Oil Exploration
and Production" and Note 6 of the Notes to Consolidated Financial
Statements included in Appendix A for additional information on hedging
activities.

Competition

All phases of the gas and oil industry are highly competitive. EEX
competes in the acquisition of properties, the search for and development
of reserves, the production and sale of gas and oil and the securing of the
labor and equipment required to conduct operations. EEX's competitors
include major gas and oil companies, other independent gas and oil concerns
and individual producers and operators. Many of these competitors have
financial and other resources that substantially exceed those available to
EEX. Gas and oil producers also compete with other industries that supply
energy and fuel.

Government Regulation

The gas and oil industry is extensively regulated by federal, state
and local authorities. Legislation affecting the gas and oil industry is
under constant review for amendment or expansion. Numerous departments and
agencies, both federal and state, have issued rules and regulations binding
on the gas and oil industry and its individual members, some of which carry
substantial penalties for the failure to comply. Inasmuch as such laws and
regulations are frequently amended, reinterpreted or expanded, EEX is
unable to predict the future cost or impact of complying with such laws and
regulations.

The Railroad Commission of Texas ("RRC") regulates the production of
natural gas and oil by EEX in Texas. Similar regulations are in effect in
all states in which EEX 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.

Environmental Matters. Gas and oil operations are subject to
extensive federal, state and local laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund Law", and similar state statutes
and, with respect to federal leases, to interruption or termination by
governmental authorities on account of environmental and other
considerations. Regulations of the Department of the Interior currently
impose absolute liability upon the lessee under a federal lease for the
costs of clean-up of pollution resulting from a lessee's operations, and
such lessee may also be subject to possible legal liability for pollution
damages. EEX maintains insurance against costs of clean-up operations but
is not fully insured against all such risks. A serious incident of
pollution may result in the Department of the Interior requiring lessees
under federal leases to suspend or cease operation in the affected area.
With respect to any EEX operations conducted on offshore federal leases,
liability may generally be imposed under the Outer Continental Shelf Lands
Act for costs of clean-up and damages caused by pollution resulting from
such operations, other than damages caused by acts of war or the negligence
of third parties.

The Oil Pollution Act of 1990 (the "OPA") and regulations thereunder
impose a variety of regulations on "responsible parties" (which includes
owners and operators of offshore facilities) related to the prevention of
oil spills and liability for damages resulting from such spills in the
United States waters. In addition, it imposes ongoing requirements on
responsible parties, including proof of financial responsibility to cover
at least some costs in a potential spill. On August 25, 1993, the Minerals
Management Service (the "MMS"), a federal agency, published an advance
notice of its intention to adopt a rule under the OPA that would require
owners and operators of offshore gas and oil facilities to establish
$150 million in financial responsibility. Under the proposed rule,
financial responsibility could be established through insurance, guaranty,
indemnity, surety bond, letter of credit, qualification as a self-insurer
or a combination thereof. There is substantial uncertainty as to whether
insurance companies or underwriters will be willing to provide coverage
under the OPA because the statute provides for direct lawsuits against
insurers who provide financial responsibility coverage, and most insurers
have strongly protested this requirement. The financial tests or other
criteria that will be used to judge self-insurance are also uncertain. EEX
cannot predict the final form of the financial responsibility rule that
will be adopted by the MMS, but such rule has the potential to result in
the imposition of substantial additional annual costs on EEX and otherwise
materially adversely affect EEX. The impact of the rule, however, should
not be any more adverse to EEX than it would be to other similarly situated
owners or operators in the Gulf of Mexico.

The operations of EEX are also subject to the Clean Water Act and the
Clean Air Act, as amended, and comparable state statutes. The EPA is
currently implementing regulations pursuant to the Clean Air Act, and the
states are also implementing programs. EEX may be required to incur
certain capital expenditures over the next five to ten years for air
pollution control equipment.

EEX's onshore operations are subject to numerous United States
federal, state and local laws and regulations controlling the discharge of
materials into the environment or otherwise relating to the protection of
the environment, including CERCLA. Such regulations, among other things,
impose absolute liability on the lessee under a lease for the cost of
clean-up of pollution resulting from a lessee's operations, subject the
lessee to liability for pollution damages, may require suspension or
cessation of operations in affected areas and impose restrictions on the
injection of liquids into subsurface aquifers that may contaminate
groundwater. Persons who are or were responsible for releases of hazardous
substances under CERCLA may be subject to joint and several liability for
the remediation and clean-up costs and for damages to natural resources.
EEX has received inquiries regarding and could be named as a potentially
responsible party at two Superfund sites. However, EEX does not believe
that any liabilities in connection with such matters will have a material
adverse effect on its business or results of operations.

For offshore operations, lessees must obtain the MMS and various
other federal and state agencies' approval for exploration, development and
production plans prior to the commencement of such operations. Similarly,
the MMS has promulgated other regulations governing the plugging and
abandoning of wells located offshore and the removal of all production
facilities. Under certain circumstances, including but not limited to,
conditions deemed to be a threat or harm to the environment, the MMS may
also require any EEX operation on federal leases to be suspended or
terminated in the affected area.

Other Laws and Regulations. Various laws and regulations require
permits for drilling wells and the maintenance of bonding requirements in
order to drill or operate wells and also regulate the spacing and location
of wells, the method of drilling and casing wells, the surface use and
restoration of properties upon which wells are drilled, the plugging and
abandoning of wells, the prevention of waste of gas and oil, the prevention
and cleanup of pollutants, the maintenance of certain gas/oil ratios and
other matters. EEX's operations are also subject to various conservation
requirements. These include the regulation of the size and shape of
drilling and spacing units or proration units, the density of wells which
may be drilled, maximum rates of production and unitization or pooling of
oil and gas properties.

In the aggregate, compliance with federal and state rules and
regulations is not expected to have a material adverse effect on EEX's
operations.

NATURAL GAS PIPELINE & GPM

The Corporation's pipeline and GPM business is comprised of the
partially rate-regulated business of Lone Star Pipeline Company ("LSP"),
the nonregulated gathering and gas processing operations of Enserch
Processing Company("EPC") and the nonregulated gas marketing operations of
Enserch Energy Services, Inc. ("EES"). Operating data for this segment are
set forth under "Natural Gas Pipeline & Gathering, Processing and Marketing
Operating Data" included in Appendix A to this report.

Pipeline. LSP owns and operates interconnected natural-gas
transmission lines, underground gas storage reservoirs, compressor stations
and related properties, all within Texas. Through these facilities, it
transports natural gas to the distribution systems of Lone Star Gas Company
("LSG"). Rates for these services are regulated by the RRC. LSP also
transports natural gas for affiliates other than LSG and third-party
shippers. LSP's transmission system is connected to the major gas hubs at
Waha in West Texas, Katy in South Texas and Carthage in East Texas.

For the year ended December 31, 1995, 23% of total LSP throughput
represented volumes transported to LSG for ultimate sale to residential and
commercial customers, 38% represented volumes transported for ultimate
destination to competitive on-system industrial and power-generation
markets and 39% represented volumes transported for destination to off-
system markets.

Revenues from transporting gas for LSG are influenced by seasonal
temperature variations. The majority of LSG's residential and commercial
gas customers use gas for heating and their needs are directly affected by
the mildness or severity of the heating season. Deliveries to
electric-generation customers are affected by the mildness or severity of
both cooling and heating seasons.

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 nonaffiliated pipeline customers.

Gathering and Processing. The Corporation's operations for the
processing of natural gas for the recovery of natural gas liquids ("NGL")
are conducted by EPC.

EPC uses cryogenic and mechanical refrigeration processes at its NGL
extraction facilities. 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, which is
commonly termed "shrinkage."

To reduce the impact of shrinkage, EPC strives to replace
"keep-whole" gas processing contracts with "net-proceeds" contracts.
Keep-whole contracts are relatively more profitable during periods of high
NGL prices and low gas costs because they provide the processor with
ownership of the entire gas stream. However, as prices decline, these
contracts become relatively 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.

Gas Marketing. On June 29, 1995, ENSERCH purchased the principal
operating assets of Sunrise Energy Services, Inc. and subsidiaries
("Sunrise"), a nonregulated marketer of natural gas. Effective June 30,
1995, ENSERCH exchanged shares of its common stock for all the common stock
of DGS Holdings Corp. ("DGS") in a pooling-of-interests transaction. DGS,
through its subsidiary, is a marketer of natural gas and natural-gas
services. Enserch Gas Company, ENSERCH's prior marketing company, DGS and
Sunrise were combined to form EES in 1995.

EES is a marketer of natural gas and natural-gas services to both the
U.S. wholesale and retail markets, primarily in the Northeast, Midwest and
West Coast. EES's marketing activities typically consist of
(i) contracting to purchase specific volumes of gas from producers,
pipelines and other suppliers at various points of receipt to be supplied
over a specific period of time, (ii) aggregating gas supplies and arranging
for the transportation of these gas supplies and (iii) negotiating to sell
specific volumes of gas over a specified period of time to local
distribution companies and other end users.

The marketing activities of EES involve price commitments into the
future and, therefore, give rise to market risk, which represents the
potential loss that can be caused by a change in the market value of a
particular commitment. To manage these market risks, EES enters into a
variety of transactions, including forward contracts principally involving
physical delivery of natural gas and derivative financial instruments,
including swaps, options, futures and other contractual arrangements.
See "Financial Review - Natural Gas Pipeline & GPM" and Note 6 of the Notes
to Consolidated Financial Statements included in Appendix A for additional
information on these activities.

Competition. LSP is the sole transporter of natural gas to LSG's
distribution systems. LSP competes with other pipelines in Texas to
transport natural gas to off-system markets. This business is highly
competitive and greatly influenced by the demand to move natural gas across
Texas to supply Northeast and upper Midwest U.S. markets. See "Natural Gas
Distribution - Competition."

NGL processing is highly competitive and includes competition among
producers, third-party owners and processors for cost-sharing and interest-
sharing arrangements.

EES pursues markets connected to pipelines other than LSP's. 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. This highly competitive
market demands that a wide array of services be offered, including term
contracts with interruptible and firm deliveries, risk management,
aggregation of supply, nominations, scheduling of deliveries and storage.
ENSERCH significantly increased its presence in these off-system markets
and its ability to provide these services through the Sunrise and DGS
transactions.

Regulation. LSP is wholly intrastate in character and performs
transportation services in the state of Texas subject to regulation by the
RRC. LSP 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.

LSP has been an open access transporter under Section 311 of the
Natural Gas Policy Act of 1978 ("NGPA") on its intrastate transmission
facilities since July 1988. 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 LSP's transportation charge to LSG for the
transportation of gas to LSG's distribution systems for sale to residential
and commercial customers. LSP's transportation services to other customers
are provided under standard or competitively negotiated contracts.

NATURAL GAS DISTRIBUTION

LSG owns and operates natural-gas distribution systems and related
properties. Through these facilities, it purchases, distributes and sells
natural gas to over 1.3 million residential, commercial, industrial and
electric-generation customers in approximately 550 cities and towns,
including the ll-county Dallas/Fort Worth Metroplex. LSG also transports
natural gas within its distribution system as market opportunities require.
Operating data for this segment are set forth under "Natural Gas
Distribution Operating Data" included in Appendix A to this report.

For the year ended December 31, 1995, sales to residential and
commercial customers accounted for 88% of LSG's total gas sales revenues
and 84% of natural-gas volumes sold. Sales to industrial and
electric-generation customers accounted for the remainder.

LSG's gas sales revenues are influenced by seasonal temperature
variations. The majority of LSG's residential and commercial gas customers
use gas for heating and their needs are directly affected by the mildness
or severity of the heating season although some 60% of LSG's residential
and commercial volumes are subject to weather normalization adjustments.
Sales to electric-generation customers are affected by the mildness or
severity of both cooling and heating seasons.

Competition. 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. Natural gas faces varying degrees of competition
from electricity, coal, natural gas liquids, oil and other refined products
throughout LSG's service territory. Pipeline systems of other companies,
both intrastate and interstate, extend into or through the areas in which
LSG's markets are located, creating competition from other sellers of
natural gas. Competitive pressure from other pipelines and alternative
fuels has caused a decline in sales by LSG to industrial and electric-
generation customers. Sales by the Corporation's nonregulated companies,
along with transportation services provided by LSP, have served to offset
much of the effects of this decline. As developments in the energy
industry point to a continuation of these competitive pressures, LSG
maintains its focus on customer service and the creation of new services
for its customers in order to remain its customers' supplier of choice.

Source and Availability of Raw Materials. LSG's gas supply consists
of contracts for the purchase of dedicated specific reserves, contracts
with other pipeline companies in the form of service agreements that are
not related to specific reserves or fields, and gas in storage. The total
gas supply as of January 1, 1996, was 754 Bcf, which is approximately 5
times LSG's purchases during 1995. Of this total, 197 Bcf are dedicated
reserves and 32 Bcf are working gas in storage. Management has calculated
that 525 Bcf, including 197 Bcf under one agreement, are committed to LSG
under service agreements. The January 1, 1996, total gas supply estimate
is 251 Bcf lower than the January 1, 1995, estimate. The difference
resulted from 156 Bcf purchased from existing gas supply, a net downward
revision of 128 Bcf with respect to estimates for existing sources and
service agreements, partially offset by new supply additions of 33 Bcf.
The net downward revision of existing sources and service agreements of 128
Bcf is comprised of 78 Bcf from the termination of a major gas-purchase
contract, 41 Bcf downward adjustment of service and peaking agreement
availability and 9 Bcf from downward revisions and terminations of various
other sources. New supply additions of 33 Bcf consisted of 8 Bcf of new
dedicated reserves under old contracts and 25 Bcf of availability added
under new service agreements and peaking contracts.

In 1995, about 86% of LSG's gas requirement was purchased from some
264 independent producers and nonaffiliated pipeline companies, one of
which supplied approximately 12% of total requirements. The remaining 14%
of LSG's requirement was supplied by affiliates.

LSG estimates its peak-day availability from long-term contracts and
withdrawals from underground storage to be 1.6 Bcf. Short-term peaking
contracts raise this level to meet anticipated sales needs.

During 1995, the average daily demand of LSG'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. LSG's greatest daily demand in 1995 was on January 4,
when the arithmetic-mean temperature was 30 degrees F. and deliveries to
all customers reached 1.7 Bcf, including estimated deliveries to
residential and commercial customers of 1.3 Bcf.

To meet peak-day gas demands during winter months, LSG utilizes the
service of seven affiliated gas storage fields, all of which are located in
Texas. These fields have a working gas capacity of 47 Bcf and a day-one
storage withdrawal capacity of 1.3 Bcf per day.

LSG 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
occurred in 1990 and lasted for only 30 hours.

Estimates of gas supplies and reserves are not necessarily indicative
of LSG'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. LSG'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
LSG, may affect its ability to meet the demands of its customers.

The LSG supply program is designed to contract for new supplies of
gas (and to recontract targeted expiring sources) connected to LSP's
pipeline system. In addition to being heavily concentrated in the
established gas-producing areas of central, northern and eastern Texas,
LSP's intrastate pipeline system also extends into or near the major
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. LSP's pipeline system provides access to all of these basins.
LSP is well situated to receive large volumes into its system at the major
"hubs", such as Katy and Waha, as well as at the major third-party owned
storage facilities where suppliers maintain instantaneous high delivery
capabilities.

LSG buys gas under long-term, intrastate contracts in order to assure
reliable supply to its customers. Many of these contracts require minimum
purchases of gas. In the past, LSG had been unable to take delivery of all
minimum gas volumes tendered by suppliers under these contracts. Based on
estimated gas demand, which assumes normal weather conditions, requisite
gas purchases are expected to substantially satisfy purchase obligations
for the year 1996 and thereafter. See Note 7 of the Notes to Consolidated
Financial Statements included in Appendix A to this report.

Regulation. LSG is wholly intrastate in character and performs its
distribution utility operations in the state of Texas subject to regulation
by the RRC and municipalities in Texas. The RRC regulates the charge for
the transportation of gas by LSP to LSG's distribution systems for sale to
LSG's residential and commercial consumers. The RRC has original
jurisdiction over rates charged to 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.

LSG employs a continuing program of rate review for all classes of
customers in its regulatory jurisdictions. Rate relief amounting to about
$14 million in annualized revenue increases, exclusive of changes in gas
cost, was achieved in Texas with the completion of the 1995 rate program.
This amount includes $5 million granted by the four cities in the Dallas
Distribution System in January 1996. A smaller rate program is being
undertaken in 1996 to obtain revenue increases where deficiencies exist.
Weather normalization adjustment clauses have been approved by 156 of the
550 cities served by LSG, representing over 60% of LSG's residential and
commercial sales volumes. These clauses allow rates to be adjusted to
reflect the impact of warmer or colder-than-normal weather during the
winter months, minimizing the impact of variations in weather on LSG's
earnings.

LSG's sales to industrial customers are provided under rates
reflected in standard rate schedules and contracts. Transportation
services to industrial and electric-generation customers are 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 actively
exercised this jurisdiction because of the existing competitive market.
Sales contracts with these customers permit automatic adjustment on a
monthly basis for the full amount of increases or decreases in the cost of
gas.

ENSERCH operates in the compressed natural-gas market through the
Alternative Fuels Division of Lone Star Energy Company ("LSEC") and two
natural-gas vehicle affiliates, Fleet Star of Texas, L.C. ("Fleet Star")
and TRANSTAR Technologies, L.C. ("TRANSTAR") that are both 50% owned by
LSEC. Through December 31, 1995, the operations of the Alternative Fuels
Division and affiliates were aligned under the Corporation's natural gas
pipeline & GPM segment for financial reporting purposes. Effective
January 1, 1996, these operations were realigned under the natural gas
distribution segment. Fleet Star and FinaStar, a partnership between Fleet
Star and Fina Oil and Chemical, had 14 public natural-gas fuel stations in
commercial operation at December 31, 1995. TRANSTAR provides turnkey
natural-gas vehicle conversions and other related services and performed
over 1,200 vehicular natural-gas conversions in 1995, compared with 500
conversions in 1994.

In South America, LSG is providing its distribution expertise to
develop a new infrastructure in support of gas systems being constructed to
service Santiago, Chile, and surrounding communities. Additionally, newly
passed legislation in Mexico has opened the door to partial ownership of
gas pipeline transmission systems by foreign companies. Based upon its
geographic proximity to the existing U.S.-based, natural-gas reserves, the
Corporation's affiliates are examining the economic potential to be gained
by participating in the developing natural-gas infrastructure in Mexico.

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's efforts are currently focused on
international projects, with decreased emphasis on projects in the United
States.

EDC has completed the development of three cogeneration plants,
including a 255-megawatt ("MW") plant in Sweetwater, Texas, that began
operation in 1989, a 62-MW natural gas-fired cogeneration facility in
Buffalo, New York, that was completed in 1992 and a 160-MW plant in
Bellingham, Washington, that began commercial operation in 1993. The
electricity produced at the Sweetwater plant is purchased by Texas
Utilities Electric Company, and thermal energy is sold to United Gypsum
Company under a long-term agreement. A subsidiary of EDC is the managing
general partner of the plant, EEX and EES provide gas to the plant, and LSP
transports the gas. The Buffalo plant supplies electricity to Niagara
Mohawk Company and thermal energy to Outokumpu American Brass, Inc. The
electricity produced at the Bellingham 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.
LSEC operates and maintains all three plants and has fixed-cost operating
and maintenance agreements for providing labor and certain routine
consumables at each plant, with each of the agreements containing
escalation provisions. The agreements for the Buffalo and Bellingham
plants also contain bonus or penalty provisions based upon plant
availability.

At the end of 1995, EDC had two international projects in the
construction and drilling phase. Construction of a 36-MW coal-fired
cogeneration facility in the Zhejiang Province of the People's Republic of
China, in which EDC has a 70% interest, began in the fourth quarter of
1995. The plant is expected to be completed in 1998. Electricity will be
sold to the Shaoxing Administration of Power Utilization, and steam will be
sold to several industrial users in the area. The second project, in which
EDC will have a 15% interest, is a 300 to 400-MW geothermal power plant in
Java, Indonesia. Drilling for geothermal resource will continue
throughout 1996, and construction of the power-generation facility is
scheduled to begin in 1997. Electricity from the plant will be sold to the
Indonesian electric utility, PT PLN (PERSERO).

In addition to operating and maintaining cogeneration plants
developed by EDC, LSEC owns and/or operates four central thermal energy
plants providing heating and cooling to various institutional customers in
Texas under agreements which expire in 1996 and 1997. LSEC is actively
pursuing new contracts to operate the plants after the existing agreements
expire. The expiration of the existing agreements will have a significant
impact on the Corporation.

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 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 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 ("CFC's"), 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, its divisions and subsidiary companies have no
material patents, licenses, franchises (excluding gas-distribution
franchises) or concessions.

EMPLOYEES

At December 31, 1995, the Corporation, its divisions and
subsidiaries, had approximately 4,167 employees.

EXECUTIVE OFFICERS OF REGISTRANT

Name Age Office and Business Experience
<S> <C> <C>

D. W. Biegler 49 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 LSG as President from July
1985 and as Chairman from January 1989.

G. R. Bryan 51 Vice Chairman, President and Chief Operating
Officer of EES since November 1995; Chairman
of EDC since February 1993. He also served
LSG as Senior Vice President, Transmission,
from February 1987 to February 1993.

M. T. Hunter 46 President and Chief Operating Officer of LSP
since June 1995. Previously he served as
President and Chief Operating Officer of
Mississippi River Transmission Corporation, a
subsidiary of Noram Energy Corp.

D. R. Long 48 Senior Vice President, Administration, since
May 1995. He previously served LSG as Vice
President, Human Resources and Services, from
January 1995 to May 1995, and as Vice
President, Human Resources and Facility
Development, from June 1990 to January 1995.

M. E. Rescoe 43 Senior Vice President, Finance, and Chief
Financial Officer since September 1995.
Previously he served as Senior Managing
Director of Bear, Stearns & Co. from 1992 to
July 1995 and was a Senior Vice President,
Finance, of Kidder, Peabody & Co. from 1983
to 1992.

W. T. Satterwhite 62 Senior Vice President and General Counsel,
Chief Legal Officer of the Corporation since
May 1972.

R. B. Williams 63 President of LSG since May 1995. He served
as Vice President, Administration, of the
Corporation from May 1989 to May 1995.
</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 the judgment of
the Board, the best interest of the Corporation, its divisions or
subsidiaries, as the case may be, will be served thereby.

ITEM 2. Properties

EEX. EEX's domestic activities are focused in four regions: the
Gulf of Mexico; East Texas; North Central Texas; and the Gulf Coast Region
of Texas, Louisiana, Mississippi and Alabama. The following table sets
forth estimated net proved reserves of EEX by region, as estimated by D&M,
at January 1, 1996:

<TABLE>
<CAPTION>
Oil
Natural and Gas
Gas Liquids Total
Region (Bcf) (MMBbls) (Bcfe)
------ ------- -------- ------
<S> <C> <C> <C>
Gulf of Mexico 127.6 36.4 346.0
East Texas 846.6 7.7 892.8
North Central Texas and other 248.9 18.1 357.5
Gulf Coast 139.7 4.3 165.5
------- ---- -------
Total Domestic 1,362.8 66.5 1,761.8
International 5.0 30.0
------- ---- -------
Total 1,362.8 71.5 1,791.8
======= ==== =======
</TABLE>

See Note 11 of the Notes to Consolidated Financial Statements
included in Appendix A to this report for additional information on gas and
oil reserves.

