AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1995
REGISTRATION NO. 33-......
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ENRON CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 47-0255140
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1400 SMITH STREET, HOUSTON, TEXAS 77002
TELEPHONE NO. (713) 853-6161
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES V. DERRICK, JR., ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
ENRON CORP.
1400 SMITH STREET
HOUSTON, TEXAS 77002
(713) 853-6161
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
GARY W. ORLOFF, ESQ. REX R. ROGERS, ESQ.
BRACEWELL & PATTERSON, L.L.P. ASSISTANT GENERAL COUNSEL
SOUTH TOWER PENNZOIL PLACE ENRON CORP.
711 LOUISIANA STREET, SUITE 2900 1400 SMITH STREET, ROOM 4842
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
MAXIMUM
TITLE OF EACH AGGREGATE
CLASS OF SECURITIES OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1) REGISTRATION FEE
------------------- ------------ ------------
<S> <C> <C>
Exchangeable Notes............................................................ $218,625,000 $75,388
</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
*****************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. *
* A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY *
* NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN *
* WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
*****************************************************************************
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1995
10,000,000 EXCHANGEABLE NOTES
ENRON CORP.
% EXCHANGEABLE NOTES DUE , 1998
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE, OF ENRON OIL & GAS COMPANY)
------------------------
The principal amount of each of the % Exchangeable Notes due
, 1998 of Enron Corp. ("Enron") being offered hereby (the
"Exchangeable Notes Offering") will be $ (the closing sales price of the
common stock, par value $.01 per share (the "Common Stock"), of Enron Oil &
Gas Company ("EOG") on 1995, as reported on the New York
Stock Exchange Composite Tape) (the "Initial Price"). The Exchangeable Notes
will mature on , 1998. Interest on the Exchangeable Notes,
at the rate of % of the principal amount per annum, is payable quarterly in
arrears on , , and
, beginning , 199 . The Exchangeable Notes
are not subject to redemption, defeasance or any sinking fund prior to
maturity.
At maturity, including as a result of acceleration or otherwise
("Maturity"), each Exchangeable Note will be mandatorily exchanged by Enron
into a number of shares of EOG Common Stock (or, at Enron's option, which may
be exercised with respect to all, but not less than all, outstanding
Exchangeable Notes, cash with an equal value) at the Exchange Rate. The
Exchange Rate is equal to, subject to certain adjustments, (a) if the Maturity
Price is greater than or equal to $ per share of EOG Common Stock (the
"Threshold Appreciation Price"), shares of EOG Common Stock per
Exchangeable Note, (b) if the Maturity Price is less than the Threshold
Appreciation Price but is greater than the Initial Price, a fractional share
of EOG Common Stock per Exchangeable Note so that the value thereof,
determined at the Maturity Price, equals the Initial Price and (c) if the
Maturity Price is less than or equal to the Initial Price, one share of EOG
Common Stock per Exchangeable Note. The "Maturity Price" means the average
Closing Price (as defined herein) per share of EOG Common Stock for the 20
Trading Days (as defined herein) immediately prior to Maturity. Accordingly,
holders of the Exchangeable Notes will not necessarily receive an amount equal
to the principal amount thereof. The Exchangeable Notes will be unsecured
obligations of Enron ranking PARI PASSU with all of its other unsecured and
unsubordinated indebtedness. Enron may only exercise its option to pay
outstanding Exchangeable Notes in cash from the proceeds of its sale of Enron
common stock. EOG will have no obligations with respect to the Exchangeable
Notes. See "Description of the Exchangeable Notes".
Concurrently with the Exchangeable Notes Offering, Enron is offering
27,000,000 shares of EOG Common Stock (31,050,000 shares if the Underwriters'
over-allotment options are exercised in full in such offerings) in concurrent
U.S. and international offerings (collectively, the "Stock Offerings"). The
consummation of the Exchangeable Notes Offering is not contingent upon the
consummation of the Stock Offerings or vice versa. Assuming the Underwriters'
over-allotment options in the Exchangeable Notes Offering and the Stock
Offerings are exercised in full and the maximum number of shares of EOG Common
Stock is delivered upon mandatory exchange of the Exchangeable Notes at
Maturity, Enron would own approximately 54% of the outstanding EOG Common
Stock.
