<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 033-53877
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* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. This prospectus shall *
* not constitute an offer to sell or the solicitation of an offer to *
* buy nor shall there be any sale of these securities in any State in *
* which such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
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SUBJECT TO COMPLETION, DATED JULY 19, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 15, 1994
3,000,000 PREFERRED SECURITIES
ENRON CAPITAL RESOURCES, L.P.
% CUMULATIVE PREFERRED SECURITIES, SERIES A
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
ENRON CORP.
---------------------
The % Cumulative Preferred Securities, Series A (the "Series A Preferred
Securities"), representing the limited partner interests offered hereby, are
being issued by Enron Capital Resources, L.P., a limited partnership organized
under the laws of the State of Delaware ("Enron Capital Resources"). Enron
Corp., a Delaware corporation ("Enron"), is the general partner of Enron Capital
Resources. Enron Capital Resources exists for the sole purpose of issuing its
limited partner interests and lending the proceeds thereof to Enron. The limited
partner interests represented by the Preferred Securities will have a preference
with respect to cash distributions and amounts payable on liquidation over the
general partner's interest in Enron Capital Resources.
The payment of distributions, if and to the extent payable out of moneys
held by Enron Capital Resources and legally available therefor, and payments on
liquidation or redemption with respect to the Series A Preferred Securities are
guaranteed (the "Guarantee") by Enron to the extent described herein. The Series
A Preferred Securities will entitle holders to receive cumulative preferential
cash distributions, at an annual rate of % of the liquidation preference of
$25 per share, accruing from the date of original issuance and payable monthly
in arrears on the last day of each calendar month of each year, commencing
August 31, 1994 ("dividends"). If Enron fails to make interest payments pursuant
to the loan from Enron Capital Resources of the proceeds of the sale of the
Series A Preferred Securities (the "Loan"), Enron Capital Resources will not
have sufficient funds to pay dividends to holders of Preferred Securities. The
Guarantee does not cover payment of dividends when Enron Capital Resources does
not have sufficient funds. See "Description of the Guarantee" herein. The
holders of Series A Preferred Securities will have the right, however,
exercisable under the circumstances described under "Description of the
Preferred Securities -- Voting Rights" herein, to cause Enron Capital Resources
to enforce its creditor's rights against Enron under the Loan. Enron's
obligations under the Loan and the Guarantee are subordinate in right to payment
to all of its Senior Indebtedness (as defined herein), which totaled
approximately $3.2 billion at June 30, 1994.
The Series A Preferred Securities are redeemable, at the option of Enron
Capital Resources (with Enron's consent), in whole or in part, from time to
time, on or after August 31, 1999, at $25 per Preferred Security plus
accumulated and unpaid dividends to the date fixed for redemption (the
"Redemption Price"), and will be redeemed at such price from the proceeds of any
repayment of the Loan of the proceeds hereof to Enron. In the event of the
liquidation of Enron Capital Resources, holders of Series A Preferred Securities
will be entitled to receive for each Series A Preferred Security a liquidation
preference of $25 plus accumulated and unpaid dividends to the date of payment,
subject to certain limitations. See "Description of the Series A Preferred
Securities -- Liquidation Distribution" herein. For a description of the various
contractual backup undertakings of Enron relating to the Series A Preferred
Securities, see "Description of the Series A Preferred Securities --
Miscellaneous", "Description of the Guarantee" and "Description of the Loan"
herein. SEE "INVESTMENT CONSIDERATIONS" HEREIN FOR CERTAIN INFORMATION RELEVANT
TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING CIRCUMSTANCES
UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES A PREFERRED SECURITIES MAY BE
DEFERRED.
Application will be made to list the Series A Preferred Securities on the
New York Stock Exchange under the symbol . Trading of the Series A
Preferred Securities is expected to commence within a 30-day period after the
initial delivery of the Preferred Securities.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO ENRON
OFFERING PRICE(1) COMMISSION(2) CAPITAL RESOURCES(3)(4)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Series A Preferred Security............ $ (3) $
- ----------------------------------------------------------------------------------------------------------------------------
Total(4)................................... $ (3) $
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued dividends, if any, from , 1994.
(2) Enron Capital Resources and Enron have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting" herein.
(3) In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will be loaned to Enron, under the Underwriting Agreement Enron
has agreed to pay to the Underwriters as compensation ("Underwriters'
Compensation") for their arranging the loan of such proceeds $. per
Series A Preferred Security (or $ in the aggregate); provided that
such compensation for sales of or more Series A Preferred Securities
to any single purchaser will be per Series A Preferred Security.
Therefore, to the extent of such sales, the actual amount of Underwriters'
Compensation will be less than the amount specified in the preceding
sentence. See "Underwriting" herein.
(4) Expenses of the offering, which are payable by Enron, are estimated to be
$ .
The Series A Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of certificates for the Series A Preferred Securities
will be made only in book-entry form through the facilities of The Depository
Trust Company on or about , 1994.
---------------------
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
RAUSCHER PIERCE REFSNES, INC.
SMITH BARNEY INC.
---------------------
The date of this Prospectus Supplement is , 1994.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
PREFERRED SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
ENRON CAPITAL RESOURCES, L.P.
Enron Capital Resources is a limited partnership organized under the
Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"). Enron is
the general partner of Enron Capital Resources (the "General Partner"), and a
wholly owned subsidiary of Enron is its organizational limited partner. All of
the general and limited partner interests in Enron Capital Resources are
beneficially owned by Enron or its wholly owned subsidiary, and upon sale of the
Series A Preferred Securities the wholly owned subsidiary will withdraw as a
limited partner so that thereafter all of the limited partner interests will be
owned by holders of Series A Preferred Securities. Enron Capital Resources'
executive offices are located at 1400 Smith Street, Houston, Texas 77002, and
its telephone number is (713) 853-6161. All of the business and affairs of Enron
Capital Resources are conducted by Enron, as General Partner. Enron Capital
Resources exists solely for the purpose of issuing limited partner interests
designated as Preferred Securities and lending the net proceeds thereof to
Enron.
ENRON CORP.
Enron, a Delaware corporation organized in 1930, is an integrated natural
gas company headquartered in Houston, Texas. Essentially all of Enron's
operations are conducted through its subsidiaries and affiliates, which are
principally engaged in the gathering, transportation and wholesale marketing of
natural gas to markets throughout the United States and internationally through
approximately 44,000 miles of natural gas pipelines; the exploration for and
production of natural gas and crude oil in the United States and
internationally; the production, purchase, transportation and worldwide
marketing of natural gas liquids and refined petroleum products; the independent
(i.e., non-utility) development, promotion, construction and operation of
natural gas-fired power plants in the United States and internationally which
use combined cycle and cogeneration technology to generate electricity and
steam; and the purchasing and marketing of long-term energy related commitments.
Natural Gas Pipelines. Enron and its subsidiaries and affiliates operate
domestic interstate pipelines extending from Texas to the Canadian border, and
across the southern United States from Florida to California. Included in
Enron's domestic interstate natural gas pipeline operations are Northern Natural
Gas Company ("Northern"), Florida Gas Transmission Company ("Florida Gas")
(indirectly 50% owned by Enron), and Transwestern Pipeline Company
("Transwestern"). Northern, Florida Gas and Transwestern are interstate
pipelines and are subject to the regulatory jurisdiction of the Federal Energy
Regulatory Commission. Each pipeline serves customers in a specific geographic
area: Northern, the upper Midwest; Florida Gas, the State of Florida; and
Transwestern, principally the southern California market. In addition, Enron
holds a 13% interest in Northern Border Partners, L.P. and operates the Northern
Border Pipeline system, which transports gas from western Canada to delivery
points in the midwestern United States. Also, Enron has a 15% interest in Enron
Liquids Pipeline, L.P., which is engaged in pipeline transportation of natural
gas liquids, refined petroleum products and carbon dioxide and is operated by a
wholly owned subsidiary of Enron.
Gas Services. Enron Gas Services Corp. and its affiliated companies ("EGS")
purchase natural gas, gas liquids and power through a variety of contractual
arrangements, including both short and long term contracts, the arrangement of
production payment and other financing transactions and other contractual
arrangements, and market these energy products to local distribution companies,
electric utilities, cogenerators and both commercial and industrial end-users.
EGS also provides price risk management services in connection with natural gas,
gas liquids and power transactions through both physical delivery and financial
arrangements.
S-2
<PAGE> 3
EGS offers a broad range of non-price regulated natural gas merchant
services by tailoring a variety of supply and marketing options to its
customers' specific needs. EGS strategy is to provide predictable pricing,
reliable delivery and low cost capital to its customers. EGS provides these
services through a variety of financial instruments, including forward
contracts, swap agreements, options and other contractual commitments.
Gas Processing. Certain Enron subsidiaries are engaged domestically in the
extraction of natural gas liquids ("NGLs") (ethane, propane, normal butane and
isobutane and natural gasoline). NGLs are typically extracted from natural gas
in liquid form under low temperature and high pressure conditions. Ethane,
propane, normal butane, isobutane and natural gasoline are used as feedstocks
for petrochemical plants in the production of plastics, synthetic rubber and
other products. Normal butane and natural gasoline are used by refineries in the
blending of motor gasoline. Isobutane is used in the alkylation process to
enhance the octane content of motor gasoline and is also used in the production
of MTBE, which is used to produce cleaner burning motor gasoline. Propane is
used as fuel for home heating and cooking, crop drying and industrial facilities
and as an engine fuel for vehicles, and ethane is used as a feedstock for
synthetic fuels production.
International Gas and Power Services. Enron's international activities
principally involve the development, acquisition, promotion and operation of
natural gas and power projects and the marketing of natural gas liquids. As is
the case in the United States, Enron's emphasis is on businesses in which
natural gas or its components play a significant role. Development projects are
focused on power plants, gas processing and terminaling facilities and gas
pipelines, while marketing activities center on fuels used by or transported
through such facilities. Enron's international activities include management of
ownership interests and operation of power plants in England, Germany, Guatemala
and the Philippines; a 3,800-mile pipeline system in southern Argentina; retail
gas and propane sales in the Caribbean basin; processing of natural gas liquids
at Teesside, England; and marketing of natural gas liquids worldwide.
Exploration and Production. Enron's natural gas and crude oil exploration
and production operations are conducted by its subsidiary, Enron Oil & Gas
Company ("EOG"). Enron currently owns 80% of the outstanding common stock of
EOG. EOG is one of the largest independent (non-integrated) oil and gas
companies in the United States in terms of domestic proved reserves. EOG is
engaged in the exploration for, and development and production of, natural gas
and crude oil reserves primarily in major producing basins in the United States
and, to a lesser extent, in Canada, Trinidad and selected other international
areas. At December 31, 1993, EOG had estimated net proved natural gas reserves
of 1,772 billion cubic feet and estimated net proved crude oil, condensate and
natural gas liquids reserves of 20.9 million barrels, and at such date
approximately 78% of EOG's reserves (on a natural gas equivalent basis) was
located in the United States, 16% in Canada and 6% in Trinidad.
S-3
<PAGE> 4
INVESTMENT CONSIDERATIONS
Prospective purchasers of the Series A Preferred Securities should
carefully review the information contained elsewhere in this Prospectus
Supplement and in the accompanying Prospectus and should particularly consider
the following matters:
SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND THE LOAN
Enron's obligations under the Guarantee are subordinate and junior in right
of payment to all general liabilities of Enron, and its obligations under the
Loan are subordinate and junior in right of payment to all Senior Indebtedness
(as defined herein) of Enron. At June 30, 1994, the Senior Indebtedness of Enron
aggregated approximately $3.2 billion. There are no terms in the Series A
Preferred Securities, the Loan or the Guarantee that limit Enron's ability to
incur additional indebtedness, including indebtedness that ranks senior to the
Loan and the Guarantee. The Guarantee guarantees payment to the holders of the
Series A Preferred Securities of accumulated and unpaid monthly dividends,
amounts payable on redemption, and amounts payable on liquidation of Enron
Capital Resources, in each case, however, only to the extent (i) that Enron
Capital Resources has funds on hand legally available therefor, (ii) that
payment thereof does not otherwise violate applicable law and (iii) that (in the
case of dividends) such dividends have been declared or (in the case of
liquidation) such amounts payable in liquidation have been properly authorized
for distribution. If Enron were to default in its obligation to pay interest or
principal amounts payable on the Loan, Enron Capital Resources would lack
legally available funds for the payment of dividends or amounts payable on
redemption of the Series A Preferred Securities, and in such event holders of
the Series A Preferred Securities would not be able to rely upon the Guarantee
for payment of such amounts. Instead, holders of the Series A Preferred
Securities would be required to seek enforcement of Enron Capital Resources'
rights against Enron pursuant to the terms of the agreement of limited
partnership of the Partnership (the "Partnership Agreement"). See "Description
of the Guarantee" and "Description of the Loan" herein.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Enron has the right to extend interest payment periods on the Loan to up to
60 consecutive months, and, as a consequence, monthly dividend payments on the
Preferred Securities can be deferred by Enron Capital Resources during any such
extended interest payment period. Dividends in arrears after the monthly payment
date therefor will accumulate additional distributions thereon at the rate per
annum of % thereof. In the event Enron exercises its right to extend the
interest payment periods on the Loan, Enron may not declare dividends on any
shares of its capital stock during such extension period. See "Description of
the Loan" herein.
Should an extended interest payment period occur, Enron Capital Resources
will continue to accrue income for United States federal income tax purposes
which will be allocated, but not distributed, to owners of the Series A
Preferred Securities. As a result, the owner will include such interest in gross
income for United States federal income tax purposes in advance of the receipt
of cash and will not receive the cash related to such income if the owner
disposes of the Series A Preferred Securities prior to the record date for
payment of dividends. See "Taxation -- Potential Extension of Interest Payment
Period" herein.
S-4
<PAGE> 5
SELECTED FINANCIAL DATA OF ENRON
The financial information set forth below has been selected from the
audited and unaudited consolidated financial statements of Enron. The
information should be read in connection with, and is qualified in its entirety
by reference to, Enron's financial statements and notes thereto incorporated by
reference herein. See "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus. The interim data reflect all adjustments, consisting of
only normal recurring adjustments, which, in the opinion of the management of
Enron, are necessary to present fairly such information for the interim periods.
The results of operations for the six month periods are not necessarily
indicative of the results expected for a full year or any other interim period.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ---------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenues.......................... $ 4,348 $ 3,765 $ 7,972 $ 6,409 $ 5,683 $ 5,428 $ 4,618
Costs and expenses
Cost of gas sold................ 2,247 1,772 3,857 2,502 2,029 2,049 2,154
Cost of other products sold..... 894 862 1,710 1,720 1,617 1,479 694
Operating expenses.............. 486 448 1,057 936 914 861 885
Amortization of deferred
contract reformation costs.... 45 44 89 101 125 102 69
Oil and gas exploration costs... 38 28 76 59 59 68 45
Depreciation, depletion and
amortization.................. 225 218 458 376 366 356 351
Taxes, other than income
taxes......................... 54 58 108 101 75 82 83
------- ------- ------- ------- ------- ------- -------
3,989 3,430 7,355 5,795 5,185 4,997 4,281
------- ------- ------- ------- ------- ------- -------
Operating income.................. 359 335 617 614 498 431 337
Other income and deductions
Equity in earnings of
unconsolidated
subsidiaries.................. 38 47 73 56 55 56 28
Other, net...................... 108 38 108 97 162 175 328
------- ------- ------- ------- ------- ------- -------
Income before interest, minority
interest and income taxes....... 505 420 798 767 715 662 693
Interest and related charges,
net............................. 137 148 300 330 373 395 398
Dividends on preferred stock of
subsidiary company.............. 9 -- 2 -- -- -- --
Minority interest................. 13 13 28 18 7 7 --
Income taxes...................... 98 51 135 90 103 58 69
------- ------- ------- ------- ------- ------- -------
Income before extraordinary
items........................... 248 208 333 329 232 202 226
Extraordinary items............... -- -- -- -- (23) -- --
------- ------- ------- ------- ------- ------- -------
Net income(1)..................... 248 208 333 306 232 202 226
Preferred stock dividends......... 7 9 17 22 25 25 25
------- ------- ------- ------- ------- ------- -------
Earnings on Common Stock.......... $ 241 $ 199 $ 316 $ 284 $ 207 $ 177 $ 201
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------------------------------
1994 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Total assets................................ $11,124 $11,504 $10,312 $10,070 $ 9,849 $ 9,105
Short-term debt............................. -- -- -- -- -- --
Long-term debt (including amounts
reclassified from short-term debt)........ 2,891 2,661 2,459 3,109 2,983 3,184
Preferred stock of subsidiary company....... 214 214
Minority interest........................... 193 196 179 101 97 93
Shareholders' equity........................ 2,767 2,623 2,518 1,901 1,838 1,767
</TABLE>
- ---------------
(1) Net income for the year ended December 31, 1993 includes a primarily
non-cash charge of $54 million to adjust for the increase in the corporate
federal income tax rate from 34 percent to 35 percent.