During 1995, EEX filed Form EIA-23 with the Department of Energy
reflecting reserve estimates for the year 1994. Such reserve estimates
were not materially different from the 1994 reserve estimates reported in
Note 11 of the Notes to Consolidated Financial Statements included in
Appendix A to this report.

Developed and undeveloped lease acreage as of December 31, 1995, are
set forth below:

<TABLE>
<CAPTION>
Developed Acres Undeveloped Acres
------------------- ---------------------
Gross Net(1) Gross Net(1)
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Domestic
Offshore 141,842 40,329 755,240 416,272
Onshore 535,294 337,790 1,541,826 901,017
------- ------- --------- ---------
Total 677,136 378,119 2,297,066 1,317,289
International 2,489,567 618,637
------- ------- --------- ---------
Total 677,136 378,119 4,786,633 1,935,926
======= ======= ========= =========

<FN>
(1) Represents the proportionate interest of EEX in the gross acres under
lease.
</FN>
</TABLE>

EEX purchased about 329,000 net acres of leasehold interests in 1995,
184,000 of which were in the Gulf of Mexico. EEX's Gulf of Mexico holdings
totaled some 457,000 net acres, with an average working interest of 49% in
212 blocks and an overriding royalty interest in 13 other blocks. EEX
operates 103 offshore blocks. EEX also canceled or allowed to expire 15
Gulf of Mexico leases during the year, which had been condemned following
drilling on or near them or after geophysical and geological findings.

EEX 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 commercial reserves sufficient to justify retention of
the acreage. The primary terms under which the undeveloped acreage can be
retained by the payment of delay rentals without the establishment of gas
and oil reserves expire as follows:

<TABLE>
<CAPTION>
Undeveloped Acres Expiring
-------------------------------------------
Domestic International
------------------- -------------------
Gross Net Gross Net
--------- ------- -------- -------
<S> <C> <C> <C> <C>
1996 663,852 380,697 273,841 68,460
1997 424,957 243,698 456,401 114,100
1998 and later 1,208,257 692,894 1,759,325 436,077
</TABLE>

Drilling rights with regard to a portion of the undeveloped acreage
may be allowed to expire before the expiration of primary terms specified
in this schedule by nonpayment of delay rentals.

At December 31, 1995, EEX owned interests in 2,125 gas wells (1,384.2
net) and 2,345 oil wells (488 net) in the United States and 4 oil wells (1
net) in Indonesia. Of these, 226 gas wells (166.4 net) and 43 oil wells
(34.9 net) were dual completions in single boreholes.

Drilling activity during the three years ended December 31, 1995,
including the activities of DALEN for all periods shown, is set forth
below:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
Gross Net Gross Net Gross Net
----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Exploratory Wells:
Productive 38 24.6 21 13.8 7 3.8
Dry 47 26.8 56 30.5 33 15.6
-- ---- -- ---- -- ----
Total 85 51.4 77 44.3 40 19.4
== ==== == ==== == ====

Development Wells:
Productive 41 26.4 90 63.0 131 86.6
Dry 6 3.5 15 7.5 9 4.5
-- ---- --- ---- --- ----
Total 47 29.9 105 70.5 140 91.1
== ==== === ==== === ====
<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
EEX's working interest owned therein.
</FN>
</TABLE>

At December 31, 1995, EEX was participating in 69 wells (41 net),
which were either being drilled or in some stage of completion.

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 correspond to 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 EEX
is set forth in Note 11 of the Notes to Consolidated Financial Statements
included in Appendix A to this report.

LSP. At December 31, 1995, LSP operated approximately 9,000 miles of
transmission and gathering lines and operated 34 compressor stations having
a total rated horsepower of approximately 101,000. LSP also owns seven
active gas-storage fields, all located on its system in Texas, and three
major gas-treatment plants to remove undesirable components from the gas
stream.

EPC. EPC has interests in 18 processing plants, 12 of which are
wholly owned.

LSG. At December 31, 1995, LSG operated approximately 23,000 miles
of distribution mains. See "Business - Natural Gas Distribution - Source
and Availability of Raw Materials" for information concerning gas supply of
Lone Star Gas Company.

LSEC. 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,
LSG, LSP 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. EEX leases approximately 205,000 square feet of office space
for its offices in Dallas, Texas, under leases expiring in December 1998
and August 2002.

See "Financial Review - Liquidity and Financial Resources" included
in Appendix A to this report for a discussion of the Corporation's 1996
capital spending budget by business segment.

ITEM 3. Legal Proceedings

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. Additional information
required hereunder is set forth in Note 7 of the Notes to Consolidated
Financial Statements included in Appendix A to this report.

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 29, 1996.

PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)-1 Financial Statements

The following items appear in the Financial Information section included in
Appendix A to this report:

Selected Financial Data . . . . . . . . . . . . . . . A-2
Financial Review. . . . . . . . . . . . . . . . . . . A-4
Natural Gas and Oil Exploration and
Production Operating Data. . . . . . . . . . . . .A-13
Natural Gas Pipeline & Gathering, Processing and
Marketing Operating Data . . . . . . . . . . . . .A-14
Natural Gas Distribution Operating Data . . . . . . .A-15
Independent Auditors' Report. . . . . . . . . . . . .A-16
Management Report on Responsibility for
Financial Reporting. . . . . . . . . . . . . . . .A-17
Financial Statements:
Statements of Consolidated Income. . . . . . . .A-18
Statements of Consolidated Cash Flows. . . . . .A-19
Consolidated Balance Sheets. . . . . . . . . . .A-20
Statements of Consolidated Common
Shareholders' Equity. . . . . . . . . . . . .A-21
Notes to Consolidated Financial Statements. . . . . .A-22
Summary of Business Segments. . . . . . . . . . . . .A-43
Quarterly Results . . . . . . . . . . . . . . . . . .A-44
Common Stock Market Prices and Dividend Information .A-45

</TABLE>

(a)-2 Financial Statement Schedules

The 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 the Corporation currently
in effect.

3.2* Bylaws of the Corporation, filed as Exhibit 3.2 to the
Corporation's Form 10-K for the year ended December 31, 1994..

4.1* Shareholder Rights Plan, filed as an Exhibit to the
Corporation'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
the Corporation's Form 10-K for the year ended December 31,
1991.

10.2* ENSERCH Corporation Deferred Compensation Plan for Directors,
filed as Exhibit 10.2 to the Corporation's Form 10-K for the
year ended December 31, 1994.

10.3* Director's Deferred Compensation Trust Agreement, as amended,
and currently in effect, filed as Exhibit 10.3 to the
Corporation'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
the Corporation'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 the
Corporation's Form 10-K for the year ended December 31, 1991.

10.6 Forms of Change of Control Agreement executed by certain
executive officers of the Corporation.

10.7 ENSERCH Corporation Performance Incentive Plan - Calendar Year
1996.

10.8* ENSERCH Corporation 1991 Stock Incentive Plan, filed as Exhibit
10.12 to the Corporation'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, and Amendment No. 2 thereto
dated January 1, 1996.

10.10* ENSERCH Corporation Deferred Compensation Trust, filed as
Exhibit 10.10 to the Corporation's Form 10-K for the year ended
December 31, 1994.

10.11* ENSERCH Corporation Retirement Income Restoration Plan and
Amendment No. 1 thereto dated September 30, 1994, filed as
Exhibit 10.11 to the Corporation's Form 10-K for the year ended
December 31, 1994.

10.12* ENSERCH Corporation Retirement Income Restoration Trust, filed
as Exhibit 10.12 to the Corporation's Form 10-K for the year
ended December 31, 1994.

21 Subsidiaries of the Corporation.

23.1 Deloitte & Touche LLP consent to incorporation by reference in
Registration Statements No. 2-59259, No. 2-77572, No. 33-15623,
No. 33-40589, No. 33-47911, No. 33-52525 and No. 33-61635.

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, No. 33-52525 and No. 33-61635.

24 Powers of Attorney.

27 Financial Data Schedule.

99* Proxy Statement dated at or about March 29, 1996 being filed
with the Securities and Exchange Commission on or about
March 29, 1996.

Long-term debt is described in Note 3 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

No reports on Form 8-K were filed during the three months ended
December 31, 1995.

<PAGE>
<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 26 , 1996 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 in the
capacities and on the date indicated.

Signature and Title Date
------------------- ----
<S> <C>
D. W. Biegler, Chairman and President,
Chief Executive Officer and Director;
Frederick S. Addy, Director; B. A.
Bridgewater, Jr., Director; Odie C. Donald,
Director; Marvin J. Girouard, Director;
Joseph M. Haggar, Jr., Director; Thomas W. March 26 , 1996
Luce, III, Director; W. C. McCord, Director; -----
Diana S. Natalicio, Director; M. E. Rescoe,
Senior Vice President, Finance and Chief
Financial Officer; J. W. Pinkerton, Vice
President and Controller, Chief Accounting
Officer

</TABLE>

By: /s/ D. W. Biegler
-----------------------
D. W. Biegler
Individually and As
Attorney-in-Fact

<PAGE>
<PAGE> APPENDIX A

ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
INDEX TO FINANCIAL INFORMATION
DECEMBER 31, 1995

Page
----

Selected Financial Data............................... A-2

Financial Review...................................... A-4

Independent Auditors' Report.......................... A-16

Management Report on Responsibility for
Financial Reporting................................. A-17

Financial Statements:
Statements of Consolidated Income................... A-18

Statements of Consolidated Cash Flows............... A-19

Consolidated Balance Sheets......................... A-20

Statements of Consolidated Common
Shareholders' Equity.............................. A-21

Notes to Consolidated Financial Statements.......... A-22

Summary of Business Segments.......................... A-43

Quarterly Results..................................... A-44

Common Stock Market Prices and Dividend Information... A-45

<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA-ENSERCH CORPORATION AND SUBSIDIARY COMPANIES

As of or for Year Ended December 31
-------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
-------------------------------------------------------------------------
(In millions except ratio and per share amounts)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (a)
Revenues
Natural gas and oil exploration
and production. . . . . . . . . . . . . . . $ 220.9 $ 179.1 $ 189.8 $ 171.5 $ 183.6 $ 213.9
Natural gas pipeline & GPM . . . . . . . . . . 996.4 1,235.8 908.0 639.5 590.4 593.6
Natural gas distribution . . . . . . . . . . . 887.5 874.7 967.9 923.4 913.2 929.9
Power and other. . . . . . . . . . . . . . . . 39.8 45.5 48.6 45.7 37.3 28.1
Less intercompany revenues . . . . . . . . . . (213.4) (239.6) (235.4) (152.4) (159.8) (145.0)
-------- --------- --------- --------- --------- --------
Total revenues . . . . . . . . . . . . . . . 1,931.2 2,095.5 1,878.9 1,627.7 1,564.7 1,620.5
Operating Income (Loss)
Natural gas and oil exploration
and production. . . . . . . . . . . . . . . (11.5) 25.6 (b) (37.3)(c) (6.2)(b) 10.9 31.9
Natural gas pipeline & GPM . . . . . . . . . . 59.6 27.0 73.4 67.7 78.7 72.6
Natural gas distribution . . . . . . . . . . . 54.6 38.3 34.2 (d) 48.4 54.1 53.8
Power and other. . . . . . . . . . . . . . . . 3.5 5.8 9.8 13.4 6.1 2.5
General and other. . . . . . . . . . . . . . . (8.5) (8.1) (11.9) (16.8) (15.4) (18.2)
-------- -------- --------- --------- --------- --------
Total operating income . . . . . . . . . . . 97.7 88.6 68.2 106.5 134.4 142.6
Other Income (Expense) - Net (e) . . . . . . . . (1.0) (6.0) .1 (12.6) 14.6 49.5
Interest and Other Financing Costs . . . . . . . (83.3) (69.3) (77.7) (94.5) (92.9) (99.0)
Income (Taxes) Benefit . . . . . . . . . . . . . (.9) 68.7 (f) (6.6)(f) 2.2 (17.8) (25.7)
Minority Interest. . . . . . . . . . . . . . . . .6 (.5) .2 (.5) (.2)
--------- --------- --------- --------- --------- --------
Income (Loss) from Continuing Operations . . . . 13.1 81.5 (16.0) 1.8 37.8 67.2
Income (Loss) from Discontinued Operations . . . 20.6 75.4 (13.8) (18.6) 35.5
Extraordinary Loss on Extinguishment of Debt . . (15.3)
-------- --------- --------- --------- --------- --------
Net Income (Loss). . . . . . . . . . . . . . . . 13.1 102.1 59.4 (27.3) 19.2 102.7
Earnings (Loss) Applicable to Common Stock . . . 1.4 90.5 46.7 (40.3) 4.9 88.5
Per Share of Common Stock
Income (loss) from continuing operations after
provision for preferred dividends. . . . . . .02 1.03 (.42) (.16) .35 .80
Discontinued operations. . . . . . . . . . . . .30 1.11 (.21) (.28) .54
Extraordinary loss . . . . . . . . . . . . . . (.23)
-------- --------- --------- --------- --------- --------
Earnings (Loss) Applicable to Common Stock . . .02 1.33 .69 (.60) .07 1.34
Average Common and Dilutive Common
Equivalent Shares Outstanding. . . . . . . . . 68.3 68.0 67.8 66.9 66.3 66.2

COMMON STOCK DATA
Cash Dividends Declared and Paid (g) . . . . . . $ .20 $ .20 $ .20 $ .80 $ .80 $ .80
Market Price
High . . . . . . . . . . . . . . . . . . . . . 18 5/8 19 1/8 22 5/8 16 1/2 21 3/8 28 1/8
Low. . . . . . . . . . . . . . . . . . . . . . 12 5/8 12 1/8 14 1/8 10 3/8 12 3/4 18 1/2
Common Shareholders' Equity per Share. . . . . . 10.50 10.65 9.54 9.00 10.32 10.97
Shares Outstanding at Year-end (a) . . . . . . . 68.5 68.2 67.9 67.2 66.5 66.0

BALANCE SHEET DATA (a)
Property, Plant and Equipment - Net. . . . . . . $2,726.8 $2,253.5 $2,119.1 $2,065.9 $2,152.2 $2,118.1
Total Assets . . . . . . . . . . . . . . . . . . 3,381.1 2,888.5 2,806.0 3,158.9 3,169.8 3,271.0
Net Working Capital (Deficiency) . . . . . . . . (185.5) (157.1) (191.8) 2.5 (42.5) 65.6
Current Ratio. . . . . . . . . . . . . . . . . . .74 .77 .74 1.00 .95 1.08
Unused Lines of Credit . . . . . . . . . . . . . $ 600.0 $ 600.0 $ 635.0 $ 485.0 $ 650.0 $ 600.0

CAPITAL STRUCTURE (a)
Senior Long-term Debt. . . . . . . . . . . . . . $ 885.2 $ 726.3 $ 640.0 $ 865.3 $ 757.6 $ 774.3
Convertible Subordinated Debentures. . . . . . . 90.8 90.8 90.8 90.8 205.7 215.7
Mandatorily Redeemable Preferred Securities
of Subsidiary of EEX . . . . . . . . . . . . . 150.0
Minority Interest in Subsidiaries. . . . . . . . 156.4 12.1 8.8 5.1 5.5 6.1
Preferred Stock. . . . . . . . . . . . . . . . . 175.0 175.0 175.0 175.0 175.0 175.0
Common Shareholders' Equity. . . . . . . . . . . 719.2 726.2 647.6 605.4 686.5 724.0
-------- -------- -------- -------- -------- --------
Total Capitalization . . . . . . . . . . . . . 2,176.6 1,730.4 1,562.2 1,741.6 1,830.3 1,895.1
Senior Long-term and Convertible Debt
Ratio (Percent). . . . . . . . . . . . . . . . . 44.8 47.2 46.8 54.9 52.6 52.2

A-2
<PAGE>
<PAGE>

<FN>
(a) The consolidated financial statements have been restated to include the results of DGS Holdings Corp., following a
pooling-of-interests transaction in June 1995, in the Natural Gas Pipeline & GPM segment and to reflect the realignment
of business segments in 1995.
(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 ($10.9 million after-tax, $.16 per share) write-down of
the inactive offshore pipeline and facilities.
(c) Includes a $41.4 million pretax ($26.9 million after-tax, $.40 per share) charge as a result of an adverse judgment in
litigation and a $13.3 million pretax ($8.6 million after-tax, $.13 per share) write-down of non-U.S. gas and oil
properties.
(d) Includes a $12.0 million pretax ($7.8 million after-tax, $.12 per share) charge principally for severance expenses
associated with re-engineering distribution operations.
(e) 1992 includes a $15.5 million pretax ($10.2 million after-tax, $.15 per share) provision for litigation; 1991 includes
a $15.1 million pretax ($10.0 million after-tax, $.15 per share) gain from the sale of Oklahoma utility properties and
non-U. S. gas and oil assets; and 1990 includes a $34 million pretax ($22 million after-tax, $.33 per share) gain from
the sale of investment in Oceaneering International, Inc.
(f) 1994 includes a $70.0 million ($1.03 per share) reduction of deferred income taxes associated with the reorganization
of partnerships to form Enserch Exploration, Inc. 1993 includes a $10.8 million ($.16 per share) charge from the 1%
increase in the statutory federal income-tax rate on corporations.
(g) In addition, 2 million shares of Pool Energy Services Company common stock were distributed in 1990. The approximate
value per share of ENSERCH common stock of this distribution was $.33.
</FN>
</TABLE>

A-3
<PAGE>
<PAGE>
ENSERCH CORPORATION
FINANCIAL REVIEW

On June 8, 1995, ENSERCH's partially owned subsidiary, Enserch
Exploration, Inc. (EEX), acquired for cash all of the capital stock of DALEN
Corporation (DALEN), a gas and oil exploration and production company. On
June 29, 1995, ENSERCH purchased for cash the principal operating assets of
Sunrise Energy Services, Inc. and subsidiaries (Sunrise), a nonregulated
marketer of natural gas. Effective June 30, 1995, ENSERCH exchanged shares
of its common stock for all of the common stock of DGS Holdings Corp. (DGS).
DGS, through its subsidiary, is a major marketer of natural gas and natural-
gas services. The "purchase" method was used to account for the DALEN and
Sunrise acquisitions; therefore, consolidated results include results of
operations for these businesses from the date of acquisition. The "pooling
of interests" method was used to account for the DGS transaction, and
consolidated results for all periods presented have been restated to include
the results of DGS.

Earnings applicable to common stock for the year 1995 were $1.4 million
($.02 per share), compared with $90 million ($1.33 per share) for 1994 and
$47 million ($.69 per share) for 1993.

CONTINUING OPERATIONS

Results from continuing operations, after provision for preferred
dividends, were income of $1.4 million ($.02 per share) in 1995, income of
$70 million ($1.03 per share) in 1994 and a loss of $29 million ($.42 per
share) in 1993. Income from continuing operations, after provision for
preferred dividends, in 1994 benefited from non-recurring items that together
totaled $75 million ($1.10 per share), while 1993 results included non-
recurring items that reduced income by $54 million ($.80 per share).
Excluding these unusual items from 1994 and 1993 results, 1995 income from
continuing operations of $1.4 million ($.02 per share) compares with a loss
of $5.1 million ($.07 per share) in 1994 and income of $25 million ($.38 per
share) in 1993. The 1994 unusual items included a $70 million reduction of
deferred income taxes associated with the reorganization of partnerships to
form EEX and a $4.9 million after-tax ($7.6 million pretax) gain from the sale
of assets. Unusual items for 1993 included an $8 million after-tax
($12 million pretax) charge principally for severance expenses associated with
the re-engineering of the natural gas distribution segment, 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-down of non-
U.S. gas and oil properties and a $27 million after-tax ($41 million pretax)
charge as a result of an adverse judgment in litigation.

Operating income for 1995 was $98 million versus $89 million in 1994 and
$68 million in 1993. Excluding the effects of the 1994 and 1993 unusual
items, operating income was $81 million for 1994 and $135 million for 1993.
Variations in revenues and operating income for each business segment are
discussed below.

A-4
<PAGE>
<PAGE>
NATURAL GAS AND OIL EXPLORATION AND PRODUCTION

In June 1995, EEX acquired DALEN for cash of $340 million and assumed
DALEN's bank debt of $115 million. The acquisition of DALEN increased proved
reserves 397 billion cubic feet of natural-gas equivalent (Bcfe) and lowered
the average reserve life of EEX's properties by about 25%.

In September 1995, EEX sold 20 million shares of its common stock to the
public for net proceeds of $208 million, increasing the public ownership
interest in EEX to 16.6%. ENSERCH's equity interest in EEX, after the
reduction in ownership percentage, increased $59 million. In accordance with
the full-cost accounting method, ENSERCH credited the $59 million to the
carrying value of gas and oil properties.

In the third quarter of 1995, a Mobil Corporation (Mobil) affiliate
acquired a 40% working interest in EEX's Garden Banks Block 388 project,
representing the sale of 81.2 Bcfe of proved reserves. EEX, which now owns
a 60% working interest in and remains the operator of the project, received
cash, property interests and future work commitments on the project. In
addition, ENSERCH was relieved of operating lease obligations of approximately
$140 million, as well as 40% of the capital expenditures required to complete
the project. In October 1995, another affiliate of Mobil purchased a 40%
working interest in EEX's Green Canyon Block 254 project, and an affiliate of
Reading & Bates Corp. purchased a 20% working interest in the project. These
transactions represented the sale of 206 Bcfe of reserves proved during 1995.
EEX, which now has a 40% working interest in and remains the operator of the
project, received cash, an interest in a gas and oil property and future work
commitments.

EEX's natural-gas reserves at January 1, 1996, were 1.36 trillion cubic
feet (Tcf), compared with 1.04 Tcf the year earlier, as estimated by DeGolyer
and MacNaughton (D&M), independent petroleum consultants. The sharply higher
gas reserves are principally attributable to the DALEN acquisition. Oil and
condensate reserves, including natural gas liquids attributable to leasehold
interests, were 71 million barrels (MMBbls), compared with the year-earlier
level of 51 MMBbls. On a Bcfe basis, over 200% of 1995 production was
replaced by additions and revisions, exclusive of the net gain from the DALEN
acquisition.

In December 1995, EEX announced plans to offer for sale its Rocky
Mountain area properties, which are in six states and aggregate over
250 thousand net acres. These properties were mostly acquired as part of the
DALEN acquisition and are being offered for sale because they are not within
the core area of EEX's other properties. Total reserves for the Rocky
Mountain properties at January 1, 1996, as estimated by D&M, were 223 Bcfe,
of which 169 Bcfe were proved. Production from these properties in 1995
averaged 40 million cubic feet of natural-gas equivalent per day. The sale
is expected to be concluded in the second quarter of 1996. EEX intends to use
the proceeds from the sale to reduce its debt.

