Filed pursuant to Rule 424(b)(5)
Registration No. 33-52525
Registration Nos. 333-43811 and 333-43811-01
PROSPECTUS SUPPLEMENT
---------------------
(TO PROSPECTUS DATED JANUARY 23, 1998)
$125,000,000
ENSERCH CORPORATION
REMARKETED RESET NOTES DUE JANUARY 1, 2008
_______________
ENSERCH Corporation (Company) is hereby offering
$125,000,000 aggregate principal amount of Remarketed Reset Notes
due January 1, 2008 (Notes).
During the period from and including January 30, 1998 to but
excluding April 1, 1998 (Initial Spread Period), interest on the
Notes will accrue at a per annum rate equal to 5.82%. After the
Initial Spread Period, the character and duration of the interest
rate on the Notes will be determined by the Remarketing Agent and
agreed to by the Company on each applicable Duration/Mode
Determination Date and the Spread will be agreed to by the Company
and the Remarketing Agent on the corresponding Spread Determination
Date. Interest on the Notes during each Subsequent Spread Period
shall be payable, as applicable, either (i) at a floating interest
rate (such Notes being in the Floating Rate Mode, and such interest
rate being a Floating Rate) or (ii) at a fixed interest rate (such
Notes being in the Fixed Rate Mode and such interest rate being a
Fixed Rate), in each case as determined by the Remarketing Agent
and the Company in accordance with a Remarketing Agreement between
the Remarketing Agent and the Company (Remarketing Agreement).
The initial Remarketing Agent will be Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
After the Initial Spread Period, the Spread used in
determining the Interest Rate for the Notes during a Subsequent
Spread Period will be determined on each subsequent Spread
Determination Date which precedes the beginning of the
corresponding Subsequent Spread Period, pursuant to agreement
between the Company and the Remarketing Agent (except as
otherwise provided below), and the interest rate mode used for
each Subsequent Spread Period may be a Floating Rate Mode or a
Fixed Rate Mode, at the discretion of the
(continued on next page)
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_______________
The Notes will be sold to the public at varying prices to be
determined by the Underwriter at the time of each sale. The net
proceeds to the Company, before deducting expenses payable by the
Company (estimated to be $200,000) will be 99.975% of the
principal amount of the Notes sold, and the aggregate net
proceeds will be $124,968,750. For further information with
respect to the plan of distribution and any discounts,
commissions or profits on resales of Notes that may be deemed
underwriting discounts or commissions, see Underwriting.
The Notes are offered by the Underwriter, subject to prior
sale, when, as and if issued by the Company and delivered to and
accepted by the Underwriter and subject to approval of certain
legal matters by Winthrop, Stimson, Putnam & Roberts, counsel for
the Underwriter and to certain other conditions. The Underwriter
reserves the right to withdraw, cancel or modify such offer and
to reject orders in whole or in part. It is expected that
delivery of the Global Note will be made on or about January 30,
1998 through the book-entry facilities of The Depository Trust
Company (DTC), against payment therefor in immediately available
funds.
_______________
MERRILL LYNCH & CO.
_______________
The date of this Prospectus Supplement is January 28, 1998.
<PAGE>
THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS THAT MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH TRANSACTIONS MAY
INCLUDE OVERALLOTMENT TRANSACTIONS AND THE PURCHASE OF NOTES TO
COVER THE UNDERWRITER'S SHORT POSITIONS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE UNDERWRITING HEREIN.
_______________
(cover continued)
Company and the Remarketing Agent. If the Company and the
Remarketing Agent are unable to agree on the Spread for any
Subsequent Spread Period, then the Company is required
unconditionally to repurchase and retire all of the Notes on
the date immediately following the end of the Initial Spread
Period or the prior Subsequent Spread Period, as the case may
be, (Tender Date) at a price equal to 100% of the principal
amount thereof, together with accrued interest to the Tender
Date. After the Initial Spread Period, (i) if the Notes are in
the Floating Rate Mode, interest on the Notes will be payable in
arrears, as specified on the applicable Duration/Mode Determination
Date, either monthly, quarterly or semi-annually, or (ii) if the
Notes are in the Fixed Rate Mode, interest on the Notes will be
payable, unless otherwise specified on the applicable Duration/Mode
Determination Date, semi-annually in arrears on each January 1 and
July 1 during the applicable Subsequent Spread Period. "Interest
Payment Dates" as used herein shall mean any dates interest is paid
on the Notes. See CERTAIN TERMS OF THE NOTES.
The Notes are not redeemable prior to April 1, 1998.
Thereafter, the Notes may be redeemable, at the option of the
Company, on such date, on each Commencement Date and on those
Interest Payment Dates that are specified as redemption dates by
the Company on the applicable Duration/Mode Determination Date,
in whole or in part, upon notice thereof given at any time during
the 30 calendar day period ending on the tenth Business Day prior
to the redemption date (provided that notice of any partial
redemption must be given to the holders (Noteholders) at least 15
Business Days prior to the redemption date), in accordance with
the redemption type selected on the Duration/Mode Determination
Date. Unless previously redeemed, the Notes will mature on
January 1, 2008. See CERTAIN TERMS OF THE NOTES -- "Redemption
of the Notes".
The Notes will be represented by a single Global Note
registered in the name of DTC or its nominee. Beneficial
interests in the Global Note will be shown on, and transfers
thereof will be effected only through, records maintained by DTC
and its participants. Except as described herein, Notes in
definitive form will not be issued.
If the Company and the Remarketing Agent agree on the Spread
with respect to any Subsequent Spread Period, each Note may be
tendered to the Remarketing Agent for purchase from the tendering
Noteholder at 100% of its principal amount and for remarketing by
the Remarketing Agent on the Tender Date. In the case of the
Initial Spread Period, the Notes may be tendered on April 1,
1998. Notice of a Noteholder's election to tender to the
Remarketing Agent must be received by the Remarketing Agent
during (i) the five Business Day period ending at 12:00 noon, New
York City time, on the fifth Business Day following the relevant
Floating Rate Spread Determination Date or (ii) the one Business
Day period ending at 12:00 noon, New York City time, on the
Business Day following the Fixed Rate Spread Determination Date.
The Remarketing Agent will attempt, on a best efforts basis, to
remarket the tendered Notes at a price equal to 100% of the
aggregate principal amount so tendered. There is no assurance
that the Remarketing Agent will be able to remarket the entire
principal amount of Notes tendered in a remarketing. The
Remarketing Agent shall also have the option, but not the
obligation, to purchase any tendered Notes at such price.