Attached hereto as Appendix A and included as part of this Prospectus is a
prospectus of EOG covering the shares of EOG Common Stock which may be
received by a holder of Exchangeable Notes at Maturity. The EOG prospectus
relates to an aggregate of 11,000,000 shares of EOG Common Stock.
For a discussion of certain United States federal income tax consequences
for holders of Exchangeable Notes, see "Certain United States Federal Income
Tax Considerations".
Application has been made to list the Exchangeable Notes on the New York
Stock Exchange ("NYSE"). EOG Common Stock (including the shares which may be
received by a holder of Exchangeable Notes at Maturity) is listed on the NYSE
under the symbol "EOG".
PROSPECTIVE INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED UNDER "RISK FACTORS RELATING TO EXCHANGEABLE NOTES" BEGINNING ON
PAGE 5.
------------------------
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 PRO-
SPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) ENRON(1)(3)
------------------ ------------ -----------
<S> <C> <C> <C>
Per Exchangeable Note....................................... $ $ $
Total (4)................................................... $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1995.
(2) Enron and EOG have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933.
(3) Before deducting expenses payable by Enron, estimated to be $ .
(4) Enron has granted the Underwriters an option for 30 days to purchase
up to an additional 1,000,000 Exchangeable Notes at the initial public
offering price, less the underwriting discount, solely to cover
over-allotments. If such over-allotment option is exercised in full, the
total initial public offering price, underwriting discount and proceeds
to Enron will be $ , $ and $ , respectively. See
"Underwriting".
------------------------
The Exchangeable Notes 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 the Exchangeable Notes will be ready for delivery in New York,
New York, on or about , 1995.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
------------------------
The date of this Prospectus is , 1995.
<PAGE>
AVAILABLE INFORMATION
Enron, a Delaware corporation, 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 Northeast
Regional Office, Seven World Trade Center, Suite 1300, 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 a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933 (the
"Securities Act") with respect to the Exchangeable Notes. This Prospectus does
not contain all of the information set forth in such Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to Enron and the Exchangeable Notes. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement 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.
------------------------
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:
(a) Annual Report on Form 10-K for the year ended December 31, 1994;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31,
1995; and
(c) Quarterly Report on Form 10-Q for the quarter ended June 30,
1995.
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 Exchangeable Notes 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). Requests
should be directed to Secretary Division, Enron Corp., at its principal
executive offices, 1400 Smith Street, Houston, Texas 77002 (telephone:
713-853-6161).
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANS-
ACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE EXCHANGEABLE NOTES
OR THE EOG COMMON STOCK AT A LEVEL ABOVE THAT 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.
2
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS. IT IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY
BY THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
CAPITALIZED TERMS WHICH ARE NOT DEFINED IN THIS SUMMARY ARE USED AS DEFINED
ELSEWHERE IN THIS PROSPECTUS.
ENRON CORP.
Enron, 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 power plants, natural gas liquids facilities and pipelines in the
United States and internationally; and the non-price regulated purchasing and
marketing of energy related commitments.
ENRON OIL & GAS COMPANY
EOG, together with its subsidiaries, is one of the largest independent
(non-integrated) oil and gas companies in the United States in terms of
domestic proved reserves. It is engaged, directly and through its
subsidiaries, in the exploration for, and the development, production and
marketing of, natural gas and crude oil primarily in major producing basins in
the United States, as well as in Canada, Trinidad and India, and to a lesser
extent, selected other international areas.
THE EXCHANGEABLE NOTES OFFERING
<TABLE>
<S> <C>
EXCHANGEABLE NOTES OFFERED........... 10,000,000 Exchangeable Notes.
PRINCIPAL AMOUNT..................... $ per Exchangeable Note.
STATED MATURITY...................... , 1998.
INTEREST RATE........................ % per annum, or $ per Exchangeable Note per quarter, payable
quarterly in arrears.
INTEREST PAYMENT DATES............... , , , and , beginning .