A-5
<PAGE>
<PAGE>
Operating income of the natural gas and oil exploration and production
business segment is strongly influenced by fluctuations in product prices and
volumes as shown in the table of Operating Data. DALEN's operations are
included since acquisition on June 8, 1995 and contributed 1995 operating
income of $6.9 million, with revenues of $70.4 million and operating expenses
of $63.5 million. DALEN's natural-gas revenues were $49 million on sales
volumes of 31 billion cubic feet (Bcf) at an average sales price of $1.60 per
thousand cubic feet (Mcf). DALEN's oil and other revenues totaled
$21 million; the average sales price for oil was $16.61 per barrel, and oil
sales volumes were 1.1 MMBbls.

The following comparisons of period-to-period operating results exclude
the impact of DALEN in 1995 and the previously noted unusual items in 1994 and
1993. There was an operating loss for 1995 of $18 million, compared with
income of $18 million for 1994 and $17 million for 1993. Revenues for 1995
were $29 million (16%) lower than in 1994, reflecting a $37 million (25%)
decrease in natural-gas revenues, but an $8 million (23%) improvement in oil
and other revenues. The average natural-gas sales price per Mcf of $1.82 in
1995, excluding DALEN, declined 15% from the 1994 average of $2.15, causing
a $23 million decline in revenues. Natural-gas sales volumes of 59 Bcf,
excluding DALEN, were 12% less than in 1994, reducing revenues by $14 million.
The lower volumes primarily resulted from less capital spending to replace gas
production due to low gas prices and the normal decline in production from
several mature fields and Mississippi Canyon Block 441 in the Gulf of Mexico.
The higher oil revenues reflect a 10% improvement in the average sales price
and a 12% increase in sales volumes from the start-up of production from the
Garden Banks project in late September and increased production from
exploration and development activities in Hardeman and Shackelford counties
in North Texas.

Operating expenses for 1995, excluding DALEN, were $7.8 million (5%)
higher than in 1994, primarily due to direct costs of $7.4 million related to
the Garden Banks project. As expected, the commencement of sales from this
project in late September detracted from 1995 results, producing an operating
loss of $3.6 million, as fixed operating costs exceeded revenues from the
initial levels of production. Some operating costs and amortization vary with
production, but other costs and the equipment lease costs are essentially
fixed and will decline on a per unit basis as production increases. Operating
results from the Garden Banks project are expected to improve in 1996 as
production begins from several additional development wells and the related
equipment lease and other fixed costs are spread over greater production.
Based on current prices, the Garden Banks project is expected to achieve
breakeven results when production reaches the equivalent of 11 to 12 thousand
gross barrels of oil per day, which is projected to occur by mid-year 1996.
Expenses for 1995 included a $1.8 million provision for injuries and damages
claims, while 1994 expenses benefited from credits of $2.0 million associated
with litigation accruals. Partially offsetting were lower depreciation and
amortization expense and reduced revenue related taxes resulting from
decreased sales volumes.

A-6
<PAGE>
<PAGE>
The total amortization rate per thousand cubic feet of natural-gas
equivalent was $1.04 in 1995, compared with $1.08 in 1994 and $1.03 in 1993.
The 1995 rate benefited from reserve additions for Green Canyon Block 254 and
DALEN and the previously noted $59 million credit to capitalized costs as a
result of the EEX common stock sale. The increase in the rate from 1993 to
1994 was caused by higher onshore exploratory expenditures and costs for
equipment under capital leases.

The slight improvement in operating income from 1993 to 1994 was
attributable to lower operating expenses, primarily resulting from year-to-
year differences in the provision for injuries and damages claims. Revenues
for 1994 were 6% lower than in 1993 due to decreased sales volumes for both
natural gas and oil and lower oil prices, partially offset by slightly higher
natural-gas prices. Natural-gas sales volumes decreased 4% due to reduced
production from several high-volume fields in South Texas and offshore
Louisiana.

EEX manages a portion of the risk associated with fluctuations in the
price of natural gas and oil through the use of hedging techniques such as gas
and oil swaps, collars and futures agreements. In total, gas and oil price
hedging activities increased 1995 revenues by $.1 million versus $4.3 million
in 1994 but reduced revenues by $3.7 million in 1993. As a result of a
temporary cessation to the historical correlation of natural-gas prices in the
physical market that serves as the delivery point for NYMEX futures contracts
and the prices in certain other physical markets where EEX sells a substantial
portion of its natural-gas production, a $6.0 million mark-to-market loss was
recognized in the fourth quarter of 1995 on contracts that no longer served
as hedges (see Note 6 of the Notes to Consolidated Financial Statements). At
December 31, 1995, EEX had outstanding swaps, collars and futures agreements
that were entered into as hedges extending through December 31, 1996 to
exchange payments on 39 Bcf of natural gas and 655 thousand barrels of oil.
At December 31, 1995, after giving effect to the $6.0 million mark-to-market
loss mentioned above, there were $1.3 million of net unrealized and
unrecognized hedging losses based on the difference between the strike price
and the NYMEX futures price for the applicable trading month. In addition,
there were $2.4 million of realized losses on hedging activities which were
deferred and will be applied as a reduction in revenues in the month of
physical sale of production.

Gas and oil prices are subject to seasonal and other fluctuations. A
decline in prices from year-end 1995 levels or other factors, without
mitigating circumstances, could cause a future write-down of capitalized costs
and a non-cash charge against income under the full-cost accounting method
cost center ceiling limitation. At June 30 and September 30, 1995, ENSERCH's
full-cost ceiling amount attributable to properties acquired in the DALEN
acquisition was significantly less than the unamortized cost of producing
properties acquired, but at December 31, 1995, the ceiling amount exceeded
costs by some $19 million. ENSERCH believes that the DALEN properties have
significant exploration and development potential and that the unamortized
cost of the gas and oil properties acquired is recoverable from future
production. The Securities and Exchange Commission has granted a waiver of
the full-cost ceiling limitation on these properties through June 30, 1996.

A-7
<PAGE>
<PAGE>
NATURAL GAS PIPELINE & GPM

ENSERCH's pipeline and gas marketing operations, formerly reported with
the natural gas transmission and distribution segment, and the gas processing
operations, formerly reported separately as the natural gas liquids processing
segment, have been combined to form the natural gas pipeline & gathering,
processing and marketing (GPM) business segment. Distribution utility
operations are reported as the natural gas distribution business segment.
Operating income from the natural gas pipeline & GPM segment was $60 million
in 1995, $27 million in 1994 and $73 million in 1993. The table of Operating
Data provides revenue and other statistical data for the segment.

Pipeline operations had 1995 operating income of $49 million versus
$25 million in 1994 and $52 million in 1993. The improvement in 1995
principally came from a $25 million reduction in the cost of gas lost in
transmission. While such losses result primarily from various physical
factors, the 1994 losses included significant out-of-period adjustments.
Pipeline revenues for 1995 of $143 million were slightly higher than 1994
revenues and about the same as in 1993. Pipeline throughput totaled 561 Bcf
in 1995, 542 Bcf in 1994 and 543 Bcf in 1993. Heating degree days for 1995
were about the same as the year earlier and 10% below normal. Mild winter
weather adversely impacted results for pipeline operations by an estimated
$5 million in 1995 and some $4 million in 1994. Winter weather was slightly
colder than normal in 1993. Operating expenses for 1995 were up slightly from
1994, which was up slightly from 1993.

In June 1995, ENSERCH purchased for cash the principal operating assets
of Sunrise and exchanged 1,204,098 shares of its common stock for all of the
common stock of DGS. DGS and Sunrise expand ENSERCH's energy services
capabilities and broaden its marketing relationships into new areas on the
West Coast and in the Midwest and Northeast. ENSERCH's gas marketing
operations are now conducted by Enserch Energy Services, Inc., formerly
Enserch Gas Company, and subsidiaries (EES) and include the acquired
operations of DGS and Sunrise.

Operating income from natural gas marketing operations for 1995 was
$6.1 million, compared with $.9 million in 1994 and $17 million in 1993. The
higher income for 1995 was primarily due to an improvement in gas margin
compared with the year earlier, partially offset by an increase in operating
expenses. The lower income in 1994 was attributable to both a sharp decline
in gas margin due to various market-driven pressures and higher operating
expenses. Natural gas marketing sales volumes and revenues decreased sharply
from 1994 after growth of about 50% from 1993. Volumes in 1995 were 14%
lower, primarily due to the decision to de-emphasize some wholesale marketing,
and gas prices were 12% lower and accounted for the remainder of the decline.
As part of its natural gas marketing activities, EES enters into forward
contracts principally involving physical delivery of natural gas and
derivative financial instruments, including swaps, options, futures and other
contractual arrangements. These activities involve price commitments into the
future and, therefore, give rise to market risk. At December 31, 1995,
natural gas marketing operations had net commitments to purchase approximately
32 Bcf of natural gas through the year 2000 with offsetting net financial
positions to sell approximately 26 Bcf, including commitments to purchase

A-8
<PAGE>
<PAGE>
approximately 40 Bcf from EEX and financial positions to sell the same
quantity. There was a net unrealized and unrecognized gain of $2.7 million
at December 31, 1995 on these contracts. At year-end 1994, a $4 million
charge was recorded to reflect lower year-end prices on forward purchase
contracts.

Natural gas processing activities contributed operating income of
$4.2 million in 1995, compared with $1.0 million in 1994 and $5.0 million in
1993. 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. Depreciation expense was $3.0 million lower in 1995
as several plants became fully depreciated at the end of 1994. NGL sales
volumes for 1995 of 6.0 MMBbls were slightly ahead of 1994 and about the same
as in 1993, while the average sales price per barrel of $11.66 was virtually
unchanged from 1994 and was 6% lower than in 1993.

NATURAL GAS DISTRIBUTION

The table of Operating Data reflects the effects of variable weather
patterns on natural gas distribution operations. Operating income for 1995
was $55 million, compared with $38 million in 1994 and $46 million in 1993,
excluding the $12 million charge in 1993 primarily for severance expenses
associated with re-engineering. The higher income in 1995 reflects lower
operating expenses resulting from cost reduction measures initiated in prior
years. Sales volumes to the high margin residential and commercial customer
category in 1995 were virtually the same as in 1994, which was 10% below 1993.
In 1995, total heating degree days were 90% of normal, compared with 91% in
1994 and 104% in 1993. Mild winter weather adversely impacted results for this
segment by an estimated $5.5 million in 1995 and some $3 million in 1994, but
colder weather had a $1.2 million positive impact in 1993.

Rate increases granted as a result of the 1995 rate program will, on a
normal weather basis, increase annual revenues by approximately $14 million,
with some $10 million of the revenue improvement to come in 1996. Over 60%
of Lone Star's volumes sold to residential and commercial customers are now
covered by a weather normalization clause.

POWER

ENSERCH's power activities had 1995 operating income of $3.5 million,
compared with $5.8 million for 1994 and $9.8 million for 1993. No projects
were closed in 1995 or 1994. In 1993, results benefited from a $15 million
gain from the sale of a position in a power project that had been scheduled
for development.

OTHER

Other income/expense consists principally of gains on disposal of assets
and interest income, less discounts on sales of receivables. In addition,
1994 included $2.7 million of costs associated with the reorganization of
partnerships to form EEX and a $1.4 million loss on the early redemption of

A-9
<PAGE>
<PAGE>
sinking fund debentures, and 1993 included a $5.6 million provision for
interest awarded in the litigation judgment mentioned earlier.

Interest expense and other financing costs for 1995 were $83 million,
compared with $69 million in 1994 and $70 million in 1993, excluding
$8 million not related to borrowings. The increase in 1995 was primarily due
to the $455 million of debt issued and assumed in the acquisition of DALEN in
June 1995. Net proceeds of $208 million received in September 1995 from the
sale of EEX common stock were used to reduce debt.

DISCONTINUED OPERATIONS

The 1994 income from discontinued operations of $21 million ($.30 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 windup of other discontinued
businesses would be greater than previously estimated. The 1993 results of
$75 million ($1.11 per share) primarily arose from the sale of the principal
operating assets of Ebasco Services Incorporated. At December 31, 1995,
discontinued businesses had assets of $74 million, consisting principally of
retained claims and accounts receivable, and current and other liabilities and
reserves of $47 million. The Corporation has filed suit against certain
parties to recover amounts outstanding. Management expects that substantially
all disputes will be resolved by year-end 1997 and that adequate provision for
uncollectible claims and accounts receivable, income-tax matters and expenses
for windup of discontinued operations has been made.

LIQUIDITY AND FINANCIAL RESOURCES

Net cash flows from operating activities of continuing operations for
1995 totaled $253 million, compared with $91 million in 1994 and $203 million
in 1993. The 1994 amount is after a $62 million payment relating to the 1993
final adverse judgment in litigation. Income before depreciation and
amortization and deferred income taxes was $26 million higher than in 1994.
Recoveries of producer settlements, which provided $51 million in 1995, are
now substantially complete with $10 million remaining to be recovered. Current
operating assets and liabilities and other changes provided $26 million in
1995 versus a requirement of $46 million in 1994, exclusive of the litigation
payment.

Investing activities required net cash flows of $605 million, compared
with $236 million in 1994 and $206 million in 1993. The 1995 requirement
includes $333 million for the DALEN acquisition, $9 million for the Sunrise
acquisition and a $7 million investment in a gas distribution business in
Mexico.

In June 1995, ENSERCH issued $150 million of 7 1/8% Notes due 2005, with
the proceeds used to prepay a variable rate note due in 1998. Also in June
1995, EEX borrowed $500 million, including $350 million under a four-year
revolving credit agreement, to pay the purchase price of $340 million for the
capital stock of DALEN, repay DALEN's bank debt of $115 million and reduce
advances from ENSERCH by $45 million. In September 1995, EEX used the
$208 million proceeds from the public sale of 20 million shares of its common

A-10
<PAGE>
<PAGE>
stock to reduce the borrowing under the revolving credit agreement. In August
1995, the proceeds from $150 million of mandatorily redeemable preferred
securities issued by a subsidiary of EEX were used to replace EEX's temporary
borrowings. The dividends on the preferred securities are included in
interest and other financing costs.

Discontinued operations required cash of $28 million in 1995, principally
for the repurchase of previously sold receivables. Discontinued operations
required cash of $.9 million in 1994. Net proceeds from the 1994 sale of
Enserch Environmental of $98 million included the recovery of $32 million
needed for working capital in 1994 prior to the sale. Also in 1994, there was
a requirement of $22 million for the remittance of December 1993 collections
of sold receivables, plus requirements for the payment of accrued expenses,
taxes and other retained obligations relating to the 1993 sale of Ebasco.
Cash provided by discontinued operations in 1993 of $318 million included net
proceeds from the sale of the principal operating assets of Ebasco and
$100 million from the limited recourse sale of Ebasco receivables.

Total capitalization at December 31, 1995 was $2.2 billion, an increase
of $446 million from year-end 1994, principally reflecting $160 million
outstanding under EEX's revolving line of credit, $150 million of mandatorily
redeemable preferred securities issued by a subsidiary of EEX and a
$148 million increase in minority interest in common equity of EEX. As a
percentage of total capitalization, common shareholders' equity plus minority
interest in subsidiaries decreased from 42.7% at December 31, 1994 to 40.2%
at year-end 1995. EEX intends to use the proceeds from the sale of its Rocky
Mountain area properties to reduce its debt. In addition, the Corporation is
obligated under operating lease arrangements for facilities used on the Garden
Banks Block 388 project (see Note 7 of the Notes to Consolidated Financial
Statements). At December 31, 1995, $416 million of common shareholders'
equity was free of restrictions as to the payment of dividends and redemption
of capital stock. The current ratio was .74 at the end of 1995, .77 at the
end of 1994 and .74 at the end of 1993.

ENSERCH has bank lines in the form of a three-year revolving agreement
totaling $600 million, all unused at year-end 1995. In addition, EEX has a
$350 million four-year revolving credit agreement, $190 million of which was
unused at December 31, 1995.

Planned property, plant and equipment additions for 1996 total
$296 million, including $187 million for natural gas and oil exploration and
production, $43 million for natural gas pipeline & GPM, $64 million for
natural gas distribution and $2 million for other requirements. The planned
expenditures are expected to be funded from internal cash flow and external
financings as required.

Inflation during recent years has had little effect on capital costs and
results of operations.

A-11
<PAGE>
<PAGE>
FOURTH-QUARTER RESULTS

Earnings applicable to common stock for the fourth quarter of 1995 were
$7.8 million ($.11 per share), compared with a loss of $4.6 million ($.07 per
share) for the fourth quarter of 1994, after excluding the $94 million ($1.38
per share) of unusual items. Excluding unusual items in 1994, operating
income improved $16 million to $30 million. Operating results for the natural
gas pipeline & GPM and natural gas distribution business segments were both
higher than in the 1994 fourth quarter; however, somewhat lower prices for
natural gas, the $6 million mark-to-market loss recognized on gas price
hedging activities and start-up of production at Garden Banks in the fourth
quarter of 1995 caused results for the natural gas and oil exploration and
production segment to be below the same quarter a year ago.

NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
will become effective for the Corporation in 1996. This statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill. The new standard is not expected to
have a significant effect on results of operations or financial position in
the foreseeable future. ENSERCH's gas and oil properties continue to be
separately evaluated at the end of each accounting period under full-cost
accounting rules.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and other
equity instruments to employees based on new fair value accounting rules.
This new accounting principle is effective for the Corporation's fiscal year
ending December 31, 1996. Managements intends to adopt the disclosure
alternative of this pronouncement.

A-12
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATURAL GAS AND OIL EXPLORATION AND PRODUCTION OPERATING DATA

For Year Ended December 31
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Income (Loss)
(in millions). . . . . . . . . . . . $(11.5) $ 25.6 $(37.3) $ (6.2) $ 10.9 $ 31.9

Revenues (in millions) . . . . . . . . $220.9 $179.1 $189.8 $171.5 $183.6 $213.9

Sales Volumes
Natural gas (Bcf). . . . . . . . . . 90.2 67.1 70.0 65.2 70.1 76.9
Oil and condensate (MMBbls). . . . . 3.4 2.0 2.1 2.3 2.8 3.1

Average Sales Price
Natural gas (per Mcf). . . . . . . . $ 1.74 $ 2.15 $ 2.09 $ 1.82 $ 1.76 $ 1.85
Oil and condensate (per Bbl) . . . . 16.86 15.38 17.24 19.20 20.31 22.39

Net Wells
Drilled. . . . . . . . . . . . . . . 81 74 79 19 67 53
Productive . . . . . . . . . . . . . 51 44 64 8 52 42

Proved Reserves (at December 31)
Natural gas (Bcf). . . . . . . . . . 1,362.8 1,041.7 1,086.5 1,101.4 1,168.1 1,236.9
Oil and condensate (MMBbls). . . . . 71.5 50.6 39.3 39.2 40.0 32.3
Total Bcfe (a) . . . . . . . . . . 1,791.8 1,345.3 1,322.3 1,336.6 1,408.1 1,430.5

Standardized Measure of Discounted
Future Net Cash Flows (in millions). $1,238 $ 827 $ 831 $ 820 $ 812 $ 963

Data in Equivalent Energy Content
(per Mcfe) (a)
Production revenue . . . . . . . . . $ 1.93 $ 2.21 $ 2.21 $ 2.07 $ 2.08 $ 2.22
Production and operating costs(b). . .44 .39 .37 .36 .40 .36
Depreciation and amortization. . . . 1.04 1.08 1.03 1.01 .93 .82

Operating Income Reconciliation from EEX to ENSERCH Segment

Operating income (loss) of EEX $ (6.2) $32.0 $15.2 $(1.2) $(34.0) $36.8
Amortization of costs capitalized by
ENSERCH not incurred by EEX (7.0) (6.3) (9.0) (6.5) (6.9) (4.4)
Write-down of capitalized cost under
the full-cost ceiling limitation
by EEX not required by ENSERCH 52.0
Litigation judgment against ENSERCH (41.4)
Effects of intercompany lease
transactions 2.5
Activities not conducted through EEX (0.8) (0.1) (2.1) 1.5 (0.2) (0.5)
------ ----- ------ ----- ----- -----
Operating income (loss) of ENSERCH's
natural gas and oil exploration and
production segment $(11.5) $25.6 $(37.3) $(6.2) $10.9 $31.9

- --------------------------------------
<FN>
(a) Oil and natural gas liquids are converted to Mcf equivalents (Mcfe) on the basis of one barrel equals 6.0 Mcfe.
(b) Excludes production, severance and ad valorem taxes.
</FN>
</TABLE>

A-13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATURAL GAS PIPELINE & GATHERING, PROCESSING AND MARKETING OPERATING DATA (a)

For Year Ended December 31
-------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Operating Income (in millions)
Pipeline . . . . . . . . . . . . . . $ 49.3 $ 25.1 $ 51.7 $ 41.2 $ 45.0 $ 31.9
Natural Gas Marketing. . . . . . . . 6.1 .9 16.7 13.4 12.5 15.8
Natural Gas Processing . . . . . . . 4.2 1.0 5.0 13.1 21.2 24.9
------ -------- ------ ------ ------ ------
Total. . . . . . . . . . . . . . . $ 59.6 $ 27.0 $ 73.4 $ 67.7 $ 78.7 $ 72.6

Revenues (in millions)
Pipeline (b) . . . . . . . . . . . . $143.5 $ 141.0 $143.4 $135.9 $185.6 $193.1
Natural Gas Marketing. . . . . . . . 750.5 997.4 666.2 406.7 297.9 287.3
Natural Gas Processing -
Natural gas liquids (c). . . . . . 69.7 68.9 73.6 79.0 84.9 91.8
Other (d). . . . . . . . . . . . . . 32.7 28.5 24.8 17.9 22.0 21.4
------ -------- ------ ------ ------ ------
Total revenues . . . . . . . . . . $996.4 $1,235.8 $908.0 $639.5 $590.4 $593.6

Volumes
Pipeline throughput (Bcf). . . . . . 561.1 541.6 542.8 472.9 481.2 437.2
Natural Gas Marketing (Bcf). . . . . 417.7 488.4 306.7 210.9 173.3 154.7
Natural Gas Processing (MMBbls). . . 6.0 5.9 6.0 5.9 6.1 6.4

Average Sales Price
Natural Gas Marketing (per Mcf). . . $ 1.80 $ 2.04 $ 2.17 $ 1.93 $ 1.72 $ 1.86
Natural Gas Liquids (per Bbl). . . . $11.66 $ 11.65 $12.34 $13.35 $13.92 $14.27

- ----------------------------
<FN>
(a) Prior year amounts have been restated for the realignment of business segments and the pooling-of-interests transaction with
DGS.
(b) Includes transportation services for affiliates and third-parties and other miscellaneous revenues.
(c) Represents revenues from sales of plant production.
(d) Includes revenues from natural-gas products purchased for resale, gathering fees and other miscellaneous revenues.
</FN>
</TABLE>
A-14
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATURAL GAS DISTRIBUTION OPERATING DATA