S-5
<PAGE> 6
CAPITALIZATION
The following table sets forth the unaudited summary capitalization of
Enron and its consolidated subsidiaries at March 31, 1994 and as adjusted to
give effect to the sale of the Series A Preferred Securities offered hereby and
the application of the proceeds therefrom as described under "Use of Proceeds"
herein. The table should be read in conjunction with Enron's consolidated
financial statements and notes thereto and other financial data incorporated by
reference herein. See "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------------------
AS
ACTUAL ADJUSTED
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt................................................... $ -- $ --
---------- ----------
Long-term debt
Enron Corp. .................................................... 1,702,774 1,702,774
Subsidiary companies............................................ 792,489 792,489
Amount reclassified from short-term debt........................ 403,880 331,130
Unamortized debt discount and premium........................... (8,325) (8,325)
---------- ----------
Total long-term debt.................................... 2,890,818 2,818,068
---------- ----------
Minority interests................................................ 192,926 192,926
---------- ----------
Preferred stock of subsidiaries................................... 213,750 288,750
---------- ----------
Shareholders' equity
Second Preferred Stock.......................................... 141,779 141,779
Common equity................................................... 2,625,105 2,622,855
---------- -----------
Total shareholders' equity.............................. 2,766,884 2,764,634
---------- ----------
Total capitalization.................................... $6,064,378 $6,064,378
========== ==========
</TABLE>
USE OF PROCEEDS
The proceeds from the sale of the Series A Preferred Securities will be
loaned to Enron to be used for general corporate purposes including the
repayment of indebtedness. In view of this Loan, under the Underwriting
Agreement Enron has agreed to pay Underwriters' Compensation to the
Underwriters, as set forth in Note (3) on the cover page of this Prospectus
Supplement.
S-6
<PAGE> 7
DESCRIPTION OF THE SERIES A PREFERRED SECURITIES
GENERAL
All of the partnership interests in Enron Capital Resources, other than the
Series A Preferred Securities offered hereby, are owned directly or indirectly
by Enron. The Partnership Agreement authorizes and creates limited partner
interests in Enron Capital Resources (the "Preferred Securities"), which may be
issued from time to time in one or more series as described in the accompanying
Prospectus. The limited partner interests represented by the Preferred
Securities will have a preference with respect to dividends and amounts payable
on liquidation over the general partner's interest in Enron Capital Resources.
The Partnership Agreement does not permit the issuance of any Preferred
Securities ranking, as to participation in profits and dividends and in the
assets of Enron Capital Resources, senior or junior to the Series A Preferred
Securities (without the vote or consent of the holders of 66 2/3% in liquidation
preference of the Series A Preferred Securities and any other series of
Preferred Securities, voting together as a class) or the incurrence of any
indebtedness by Enron Capital Resources. The following statements regarding the
Preferred Securities are summaries of certain provisions to be contained in the
Partnership Agreement, as amended to provide for the issuance of the Series A
Preferred Securities. The form of Partnership Agreement as so amended will be
included as an exhibit to a Current Report on Form 8-K to be filed by Enron
prior to the consummation of the sale of the Series A Preferred Securities
offered hereby (the "Enron Form 8-K"). Reference is hereby made to the form of
such Partnership Agreement as so amended for full and complete statements of
such terms and provisions.
DIVIDENDS
Dividends on the Series A Preferred Securities will be cumulative, will
accrue from , 1994 and will be payable monthly in arrears on the
last day of each calendar month of each year, commencing August 31, 1994, out of
moneys held by Enron Capital Resources and legally available therefor, except as
otherwise described below.
The dividend payable on each Series A Preferred Security will be fixed at a
rate per annum of % of the stated liquidation preference thereof ($25).
Dividends in arrears for more than one month will accumulate additional
distributions thereon at the rate per annum of % thereof. Unless otherwise
indicated, the term "dividends" as used herein refers to all distributions on
the Series A Preferred Securities, other than distributions on liquidation, and
such term includes any such additional distributions payable on dividends in
arrears.
The amount of dividends payable for any period will be computed on the
basis of twelve 30-day months and a 360-day year and, for any period shorter
than a full monthly dividend period, will be computed on the basis of the actual
number of days elapsed in such period. Payment of dividends is limited in
relation to the amount of funds held by Enron Capital Resources and legally
available therefor.
Dividends on the Series A Preferred Securities must be paid on the dates
payable to the extent that the General Partner reasonably anticipates that at
the time of payment Enron Capital Resources will have, and must be paid by Enron
Capital Resources to the extent that at the time of proposed payment it has, (x)
funds legally available for the payment of such dividends and (y) cash on hand
sufficient to permit such payments. It is anticipated that Enron Capital
Resources' earnings will be limited to payments under the Loan of the proceeds
from the issuance and sale of the Series A Preferred Securities or similar loans
relating to other series of Preferred Securities that may be issued in the
future. See "Description of the Loan -- Interest" herein.
Dividends on the Series A Preferred Securities will be payable to the
record holders thereof as they appear on the security register on the relevant
record dates, which will be one Business Day prior to the relevant payment
dates. Subject to any applicable laws and regulations, each such payment will be
made as described under "Book-Entry-Only Issuance -- The Depository Trust
Company" herein. In the event that any date on which dividends are payable on
the Series A Preferred Securities is not a Business Day, then payment of the
dividend payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
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<PAGE> 8
each case with the same force and effect as if made on such date. A "Business
Day" shall mean any day other than a day on which banking institutions in The
City of New York are authorized or required by law to close.
CERTAIN RESTRICTIONS ON ENRON CAPITAL RESOURCES
If dividends have not been paid in full on the Series A Preferred
Securities, Enron Capital Resources shall not:
(i) pay, or set aside for payment, any dividends on any other series
of Preferred Securities, unless the amount of any dividends declared on any
other series of Preferred Securities is paid on such other series of
Preferred Securities and the Series A Preferred Securities on a pro rata
basis on the date such dividends are paid on such other series of Preferred
Securities, so that
(x) the aggregate amount of dividends paid on the Series A
Preferred Securities bears to the aggregate amount of dividends paid on
such other series of Preferred Securities the same ratio as
(y) the aggregate of all accrued and unpaid dividends in respect of
the Series A Preferred Securities bears to the aggregate of all accrued
and unpaid dividends in respect of such other series of Preferred
Securities; or
(ii) redeem, purchase or otherwise acquire any Preferred Securities
other than the redemption of all outstanding Series A Preferred Securities
at the Redemption Price, as described below under "Redemption;"
until, in each case, such time as all accrued and unpaid dividends on the Series
A Preferred Securities shall have been paid in full for all dividend periods
terminating on or prior to, in the case of clause (i), such payment and, in the
case of clause (ii), the date of such redemption, purchase or acquisition.
As of the date of this Prospectus Supplement, there are no series of
Preferred Securities outstanding.
REDEMPTION
The Series A Preferred Securities are redeemable, at the option of Enron
Capital Resources and subject to the prior consent of Enron, in whole or in part
from time to time, on or after August 31, 1999, upon not less than 30 nor more
than 60 days' notice, at the redemption price of $25 per Series A Preferred
Security, plus accumulated and unpaid dividends to the date fixed for redemption
(the "Redemption Price"). In the event that fewer than all the outstanding
Series A Preferred Securities are to be so redeemed, the Preferred Securities to
be redeemed will be selected as described under "Book-Entry-Only Issuance -- The
Depository Trust Company" below. Enron Capital Resources may not redeem fewer
than all of the outstanding Series A Preferred Securities unless all accumulated
and unpaid dividends have been paid on all Series A Preferred Securities for all
monthly dividend periods terminating on or prior to the date of redemption. If a
partial redemption would result in a delisting of the Series A Preferred
Securities, Enron Capital Resources may only redeem the Series A Preferred
Securities in whole.
If at any time Enron repays the Loan when due or prepays the Loan as
described under "Description of the Loan -- Optional Prepayment", the proceeds
from such repayment of principal on the Loan will be applied to redeem the
Series A Preferred Securities at the Redemption Price upon not less than 30 nor
more than 60 days' notice, provided that any such amounts may be reloaned to
Enron, and not used for such redemption, if at the time of each such loan, and
as determined in the judgment of Enron, as General Partner, and its financial
advisor, (a) Enron is not in bankruptcy, (b) Enron is not in default on any loan
pertaining to the Series A Preferred Securities, (c) Enron has made timely
payments on the repaid Loan for the immediately preceding 18 months, (d) Enron
Capital Resources is not in arrears on payments of dividends on the Series A
Preferred Securities, (e) Enron is expected to be able to make timely payment of
principal and interest on such loan, (f) such loan is being made on terms, and
under circumstances, that are consistent with those which a lender would require
for a loan to an unrelated party, (g) such loan is being made at a rate
sufficient to provide payments equal to or greater than the amount of dividends
that accrue on the Series A Preferred Securities, (h) the senior unsecured
long-term debt of Enron is rated BBB-or better by Standard &
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Poor's Corporation or "Baa3" or better by Moody's Investors Service, Inc. or the
equivalent by any other nationally recognized statistical rating organization,
(i) such loan is being made for a term that is consistent with market
circumstances and Enron's financial condition, (j) the term of such loan is no
more than 30 years, and (k) the final maturity of such loan is not later than
the 49th anniversary of the issuance of the Series A Preferred Securities.
In the event that, after the issuance of the Series A Preferred Securities,
legislation is enacted or existing law is modified or interpreted in a manner
that causes Enron Capital Resources to be treated as an association taxable as a
corporation or otherwise taxable as an entity for federal or state income tax
purposes with respect to its operations for any period prior to August 31, 1999,
Enron Capital Resources, subject to the consent of Enron, may redeem all, but
not less than all, of the Series A Preferred Securities upon notice as set forth
above at the Redemption Price, even if such redemption occurs prior to August
31, 1999.
If Enron Capital Resources gives a notice of redemption in respect of
Series A Preferred Securities (which notice will be irrevocable), then, by 12:00
noon, New York time, on the redemption date, Enron Capital Resources will
irrevocably deposit with The Depository Trust Company funds sufficient to pay
the applicable Redemption Price and will give The Depository Trust Company
irrevocable instructions and authority to pay the Redemption Price to the
holders thereof. See "Book-Entry-Only Issuance -- The Depository Trust Company"
herein. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit all rights of holders of such
Series A Preferred Securities so called for redemption will cease, except the
right of the holders of such shares to receive the Redemption Price, but without
interest. In the event that any date fixed for redemption of Series A Preferred
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Series A Preferred Securities is improperly
withheld or refused and not paid either by Enron Capital Resources or by Enron
pursuant to the Guarantee described under "Description of the Guarantee" herein,
dividends on such shares will continue to accrue at the then applicable rate,
from the original redemption date to the date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price. Subject to the foregoing and
applicable law (including, without limitation, federal securities laws), Enron
or its subsidiaries may at any time and from time to time purchase outstanding
Series A Preferred Securities by tender, in the open market or by private
agreement.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Enron Capital Resources, the holders of the Series A Preferred
Securities at the time outstanding, together with the holders of any other
series of Preferred Securities outstanding, will be entitled to receive, out of
the assets of Enron Capital Resources available for distribution to partners
after satisfaction of liabilities to creditors as required by the Delaware Act,
an amount equal to the aggregate of the stated liquidation preference of $25 per
Preferred Security and all accumulated and unpaid dividends to the date of
payment (the "Liquidation Distribution"). Pursuant to the Partnership Agreement,
Enron Capital Resources shall automatically dissolve and be liquidated: (i) when
the period fixed for the duration of Enron Capital Resources expires; or (ii)
upon the bankruptcy, resignation, withdrawal, expulsion, termination, cessation
or dissolution of the General Partner.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because Enron Capital Resources has insufficient assets available
to pay in full the aggregate Liquidation Distribution and the aggregate maximum
liquidation distributions on any other series of Preferred Securities, then the
amounts
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payable by Enron Capital Resources on the Series A Preferred Securities and on
such other series of Preferred Securities shall be paid on a pro rata basis, so
that
(i) the aggregate amount paid in respect of the Liquidation
Distribution bears to the aggregate amount paid as liquidation
distributions on the other series of Preferred Securities the same ratio as
(ii) the aggregate Liquidation Distribution bears to the aggregate
maximum liquidation distributions on the other series of Preferred
Securities.
VOTING RIGHTS
If (i) Enron Capital Resources fails to pay dividends in full on the Series
A Preferred Securities for 18 consecutive monthly dividend periods; (ii) an
Event of Default (as defined in the Loan Agreement relating to the Loan) occurs
and is continuing on the Loan; (iii) Enron is in default on any of its payment
or other obligations under the Guarantee (as described under "Description of the
Guarantee -- Certain Covenants of Enron" herein), then the holders of a majority
in liquidation preference of the outstanding Series A Preferred Securities,
together with the holders of any other series of Preferred Securities
outstanding having the right to vote for the appointment of a trustee in such
event, acting as a single class, will be entitled to appoint and authorize a
trustee to enforce Enron Capital Resources' creditor rights under the Loan
against Enron, enforce the obligations undertaken by Enron under the Guarantee
and the Expense Agreement (as defined under "Miscellaneous" herein), enforce any
similar obligations of Enron relating to any such other series and pay dividends
on the Series A Preferred Securities and any such other series to the extent
Enron Capital Resources has funds available to pay such dividends. For purposes
of determining whether Enron Capital Resources has failed to pay dividends in
full for 18 consecutive monthly dividend periods, dividends shall be deemed to
remain in arrears, notwithstanding any payments in respect thereof, until full
cumulative dividends have been or contemporaneously are paid with respect to all
monthly dividend periods terminating on or prior to the date of payment of such
full cumulative dividends. Not later than 30 days after such right to appoint a
trustee arises, the General Partner will convene a general meeting for the above
purpose. If the General Partner fails to convene such meeting within such 30-day
period, the holders of 10% in liquidation preference of the outstanding
Preferred Securities will be entitled to convene such meeting. The provisions of
the Partnership Agreement relating to the convening and conduct of the general
meetings of the partners will apply with respect to any such meeting. Any
trustee so appointed (i) shall not be admitted as a partner in Enron Capital
Resources or otherwise be deemed a partner in Enron Capital Resources, (ii)
shall have no liabilities for the debts, liabilities or obligations of Enron
Capital Resources and (iii) shall vacate office immediately if Enron Capital
Resources (or Enron pursuant to the Guarantee) shall have paid in full all
accumulated and unpaid dividends on the Series A Preferred Securities and any
such other series or such default or breach by Enron, as the case may be, shall
have been cured, and the General Partner will continue the business of Enron
Capital Resources without dissolution.
If any amendment to the Partnership Agreement is proposed for adoption by
the securityholders of Enron Capital Resources providing for, or the General
Partner otherwise proposes to effect, (x) any variation or abrogation of the
rights, preferences and privileges of the Series A Preferred Securities, whether
by way of amendment to the Partnership Agreement or otherwise (including,
without limitation, the authorization or issuance of any securities of Enron
Capital Resources ranking, as to participation in the profits or assets of Enron
Capital Resources, senior or junior to the Series A Preferred Securities), or
(y) the liquidation, dissolution or winding up of Enron Capital Resources, then
the holders of outstanding Series A Preferred Securities will be entitled to
vote on such proposal as a class with all other holders of any series of
Preferred Securities similarly affected, and such action shall not be effective
except with the approval of the holders of 66 2/3% in liquidation preference of
the outstanding Preferred Securities having the right to vote on the matter;
provided, however, that no such approval shall be required if the liquidation,
dissolution or winding up of Enron Capital Resources is proposed or initiated
upon the initiation of proceedings, or after proceedings have been initiated,
for the liquidation, dissolution or winding up of Enron.
The rights attached to the Series A Preferred Securities will be deemed not
to be varied by the creation or issue of, and no vote will be required for the
creation of, any limited partner interest in Enron Capital Resources ranking
pari passu with the Series A Preferred Securities with regard to participation
in the profits or assets of Enron Capital Resources. Holders of Series A
Preferred Securities will have no preemptive rights.
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Any required approval of holders of Series A Preferred Securities may be
given at a separate meeting of such holders convened for such purpose, at a
general meeting of securityholders of Enron Capital Resources or pursuant to
written consent. Enron Capital Resources will cause a notice of any meeting at
which holders of the Series A Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be mailed to each holder of record of Series A Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such meeting
or the date by which such action is to be taken, (ii) a description of any
action proposed for adoption at such meeting on which such holders are entitled
to vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents.
Notwithstanding that holders of Series A Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Series A Preferred Securities (and any other series of Preferred Securities
entitled to vote or consent with the holders of the Series A Preferred
Securities, voting or consenting as a single class) that are owned by Enron or
any entity owned more than 50% by Enron, either directly or indirectly, shall
not be entitled to vote or consent and shall, for the purposes of such vote or
consent, be treated as if they were not outstanding.
BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository for
the Series A Preferred Securities. The Series A Preferred Securities will be
issued only as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One or more fully-registered global Series A Preferred Security
certificates will be issued, representing in the aggregate the total number of
Series A Preferred Securities, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of Series A Preferred Securities under the DTC system must be
made by or through Direct Participants, which will receive a credit for the
Series A Preferred Securities on DTC's records. The ownership interest of each
actual purchaser of each Series A Preferred Security ("Beneficial Owner") is in
turn to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Series A Preferred Securities. Transfers of ownership interests in the
Series A Preferred Securities are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in Series A
Preferred Securities, except in the event that use of the book-entry system for
the Preferred Securities is discontinued.
DTC will have knowledge of the actual Beneficial Owners of the Series A
Preferred Securities; DTC's records will reflect only the identity of the Direct
Participants to whose accounts such Series A Preferred
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Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Series A Preferred Securities are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Direct Participant in such series to
be redeemed.
Although voting with respect to the Series A Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will consent or vote with respect to Series A Preferred Securities. Under its
usual procedures, DTC will mail an omnibus proxy to Enron Capital Resources as
soon as possible after the record date. The omnibus proxy will assign Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Series A Preferred Securities are credited on the record date (identified in
a listing attached to the omnibus proxy).
Dividend payments on the Series A Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payable date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payable date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participant and not of DTC, Enron Capital Resources or Enron, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of dividends to DTC is the responsibility of Enron Capital Resources,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Securities at any time by giving reasonable
notice to Enron Capital Resources. Under such circumstances, in the event that a
successor securities depository is not obtained, Series A Preferred Security
certificates are required to be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Enron Capital Resources believes to be
reliable, but Enron Capital Resources takes no responsibility for the accuracy
thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
Enron will act as registrar, transfer agent and paying agent for the Series
A Preferred Securities.