Additionally, the obligation of the Remarketing Agent to purchase
tendered Notes from the tendering Noteholders and to remarket
such Notes will be subject to certain conditions and termination
events customary in the Company's public offerings. If the
Remarketing Agent does not purchase all tendered Notes on the
relevant Tender Date, the Company is required unconditionally on
such date to repurchase and retire any tendered Notes not
remarketed or purchased by the Remarketing Agent on the Tender
Date at a price equal to 100% of the principal amount thereof,
plus accrued interest. No beneficial owner of any Note shall have
any rights or claims against the Company or the Remarketing Agent
as a result of the Remarketing Agent not purchasing such Notes.
See CERTAIN TERMS OF THE NOTES -- "Tender at Option of Beneficial
Owners."
S-2
<PAGE>
THE COMPANY
The Company was incorporated under the laws of the State of
Texas in 1942 and has perpetual existence under the provisions of
the Texas Business Corporation Act. The Company, a wholly owned
subsidiary of Texas Utilities Company (Texas Utilities), is an
integrated company focused on natural gas. Its major business
operations are natural gas pipeline, processing, marketing and
distribution. Through these business operations, the Company is
engaged in owning and operating interconnected natural gas
transmission lines, underground storage reservoirs, compressor
stations and related properties in 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 United States, and owning and
operating approximately 550 local gas utility distribution
systems in Texas. The principal executive offices of the Company
are located at 1601 Bryan Street, Dallas, Texas 75201; the
telephone number is (214) 812-4600.
On August 5, 1997 (Merger Date), Texas Utilities became the
holding company for both the Company and Texas Energy Industries,
Inc. (TEI). Immediately prior to the transaction (Merger), the
Company's ownership interests in Enserch Exploration, Inc. and
Lone Star Energy Plant Operations, Inc. (together, the Unacquired
Business) were distributed to the holders of the Company's common
stock. Pursuant to the Merger, Lone Star Gas Company and Lone
Star Pipeline Company, the local distribution and pipeline
divisions of the Company, and other businesses, excluding the
Unacquired Businesses, were acquired by Texas Utilities.
TEI is a holding company formerly known as Texas Utilities
Company. The principal subsidiary of TEI is Texas Utilities
Electric Company (TU Electric), which is an electric utility
engaged in the generation, purchase, transmission, distribution
and sale of electric energy wholly within the State of Texas.
The other electric utility subsidiaries of TEI are Southwestern
Electric Service Company, which is engaged in the purchase,
transmission, distribution and sale of electric energy in ten
counties in the eastern and central parts of Texas with a
population estimated at 126,900, and Texas Utilities Australia
Pty. Ltd., owner of Eastern Energy Limited, which is engaged in
the purchase, distribution, marketing and sale of electric energy
to approximately 481,000 customers in the State of Victoria,
Australia. TEI also has three other subsidiaries which perform
specialized functions within the Texas Utilities system: Texas
Utilities Fuel Company owns a natural gas pipeline system,
acquires, stores and delivers fuel gas and provides other fuel
services at cost for the generation of electric energy by TU
Electric; Texas Utilities Mining Company owns, leases and
operates fuel production facilities for the surface mining and
recovery of lignite at cost for the generation of electric energy
by TU Electric; and Texas Utilities Services Inc. provides
financial, accounting, information technology, environmental
services, customer services, personnel, procurement and other
administrative services at cost. In addition, in November
1997, Texas Utilities acquired Lufkin-Conroe Communications Co.
(LCC). LCC offers long-distance, cellular, internet and other
services and provides local telephone services in Southeast
Texas.
As of December 31, 1997, the Company transferred its
interests in four of its subsidiaries to TEI (Reorganization).
These subsidiaries are Enserch Development Corporation, Lone Star
Gas International, Inc., National Pipeline Company and Enserch
International Services Inc. (Transferred Subsidiaries). As a
result of the Reorganization, the Company is no longer engaged in
foreign and domestic power and pipeline project development. The
Reorganization was effected in order to strengthen the Company's
financial position by relieving it of certain indebtedness as
well as its obligation to make capital expenditures in the
future. See SUMMARY OF HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION OF THE COMPANY AND ITS SUBSIDIARIES.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale
of the Notes are expected to be used for the redemption or
repurchase of certain of its outstanding debt and preferred
stock.
S-3
<PAGE>
SUMMARY OF HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION OF THE COMPANY AND ITS SUBSIDIARIES
(THOUSANDS OF DOLLARS, EXCEPT RATIOS AND PERCENTAGES)
The following material, which is presented herein solely to
furnish limited introductory information, is qualified in its
entirety by, and should be considered in conjunction with, the
other information appearing in this Prospectus Supplement and the
accompanying Prospectus, including the Incorporated Documents.
In the opinion of the Company, all adjustments (constituting only
normal recurring accruals) necessary for a fair statement of the
results of operations for the nine months ended September 30,
1997, have been made.
ACTUAL
---------------------------------------------------------
TWELVE MONTHS ENDED
DECEMBER 31,
---------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Income statement data:
Operating
Revenues $1,627,739 $1,878,902 $2,095,508 $1,931,240 $2,142,625
Net Income
(Loss) $ (27,333) $ 59,381 $ 102,095 $ 13,053 $19,042
Ratio of
Earnings to
Fixed
Charges(b) 1.00 0.91 1.09 1.06 1.44
ADJUSTED(A)
---------------------------------------
NINE MONTHS ENDED
1996 SEPTEMBER 30, 1997
---- ------------------
Income statement data:
Operating Revenues $1,888,974 $1,554,808
Net Income (Loss) $ 1,395 $ (14,384)
Ratio of Earnings to
Fixed Charges(b) 1.24 0.70
ADJUSTED(C)
--------------------------
OUTSTANDING AT
SEPTEMBER 30,
1997 AMOUNT PERCENT
-------------- ------ -------
Capitalization (Unaudited):
Long-term Debt . . . . . $ 674,590 $ 899,590 51.7%
Preferred Stock . . . . . 175,000 75,000 4.3
564,533 764,533 44.0
Common Stock Equity . . . . ---------- ---------- -----
$1,414,123 $1,739,123 100.0%
Total Capitalization . . ========== ========== =====
(a) Adjusted income statement data is derived from the
historical financial statements of the Company and gives
effect to the distribution of all of the shares of Enserch
Exploration, Inc. held by the Company to its shareholders
(Distribution), and assumes that the Distribution had
occurred at the beginning of the period presented. The
unaudited pro forma net income for the nine months ended
September 30, 1997 excludes $21,285,000 of direct merger
expenses incurred by the Company and contains only the
income from continuing operations. In the Company's opinion
the effect of the Reorganization on the statements of income
is immaterial and, as a result, no adjustments have been
made to reflect the Reorganization.