For Year Ended December 31
------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Income (in millions) . . . . $ 54.6 $ 38.3 $ 34.2 $ 48.4 $ 54.1 $ 53.8

Natural Gas Sales Revenues by Customer
(in millions)
Residential & commercial. . . . . . $ 766.5 $ 744.3 $ 823.8 $ 716.5 $ 702.9 $ 684.3
Industrial. . . . . . . . . . . . . 55.7 63.5 69.6 88.9 100.3 114.6
Electric generation . . . . . . . . 44.5 46.6 52.7 97.5 89.6 110.9
------- ------- ------- -------- ------- -------
Total gas sales revenues. . . . . 866.7 854.4 946.1 902.9 892.8 909.8
Gas transportation revenues (a). . . . 11.5 11.3 11.5 9.9 10.0 9.6
Other revenues . . . . . . . . . . . . 9.3 9.0 10.3 10.6 10.4 10.5
------- ------- ------- -------- ------- -------
Total revenues. . . . . . . . . . $ 887.5 $ 874.7 $ 967.9 $ 923.4 $ 913.2 $ 929.9

Natural Gas Sales Volumes by Customer
(Bcf)
Residential & commercial. . . . . . 125.7 125.7 139.3 120.6 128.5 122.6
Industrial. . . . . . . . . . . . . 13.6 15.3 16.9 20.3 25.8 28.3
Electric generation . . . . . . . . 11.0 11.0 12.4 21.3 23.3 26.7
------- ------- ------- -------- ------- -------
Total gas sales volumes . . . . . 150.3 152.0 168.6 162.2 177.6 177.6

Natural Gas Sales Revenues (per Mcf)
Residential & commercial. . . . . . $ 6.10 $ 5.92 $ 5.91 $ 5.94 $ 5.47 $ 5.58
Industrial. . . . . . . . . . . . . 4.11 4.16 4.12 4.37 3.90 4.06
Electric generation . . . . . . . . 4.04 4.24 4.26 4.56 3.85 4.15

Natural Gas Purchase Cost (per Mcf). . $ 4.07 $ 4.05 $ 4.13 $ 4.10 $ 3.67 $ 3.81

Heating Degree Days. . . . . . . . . . 2,173 2,201 2,508 1,980 2,179 2,015
% of normal (2,407) . . . . . . . . 90.3 91.4 104.2 82.3 90.5 83.7
Cooling Degree Days. . . . . . . . . . 2,656 2,676 2,767 2,415 2,670 2,791
% of normal (2,603) . . . . . . . . 102.0 102.8 106.3 92.8 102.6 107.2

- --------------------------
<FN>
(a) Represents the portion of transportation revenues attributable to the distribution system. Related volumes are included
within Natural Gas Pipeline & Gathering, Processing and Marketing statistics.
</FN>
</TABLE>

A-15
<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, 1995 and 1994, 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, 1995.
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. The consolidated financial statements give
retroactive effect to the combination of ENSERCH Corporation and DGS Holdings
Corp., which has been accounted for as a pooling-of-interests, as described
in Note 2 of the Notes to Consolidated Financial Statements. We have
previously audited the consolidated balance sheets of ENSERCH Corporation and
subsidiary companies as of December 31, 1993, 1992, 1991 and 1990 and the
related statements of consolidated income, cash flows and common shareholders'
equity for the years ended December 31, 1992, 1991, and 1990 (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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, 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 1990 through 1995
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 9, 1996

A-16
<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 the
Corporation's internal auditors and Deloitte & Touche LLP, the Corporation's
independent 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, 1995, the overall system of
internal accounting controls is sufficient to accomplish the objectives
discussed herein.

/s/ D. W. Biegler /s/ M. E. Rescoe /s/ J. W. Pinkerton
- -------------------- ------------------------ --------------------
D. W. Biegler M. E. Rescoe J. W. Pinkerton
Chairman, President Senior Vice President, Vice President and
and Chief Finance, Chief Controller, Chief
Executive Officer Financial Officer Accounting Officer

February 9, 1996

A-17
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED INCOME

Year Ended December 31
------------------------------------------------
1995 1994 1993
------------------------------------------------
(In thousands except per share amounts)
<S> <C> <C> <C>
Revenues
Natural gas and oil exploration and production . . . $ 220,851 $ 179,140 $ 189,796
Natural gas pipeline & GPM . . . . . . . . . . . . . 996,451 1,235,763 907,969
Natural gas distribution . . . . . . . . . . . . . . 887,465 874,707 967,876
Power and other. . . . . . . . . . . . . . . . . . . 39,817 45,499 48,635
Less intercompany revenues . . . . . . . . . . . . . (213,344) (239,601) (235,374)
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . 1,931,240 2,095,508 1,878,902
---------- ---------- ----------
Costs and Expenses
Gas purchase . . . . . . . . . . . . . . . . . . . . 1,170,732 1,432,301 1,160,416
Operating expenses . . . . . . . . . . . . . . . . . 405,580 366,512 420,272
Depreciation and amortization. . . . . . . . . . . . 168,262 126,979 144,326
Gross receipts and production taxes. . . . . . . . . 51,086 50,723 55,999
Payroll, ad valorem and other taxes. . . . . . . . . 37,851 30,347 29,652
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . 1,833,511 2,006,862 1,810,665
---------- ---------- ----------
Operating Income . . . . . . . . . . . . . . . . . . . 97,729 88,646 68,237
Other Income (Expense) - Net . . . . . . . . . . . . . (1,033) (6,048) 116
Interest and Other Financing Costs . . . . . . . . . . (83,324) (69,310) (77,720)
---------- ---------- ----------
Income (Loss) before Income Taxes
and Minority Interest. . . . . . . . . . . . . . . . 13,372 13,288 (9,367)
Income Taxes (Benefit) . . . . . . . . . . . . . . . . 921 (68,737) 6,636
Minority Interest. . . . . . . . . . . . . . . . . . . (602) 573 34
---------- ---------- ----------
Income (Loss) from Continuing Operations . . . . . . . 13,053 81,452 (16,037)
Income from Discontinued Operations . . . . . . . . . 20,642 75,418
---------- ---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . . . 13,053 102,094 59,381
Provision for Dividends on Preferred Stock . . . . . . 11,690 11,619 12,663
---------- ---------- ----------
Earnings Applicable to Common Stock. . . . . . . . . . $ 1,363 $ 90,475 $ 46,718
========== ========== ==========
Per Share of Common Stock
Income (loss) from continuing operations
after provision for dividends on
preferred stock. . . . . . . . . . . . . . . . . . $ .02 $ 1.03 $ (.42)
Discontinued operations. . . . . . . . . . . . . . . .30 1.11
---------- ---------- ----------
Earnings applicable to common stock. . . . . . . . . $ .02 $ 1.33 $ .69
========== ========== ==========
Cash dividends declared. . . . . . . . . . . . . . . $ .20 $ .20 $ .20
========== ========== ==========
Average Common and Dilutive Common
Equivalent Shares Outstanding. . . . . . . . . . . . 68,323 68,049 67,802
========== ========== ==========
Operating Income (Loss) of Major Business Segments
(Excludes general corporate expenses)
Natural gas and oil exploration and production . . . $ (11,450) $ 25,617 $ (37,293)
Natural gas pipeline & GPM . . . . . . . . . . . . . 59,580 27,048 73,425
Natural gas distribution . . . . . . . . . . . . . . 54,634 38,334 34,175
Power and other. . . . . . . . . . . . . . . . . . . 3,478 5,761 9,795
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
A-18
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS
Year Ended December 31
----------------------------------------------
1995 1994 1993
----------------------------------------------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations . . . . . . . . . . . . . $ 13,053 $ 81,452 $(16,037)
Depreciation and amortization. . . . . . . . . . . . . . . . . . . 168,262 126,979 144,326
Deferred income-tax benefit. . . . . . . . . . . . . . . . . . . . (5,680) (59,151) (847)
Recoveries of gas-purchase contract settlements. . . . . . . . . . 51,297 49,602 50,825
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,283 (2,544) (5,548)
Changes in current operating assets and liabilities
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . (31,476) 13,038 (17,988)
Other current assets . . . . . . . . . . . . . . . . . . . . . . 13,087 (34,014) (13,645)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 18,503 (2,142) 51,465
Other current liabilities. . . . . . . . . . . . . . . . . . . . 18,332 (20,041) (36,153)
Litigation judgment payable. . . . . . . . . . . . . . . . . . (62,498) 47,032
-------- -------- --------
Net Cash Flows from Operating Activities . . . . . . . . . . . 252,661 90,681 203,430
-------- -------- --------
INVESTING ACTIVITIES
Purchases of businesses, net of cash acquired. . . . . . . . . . . (348,607) (122) 508
Additions of property, plant and equipment . . . . . . . . . . . . (297,026) (260,058) (218,693)
Retirements of property, plant and equipment . . . . . . . . . . . 59,699 16,756 15,211
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,225) 7,005 (2,711)
--------- -------- --------
Net Cash Flows used for Investing Activities . . . . . . . . . (605,159) (236,419) (205,685)
--------- -------- --------
FINANCING ACTIVITIES
Change in commercial paper and other short-term borrowings . . . . 32,759 116,271 (118,842)
Borrowing under EEX bank revolving credit agreement and
bridge loan. . . . . . . . . . . . . . . . . . . . . . . . . . . 530,000
Repayment of DALEN bank debt assumed at acquisition. . . . . . . . (115,000)
Issuance of mandatorily redeemable preferred securities
of subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Issuance of EEX common stock . . . . . . . . . . . . . . . . . . . 207,872
Retirement of EEX revolving credit agreement and
bridge loan. . . . . . . . . . . . . . . . . . . . . . . . . . . (370,000)
Issuance of senior long-term debt. . . . . . . . . . . . . . . . . 150,000 300,145 200,008
Debt issuance costs. . . . . . . . . . . . . . . . . . . . . . . . (944) (883)
Retirement of senior long-term debt and
convertible debentures . . . . . . . . . . . . . . . . . . . . . (162,677) (214,983) (423,523)
Settlement of foreign currency swap. . . . . . . . . . . . . . . . 23,089
Issuance of Series F Preferred Stock . . . . . . . . . . . . . . . 72,797
Retirement of Series D Preferred Stock . . . . . . . . . . . . . . (75,000)
Change in advances under lease arrangements. . . . . . . . . . . . 9,883 (32,157) 13,571
Change in assignments of future gas purchase credits . . . . . . . (17,191) (21,000) (15,923)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (784) 1 3,988
Issuance of ENSERCH common stock . . . . . . . . . . . . . . . . . 4,408 3,451 10,876
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . . . . (25,401) (25,071) (25,967)
-------- --------- --------
Net Cash Flows from (used for) Financing Activities. . . . . . 392,925 123,571 (332,723)
-------- --------- --------
Net Cash Flows from (used for) Discontinued Operations . . . . . . (28,102) (942) 318,408
-------- --------- --------
Net Increase (Decrease) in Cash and Equivalents. . . . . . . . . . . 12,325 (23,109) (16,570)
Cash and Equivalents at Beginning of Year. . . . . . . . . . . . . . 9,811 32,920 49,490
-------- -------- --------
Cash and Equivalents at End of Year. . . . . . . . . . . . . . . . . $ 22,136 $ 9,811 $ 32,920
======== ======== ========
Amounts paid (refunded)
Interest and other financing costs (net of amount capitalized) . . $ 99,182 $ 66,926 $101,549
======== ======== ========
Income taxes - net . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,659) $ 5,245 $ 20,900
======== ======== ========
Purchases of businesses
Fair value of assets acquired. . . . . . . . . . . . . . . . . . $502,955 $ 7,793
Cash paid for acquisitions . . . . . . . . . . . . . . . . . . . 348,607 (508)
-------- --------
Liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . $151,348 $ 8,301
======== ========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
A-19
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS
December 31
--------------------------
1995 1994
--------------------------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents. . . . . . . . . . . . . . . . . . . . $ 22,136 $ 9,811
Accounts receivable . . . . . . . . . . . . . . . . . . . . 296,178 224,500
Gas stored underground. . . . . . . . . . . . . . . . . . . 107,633 114,862
Prepayments for gas and recoverable
gas-purchase settlements. . . . . . . . . . . . . . . . . 7,047 52,565
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,922 128,706
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . 533,916 530,444
---------- ----------
Investments . . . . . . . . . . . . . . . . . . . . . . . . . 64,974 56,165
---------- ----------
Property, Plant and Equipment (at cost)
Natural gas and oil exploration and production (full-cost
method) . . . . . . . . . . . . . . . . . . . . . . . . . 2,581,737 2,070,318
Natural gas pipeline & gathering, processing
and marketing . . . . . . . . . . . . . . . . . . . . . . 827,913 775,962
Natural gas distribution. . . . . . . . . . . . . . . . . . 948,076 898,361
Power and other . . . . . . . . . . . . . . . . . . . . . . 32,702 32,186
General and other . . . . . . . . . . . . . . . . . . . . . 23,761 26,672
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 4,414,189 3,803,499
Less accumulated depreciation and amortization. . . . . . . 1,687,409 1,550,014
---------- ----------
Net property, plant and equipment . . . . . . . . . . . . 2,726,780 2,253,485
---------- ----------
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . 55,424 48,443
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $3,381,094 $2,888,537
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Commercial paper and other short-term borrowings. . . . . . $ 187,000 $ 154,241
Current portion of senior long-term debt. . . . . . . . . . 14,760 10,600
Accounts payable. . . . . . . . . . . . . . . . . . . . . . 329,844 331,920
Accrued interest. . . . . . . . . . . . . . . . . . . . . . 22,436 35,885
Other current liabilities . . . . . . . . . . . . . . . . . 123,212 95,635
Liabilities for discontinued operations . . . . . . . . . . 42,120 59,259
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . 719,372 687,540
---------- ----------
Senior Long-term Debt . . . . . . . . . . . . . . . . . . . . 870,476 715,721
---------- ----------
Convertible Subordinated Debentures . . . . . . . . . . . . . 90,750 90,750
---------- ----------
Other Liabilities
Deferred income taxes . . . . . . . . . . . . . . . . . . . 277,076 280,051
Accrued pension costs . . . . . . . . . . . . . . . . . . . 54,959 53,617
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,845 147,570
---------- ----------
Total other liabilities . . . . . . . . . . . . . . . . . 499,880 481,238
---------- ----------
Mandatorily Redeemable Preferred Securities
of Subsidiary of EEX. . . . . . . . . . . . . . . . . . . . 150,000
---------- ----------
Minority Interest in Subsidiaries . . . . . . . . . . . . . . 156,434 12,101
---------- ----------
Commitments and Contingent Liabilities (Note 7) . . . . . . .

Shareholders' Equity
Adjustable rate preferred stock . . . . . . . . . . . . . . 175,000 175,000
Common shareholders' equity . . . . . . . . . . . . . . . . 719,182 726,187
---------- ----------
Shareholders' equity. . . . . . . . . . . . . . . . . . . 894,182 901,187
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $3,381,094 $2,888,537
========== ==========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
A-20
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED COMMON SHAREHOLDERS' EQUITY

Year Ended December 31
------------------------------------------
1995 1994 1993
------------------------------------------
(In thousands)
<S> <C> <C> <C>
Common Stock - $4.45 par value, authorized 100 million shares
Balance at beginning of year . . . . . . . . . . . . . . $303,301 $301,977 $299,207
Issued for stock plans (358; 298; and 622 shares). . . 1,596 1,324 2,770
-------- -------- --------
Balance at end of year (Outstanding shares:
68,516; 68,158; and 67,860). . . . . . . . . . . . . . 304,897 303,301 301,977
-------- -------- --------
Paid in Capital
Balance at beginning of year . . . . . . . . . . . . . . 334,672 333,768 348,442
Excess of proceeds over par value of
common stock issued for stock plans. . . . . . . . . 4,185 3,107 8,106
Dividends declared in excess of retained earnings. . . (22,780)
Series F preferred stock issuance costs. . . . . . . . (2,203)
-------- -------- --------
Balance at end of year. . . . . . . . . . . . . . . . . 338,857 334,672 333,768
-------- -------- --------
Retained Earnings (Deficit)
Balance at beginning of year . . . . . . . . . . . . . . 89,054 11,913 (44,307)
Net income . . . . . . . . . . . . . . . . . . . . . . 13,053 102,094 59,381
Dividends declared . . . . . . . . . . . . . . . . . . (25,162) (24,952) (25,939)
Transfer of dividends declared in excess of
retained earnings to paid in capital . . . . . . . . 22,780
Other. . . . . . . . . . . . . . . . . . . . . . . . . (4) (1) (2)
-------- -------- --------
Balance at end of year . . . . . . . . . . . . . . . . . 76,941 89,054 11,913
-------- -------- --------
Unamortized Restricted Stock Compensation
Balance at beginning of year. . . . . . . . . . . . . . . (840)
Shares granted (59 and 89). . . . . . . . . . . . . . . (865) (1,261)
Cancellations (5 and 14). . . . . . . . . . . . . . . . 64 192
Amortization. . . . . . . . . . . . . . . . . . . . . . 460 140
Market valuation adjustments. . . . . . . . . . . . . . (332) 89
-------- --------
Balance at end of year. . . . . . . . . . . . . . . . . . (1,513) (840)
-------- -------- --------
Common Shareholders' Equity. . . . . . . . . . . . . . . . $719,182 $726,187 $647,658
======== ======== ========

<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
A-21
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All dollar amounts, except per share amounts, in the notes to 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.
Information by business segments is presented elsewhere herein and is an
integral part of these financial statements. The preparation of financial
statements requires the use of significant estimates and assumptions by
management; actual results could differ from those estimates.

The financial statements for years prior to 1995 have been restated to include
the historical results of DGS Holdings Corp. (DGS) following a pooling-of-
interests transaction effective June 30, 1995 (see Note 2).

Prior-period results also have been restated to reflect a realignment of
business segments. The pipeline and gas marketing operations, formerly
reported under the natural gas transmission and distribution segment, and the
gas processing operations, formerly reported separately as the natural gas
liquids processing segment, are now combined as the natural gas pipeline &
gathering, processing and marketing (GPM) business segment. Distribution
utility operations are now reported as the natural gas distribution segment.

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 purchased in the United States with a maturity
of three months or less at date of purchase are considered to be cash
equivalents.

Derivative Instruments - The Corporation frequently enters into swaps,
futures, options and other derivative contracts in connection with its natural
gas marketing activities conducted by Enserch Energy Services, Inc. (EES) or
to hedge the impact of market fluctuations in gas and oil prices on
anticipated future gas and oil production of Enserch Exploration, Inc. (EEX)
or other contractual commitments. The Corporation defers the impact of
changes in the market value of contracts that serve as hedges until the
related transaction is completed. The Corporation also enters into interest-
rate swaps to manage risk associated with interest rates and reduce the
Corporation's exposure to interest rate fluctuations. Interest-rate swaps are
valued on a periodic basis, with resulting differences deferred and recognized
as an adjustment to interest and other financing costs over the term of the
agreement.

A-22
<PAGE>
<PAGE>
Natural Gas and Oil Exploration and Production - The full-cost accounting
method prescribed by the Securities and Exchange Commission (SEC) is followed
for gas and oil properties. Under this method, all acquisition, exploration
and development costs incurred, including salaries, benefits and other
internal costs directly attributable to these activities, are capitalized.
All costs associated with production and general corporate activities are
expensed in the period incurred. 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
equivalent energy content. Amortization of gas and oil properties was
approximately 6.0% in 1995, 5.8% in 1994 and 6.0% in 1993. Depreciation of
other property, plant and equipment is provided principally by the straight-
line method over the estimated service lives of the related assets. At
December 31, 1995, 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.

Natural Gas Pipeline & GPM - Lone Star Pipeline Company (Lone Star Pipeline
or LSP) is subject to regulatory utility accounting requirements. Pipeline
revenues consist of the transportation charge to Lone Star Gas Company (Lone
Star Gas or LSG) and transportation revenues from unaffiliated customers. The
transportation rate charged to LSG for gas ultimately consumed by residential
and commercial customers is established by the Railroad Commission of Texas.
The pipeline system is generally depreciated by the straight-line method over
approximately 40 years. Gas stored underground is valued at average cost.

Natural Gas Distribution - Lone Star Gas is also subject to regulatory utility
accounting requirements. LSG city gate rate for the cost of gas ultimately
delivered to residential and commercial customers is established by the
Railroad Commission of Texas and provides for full recovery of the actual cost
of gas delivered, including out-of-period costs such as gas-purchase contract
settlement costs. LSG's rates to residential and commercial customers are
established by the municipal governments of the cities and towns served, with
the Railroad Commission of Texas having appellate jurisdiction. Lone Star Gas
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 distribution system is depreciated by the straight-line method
over approximately 40 years.

2. CHANGE IN ORGANIZATION, ACQUISITIONS AND DISPOSITIONS

Prior to December 30, 1994, ENSERCH's 99.2% ownership of Enserch Exploration
Partners, Ltd. (EP) was held primarily through Enserch Processing Partners
Limited (EPPL). On December 30, 1994, EEX 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. In 1995, ENSERCH sold its

A-23
<PAGE>
<PAGE>
international gas and oil operations and its SACROC operations to EEX for
1,240,000 shares of EEX common stock and $4.2 million in cash.

On June 8, 1995, EEX acquired all the capital stock of DALEN Corporation
(DALEN) for cash of $340 million and assumed DALEN's bank debt of $115
million. The acquisition was accounted for as a purchase. The assets
acquired and the liabilities assumed were recorded at their estimated fair
value pending final evaluation. Essentially all of the valuation adjustment
was assigned to gas and oil properties.

Following is a summary of pro forma results of operations assuming the DALEN
acquisition had occurred at the beginning of the periods presented:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . . . $1,979,564 $2,238,904
Operating Income. . . . . . . . . . . . . . . . . . . . 97,272 108,879
Net Income. . . . . . . . . . . . . . . . . . . . . . . 2,793 91,652
Earnings (Loss) Applicable to Common Stock. . . . . . . (8,897) 80,033
Earnings (Loss) Applicable to Common Stock - per share. (.13) 1.18
</TABLE>
At June 30 and September 30, 1995, ENSERCH's full-cost ceiling amount
attributable to the properties acquired in the DALEN acquisition was
significantly less than the unamortized cost of producing properties acquired,
but at December 31, 1995, the ceiling amount exceeded costs by some $19
million. ENSERCH believes that the acquired properties have significant
exploration and development potential. ENSERCH expects to be able to utilize
its expertise, particularly with respect to tight sands reservoirs, to enhance
production and cash flows from these properties because of the geologic
similarity and proximity of the major producing properties to ENSERCH's other
properties. ENSERCH believes that the unamortized cost of the gas and oil
properties acquired is recoverable from future production. ENSERCH requested
and was granted a waiver of the full-cost ceiling limitation on these
properties by the SEC through June 30, 1996. If an excess exists after that
date, a write-down may be required.