Registration of transfers of Series A Preferred Securities will be effected
without charge by or on behalf of Enron Capital Resources, but upon payment
(with the giving of such indemnity as Enron Capital Resources or Enron may
require) in respect of any tax or other governmental charges which may be
imposed in relation to it.
Enron Capital Resources will not be required to register or cause to be
registered the transfer of Series A Preferred Securities after such Series A
Preferred Securities have been called for redemption.
MISCELLANEOUS
Enron and Enron Capital Resources will enter into an agreement (the
"Expense Agreement") pursuant to which Enron will agree to guarantee the payment
of any liabilities incurred by Enron Capital Resources (other than obligations
to holders of Series A Preferred Securities, which will be separately guaranteed
to the extent set forth in the Guarantee; see "Description of the Guarantee"
herein). The Expense Agreement expressly provides that it is for the benefit of,
and is enforceable by, third parties to whom Enron Capital Resources owes such
obligations. A copy of the form of Expense Agreement will be filed as an exhibit
to the Enron Form 8-K.
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DESCRIPTION OF THE GUARANTEE
Set forth below is information concerning the Guarantee which will be
executed and delivered by Enron for the benefit of the holders from time to time
of Series A Preferred Securities. The Guarantee is limited to the extent set
forth herein. The Guarantee guarantees payments described below to the holders
of Series A Preferred Securities only to the extent that Enron Capital Resources
has funds on hand legally available therefor and payment thereof does not
otherwise violate applicable law. If Enron were to default on its obligation to
pay interest or amounts payable on the Loan, Enron Capital Resources would lack
legally available funds for the payment of dividends or amounts payable on
redemption of the Series A Preferred Securities, and in such event the holders
of the Series A Preferred Securities would not be able to rely on the Guarantee
for payment of such amounts. The following statements are summaries of certain
terms and provisions to be contained in the Guarantee, a form of which will be
included as an exhibit to the Enron Form 8-K. Reference is hereby made to the
form of such Guarantee for full and complete statements of such terms and
provisions.
GENERAL
Enron will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to the holders of the Series A Preferred Securities, the
Guarantee Payments (as defined below) (except to the extent paid by Enron
Capital Resources), as and when due, regardless of any defense, right of set-off
or counterclaim which Enron Capital Resources may have or assert. The following
payments to the extent not paid by Enron Capital Resources (the "Guarantee
Payments") will be subject to the Guarantee (without duplication): (i) any
accumulated and unpaid dividends that are required to be paid on the Series A
Preferred Securities out of moneys legally available therefor, (ii) the
Redemption Price payable out of funds legally available therefor with respect to
Series A Preferred Securities called for redemption by Enron Capital Resources,
and (iii) upon a liquidation of Enron Capital Resources, the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of Enron Capital Resources
available for distribution to Series A Preferred Securityholders in liquidation
of Enron Capital Resources. Enron's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by Enron to the holders
of Series A Preferred Securities or by causing Enron Capital Resources to pay
such amounts to such holders.
CERTAIN COVENANTS OF ENRON
In the Guarantee, Enron will covenant that, so long as any Series A
Preferred Securities remain outstanding, Enron shall not declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with respect
to the foregoing if at such time Enron shall be in default with respect to its
payment or other obligations under the Guarantee or the Expense Agreement or
there shall have occurred any event that, with the giving of notice or the lapse
of time or both, would constitute an Event of Default under the Loan.
In the Guarantee, Enron will also covenant that, so long as any Series A
Preferred Securities remain outstanding, it will (i) not voluntarily dissolve,
wind-up or liquidate Enron Capital Resources, and (ii) remain the General
Partner of Enron Capital Resources and timely perform all of its duties as
General Partner of Enron Capital Resources (including the duty to pay dividends
on the Series A Preferred Securities in accordance with the Partnership
Agreement); provided that any permitted successor of Enron under the Loan
Agreement may succeed to Enron's duties as General Partner.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Series A Preferred Securities (in which case no vote will be
required), the Guarantee may be changed only with the prior approval of the
holders of not less than 66 2/3% in liquidation preference of the outstanding
Series A Preferred Securities. The manner of obtaining any such approval of
holders of the Series A Preferred Securities will be as set forth under
"Description of the Preferred Securities -- Voting Rights" herein. All
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guarantees and agreements contained in the Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of Enron and shall inure to the
benefit of the holders of the Series A Preferred Securities.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of all Series A Preferred Securities or
upon full payment of the amounts payable upon liquidation of Enron Capital
Resources. The Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of Series A Preferred Securities must
restore payment of any sums paid under the Series A Preferred Securities or the
Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Enron and will
rank (i) subordinate and junior in right of payment to all liabilities of Enron,
(ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by Enron and with any guarantee heretofore or hereafter entered
into by Enron in respect of any preferred or preference stock of any affiliate
of Enron and (iii) senior to Enron's common stock. For purposes of clause (ii),
"pari passu" means that any payments to which beneficiaries of the Guarantee are
entitled must be shared with holders of any preferred or preference stock or
beneficiaries of any guarantee for which the Guarantee is stated to be pari
passu ("Pari Passu Securities") to the same extent as would be required under
applicable law if instead the Guarantee constituted a class of preferred or
preference stock of Enron ranking pari passu with such Pari Passu Securities
(and if such Pari Passu Securities are a guarantee of Enron affiliate stock, as
if such Pari Passu Securities were part of the most senior preferred or
preference stock of Enron) as to such payments. However, beneficiaries of the
Guarantee are not conversely entitled to share in payments to which the holders
of such Pari Passu Securities are entitled, although, as described above under
"Certain Covenants of Enron", in the Guarantee Enron will covenant not to make
payments in respect of its capital stock if it is in default in its obligations
thereunder. The Guarantee provides that each holder of Series A Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection.
A holder of Series A Preferred Securities may enforce the Guarantee directly
against Enron, and Enron will waive any right or remedy to require that any
action be brought against Enron Capital Resources or any other person or entity
before proceeding against Enron. The Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by Enron
Capital Resources and by complete performance of all obligations under the
Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
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DESCRIPTION OF THE LOAN
Set forth below is information concerning the Loan from Enron Capital
Resources to Enron of the proceeds of the issuance and sale of the Series A
Preferred Securities. The following statements are summaries of certain terms
and provisions to be contained in the loan agreement relating to the Loan (the
"Loan Agreement"), a form of which will be included as an exhibit to the Enron
Form 8-K. Reference is hereby made to the form of such Loan Agreement for full
and complete statements of such terms and provisions. Enron's obligations under
the Loan Agreement will also be for the benefit of the holders from time to time
of Series A Preferred Securities, and such holders will be entitled to enforce
the Loan Agreement directly against Enron.
GENERAL
Pursuant to the Loan Agreement, Enron Capital Resources will agree to make
the Loan to Enron in an aggregate principal amount equal to $75,000,000, such
amount being the aggregate stated liquidation preference of $25 per Series A
Preferred Security issued and sold by Enron Capital Resources.
The entire principal amount of the Loan will become due and payable,
together with any accrued and unpaid interest thereon, including Additional
Interest (as hereinafter defined), if any, on the earliest of August 31, 2024,
or the date upon which Enron is dissolved, wound-up or liquidated or the date
upon which Enron Capital Resources is dissolved, wound-up or liquidated.
MANDATORY PREPAYMENT
If Enron Capital Resources redeems Series A Preferred Securities in
accordance with the terms thereof, the Loan will become due and payable in a
principal amount equal to the aggregate stated liquidation preference of the
Series A Preferred Securities so redeemed, together with any and all accrued
interest thereon. Any payment pursuant to this provision shall be made prior to
12:00 noon, New York time, on the date of such redemption or at such other time
on such earlier date as Enron Capital Resources and Enron shall agree.
OPTIONAL PREPAYMENT
Enron shall have the right to prepay the Loan, without premium or penalty,
in whole or in part (together with any accrued but unpaid interest, including
Additional Interest, if any, on the portion being prepaid) at any time on or
after August 31, 1999. Enron may also prepay the Loan, without premium or
penalty, prior to August 31, 1999 in the event that, after the issuance of the
Series A Preferred Securities, legislation is enacted or existing law is
modified or interpreted in a manner that causes Enron Capital Resources to be
treated as an association taxable as a corporation or otherwise taxable as an
entity for federal or state income tax purposes with respect to its operations
for any period prior to August 31, 1999, and Enron Capital Resources, subject to
the consent of Enron, has elected to redeem all of the Series A Preferred
Securities, as described under "Description of the Series A Preferred
Securities -- Redemption" herein.
INTEREST
The Loan will bear interest at an annual rate equal to % from the date it
is made until maturity. Such interest will be payable on the last day of each
calendar month of each year, commencing August 31, 1994. In the event that any
date on which interest is payable on the Loan is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date; provided that Enron shall have the right at any time during the
term of the Loan, so long as Enron is not in default in the payment of interest
on the Loan, to extend the interest payment period to up to 60 months, at the
end of which period Enron shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the Loan to the extent
permitted by applicable law); and provided further that, during any such
extended interest payment period
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Enron shall not declare or pay any dividend on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock or make any
guarantee payments with respect to the foregoing. Prior to the termination of
any such extended interest payment period Enron may further extend the interest
payment period, provided that such extended interest payment period together
with all such further extensions thereof may not exceed 60 months. Enron shall
give Enron Capital Resources notice of its selection of such extended interest
payment period one Business Day prior to the earlier of (i) the date on which
the dividends on the Series A Preferred Securities are payable or (ii) the date
Enron Capital Resources is required to give notice of the record or payment date
of such related dividend to the New York Stock Exchange or other applicable
self-regulatory organization or to holders of the Series A Preferred Securities,
but in any event not less than two Business Days prior to such record date.
Enron shall cause Enron Capital Resources to give such notice of Enron's
selection of such extended interest payment period to the holders of the Series
A Preferred Securities.
ADDITIONAL INTEREST
If at any time Enron Capital Resources shall be required to pay any
interest on dividends in arrears in respect of the Series A Preferred Securities
pursuant to the terms thereof, then Enron will pay as interest to Enron Capital
Resources as the holder of the Loan ("Additional Interest") an amount equal to
such interest on dividends in arrears. In addition, if Enron Capital Resources
would be required to pay any taxes, duties, assessments or governmental charges
of whatever nature (other than withholding taxes) imposed by the United States,
or any other taxing authority, then, in any such case, Enron also will pay as
Additional Interest such amounts as shall be required so that the net amounts
received and retained by Enron Capital Resources after paying any such taxes,
duties, assessments or governmental charges will be not less than the amounts
Enron Capital Resources would have received had no such taxes, duties,
assessments or governmental charges been imposed.
METHOD AND DATE OF PAYMENT
Each payment by Enron of principal and interest (including Additional
Interest, if any) on the Loan shall be made to Enron Capital Resources in lawful
money of the United States, at such place and to such account as may be
designated by Enron Capital Resources.
SET-OFF
Notwithstanding anything to the contrary in the Loan Agreement, Enron shall
have the right to set-off any payment it is otherwise required to make
thereunder with and to the extent Enron has theretofore made, or is concurrently
on the date of such payment making, a payment under the Guarantee.
SUBORDINATION
The Loan Agreement provides that Enron and Enron Capital Resources covenant
and agree (and each holder of Series A Preferred Securities by acceptance
thereof agrees) that the Loan is subordinate and junior in right of payment to
all Senior Indebtedness as provided in the Loan Agreement but not to other
liabilities of Enron. The term "Senior Indebtedness" shall mean the principal,
premium, if any, and interest on (i) all indebtedness of Enron, whether
outstanding on the date of the Loan Agreement or thereafter created, incurred or
assumed, which is for money borrowed, or evidenced by a note or similar
instrument given in connection with the acquisition of any business, properties
or assets, including securities, (ii) any indebtedness of others of the kinds
described in the preceding clause (i) for the payment of which Enron is
responsible or liable (directly or indirectly, contingently or otherwise) as
guarantor or otherwise, (iii) any indebtedness secured by a lien upon property
owned by Enron and upon which indebtedness Enron customarily pays interest, even
though Enron has not assumed or become liable for the payment of such
indebtedness and (iv) amendments, renewals, extensions and refundings of any
such indebtedness, unless in any instrument or instruments evidencing or
securing such indebtedness or pursuant to which the same is outstanding, or in
any such amendment, renewal, extension or refunding, it is expressly provided
that such indebtedness is not superior in right of payment to the Loan. The
Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any
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term of the Senior Indebtedness or extension or renewal of the Senior
Indebtedness and irrespective of certain other events specified in the Loan
Agreement.
Upon the maturity of any Senior Indebtedness by lapse of time, acceleration
or otherwise, all Senior Indebtedness then due and owing shall first be paid in
full, or such payment duly provided for in cash (or in securities or other
property satisfactory to all of the holders of such Senior Indebtedness), before
any payment is made on account of the Loan.
In the event that (i) Enron shall default in the payment of any principal,
or premium, if any, or interest on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or
declaration or otherwise or (ii) an event of default occurs with respect to any
Senior Indebtedness permitting the holders thereof to accelerate the maturity
thereof and written notice describing such event of default, and requesting
commencement of payment blockage on the Loan as hereinafter described, is given
to Enron by the holders of Senior Indebtedness, then unless and until such
default in payment or event of default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the Loan or interest thereon or in respect of any repayment,
redemption, retirement, purchase or other acquisition of the Loan.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, composition or other similar proceeding relating to Enron or its
property or for the benefit of its creditors, (ii) any proceeding for the
liquidation, dissolution or other winding up of Enron, voluntary or involuntary,
whether or not involving insolvency or bankruptcy proceedings, (iii) any
assignment by Enron for the benefit of creditors, or (iv) any other marshalling
of the assets of Enron, all Senior Indebtedness (including, without limitation,
interest accruing thereon after the commencement of any such proceeding,
assignment or marshalling of assets) shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, shall be
made on the Loan. Any payment or distribution, whether in cash, securities or
other property (other than securities of Enron or any other corporation provided
for by a plan of reorganization, the payment of which is subordinate, at least
to the extent provided in the subordination provisions of the Loan Agreement
with respect to the indebtedness evidenced by the Loan, to the payment of all
Senior Indebtedness at the time outstanding and to any securities issued in
respect thereof under any such plan of reorganization), which would otherwise
(but for the subordination provisions) be payable or deliverable in respect of
the Loan shall be paid or delivered directly to the holders of Senior
Indebtedness (or their representative or trustee) in accordance with the
priorities then existing among such holders until all Senior Indebtedness shall
have been paid in full. No present or future holder of any Senior Indebtedness
shall be prejudiced in the right to enforce subordination of the indebtedness
constituting the Loan by any act or failure to act on the part of Enron.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash (or securities or other property
satisfactory to such holders) in full payment of such Senior Indebtedness then
outstanding. Upon the payment in full of all Senior Indebtedness, Enron Capital
Resources shall be subrogated to all the rights of any holders of Senior
Indebtedness to receive any further payments or distributions applicable to the
Senior Indebtedness until the Loan shall have been paid in full, and such
payments or distributions of cash, securities or other property received by
Enron Capital Resources, by reason of such subrogation, which otherwise would be
paid or distributed to the holders of Senior Indebtedness, shall, as between
Enron and its creditors other than the holders of Senior Indebtedness, on the
one hand, and Enron Capital Resources, on the other, be deemed to be a payment
by Enron on account of Senior Indebtedness, and not on account of the Loan.
S-17
<PAGE> 18
As of March 31, 1994, "Senior Indebtedness," as defined, was as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Long-term debt............................................. $2,890.8
Guarantees of third-party debt............................. 301.3
--------
Total............................................ $3,192.1
========
</TABLE>
The long-term debt figure includes approximately $350 million of senior
subordinated debt. The guarantees represent Enron obligations on certain debt of
unconsolidated joint ventures and unconsolidated subsidiaries.
CERTAIN COVENANTS OF ENRON
Enron will covenant that it will not declare or pay any dividend on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock, or make any guarantee payments with respect to the foregoing,
if at such time (i) there shall have occurred any event that, with the giving of
notice or the lapse of time or both, would constitute an Event of Default under
the Loan Agreement or (ii) Enron shall be in default with respect to its payment
or other obligations under the Guarantee or the Expense Agreement. Enron will
also covenant (i) not to voluntarily dissolve, wind-up or liquidate Enron
Capital Resources, and (ii) to remain the General Partner of Enron Capital
Resources and to timely perform all of its duties as General Partner of Enron
Capital Resources (including the duty to pay dividends on the Series A Preferred
Securities as described in the fourth paragraph under "Description of the Series
A Preferred Securities -- Dividends" herein); provided that any permitted
successor of Enron under the Loan Agreement may succeed to Enron's duties as
General Partner. Enron will also covenant (a) that it will not take any action
or refuse to take any reasonable action the effect of which, if taken or not
taken, as the case may be, would be to cause Enron Capital Resources to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes, and (b) that, at all times while
serving as the General Partner of Enron Capital Resources, Enron will not make
any dividend or distribution on, or repurchase any shares of, its stock or take
any other action within its control if the effect of such dividend,
distribution, repurchase or other action would be to reduce its net worth below
an amount necessary to receive an opinion of counsel that Enron Capital
Resources will be treated as a partnership for federal income tax purposes.
Enron Capital Resources may not waive compliance or waive any default in
compliance by Enron of any covenant or other term in the Loan Agreement without
the approval of the same percentage of Series A Preferred Securityholders,
obtained in the same manner, as would be required for an amendment of the Loan
Agreement to the same effect.