(b) See HISTORICAL AND PRO FORMA RATIOS OF EARNINGS TO FIXED
CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
DIVIDENDS in the accompanying Prospectus.
(c) To give effect to (1) the issuance of the Notes and
$125,000,000 aggregate principal amount of 6 1/4% Series A
Notes by the Company, (2) the redemption of $100,000,000 of
preferred stock on January 16, 1998, (3) the transfer by the
Company to TEI of the Transferred Subsidiaries which
resulted in a decrease of approximately $25,000,000 of long-
term debt and (4) the sale of shares of the Company's common
stock to Texas Utilities for an aggregate of $200,000,000.
Adjusted amounts do not reflect any possible future sales
from time to time by the Company of up to an additional
$250,000,000 principal amount of its debt securities and/or
preferred trust securities of its subsidiary, Enserch
Capital I, for which registration statements are effective
pursuant to Rule 415 under the Securities Act.
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CERTAIN TERMS OF THE NOTES
The following information concerning the Notes supplements
and should be read in conjunction with the statements under
DESCRIPTION OF DEBT SECURITIES in the accompanying Prospectus.
Reference is also made to the Remarketing Agreement and the
Remarketing Agreement Supplement (the forms of which will be
filed with the Commission and incorporated by reference into the
Registration Statement of which the Prospectus forms a part).
General
The Notes will be issued as a new series of Debt Securities
under an Indenture (For Unsecured Debt Securities), dated as of
January 1, 1998 (Indenture), between the Company and The Bank of
New York as trustee (Trustee).
The Notes will be unsecured obligations ranking pari passu
with other outstanding unsecured indebtedness of the Company.
Under certain circumstances involving the creation by the
Company, or a subsidiary of the Company, of any mortgage, pledge
or other lien or encumbrance on any of its properties or assets,
certain outstanding unsecured indebtedness of the Company would
be entitled to the benefit of a security interest in such
property or assets. In no event are the Notes entitled to the
benefit of a security interest in such property or assets.
Maturity
The Notes will mature on January 1, 2008 and will be issued
only in fully registered, book-entry form. See -- "Book-Entry
Only -- The Depositary Trust Company" below.
Interest and Payment
For the period from and including January 30, 1998 to but
excluding April 1, 1998 (Initial Spread Period and Initial
Interest Period), interest on the Notes will accrue at a per
annum rate equal to 5.82% (computed on the basis of the actual
number of days elapsed over a 360-day year) and will be payable
on April 1, 1998 to the persons in whose names the Notes are
registered at the close of business on March 15, 1998.
Floating Rate Mode
During the Floating Rate Mode, interest on the Notes for
each Subsequent Spread Period (as defined below) will be payable
either monthly, quarterly, or semi-annually, as specified by the
Company on each Duration/Mode Determination Date (as defined
below). Unless otherwise specified on each Duration/Mode
Determination Date in connection with Notes in the Floating Rate
Mode, interest will be payable, in arrears, in the case of Notes
which pay (i) monthly, on the first day of each month; (ii)
quarterly, on the first day of each January, April, July and
October; and (iii) semi-annually, on the first day of each
January and July. During any Subsequent Spread Period during
which the Notes are in the Floating Rate Mode, the interest rate
on the Notes will be reset either monthly, quarterly or
semi-annually, and the Notes will bear interest at a per annum
rate (computed on the basis of the actual number of days elapsed
over a 360-day year) equal to LIBOR (as defined below) for the
applicable Interest Period (as defined below), plus the
applicable Spread. Interest on the Notes will accrue from and
including each Interest Payment Date (or in the case of the
Initial Interest Period, January 30, 1998) to but excluding the
next succeeding Interest Payment Date or maturity date, as the
case may be. After the Initial Interest Period, each interest
period during any Subsequent Spread Period (each, an Interest
Period) will be from and including the most recent Interest
Payment Date on which interest has been paid to, but excluding,
the next Interest Payment Date. The first day of an Interest
Period is referred to herein as an Interest Reset Date.
After the Initial Interest Period, the interest rate will be
determined in the manner described below for each subsequent
Spread period (Subsequent Spread Period) which will be a period
of at least six months and not extending beyond the maturity
S-5
<PAGE>
date, designated by the Company; provided that the first
Subsequent Spread Period may be a period of three months or the
sum of three months plus any integral multiple of six months
ending on or before the maturity date. Each Subsequent Spread
Period, other than the first Subsequent Spread Period shall
commence on a January 1 or July 1 (or as otherwise specified by
the Company and the Remarketing Agent on the applicable
Duration/Mode Determination Date in connection with the
establishment of each Subsequent Spread Period), as applicable
(Commencement Date), and shall end on or before January 1, 2008.
The first Commencement Date will be April 1, 1998.
If any Interest Payment Date (other than at maturity),
redemption date, Interest Reset Date, Duration/Mode Determination
Date, Spread Determination Date (as defined below), Commencement
Date or Tender Date would otherwise be a day that is not a
Business Day, such Interest Payment Date, redemption date,
Interest Reset Date, Duration/Mode Determination Date, Spread
Determination Date, Commencement Date or Tender Date will be
postponed to the next succeeding day that is a Business Day.
LIBOR applicable for an Interest Period will be determined
by the Rate Agent (as defined under -- "Tender at Option of
Beneficial Owners" below) as of the second London Business Day
(as defined below) preceding each Interest Reset Date (LIBOR
Determination Date) in accordance with the following provisions:
(i) LIBOR will be determined on the basis of the offered
rate for deposits in U.S. Dollars of the applicable Index
Maturity commencing on the second London Business Day
immediately following such LIBOR Determination Date, which
appears on Telerate Page 3750 (as defined below) as of
approximately 11:00 a.m., London time, on such LIBOR
Determination Date. "Telerate Page 3750" means the display
designated on page "3750" on Dow Jones Markets Limited (or
such other page as may replace the 3750 page on that service
or such other service or services as may be nominated by the
British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. Dollar deposits). If
no such offered rate appears on Telerate Page 3750, LIBOR
for such LIBOR Determination Date will be determined in
accordance with the provisions of paragraph (ii) below. The
term "London Business Day" means any day on which dealings
in deposits in U.S. Dollars are transacted in the London
interbank market.