On September 26, 1995, EEX sold 20 million shares of its common stock to the
public for net proceeds of approximately $208 million, and ENSERCH's ownership
percentage was reduced from 99.2% to 83.4%. As a result of the stock sale,
ENSERCH's equity interest in EEX, after the reduction in ownership percentage,
increased $59 million. In accordance with the full-cost accounting method,
ENSERCH credited the $59 million to the carrying value of gas and oil
properties, with no gain recognized on the sale since the sale did not
significantly alter the relationship between capitalized costs and proved
reserves.

On June 29, 1995, ENSERCH purchased the principal operating assets of Sunrise
Energy Services, Inc. and subsidiaries (Sunrise), a nonregulated marketer of
natural gas, for approximately $9 million in cash, including some $8 million
of cost in excess of net assets acquired. The acquisition was accounted for
as a purchase. The goodwill is being amortized over 20 years. The acquired
Sunrise operations had revenues of approximately $76 million for the six
months ended June 30, 1995 and $232 million for the year ended December 31,
1994. Operating results of the Sunrise operations for these periods were not

A-24
<PAGE>
<PAGE>
significant. The Sunrise operations do not constitute a significant
acquisition; therefore, pro forma information is not presented.

Operations of DALEN and Sunrise have been included in the accompanying
consolidated financial statements from their respective dates of acquisition.

Effective June 30, 1995, the Corporation exchanged 1,204,098 shares of ENSERCH
common stock for 100% of the outstanding shares of DGS, which, through its
subsidiary, is a major marketer of natural gas and natural-gas services. The
transaction was accounted for as a pooling-of-interests. Accordingly, the
Corporation's financial statements have been restated for all periods
presented to include DGS in the natural gas pipeline & GPM segment. Common
stock at the beginning of 1993 has been increased by $5.4 million to reflect
the par value of shares issued, paid in capital has been reduced by $5.3
million for the excess of the par value over net assets acquired, and retained
earnings has been increased by $.8 million for the retained earnings of DGS.
Operating results of DGS for the periods preceding the acquisition were as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31
Six Months Ended --------------------
June 30, 1995 1994 1993
------------- -------- --------
<S> <C> <C> <C>
Revenues $120,030 $238,077 $145,701
Net Income (Loss) 527 (223) 144

</TABLE>
DGS's net income for the 1995 and 1994 periods was impacted by significant
financing costs that are not incurred under ENSERCH ownership. The 1994
results reflect significant severance and other costs relating to an
acquisition.

3. BORROWINGS AND LINES OF CREDIT
<TABLE>
<CAPTION>
Senior Long-term Debt at December 31: 1995 1994
-------- --------
<S> <C> <C>
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% Notes due 1996 through 1999. . . . . . . . . . . . . . . 65,600 76,200
EEX Bank Revolving Credit Agreement Maturing 1999. . . . . . . 160,000
8 7/8% Notes due 2001 . . . . . . . . . . . . . . . . . . . . 100,000 100,000
6 3/8% Notes due 2004. . . . . . . . . . . . . . . . . . . . . 150,000 150,000
7 1/8% Notes due 2005. . . . . . . . . . . . . . . . . . . . . 150,000
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,636 121
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . 885,236 726,321
Less current maturities. . . . . . . . . . . . . . . . . . . . 14,760 10,600
-------- --------
Noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . $870,476 $715,721
======== ========
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Maturities $14,760 $119,000 $19,300 $329,500 $4,500
</TABLE>

A-25
<PAGE>
<PAGE>
EEX has a $350 million revolving credit line that matures on May 1, 1999, of
which $190 million was unused at December 31, 1995. The interest rate ranges
from LIBOR (5.94% in effect at December 31, 1995) plus .35% to .75% per annum,
plus a facility fee of from .15% to .25% per annum, depending upon EEX's
consolidated capitalization ratio.

The convertible subordinated debentures have an interest rate of 6 3/8%, are
due in 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 102.55% of the principal amount, plus accrued interest, through
March 31, 1996 and at declining premiums thereafter.

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, 1995, all unused, 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.

Commercial paper totaled $187 million at December 31, 1995 and $151 million
at year-end 1994. The weighted average interest rate in effect on commercial
paper borrowings at December 31, 1995 and 1994, was 6.0% and 6.3%,
respectively.
<TABLE>
<CAPTION>

Interest and Other Financing Costs: 1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest costs incurred. . . . . . . . . . . . . . . . $ 85,118 $ 74,260 $ 82,181(a)
Dividends on preferred
securities of subsidiary . . . . . . . . . . . . . . 4,123
Interest capitalized . . . . . . . . . . . . . . . . . (5,917) (4,950) (4,461)
-------- -------- --------
Interest charged to expense. . . . . . . . . . . . . $ 83,324 $ 69,310 $ 77,720(a)
======== ======== ========
<FN>
(a) Includes interest not related to borrowings of $8.2 million.
</FN>
</TABLE>
4. MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY

On August 4, 1995, a subsidiary ("Issuer") of EEX, completed the private
placement of $150 million of adjustable rate mandatorily redeemable preferred
securities for which EEX is also obligated. The dividends on the preferred
securities are based on LIBOR plus .696% and are reflected in interest and
other financing costs in the statements of consolidated income. In November
1995, EEX entered into an interest-rate swap to effectively fix the rate for
the dividend on these preferred securities at 6.49% (see Note 6). The
mandatory redemption date for Issuer's preferred securities is August 4, 2005
or earlier under certain conditions.

A-26
<PAGE>
<PAGE>
5. SHAREHOLDERS' EQUITY

As of December 31, 1995, 7,686,244 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>

Adjustable Rate
Preferred Stock Stated Value Per Shares Outstanding
at December 31, 1995 and 1994: ----------------------- -----------------------
- ----------------------------- Preferred Depositary Preferred Depositary
Share Share Shares Shares Amount
------ ------- ------ --------- --------
<S> <C> <C> <C> <C> <C>
Series E . . . . . . . . . . . $1,000 $100 100,000 1,000,000 $100,000
Series F . . . . . . . . . . . 1,000 25 75,000 3,000,000 75,000
--------
Total . . . . . . . . . . . $175,000
========
</TABLE>
The Series E stock is redeemable at the option of the Corporation at stated
value at any time and the Series F stock is redeemable at stated value after
May 1, 1999. 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 E Series F
-------------- ------------
<S> <C> <C>
Dividend rate 1.20% below 87% of
Applicable Rate Applicable Rate
Minimum rate 7.00% 4.50%
Maximum rate 13.00% 10.50%
</TABLE>

<TABLE>
<CAPTION>
Dividends Declared: 1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
Adjustable Rate Preferred Stock:
Series D (redeemed in 1994)($.42, $3.77 per share) . . $ $ 625 $ 5,653
Series E ($7.00, $7.00, $7.00 per depositary share). . . 7,000 7,000 7,000
Series F ($1.54, $1.32 per depositary share) . . . . . . 4,610 3,955
Common Stock ($.20, $.20, $.20 per share). . . . . . . . . 13,552 13,372 13,286
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $25,162 $24,952 $25,939
======= ======= =======
</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, 1995, the amount of dividends on common stock
that could be paid under the most restrictive of these agreements exceeded the
retained earnings and paid in capital of the Corporation.

A-27
<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, 1995,
there were 130 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>

Summary of Stock Option Activity: Number of Options
------------------------------------------
1995 Price Range 1995 1994 1993
----------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Outstanding - Beginning
of year. . . . . . . . . . . . . . . $ 4.45-$25.63 2,308,823 2,388,970 2,327,410

Granted. . . . . . . . . . . . . . . $13.25-$17.44 263,200 144,700 257,000

Exercised (a). . . . . . . . . . . . $12.50-$17.00 (27,825) (32,347) (115,270)

Canceled or expired. . . . . . . . . $12.50-$25.63 (29,600) (192,500) (80,170)
--------- --------- ---------
Outstanding - End of year. . . . . . . $ 4.45-$23.88 2,514,598 2,308,823 2,388,970
========= ========= =========
Exercisable. . . . . . . . . . . . . . $ 4.45-$23.88 1,957,637 1,838,175 1,737,127
========= ========= =========
<FN>
(a) Price ranges for options exercised in 1994 were $4.45 to $12.50 and in 1993 were $12.50 to $21.00 per
share.
</FN>
</TABLE>

The current stock option plan was amended in February 1994 to include
provisions for granting restricted stock. At December 31, 1995, a total of
128,456 shares of performance-based restricted stock had been issued to
certain 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. In addition, a total of
11,501 shares of non-performance based restricted stock were issued in May
1995 to certain non-employee directors and were outstanding at December 31,
1995.

A-28
<PAGE>
<PAGE>
6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Corporation's operations involve managing market risks related to changes
in interest rates and commodity prices. Derivative financial instruments,
specifically swaps, futures, options and other contracts, are used to reduce
and manage those risks.

Interest-Rate Swaps - In November 1995, EEX entered into an interest-rate swap
on a notional amount of $150 million to fix the interest rate associated with
the mandatorily redeemable preferred securities of subsidiary. The notional
amount declines on a schedule that parallels the estimated redemption of the
securities and terminates in July 2000. Under the swap agreement, EEX is to
receive interest on the outstanding notional amount at a rate (5.94% in effect
at December 31, 1995) based on LIBOR, reset quarterly, and is to pay a fixed
rate of 5.8%. The net effect of the swap fixes the rate on the preferred
dividends at 6.49%.

In December 1995, the Corporation entered into an interest-rate swap with a
bank on a notional amount of $150 million to fix the interest on $150 million
of the $210 million floating rate obligations of the Garden Banks lease at a
fixed cost of 5.71%. The swap has a staggered maturity out to seven years
with an average life of approximately five years. The cost of the Garden
Banks lease is based on the three month LIBOR rate (which was 5.81% at the
date of the agreement in December 1995).

The Corporation is exposed to market risk under these swap arrangements due
to the possibility of exchanging a lower interest rate for a higher interest
rate. The counterparties are major financial institutions, and the risk of
incurring losses related to credit risk is considered by the Corporation to
be remote.

Hedging Activities - The Corporation, through EEX, enters into swaps, futures
and other derivative contracts to hedge the price risks associated with a
portion of anticipated future gas and oil production. 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. The Corporation
does not obtain collateral to support the agreements but monitors the
financial viability of counterparties and believes its credit risk is minimal
on these transactions. In the event of nonperformance by counterparties, the
Corporation would be exposed to price risk. The Corporation has some risk of
accounting loss since the price received for the product at the actual
physical delivery point may differ from the prevailing price at the delivery
point required for settlement of the hedging transaction.

In late December 1995, there was a temporary cessation to the historical
correlation of natural-gas prices in the physical market that serves as the
delivery point for NYMEX future contracts and the prices in certain other
physical markets where EEX sells a substantial portion of its natural-gas
production. As a result, EEX's NYMEX futures contracts for the first quarter
of 1996 no longer served as effective hedges for the portion of production
that would be sold in market locations other than those to which the NYMEX

A-29
<PAGE>
<PAGE>
contracts were tied. In late December and early January, EEX closed
substantially all of its first quarter 1996 NYMEX futures contracts and, as
a result, recognized a loss of $6.0 million in 1995. For the full year 1995,
EEX recognized a net gain of $.1 million on hedging activities related to the
sale of its gas and oil production.

At December 31, 1995, EEX had outstanding swaps, collars and futures
agreements that were entered into as hedges extending through December 31,
1996 to exchange payments on 39 Bcf of natural gas and 655 MBbls of oil. The
weighted average strike price and market price per Mcf of natural gas was
$2.01 and $2.10, respectively, and the weighted average strike price and
market price per barrel of oil was $18.43 and $19.03, respectively. At
December 31, 1995, after giving effect to the $6.0 million mark-to-market loss
mentioned above, there were $1.3 million of net unrealized and unrecognized
hedging losses based on the difference between the strike price and the NYMEX
futures price for the applicable trading month. In addition, there were $2.4
million of realized losses on hedging activities which were deferred and will
be applied as a reduction in revenues in the month of physical sale of
production.

Natural Gas Marketing Activities - The Corporation, through EES, is a marketer
of natural gas and natural-gas services. As part of these business
activities, EES enters into a variety of transactions, including forward
contracts principally involving physical delivery of natural gas and
derivative financial instruments, including swaps, options, futures and other
contractual arrangements. The derivative transactions are concentrated with
established energy companies and major financial institutions.

EES's marketing activities involve price commitments into the future and,
therefore, give rise to market risk, which represents the potential loss that
can be caused by a change in the market value of a particular commitment.
Net open portfolio positions often result from the origination of new
transactions or in response to changing market conditions. The Corporation
closely monitors and manages its exposure to market risk.

Credit risk relates to the risk of loss that the Corporation would incur as
a result of nonperformance by counterparties pursuant to the terms of their
contractual obligations. The Corporation maintains credit policies with
regard to its counterparties that management believes significantly minimize
overall credit risk. The Corporation does not obtain collateral to support
the agreements but monitors the financial viability of counterparties and
believes its credit risk is minimal on these transactions.

EES enters into contracts to purchase and sell natural gas for physical
delivery in the future. At December 31, 1995, EES had net commitments to
purchase 33 trillion Btu's (about 32 Bcf) of natural gas through the year 2000
with offsetting net financial positions to sell 27 trillion Btu's (about 26
Bcf), including commitments to purchase 41 trillion Btu's (about 40 Bcf) from
EEX and financial positions to sell the same quantity. There was a net
unrealized and unrecognized gain of $2.7 million at December 31, 1995 on these
contracts. At December 31, 1994, EES had a net commitment to purchase natural
gas for which a $4 million charge was recorded to reflect lower year-end
market prices.

A-30
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Fair Value of Financial Instruments
at December 31: 1995 1994
--------------------- ---------------------
Carrying Estimated Carrying Estimated
or Notional Fair or Notional Fair
Amount Value Amount Value
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Senior long-term debt (a). . . . . . . . . . . . . $887,079 $908,425 $727,597 $697,378
Convertible debentures (b) . . . . . . . . . . . . 90,750 88,027 90,750 77,138

Off-balance sheet assets (liabilities)
Recoverable gas-purchase contracts (c) . . . . . 5,769 5,872 30,264 29,726
Receivables sold with limited
recourse (d) . . . . . . . . . . . . . . . . . 100,000 100,000 132,723 132,723
Interest-rate swaps (e). . . . . . . . . . . . . (2,664)
EEX gas and oil swaps (e). . . . . . . . . . . . (1,324) 4,085
EES derivatives (f). . . . . . . . . . . . . . . 2,695 (160)
Financial guarantees (e) . . . . . . . . . . . . (119,095) (111,435)

<FN>
Estimated fair value: (a) variable-rate debt - approximates carrying amount, exchange traded debt - quoted
market prices, and other debt - discounted value using rates for debt with similar characteristics; (b)
quoted market prices; (c) discounted cash flows; (d) approximates carrying or notional amount; (e) based
either on quotes or the cost to terminate or otherwise settle the agreements; (f) based on mark-to-market
valuations.
</FN>
</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, accrued interest and mandatorily
redeemable preferred securities of subsidiary, approximated carrying value.
The estimated fair value of senior long-term debt does not reflect prepayment
penalties, which would be incurred upon early extinguishment.

7. 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
of the Corporation for the years 1982-1986 (approximately $85 million),
interest, costs and attorneys' fees.

On September 20, 1994, the first of 21 asbestos related lawsuits was filed
against former subsidiaries of the Corporation and numerous other unrelated
defendants in the District Court of Wyandotte County, Kansas. There are
currently 280 plaintiffs who claim to have been exposed to asbestos and
asbestos related products at their places of employment since 1935. The
plaintiffs are claiming damages of $123 million for physical and psychological
injuries under theories of negligence, strict liability and breach of
warranty.

A-31
<PAGE>
<PAGE>
On October 30, 1995, a lawsuit was filed in the Supreme Court of Western
Australia by Woodside Petroleum Ltd. and its joint venture partners against
the Corporation, a former subsidiary of the Corporation, and others.
Plaintiffs seek damages of approximately $18 million from the Corporation
based on an indemnity arrangement and approximately $208 million from the
other defendants for alleged breaches of contract and breaches of a trade
practice act, all in connection with the construction of an offshore gas and
condensate drilling production platform. The Corporation has agreed to
indemnify the current owner of the former subsidiary pursuant to the
provisions in the prior sales agreement. The Corporation is reviewing the
relevant documents and facts in order to determine the extent, if any, of its
potential liability in the lawsuit.

Management of the Corporation believes it has meritorious defenses to the
claims made in these and other actions brought in the ordinary course of
business. In the opinion of management, the Corporation will incur no
liability from these 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,
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. 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>

1996 1997 1998 1999 2000 Thereafter
----- ----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Operating leases (a) . . . . . . . . . . . . $25.2 $14.4 $ 9.8 $ 7.3 $ 6.7 $67.3
Capital leases (b) . . . . . . . . . . . . . 4.0 3.9 3.7 1.8 23.3 -
Gas-purchase contracts . . . . . . . . . . . 120.0 113.0 89.0 38.0 9.0 2.0
<FN>
(a) Excludes $168 million of guaranteed estimated residual value to be paid in 1998 if the lease terminates.
(b) Includes a total of $6.3 million representing interest.
</FN>
</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 (37.5% owned) and
Garden Banks Block 388 (60% owned) projects. The leases contain fixed-priced
purchase options and, if terminated, require a guaranteed residual payment.

The lease for the Mississippi Canyon Block 441 project was modified in the
second quarter of 1994 with terms that resulted in capital lease accounting
treatment and a noncash investing and financing transaction of $34 million.
The balance of the lease obligation is $30.4 million at December 31, 1995; the
noncurrent portion of the lease obligation of $28.4 million at year-end 1995
is included in other noncurrent liabilities.

A-32
<PAGE>
<PAGE>
In the third quarter of 1995, a Mobil Corporation (Mobil) affiliate acquired
a 40% working interest in EEX's Garden Banks Block 388 project; accordingly,
ENSERCH was relieved of operating lease obligations of approximately $140
million, as well as 40% of the capital expenditures required to complete the
project. EEX now owns a 60% working interest in the project and remains the
operator.

Under the Garden Banks lease arrangement, the lessor funded EEX's $210 million
(60%) share of construction cost of the facilities. The facilities have been
leased for an initial period extending through March 31, 1998. 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 has the option to purchase
the facilities throughout the lease period and has guaranteed an estimated
residual value for the facilities of approximately $168 million should the
lease terminate. Lease payments were deferred prior to commencement of
production in the third quarter of 1995. Amortization of the deferred lease
payments began at that time.

The Corporation had a number of other noncancelable long-term operating leases
at December 31, 1995, principally for office space and machinery and
equipment. Rental expenses incurred under all operating leases aggregated
$13.1 million in 1995, $8.4 million in 1994 and $11.0 million in 1993. Rental
income received for subleased office space was $3.4 million in 1995, $3.6
million in 1994 and $3.4 million in 1993. Future minimum rental income to be
received for subleased office space is $6.9 million over the next five years.

Gas-Purchase Contracts - Lone Star Gas Company buys gas under long-term,
intrastate contracts in order to assure reliable supply to its customers.
Many of these contracts require minimum purchases of gas. LSG has made
accruals for payments that may be required for settlement of gas-purchase
contract claims asserted or that are probable of assertion. LSG continually
evaluates its position relative to asserted and unasserted claims, above-
market prices or future commitments. Management believes that LSG has not
incurred losses for which reserves should be provided at December 31, 1995.
Based on estimated gas demand, which assumes normal weather conditions,
requisite gas purchases are expected to substantially satisfy purchase
obligations for the year 1996 and thereafter.

Sales of Receivables - The Corporation has sold $100 million of receivables
under a limited recourse agreement that extends to October 31, 1996.
Additional receivables are continually sold to replace those collected. The
agreement is expected to be extended. The uncollected balance of sold
receivables of discontinued operations was repurchased during 1995. The
uncollected balances of receivables sold were $100 million at year-end 1995
and $133 million at year-end 1994.

Guarantees - The Corporation and/or its subsidiaries are the guarantor on
various commitments and obligations of others aggregating some $119 million
at December 31, 1995. The Corporation is exposed to loss in the event of
nonperformance by other parties. However, the Corporation does not anticipate
nonperformance by the counterparties.

A-33
<PAGE>
<PAGE>
Concentrations of Credit Risk - Lone Star Gas 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, 1995 and 1994, the allowance for possible losses deducted from
accounts receivable was $5,174 and $5,264, respectively. The Corporation
believes that its provision for possible losses on uncollectible accounts
receivable is adequate for its credit loss exposure.

8. 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 1995 1994 1993
(in millions): ------ ----- -----
<S> <C> <C> <C>
Service cost - benefits earned during the period . . . . $ 3.8 $ 7.5 $12.5
Interest cost on projected benefit obligation. . . . . . 23.5 22.6 19.5
Actual (return) loss on assets . . . . . . . . . . . . . (46.8) 3.8 (28.0)
Net amortization and deferral. . . . . . . . . . . . . . 24.0 (27.4) 3.9
------ ----- -----
Net periodic pension expense . . . . . . . . . . . . . . $ 4.5 $ 6.5 $ 7.9
====== ===== =====
Valuation Assumptions:

Discount rate. . . . . . . . . . . . . . . . . . . . . . 7.65% 9.00% 7.25%
Rate of increase in compensation levels. . . . . . . . . 4.00% 4.00% 4.00%
Expected long-term rate of return on assets. . . . . . . 9.50% 9.50% 9.50%

Amounts Recognized (in millions):

Actuarial present value of pension benefit obligation:
Vested benefit obligation. . . . . . . . . . . . . . . $(297.0) $(238.0)
======= =======
Accumulated benefit obligation . . . . . . . . . . . . $(299.3) $(250.2)
======= =======
Projected pension benefit obligation . . . . . . . . . $(327.9) $(272.1)
Plan assets at fair value. . . . . . . . . . . . . . . . 263.1 232.2
------- -------
Projected benefit obligation in excess of plan assets. . (64.8) (39.9)
Unrecognized net asset at transition . . . . . . . . . . (6.0) (8.0)
Unrecognized prior service cost (credit) . . . . . . . . (3.5) (2.2)
Unrecognized net actuarial loss (gain) . . . . . . . . . 16.9 (3.7)
------- -------
Accrued pension cost . . . . . . . . . . . . . . . . . . $ (57.4) $ (53.8)
======= =======
</TABLE>
ENSERCH retained the pension obligations to former engineering and
construction employees. No further benefits will accrue for the former
employees. Plan curtailment gains of $2.2 million in 1994 and $6.9 million
in 1993 were recognized in discontinued operations.

A-34
<PAGE>
<PAGE>
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 or, at the employee's option, EEX
common stock. Costs under the plans were $1.8 million, $1.9 million and
$3.5 million in 1995, 1994, and 1993, respectively.