EVENTS OF DEFAULT
If one or more of the following events (each an "Event of Default") shall
occur and be continuing:
(a) default in the payment of interest on the Loan, including any
Additional Interest in respect thereof, when due for 10 days (whether by
virtue of the provisions described above under "Subordination" or
otherwise); provided that a valid extension of the interest payment period
by Enron shall not constitute a default in the payment of interest for this
purpose; or
(b) default in the payment of principal on the Loan when due (whether
by virtue of the provisions described above under "Subordination" or
otherwise); or
(c) the dissolution, winding up or liquidation of Enron Capital
Resources; or
(d) the bankruptcy, insolvency or liquidation of Enron; or
(e) breach of any covenants contained in the Loan Agreement continued
for 30 days after notice to Enron from any Series A Preferred
Securityholder;
S-18
<PAGE> 19
then Enron Capital Resources will have the right to declare the principal of and
the interest on the Loan (including any Additional Interest and any interest
subject to an extension election) and any other amounts payable under the Loan
Agreement to be forthwith due and payable and to enforce its other rights as a
creditor with respect to the Loan. Under the terms of the Series A Preferred
Securities, the holders of outstanding Series A Preferred Securities will have
the rights referred to under "Description of the Series A Preferred Securities
- -- Voting Rights" herein including the right to appoint a trustee, which trustee
shall be authorized to exercise Enron Capital Resources' right to accelerate the
principal amount of the Loan and to enforce Enron Capital Resources' other
creditor rights under the Loan.
MISCELLANEOUS
Enron will have the right at all times to assign any of its rights or
obligations under the Loan Agreement to a direct or indirect wholly-owned
subsidiary of Enron; provided that, in the event of any such assignment, Enron
will remain jointly and severally liable for all such obligations. Enron Capital
Resources may not assign any of its rights under the Loan Agreement without the
prior written consent of Enron. Subject to the foregoing, the Loan Agreement
will be binding upon and inure to the benefit of Enron and Enron Capital
Resources and their respective successors and assigns. The Loan Agreement
provides that it may not otherwise be assigned by Enron or Enron Capital
Resources.
The Loan Agreement will provide that Enron may merge with or into another
entity, may permit another entity to merge with or into Enron and may sell,
transfer or lease all or substantially all of its assets to another entity only
if (i) at such time no Event of Default has occurred and is continuing, or would
occur as a result of such merger, sale, transfer or lease, and (ii) Enron is the
survivor of such merger or the survivor of such merger or entity to which
Enron's assets are sold, transferred or leased is an entity organized under the
laws of the United States or any state thereof, assumes all of Enron's
obligations under the Loan Agreement and becomes the General Partner.
Except as to matters relating to the authorization, execution and delivery
of the Loan Agreement by Enron Capital Resources, which will be governed by the
laws of Delaware, the Loan Agreement will be governed by and construed in
accordance with the laws of the State of New York.
The Loan Agreement may be amended by mutual consent of the parties in the
manner the parties shall agree; provided that, so long as any of the Series A
Preferred Securities remain outstanding, no such amendment that adversely
affects the holders of Series A Preferred Securities shall be made, and no
termination of the Loan Agreement shall occur, without the prior approval of the
holders of at least 66 2/3% of the outstanding Series A Preferred Securities.
S-19
<PAGE> 20
TAXATION
This section is a summary of certain federal income tax considerations that
may be relevant to prospective purchasers of Preferred Securities and represents
the opinion of Vinson & Elkins L.L.P., counsel to Enron and Enron Capital
Resources, insofar as it relates to matters of law and legal conclusions. This
section is based upon current provisions of the Internal Revenue Code of 1986,
as amended ("Code"), existing and proposed regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Subsequent changes may cause the tax consequences to vary substantially from the
consequences described below.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting purchasers of Series A Preferred
Securities. Moreover, the discussion focuses on holders of Series A Preferred
Securities who are individual citizens or residents of the United States and has
only limited application to corporations, estates, trusts or non-resident
aliens. Accordingly, each prospective purchaser of Series A Preferred Securities
should consult, and should depend on, his own tax advisor in analyzing the
federal, state, local and foreign tax consequences of the purchase, ownership or
disposition of Series A Preferred Securities.
INCOME FROM SERIES A PREFERRED SECURITIES
In the opinion of Vinson & Elkins L.L.P., Enron Capital Resources will be
treated as a partnership for federal income tax purposes. Accordingly, each
holder of Series A Preferred Securities will be required to include in gross
income his distributive share of Enron Capital Resources' net income. Such
income will not exceed dividends received on such Series A Preferred Securities,
except in limited circumstances as described under "Potential Extension of
Interest Payment Period" herein. No portion of such income will be eligible for
the dividends received deduction.
DISPOSITION OF SERIES A PREFERRED SECURITIES
Gain or loss will be recognized on a sale of Series A Preferred Securities
equal to the difference between the amount realized and the Series A Preferred
Securityholder's tax basis for the Series A Preferred Securities sold. Gain or
loss recognized by a Series A Preferred Securityholder on the sale or exchange
of a Series A Preferred Security held for more than one year will generally be
taxable as long-term capital gain or loss.
ENRON CAPITAL RESOURCES INFORMATION RETURNS AND AUDIT PROCEDURES
Enron, as General Partner of Enron Capital Resources, will furnish each
Series A Preferred Securityholder with a Schedule K-1 each year setting forth
such Series A Preferred Securityholder's allocable share of income for the prior
calendar year. Enron is required to furnish such K-1s as soon as practicable
following the end of the year, but in any event prior to March 31.
Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to Enron Capital Resources (a) the name, address
and taxpayer identification number of the beneficial owner and the nominee; (b)
information as to whether the beneficial owner is (i) a person that is not a
United States person, (ii) a foreign government, an international organization
or any wholly owned agency or instrumentality of either of the foregoing, or
(iii) a tax-exempt entity; (c) the amount and description of Series A Preferred
Securities held, acquired or transferred for the beneficial owner; and (d)
certain information including the dates of acquisitions and transfers, means of
acquisitions and transfers, and acquisition cost for purchases, as well as the
amount of net proceeds from sales. Brokers and financial institutions are
required to furnish additional information, including whether they are United
States persons and certain information on Series A Preferred Securities they
acquire, hold or transfer for their own accounts. A penalty of $50 per failure
(up to a maximum of $100,000 per calendar year) is imposed by the Code for
failure to report such information to Enron Capital Resources. The nominee is
required to supply the beneficial owners of the Series A Preferred Securities
with the information furnished to Enron Capital Resources.
S-20
<PAGE> 21
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
Under the terms of the Loan, Enron will be permitted to extend the interest
payment period up to 60 months. In the event that Enron exercises this right,
Enron may not, among other things, declare dividends on any of its capital
stock, and therefore the extension of an interest payment period is, in the view
of Enron, a remote possibility. In the event that the interest payment period is
extended, Enron Capital Resources will continue to accrue income, equal to the
amount of the interest payment due at the end of the extended interest payment
period, over the length of the extended interest payment period.
During an extended interest payment period accrued income will be
allocated, but not distributed, to holders of record on the Business Day
preceding the last day of each calendar month. As a result, holders of record
during an extended interest payment period will include interest in gross income
in advance of the receipt of cash, and any such holders who dispose of Preferred
Securities prior to the record date for the payment of dividends following such
extended interest payment period will include interest in gross income but will
not receive any cash related thereto. The tax basis of a Series A Preferred
Security will be increased by the amount of any interest that is included in
income without a receipt of cash, and will be decreased when and if such cash is
subsequently received from Enron Capital Resources.
S-21
<PAGE> 22
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), Enron Capital Resources has agreed to sell to
each of the Underwriters named below, and each of the Underwriters, for whom
Merrill Lynch, Pierce, Fenner & Smith Incorporated, PaineWebber Incorporated,
Prudential Securities Incorporated, Rauscher Pierce Refsnes, Inc. and Smith
Barney Inc. are acting as representatives (the "Representatives"), has severally
agreed to purchase the number of Series A Preferred Securities set forth
opposite its name below. In the Underwriting Agreement, the several Underwriters
have agreed, subject to the terms and conditions set forth therein, to purchase
all the Series A Preferred Securities offered hereby if any of the Series A
Preferred Securities are purchased. In the event of default by an Underwriter,
the Underwriting Agreement provides that, in certain circumstances, the purchase
commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER
OF
SERIES A
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
PaineWebber Incorporated.................................................
Prudential Securities Incorporated.......................................
Rauscher Pierce Refsnes, Inc.............................................
Smith Barney Inc.........................................................
---------
Total....................................................... 3,000,000
=========
</TABLE>
The Representatives of the Underwriters have advised Enron Capital
Resources that they propose initially to offer the Series A Preferred Securities
to the public at the public offering price set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less a concession
not in excess of $ per Series A Preferred Security; provided, however, that
such concession shall not exceed $ per Series A Preferred Security for sales of
or more Series A Preferred Securities to any single purchaser. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per Series A Preferred Security to certain other dealers. After the
initial public offering of the Series A Preferred Securities, the public
offering price, concession and discount may be changed.
In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will be loaned to Enron, under the Underwriting Agreement Enron has
agreed to pay as compensation ("Underwriters'
S-22
<PAGE> 23
Compensation") for the Underwriters' arranging the Loan of such proceeds, an
amount in New York Clearing House (next day) funds of $ per Preferred Security
for the accounts of the several Underwriters; provided that such compensation
for sales of or more Series A Preferred Securities to any single
purchaser will be per Series A Preferred Security. Therefore, to the
extent of such sales, the actual amount of Underwriters' Compensation will be
less than the amounts specified in the preceding sentence.
Application will be made to list the Series A Preferred Securities on the
New York Stock Exchange under the symbol . Subject to such
listing, trading of the Series A Preferred Securities on the New York Stock
Exchange is expected to commence within a 30-day period after the initial
delivery of the Series A Preferred Securities. The Representatives have advised
Enron Capital Resources that they intend to make a market in the Series A
Preferred Securities prior to the commencement of trading on the New York Stock
Exchange. The Representatives will have no obligation to make a market in the
Series A Preferred Securities, however, and may cease market making activities,
if commenced, at any time.
Enron Capital Resources and Enron have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to make
in respect of, certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
Certain of the Underwriters are customers of, or engage in transactions
with, and from time to time have performed services for, Enron and its
subsidiaries and associated companies in the ordinary course of business.
VALIDITY OF SECURITIES
The validity of the Series A Preferred Securities and the validity of the
Backup Undertakings relating to the Series A Preferred Securities, consisting of
the Guarantee, the Loan Agreement and the Expense Agreement, will be passed upon
on behalf of Enron Capital Resources and Enron by James V. Derrick, Jr., Senior
Vice President and General Counsel of Enron, and on behalf of the Underwriters
by Sullivan & Cromwell, counsel to the Underwriters.
S-23
<PAGE> 24
PROSPECTUS
(LOGO)
DEBT SECURITIES
SECOND PREFERRED STOCK
COMMON STOCK
WARRANTS TO PURCHASE COMMON STOCK
WARRANTS TO PURCHASE DEBT SECURITIES
------------------------
Enron Corp. ("Enron") may offer from time to time (i) secured or unsecured
debt securities ("Debt Securities") consisting of debentures, notes or other
secured or unsecured evidences of indebtedness in one or more series, (ii)
shares of second preferred stock, par value $1.00 per share ("Second Preferred
Stock"), in one or more series, which may be represented by depositary shares
("Depositary Shares") evidenced by depositary receipts, (iii) warrants to
purchase Debt Securities ("Debt Warrants") and Debt Securities issuable upon
exercise of Debt Warrants, or (iv) any combination of the foregoing, at an
aggregate initial public offering price not to exceed $600,000,000, at prices
and on terms to be determined at or prior to the time of sale. In addition,
Enron or certain selling stockholders (the "Selling Stockholders") may offer
from time to time up to 7.5 million shares of Enron common stock, par value $.10
per share ("Common Stock"), at prices and on terms to be determined at or prior
to the time of sale. Enron may offer from time to time warrants to purchase up
to 7.5 million shares of Common Stock ("Stock Warrants") and Common Stock
issuable upon exercise of Stock Warrants, at prices and on terms to be
determined at or prior to the time of sale.
Specific terms of the securities in respect of which this Prospectus is
being delivered ("Offered Securities") will be set forth in an accompanying
Prospectus Supplement ("Prospectus Supplement"), together with the terms of the
offering of the Offered Securities, the initial price thereof and the net
proceeds from the sale thereof. The Prospectus Supplement will set forth with
regard to the particular Offered Securities, without limitation, the following:
(i) in the case of Debt Securities, the specific designation, aggregate
principal amount, authorized denomination, maturity, rate (which may be fixed or
variable) or method of calculation of interest and dates for payment thereof,
and any exchangeability, conversion, redemption, prepayment or sinking fund
provisions and any listing on a securities exchange, (ii) in the case of Second
Preferred Stock, the designation, number of shares or fractional interests
therein, liquidation preference per share, initial public offering price,
dividend rate (or method of calculation thereof), dates on which dividends shall
be payable and dates from which dividends shall accrue, any redemption or
sinking fund provisions and any listing on a securities exchange and (iii) in
the case of Common Stock, whether the seller thereof is Enron or one or more
Selling Stockholders. If shares of Second Preferred Stock are to be represented
by Depositary Shares, the Prospectus Supplement will set forth the fraction of a
share of such Second Preferred Stock represented by one Depositary Share. With
regard to Stock Warrants and Debt Warrants, if any, the Prospectus Supplement
will contain a description of the Common Stock and Debt Securities,
respectively, for which each warrant is exercisable and the offering price, if
any, exercise price, duration, detachability, call provisions, and other
principal terms of the warrants.
As part of the Offered Securities, Enron Capital Resources, L.P. ("Enron
Capital Resources"), a Delaware limited partnership of which Enron is the
general partner, may also offer from time to time limited partner interests
designated as preferred securities, preferred units or preferred shares or
having such other designation as Enron shall establish ("Preferred Securities").
The Preferred Securities may be offered in one or more series, at an aggregate
initial public offering price not to exceed $600,000,000 at the time of sale. In
connection therewith, Enron may offer back-up undertakings ("Backup
Undertakings") with respect to the Preferred Securities, as described in this
Prospectus under "Enron Capital Resources, L.P." Enron Capital Resources exists
solely for purposes of issuing Preferred Securities and lending the net proceeds
thereof to Enron. If Enron fails to make interest payments on the loans, Enron
Capital Resources will have insufficient funds to make distributions to holders
of Preferred Securities. The terms of the Backup Undertakings, the rights of
holders of Preferred Securities to cause acceleration of the loans and other
rights of the holders of Preferred Securities will be set forth in the related
Prospectus Supplement. The term "Offered Securities" as used herein shall also
refer to such Preferred Securities and any related Backup Undertakings. Any
issue of Preferred Securities and related Backup Undertakings shall
correspondingly reduce the amount of other Offered Securities available for
offer and sale hereunder.
Enron and/or Enron Capital Resources may sell the Offered Securities
directly, through agents designated from time to time or through underwriters or
dealers. See "Plan of Distribution". If any agents of Enron and/or Enron Capital
Resources or any underwriters or dealers are involved in the sale of the Offered
Securities, the names of such agents, underwriters or dealers and any applicable
commissions and discounts will be set forth in the related Prospectus
Supplement.
This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 15, 1994.
<PAGE> 25
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
IN A PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ENRON OR
ENRON CAPITAL RESOURCES. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT
CONSTITUTES AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE HEREUNDER
OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THEREOF.
AVAILABLE INFORMATION
Enron is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the following Regional Offices of the Commission: Midwest
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and New York Regional Office, 7 World Trade Center, New
York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. Enron's Common Stock and Cumulative
Second Preferred Convertible Stock are listed on the New York and Midwest Stock
Exchanges, and Enron's Common Stock is also listed on the Pacific Stock
Exchange. Reports, proxy statements and other information concerning Enron can
be inspected and copied at the respective offices of these exchanges at 20 Broad
Street, New York, New York 10005; 120 South LaSalle Street, Chicago, Illinois
60603; and 301 Pine Street, San Francisco, California 94014.
This Prospectus constitutes a part of Registration Statements on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statements") filed with the Commission under the Securities Act of 1933 (the
"Securities Act") with respect to the Offered Securities. This Prospectus does
not contain all of the information set forth in such Registration Statements,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is made to such Registration Statements and to the
exhibits relating thereto for further information with respect to Enron and the
Offered Securities. Any statements contained herein concerning the provisions of
any document filed as an exhibit to any of the Registration Statements or
otherwise filed with the Commission or incorporated by reference herein are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed for a more complete description of the matter involved. Each
such statement is qualified in its entirety by such reference.
No separate financial statements of Enron Capital Resources have been
included herein. Enron and Enron Capital Resources do not consider that such
financial statements would be material to holders of Preferred Securities of
Enron Capital Resources because Enron Capital Resources is a newly organized
special purpose entity, has no operating history and no independent operations
and is not engaged in, and does not propose to engage in, any activity other
than the issuance of its securities and the lending of the proceeds thereof to
Enron. See "Enron Capital Resources, L.P." Enron Capital Resources is a limited
partnership organized under the Delaware Revised Uniform Limited Partnership
Act. Enron is the general partner of Enron Capital Resources, and a wholly owned
subsidiary of Enron is its organizational limited partner. All of the general
and limited partner interests in Enron Capital Resources are beneficially owned
by Enron or its wholly owned subsidiary, and upon the sale of Preferred
Securities, the wholly owned subsidiary will withdraw as a limited partner so
that thereafter all of such limited partner interests will be owned by holders
of Preferred Securities.
2
<PAGE> 26
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Enron (File No.