(ii) With respect to a LIBOR Determination Date on which no
rate appears on Telerate Page 3750 as of approximately 11:00
a.m., London time, on such LIBOR Determination Date, the
Rate Agent shall request the principal London offices of
each of four major reference banks in the London interbank
market selected by the Rate Agent (after consultation with
the Company) to provide the Rate Agent with a quotation of
the rate at which deposits in U.S. Dollars of the applicable
Index Maturity commencing on the second London Business Day
immediately following such LIBOR Determination Date, are
offered by it to prime banks in the London interbank market
as of approximately 11:00 a.m., London time, on such LIBOR
Determination Date and in a principal amount equal to an
amount of not less than U.S. $1,000,000 that is
representative for a single transaction in such market at
such time. If at least two such quotations are provided,
LIBOR for such LIBOR Determination Date will be the
arithmetic mean of such quotations as calculated by the Rate
Agent. If fewer than two quotations are provided, LIBOR for
such LIBOR Determination Date will be the arithmetic mean of
the rates quoted as of approximately 11:00 a.m., New York
City time, on such LIBOR Determination Date by three major
banks in The City of New York selected by the Rate Agent
(after consultation with the Company) for loans in U.S.
Dollars to leading European banks, of the applicable Index
Maturity commencing on the second London Business Day
immediately following such LIBOR Determination Date and in a
principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction
in such market at such time; provided, however, that if the
banks selected as aforesaid by the Rate Agent are not
quoting as mentioned in this sentence, LIBOR for such LIBOR
Determination Date will be LIBOR determined with respect to
the immediately preceding LIBOR Determination Date.
The Index Maturity applicable to Notes in the Floating Rate
Mode will be, in the case of Notes paying (i) monthly, one month;
(ii) quarterly, three months; and (iii) semi-annually, six
months.
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<PAGE>
Fixed Rate Mode
If the Notes are to be reset to the Fixed Rate Mode, as
agreed to by the Company and the Remarketing Agent on a Duration/
Mode Determination Date, then the applicable Fixed Rate for the
corresponding Subsequent Spread Period will be determined on the
Business Day following the Fixed Rate Spread Determination Date
(Fixed Rate Determination Date), in accordance with the following
provisions: the Fixed Rate will be a per annum rate and will be
determined by 2:00 p.m. New York City time on such Fixed Rate
Determination Date by adding the applicable Spread (as agreed to
by the Company and the Remarketing Agent on the preceding Fixed
Rate Spread Determination Date) to the yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) of the
applicable United States Treasury security, selected by the Rate
Agent or its agent after consultation with the Remarketing Agent,
as having a maturity comparable to the duration selected for the
following Subsequent Spread Period, which would be used in
accordance with customary financial practice in pricing new
issues of corporate debt securities of comparable maturity to the
duration selected for the following Subsequent Spread Period.
Interest in the Fixed Rate Mode will be computed on the
basis of a 360-day year of twelve 30-day months. Such interest
will be payable semi-annually in arrears on the Interest Payment
Dates (January 1 and July 1, unless otherwise specified by the
Company and the Remarketing Agent on the applicable Duration/Mode
Determination Date) at the applicable Fixed Rate, as determined
by the Company and the Remarketing Agent on the Fixed Rate
Determination Date, beginning on the Commencement Date and for
the duration of the relevant Subsequent Spread Period. Interest
on the Notes will accrue from and including each Interest Payment
Date to but excluding the next succeeding Interest Payment Date
or maturity date, as the case may be. See -- "Additional Terms of
the Notes" for other provisions applicable to Notes in the Fixed
Rate Mode.
If any Interest Payment Date or any redemption date in the
Fixed Rate Mode falls on a day that is not a Business Day (in
either case, other than any Interest Payment Date or redemption
date that falls on a Commencement Date, in which case such date
will be postponed to the next day that is a Business Day), the
related payment of principal and interest will be made on the
next succeeding Business Day as if it were made on the date such
payment was due, and no interest will accrue on the amounts so
payable for the period from and after such dates.
Additional Terms of the Notes
The Spread that will be applicable during each Subsequent
Spread Period will be the percentage (a) recommended by the
Remarketing Agent so as to result in a rate that, in the opinion
of the Remarketing Agent, will enable tendered Notes to be
remarketed by the Remarketing Agent at 100% of the principal
amount thereof, as described under -- "Tender at Option of
Beneficial Owners" below, and (b) agreed to by the Company. The
interest rate mode during each Subsequent Spread Period shall be
either the Floating Rate Mode or the Fixed Rate Mode, as
determined by the Company and the Remarketing Agent.
If the maturity date for the Notes falls on a day that is
not a Business Day, the related payment of principal and interest
will be made on the next succeeding Business Day as if it were
made on the date such payment was due, and no interest will
accrue on the amounts so payable for the period from and after
such dates.
Unless notice of redemption of the Notes as a whole has been
given, the duration, redemption dates, redemption type (i.e.,
par, premium or make-whole, including in the case of make-whole,
Reinvestment Spread), redemption prices (if applicable),
Commencement Date, Interest Payment Dates and interest rate mode
(i.e., Fixed Rate Mode or Floating Rate Mode) (and any other
relevant terms) for each Subsequent Spread Period will be
established by 3:00 p.m., New York City time, on the tenth
Business Day prior to the Commencement Date of each Subsequent
Spread Period (Duration/Mode Determination Date). In addition,
the Spread for each Subsequent Spread Period will be established
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<PAGE>
by 3:00 p.m., New York City time, on the eighth Business Day
prior to the Commencement Date of such Subsequent Spread Period
for which Notes will be in the Floating Rate Mode (Floating Rate
Spread Determination Date) or by 12:00 noon, New York City time
on the third Business Day prior to the Commencement Date of such
Subsequent Spread Period for which Notes will be in the Fixed
Rate Mode (Fixed Rate Spread Determination Date and together with
the Floating Rate Spread Determination Date, Spread Determination
Date). The Company will request not later than seven nor more
than 15 calendar days prior to any Duration/Mode Determination
Date, that DTC notify its Participants of such Duration/Mode
Determination Date and of the procedures that must be followed if
any beneficial owner of a Note wishes to tender such Note as
described under -- "Tender at Option of Beneficial Owners" below.
In the event that DTC or its nominee is no longer the holder of
record of the Notes, the Company will notify the Noteholders of
such information within such period of time. This will be the
only notice given by the Company or the Remarketing Agent with
respect to such Duration/Mode Determination Date and procedures
for tendering Notes. The term "Business Day" means any day other
than a Saturday or Sunday or a day on which banking institutions
in The City of New York are required or authorized to close and,
in the case of Notes in the Floating Rate Mode, that is also a
London Business Day.
In the event that the Company and the Remarketing Agent do
not agree on the Spread for any Subsequent Spread Period, then
the Company is required unconditionally to repurchase and retire
all of the Notes on the Tender Date at a price equal to 100% of
the principal amount thereof, together with accrued interest to
the Tender Date.
All percentages resulting from any calculation of any
interest rate for the Notes will be rounded, if necessary, to the
nearest one hundred thousandth of a percentage point, with five
one millionths of a percentage point rounded upward and all
dollar amounts will be rounded to the nearest cent, with one-half
cent being rounded upward.