EXCHANGE AT MATURITY................. At Maturity, the principal amount of each Exchangeable Note will be
mandatorily exchanged by Enron into a number of shares of EOG Common
Stock (or, at Enron's option, which may be exercised with respect to
all, but not less than all, of the outstanding Exchangeable Notes,
cash with an equal value) at the Exchange Rate. The Exchange Rate is
equal to, subject to certain adjustments, (a) if the Maturity Price
is greater than or equal to $ per share of EOG Common Stock (the
"Threshold Appreciation Price"), shares of EOG Common Stock per
Exchangeable Note, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Price, a
fractional share of EOG Common Stock per Exchangeable Note so that
the value thereof (determined at the Maturity Price) equals the
Initial Price and (c) if the Maturity Price is less than or equal to
the Initial Price, one share of EOG Common Stock per Exchangeable
Note. The "Maturity Price" means the average Closing Price per share
of EOG Common Stock for the 20 Trading Days immediately prior to
Maturity. Accordingly,
3
holders of the Exchangeable Notes will not necessarily receive an
amount equal to the principal amount thereof. The Exchangeable Notes
are not exchangeable for EOG Common Stock at the option of the
holder. Enron may only exercise its option to pay outstanding
Exchangeable Notes in cash from the proceeds of its sale of Enron
common stock. See "Description of the Exchangeable Notes _ General."
NO REDEMPTION OR SINKING FUND........ The Exchangeable Notes are not subject to redemption, defeasance or
any sinking fund prior to Maturity.
RANKING.............................. The Exchangeable Notes will be unsecured obligations of Enron ranking
PARI PASSU with all of its other unsecured and unsubordinated
indebtedness.
RELATIONSHIP TO EOG COMMON
STOCK................................ The Exchangeable Notes will bear interest at % per annum, a
yield substantially in excess of the % anticipated dividend
yield of EOG Common Stock based on the Initial Price of $ and
the current quarterly dividend payable on EOG Common Stock. However,
the opportunity for equity appreciation afforded by an investment in
the Exchangeable Notes is less than the opportunity for equity
appreciation afforded by an investment in EOG Common Stock because
the amount receivable by a holder of an Exchangeable Note upon
exchange at Maturity will only exceed the principal amount of such
Exchangeable Note if the Maturity Price exceeds the Threshold
Appreciation Price (which represents an appreciation of % over
the Initial Price). Moreover, holders of the Exchangeable Notes will
only be entitled to receive upon exchange at Maturity % (the
percentage equal to the Initial Price divided by the Threshold
Appreciation Price) of any appreciation of the value of EOG Common
Stock in excess of the Threshold Appreciation Price. Holders of the
Exchangeable Notes will not be entitled to any rights with respect to
EOG Common Stock (including, without limitation, voting rights and
rights to receive any dividends or other distributions in respect
thereof) until such time, if any, as Enron shall have exchanged
shares of EOG Common Stock for Exchangeable Notes at Maturity thereof
and unless the applicable record date, if any, for the exercise of
such rights occurs after such exchange.
USE OF PROCEEDS...................... The net proceeds will be added to Enron's general funds and are
expected to be used to retire existing indebtedness and for general
corporate purposes. See "Use of Proceeds."
</TABLE>
4
RISK FACTORS RELATING TO EXCHANGEABLE NOTES
As described in more detail below, the trading price of the Exchangeable
Notes may vary considerably prior to Maturity due to, among other things,
fluctuations in the price of EOG Common Stock and other events that are
difficult to predict and beyond Enron's control.
COMPARISON TO OTHER DEBT SECURITIES; RELATIONSHIP TO EOG COMMON STOCK
The terms of the Exchangeable Notes differ from those of ordinary debt
securities in that the amount that a holder of the Exchangeable Notes will
receive upon mandatory exchange at Maturity is not fixed, but is based on the
price of the EOG Common Stock as specified in the Exchange Rate. There can be
no assurance that the amount received by such holder upon exchange at Maturity
will be equal to or greater than the principal amount of the Exchangeable
Note. For example, if the Maturity Price of the EOG Common Stock is less than
the Initial Price, the amount received upon exchange will be less than the
principal amount paid for the Exchangeable Note, in which case an investment
in Exchangeable Notes will result in a loss.