1-3423) pursuant to Section 13(a) of the Exchange Act are incorporated herein by
reference as of their respective dates:
(a) Annual Report on Form 10-K for the year ended December 31, 1993;
and
(b) Quarterly Report on Form 10-Q for the quarter ended March 31,
1994.
Each document filed by Enron pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Offered Securities pursuant hereto shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such document. Any statement contained herein or in a document
all or a portion of which is incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
Enron will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to Secretary Division,
Enron Corp., at its principal executive offices, 1400 Smith Street, Houston,
Texas 77002 (telephone: 713-853-6161).
3
<PAGE> 27
BUSINESS OF ENRON CORP.
Enron Corp. ("Enron"), a Delaware corporation organized in 1930, is an
integrated natural gas company with headquarters in Houston, Texas. Essentially
all of Enron's operations are conducted through its subsidiaries and affiliates
which are principally engaged in the gathering, transportation and wholesale
marketing of natural gas to markets throughout the United States and
internationally through approximately 44,000 miles of natural gas pipelines; the
exploration for and production of natural gas and crude oil in the United States
and internationally; the production, purchase, transportation and worldwide
marketing of natural gas liquids and refined petroleum products; the independent
(i.e., non-utility) development, promotion, construction and operation of
natural gas-fired power plants in the United States and internationally; and the
non-price regulated purchasing and marketing of long-term energy related
commitments.
INTERSTATE PIPELINES. Enron and its subsidiaries operate domestic
interstate pipelines extending from Texas to the Canadian border and across the
southern United States from Florida to California. Included in Enron's domestic
interstate natural gas pipeline operations are Northern Natural Gas Company
("Northern"), Transwestern Pipeline Company ("Transwestern"), and Florida Gas
Transmission Company ("Florida Gas") (indirectly 50% owned by Enron). Northern,
Transwestern and Florida Gas are interstate pipelines and are subject to the
regulatory jurisdiction of the Federal Energy Regulatory Commission. Each
pipeline serves customers in a specific geographical area: Northern, the upper
Midwest; Transwestern, principally the California market; and Florida Gas, the
State of Florida. In addition, Enron holds a 13% interest in Northern Border
Partners, L.P. and operates the Northern Border Pipeline system, which
transports gas from Western Canada to delivery points in the midwestern United
States. Also, Enron has a 15% interest in Enron Liquids Pipeline, L.P., which is
engaged in pipeline transportation of natural gas liquids, refined petroleum
products and carbon dioxide and is operated by a wholly owned subsidiary of
Enron.
GAS SERVICES. Enron Gas Services Corp. and its affiliated companies ("EGS")
purchase natural gas, gas liquids and power through a variety of contractual
arrangements, including both short and long term contracts, the arrangement of
production payment and other financing transactions, and other contractual
arrangements, and market these energy products to local distribution companies,
electric utilities, cogenerators and both commercial and industrial end-users.
EGS also provides price risk management services in connection with natural gas,
gas liquids and power transactions through both physical delivery and financial
arrangements.
EGS offers a broad range of non-price regulated natural gas merchant
services by tailoring a variety of supply and marketing options to its
customers' specific needs. EGS's strategy is to provide predictable pricing,
reliable delivery and low cost capital to its customers. EGS provides these
services through a variety of financial instruments, including forward
contracts, swap agreements, options and other contractual commitments.
GAS PROCESSING. Certain Enron subsidiaries are engaged domestically in the
extraction of natural gas liquids ("NGLs") (ethane, propane, normal butane and
isobutane and natural gasoline). NGLs are typically extracted from natural gas
in liquid form under low temperature and high pressure conditions. Ethane,
propane, normal butane, isobutane and natural gasoline are used as feedstocks
for petrochemical plants in the production of plastics, synthetic rubber and
other products. Normal butane and natural gasoline are used by refineries in the
blending of motor gasoline. Isobutane is used in the alkylation process to
enhance the octane content of motor gasoline and is also used in the production
of MTBE, which is used to produce cleaner burning motor gasoline. Propane is
used as fuel for home heating and cooking, crop drying and industrial facilities
and as an engine fuel for vehicles, and ethane is used as a feedstock for
synthetic fuels production.
INTERNATIONAL GAS AND POWER SERVICES. Enron's international activities
principally involve the development, acquisition, promotion and operation of
natural gas and power projects and the marketing of natural gas liquids. As is
the case in the United States, Enron's emphasis is on businesses in which
natural gas or its components play a significant role. Development projects are
focused on power plants,
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gas processing and terminaling facilities and gas pipelines, while marketing
activities center on fuels used by or transported through such facilities.
Enron's international activities include management of ownership interests and
operation of power plants in England, Germany, Guatemala and the Philippines; a
3,800-mile pipeline system in southern Argentina; retail gas and propane sales
in the Caribbean basin; processing of natural gas liquids at Teesside, England;
and marketing of natural gas liquids worldwide.
EXPLORATION AND PRODUCTION. Enron's natural gas and crude oil exploration
and production operations are conducted by its subsidiary, Enron Oil & Gas
Company ("EOG"). Enron currently owns 80% of the outstanding common stock of
EOG. EOG is one of the largest independent (non-integrated) oil and gas
companies in the United States in terms of domestic proved reserves. EOG is
engaged in the exploration for, and development and production of, natural gas
and crude oil reserves primarily in major producing basins in the United States
and, to a lesser extent, in Canada, Trinidad and selected other international
areas. At December 31, 1993, EOG had estimated net proved natural gas reserves
of 1,772 billion cubic feet and estimated net proved crude oil, condensate and
natural gas liquids reserves of 20.9 million barrels, and at such date,
approximately 78% of EOG's proved reserves (on a natural gas equivalent basis)
was located in the United States, 16% in Canada and 6% in Trinidad.
Enron, a Delaware corporation, has its principal executive offices at 1400
Smith Street, Houston, Texas 77002, and its telephone number is 713-853-6161.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Securities will be added to
Enron's general funds and are expected to be used to retire existing
indebtedness and for general corporate purposes.
RATIOS OF ENRON'S EARNINGS TO FIXED CHARGES
AND EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------------
1994 1993 1992 1991 1990 1989
------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.......... 3.19 1.98 1.74 1.66 1.58 1.70
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends................. 3.05 1.88 1.64 1.54 1.47 1.57
</TABLE>
The ratios of earnings to fixed charges and earnings to fixed charges and
preferred stock dividends are based on continuing operations. "Earnings"
represent the aggregate of (a) the pre-tax income of Enron and its majority
owned subsidiaries, (b) Enron's share of pre-tax income of its 50% owned
companies, (c) any income actually received from less than 50% owned companies,
and (d) fixed charges, net of interest capitalized. "Fixed Charges" represent
interest (whether expensed or capitalized), amortization of debt discount and
expense and that portion of rentals considered to be representative of the
interest factor. "Fixed Charges and Preferred Stock Dividends" represent fixed
charges (as described above) and preferred stock dividend requirements of Enron.
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DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate (the "Offered Debt Securities"). The particular
terms of the Offered Debt Securities and the extent, if any, to which such
general provisions may apply to the Offered Debt Securities will be described in
the Prospectus Supplement relating to such Offered Debt Securities.
The Offered Debt Securities will be secured or unsecured obligations of
Enron. Any such unsecured obligations will be issued under an Indenture (the
"Indenture") between Enron and Harris Trust and Savings Bank, as Trustee (the
"Trustee"), dated as of November 1, 1985. The following statements are summaries
of certain provisions contained in the Indenture, the form of which is filed as
an exhibit to the Registration Statements of which this Prospectus is a part.
Reference is hereby made to the Indenture for full and complete statements of
such terms and provisions, including the definitions of certain terms used
herein. Wherever reference is made in the following statements to a particular
section of the Indenture, such section shall be deemed to be incorporated in
such statements as a part thereof. If Offered Debt Securities will be secured
obligations of Enron, they will be issued under a separate indenture, which will
be described in the Prospectus Supplement relating to such Offered Debt
Securities.
GENERAL
The Indenture does not limit the aggregate principal amount of unsecured
debentures, notes or other evidences of indebtedness of Enron (the "Indenture
Securities") which may be issued thereunder from time to time in one or more
series by Enron, and Enron may in the future issue additional Indenture
Securities (in addition to the Offered Debt Securities) under the Indenture. At
April 30, 1994, an aggregate of $1,043,000,000 principal amount of Indenture
Securities of Enron was issued and outstanding under the Indenture. Reference is
made to the Prospectus Supplement for the following terms of the Offered Debt
Securities: (i) the title of the Offered Debt Securities; (ii) any limit upon
the aggregate principal amount of the Offered Debt Securities; (iii) the date or
dates on which the principal of the Offered Debt Securities is payable; (iv) the
rate or rates (which may be fixed or variable), or the method by which such rate
or rates shall be determined, at which the Offered Debt Securities shall bear
interest, if any, the date or dates from which such interest shall accrue or the
method by which such date or dates shall be determined, the interest payment
dates on which such interest shall be payable and the regular record date for
the interest payable on any interest payment date; (v) the place or places where
the principal of (and premium, if any) and interest on Offered Debt Securities
shall be payable; (vi) the period or periods within which, the price or prices
at which and the terms and conditions upon which Offered Debt Securities may be
redeemed, in whole or in part, at the option of Enron, if Enron is to have that
option; (vii) the obligation, if any, and the option, if any, of Enron to
redeem, purchase or repay Offered Debt Securities pursuant to any sinking fund
or analogous provisions or at the option of a holder thereof and the period or
periods within which, the price or prices at which and the terms and conditions
upon which Offered Debt Securities shall be redeemed, purchased or repaid in
whole or in part, pursuant to such obligation or option; (viii) any trustees,
paying agents, transfer agents or registrars with respect to Offered Debt
Securities; and (ix) any other terms of the Offered Debt Securities (which terms
shall not be inconsistent with the provisions of the Indenture). (Section 301.)
Enron will maintain in each place specified by it for payment of any series
of Offered Debt Securities an office or agency where Offered Debt Securities of
that series may be presented or surrendered for payment, where Offered Debt
Securities of that series may be surrendered for registration of transfer or
exchange and where notices and demands to or upon Enron in respect of the
Offered Debt Securities of that series and the Indenture may be served.
Unless otherwise indicated in the Prospectus Supplement relating thereto,
the Offered Debt Securities will be issued only in fully registered form,
without coupons, in denominations of $1,000 or integral multiples thereof.
(Section 302.) No service charge will be made for any transfer or exchange of
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<PAGE> 30
such Offered Debt Securities, but Enron may require payment of a sum sufficient
to cover any tax or other governmental charge payable in relation thereto.
(Section 305.)
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a substantial discount below their
principal amount. Special federal income tax, accounting and other
considerations applicable to any such Original Issue Discount Securities will be
described in any Prospectus Supplement relating thereto. "Original Issue
Discount Security" means any security which provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof as a result of the occurrence of an Event
of Default and the continuation thereof. (Section 101.)
LIMITATIONS ON MORTGAGES AND LIENS
The Indenture provides that so long as any of the Indenture Securities
issued under the Indenture (including the Offered Debt Securities) are
outstanding, Enron will not, and will not permit any Subsidiary (as defined in
the Indenture and herein) to, pledge, mortgage or hypothecate, or permit to
exist, except in favor of Enron or any Subsidiary, any mortgage, pledge or other
lien upon, any Principal Property (as defined in the Indenture and herein) at
any time owned by it, to secure any indebtedness (as defined in the Indenture),
unless effective provision is made whereby outstanding Indenture Securities
(including the Offered Debt Securities) will be equally and ratably secured with
any and all such indebtedness and with any other indebtedness similarly entitled
to be equally and ratably secured. This restriction does not apply to prevent
the creation or existence of: (a) mortgages, pledges, liens or encumbrances on
any property held or used by Enron or a Subsidiary in connection with the
exploration for, development of or production of, oil, gas, natural gas
(including liquified gas and storage gas), other hydrocarbons, helium, coal,
metals, minerals, steam, timber, geothermal or other natural resources or
synthetic fuels, such properties to include, but not be limited to, Enron's or a
Subsidiary's interest in any mineral fee interests, oil, gas or other mineral
leases, royalty, overriding royalty or net profits interests, production
payments and other similar interests, wellhead production equipment, tanks,
field gathering lines, leasehold or field separation and processing facilities,
compression facilities and other similar personal property and fixtures; (b)
mortgages, pledges, liens or encumbrances on oil, gas, natural gas (including
liquified gas and storage gas), other hydrocarbons, helium, coal, metals,
minerals, steam, timber, geothermal or other natural resources or synthetic
fuels produced or recovered from any property, an interest in which is owned or
leased by Enron or a Subsidiary; (c) mortgages, pledges, liens or encumbrances
(or certain extensions, renewals or refundings thereof) upon any property
acquired before or after the date of the Indenture, created at the time of
acquisition or within one year thereafter to secure all or a portion of the
purchase price thereof, or existing thereon at the date of acquisition, whether
or not assumed by Enron or a Subsidiary, provided that every such mortgage,
pledge, lien or encumbrance applies only to the property so acquired and fixed
improvements thereon; (d) mortgages, pledges, liens or encumbrances upon any
property acquired before or after the date of the Indenture by any corporation
that is or becomes a Subsidiary after the date of the Indenture ("Acquired
Entity"), provided that every such mortgage, pledge, lien or encumbrance (1)
shall either (i) exist prior to the time the Acquired Entity becomes a
Subsidiary or (ii) be created at the time the Acquired Entity becomes a
Subsidiary or within one year thereafter to secure all or a portion of the
acquisition price thereof and (2) shall only apply to those properties owned by
the Acquired Entity at the time it becomes a Subsidiary or thereafter acquired
by it from sources other than Enron or any other Subsidiary; (e) pledges of
current assets, in the ordinary course of business, to secure current
liabilities; (f) deposits to secure public or statutory obligations; (g) liens
to secure indebtedness other than Funded Debt (as defined in the Indenture and
herein); (h) mortgages, pledges, liens or encumbrances upon any office, data
processing or transportation equipment; (i) mortgages, pledges, liens or
encumbrances created or assumed by Enron or a Subsidiary in connection with the
issuance of debt securities the interest on which is excludable from gross
income of the holder of such security pursuant to the Internal Revenue Code of
1986, as amended, for the purpose of financing the acquisition or construction
of property to be used by Enron or a Subsidiary; (j) pledges or assignments of
accounts receivable or conditional sales contracts or chattel mortgages and
evidences of indebtedness secured thereby, received in connection with the sale
by Enron or a
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<PAGE> 31
Subsidiary of goods or merchandise to customers; or (k) certain other liens or
encumbrances. (Section 1007.)
Notwithstanding the foregoing, Enron or a Subsidiary may issue, assume or
guarantee indebtedness secured by a mortgage which would otherwise be subject to
the foregoing restrictions in an aggregate amount which, together with all other
indebtedness of Enron or a Subsidiary secured by a mortgage which (if originally
issued, assumed or guaranteed at such time) would otherwise be subject to the
foregoing restrictions (not including secured indebtedness permitted under the
foregoing exceptions), does not at the time exceed 10% of the Consolidated Net
Tangible Assets (total assets less (a) total current liabilities, excluding
indebtedness due within 12 months, and (b) goodwill, patents and trademarks) of
Enron, as shown on the audited consolidated financial statements of Enron as of
the end of the fiscal year preceding the date of determination. (Section 1007.)
The holders of at least 50% in principal amount of the outstanding
Indenture Securities under the Indenture (including the Offered Debt Securities)
may waive compliance by Enron with the covenant contained in Section 1007 of the
Indenture (and certain other covenants of Enron). (Section 1009.)
The Indenture defines the term "Subsidiary" to mean a corporation all of
the voting shares (that is, shares entitled to vote for the election of
directors, but excluding shares entitled so to vote only upon the happening of
some contingency unless such contingency shall have occurred) of which shall be
owned by Enron or by one or more Subsidiaries or by Enron and one or more
Subsidiaries. The term "Principal Property" is defined to mean any oil or gas
pipeline, gas processing plant or chemical plant located in the United States,
except any such property, pipeline or plant that in the opinion of the Board of
Directors of Enron is not of material importance to the total business conducted
by Enron and its Subsidiaries. "Principal Property" does not include any oil or
gas property or the production or any proceeds of production from an oil or gas
producing property or the production or any proceeds of production of gas
processing plants or oil or gas or petroleum products in any pipeline. (Section
101.)
The term "indebtedness", as applied to Enron or any Subsidiary, is defined
to mean bonds, debentures, notes and other instruments representing obligations
created or assumed by any such corporation for the repayment of money borrowed
(other than unamortized debt discount or premium). All indebtedness secured by a
lien upon property owned by Enron or any Subsidiary and upon which indebtedness
any such corporation customarily pays interest, even though such corporation has
not assumed or become liable for the payment of such indebtedness, is also
deemed to be indebtedness of any such corporation. All indebtedness for money
borrowed incurred by other persons which is directly guaranteed as to payment of
principal by Enron or any Subsidiary is for all purposes of the Indenture deemed
to be indebtedness of any such corporation, but no other contingent obligation
of any such corporation in respect of indebtedness incurred by other persons is
for any purpose deemed indebtedness of such corporation. Indebtedness of Enron
or any Subsidiary does not include (i) amounts which are payable only out of all
or a portion of the oil, gas, natural gas, helium, coal, metals, minerals,
steam, timber or other natural resources produced, derived or extracted from
properties owned or developed by such corporation; (ii) any amount representing
capitalized lease obligations; (iii) any indebtedness incurred to finance oil,
gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons or
geothermal or other natural resources or synthetic fuel exploration or
development, payable, with respect to principal and interest, solely out of the
proceeds of oil, gas, natural gas, helium, coal, metals, minerals, steam,
timber, hydrocarbons or geothermal or other natural resources or synthetic fuel
to be produced, sold and/or delivered by Enron or any Subsidiary; (iv) indirect
guarantees or other contingent obligations in connection with the indebtedness
of others, including agreements, contingent or otherwise, with such other
persons or with third persons with respect to, or to permit or ensure the
payment of, obligations of such other persons, including, without limitation,
agreements to purchase or repurchase obligations of such other persons,
agreements to advance or supply funds to or to invest in such other persons or
agreements to pay for property, products or services of such other persons
(whether or not conferred, delivered or rendered) and any demand charge,
throughput, take-or-pay, keep-well, make-whole, cash deficiency, maintenance of
working capital or earnings or similar agreements; and (v) any guarantees with
respect to lease or other similar periodic payments to be made by other persons.