Tender at Option of Beneficial Owners
In the event the Company and the Remarketing Agent agree on
the Spread on the Spread Determination Date with respect to any
Subsequent Spread Period, the Company and the Remarketing Agent
will enter into a Remarketing Agreement Supplement (Remarketing
Agreement Supplement) under which the Remarketing Agent will
agree, subject to the terms and conditions set forth therein, to
purchase from tendering Noteholder on the Tender Date all Notes
with respect to which the Remarketing Agent receives a Tender
Notice as described below at 100% of the principal amount thereof
(Purchase Price). Except as otherwise provided in the next
succeeding paragraph, each beneficial owner of a Note may, at
such owner's option, upon giving notice as provided below (Tender
Notice), tender such Note for purchase by the Remarketing Agent
on the Tender Date with respect to a Subsequent Spread Period at
the Purchase Price. The Purchase Price will be paid by the
Remarketing Agent in accordance with the standard procedures of
DTC, which currently provide for payments in same-day funds.
Interest accrued on the Notes with respect to the preceding
interest period will be paid in the manner described under --
"Book-Entry System" below and -- "Additional Terms of the Notes"
above. If such beneficial owner has an account at the
Remarketing Agent and tenders such Note through such account,
such beneficial owner will not be required to pay any fee or
commission to the Remarketing Agent. If such Note is tendered
through a broker, dealer, commercial bank, trust company or other
institution, other than the Remarketing Agent, such holder may be
required to pay fees or commissions to such other institution.
It is currently anticipated that Notes so purchased by the
Remarketing Agent will be remarketed by it.
In the case of a Floating Rate Spread Determination Date,
the Tender Notice must be received by the Remarketing Agent
during the period commencing on the first Business Day following
such Spread Determination Date and ending at 12:00 noon, New York
City time, on the fifth Business Day following such Spread
Determination Date. In the case of a Fixed Rate Spread
Determination Date, the Tender Notice must be received by the
Remarketing Agent during the period commencing at 12:00 noon, New
York City time, on such Spread Determination Date and ending at
12:00 noon, New York City time, on the first Business Day
following such Spread Determination Date. The term "Notice Date"
means, in either case, the date by which a Tender Notice must be
received by the Remarketing Agent. In order to ensure that a
Tender Notice is received on a particular day, the beneficial
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owner of Notes must direct his broker or other designated
Participant or Indirect Participant (as defined below) to give
such Tender Notice before the broker's cut-off time for accepting
instructions for that day. Different firms may have different
cut-off times for accepting instructions from their customers.
Accordingly, beneficial owners should consult the brokers or
other Participants or Indirect Participants through which they
own their interests in the Notes for the cut-off times for such
brokers, other Participants or Indirect Participants. See --
"Book-Entry Only -- The Depositary Trust Company" below. Except
as otherwise provided below, a Tender Notice shall be
irrevocable. If a Tender Notice is not received for any reason
by the Remarketing Agent with respect to any Note by 12:00 noon,
New York City time, on the Notice Date, the beneficial owner of
such Note shall be deemed to have elected not to tender such Note
for purchase by the Remarketing Agent, and the interest rate
thereon will be reset automatically to the new applicable
interest rate on the Commencement Date for the Subsequent Spread
Period.
The Remarketing Agent will attempt, on a best efforts basis,
to remarket the tendered Notes at a price equal to 100% of the
aggregate principal amount so tendered. There is no assurance
that the Remarketing Agent will be able to remarket the entire
principal amount of Notes tendered in a remarketing. The
Remarketing Agent shall also have the option, but not the
obligation, to purchase any tendered Notes at such price. The
obligation of the Remarketing Agent to purchase tendered Notes
from the tendering Noteholders and to remarket such Notes will be
subject to certain conditions and termination events customary in
the Company's public offerings, including a condition that no
material adverse change in the condition of the Company and its
subsidiaries, taken as a whole, shall have occurred since the
Spread Determination Date. In the event that the Remarketing
Agent is unable to remarket some or all of the tendered Notes and
chooses not to purchase such tendered Notes, the Company is
obligated unconditionally to purchase and retire on the Tender
Date the remaining unsold tendered Notes at a price equal to 100%
of the principal amount, plus accrued interest, if any, to the
applicable Tender Date.
No beneficial owner of any Note shall have any rights or
claims under the Remarketing Agreement Supplement or against the
Company or the Remarketing Agent as a result of the Remarketing
Agent's not purchasing such Notes.
If the Remarketing Agent does not purchase all Notes
tendered for purchase on any Tender Date, it will promptly notify
the Company and the Trustee.
The term "Remarketing Agent" means the nationally recognized
broker-dealer selected by the Company to act as Remarketing
Agent. The term "Rate Agent" means the entity selected by the
Company as its agent to determine (i) LIBOR and the interest rate
on the Notes for any Interest Period and/or (ii) the yield to
maturity on the applicable United States Treasury security that
is used in connection with the determination of the applicable
Fixed Rate, and the ensuing applicable Fixed Rate. Pursuant to
the Remarketing Agreement, Merrill Lynch, Pierce, Fenner & Smith
Incorporated has agreed to act as Remarketing Agent. The
Company, in its sole discretion, will appoint a Rate Agent and
may change the Remarketing Agent and the Rate Agent for any
Subsequent Spread Period at any time on or prior to 3:00 p.m.,
New York City time, on the Duration/Mode Determination Date
relating thereto.
The Remarketing Agent, in its individual or any other
capacity, may buy, sell, hold and deal in any of the Notes. The
Remarketing Agent may exercise any vote or join in any action
which any beneficial owner of Notes may be entitled to exercise
or take with like effect as if it did not act in any capacity
under the Remarketing Agreement. The Remarketing Agent, in its
individual capacity, either as principal or agent, may also
engage in or have an interest in any financial or other
transaction with the Company as freely as if it did not act in
any capacity under the Remarketing Agreement.
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Redemption of the Notes
The Notes may not be redeemed prior to April 1, 1998. On
that date, on each Commencement Date and on those Interest
Payment Dates specified as redemption dates by the Company on the
Duration/Mode Determination Date in connection with any
Subsequent Spread Period, the Notes may be redeemed, at the
option of the Company, in whole or in part, upon notice thereof
given at any time during the 30-calendar-day period ending on the
tenth Business Day prior to the redemption date (provided that
notice of any partial redemption must be given at least 15
calendar days prior to the redemption date), in accordance with
the redemption type selected on the Duration/Mode Determination
Date. In the event that less than all of the outstanding Notes
are to be redeemed, the Notes to be redeemed shall be selected by
such method as the Trustee shall deem fair and appropriate. So
long as the Global Note is held by DTC, the Company will give
notice to DTC, whose nominee is the record holder of all of the
Notes, and DTC will determine the principal amount to be redeemed
from the account of each Participant. This will be the only
notice given by the Company or the Remarketing Agent with respect
to redemption of the Notes. A Participant may determine to redeem
from some beneficial owners (which may include a Participant
holding Notes for its own account) without redeeming from the
accounts of other beneficial owners.