Postretirement Benefits Other than Pensions - Some retirees 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): 1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits earned during the period . . . . . . . $ .2 $ .4 $ .4
Interest cost on projected benefit obligation. . . . . . . . . 6.0 5.5 5.6
Net amortization and deferral. . . . . . . . . . . . . . . . . 3.6 4.3 4.0
------ ------- -------
Net periodic postretirement benefit cost . . . . . . . . . . . $ 9.8 $ 10.2 $ 10.0
====== ======= =======

Valuation Assumptions:

Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . 7.65% 9.00% 7.25%
Medical cost trend rate. . . . . . . . . . . . . . . . . . . . 7.00% 12.00% 12.00%

Amounts Recognized (in millions):

Accumulated postretirement benefit obligations:
Retirees and dependents. . . . . . . . . . . . . . . . . . . $(68.3) $ (75.2)
Fully eligible active plan participants. . . . . . . . . . . (.3) (1.0)
Other active plan participants . . . . . . . . . . . . . . . (6.9) (6.7)
------ -------
Accumulated postretirement benefit obligation. . . . . . . . (75.5) (82.9)
Unrecognized obligation at transition. . . . . . . . . . . . . 58.1 62.1
Unrecognized net actuarial loss. . . . . . . . . . . . . . . . 10.0 15.1
------ -------
Accrued postretirement benefit cost. . . . . . . . . . . . . . $ (7.4) $ (5.7)
====== =======
</TABLE>

The assumed health care cost trend rate is 7.0% for 1995, declining gradually
to 4.5% after 1999, 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, 1995 and the net periodic postretirement
benefit cost for 1995 would be increased by $4.6 million and $.4 million,
respectively.

A-35
<PAGE>
<PAGE>
9. INCOME TAXES
<TABLE>
<CAPTION>
Provision (Benefit) for Income Taxes
on Continuing Operations: 1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Current
Federal. . . . . . . . . . . . . . . . . . . . . $ 6,230 $(10,196) $ 7,464
State. . . . . . . . . . . . . . . . . . . . . . 321 560 463
Foreign. . . . . . . . . . . . . . . . . . . . . 50 50 (444)
------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . . 6,601 (9,586) 7,483
------- -------- -------
Deferred
Federal. . . . . . . . . . . . . . . . . . . . . (5,680) (59,151) (1,302)
State. . . . . . . . . . . . . . . . . . . . . . 455
-------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . . (5,680) (59,151) (847)
-------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . $ 921 $(68,737) $ 6,636
======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of Income Taxes (Benefit) Computed at the Federal Statutory
Rate to Provision for Income Taxes (Benefit) of Continuing Operations:

1995 1994 1993
Income (loss) from continuing ------- -------- --------
operations before income taxes:
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . . . . . . $17,230 $ 16,582 $ 9,102
Foreign. . . . . . . . . . . . . . . . . . . . . (3,858) (3,294) (18,469)
------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . $13,372 $ 13,288 $ (9,367)
======= ======== ========
Income taxes (benefit) computed at
the federal statutory rate of 35%. . . . . . . $ 4,680 $ 4,651 $ (3,278)
Impact of 1% increase in federal statutory rate. . 10,810
Change in tax status . . . . . . . . . . . . . . . (70,000)
State and foreign taxes. . . . . . . . . . . . . . 242 397 467
Reduction of prior year tax liabilities. . . . . . (3,590) (3,734) (67)
Nondeductible meals and entertainment. . . . . . . 427 360 126
Amortization of property basis difference
from EEX stock sale. . . . . . . . . . . . . . . (454)
Percentage depletion . . . . . . . . . . . . . . . (324) (22) (43)
Tax benefit of dividends to ESOP . . . . . . . . . (256) (316)
Basis difference in investment sold. . . . . . . . (509)
Other - net. . . . . . . . . . . . . . . . . . . . (60) (133) (554)
-------- -------- --------

Provision for Income Taxes (Benefit) . . . . . $ 921 $(68,737) $ 6,636
======== ======== ========
</TABLE>

At the completion of the conversion of EP and EPPL to corporate form in 1994,
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 in 1994.

A-36
<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, 1995 and 1994 balance sheet dates are as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- -------------------------------
Total Current Noncurrent Total Current Noncurrent
------- --------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Deferred Tax Assets:
Net operating-loss and other tax-
credit carryforwards . . . . . . $103,915 $ $103,915 $ 98,582 $ 891 $ 97,691
Retirement and other employee
benefit obligations. . . . . . . 27,811 3,078 24,733 24,139 4,342 19,797
Accruals and allowances. . . . . . 27,755 15,452 12,303 36,857 23,055 13,802
Losses of controlled foreign
corporations . . . . . . . . . . 9,848 9,848 8,790 8,790
All other. . . . . . . . . . . . . 14,212 4,356 9,856 13,646 4,586 9,060
-------- ------- -------- -------- ------- -------
Total. . . . . . . . . . . . . . 183,541 22,886 160,655 182,014 32,874 149,140
-------- ------- -------- -------- ------- -------
Deferred Tax Liabilities:
Exploration and intangible
development costs. . . . . . . . . 209,443 209,443 218,289 218,289
Property-related
differences. . . . . . . . . . . . 166,419 166,419 151,452 151,452
Deferred gas-purchase contract
settlements. . . . . . . . . . 1,553 1,553 10,145 8,398 1,747
All other. . . . . . . . . . . . . . 61,877 8 61,869 57,703 57,703
-------- -------- -------- -------- -------- -------
Total. . . . . . . . . . . . . . . 439,292 1,561 437,731 437,589 8,398 429,191
-------- -------- -------- -------- -------- -------
Net Deferred Tax Liability (Asset) $255,751 $(21,325)(a)$277,076 $255,575 $(24,476)(a) $280,051
======== ======== ======== ======== ======== ========
<FN>
(a) Included in other current assets in the balance sheet.
</FN>
</TABLE>
At December 31, 1995, domestic net operating-loss carryforwards total
$222 million, which begin to expire in 2003, and tax-credit carryforwards
total $26 million, which begin to expire in 1999. The tax benefits of these
carryforwards of $104 million, as shown above, are available to reduce future
income-tax payments.
<TABLE>
<CAPTION>
Cash Payments (Refunds) of Income Taxes: 1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Federal:
Current year, including alternative
minimum tax. . . . . . . . . . . . . . . . . . $ 8,363 $ 10,650 $13,857
Prior years. . . . . . . . . . . . . . . . . . . (10,413) (12,148) 2,000
-------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . . (2,050) (1,498) 15,857
State. . . . . . . . . . . . . . . . . . . . . . . (3,609) 6,743 4,193
Foreign. . . . . . . . . . . . . . . . . . . . . . 850
-------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . . $ (5,659) $ 5,245 $20,900
======== ======== =======
</TABLE>

A-37
<PAGE>
<PAGE>

10. DISCONTINUED OPERATIONS

In October 1994, the Corporation sold Enserch Environmental Corporation, which
conducted the former environmental businesses of Ebasco Services Incorporated
(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.
Discontinued operations are summarized as follows:
<TABLE>
<CAPTION>

Operating Information: 1995 1994 1993
------- --------- ----------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 72,081 $1,416,450
Cost and expenses. . . . . . . . . . . . . . . . . . . . 68,246 1,391,002
--------- ----------
Operating income . . . . . . . . . . . . . . . . . . . . 3,835 25,448
Other income (expense) - net . . . . . . . . . . . . . . (583)
Interest expense . . . . . . . . . . . . . . . . . . . . (1,241) (12,488)
Income taxes . . . . . . . . . . . . . . . . . . . . . . (1,225) (5,373)
--------- ----------
Income from operations . . . . . . . . . . . . . . . . . 1,369 7,004
Gain on sale, net of income-tax provision
of $15,750 in 1994 and benefit of $6,725
in 1993. . . . . . . . . . . . . . . . . . . . . . . . 29,250 68,414
Provision for additional costs and
expenses for the windup of discontinued
businesses, net of tax benefit of $7,523 . . . . . . . (9,977)
--------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 20,642 $ 75,418
========= ==========
Cash Flow Information:
Net cash flows from (used for)
Operating activities . . . . . . . . . . . . . . . . . $(28,102) $(107,487) $ 93,934
Proceeds from sales of assets. . . . . . . . . . . . . 97,749 198,113
Investing activities . . . . . . . . . . . . . . . . . 8,796 26,361
-------- --------- ----------
Net cash flows from (used for) discontinued
operations . . . . . . . . . . . . . . . . . . . . $(28,102) $ (942) $ 318,408
======== ========= ==========
</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 windup of discontinued businesses would be greater than
previously estimated.

At December 31, 1995, discontinued businesses had assets of $74 million,
consisting principally of retained claims and accounts receivable, and current
and other liabilities and reserves of $47 million. The Corporation has filed
suit against certain parties to recover amounts outstanding. Management
expects that substantially all disputes will be resolved by year-end 1997 and
that adequate provision for uncollectible claims and accounts receivable,
income-tax matters and expenses for windup of discontinued operations has been
made.

A-38
<PAGE>
<PAGE>
11. 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): 1995 1994
-------- --------
<S> <C> <C>
Proved gas and oil properties. . . . . . . . . . . . . $2,362.1 $1,946.5
Unproved gas and oil properties. . . . . . . . . . . . 199.3 108.2
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . $2,561.4 $2,054.7
======== ========
Accumulated depreciation and amortization. . . . . . . $ 933.4 $ 836.3
======== ========
</TABLE>
A net credit of $59 million arising from the sale of EEX common stock in
September 1995 was treated as a reduction of the carrying value of gas and oil
properties (see Note 2).
<TABLE>
<CAPTION>

Costs Incurred (in millions): 1995 1994 1993
-------------------- -------------------- ------------------
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 . . . . . . . . . . . $356.3 $ $ 1.6 $ $ 8.3 $
Unproved . . . . . . . . . . 121.6 20.6 12.6 .8
Exploration costs. . . . . . . 59.5 9.0 58.7 3.3 36.8 4.9
Development costs. . . . . . . 46.2 84.2 63.0
------ ------ ------ ------ ------ ------
Total. . . . . . . . . . . . $583.6 $ 9.0 $165.1 $ 3.3 $120.7 $ 5.7
====== ====== ====== ====== ====== ======
Amortization
(Per MMBtu)(a) . . . . . . . $ 1.01 $ 1.04 $ .98
<FN>
(a) Amortization expense per unit of production converted to a common unit of measure, millions of British
thermal units (MMBtu); on a per thousand cubic feet of gas equivalent (Mcfe) basis, the amounts are: $1.03,
$1.06 and $1.01.
<FN>
</TABLE>
<TABLE>
<CAPTION>
Costs Excluded from the Amortizable Base as of December 31, 1995 (in
millions):

Total at
Prior December 31,
Year Incurred 1995 1994 1993 Years 1995
---- ---- ---- ----- ------------
<S> <C> <C> <C> <C> <C>
Property acquisition costs . . $117.9 $18.8 $ 9.2 $ 1.9 $147.8
Exploration costs. . . . . . . 20.2 14.2 3.9 1.1 39.4
Interest capitalized . . . . . 5.3 3.0 2.1 1.7 12.1
------ ----- ----- ----- ------
Total. . . . . . . . . . . $143.4 $36.0 $15.2 $ 4.7 $199.3
====== ===== ===== ===== ======
</TABLE>
A-39
<PAGE>
<PAGE>
Approximately 20% of the excluded costs relates to offshore activities in the
Gulf of Mexico, about 76% 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.

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 interest expense
and corporate overhead.

<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
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. . . . . . . . $ 86.7 $ $110.0 $ $110.0 $
Nonaffiliated . . . . . . 131.9 63.5 81.0
Less:
Production costs (a). . . 67.2 44.0 45.9
Exploration costs (b) . . 9.6 2.3 8.4 1.0 7.6 1.6
Depreciation and
amortization (c). . . . 116.4 .9 85.6 86.0 13.3
Income-tax effects. . . . 8.6 (1.1) 12.4 (.3) 18.0 (5.2)
------ ------ ------ ----- ------ -----
Net producing
activities . . . . . . . $ 16.8 $ (2.1) $ 23.1 $ (.7) $ 33.5 $(9.7)
====== ====== ====== ===== ====== =====
<FN>
(a) Includes severance, ad valorem and production taxes.
(b) Includes internal costs that cannot be directly identified with acquisition, exploration or development
activities.
(c) Amounts for 1995 and 1993 include write-downs of non-U.S. exploratory projects of $.9 million and $13.3
million, respectively. Amount for 1994 excludes a $7.6 million gain from the sale of an inactive offshore
pipeline and facilities, which were not related to gas and oil producing activities.
</FN>
</TABLE>
A-40
<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>
U. S. Reserves: Gas (MMcf) Oil (MBbls)(a)
--------------------------------- ------------------------
1995 1994 1993 1995 1994 1993
---------- ---------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
At January 1 . . . . . . . . . . . . 1,041,736 1,086,482 1,101,426 46,486 39,349 39,231
Changes in reserves
Revisions of previous estimates. . 26,802 (25,106) 20,196 2,312 (499) 1,344
Extensions, discoveries
and additions . . . . . . . . . 62,249 47,580 34,549 21,466 9,877 1,292
Purchase of minerals in place. . . 336,668 787 4,379 11,417 14 3
Sales of minerals in place . . . . (14,497) (894) (4,042) (11,274) (28) (40)
Production . . . . . . . . . . . . (90,195) (67,113) (70,026) (3,870) (2,227) (2,481)
--------- --------- --------- ------- ------- -------
At December 31 . . . . . . . . . . . 1,362,763 1,041,736 1,086,482 66,537 46,486 39,349
========= ========= ========= ======= ======= =======

Proved Developed Reserves
At January 1 . . . . . . . . . . . 698,643 735,093 676,851 14,437 15,380 14,844
At December 31 . . . . . . . . . . 937,372 698,643 735,093 30,110 14,437 15,380
<FN>
(a) Includes condensate and natural gas liquids attributable to leasehold interests of 3,593 MBbls for 1995,
911 MBbls for 1994 and 1,117 MBbls for 1993.
</FN>
</TABLE>
<TABLE>
<CAPTION>

Oil (MBbls)
--------------------
Non-U.S. Reserves: 1995 1994
------- --------
<S> <C> <C>
At January 1 . . . . . . . . . . . . 4,105 0
Extensions, discoveries
and additions . . . . . . . . . 858 4,105
------ ------
At December 31 . . . . . . . . . . . 4,963 4,105
====== ======
Proved Developed . . . . . . . . . . 0 0

</TABLE>
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 prices and contracts 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) $2.19 in 1995, $2.29 in 1994 and $2.38 in 1993; Oil (per
barrel) $16.91 in 1995, $14.07 in 1994 and $11.73 in 1993.

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.

A-41
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Standardized Measure (in millions): 1995 1994 1993
-------- --------- ---------
<S> <C> <C> <C>
Future cash inflows. . . . . . . . . . . . . . . . . $ 4,180.7 $ 3,101.1 $ 3,047.0
Future production and development costs. . . . . . . (1,568.9) (1,218.5) (1,057.9)
Future income-tax expense. . . . . . . . . . . . . . (539.1) (499.3) (528.0)
--------- --------- ---------
Future net cash flows. . . . . . . . . . . . . . . . 2,072.7 1,383.3 1,461.1
Less 10% annual discount . . . . . . . . . . . . . . 834.8 556.1 630.5
--------- --------- ---------
Standardized measure of discounted future net
cash flows . . . . . . . . . . . . . . . . . . . . $ 1,237.9 $ 827.2 $ 830.6
========= ========= =========

Change in Standardized Measure (in millions):

Sales and transfers of gas and oil produced, net of
production costs . . . . . . . . . . . . . . . . . $ (151.4) $ (120.8) $ (136.2)
Changes in prices, net of production and future
development costs. . . . . . . . . . . . . . . . . 63.1 (15.6) (.5)
Extensions, discoveries and improved recovery,
less related costs . . . . . . . . . . . . . . . . 175.8 121.3 41.4
Purchases of minerals in place . . . . . . . . . . . 367.6 1.6 9.4
Revisions of previous quantity estimates . . . . . . (122.8) (87.1) (28.5)
Sales of minerals in place . . . . . . . . . . . . . (22.9) (1.3)
Accretion of discount. . . . . . . . . . . . . . . . 103.3 102.7 105.4
Net change in income taxes . . . . . . . . . . . . . 7.6 5.1 20.9
Other. . . . . . . . . . . . . . . . . . . . . . . . (9.6) (9.3) (1.0)
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . $ 410.7 $ (3.4) $ 10.9
========= ========= =========
</TABLE>

A-42
<PAGE>
<PAGE>
SUMMARY OF BUSINESS SEGMENTS
ENSERCH Corporation and Subsidiary Companies

The Corporation's major business segments are:
Natural gas and oil exploration and production
Natural gas pipeline & gathering, processing and marketing (GPM)
Natural gas distribution
Power and other

Through these business segments, the Corporation is engaged in (1) natural
gas and oil exploration and production - exploring for, developing, producing
and marketing natural gas and oil, (2) natural gas pipeline & GPM - owning and
operating interconnected natural gas transmission lines, underground storage
reservoirs, compressor stations and related properties, all within Texas;
gathering and processing natural gas to remove impurities and extract liquid
hydrocarbons for sale; and the wholesale and retail marketing of natural gas
in several areas of the U.S., (3) natural gas distribution - owning and
operating some 550 local gas utility distribution systems in Texas, and
(4) power and other - developing, financing and operating electric power
generating plants and cogeneration facilities and operating thermal energy
plants for large building complexes, such as universities and medical centers.
<TABLE>
<CAPTION>
Natural Gas
and Oil
Exploration Natural Gas Power General
and Pipeline Natural Gas and and
Production & GPM Distribution Other Other Consolidated
----------- ----------- ------------ --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from Nonaffiliates
1995 . . . . . . . . . . . . . . $ 133,849 $ 871,283 $ 886,291 $ 39,817 $ $1,931,240
1994 . . . . . . . . . . . . . . 68,949 1,107,736 873,324 45,499 2,095,508
1993 . . . . . . . . . . . . . . 79,780 784,035 966,452 48,635 1,878,902

Intersegment Revenues from
Affiliates (eliminated
in consolidation)
1995 . . . . . . . . . . . . . . 87,002 125,168 1,174 213,344
1994 . . . . . . . . . . . . . . 110,191 128,027 1,383 239,601
1993 . . . . . . . . . . . . . . 110,016 123,934 1,424 235,374

Operating Income (Loss)
1995 . . . . . . . . . . . . . . (11,450) 59,580 54,634 3,478 (8,513) 97,729
1994 . . . . . . . . . . . . . . 25,617 27,048 38,334 5,761 (8,114) 88,646
1993 . . . . . . . . . . . . . . (37,293) 73,425 34,175 9,795 (11,865) 68,237

Depreciation and Amortization
1995 . . . . . . . . . . . . . . 119,376 21,758 24,906 1,563 659 168,262
1994 . . . . . . . . . . . . . . 79,594 22,888 22,475 1,403 619 126,979
1993 . . . . . . . . . . . . . . 100,687 20,907 20,664 1,470 598 144,326

Identifiable Assets
1995 . . . . . . . . . . . . . . 1,718,050 711,747 744,981 38,630 167,686(a) 3,381,094
1994 . . . . . . . . . . . . . . 1,295,231 697,405 698,341 41,794 155,766(a) 2,888,537
1993 . . . . . . . . . . . . . . 1,193,525 703,727 668,139 32,632 207,976(a) 2,805,999

Gross Additions to Property,
Plant and Equipment
1995 . . . . . . . . . . . . . . 190,168(b) 44,617 61,286 312 643 297,026
1994 . . . . . . . . . . . . . . 133,254 47,503 78,186 622 493 260,058
1993 . . . . . . . . . . . . . . 119,566 36,717 61,067 373 970 218,693
<FN>
(a) Includes $74,051 in 1995, $62,622 in 1994 and $102,291 in 1993 related to discontinued operations.
(b) Excludes property acquired in the purchase of DALEN.

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. 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.
</FN>
</TABLE>

A-43
<PAGE>
<PAGE>

QUARTERLY RESULTS (UNAUDITED) - The results of operations by quarters are
summarized below. Quarterly amounts previously reported for 1994 and the
first quarter of 1995 have been restated to give effect to the pooling-of-
interests transaction with DGS. In the opinion of the Corporation's management,
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>
1995:
Revenues . . . . . . . . . . . . . . . . . . . . . . $612,641 $396,160 $414,547 $507,892
Operating Income (Loss). . . . . . . . . . . . . . . 67,532 (3,938) 4,114 30,021
Net Income (Loss). . . . . . . . . . . . . . . . . . 30,816 (14,632) (13,771) 10,640
Earnings (Loss) Applicable to Common Stock . . . . . 27,780 (17,613) (16,637) 7,833
Per Share of Common Stock-
Earnings (loss) applicable to common stock . . . . $ .41 $ (.26) $ (.24) $ .11

1994:
Revenues . . . . . . . . . . . . . . . . . . . . . . $636,181 $409,962 $493,619 $555,746
Operating Income (Loss). . . . . . . . . . . . . . . 71,235 (808) (3,683) 21,902(a)
Income (Loss) from Continuing Operations . . . . . . 35,330 (12,242) (14,925) 73,289(a)(b)
Income from Discontinued Operations. . . . . . . . . 562 743 399 18,938
Net Income (Loss). . . . . . . . . . . . . . . . . . 35,892 (11,499) (14,526) 92,227
Earnings (Loss) Applicable to Common Stock . . . . . 33,048 (14,271) (17,506) 89,204
Per Share of Common Stock:
Income (loss) from continuing operations after
provision for dividends on preferred stock . . . $ .48 $ (.22) $ (.27) $ 1.03
Discontinued operations. . . . . . . . . . . . . . .01 .01 .01 .28
-------- -------- -------- --------
Earnings (loss) applicable to common stock . . . . $ .49 $ (.21) $ (.26) $ 1.31

<FN>
(a) Includes a $4.9 million after-tax ($7.6 million pretax) gain from the sale of an inactive offshore pipeline and
facilities.
(b) Includes a $70 million reduction of deferred income taxes associated with the reorganization of partnerships to form
Enserch Exploration, Inc.
</FN>

Changes to previously reported information from pooling-of-interests transaction with
DGS

1995:
Revenues . . . . . . . . . . . . . . . . . . . . $ 64,740
Operating Income . . . . . . . . . . . . . . . . 990
Income from Continuing Operations. . . . . . . . 430

1994:
Revenues . . . . . . . . . . . . . . . . . . . . $ 70,479 $ 59,813 $53,893 $53,892
Operating Income (Loss). . . . . . . . . . . . . 326 (33) 452 452
Income (Loss) from Continuing Operations . . . . (34) (271) 41 41

</TABLE>

A-44
<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>

1995 1994 1993
------------------- ------------------ --------------------
High Low High Low High Low
------------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter . . . . . $15 1/8 $12 5/8 $19 1/8 $12 7/8 $19 1/8 $14 1/8
Second Quarter. . . . . 18 3/8 14 5/8 15 1/4 12 5/8 19 5/8 16 7/8
Third Quarter . . . . . 18 5/8 15 7/8 16 1/2 13 1/8 22 5/8 17 1/2
Fourth Quarter. . . . . 16 7/8 14 1/4 15 12 1/8 21 1/4 15 1/2

1992 1991 1990
------------------- ------------------- --------------------
High Low High Low High Low
------------------- ------------------ --------------------
First Quarter . . . . . $14 3/8 $10 3/8 $20 1/2 $16 7/8 $28 $23 3/8
Second Quarter. . . . . 16 3/8 12 1/8 21 3/8 17 1/8 27 7/8 23
Third Quarter . . . . . 16 1/8 14 18 3/4 15 5/8 28 1/8 24
Fourth Quarter. . . . . 16 1/2 13 3/4 17 1/2 12 3/4 27 5/8 18 1/2
</TABLE>
<TABLE>
<CAPTION>

COMMON STOCK DATA AT YEAR-END 1995 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Shareholders of Record 19,247 19,614 20,406 22,832 23,979 25,090
------ ------ ------ ------ ------ ------
Shares Outstanding (000's) 68,516 68,158 67,860 67,238 66,506 65,968
------ ------ ------ ------ ------ ------
</TABLE>
DIVIDENDS PER SHARE OF COMMON STOCK

As of December 31, 1995, the Corporation had paid 206 consecutive quarterly
cash dividends on its common stock. At December 31, 1995, $416 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 1996, a quarterly cash
dividend of $.05 per share was declared, payable March 4, 1996, to
shareholders of record on February 23, 1996. Quarterly cash dividends on
common stock were $.05 per share (annual rate of $.20 per share) in 1995
through 1993 and $.20 per share (annual rate of $.80 per share) for the three
preceding years.