(Section 101.)
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<PAGE> 32
The term "Funded Debt" as applied to any corporation means all indebtedness
incurred, created, assumed or guaranteed by such corporation, or upon which it
customarily pays interest charges, which matures, or is renewable by such
corporation to a date, more than one year after the date as of which Funded Debt
is being determined; provided, however, that the term "Funded Debt" shall not
include (i) indebtedness incurred in the ordinary course of business
representing borrowings, regardless of when payable, of such corporation from
time to time against, but not in excess of the face amount of, its installment
accounts receivable for the sale of appliances and equipment sold in the regular
course of business or (ii) advances for construction and security deposits
received by such corporation in the ordinary course of business. (Section 101.)
The foregoing limitations on mortgages, pledges and liens are intended to
limit other creditors of Enron from obtaining preference or priority over
holders of the Indenture Securities issued under the Indenture, but are not
intended to prevent other creditors from sharing equally and ratably and without
preference ("pari passu") over the holders of such Indenture Securities. While
such limitations on mortgages and liens do provide protection to the holders of
the Indenture Securities, there are a number of exceptions to such restrictions
which could result in certain assets of Enron and its Subsidiaries being
encumbered without equally and ratably securing the Indenture Securities issued
under the Indenture. Specifically, the restrictions apply only to pledges,
mortgages or liens upon "Principal Property" (as defined in the Indenture and
herein) to secure any "indebtedness" (as defined in the Indenture and herein),
unless effective provision is made whereby outstanding Securities will be
equally and ratably secured with any such indebtedness and with any other
indebtedness similarly entitled to be equally and ratably secured. There are
certain exceptions to the definition of "indebtedness," which are enumerated in
the Indenture and herein. In addition, the restrictions do not apply to prevent
the creation or existence of mortgages, pledges, liens or encumbrances on
certain types of properties or pursuant to certain types of transactions, all as
enumerated in the Indenture and above. Also, up to 10% of Consolidated Net
Tangible Assets (as defined in the Indenture and herein) is not subject to the
mortgage and lien limitations contained in the Indenture.
MODIFICATION OF THE INDENTURE
With certain exceptions, the Indenture provides that, with the consent of
the holders of not less than 50% in principal amount of all outstanding
Indenture Securities (including, where applicable, the Offered Debt Securities)
affected thereby, Enron and the Trustee may enter into a supplemental indenture
for the purpose of adding to, changing or eliminating any of the provisions of
the Indenture or of modifying in any manner the rights of the holders of
Indenture Securities under the Indenture. Notwithstanding the foregoing, the
consent of the holder of each outstanding Indenture Security affected thereby
will be required to: (a) change the Stated Maturity (as defined in the
Indenture) of the principal of, or any installment of principal of or interest
on, any Indenture Security, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change any Place of Payment (as defined in the Indenture) where, or change the
coin or currency in which, any Indenture Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date, as defined in the Indenture); (b)
reduce the percentage in principal amount of the outstanding Indenture
Securities of any series, the consent of whose holders is required for any
supplemental indenture or for any waiver provided for in the Indenture; or (c)
with certain exceptions, modify any of the provisions of the sections of the
Indenture which concern waivers of past defaults, waivers of certain covenants
or consent to supplemental indentures, except to increase the percentage of
principal amount of Indenture Securities of any series, the holders of which are
required to effect such waiver or consent, or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each outstanding Indenture Security affected thereby. The
Indenture provides that a supplemental indenture which changes or eliminates any
covenant or other provision of the Indenture which has expressly been included
solely for the benefit of one or more particular series of Indenture Securities,
or which modifies the rights of the holders of Indenture Securities
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<PAGE> 33
of such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under the Indenture of the holders of Indenture
Securities of any other series. (Section 902.)
EVENTS OF DEFAULT AND RIGHTS UPON DEFAULT
Under the Indenture, the term "Event of Default" with respect to any series
of Indenture Securities, means any one of the following events which shall have
occurred and is continuing: (a) default in the payment of any interest upon any
Indenture Security of that series when it becomes due and payable or default in
the payment of any mandatory sinking fund payment provided for by the terms of
any series of Indenture Securities, and continuance of such default for a period
of 30 days; (b) default in the payment of the principal of (or premium, if any,
on) any Indenture Security of that series at its maturity; (c) default in the
performance, or breach, of any covenant or warranty of Enron in the Indenture
(other than a covenant or warranty a default in the performance of which or the
breach of which is otherwise specifically dealt with in the Indenture or which
has been expressly included in the Indenture solely for the benefit of one or
more series of Indenture Securities other than that series), and continuance of
such default or breach for 60 days after there has been given to Enron by the
Trustee, or to Enron and the Trustee by the holders of at least 25% in principal
amount of all outstanding Indenture Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" under the Indenture; or (d) certain events involving
Enron in bankruptcy, receivership or other insolvency proceedings or an
assignment for the benefit of creditors. (Section 501.)
If an Event of Default described in clause (a) or (b) in the foregoing
paragraph has occurred and is continuing with respect to Indenture Securities of
any series, the Indenture provides that the Trustee or the holders of not less
than 25% in principal amount of the outstanding Indenture Securities of that
series may declare the principal amount of all of the Indenture Securities of
that series to be due and payable immediately, and upon any such declaration
such principal amount shall become immediately due and payable. If an Event of
Default described in clause (c) or (d) of the foregoing paragraph occurs and is
continuing, the Trustee or the holders of not less than 25% in principal amount
of all of the Indenture Securities then outstanding may declare the principal
amount of all of the Indenture Securities to be due and payable immediately, and
upon any such declaration such principal amount shall become immediately due and
payable. (Section 502.)
A default under other indebtedness of Enron is not an Event of Default
under the Indenture, and an Event of Default under one series of Indenture
Securities will not necessarily be an Event of Default under another series.
At any time after such a declaration of acceleration with respect to
Indenture Securities of any series (or of all series, as the case may be) has
been made and before judgment or decree for payment of the money due has been
obtained by the Trustee, the holders of a majority in principal amount of the
outstanding Indenture Securities of that series (or of all series, as the case
may be) may rescind and annul such declaration and its consequences, if, subject
to certain conditions, all Events of Default with respect to Indenture
Securities of that series (or of all series, as the case may be), other than the
non-payment of the principal of the Indenture Securities due solely by such
declaration of acceleration, have been cured or waived and all payments due
(other than by acceleration) have been paid or deposited with the Trustee.
(Section 502.) With certain exceptions, the holders of not less than a majority
in principal amount of the outstanding Indenture Securities of any series, on
behalf of the holders of all the Indenture Securities of such series, may waive
any past default described in clause (a) or (b) of the first paragraph of this
heading "Events of Default and Rights Upon Default" (or, in the case of a
default described in clause (c) or (d) of such paragraph, the holders of a
majority in principal amount of all outstanding Indenture Securities may waive
any such past default), and its consequences, except a default (a) in the
payment of the principal of (or premium, if any) or interest on any Indenture
Security, or (b) in respect of a covenant or provision of the Indenture which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Indenture Security of such series affected. (Section
513.)
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<PAGE> 34
The holders of not less than a majority in principal amount of the
Indenture Securities of any series at the time outstanding are empowered under
the terms of the Indenture, subject to certain limitations, to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. (Section
512.)
The Indenture further provides that no holder of an Indenture Security of
any series may enforce the Indenture except in the case of failure by the
Trustee to act for 60 days after notice of a continuing Event of Default with
respect to the Indenture Securities of that series and after request by the
holders of not less than 25% in principal amount of the outstanding Indenture
Securities of such series and the offer to the Trustee of reasonable indemnity,
but this provision will not prevent a holder of any Indenture Security from
enforcing the payment of the principal of, and interest on, such holder's
Indenture Security. (Sections 507 and 508.)
The Indenture requires that Enron deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officer's Certificate, stating whether to
the best knowledge of the signers thereof Enron is in default in the performance
and observance of certain of the terms of the Indenture and, if so, specifying
each such default and the nature and status thereof of which the signers may
have knowledge. (Section 1008.)
DISCHARGE OF INDENTURE
With certain exceptions, Enron may discharge its obligations under the
Indenture with respect to any series of Indenture Securities by (i) paying or
causing to be paid the principal of (and premium, if any) and interest on all
the Indenture Securities of such series outstanding, as and when the same shall
become due and payable; (ii) delivering to the Trustee all outstanding Indenture
Securities of such series for cancellation; or (iii) entering into an agreement
in form and substance satisfactory to Enron and the Trustee providing for the
creation of an escrow fund and depositing in trust with the Trustee, as escrow
agent of such fund, sufficient funds in cash and/or Eligible Obligations and/or
U.S. Government Obligations, maturing as to principal and interest in such
amounts and at such times as will be sufficient to pay at the Stated Maturity or
Redemption Date all such Indenture Securities of such series not previously
delivered to the Trustee for cancellation, including principal (and premium, if
any) and interest to the Stated Maturity or Redemption Date. (Section 401.)
The Indenture defines "Eligible Obligations" to mean interest bearing
obligations as a result of the deposit of which the Indenture Securities are
rated in the highest generic long-term debt rating category assigned to legally
defeased debt by one or more nationally recognized rating agencies. (Section
101.)
For federal income tax purposes, there is a substantial risk that a legal
defeasance of a series of Indenture Securities by the deposit of cash, Eligible
Obligations or U.S. Government Obligations in a trust would be characterized by
the Internal Revenue Service or a court as a taxable exchange by the holders of
the Indenture Securities of that series for either (i) an issue of obligations
of the defeasance trust or (ii) a direct interest in the cash and/or Eligible
Obligations and/or U.S. Government Obligations held in the defeasance trust. If
the defeasance were so characterized, then a holder of an Indenture Security of
the series defeased would be: (i) required to recognize gain or loss (which
would be capital gain or loss if the Indenture Securities were held as a capital
asset) at the time of the defeasance as if the Indenture Security had been sold
at such time for an amount equal to the amount of cash and the fair market value
of the Eligible Obligations and/or U.S. Government Obligations held in the
defeasance trust; (ii) required to include in income in each taxable year the
interest and any original issue discount or gain or loss attributable to either
such defeasance trust obligations or such securities, as the case may be; and
(iii) subject to the market discount provisions of the Internal Revenue Code as
they may pertain to such defeasance trust obligations or such securities. As a
result, a holder of an Indenture Security may be required to pay taxes on any
such gain or income even though such holder may not have received any cash
therefrom. Prospective investors are urged to consult their own advisors as to
the tax consequences of an actual or legal defeasance, including the
applicability and effect of tax laws other than federal income tax law.
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CONCERNING THE TRUSTEE
Harris Trust and Savings Bank is the Trustee under the Indenture. Such bank
also acts as a depository of funds for, makes loans to, and performs other
services for, Enron in the normal course of business, including acting as
trustee under other indentures of Enron.
The Indenture contains the provisions required by the Trust Indenture Act
of 1939 with reference to the disqualification of the Trustee if it shall have
or acquire any "conflicting interest", as therein defined. (Section 608.) The
Indenture also contains certain limitations on the right of the Trustee, as a
creditor of Enron, to obtain payment of claims in certain cases, or to realize
on certain property received by it in respect of any such claims, as security or
otherwise. (Section 613.)
SELLING STOCKHOLDERS
The following table sets forth the name of each Selling Stockholder, the
number of shares of Common Stock which may be regarded as beneficially owned by
such Selling Stockholder and the maximum number of shares which may be offered
hereby by such Selling Stockholder as of the date hereof.
<TABLE>
<CAPTION>
NUMBER OF
SHARES NUMBER OF
BENEFICIALLY SHARES
SELLING STOCKHOLDER OWNED(1) OFFERED
------------------- ------------ ---------
<S> <C> <C>
Enron Corp. Flexible Equity Trust.................................. 7,500,000 (2)
Enron Corp. Savings Plan........................................... 7,277,011 (2)
</TABLE>
- ---------------
(1) Amounts shown reflect record ownership. The Enron Corp. Flexible Equity
Trust and the Enron Corp. Savings Plan have been established in connection
with Enron's employee benefit programs.
(2) The aggregate number of shares of Common Stock to be offered hereby by the
Selling Stockholders and Enron shall not exceed 7.5 million shares.
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<PAGE> 36
DESCRIPTION OF ENRON CORP. CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
At June 15, 1994, the authorized capital stock of Enron was 616,500,000
shares, consisting of:
(a) 1,500,000 shares of Preferred Stock, par value $100 per share (the
"Preferred Stock"), of which no shares were outstanding;
(b) 5,000,000 shares of Second Preferred Stock, par value $1 per share
(the "Second Preferred Stock"), of which 1,417,183 shares of Cumulative
Second Preferred Convertible Stock (the "Convertible Preferred Stock") were
outstanding;
(c) 10,000,000 shares of Preference Stock, par value $1 per share (the
"Preference Stock"), of which no shares were outstanding; and
(d) 600,000,000 shares of Common Stock, par value $.10 per share (the
"Common Stock"), of which 251,139,993 shares were outstanding.
In general, the classes of authorized capital stock are afforded
preferences with respect to dividends and liquidation rights in the order listed
above. The Board of Directors of Enron is empowered, without approval of the
stockholders, to cause the Preferred Stock, Second Preferred Stock and
Preference Stock to be issued in one or more series, with the numbers of shares
of each series and the rights, preferences and limitations of each series to be
determined by it. Among the specific matters that may be determined by the Board
of Directors are: the annual rate of dividends; the redemption price, if any;
the terms of a sinking or purchase fund, if any; the amount payable in the event
of any voluntary liquidation, dissolution or winding up of the affairs of Enron;
conversion rights, if any; and voting powers, if any, in addition to those
described below. The descriptions set forth below do not purport to be complete
and are qualified in their entirety by reference to the Restated Certificate of
Incorporation of Enron, as amended (the "Restated Certificate of
Incorporation").
No holders of any class of Enron's capital stock are entitled to preemptive
rights.
SECOND PREFERRED STOCK
The following is a general description of the terms of the Second Preferred
Stock of Enron. The particular terms of any series of Second Preferred Stock
offered hereby ("Offered Second Preferred Stock") will be set forth in the
Prospectus Supplement relating thereto. The rights, preferences, privileges and
restrictions, including dividend rights, voting rights, terms of redemption and
liquidation preferences, of the Offered Second Preferred Stock of each series
will be fixed or designated pursuant to a certificate of designations adopted by
the Board of Directors or a duly authorized committee thereof. The description
of Second Preferred Stock set forth below and the description of the terms of a
particular series of Offered Second Preferred Stock that will be set forth in a
Prospectus Supplement do not purport to be complete and are qualified in their
entirety by reference to the certificate of designations relating to such
series.
The Offered Second Preferred Stock shall rank on a parity with the
Convertible Preferred Stock, but in all respects, regardless of series, the
Offered Second Preferred Stock shall rank in preference to the Common Stock as
to payment of dividends and as to distribution of assets of Enron upon the
liquidation, dissolution or winding up of Enron. Upon issuance against full
payment of the purchase price therefor, shares of Offered Second Preferred Stock
will be fully paid and nonassessable.
DIVIDENDS. Holders of Offered Second Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors of Enron out of any
funds legally available for that purpose, dividends in cash at such respective
rates, payable on such dates in each year and in respect of such dividend
periods, as stated in Enron's Restated Certificate of Incorporation or the
certificate of designations for such series of Offered Second Preferred Stock,
before any dividends may be declared or paid or set apart for payment upon the
Common Stock or any other class of stock ranking junior to such series of
Offered
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<PAGE> 37
Second Preferred Stock. No dividend may be declared or paid on any series of
Offered Second Preferred Stock unless at the same time a dividend in like
proportion to the respectively designated dividend amounts shall be declared or
paid on each other series of Preferred Stock then issued and outstanding ranking
prior to or on a parity with such particular series with respect to the payment
of dividends. Dividends on Offered Second Preferred Stock may be either
cumulative or non-cumulative.
The annual rate of dividends payable on shares of the Convertible Preferred
Stock is the greater of $10.50 per share or the dividend amount payable on the
number of shares of Common Stock into which one share of Convertible Preferred
Stock is convertible (currently 13.652 shares). Such dividends are payable
quarterly on the first days of January, April, July and October. These dividend
rights are superior to the dividend rights of the Common Stock and will rank
equally with the dividend rights on the Offered Second Preferred Stock.
LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or
winding up of Enron, whether voluntary or involuntary, holders of Offered Second
Preferred Stock of each series (if any shares thereof are then issued and
outstanding) will be entitled to payment of the applicable liquidation price or
prices plus accrued dividends, out of the available assets of Enron, in
preference to the holders of the Common Stock or any other class of stock
ranking junior to such series of Offered Second Preferred Stock upon
liquidation, dissolution or winding up. Enron's Restated Certificate of
Incorporation provides that the sale, conveyance, exchange or transfer of all or
a part of the property or assets of Enron or a consolidation or merger of Enron
with one or more corporations shall not be deemed to be a liquidation,
dissolution or winding up of Enron.