In addition, the opportunity for equity appreciation afforded by an
investment in the Exchangeable Notes is less than the opportunity for equity
appreciation afforded by an investment in the EOG Common Stock because the
amount received by a holder of an Exchangeable Note upon exchange at Maturity
will only exceed the principal amount of such Exchangeable Note if the
Maturity Price exceeds the Threshold Appreciation Price (which represents an
appreciation of % over the Initial Price). Holders of the Exchangeable Notes
will only be entitled to receive upon exchange at Maturity % of any
appreciation of the value of EOG Common Stock in excess of the Threshold
Appreciation Price. Because the price of the EOG Common Stock is subject to
market fluctuations, the value of the EOG Common Stock (or, at the option of
Enron, the amount of cash) received by a holder of an Exchangeable Note upon
exchange at Maturity, determined as described herein, may be more or less than
the principal amount of the Exchangeable Note.
It is impossible to predict whether the price of EOG Common Stock will
rise or fall. Trading prices of EOG Common Stock will be influenced by EOG's
operational results and by complex and interrelated political, economic,
financial and other factors that can affect natural gas and crude oil
commodity markets generally. See the prospectus relating to EOG and to EOG
Common Stock attached hereto as Appendix A and included as part of this
Prospectus.
DILUTION OF EOG COMMON STOCK
The amount that holders of the Exchangeable Notes are entitled to receive
upon the mandatory exchange at Maturity is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends and certain
other actions of EOG that modify its capital structure. See "Description of
the Exchangeable Notes -- Dilution Adjustments." The amount to be received by
holders of Exchangeable Notes upon mandatory exchange at Maturity may not be
adjusted for other events, such as offerings of EOG Common Stock for cash or
in connection with acquisitions, that may adversely affect the price of the
EOG Common Stock and, because of the relationship of such amount to be
received upon exchange to the price of EOG Common Stock, such other events may
adversely affect the trading price of the Exchangeable Notes. There can be no
assurance that EOG will not make offerings of EOG Common Stock or take other
action in the future. In addition, in the event Enron does not exercise its
option to deliver cash, holders of the Exchangeable Notes will not be entitled
to any rights with respect to the EOG Common Stock (including, without
limitation, voting rights and rights to receive any dividends or other
distributions in respect thereof) until such time as Enron shall have
exchanged shares of EOG Common Stock for Exchangeable Notes at Maturity
thereof and unless the applicable record date, if any, for the exercise of
such rights occurs after such exchange.
5
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the Exchangeable Notes will trade in
the secondary market or whether such market will be liquid or illiquid.
Exchangeable Notes are novel securities and there is currently no secondary
market for the Exchangeable Notes. The Underwriters currently intend, but are
not obligated, to make a market in the Exchangeable Notes. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide the holders of the Exchangeable Notes with
liquidity of investment or that it will continue for the life of the
Exchangeable Notes.
Enron has applied for listing of the Exchangeable Notes on the NYSE.
However, there can be no assurance that the Exchangeable Notes will not later
be delisted or that trading in the Exchangeable Notes on the NYSE will not be
suspended. If the Exchangeable Notes are not listed or traded on any
securities exchange or trading market, or if trading of the Exchangeable Notes
is suspended, pricing information for the Exchangeable Notes may be more
difficult to obtain, and the liquidity of the Exchangeable Notes may be
adversely affected.
NO OBLIGATION ON THE PART OF EOG WITH RESPECT TO THE EXCHANGEABLE NOTES
EOG has no obligations with respect to the Exchangeable Notes or amounts
to be paid to holders thereof, including any obligation to take the needs of
holders of the Exchangeable Notes into consideration for any reason. EOG will
not receive any of the proceeds of the offering of the Exchangeable Notes made
hereby and is not responsible for the determination of the timing of, prices
for or quantities of the Exchangeable Notes to be issued or the determination
or calculation of the amount to be paid upon mandatory exchange at Maturity.