A-45

<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 he 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:

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, Texas
4200 South Hulen

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

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%o) 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 bc 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.

(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.

(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.

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.

6. The Adjustable Rate Preferred Stock shall not have any conversion,
exchange or sinking fund rights.

____________________

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>
<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:

CLASS NUMBER OF SHARES

Common Stock 57,602,674

ARTICLE FOUR. The number of shares of each class voted for and
against such amendment, respectively, was:

CLASS NUMBER OF SHARES VOTED
For Against

Common Stock 42,753,448 5,721,265

ENSERCH Corporation

Dated: May 10, 1988 By /s/ W. C. McCord
W. C. McCord
Its Chairman and
President
<PAGE>
<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
<PAGE>
<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>
<PAGE>
ASSUMED NAME CERTIFICATE
FOR AN INCORPORATED BUSINESS OR PROFESSION

1. The assumed name under which the business or professional service is
to be conducted or rendered is Enserch Processing Company.

2. The name of the incorporated business or profession as stated in its
Restated Articles of Incorporation is ENSERCH Corporation.

3. The state, country, or other jurisdiction under the laws of which it
was incorporated or associated in Texas, and the address of its
registered or similar office in that jurisdiction is c/o Corporate
Secretary's Department, ENSERCH Center, 300 South St. Paul Street,
Suite 850 E-C, Dallas, Texas 75201.

4. The period, not to exceed ten years, during which the assumed name
will be used is January 18, 1995, to January 17, 2005.

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 c/o Corporate Secretary's
Department, ENSERCH Center, Suite 850 E-C, Dallas, Texas 75201, and
the name of its registered agent at such address is Michael G.
Fortado. The address of the principal office is 300 South St. Paul
Street, Suite 850 E-C, Dallas, Texas 75201.

7. The county or counties where business or professional services are
being or are to be conducted or rendered under such assumed name are
all counties within the State.

/s/ Robert L. Jay
-----------------------------
Assistant Corporate Secretary

Before me on this 8th day of January, 1995, personally appeared
Robert L. Jay, Assistant Corporate Secretary and acknowledged to me that he
executed the foregoing certificate of the purposes therein expressed.

/s/ Jo D. Wade
------------------------------
Notary Public - Dallas County

<PAGE> EXHIBIT 10.6

(Form of Change in Control Agreement - Form A)

February 13, 1996

-------------------
-------------------
-------------------

Dear :
----------------

On February 13, 1996, the Board of Directors of ENSERCH Corporation
authorized an amendment and restatement to your Change in Control Agreement
dated February 21, 1989, as amended on December 4, 1995. The principal
amendments are reflected in the list of changes provided separately. This
amended and restated document is in replacement of the existing agreement
and amendment.

ENSERCH Corporation (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential to protecting
and enhancing the best interest of the Company and its shareholders. In
this connection, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may
exist and that such possibility, and the uncertainty and questions which it
may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its shareholders.
Accordingly, the Company's Board of Directors (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Company's, its
division's and subsidiaries' management including yourself, to their
assigned duties without distraction in the face of the potentially
disturbing circumstances arising from the possibility of a change in
control of the Company.

In order to induce you to remain in the employ of the Company, this
Agreement sets forth certain benefits which the Company agrees will be
provided to you in the event there is a termination of your employment with
the Company that is associated with (as described in Section 3 hereof) a
"change in control of the Company" (as defined in Section 2 hereof) under
the circumstances described below.

1. TERM. This Agreement shall have an initial term expiring on the
earlier of (a) the third anniversary of the date hereof, assuming there has
been no change in control of the Company, or (b) your Normal Retirement
Date as defined herein; provided, however, that upon each anniversary date
of this Agreement the term of this Agreement under clause (a) (as the same
may be extended by this proviso) shall be automatically extended annually
for an additional period of one (1) year on a continuing basis unless
either party shall give written notice of intention not to so extend at
least six (6) months prior to such anniversary date. No notice by the
Company of its intention not to extend shall be effective if, within one
year prior to the original expiration date, or if this Agreement is in a
renewal period, within one year prior to the termination date proposed by
the Company, the Company has received notice, official or unofficial, or
otherwise has reason to believe that a Person (as defined herein) has taken
or is considering steps that would when completed bring about a change in
control of the Company. This Agreement shall in any case continue in
effect for three (3) years following a change in control of the Company.

2. CHANGE IN CONTROL. For purposes of this Agreement, a "change in
control of the Company" or a "change in control" shall mean a change in
control of a nature that would be required to be reported in response to
Item l(a) of the Current Report on 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 in Rule 12b-2 of Regulation 12B of the Exchange Act;
provided that, without limitation such a change in control shall be deemed
to have occurred if (a) 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 (b) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for
any reason to constitute at least two-thirds 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
(b), considered as though such person were a member of the Incumbent Board,
or (c) 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%, or (d) the shareholders of the
Company have approved an agreement to merge or consolidate with or into
another corporation or an agreement to sell or otherwise dispose of all or
substantially all of the Company's assets (including a plan of
liquidation). For purposes of this Agreement, 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.

3. TERMINATION ASSOCIATED WITH A CHANGE IN CONTROL. If and only if
any of the events described in Section 2 hereof constituting a change in
control of the Company shall occur, you shall be entitled to the benefits
provided in Section 4 hereof upon the termination of your employment as
provided in this Section 3 within six (6) months prior to such change in
control, or within six (6) months prior to the date that the Board of
Directors of the Company authorizes a merger, consolidation or other
transaction or event that if consummated would constitute a change in
control and such action is consummated (collectively herein referenced to
as "termination preceding a change in control"), or within three (3) years
after such change in control, unless such termination is (a) because of
your death, or Retirement on or after your Normal Retirement Date (that is,
early retirement initiated by the Company shall be treated as a dismissal
and not a voluntary early retirement), (b) by the Company for Cause or
Disability or (c) by you other than for Good Reason (including voluntary
early retirement when there is no concurrent Good Reason); provided,
however, that notwithstanding clause (c), during the thirteenth through the
eighteenth month following a change in control you may elect to voluntarily
terminate your employment and be entitled to payments and benefits provided
in Section 4. (In the case of termination preceding a change in control,
references in the definition of "Good Reason" to conditions in effect
immediately prior to a change in control shall be deemed to mean conditions
in effect immediately prior to your termination.) References to actions by
and employment with the Company shall include actions by and employment
with the divisions and subsidiaries of the Company where the context so
requires.

(i) Disability; Retirement.

(A) If, as a result of your incapacity due to physical or
mental illness, you shall have been unable for more than six
(6) months to perform your duties with the Company on a full
time basis, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full
time performance of your duties, the Company may terminate your
employment for "Disability."

(B) Termination of your employment based on "Retirement"
shall mean retirement in accordance with the terms of the
Company's Retirement and Death Benefit Program of 1969 (the
"Retirement Plan") as in effect on January 1, 1996, including
early retirement, or in accordance with any retirement
arrangement established with your consent with respect to you.
"Normal Retirement Date" as used herein shall have the meaning
provided in the Retirement Plan or any successor or substitute
plan or plans of the Company put into effect prior to a change
in control of the Company.

(ii) Cause. Termination of your employment by the Company for
"Cause" shall mean termination upon (A) the willful and continued
failure by you substantially to perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness), after a demand for substantial
performance is delivered to you by the Chairman or President of the
Company which specifically identifies the manner in which such
executive believes that you have not substantially performed your
duties, and a reasonable period of opportunity for such substantial
performance is provided, or (B) the willful engaging by you in
illegal misconduct materially and demonstrably injurious to the
Company. For purposes of this paragraph, no act, or failure to act,
on your part shall be considered "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by you in good faith and in the best interest of
the Company. Notwithstanding the foregoing, you shall not be deemed
to have been terminated for Cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for
that purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty
of conduct set forth above in clauses (A) or (B) in this paragraph
and specifying the particulars thereof in detail.

(iii) Good Reason. "Good Reason" for you to terminate your
employment shall mean:

(A) an adverse change in your status or position(s) as an
executive of the Company as in effect immediately prior to the change
in control, including, without limitation, any adverse change in your
status or position as a result of a material diminution in your
duties or responsibilities (other than, if applicable, any such
change directly attributable to the fact that less than 50% of the
Company's voting securities are publicly owned or the fact that your
position becomes a position with a subsidiary or division), or a
material change in your business location or the assignment to you of
any duties or responsibilities which are inconsistent with such
status or position(s), or a substantial increase in your business
travel, or any removal of you from or any failure to reappoint or
reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or
as a result of your death or by you other than for Good Reason);

(B) a reduction by the Company in your base salary as in effect
immediately prior to the change in control or in the number of
vacation days to which you are then entitled under the Company's
normal vacation policy as in effect immediately prior to the change
in control;

(C) the taking of any action by the Company (including the
elimination of a plan without providing substitutes therefor or the
reduction of your awards thereunder) that would diminish or the
failure by the Company to take any action which would maintain the
aggregate projected value of your awards under the Company's bonus,
stock option or management incentive unit plans in which you were
participating at the time of a change in control of the Company;

(D) the taking of any action by the Company that would diminish
or the failure by the Company to take any action which would maintain
the aggregate value of the benefits provided you under the Company's
medical, health, dental, accident, disability, life insurance, stock
purchase or retirement plans in which you were participating at the
time of a change in control of the Company;

(E) the taking of any action by the Company that would diminish
or the failure of the Company to take any action that would maintain
indemnification or insurance for officers' liability; or

(F) a failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by
Section 7 hereof; or

(G) any purported termination by the Company of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (iv) below (and, if
applicable, paragraph (ii) above); for purposes of this Agreement, no
such purported termination shall be effective.

(iv) Notice of Termination. Any termination by the Company
pursuant to paragraphs (i) or (ii) above or by you pursuant to
paragraph (iii) above or voluntarily by you during the thirteenth to
eighteenth month following a change in control shall be communicated
by written Notice of Termination to the other party hereto. In the
event of termination preceding a change in control, written Notice of
Termination to the other party hereto shall be communicated within
thirty (30) days following a change in control in order to reflect
termination by the Company pursuant to paragraphs (i) or (ii) above
or by you pursuant to paragraph (iii) above. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice specifying
the termination provision in this Agreement relied upon and setting
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so specified.

(v) Date of Termination. "Date of Termination" shall mean (A)
if your employment is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that you shall not
have returned to the performance of your duties on a full-time basis
during such thirty (30) day period), (B) if you terminate your
employment pursuant to paragraph (iii) above, the date specified in
the Notice of Termination, (C) in the case of a termination preceding
a change in control, the date of discharge if termination is by the
Company or the date notice of intention to leave is given by the
executive in the case of termination for Good Reason, and (D) if your
employment is terminated for any other reason except death or
Retirement, the date on which Notice of Termination is given.

4. COMPENSATION UPON CHANGE IN CONTROL, TERMINATION OR DURING
DISABILITY.

(i) Compensation During Disability. During any period that
you fail to perform your duties hereunder as a result of incapacity
due to physical or mental illness, you shall continue to receive your
full base salary at the rate then in effect, and any time of service
for vesting purposes under any plan shall continue to accrue during
such period of incapacity until and if your employment is terminated
pursuant to Section 3(i) hereof (and for any longer period as may be
provided under applicable plans).

(ii) Compensation Upon Termination for Cause. If your
employment is terminated for Cause, the Company shall pay you your
full base salary and accrued vacation pay through the Date of
Termination at the rate in effect at the time Notice of Termination
is given plus any benefits or awards (including both the cash and
stock components) which pursuant to the terms of any plans have been
earned or become payable, but which have not yet been paid to you,
and shall have no further obligations to you under this Agreement.

(iii) Compensation Upon Termination Other than For Disability
or Cause or Good Reason. Subject to Section 9 hereof, if the Company
terminates your employment other than for Disability or Cause
pursuant to Section 3(i) or (ii) hereof or if you terminate your
employment for Good Reason (which termination may be effected by
Retirement prior to your Normal Retirement Date), or if, during the
thirteenth through the eighteenth month after the change in control
you voluntarily terminate your employment, then the Company shall pay
to you (without regard to the provisions of any benefit plan) in a
lump sum on or before the tenth business day following the Date of
Termination ("Payment Date") an amount equal to the sum of the
following paragraphs (A) through (F), reduced by any of such amounts
already paid and the value of any severance amounts agreed to between
you and the Company and paid at the time of severance from the
Company in the case of a termination preceding a change in control:

(A) Your full base salary through the Date of
Termination at the rate in effect just prior to the time Notice
of Termination is given, plus any earned vacation time, plus
any benefits or awards (including both the cash and stock
components) which pursuant to the terms of any plans have been
earned or become payable, but which have not yet been paid to
you; plus

(B) An amount equal to the greater of your largest
target bonus during either of the two years preceding the year
in which the change in control occurs or your target bonus for
the year in which the Date of Termination occurs, prorated for
the current year; plus

(C) An amount equal to three times your "Annual
Compensation", as defined below, provided however, that such
amount shall in no event exceed the Annual Compensation you
would have otherwise received had your employment continued at
such rate until your Normal Retirement Date ("Annual
Compensation" shall mean the greater of your annual base salary
on the Date of Termination or your highest annual base salary
in effect during either of the two years immediately prior to
the change in control plus an amount equal to the greater of
your target bonus for the year in which the Date of Termination
occurs or your highest target bonus during either of the two
years immediately prior to the change in control); plus

(D) An amount equal to the balance contained in your
account in the Management Incentive Program Unit Plan; plus

(E) If you choose to receive cash for some or all
unexercised stock options in lieu of exercising such options,
which choice shall be communicated by you in writing to the
Company, an amount equal to the market value of the Company's
common stock on the Date of Termination or on any other date
within 180 days preceding the Date of Termination, on whichever
date the value is highest, multiplied by the number of options
granted to you prior to the Date of Termination (you should
seek legal advice before choosing to receive cash for options
held less than six (6) months) under any stock option plan of
the Company or other arrangement pursuant to which options to
purchase common stock of the Company have been issued and which
have not been exercised through the Payment Date, less the
aggregate value of the option price of such options; and plus

(F) An amount equal to an undiscounted lump sum of the
total Deferred Compensation which would be payable to you at
your Retirement in accordance with the provisions of the
Supplemental Compensation Plan.

(iv) Discharge of Company's Obligation. The payment to you of
appropriate amounts under paragraphs (D), (E) and (F) shall be
considered for all purposes a discharge of all obligations pursuant
to such plans except as to options not cashed out under paragraph
(E).

(v) Base Salary; Severance Pay. For purposes of this
Agreement, the term "base salary" shall include any amounts deducted
pursuant to Sections 125 and 401K of the Internal Revenue Code of
1986, as amended (the "Code"), and any amounts deducted under the
ENSERCH Corporation Deferred Compensation Plan. Amounts paid pursuant
to this paragraph shall be deemed severance pay and in lieu of any
further salary for periods subsequent to the Date of Termination.

(vi) Gross-Up Provision. In the event that you become
entitled to the payments provided by Sections 4(iii) or 5 hereof (the
"Agreement Payments"), if any of the Agreement Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Code (or any similar tax that may hereafter be imposed), the Company
shall pay to you at the time specified in Subsection (vii) below an
additional amount (the "Gross-up Payment") such that the net amount
retained by you, after deduction of any Excise Tax on the Total
Payments (as hereinafter defined) and any federal, state and local
income tax and Excise Tax upon the Gross-up Payment provided for by
this subsection (vi), but before deduction for any federal, state or
local income tax on the Agreement Payments, shall be equal to the
"Total Payments," as defined below.

For purposes of determining whether any of the Agreement
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (a) any other payments or benefits received or to be
received by you in connection with a change in control of the Company
or your termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change of control of
the Company or any person affiliated with the Company or such person)
(which, together with the Agreement Payments, shall constitute the
"Total Payments") shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(l) of the Code shall
be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Company's independent auditors such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of Section 280G(b)(3) of
the Code or are otherwise not subject to the Excise Tax, (b) the
amount of the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (1) the total amount of
the Total Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(l) of the Code (after applying
clause (a), above), and (c) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of Sections
280(G)(d)(3) and (4) of the Code.

For purposes of determining the amount of the Gross-up Payment,
you shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation for the calendar year in
which the Gross-up Payment is to be made and the applicable state and
local income taxes at the highest marginal rate of taxation for the
calendar year in which the Gross-up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time the Gross-up Payment is
made, you shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined the portion of the
Gross-up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the portion of the Gross-up
Payment being repaid by you if such repayment results in a reduction
in Excise Tax and/or a federal and state and local income tax
deduction), plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-up Payment), the Company shall
make an additional gross-up payment in respect of such excess (plus
any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.

(vii) Time of Gross-Up Payment; Estimated Payments; Loan
Provision. The Gross-up Payment or portion thereof provided for in
Subsection (vi) above shall be paid not later than the thirtieth day
following payment of any amounts under Sections 4(iii) or 5;
provided, however, that if the amount of such Gross-up Payment or
portion thereof cannot be finally determined on or before such day,
the Company shall pay to you on such day an estimate, as determined
in good faith by the Company, of the minimum amount of such payments
and shall pay the remainder of such payments (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined, but in no event later than the
forty-fifth day after payment of any amounts under Sections 4(iii) or
5. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess
shall constitute a loan by the Company to you, payable on the fifth
day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).

(viii) Continuation of Certain Benefits. If the Company
terminates your employment other than for Disability or Cause
pursuant to Section 3(i) or 3(ii) hereof or if you terminate your
employment for Good Reason or if during the thirteenth through the
eighteenth month after the change in control you voluntarily
terminate your employment (any one of which termination may be
effected by Retirement prior to your Normal Retirement Date), the
Company shall assign to you any club membership held for your benefit
and the Company shall maintain in full force and effect for your
continued benefit for a period terminating on the earliest of (A)
three years after the Date of Termination or (B) your Normal
Retirement Date, all life, health, accident and disability insurance
plans and programs in which you were a participant immediately prior
to the Date of Termination, provided that your continued
participation is possible under the terms and provisions of such
plans and programs. In the event that your participation in any such
plan or program is barred, the Company shall provide you with
benefits substantially similar to those to which you would be
entitled as a participant in such plans and programs. Any required
statutory period of COBRA health benefit continuation that terminated
employees may elect shall not begin until the end of the period of
coverage provided hereby. The benefits provided under this Section,
other than assignment of any club membership, shall be reduced to the
extent of benefits received by you from another employer. At the end
of the period of coverage, you shall have the option to have assigned
to you, at no cost and with no apportionment of prepaid premiums, any
assignable insurance policy owned by the Company and relating
specifically to you.

(ix) Lump Sum Payment for Additional Two Years of Service. If
you are not a participant in the Retirement Income Restoration Plan
of ENSERCH Corporation ("RIRP") (the RIRP has provisions comparable to
this subparagraph (ix)) when your employment with the Company is
terminated within the first three years after a change in control, by
the Company without Cause or by you for Good Reason, you shall
receive from the Company, at the time you first receive any payment
under or with respect to the Retirement Plan, an amount (calculated
and paid in the form of a lump sum) equal to the difference between
(i) the "Lump Sum", as defined below, value of any payment you receive
at such time (or any monthly annuities that you then become entitled
to receive) from (a) the Retirement Plan and (b) from the Company
with respect to the portion, if any, of your Retirement Plan pension
which exceed the limitations on pension amounts to which the
Retirement Plan is subject and (ii) the Lump Sum value of payments
that would have been payable if it or they had been calculated as if
you had been deemed to have had two (2) additional "Years of Service",
as defined below. "Years of Service" shall be as defined in the
Retirement Plan and shall be applied as if you were a participant
thereunder at the time of your termination of employment, and "Lump
Sum" shall mean an amount calculated in accordance with the interest
rate and other actuarial assumptions set forth or used in connection
with lump sum calculations under the Retirement Plan.

(x) Lump Sum Payment if Not Vested under Retirement Plan. If
you are not vested under the Retirement Plan when your employment
with the Company is terminated within the first three years after a
change in control by the Company without Cause or by you for Good
Reason, you shall receive from the Company at the time payments are
made pursuant to paragraph (iii) above, an amount (calculated and
paid in a lump sum) equal to the Lump Sum value of any payment you
would have been entitled to receive at your Normal Retirement Date
(or any annuities that you would have been entitled to receive) from
the Retirement Plan and the RIRP calculated (a) as if you were 100%
vested under such plans and (b) using actual years of service
increased by two (2) additional Years of Service.

(xi) Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise, nor (except as provided in Section 4(viii))
shall the amount of any payment or benefit provided for in this
Section 4 be reduced by any compensation earned or benefit received
by you as the result of employment by another employer after the Date
of Termination, or otherwise.

(xii) Deferred Payment Election. Upon entering into this
Agreement and for a period of 14 days following each anniversary of
the date hereof (the "Election Period"), you may, in writing, direct
the Company that any amounts which should become payable to you
pursuant to Section 4(iii) hereof shall be paid to you in three (3)
equal annual installments, with the first such installment payable
within five (5) business days of the Date of Termination and each
successive installment paid on the anniversary of the Date of
Termination or the next following business day if such date is not a
business day (the "Deferred Payment Election"). A Deferred Payment
Election, once made, cannot be revoked except during an Election
Period; provided, however, that no Deferred Payment Election can be
made or revoked by you during an Election Period that occurs after a
change in control of the Company or at a time when, in the judgment
of the Company, a change in control may occur within sixty (60) days
of such Election Period. Notwithstanding anything in the foregoing
to the contrary, a Deferred Payment Election shall be automatically
revoked should you terminate your employment under the circumstances
described in Section 7 below.