The redemption type to be chosen by the Company and the
Remarketing Agent on the Duration/Mode Determination Date may be
one of the following as defined herein: (i) Par Redemption; (ii)
Premium Redemption; or (iii) Make-Whole Redemption. "Par
Redemption" means redemption at a redemption price equal to 100%
of the principal amount thereof, plus accrued interest thereon,
if any, to the redemption date. "Premium Redemption" means
redemption at a redemption price or prices greater than 100% of
the principal amount thereof, plus accrued interest thereon, if
any, to the redemption date, as determined on the Duration/Mode
Determination Date. "Make-Whole Redemption" means redemption at a
redemption price equal to the Make-Whole Amount (as defined
below), if any, with respect to such Notes. Unless otherwise
specified by the Company on any Duration/Mode Determination Date,
the redemption type will be a Par Redemption.
"Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any Note, an amount equal to
the greater of (i) 100% of the principal amount and (ii) the sum
of the present values of the remaining scheduled payments of
principal and interest thereon from the redemption date to the
end of the applicable Subsequent Spread Period, computed by
discounting such payments, in each case, to the date of
redemption on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the applicable Treasury
Yield plus the Reinvestment Spread, plus accrued interest on the
principal amount thereof to the date of redemption.
"Treasury Yield" means, with respect to any redemption date,
the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for
the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the applicable Comparable Treasury
Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by the Remarketing Agent as having a maturity
comparable to the remaining term of the Notes that would be
utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of
the Notes.
"Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the applicable Reference
Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest of such applicable Reference
Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer
than four such Reference Treasury Dealer Quotations, the average
of all such Quotations. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount)
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quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m. on the third Business Day preceding such
redemption date.
"Reference Treasury Dealer" means, with respect to the Notes
offered hereby, at least four primary U.S. Government securities
dealers in New York City as the Company or the Trustee shall
select, which may include the Remarketing Agent or an affiliate
thereof.
"Reinvestment Spread" means, with respect to the Notes, a
number, expressed as a number of basis points or as a percentage,
selected by the Company and agreed to by the Remarketing Agent on
the Duration/Mode Determination Date.
Book-Entry Only -- The Depository Trust Company.
DTC will act as securities depositary for the Notes. The
Notes will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or
more fully-registered global Note certificates, representing the
total aggregate principal amount of the Notes, will be issued and
will be deposited with DTC.
DTC is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning
of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants
(Participants) deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and
certain other organizations (Direct Participants). DTC is owned
by a number of its Direct Participants and by the New York Stock
Exchange, the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system
is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions
through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly (Indirect
Participants). The rules applicable to DTC and its Direct
Participants and Indirect Participants (together, Participants)
are on file with the Securities and Exchange Commission.
Purchases of Notes within the DTC system must be made by or
through Direct Participants, which will receive a credit for the
Notes on DTC's records. The ownership interest of each actual
purchaser of Notes (Beneficial Owner) is in turn to be recorded
on the Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of
their holdings, from the Participants through which the
Beneficial Owners purchased Notes. Transfers of ownership
interests in the Notes are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing
their ownership interests in the Notes, except in the event that
use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all the Notes deposited
by Direct Participants with DTC are registered in the name of
DTC's nominee, Cede & Co. The deposit of Notes with DTC and
their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Notes
are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
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Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants and by Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or
regulatory requirements that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than
all of the Notes are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with
respect to Notes. Under its usual procedures, DTC would mail an
Omnibus Proxy to the Company as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co. consenting or voting
rights to those Direct Participants to whose accounts the Notes
are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Principal and interest payments on the Notes will be made to
DTC. DTC's practice is to credit Direct Participants' accounts
on the relevant payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe
that it will not receive payments on such payment date. Payments
by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or
registered in "street name," and such payments will be the
responsibility of such Participant and not of DTC or the Company,
subject to any statutory or regulatory requirements to the
contrary that may be in effect from time to time. Payment of
principal and interest to DTC is the responsibility of the
Company, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Participants.
Except as provided herein, a Beneficial Owner will not be
entitled to receive physical delivery of Notes. Accordingly,
each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Notes.
DTC may discontinue providing its services as securities
depositary with respect to the Notes at any time by giving
reasonable notice to the Company. Under such circumstances, in
the event that a successor securities depositary is not obtained,
Note certificates are required to be printed and delivered.
Additionally, the Company may decide to discontinue use of the
system of book-entry transfers through DTC (or any successor
depositary) with respect to the Notes. In that event,
certificates for the Notes will be printed and delivered.
The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company does not take
responsibility for the accuracy thereof.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal
income tax consequences of the purchase, ownership and
disposition of the Notes is based upon the Internal Revenue Code
of 1980, as amended (Code), regulations promulgated under the
Code (Treasury Regulations), rulings and decisions now in effect,
all of which are subject to change (prospectively or
retroactively) or possible differing interpretations. The
following discussion deals only with Notes held as capital assets
and does not purport to deal with persons in special tax
situations, such as financial institutions, banks, insurance
companies, regulated investment companies, dealers in securities
or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or
persons whose functional currency is not the United States
dollar. It also does not deal with holders other than original
purchasers (except where otherwise specifically noted). Persons
considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal
income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the
Notes arising under the laws of any other taxing jurisdiction.
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As used herein, the term "U.S. Holder" means a beneficial
owner of a Note that is for United States Federal income tax
purposes (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in
or under the laws of the United States or of any state thereof,
(iii) an estate the income of which is subject to United States
Federal income taxation regardless of its source, or (iv) a trust
if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more
United States persons have the authority to control all
substantial decisions of the trust. As used herein, the term
"Non-U.S. Holder" means a beneficial owner of a Note that is not
a U.S. Holder.
U.S. Holders
Payments of Interest. The Notes should constitute variable
rate debt instruments (VRDI) and the interest payments received
should be considered "qualified stated interest" under section
1.1275-5 of the Treasury Regulations. Based on this treatment,
the interest received will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or
received in accordance with the U.S. Holder's regular method of
tax accounting.