TAX UNCERTAINTIES
The Indenture (as defined herein) requires that any holder subject to
U.S. federal income tax include currently in income, for U.S. federal income
tax purposes, payments denominated as interest that are made with respect to
the Exchangeable Notes, in accordance with such holder's method of accounting,
and the amount of original issue discount ("OID"), if any, attributable to the
Exchangeable Notes as it accrues. The Indenture also requires holders to treat
the Exchangeable Notes as a unit consisting of (i) an exchange note, which is
a debt obligation with a fixed principal amount unconditionally payable at
Maturity equal to the principal amount of the Exchangeable Notes, and (ii) a
forward purchase contract pursuant to which the holder agrees to use the
principal payment due on the Exchangeable Notes to purchase at Maturity the
EOG Common Stock that the holder is entitled to receive at that time (subject
to Enron's right to deliver cash in lieu of the EOG Common Stock). It is
contemplated that, upon a holder's sale or other disposition of the
Exchangeable Notes prior to Maturity, the amount realized will be allocated
between these two components of the Exchangeable Notes on the basis of their
then relative fair market values. Because of an absence of authority as to the
proper characterization of the Exchangeable Notes for tax purposes, these tax
characterizations and results are uncertain. This uncertainty extends to
characterization of any gain or loss recognized with respect to the
Exchangeable Notes at Maturity as capital gain or loss or ordinary income or
loss and, in the event Enron delivers EOG Common Stock at Maturity, as to
whether any gain or loss can be deferred until a sale or disposition of such
stock. As a result of these uncertainties, Enron has not received an opinion
of counsel with respect to the specific tax consequences of owning or
disposing of the Exchangeable Notes. See "Certain United States Federal Income
Tax Considerations."
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
6
approximately 44,000 miles of natural gas pipelines; the exploration for and
development 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 power plants, natural gas liquids facilities and pipelines in the
United States and internationally; and the non-price regulated purchasing and
marketing of energy related commitments.
TRANSPORTATION AND OPERATION. Enron's operations include the interstate
and intrastate transmission of natural gas, construction, management and
operation of natural gas and natural gas liquids pipelines, liquids plants,
clean fuel plants and power facilities. 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), and all such pipelines 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; Florida Gas, the State of Florida; and Transwestern, principally the
California market. In addition, Enron holds a 13% interest in Northern Border
Partners, L.P., which owns a 70% interest in the Northern Border Pipeline
system. An Enron subsidiary operates the Northern Border Pipeline system,
which transports gas from western Canada to delivery points in the midwestern
United States. Also, Enron has an approximately 15% interest in Enron Liquids
Pipeline, L.P., which is engaged in pipeline transportation of natural gas
liquids, refined petroleum products and carbon dioxide, operates coal
terminalling, gas processing and natural gas liquids fractionation facilities,
and is operated by a wholly owned subsidiary of Enron.
DOMESTIC GAS AND POWER SERVICES. Enron Capital & Trade Resources Corp.
and its affiliated companies ("ECT") purchase natural gas, natural 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. ECT markets these
energy products to local distribution companies, electric utilities,
cogenerators, and both commercial and industrial end-users. ECT also provides
price risk management services in connection with natural gas, gas liquids and
power transactions through both physical delivery and financial arrangements.
ECT 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. ECT's strategy is to provide predictable pricing,
reliable delivery and low cost capital to its customers. ECT provides these
services through a variety of instruments, including forward contracts, swap
agreements and other contractual commitments.
Certain Enron subsidiaries are engaged domestically in the extraction of
natural gas liquids (ethane, propane, normal butane, isobutane and natural
gasoline), which 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 independent (non-utility) 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
7
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 terminalling facilities, and gas pipelines, while marketing
activities center on fuels used by or transported through such facilities.
Enron's international activities include management of direct and indirect
ownership interests in and operation of power plants in England, Germany,
Guatemala and the Phillippines; a 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.
Enron is also involved in power and pipeline projects in varying stages of
development in China, the Dominican Republic, Colombia, Turkey, Bolivia and
Brazil, Indonesia and elsewhere.