The amount payable on shares of the Convertible Preferred Stock in the
event of any involuntary or voluntary liquidation, dissolution or winding up of
the affairs of Enron is $100.00 per share, together with accrued dividends to
the date of distribution or payment. The liquidation rights of the Convertible
Preferred Stock will rank equally with the liquidation rights of Offered Second
Preferred Stock.
REDEMPTION AND CONVERSION. Each series of Offered Second Preferred Stock
will be subject to redemption, if applicable, on such terms, at such prices and
on such dates as may be set forth in the applicable certificate of designations.
The Offered Second Preferred Stock will not be convertible.
The Convertible Preferred Stock is redeemable at the option of Enron at any
time, in whole or in part, at a redemption price of $100.00 per share, together
with accrued dividends to the date of distribution or payment. Each share of
Convertible Preferred Stock is convertible into 13.652 shares of Common Stock at
any time at the option of the holder.
VOTING RIGHTS. The holders of the Second Preferred Stock (including the
Offered Second Preferred Stock) have no voting rights except as specifically
required by statute and except for certain voting rights specifically provided
in Enron's Restated Certificate of Incorporation and the certificates of
designations creating the various series of such stock. Enron's Restated
Certificate of Incorporation provides that the vote or consent of the holders of
at least a majority of the then outstanding shares of Second Preferred Stock
(including the Offered Second Preferred Stock), irrespective of series, is
required to effect (a) any change in the Restated Certificate of Incorporation
or bylaws which affects adversely the voting powers, rights or preferences of
the Second Preferred Stock (if only certain series are affected, separate votes
by the series affected are required); (b) the authorization or creation of, or
increase in the authorized amount of, any stock of any class, or any security
convertible into stock of any class, ranking prior to the Second Preferred
Stock; (c) the voluntary dissolution, liquidation or winding up of the affairs
of Enron, or the sale, lease or conveyance by Enron of all or substantially all
of its property or assets; (d) the purchase or redemption of less than all of
the Second Preferred Stock unless the full dividend on all shares of Second
Preferred Stock has been paid or declared and a sum sufficient for payment
thereof set apart; (e) the increase of the authorized amount of Second Preferred
Stock or the authorization or creation of or the increase in the authorized
amount of any stock of any class, or any security convertible into stock of any
class, ranking on a parity with the Second Preferred Stock; (f) any merger or
consolidation of Enron, except under certain conditions. Further, in the event
dividend payments on the Second Preferred Stock shall be in default in an amount
equivalent to six full quarterly
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<PAGE> 38
dividends, then the holders of Second Preferred Stock, voting separately as a
class, shall be entitled to elect two directors of Enron until such time as such
dividends shall have been paid or funds sufficient therefor deposited in trust.
Holders of Convertible Preferred Stock are entitled to vote together with
the Common Stock on all matters submitted to a vote of Enron stockholders, with
each share of Convertible Preferred Stock having a number of votes equal to the
number of shares of Common Stock into which one share of Convertible Preferred
Stock is convertible (currently 13.652 shares).
Voting rights of the holders of the Convertible Preferred Stock and Common
Stock are, and the voting rights of the Offered Second Preferred Stock will be,
non-cumulative.
OTHER PREFERRED STOCK
The holders of the Preferred Stock and Preference Stock, when and if
issued, will have no voting rights except as specifically required by statute
and except for certain voting rights specifically provided in Enron's Restated
Certificate of Incorporation and the certificates of designations creating the
various series of such classes of stock. In general, a vote of at least
two-thirds of a class, voting as a class, will be required to effect (a) any
change in the Restated Certificate of Incorporation or bylaws which affects
adversely the voting powers, rights or preferences of such class (if only
certain series are affected, separate votes by the series affected are
required); (b) the authorization or creation of, or the increase in the
authorized amount of, any stock of any class, or any security convertible into
stock of any class, ranking prior to such class; (c) the voluntary dissolution,
liquidation or winding up of the affairs of Enron or the sale, lease or
conveyance by Enron of all or substantially all of its property or assets; or
(d) the purchase or redemption of less than all of the shares of such class
unless the full dividend on all such shares has been paid or declared and a sum
sufficient for payment thereof set apart. In addition, the vote of a majority of
a class, voting as a class, is required (i) to increase the authorized amount of
such class, or to authorize or create or to increase the authorized amount of,
any stock of any class, or any security convertible into stock of any class,
ranking on a parity with such class; or (ii) to approve mergers or
consolidations, except under certain conditions. Further, in the event dividends
payable on any such class shall be in default in an amount equivalent to six
full quarterly dividends, then the holders of such class, voting separately as a
class, shall be entitled to elect two directors of Enron until such time as such
dividends shall have been paid or funds sufficient therefor deposited in trust.
COMMON STOCK
So long as any shares of Preferred Stock, Second Preferred Stock or
Preference Stock shall be outstanding, no dividends, whether in cash or
property, shall be paid or declared, nor shall any distribution be made, on the
Common Stock, nor shall any shares of any Common Stock be purchased, redeemed or
otherwise acquired for value by Enron, nor shall Enron permit any distribution
to be made on any Common Stock or shares of Common Stock purchased, redeemed or
otherwise acquired by any subsidiary, unless all dividends on the Preferred
Stock, Second Preferred Stock and Preference Stock of all series for all past
quarterly dividend periods and for the then current quarterly period shall have
been paid or declared and a sum sufficient for the payment thereof set apart,
and unless Enron shall not be in arrears with respect to any sinking fund
requirement for any such shares. The foregoing provisions shall not, however,
apply to a dividend payable in Common Stock or the acquisition of shares of
Common Stock in exchange for or through application of the proceeds of the sale
of shares of Common Stock.
Subject to the prior rights of the Preferred Stock, the Second Preferred
Stock and the Preference Stock, the shares of Common Stock of Enron: (a) are
entitled to such dividends as may be declared by the Board of Directors out of
funds legally available therefor; (b) are entitled to one vote per share; (c)
have no preemptive or conversion rights; (d) are not subject to, or entitled to
the benefits of, any redemption or sinking fund provision; and (e) are entitled
upon liquidation to receive the assets of Enron remaining after the payment of
corporate debts and the satisfaction of the liquidation preferences of the
Preferred Stock, Second Preferred Stock and Preference Stock.
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<PAGE> 39
CERTAIN OTHER PROVISIONS OF ENRON'S RESTATED CERTIFICATE OF INCORPORATION
The Restated Certificate of Incorporation of Enron limits the liability of
directors of Enron (in their capacity as directors but not in their capacity as
officers) to Enron or its stockholders to the fullest extent permitted by
Delaware law. Specifically, directors of Enron will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to Enron or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
Enron's Restated Certificate of Incorporation contains a "fair price"
provision which generally requires that certain mergers, business combinations
and similar transactions with a "Related Person" (generally the beneficial owner
of at least 10 percent of Enron's voting stock) be approved by the holders of at
least 80 percent of Enron's voting stock, unless (a) the transaction is approved
by at least 80 percent of the "Continuing Directors" of Enron, who constitute a
majority of the entire board, (b) the transaction occurs more than five years
after the last acquisition of Enron voting stock by the related person or (c)
certain "fair price" and procedural requirements are satisfied. Enron's Restated
Certificate of Incorporation defines "Business Transaction" as (a) any merger or
consolidation involving Enron or a subsidiary of Enron, (b) any sale, lease,
exchange, transfer or other disposition (in one transaction or a series of
transactions), including without limitation a mortgage or any other security
device, of all or any substantial part of the assets either of Enron or of a
subsidiary of Enron, (c) any sale, lease, exchange, transfer or other
disposition of all or any substantial part of the assets of an entity to Enron
or a subsidiary of Enron, (d) the issuance, sale, exchange, transfer or other
disposition by Enron or a subsidiary of Enron of any securities of Enron or any
subsidiary of Enron, (e) any recapitalization or reclassification of Enron's
securities (including without limitation, any reverse stock split) or other
transaction that would have the effect of increasing the voting power of a
Related Person, (f) any liquidation, spinoff, splitoff, splitup or dissolution
of Enron, and (g) any agreement, contract or other arrangement providing for any
of the transactions described in this definition of Business Transaction.
Continuing Director is defined to mean a director who either was a member of the
Board of Directors of Enron prior to the time such Related Person became a
Related Person or who subsequently became a director of Enron and whose
election, or nomination for election by Enron's stockholders, was approved by a
vote of at least 80 percent of the Continuing Directors then on the Board,
either by a specific vote or by approval of the proxy statement issued by Enron
on behalf of the Board of Directors in which such person is named as nominee for
director, without an objection to such nomination; provided, however, that in no
event shall a director be considered a "Continuing Director" if such director is
a Related Person and the Business Transaction to be voted upon is with such
Related Person or is one in which such Related Person otherwise has an interest
(except proportionately as a stockholder of Enron).
GENERAL
The foregoing statements are summaries of certain provisions contained in
the Restated Certificate of Incorporation of Enron, the form of which is filed
as an exhibit to the Registration Statements of which this Prospectus is a part.
They do not purport to be complete statements of all the terms and provisions of
the Restated Certificate of Incorporation, and reference is hereby made to the
Restated Certificate of Incorporation for full and complete statements of such
terms and provisions, including the definitions of certain terms used herein.
Whenever reference has been made to the Restated Certificate of Incorporation,
such Restated Certificate of Incorporation shall be deemed to be incorporated in
such statements as a part thereof, and such statements are qualified in their
entirety by such reference.
The transfer agent and registrar of the Convertible Preferred Stock and the
Common Stock is First Chicago Trust Company of New York.
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<PAGE> 40
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
Enron may, at its option, elect to offer fractional interests in the
Offered Second Preferred Stock. In the event such option is exercised, Enron
will offer depositary shares ("Depositary Shares"), each of which will represent
a fraction (to be set forth in the Prospectus Supplement relating to a
particular series of Offered Second Preferred Stock) of a share of a particular
series of Offered Second Preferred Stock as described below.
The Offered Second Preferred Stock of any series represented by Depositary
Shares will be deposited under a deposit agreement (the "Deposit Agreement")
between Enron and a bank or trust company selected by Enron having its principal
office in the United States and having, alone or together with its affiliates, a
combined capital and surplus of at least $50,000,000 (the "Depositary"). Subject
to the terms of the Deposit Agreement, each registered holder of a Depositary
Share will be entitled, in proportion to the applicable fraction of a share of
Offered Second Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the Offered Second Preferred Stock represented thereby
(including dividend, voting, redemption and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts ("Depositary
Receipts") issued pursuant to the Deposit Agreement. Depositary Receipts will be
distributed to those persons purchasing the fractional interests in Offered
Second Preferred Stock in accordance with the terms of the offering set forth in
the applicable Prospectus Supplement. A copy of the form of Deposit Agreement is
filed as an exhibit to the Registration Statements of which this Prospectus is a
part, and the following summary is qualified in its entirety by reference to
such exhibit.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all dividends or other cash distributions
received in respect of the Offered Second Preferred Stock to the record holders
of Depositary Shares relating to such Offered Second Preferred Stock in
proportion to the number of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash or rights, preferences or
privileges upon the Offered Second Preferred Stock, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto in proportion to the number of such Depositary Shares owned by
such holders, unless the Depositary determines that such distribution cannot be
made proportionately among such holders or that it is not feasible to make such
distribution, in which case the Depositary may, with the approval of Enron, sell
such securities or property and distribute the net proceeds from such sale to
such holders or adopt such other method as it deems equitable and practicable
for effecting such distribution.
WITHDRAWAL OF THE OFFERED SECOND PREFERRED STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Depositary (unless the related Offered Second Preferred Stock or Depositary
Shares have previously been called for redemption), and upon payment of the
charges provided in the Deposit Agreement and subject to the terms hereof, the
holder of the Depositary Shares evidenced thereby is entitled to delivery at
such office to or upon his order the number of whole shares of Offered Second
Preferred Stock and any money or other property represented by such Depositary
Shares. If the Depositary Receipts delivered by the holder evidence a number of
Depositary Shares in excess of the number of Depositary Shares representing the
number of whole shares of Offered Second Preferred Stock to be withdrawn, the
Depositary will deliver to such holder at the same time a new Depositary Receipt
evidencing such excess number of Depositary Shares. Holders of Offered Second
Preferred Stock thus withdrawn, and any subsequent holders of those shares, will
not thereafter be entitled to deposit such shares under the Deposit Agreement or
to receive Depositary Shares therefor.
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<PAGE> 41
REDEMPTION OF DEPOSITARY SHARES
Upon redemption of Offered Second Preferred Stock represented by Depositary
Shares, the Depositary will redeem as of the same redemption date the number of
Depositary Shares representing Offered Second Preferred Stock so redeemed,
provided Enron shall have paid in full to the Depositary the redemption price of
the Offered Second Preferred Stock to be redeemed (which redemption price shall
include an amount equal to any accrued and unpaid dividends thereon to the date
fixed for redemption). The redemption price per Depositary Share will be equal
to the applicable fraction of the redemption price and any other amounts per
share payable with respect to the Offered Second Preferred Stock. If fewer than
all the Depositary Shares are to be redeemed, the Depositary Shares to be
redeemed will be selected by the Depositary by lot or pro rata or by any other
equitable method, in each case as may be determined by Enron.
VOTING OF THE OFFERED SECOND PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Offered
Second Preferred Stock are entitled to vote, the Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Shares. Each record holder of such Depositary Shares on the record
date (which will be the same date as the record date for the Offered Second
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the amount of Offered Second Preferred Stock
represented by such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the number of shares of Offered Second Preferred
Stock represented by such Depositary Shares in accordance with such
instructions, and Enron will agree to take all reasonable action which may be
deemed necessary by the Depositary in order to enable the Depositary to do so.
The Depositary will abstain from voting Offered Second Preferred Stock (but, at
its discretion, not from appearing at any meeting with respect to such Offered
Second Preferred Stock) to the extent it does not receive specific instructions
from the holders of Depositary Shares representing Offered Second Preferred
Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between Enron and the Depositary. However, any amendment which materially and
adversely alters the rights of the holders of Depositary Shares will not be
effective unless such amendment has been approved by the holders of at least a
majority of the Depositary Shares then outstanding.
The Deposit Agreement may be terminated by Enron upon not less than 60
days' notice, whereupon the Depositary shall deliver or make available to each
holder of Depositary Receipts, upon surrender of the Depositary Receipts held by
such holder, such number of whole or fractional shares of Offered Second
Preferred Stock represented by such Depositary Receipts. The Deposit Agreement
will automatically terminate if (i) all outstanding Depositary Shares have been
redeemed, or (ii) there has been a final distribution in respect of the Offered
Second Preferred Stock in connection with any liquidation, dissolution or
winding up of Enron and such distribution has been made to the holders of
Depositary Receipts.
CHARGES OF DEPOSITARY
Enron will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Depositary arrangements. Enron will pay
the fees and expenses of the Depositary in connection with the performance of
its duties under the Deposit Agreement, to the extent specified in the Deposit
Agreement. Holders of Depositary Receipts will pay transfer and other taxes and
governmental charges.
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MISCELLANEOUS
Enron will forward to holders of Depositary Shares any reports and
communications that it sends to holders of Offered Second Preferred Stock.
Neither the Depositary nor Enron will be liable if it is prevented from or
delayed in, by law or any circumstances beyond its control, performing its
obligations under the Deposit Agreement. The obligations of Enron and the
Depositary under the Deposit Agreement will be limited to performing their
duties thereunder without negligence or willful misconduct, and Enron and the
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Shares or any Offered Second Preferred Stock unless
satisfactory indemnity is furnished. Enron and the Depositary may rely on advice
of counsel or accountants, on information provided by holders of Depositary
Shares or other persons believed to be authorized or competent and on documents
believed to be genuine.
In the event the Depositary shall receive conflicting claims, requests or
instructions from any holders of Depositary Receipts, on the one hand, and
Enron, on the other hand, the Depositary shall be entitled to act on such
claims, requests or instructions received from Enron.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to Enron notice of its
election to do so, and Enron may at any time remove the Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Depositary and its acceptance of such appointment. Such successor Depositary
must be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having, alone or together with its affiliates, a combined
capital and surplus of at least $50,000,000.
DESCRIPTION OF WARRANTS TO PURCHASE COMMON STOCK
The following statements with respect to the Stock Warrants are summaries
of, and subject to, the detailed provisions of a warrant agreement ("Stock
Warrant Agreement") to be entered into by Enron and a warrant agent to be
selected at the time of issue (the "Stock Warrant Agent"), and having the terms
described in the Prospectus Supplement relating thereto.
GENERAL
The Stock Warrants, evidenced by warrant certificates (the "Stock Warrant
Certificates"), may be issued under the Stock Warrant Agreement independently or
together with any Offered Securities and may be attached to or separate from
such Offered Securities. If Stock Warrants are offered, the Prospectus
Supplement will describe the terms of the warrants, including the following: (1)
the offering price, if any; (2) the number of shares of Common Stock purchasable
upon exercise of one Stock Warrant and the initial price at which such shares
may be purchased upon exercise; (3) the date on which the right to exercise the
Stock Warrants shall commence and the date on which such right shall expire; and
(4) any other terms of the Stock Warrants. The shares of Common Stock issuable
upon exercise of the Stock Warrants will, when issued in accordance with the
Stock Warrant Agreement, be fully paid and nonassessable.
EXERCISE OF STOCK WARRANTS
Stock Warrants may be exercised by surrendering to the Stock Warrant Agent
the Stock Warrant Certificate signed by the warrantholder, or his duly
authorized agent, indicating the warrantholder's election to exercise all or a
portion of the Stock Warrants evidenced by the certificate. Surrendered Stock
Warrant Certificates shall be accompanied by payment of the aggregate exercise
price of the Stock Warrants to be exercised, as set forth in the Prospectus
Supplement, which payment may be made in the form of cash or a check equal to
the exercise price. Certificates evidencing duly exercised Stock Warrants shall
be delivered by the Stock Warrant Agent to the transfer agent for the Common
Stock.