Disposition of a Note. Based on the forgoing treatment,
upon the sale, exchange or retirement of a Note, a U.S. Holder
generally will recognize taxable gain or loss in an amount equal
to the difference, if any, between the amount realized upon the
sale, exchange or retirement (other than amounts representing
accrued and unpaid interest which will be taxable as interest
income) and such U.S. Holder's adjusted tax basis in its Note. A
U.S. Holder's adjusted tax basis in a Note is generally equal to
such U.S. Holder's initial investment in such Note. In the case
of a noncorporate U.S. Holder, any gain recognized upon the sale,
exchange or retirement of a Note generally will be taxable at a
maximum rate of 20% if the U.S. Holder's holding period for the
Note is more than 18 months or at a maximum rate of 28% if such
holding period is more than one year but not more than 18 months.
The deduction of capital losses is subject to certain
limitations.
Other Possible Treatment of the Notes. While the Company
intends to treat the Notes as VRDI's issued without original
issue discount (OID), it is possible that the Internal Revenue
Service (IRS) will take the position that the Notes are either
(i) VRDI's issued with OID, or (ii) contingent payment debt
instruments. In the event the IRS were successful in either
assertion, Noteholders could experience U.S. federal income tax
consequences significantly different from those discussed herein.
The Treasury Regulations governing VRDI's issued with OID and
contingent payment debt instruments are complex, and prospective
purchasers of Notes are urged to consult their tax advisors as to
the potential application of, and the consequences of applying,
those regulations.
Information Reporting and Backup Withholding. In general,
information reporting requirements will apply to certain payments
of principal and interest and to the proceeds of sales of Notes
made to U.S. Holders other than certain exempt recipients (such
as corporations). A 31% backup withholding tax will apply to
such payments if the U.S. Holder (i) fails to provide a taxpayer
identification number (TIN), (ii) furnishes an incorrect TIN,
(iii) is notified by the IRS that it has failed to properly
report payments of interest and dividends or (iv) under certain
circumstances, fails to certify, under penalty of perjury, that
it has furnished a correct TIN and has not been notified by the
IRS that it is subject to backup withholding. In the case of
interest paid after December 31, 1998, a U.S. Holder generally
will be subject to backup withholding at a 31% rate unless
certain IRS certification procedures are complied with directly
or through an intermediary.
The Company will furnish annually to the IRS and to record
holders of the Notes (other than with respect to certain exempt
holders) information relating to the interest accruing and paid
on the Notes during the calendar year.
Any amounts withheld under the backup withholding rules will
be allowed as a refund or a credit against such U.S. Holder's
U.S. federal income tax liability provided the required
information is furnished to the IRS.
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Non-U.S. Holders
Interest on Notes. Subject to the discussion below
concerning backup withholding, no withholding of United States
federal income tax will be required with respect to the payment
by the Company or any paying agent of principal or interest on a
Note owned by a Non-U.S. Holder, provided that the beneficial
owner (i) does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of Section 871(h)(3)
of the Internal Revenue Code of 1986, as amended (Code), and the
regulations thereunder, (ii) is not a controlled foreign
corporation related, directly or indirectly, to the Company
through stock ownership, (iii) is not a bank whose receipt of
interest on a Note is described in Section 881(c)(3)(A) of the
Code and (iv) satisfies the statement requirement (described
generally below) set forth in Section 871(h) and Section 881(c)
of the Code and the regulations thereunder.
To satisfy the requirement referred to in (iv) above, the
beneficial owner of such Note, or a financial institution holding
the Note on behalf of such owner, must provide, in accordance
with specified procedures, the Company or its paying agent with a
statement to the effect that the beneficial owner is not a U.S.
person. These requirements will be met if (1) the beneficial
owner provides his name and address, and certifies, under
penalties of perjury, that he is not a U.S. person (which
certification may be made on an IRS Form W-8 (or successor form))
or (2) a financial institution holding the Note on behalf of the
beneficial owner certifies, under penalties of perjury, that such
statement has been received by it and furnishes a paying agent
with a copy thereof.
In the event that any of the above requirements are not
satisfied, the Company will nonetheless not withhold federal
income tax on interest paid to a Non-U.S. holder if it receives
IRS Form 4224 (or, after December 31, 1998, a Form W-8) from that
Non-U.S. Holder, establishing that such income is effectively
connected with the conduct of a trade or business in the United
States, unless the Company has knowledge to the contrary.
Interest or any redemption premium paid to a Non-U.S. Holder
(other than a partnership) that is effectively connected with the
conduct by the holder of a trade or business in the United States
is generally taxed at the graduated rates that are applicable to
United States persons. In the case of a Non-U.S. Holder that is
a corporation, such effectively connected income may also be
subject to the United States federal branch profits tax (which is
generally imposed on a foreign corporation on the deemed
repatriation from the United States of effectively connected
earnings and profits) at a 30% rate (unless the rate is reduced
or eliminated by an applicable income tax treaty and the holder
is a qualified resident of the treaty country). In the case of a
partnership that has foreign partners (i.e., persons who would be
Non-U.S.Holders if they held the Notes directly), such
effectively connected income allocable to the foreign partner
would generally be subject to United States federal withholding
tax (regardless of whether such income is, in fact, distributed
to such foreign partner) at a 35% rate, if the foreign partner is
a corporation, or at a 39.6% rate, if the foreign partner is not
a corporation. Any foreign partner of such a partnership would
be entitled to a credit against his United States federal income
tax for his share of the withholding tax paid by the partnership.
Sale, Exchange, Redemption or other Disposition of Notes. A
Non-U.S. Holder will generally not be subject to United States
federal income tax with respect to gain recognized on a sale,
exchange, redemption or other disposition of Notes unless (i) the
gain is effectively connected with a trade or business of the
Non-U.S. Holder in the United States, (ii) in the case of a Non-
U.S. Holder who is an individual and holds the Notes as a capital
asset, such holder is present in the United States for 183 or
more days in the taxable year of the sale or other disposition
and certain other conditions are met, or (iii) the Non-U.S.
Holder is subject to tax pursuant to certain provisions of the
Code applicable to United States expatriates.
Gains derived by a Non-U.S. Holder (other than a
partnership) from the sale or other disposition of Notes that are
effectively connected with the conduct by the Holder of a trade
or business in the United States are generally taxed at the
graduated rates that are applicable to United States persons. In
the case of a Non-U.S. Holder that is a corporation, such
effectively connected income may also be subject to the United
States branch profits tax. In the case of a partnership that has
foreign partners (i.e., persons who would be Non-U.S. Holders if
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they held the Notes directly), such effectively connected income
allocable to the foreign partner would generally be subject to
United States federal withholding tax (regardless of whether such
income is, in fact, distributed to such foreign partner) at a 35%
rate, if the foreign partner is a corporation, or at a 39.6%
rate, if the foreign partner is not a corporation. Any foreign
partner of such a partnership would be entitled to a credit
against his United States federal income tax for his share of the
withholding tax paid by the partnership. If an individual Non-
U.S. Holder falls under clause (ii) above, he will be subject to
a flat 30% tax on the gain derived from the sale or other
disposition, which may be offset by United States capital losses
recognized within the same taxable year as such sale or other
disposition (notwithstanding the fact that he is not considered a
resident of the United States).