Enron Global Power & Pipelines L.L.C., a Delaware limited liability
company ("EPP"), was formed in November 1994 by Enron to own and manage
Enron's operating power plant and natural gas pipeline business conducted
outside the United States, Canada and Western Europe, and to expand such
business through acquisitions. EPP's initial assets consist of interests
contributed by Enron in two power plants in the Phillippines (with 226
megawatts of aggregate net generating capacity), a power plant in Guatemala
(with 110 megawatts of net generating capacity) and a 6,548 kilometer (4,069
mile) natural gas pipeline system in Argentina. The public offering of common
shares of EPP was completed in November 1994. Enron owns approximately 52% of
the common shares of EPP. Enron formed EPP to attract public equity capital to
emerging market infrastructure projects, to enable public investors to better
evaluate and participate directly in the growth of Enron's operating power
plant and natural gas pipeline activities in emerging markets and to generate
additional capital for Enron to reinvest in future development efforts and for
other corporate purposes.
EXPLORATION AND PRODUCTION. Substantially all of Enron's natural gas and
crude oil exploration and production operations are conducted by its
subsidiary EOG. EOG is engaged in the exploration for, and development,
production and marketing of, natural gas and crude oil primarily in major
producing basins in the United States, as well as in Canada, Trinidad, India
and to a lesser extent, selected other international areas. At December 31,
1994, EOG had estimated net proved natural gas reserves of 1,910 billion cubic
feet and estimated net proved crude oil, condensate and natural gas liquids
reserves of 37 million barrels, and at such date, approximately 70% of EOG's
reserves (on a natural gas equivalent basis) was located in the United States,
16% in Canada, 11% in Trinidad and 3% in India. A limited partnership in which
ECT owns a 50% general partner interest has entered into an agreement to
acquire a controlling interest in Coda Energy, Inc. ("Coda"). Coda is engaged
in the exploration for, and the development, production and marketing of,
natural gas and crude oil primarily in North Texas and Oklahoma. Crude oil
accounts for approximately 86% of Coda's proved reserves. At December 31,
1994, Coda reported estimated proved natural gas reserves of 39,808 MMcf and
estimated proved crude oil, condensate and natural gas liquids reserves of
39,207 MBbls. See "Relationship Between Enron and EOG -- Conflicts of
Interest."
8
SELECTED FINANCIAL DATA OF ENRON
The financial information set forth below has been derived 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." The interim data reflects all 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 nine-month periods are
not necessarily indicative of the results expected for a full year or any
other interim period.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
YEAR ENDED DECEMBER 31,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Revenues........................... $ 5,460 $ 5,698 $ 6,415 $ 7,985 $ 8,984 $ 6,397 $ 6,639
Costs and expenses
Cost of gas and other products
sold........................... 3,528 3,646 4,222 5,567 6,517 4,631 4,726
Operating expenses............... 861 914 936 1,057 1,033 714 751
Amortization of deferred contract
reformation costs.............. 102 125 101 89 91 65 19
Oil and gas exploration costs.... 68 59 59 76 84 58 61
Depreciation, depletion and
amortization................... 356 366 376 458 441 328 321
Taxes, other than income taxes... 82 75 101 108 102 78 85
--------- --------- --------- --------- --------- --------- ---------
4,997 5,185 5,795 7,355 8,268 5,874 5,963
--------- --------- --------- --------- --------- --------- ---------
Operating income..................... 463 513 620 630 716 523 676
Other income and deductions
Equity in earnings of unconsolidated
subsidiaries....................... 56 55 56 73 112 74 49
Other, net........................... 143 147 91 95 116 112 116
--------- --------- --------- --------- --------- --------- ---------
Income before interest, minority
interest and income taxes.......... 662 715 767 798 944 709 841
Interest and related charges, net.... 395 373 330 300 273 202 214
Dividends on preferred stock of
subsidiary company................. -- -- -- 2 20 14 24
Minority interest.................... 7 7 18 28 31 21 34
Income taxes......................... 58 103 90 135 167 127 180
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary items.... 202 232 329 333 453 345 389
Extraordinary items.................. -- -- (23) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income(1)........................ 202 232 306 333 453 345 389
Preferred stock dividends............ 25 25 22 17 15 11 11
--------- --------- --------- --------- --------- --------- ---------
Earnings on Common Stock............. $ 177 $ 207 $ 284 $ 316 $ 438 $ 334 $ 378
========= ========= ========= ========= ========= ========= =========
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1990 1991 1992 1993 1994 1995
--------- --------- --------- --------- --------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Total assets..................... $ 9,849 $ 10,070 $ 10,312 $ 11,504 $ 11,966 $ 13,029
Short-term debt.................. -- -- -- -- -- --
Long-term debt (including amounts
reclassified from short-term
debt).......................... 2,983 3,109 2,459 2,661 2,805 3,425
Preferred stock of subsidiary
company........................ -- -- -- 214 377 396
Minority interest................ 97 101 179 196 290 316
Shareholders' equity............. 1,838 1,901 2,518 2,623 2,880 3,107
</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.