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<PAGE> 43
Upon receipt thereof, the transfer agent shall deliver or cause to be delivered,
to or upon the written order of the exercising warrantholder, a certificate
representing the number of shares of Common Stock purchased. If fewer than all
of the Stock Warrants evidenced by any certificate are exercised, the Stock
Warrant Agent shall deliver to the exercising warrantholder a new Stock Warrant
Certificate representing the unexercised Stock Warrants.
ANTIDILUTION PROVISIONS
The exercise price payable and the number of shares of Common Stock
purchasable upon the exercise of each Stock Warrant will be subject to
adjustment in certain events, including (1) the issuance of a stock dividend to
holders of Common Stock or a combination, subdivision or reclassification of
Common Stock; (2) the issuance of rights, warrants or options to all holders of
Enron's Common Stock entitling the holders thereof to purchase Common Stock for
an aggregate consideration per share less than the current market price per
share of Common Stock; or (3) any distribution by Enron to the holders of its
Common Stock of evidences of indebtedness of Enron or of assets (excluding cash
dividends or distributions payable out of consolidated earnings and earned
surplus and dividends or distributions referred to in (1) above). In lieu of
adjusting the number of shares of Common Stock purchasable upon exercise of each
Stock Warrant, Enron may elect to adjust the number of Stock Warrants. No
adjustment in the number of shares purchasable upon exercise of the Stock
Warrants will be required until cumulative adjustments require an adjustment of
at least 1% thereof. Enron may, at its option, reduce the exercise price at any
time. No fractional shares will be issued upon exercise of Stock Warrants, but
Enron will pay the cash value of any fractional shares otherwise issuable.
Notwithstanding the foregoing, in case of any consolidation, merger or sale or
conveyance of the property of Enron as an entirety or substantially as an
entirety, the holder of each outstanding Stock Warrant upon exercise thereof
shall have the right to the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock for which such Stock Warrant was exercisable immediately
prior thereto.
NO RIGHTS AS STOCKHOLDERS
Holders of Stock Warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
stockholders with respect to any meeting of stockholders for the election of
directors of Enron or any other matter or to exercise any rights whatsoever as
stockholders of Enron.
DESCRIPTION OF WARRANTS TO PURCHASE DEBT SECURITIES
The following statements with respect to the Debt Warrants are summaries
of, and subject to, the detailed provisions of a warrant agreement (the "Debt
Warrant Agreement") to be entered into by Enron and a warrant agent to be
selected at the time of issue (the "Debt Warrant Agent"), and having the terms
described in the Prospectus Supplement relating thereto.
GENERAL
The Debt Warrants, evidenced by warrant certificates (the "Debt Warrant
Certificates"), may be issued under the Debt Warrant Agreement independently or
together with any Offered Debt Securities and may be attached to or separate
from such Offered Debt Securities. If Debt Warrants are offered, the Prospectus
Supplement will describe the terms of the warrants, including the following: (1)
the offering price, if any; (2) the designation, aggregate principal amount and
terms of the Debt Securities purchasable upon exercise of the warrants; (3) if
applicable, the designation and terms of the Debt Securities with which the Debt
Warrants are issued and the number of warrants issued with each such Debt
Security; (4) if applicable, the date on and after which the Debt Warrants and
the related Debt Securities will be separately transferable; (5) the principal
amount of Debt Securities purchasable upon exercise of one Debt Warrant and the
price at which such principal amount of Debt Securities may be
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purchased upon exercise; (6) the date on which the right to exercise the Debt
Warrants shall commence and the date on which such right shall expire; (7)
federal income tax consequences; (8) whether the warrants represented by the
Debt Warrant Certificates will be issued in registered or bearer form; and (9)
any other terms of the Debt Warrants.
Debt Warrant Certificates may be exchanged for new Debt Warrant
Certificates of different denominations and may (if in registered form) be
presented for registration of transfer at the corporate trust office of the Debt
Warrant Agent, which will be listed in the Prospectus Supplement relating
thereto, or at such other office as may be set forth therein. Warrantholders
will not have any of the rights of holders of Debt Securities (except to the
extent that the consent of warrantholders may be required for certain
modifications of the terms of an Indenture and the series of Debt Securities
issuable upon exercise of the Debt Warrants) and will not be entitled to
payments of principal of and interest, if any, on the Debt Securities.
EXERCISE OF DEBT WARRANTS
Debt Warrants may be exercised by surrendering the Debt Warrant Certificate
at the corporate trust office of the Debt Warrant Agent, with the form of
election to purchase on the reverse side of the Debt Warrant Certificate
properly completed and executed, and by payment in full of the exercise price,
as set forth in the Prospectus Supplement relating thereto. Upon the exercise of
Debt Warrants, the Debt Warrant Agent will, as soon as practicable, deliver the
Debt Securities in authorized denominations in accordance with the instructions
of the exercising warrantholder. If less than all of the Debt Warrants evidenced
by the warrant certificate are exercised, a new Debt Warrant Certificate will be
issued for the remaining amount of Debt Warrants.
ENRON CAPITAL RESOURCES, L.P.
GENERAL
Enron Capital Resources is a limited partnership organized under the
Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"). Enron is
the general partner of Enron Capital Resources (the "General Partner"), and a
wholly owned subsidiary of Enron is its organizational limited partner. All of
the general and limited partner interests in Enron Capital Resources are
beneficially owned by Enron or its wholly owned subsidiary, and upon the sale of
the Preferred Securities the wholly owned subsidiary will withdraw as a limited
partner so that thereafter all of such interests will be owned by holders of
Preferred Securities. Enron Capital Resources' executive offices are located at
1400 Smith Street, Houston, Texas 77002, and its telephone number is (713)
853-6161. All of the business and affairs of Enron Capital Resources are
conducted by Enron, as General Partner. Enron Capital Resources exists solely
for the purpose of issuing limited partner interests designated as Preferred
Securities and lending the net proceeds thereof to Enron.
PREFERRED SECURITIES
Enron Capital Resources may from time to time issue limited partner
interests designated as Preferred Securities, in one or more series, having
terms described in the Prospectus Supplement relating thereto. The Preferred
Securities may be designated as preferred securities, preferred units or
preferred shares, or may have such other designation as Enron shall establish,
as described in the Prospectus Supplement relating thereto. Under Enron Capital
Resources' agreement of limited partnership (the "Partnership Agreement"),
Enron, as General Partner, may establish the terms of each series of Preferred
Securities, including distribution, redemption, voting and liquidation rights
and such other preferred, deferred or other special rights or such restrictions,
as Enron may determine, such terms to be set forth in the related Prospectus
Supplement. Upon the first issuance of Preferred Securities, the wholly owned
subsidiary of Enron that serves as organizational limited partner will withdraw
as a limited partner, and thereafter holders of Preferred Securities will be the
only limited partners of Enron Capital Resources. The Preferred Securities of
Enron Capital Resources offered hereby will be guaranteed by Enron to the
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limited extent set forth below under "Guarantee" and may also be entitled to the
benefits of certain undertakings of Enron as described below under "Backup
Undertakings". Any special federal income tax, accounting and other
considerations applicable to any offering of Preferred Securities and related
Backup Undertakings will be described in the Prospectus Supplement relating
thereto.
GUARANTEE
Enron will irrevocably and unconditionally agree (the "Guarantee"), to the
extent set forth herein, to pay in full, to the holders of Preferred Securities
of any series, the Guarantee Payments (as defined below), as and when due,
regardless of any defense, right of set-off or counterclaim which Enron Capital
Resources may have or assert. The Guarantee will constitute a guarantee of
payment and not of collection and may be enforced by holders of Preferred
Securities directly against Enron. The following payments to the extent not paid
by Enron Capital Resources (the "Guarantee Payments") will be subject to the
Guarantee (without duplication): (i) any accumulated arrears and accruals of
unpaid distributions which have been declared on the Preferred Securities of any
series out of moneys legally available therefor, (ii) the redemption price
including all accumulated arrears and accruals of unpaid distributions payable,
out of moneys legally available therefor, with respect to any Preferred
Securities of any series called for redemption, (iii) upon a liquidation of
Enron Capital Resources, the lesser of (a) the aggregate of the liquidation
preference and all accumulated arrears and accruals of unpaid distributions
(whether or not declared) on the Preferred Securities of any series to the date
of payment and (b) the amount of assets of Enron Capital Resources remaining
available for distribution in liquidation to the holders of Preferred Securities
of such series, and (iv) any additional amounts payable by Enron Capital
Resources as described in the accompanying Prospectus Supplement. In addition,
the Prospectus Supplement relating to a series of Preferred Securities will
describe the rank of the Guarantee and any additional covenants or other terms
of the Guarantee of Enron with respect to such series, including any additional
amounts payable under the Guarantee with respect thereto.
BACKUP UNDERTAKINGS
Enron will guarantee the payment of any liabilities incurred by Enron
Capital Resources (other than obligations to holders of Preferred Shares)
pursuant to an amendment to the Partnership Agreement or a separate agreement
between Enron and Enron Capital Resources. Such agreement will be for the
benefit of, and enforceable by, third parties to whom Enron Capital Resources
owes such obligations.
In connection with any series of Preferred Securities, Enron may enter into
additional arrangements with Enron Capital Resources, including intercompany
loan agreements and amendments to the Partnership Agreement, that operate
directly or indirectly for the benefit of holders of the Preferred Securities.
The Guarantee described above under "Guarantee", any intercompany loan
agreements, the agreement described in the previous paragraph and any such other
arrangements are herein collectively referred to as "Backup Undertakings" of
Enron and will be described in the Prospectus Supplement relating to any series
of Preferred Securities to which they apply.
THE PARTNERSHIP AGREEMENT
The following paragraphs are a summary of certain provisions of the
Partnership Agreement. A copy of the Partnership Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. Any
amendments to the Partnership Agreement, including those that relate to a series
of Preferred Securities, will be described in the Prospectus Supplement relating
to such series of Preferred Securities. Enron Capital Resources will provide to
prospective investors a copy of the form of such agreement and any such
amendment upon request at no charge. The following discussion is qualified in
its entirety by reference to the Partnership Agreement as it may be amended.
PURPOSE. The purpose of Enron Capital Resources under the Partnership
Agreement is limited to issuing one or more series of Preferred Securities and
loaning the net proceeds thereof to Enron. The
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General Partner is authorized to perform all acts deemed necessary to carry out
such purposes and to conduct the business of Enron Capital Resources.
COMPENSATION TO GENERAL PARTNER. The Partnership Agreement provides that
the General Partner is not entitled to receive any compensation for its services
as general partner of Enron Capital Resources.
AMENDMENT OF PARTNERSHIP AGREEMENT. The Partnership Agreement may be
amended by the General Partner, except as otherwise described in a Prospectus
Supplement relating to Preferred Securities.
MEETINGS; VOTING. Holders of Preferred Securities who are record holders of
Preferred Securities on the record date set pursuant to the Partnership
Agreement will be entitled to notice of, and to vote at, meetings of holders of
Preferred Securities and to act with respect to matters as to which approvals
may be solicited. The General Partner does not anticipate that any meeting of
holders of Preferred Securities will be called in the foreseeable future.
LIMITED LIABILITY. Assuming that a holder of Preferred Securities does not
participate in the control of the business of Enron Capital Resources, within
the meaning of the Delaware Act, and that he otherwise acts in conformity with
the provisions of the Partnership Agreement, his liability under the Delaware
Act will be limited generally to the amount of capital he is obligated to
contribute to Enron Capital Resources in respect of his Preferred Securities
plus his share of any undistributed profits and assets of Enron Capital
Resources. Enron Capital Resources will operate in such manner as the General
Partner deems reasonable and necessary or appropriate to preserve the limited
liability of holders of Preferred Securities. Under the Delaware Act, a limited
partnership may not make a distribution to a partner to the extent that at the
time of the distribution, after giving effect to the distribution, all
liabilities of the partnership, other than liabilities to partners on account of
their partnership interests and nonrecourse liabilities, exceed the fair value
of the assets of the limited partnership. The Delaware Act provides that a
limited partner who receives such a distribution and knew at the time of the
distribution that the distribution was in violation of the Delaware Act shall be
liable to the limited partnership for the amount of the distribution for three
years from the date of the distribution. Under the Delaware Act, an assignee who
becomes a substituted limited partner of a limited partnership is liable for the
obligations of his assignor to make contributions to the partnership, except the
assignee is not obligated for liabilities unknown to him at the time he became a
limited partner and which could not be ascertained from the partnership
agreement.
TERMINATION AND DISSOLUTION. Enron Capital Resources will continue until
December 31, 2084, unless sooner terminated pursuant to the Partnership
Agreement. Enron Capital Resources will be dissolved in certain events,
including upon (i) the election of the General Partner to dissolve Enron Capital
Resources, if approved by the holders of at least a majority of the voting power
of the Preferred Shares, (ii) the bankruptcy or dissolution of the General
Partner or (iii) under certain circumstances, withdrawal or removal of the
General Partner.
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PLAN OF DISTRIBUTION
Enron, Enron Capital Resources and/or the Selling Stockholders may sell the
Offered Securities (i) through underwriters or dealers; (ii) directly to
purchasers; (iii) through agents; or (iv) from time to time at prevailing market
prices on the New York Stock Exchange, in the case of sales of Common Stock. The
Prospectus Supplement with respect to the Offered Securities will set forth the
terms of the offering of the Offered Securities, including the name or names of
any underwriters or agents, the purchase price of the Offered Securities and the
proceeds to Enron, Enron Capital Resources and/or the Selling Stockholders from
such sale, any delayed delivery arrangements, any underwriting discounts and
commissions and other items constituting underwriters' compensation, any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such Prospectus Supplement. Unless otherwise set forth
in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Securities, Enron, Enron
Capital Resources and/or the Selling Stockholders will sell such Offered
Securities to the dealers as principals. The dealers may then resell such
Offered Securities to the public at varying prices to be determined by such
dealers at the time of resale.
The Offered Securities may be sold directly by Enron, Enron Capital
Resources and/or the Selling Stockholders or through agents designated by Enron,
Enron Capital Resources and/or the Selling Stockholders from time to time. Any
agent involved in the offer or sale of the Offered Securities in respect to
which this Prospectus is delivered will be named, and any commissions payable by
Enron, Enron Capital Resources and/or the Selling Stockholders to such agent
will be set forth, in the Prospectus Supplement relating thereto. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment.
Common Stock offered by Selling Stockholders may be sold from time to time
on the New York Stock Exchange at prevailing market prices. The terms of any
such sales will be described in the Prospectus Supplement, if any, relating
thereto.
If so indicated in the Prospectus Supplement, Enron, Enron Capital
Resources and/or the Selling Stockholders will authorize agents, underwriters or
dealers to solicit offers from certain types of institutions to purchase Offered
Securities from Enron, Enron Capital Resources and/or the Selling Stockholders
at the public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement will set forth
the commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements with
Enron, Enron Capital Resources and/or the Selling Stockholders to
indemnification by Enron or Enron Capital Resources against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with or perform services for Enron in the
ordinary course of business.
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The Offered Securities may or may not be listed on a national securities
exchange. No assurances can be given that there will be a market for the Offered
Securities.
VALIDITY OF SECURITIES
The validity of the Offered Securities will be passed upon for Enron and
Enron Capital Resources by James V. Derrick, Jr., Esq., Senior Vice President
and General Counsel of Enron. Mr. Derrick owns substantially less than 1% of the
outstanding shares of Common Stock of Enron.
EXPERTS
The consolidated financial statements and schedules included in Enron's
Annual Report on Form 10-K for the year ended December 31, 1993, incorporated by
reference in this Prospectus, have been audited by Arthur Andersen & Co.,
independent public accountants, as indicated in their reports with respect
thereto. The consolidated financial statements and schedules referred to above
and such reports have been incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to Enron's Annual Report on Form 10-K for
the year ended December 31, 1993, and the estimates from the reports of that
firm appearing in such Annual Report, are incorporated by reference herein on
the authority of said firm as experts in petroleum engineering and in giving
such reports.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF SUCH INFORMATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
Enron Capital Resources, L.P. ....... S-2
Enron Corp........................... S-2
Investment Considerations............ S-4
Selected Financial Data of Enron..... S-5
Capitalization....................... S-6
Use of Proceeds...................... S-6
Description of the Series A Preferred
Securities......................... S-7
Description of the Guarantee......... S-13
Description of the Loan.............. S-15
Taxation............................. S-20
Underwriting......................... S-22
Validity of Securities............... S-23
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 3
Business of Enron Corp............... 4
Use of Proceeds...................... 5
Ratios of Enron's Earnings to Fixed
Charges and Earnings to Fixed
Charges and Preferred Stock
Dividends.......................... 5
Description of Debt Securities....... 6
Selling Stockholders................. 12
Description of Enron Corp. Capital
Stock.............................. 13
Description of Depositary Shares..... 17
Description of Warrants to Purchase
Common Stock....................... 19
Description of Warrants to Purchase
Debt Securities.................... 20
Enron Capital Resources, L.P ........ 21
Plan of Distribution................. 24
Validity of Securities............... 25
Experts.............................. 25
</TABLE>
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ENRON CAPITAL
RESOURCES, L.P.
GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY
ENRON CORP.
% CUMULATIVE PREFERRED SECURITIES,
SERIES A
------------------------
P R O S P E C T U S
------------------------
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
RAUSCHER PIERCE REFSNES, INC.
SMITH BARNEY INC.
, 1994
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