Federal Estate Tax. A Note beneficially owned by an
individual who at the time of death is a Non-U.S. Holder will not
be subject to United States federal estate tax as a result of
such individual's death, provided that such individual does not
actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to
vote within the meaning of Section 871(h)(3) of the Code and
provided that the interest payments with respect to such Note
would not have been, if received at the time of such individual's
death, effectively connected with the conduct of a United States
trade or business by such individual.
Information Reporting and Backup Withholding. No
information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to
Non-U.S. Holders if a statement described in (iv) under --
"Interest on Notes" has been received and the payor does not have
actual knowledge that the beneficial owner is a United States
person.
Information reporting and backup withholding will not apply
if payments of interest on a Note are paid or collected by a
custodian, nominee, or agent on behalf of the beneficial owner of
such Note if such custodian, nominee, or agent has documentary
evidence in its records that the beneficial owner is not a U.S.
person and certain other conditions are met, or the beneficial
owner otherwise establishes an exemption.
Payments on the sale, exchange or other disposition of a
Note made to or through a foreign office of a broker generally
will not be subject to backup withholding. However, payments
made by a broker that is a United States person, a controlled
foreign corporation for United States federal income tax
purposes, a foreign person 50 percent or more of whose gross
income is effectively connected with a United States trade or
business for a specified three year period, or (with respect to
payments after December 31, 1998) a foreign partnership with
certain connections to the United States, will be subject to
information reporting unless the broker has in its records
documentary evidence that the beneficial owner is not a United
States person and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption. Backup
withholding may apply to any payment that such broker is required
to report if the broker has actual knowledge that the payee is a
United States person. Payments to or through the United States
office of a broker will be subject to information reporting and
backup withholding unless the Holder certifies, under penalties
of perjury, that it is not a United States person or otherwise
establishes an exemption.
For payments made after December 31, 1998, with respect to
Notes held by foreign partnerships, IRS regulations require that
the certification described in (iv) under -- "Interest on Notes"
above be provided by the partners, rather than by the foreign
partnership, and that the partnership provide certain
information, including a United States TIN. A look-through rule
will apply in the case of tiered partnerships.
Non-U.S. Holders should consult their tax advisors regarding
the application of information reporting and backup withholding
in their particular situations, the availability of an exemption
therefrom, and the procedures for obtaining such an exemption, if
available. Any amounts withheld under the backup withholding
rules will be allowed as a refund or credit against the Non-U.S.
Holder's U.S. federal income tax liability and may entitle such
Holder to a refund, provided the required information is
furnished to the IRS.
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UNDERWRITING
Under the terms and subject to the conditions of the
Underwriting Agreement dated the date hereof, the Company has
agreed to sell to Merrill Lynch, Pierce, Fenner & Smith
Incorporated (Underwriter), and the Underwriter has agreed to
purchase, the entire principal amount of the Notes. The
Underwriting Agreement provides that the obligation of the
Underwriter to pay for and accept delivery of the Notes is
subject to the approval of certain legal matters by their counsel
and to certain other conditions. The Underwriter is committed to
take and pay for all of the Notes if any are taken.
The Underwriter has advised the Company that the Underwriter
proposes to offer the Notes from time to time for sale in
negotiated transactions or otherwise, at prices determined at the
time of sale. The Underwriter may effect
such transactions by selling Notes to or through dealers and such
dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriter and
any purchasers of Notes for whom they may act as agent. The
Underwriter and any dealers that participate with the Underwriter
in the distribution of the Notes may be deemed to be
underwriters, and any discounts or commissions received by them
and any profit on the resale of Notes by them may be deemed to be
underwriting compensation.
The Company has agreed to indemnify the Underwriter against
certain liabilities under the Securities Act.
The Company does not intend to apply for listing of the
Notes on a national securities exchange, and there is at present
no trading market for the Notes. The Company has been advised by
the Underwriter that it intends to make a market in the Notes as
permitted by applicable laws and regulations. The Underwriter is
not obligated, however, to make a market in the Notes and any
such market-making activities may be discontinued at any time by
the Underwriter. Accordingly, no assurance can be given as to
the liquidity of, or any trading market for, the Notes.
In order to facilitate the offering of the Notes, the
Underwriter may engage in transactions that maintain or otherwise
affect the price of the Notes. Specifically, the Underwriter may
overallot in connection with the offering of the Notes, creating
a short position in the Notes for its own account. In addition,
to cover overallotments, the Underwriter may bid for, and
purchase, the Notes in the open market. Any of these activities
may maintain the price of the Notes above independent market
levels. The Underwriter is not required to engage in these
activities and may end any of these activities at any time.
The Underwriter is also an underwriter with respect to the
Company's 6 1/4% Series A Notes due January 1, 2003 which are
expected to be issued on or about the same date as the Notes.
S-16
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS
SUPPLEMENT AND PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT
AND PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH
OFFER OR SOLICITATION IS UNLAWFUL.
_______________
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
The Company . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . S-3
Summary of Historical and Pro Forma Consolidated Financial
Information . . . . . . . . . . . . . . . . . . . . . . . S-4
Certain Terms of the Notes . . . . . . . . . . . . . . . . . S-5
Certain Federal Income Tax Considerations . . . . . . . . . S-12
Underwriting . . . . . . . . . . . . . . . . . . . . . . . S-16
PROSPECTUS
Incorporation of Certain Documents By Reference . . . . . . . 3
Available Information . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 5
Historical and Pro Forma Ratios of Earnings to Fixed Charges
and Earnings to Combined Fixed Charges and
Preferred Dividends . . . . . . . . . . . . . . . . . . . 5
Description of Debt Securities . . . . . . . . . . . . . . . 6
Description of the Preferred Trust Securities . . . . . . . . 14
Description of the Guarantee . . . . . . . . . . . . . . . . 21
Description of the Junior Subordinated Debentures . . . . . . 23
Certain United States Federal Income Tax Consequences
Relating to the Preferred Trust Securities . . . . . . . . 32
Experts and Legality . . . . . . . . . . . . . . . . . . . . 34
Plan of Distribution . . . . . . . . . . . . . . . . . . . . 35
=================================================================
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$125,000,000
ENSERCH CORPORATION
REMARKETED RESET NOTES
DUE JANUARY 1, 2008
_______________
PROSPECTUS SUPPLEMENT
_______________
MERRILL LYNCH & CO.
JANUARY 28, 1998
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