9
CAPITALIZATION
The following table sets forth the capitalization of Enron and its
consolidated subsidiaries as of September 30, 1995, and as adjusted to give
effect to the issuance on October 11, 1995 of $100 million aggregate principal
amount of Notes due 2007, and the issuance of the Exchangeable Notes offered
hereby and, in each case, the use of proceeds therefrom.
ACTUAL AS ADJUSTED
------------- ------------
(IN THOUSANDS)
Short-term debt
Notes payable................... $ -- $ --
Current maturities of long-term
debt............................ -- --
------------- ------------
Total short-term debt...... -- --
------------- ------------
Long-term debt
Enron:
Amount reclassified from
short-term debt............... 587,032
Notes due 1996-2023 (6 3/4% to
10.75%)....................... 1,753,139 1,753,139
Exchangeable Notes due 1998
( %)......................... --
Notes due 2007 (6 7/8%)......... -- 100,000
Subsidiary companies:
Notes due 1998-2005 (4.52% to
9.2%)......................... 636,000 636,000
Notes due 1998-1999 (floating
rates)........................ 55,000 55,000
Other........................... 53,674 53,674
Enron:
Senior subordinated debentures
due 2005-2012 (6.75%-8.25%)... 350,000 350,000
Unamortized debt discount and
premium......................... (9,641)
------------- ------------
Total long-term debt....... 3,425,204
------------- ------------
Minority interests................... 315,821 315,821
------------- ------------
Preferred stock of subsidiary
companies.......................... 395,750 395,750
------------- ------------
Shareholders' equity
Convertible preferred stock..... 138,605 138,605
Common stock.................... 25,373 25,373
Additional paid-in capital...... 1,792,544 1,792,544
Retained earnings............... 1,574,335 1,574,335
Cumulative foreign currency
translation adjustment........ (149,570) (149,570)
Common stock held in treasury... (62,827) (62,827)
Other, including Flexible Equity
Trust......................... (210,969) (210,969)
------------- ------------
Total shareholders'
equity................... 3,107,491 3,107,491
------------- ------------
Total
capitalization...... $ 7,244,266 $
============= ============
10
RELATIONSHIP BETWEEN ENRON AND EOG
OWNERSHIP OF COMMON STOCK
Through its ability to elect all directors of EOG, Enron has the ability
to control all matters relating to the management of EOG, including any
determination with respect to acquisition or disposition of EOG assets, future
issuance of Common Stock or other securities of EOG and any dividends payable
on the Common Stock. Enron also has the ability to control EOG's exploration,
development, acquisition and operating expenditure plans. The sale by Enron of
EOG Common Stock pursuant to the Stock Offerings will cause Enron's ownership
interest in EOG to fall below 80% with the result that (i) EOG will cease to
be included in the consolidated federal income tax return filed by Enron and
(ii) the tax allocation agreement between EOG and Enron described below will
terminate. There is no agreement between Enron and EOG that would prevent
Enron from acquiring additional shares of Common Stock of EOG.