5. TERMINATION IN CONNECTION WITH THE DISPOSITION OF A COMPANY
BUSINESS. If there occurs at any time during the Term of this Agreement a
spin-off to shareholders or a sale or other disposition to a non-affiliate
of the Company (collectively, "New Owner", which term shall include all
entities controlled by or under common control with the New Owner) of a
portion of the business of the Company ("Disposition") for which you perform
substantially all of your duties or as part of a restructuring or
reorganizing of the Company you are assigned to work with such New Owner
and you become employed by the New Owner, then a change in control, for the
limited purpose of this Section 5, will be deemed to have occurred, and

(i) if, and only if, your employment is terminated as
described in any of the paragraphs (A) through (D) below (in each
case a termination shall not be deemed to be a termination for
purposes of this Section 5 if you are offered and refuse to accept a
comparable position with the Company or an affiliate of the Company
or the New Owner and for this purpose a position is not comparable if
there are changes from the position you held prior to the Disposition
that would constitute Good Reason for you to terminate your
employment):

(A) You are terminated by the Company on the date of the
Disposition and are not employed by the New Owner; or

(B) Within six (6) months prior to the date of
Disposition, your employment with the Company is terminated
other than for Cause or Disability or you terminate your
employment with the Company for Good Reason; or

(C) You continue your employment with the Company and
within three years following the Date of the Disposition your
employment with the Company is terminated other than for Cause
or Disability or you terminate your employment for Good Reason;
or

(D) You are employed by the New Owner and within three
years following the date of Disposition your employment with
the New Owner is terminated other than for Cause or Disability
or you terminate your employment with the New Owner for Good
Reason. (For purposes of this subsection, "Company" shall be
deemed to mean "New Owner" in the definition of "Good Reason"
where the context so requires and references in the definition
of "Good Reason" to conditions in effect immediately prior to a
change in control shall be deemed to mean conditions in the
offer of employment to you or otherwise in effect upon your
initial employment with the New Owner.)

(ii) then, subject to Section 9 hereof, you shall be entitled
to the benefits described in either (A) or (B) below:

(A) If any of paragraphs (A) (B) or (C) of subsection
(i) above apply, then you shall be entitled to the payments and
benefits specified in Section 4.

(B) If paragraph (D) of subsection (i) above applies,
then the Company shall pay to you an amount equal to three
times the higher of your annual base salary in effect on the
date of Disposition or your highest annual base salary in
effect during either of the two years immediately prior to the
date of Disposition; plus an amount equal to three times the
greater of your target bonus for the year in which the
Disposition occurred or your highest target bonus during either
of the two years immediately prior to the Disposition; provided
however, that such amount shall in no event exceed the
aggregate amount of base salary and target bonuses that you
would have otherwise received had your employment continued at
such higher rate until your Normal Retirement Date; plus the
Gross-up payments and other provisions of Sections 4(vi) and
4(vii).

6. EMPLOYEE'S COMMITMENT: RIGHT TO TERMINATE.

(i) Employee's Right to Terminate. Except as otherwise
provided in paragraph (ii) below, the Company or you may terminate
your employment at any time, subject to the Company's providing the
benefits specified herein in accordance with the terms hereof.

(ii) Employee's Commitment In Event of Tender or Exchange
Offer. In the event a tender offer or exchange offer is made by a
Person for more than 20% of the combined voting power of the
Company's Voting Securities, including shares of Common Stock of the
Company, you agree that you will not leave the employ of the Company
(other than as a result of Disability or upon Normal Retirement) and
will render the services contemplated in this Agreement until such
tender offer or exchange offer has been abandoned or terminated or a
change in control of the Company has occurred.

(iii) Employee's Duty. During the life of this Agreement, you
will faithfully perform your duties to the best of your ability and
in accordance with the directions of the Chief Executive Officer and
the Board of Directors, provided that after a change in control of
the Company such directions do not constitute Good Reason for you to
terminate your employment; and you will devote to the performance of
such duties your full working time, attention and energies.

(iv) Confidential and Proprietary Information. You will not
at any time during the life of this Agreement, or thereafter,
communicate or disclose to any unauthorized person, or use for your
own account, without the written consent of the Company, any
proprietary processes, or other confidential information of the
Company or any subsidiary concerning their business or affairs,
suppliers or customers, it being understood, however, that the
obligations of this paragraph shall not apply to the extent that the
aforesaid matters (A) are disclosed in circumstances in which you are
legally required to do so or (B) become generally known to and
available for use by the public otherwise than by your wrongful act
or omission.

7. SUCCESSOR'S BINDING AGREEMENT.

(i) Successor's Binding Agreement. The Company will seek, by
written request at least five (5) business days prior to the time a
Person becomes a Successor (as hereinafter defined), to have such
Person, by agreement in form and substance satisfactory to you,
assent to the fulfillment of the Company's obligations under this
Agreement. Failure of such Person to furnish such assent by the
later of (A) three business days prior to the time such Person
becomes a Successor or (B) two business days after such person
receives a written request to so assent shall constitute Good Reason
for termination by you of your employment if a change in control of
the Company occurs or has occurred. For purposes of this Agreement,
"Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage
of time), the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's Voting
Securities or otherwise. Whether or not such assent is given by a
Successor, this Agreement shall be binding on the Successor and its
assigns.

(ii) Enforceability by Employee's Successors. This Agreement
shall inure to the benefit of and be enforceable by your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die before all
amounts that would still be payable to you hereunder if you had
continued to live are paid, all such unpaid amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee, or other designee or, if there be
no such designee, to your estate.

8. FEES AND EXPENSES. The Company shall pay all legal fees,
expenses of arbitration and related expenses incurred by you in connection
with this Agreement following a change in control of the Company,
including, without limitation, (a) all such fees and expenses, if any,
incurred in contesting or disputing any termination of your employment
following a change in control or incurred by you in seeking advice with
respect to the matters set forth in Section 7 hereof or (b) your seeking to
obtain or enforce any right or benefit provided by this Agreement.

9. TAXES. All payments to be made to you under this Agreement will
be subject to required withholding of applicable federal, state and local
taxes.

10. INTEREST. All payments due under this Agreement and unpaid
shall bear interest at the rate of 10% per annum, compounded daily,
beginning on the next ensuing day
after the Payment Date or such other date as they may be due.

11. NON-ALIENABILITY. Your interest under this Agreement is not
subject to anticipation, alienation, assignment or attachment and may not
be transferred 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 your
debts, contracts, liabilities, engagement, or torts, nor shall they be
subject to garnishment, attachment, or other legal or equitable process nor
shall they be an asset in bankruptcy, except that not amount shall be
payable hereunder until and unless any and all amounts representing debts
or other obligations owed to any company by you shall have been fully paid
and satisfied.

12. SURVIVAL. The respective obligations of, and benefits afforded
to, the Company and you as provided in Sections 4, 5, 6, 7, 8, 9 and 16 of
this Agreement shall survive termination of this Agreement.

13. NOTICE. Notices and all other communications provided for
herein shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt
requested, postage prepaid addressed to the respective addresses set forth
on the first page of this Agreement or to such other address as either
party may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt. All notices to the Company shall be directed to the attention of
the Chief Executive Officer of the Company with a copy to the Secretary of
the Company.

14. MISCELLANEOUS. This Agreement does not supersede any other plan
of the Company or agreement with the Company. No provision of this
Agreement may be modified, waived or discharged except in writing
specifically referring to such provision and signed by you and such officer
as may be specifically designated by the Board of Directors of the Company.
No waiver at any time by either party hereto of the breach of any condition
or provision of this Agreement, or of compliance by the other party with
the same, shall be deemed a waiver of any other condition or provision at
the same or at any other time. No agreement or representation still in
effect, oral or otherwise, express or implied, with respect to the subject
matter hereof has been made by either party other than (i) those set forth
expressly in this Agreement or (ii) those in any stock option agreements,
restricted stock agreements, or deferred compensation agreements. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Texas.

15. VALIDITY. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.

16. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
in the city nearest to your principal residence which has an office of the
American Arbitration Association by one arbitrator in accordance with the
rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement. The Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 16.

17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.

If this letter correctly sets forth our entire agreement, as amended
and restated, on the subject matter hereof, kindly sign and return to the
Company the enclosed copy of this letter which will then constitute our
agreement on this subject.

Sincerely,

ENSERCH Corporation

By:
---------------------------

AGREED to as of the date
first above written.

------------------------

(Form of Change in Control Agreement - Form B)

February 12, 1996

-----------------------
-----------------------
-----------------------

Dear :
--------------------

On February 12, 1996, the Compensation Committee of the Board of
Directors of ENSERCH Corporation authorized an amendment and restatement to
your Change in Control Agreement dated February 21, 1989, as amended on
December 4, 1995. The principal amendments are reflected in the list of
changes provided separately. This amended and restated document is in
replacement of the existing agreement and amendment.

3. TERMINATION ASSOCIATED WITH A CHANGE IN CONTROL. If and only if
any of the events described in Section 2 hereof constituting a change in
control of the Company shall occur, you shall be entitled to the benefits
provided in Section 4 hereof upon the termination of your employment as
provided in this Section 3 within six (6) months prior to such change in
control, or within six (6) months prior to the date that the Board of
Directors of the Company authorizes a merger, consolidation or other
transaction or event that if consummated would constitute a change in
control and such action is consummated (collectively herein referenced to
as "termination preceding a change in control"), or within three (3) years
after such change in control, unless such termination is (a) because of
your death, or Retirement on or after your Normal Retirement Date (that is,
early retirement initiated by the Company shall be treated as a dismissal
and not a voluntary early retirement), (b) by the Company for Cause or
Disability or (c) by you other than for Good Reason (including voluntary
early retirement when there is no concurrent Good Reason). (In the case of
termination preceding a change in control, references in the definition of
"Good Reason" to conditions in effect immediately prior to a change in
control shall be deemed to mean conditions in effect immediately prior to
your termination.) References to actions by and employment with the
Company shall include actions by and employment with the divisions and
subsidiaries of the Company where the context so requires.

(i) Disability; Retirement.

(iii) Good Reason. "Good Reason" for you to terminate your
employment shall mean:

(E) the taking of any action by the Company that would diminish
or the failure of the Company to take any action that would maintain
indemnification or insurance for officers' liability; or

(F) a failure by the Company to obtain from any Successor (as
hereinafter defined) the assent to this Agreement contemplated by
Section 7 hereof; or

(iv) Notice of Termination. Any termination by the Company
pursuant to paragraphs (i) or (ii) above or by you pursuant to
paragraph (iii) above shall be communicated by written Notice of
Termination to the other party hereto. In the event of termination
preceding a change in control, written Notice of Termination to the
other party hereto shall be communicated within thirty (30) days
following a change in control in order to reflect termination by the
Company pursuant to paragraphs (i) or (ii) above or by you pursuant
to paragraph (iii) above. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice specifying the termination
provision in this Agreement relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so
specified.

4. COMPENSATION UPON CHANGE IN CONTROL, TERMINATION OR DURING
DISABILITY.

(iii) Compensation Upon Termination Other than For Disability
or Cause or Good Reason. Subject to Section 9 hereof, if the Company
terminates your employment other than for Disability or Cause
pursuant to Section 3(i) or (ii) hereof or if you terminate your
employment for Good Reason (which termination may be effected by
Retirement prior to your Normal Retirement Date), then the Company
shall pay to you (without regard to the provisions of any benefit
plan) in a lump sum on or before the tenth business day following the
Date of Termination ("Payment Date") an amount equal to the sum of the
following paragraphs (A) through (E), reduced by any of such amounts
already paid and the value of any severance amounts agreed to between
you and the Company and paid at the time of severance from the
Company in the case of a termination preceding a change in control:

(D) An amount equal to the balance contained in your
account in the Management Incentive Program Unit Plan; and plus

(iv) Discharge of Company's Obligation. The payment to you of
appropriate amounts under paragraphs (D) and (E) shall be considered
for all purposes a discharge of all obligations pursuant to such
plans except as to options not cashed out under paragraph (E).

(viii) Continuation of Certain Benefits. If the Company
terminates your employment other than for Disability or Cause
pursuant to Section 3(i) or 3(ii) hereof or if you terminate your
employment for Good Reason (either of which termination may be
effected by Retirement prior to your Normal Retirement Date), the
Company shall assign to you any club membership held for your benefit
and the Company shall maintain in full force and effect for your
continued benefit for a period terminating on the earliest of (A)
three years after the Date of Termination or (B) your Normal
Retirement Date, all life, health, accident and disability insurance
plans and programs in which you were a participant immediately prior
to the Date of Termination, provided that your continued
participation is possible under the terms and provisions of such
plans and programs. In the event that your participation in any such
plan or program is barred, the Company shall provide you with
benefits substantially similar to those to which you would be
entitled as a participant in such plans and programs. Any required
statutory period of COBRA health benefit continuation that terminated
employees may elect shall not begin until the end of the period of
coverage provided hereby. The benefits provided under this Section,
other than assignment of any club membership, shall be reduced to the
extent of benefits received by you from another employer. At the end
of the period of coverage, you shall have the option to have assigned
to you, at no cost and with no apportionment of prepaid premiums, any
assignable insurance policy owned by the Company and relating
specifically to you.

(A) You are terminated by the Company on the date of the
Disposition and are not employed by the New Owner; or

(ii) then, subject to Section 9 hereof, you shall be entitled
to the benefits described in either (A) or (B) below:

(A) If any of paragraphs (A) (B) or (C) of subsection
(i) above apply, then you shall be entitled to the payments and
benefits specified in Section 4.

6. EMPLOYEE'S COMMITMENT: RIGHT TO TERMINATE.

7. SUCCESSOR'S BINDING AGREEMENT.

9. TAXES. All payments to be made to you under this Agreement will
be subject to required withholding of applicable federal, state and local
taxes.

17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.

Sincerely,

ENSERCH Corporation

By:
----------------------

AGREED to as of the date
first above written.

------------------------

<PAGE> EXHIBIT 10.7

ENSERCH CORPORATION
PERFORMANCE INCENTIVE PLAN
CALENDAR YEAR 1996

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 participate 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 individu-
ally 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 other Goal Achievement Factor will be:
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%.

Any earnings or operating income achievement less than 0.90 ratio will reduce
goal achievement factor by 0.5% for each 0.01 less than 0.90.

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 substantially 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 Attachment 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, 1996, 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.

VIII. CONFLICT OF INTEREST

If at any time during the period the Participant is to receive or accrue
payments hereunder, the Participant engages in the employment, consultation or
representation of any corporation, partnership, individual, political
subdivision, or any enterprise that is engaged in any action or proceeding that
could be reasonably construed as being adverse to the interest of the Company,
the Participant and his beneficiaries or heirs shall forfeit all rights to
receive payments of bonus awards provided under this Plan regardless of whether
or not such payments had been previously approved by the Company; except that
before any such termination under this section of the Participant's right to
receive payments, the Company shall notify the Participant in writing of its
opinion about the adversary situation, after which time the Participant shall
have a period of 15 days to correct the situation to the satisfaction of the
Company as to preclude benefit termination.

This provision shall apply to full-time and part-time employees of the Company
and to retired or terminated employees. For purposes of this Plan, the Company
shall determine within its sole discretion whether or not the Participant's
actions can be reasonably construed as adverse to the Company's interests.

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.

(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 /s/ D. W. Biegler
Title: Chairman and President
<PAGE>
<PAGE>
AMENDMENT NO. 2 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 respects only:
FIRST: Effective as of January 1, 1996, Article I, Section
1.1 of the Plan is hereby amended by restating subsection (i)
thereof to read as follows:
(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
Sections 3.1, 3.2, 3.6 and 3.7.

SECOND: Effective as of January 1, 1996, Article I, Section
1.1 of the Plan is hereby amended by adding the following new
subsections to the end thereof:
(r) "Compensation" shall mean Compensation as defined
in Section 1.2(f) of the ENSERCH Corporation Employee Stock
Purchase and Savings Plan.

(s) "Contribution Service" shall mean Contribution
Service as described in Section 2.1 of the ENSERCH
Corporation Employee Stock Purchase and Savings Plan.

THIRD: Effective as of January 1, 1996, Article III of the
Plan is hereby amended by adding the following new section to the
end thereof:
Section 3.7 Employer Contributions.

(a) Matching Contributions. For each payroll period,
each Employer shall make a matching contribution to the Plan
for each Participant who is an Eligible Employee during such
pay period in an amount which will equal:

(1) with respect to a Participant who has
completed less than five years of Contribution Service
as of the end of that pay period, 30% of the amounts
deferred by such Participant pursuant to Section 3.1
for that pay period to the extent that such amounts
deferred do not exceed 2% of such Participant's
Compensation for such pay period;

(2) with respect to a Participant who has
completed at least five but less than fifteen years of
Contribution Service as of the end of that pay period,
40% of the amounts deferred by such Participant
pursuant to Section 3.1 for that pay period to the
extent that such amounts deferred do not exceed 3% of
such Participant's Compensation for such pay period;

(3) with respect to a Participant who has
completed at least fifteen but less than twenty-five
years of Contribution Service as of the end of that pay
period, 50% of the amounts deferred by such Participant
pursuant to Section 3.1 for that pay period to the
extent that such amounts deferred do not exceed 4% of
such Participant's Compensation for such pay period;
and

(4) with respect to a Participant who has
completed at least twenty-five years of Contribution
Service as of the end of that pay period, 60% of the
amounts deferred by such Participant pursuant to
Section 3.1 for that pay period to the extent that such
amounts deferred do not exceed 5% of such Participant's
Compensation for such pay period.

Employer matching contributions made under this Plan for a
Participant shall be credited each month to such
Participant's Deferral Account under the Plan.

(b) Discretionary Contributions. In addition to the
Employer contributions made pursuant to Section 3.7(a), for
each Plan Year each Employer shall contribute to the Plan as
an Employer contribution such amount, if any, to be
determined by the Compensation Committee. Any Employer
contribution made for a Plan Year pursuant to this Section
shall be credited to the Deferral Accounts of those
Participants specified by the Compensation Committee in the
manner determined by the Compensation Committee in its
absolute discretion.

IN WITNESS WHEREOF, this Amendment has been executed this
1st day of January, 1996.

ENSERCH Corporation

By /s/ D. W. Biegler
Title: President

<PAGE> EXHIBIT 21

ENSERCH Corporation, its subsidiaries and their subsidiaries and
affiliates, respectively, on March 15, 1996, are listed below.

State or Country
Name of Company Incorporation

ENSERCH Corporation (unincorporated divisions include: Texas
Lone Star Gas Company,
Lone Star Pipeline Company and
Enserch Processing Company)
Lone Star Energy Services, Inc. Texas
Lone Star Gas Company of Texas, Inc. Texas
National Pipeline Company Texas
Enserch de Mexico S.A. de C.V. Mexico
Enserch de Monterrey S.A. de C.V. Mexico
Enserch Gas Transmission Company Texas
Ensat Pipeline Company Texas
Enserch Processing, Inc. Delaware
Enserch Energy Services, Inc. Texas
Enserch Gas Marketing, Inc. Texas
Consolidated Energy Company Texas
SunPacific Gas Company California
DGS Holdings Corp. Delaware
DGS MultiFuels, Inc. Delaware
DGS Trading, Inc. Delaware
Direct Gas Services Corp. Delaware
Direct Gas Supply Corp. New York
Industrial Energy Services Company Pennsylvania
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 Energy International Services, Inc. Texas
Lone Star Gas International, Inc. Texas
Lone Star Gas Chile S.A. Chile
LSE Canton Operations, Inc. Texas
LS Energy, 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
Enserch International Ltd. Cayman Islands
Enserch International Services, Inc. Texas
EDC International (Karnataka No. 1) Ltd. Cayman Islands
EDC Northwest Cogeneration, Inc. Delaware
EDC Palakkad Power Ltd. Cayman Islands
EDC Palakkad One Holding Company Mauritius
EDC Palakkad Two Holding Company Mauritius
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
EEX Capital L.L.C. Texas
MIStS Issuer L.L.C.(3) Texas
Enserch Offshore, Inc. Texas
Enserch Oil & Gas, Inc. Texas
Enserch Preferred Capital, Inc. Delaware
DALEN Resources California Company Delaware
Corpus Christi Energy Company Delaware
Corpus Christi Hydrocarbons Company Delaware
Enserch International Oil & Gas, Inc. Texas
Enserch International Exploration Ltd. Cayman Islands
Enserch Far East Ltd. Cayman Islands
Enserch India, Inc. Texas
Enserch Malaysia Ltd. Cayman Islands
Enserch Middle East Ltd. Texas
Enserch (U.K.) Oil & 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
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 Shirley, Inc. Delaware
Enserch E&C Holdings, Inc. Nevada
Enserch E&C, Inc. Nevada
ESICORP Industries Inc. (Delaware) Delaware
Ebasco B.V. Netherlands
Ebasco Dorsch Consultants Inc. (4) 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 Limited Bermuda
Ebasco Services of Canada Limited Canada
ESICORP Constructors International, Inc.* Delaware
ENS (U.K.) Limited United Kingdom
ENS Limited United Kingdom
Process Engineering International
Limited United Kingdom
ENS Equipment Corporation Delaware
E & L Technologies Inc. Delaware
E & L Associates, Inc. California
E & L International, Inc. California
Enserch Environmental Management Company, Inc.(5) Delaware

________________________________

* Company in liquidation.
(1) 50% owned by parent corporation.
(2) 17% owned by public shareholders.
(3) .999% owned by EEX Capital L.L.C. and .001% owned by Enserch Preferred
Capital, Inc.
(4) 80% owned by parent corporation.
(5) 67% owned by parent corporation.

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.

Partnership Affiliates
State of
Name of Company Organization

Enserch Financing, L.P. Texas
Enserch SACROC, Inc. (1) 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

**General partnership.
(1) 99.65% owned by Enserch Financing, L.P. and .35% owned by ENS Holdings
Limited Partnership.

<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, No. 33-52525 and No. 33-61635 of ENSERCH
Corporation on Form S-3 of our report dated February 9, 1996, appearing in
this Annual Report on Form 10-K of ENSERCH Corporation for the year ended
December 31, 1995.

DELOITTE & TOUCHE LLP

Dallas, Texas
March 26, 1996

<PAGE> EXHIBIT 23.2

DeGolyer and MacNaughton
One Energy Square
Dallas, Texas 75206

March 26, 1996

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, 1996 on Reserves in Certain Properties owned by Enserch
Exploration, Inc.," and "Report as of January 1, 1996 on Oil Reserves
attributable to Enserch Far East, Ltd. in the Mudi Field in East Java,
Republic of Indonesia" and to references to us in "Business - Natural Gas
and Oil Exploration and Production - General - Recent Developments - Garden
Banks Project and Green Canyon Project," and "Properties" appearing in
Part I, and to the reference to us in "Financial Review" and in Note 11 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,
1995, 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, No. 33-52525 and No. 33-61635, 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, 1995, 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 M. E. Rescoe, 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.