CONTRACTUAL ARRANGEMENTS
EOG entered into a Services Agreement (the "Services Agreement") with
Enron effective January 1994, pursuant to which Enron provides various
services, such as maintenance of certain employee benefit plans, provision of
telecommunications and computer services, lease of office space and the
provision of purchasing and operating services and certain other corporate
staff and support services. Such services historically have been supplied to
EOG by Enron, and the Services Agreement provides for the further delivery of
such services substantially identical in nature and quality to those services
previously provided. EOG has agreed to a fixed rate for the rental of office
space and to reimburse Enron for all other direct costs incurred in rendering
services to EOG under the contract and to pay Enron for allocated indirect
costs incurred in rendering such services up to a maximum of $6.7 million for
1994, such cap to be increased in subsequent years for inflation and certain
changes in EOG's allocation bases with any increase not to exceed 7.5% per
year. Approximately $6.6 million was paid under the Services Agreement by EOG
to Enron in 1994. The Services Agreement is for an initial term of five years
through December 1998 and will continue thereafter until terminated by either
party.
In March 1995, in a series of transactions with Enron and an affiliate of
Enron, EOG exchanged all of its fuel supply and purchase contracts and related
price swap agreements associated with the Texas City cogeneration plant (the
"Cogen Contracts") for certain natural gas price swap agreements (the "Swap
Agreements") of equivalent value. As a result of the transactions, EOG has
been relieved of all performance obligations associated with the Cogen
Contracts. EOG will realize net operating revenues and receive corresponding
cash payments of approximately $91 million during the period extending through
December 31, 1999 under the terms of the Swap Agreements. The estimated fair
value of the Swap Agreements was approximately $81 million at the date the
Swap Agreements were received. The net of this series of transactions will
result in increases in net operating revenues and cash receipts for EOG during
1995 and 1996 of approximately $13 million and $7 million, respectively, with
offsetting decreases in 1998 and 1999 versus that anticipated under the Cogen
Contracts.
EOG has been included in the consolidated federal income tax return filed
by Enron as the common parent for itself and its subsidiaries and affiliated
companies, excluding any foreign subsidiaries. Consistent therewith and
pursuant to a Tax Allocation Agreement between EOG, EOG's subsidiaries and
Enron, either Enron has paid to EOG and each subsidiary an amount equal to the
tax benefit realized in the Enron consolidated federal income tax return
resulting from the utilization of EOG's or the subsidiary's net operating
losses and/or tax credits, or EOG and each subsidiary has paid to Enron an
amount equal to the federal income tax computed on its separate taxable income
less the tax benefits associated with any net operating losses and/or tax
credits generated by EOG or the subsidiary which were utilized in the Enron
consolidated return. Enron has paid EOG and each subsidiary for the tax
benefits associated with their net operating losses and tax credits utilized
in the Enron consolidated return, provided that a tax benefit was realized
except as discussed below, even if such benefits could not have been used by
EOG or the subsidiary on a separately filed tax return. EOG entered into an
agreement with Enron providing for EOG to be paid for all realizable benefits
associated with tight gas sand federal income tax credits concurrent with tax
reporting and settlement for the periods in which they were generated. The Tax
Allocation
11
Agreement applies to EOG and each of its subsidiaries for all years in which
EOG or any of its subsidiaries are or were included in the Enron consolidated
return. To the extent a state or other taxing jurisdiction requires or permits
a consolidated, combined, or unitary tax return to to be filed and such return
includes EOG or any of its subsidiaries, the principles expressed with respect
to consolidated federal income tax allocation shall apply. The Tax Allocation
Agreement will cease to be effective from the time at which deconsolidation
occurs for future periods, but will remain in effect with regard to periods
prior to deconsolidation. EOG has entered into a supplemental agreement with
Enron clarifying future potential adjustments associated with the final
settlement on audit of taxes for periods prior to the deconsolidation for
issues not addressed in the original agreement. Enron and EOG do not believe
that the cessation of consolidated tax reporting and effectiveness of the Tax
Allocation Agreement concurrently with deconsolidation will have a material
adverse effect on the financial condition or results of operations of either
Enron or EOG.
CONFLICTS OF INTEREST
The nature of the respective businesses of EOG and Enron and its
affiliates is such as to potentially give rise to conflicts of interest
between the two companies. Conflicts could arise, for example, with respect to
transactions involving purchases, sales and transportation of natural gas and
other business dealings between EOG and Enron and its affiliates, potential
acquisitions of businesses or oil and gas properties, the issuance of
additional shares of voting securities, the election of directors or the
payment of dividends by EOG.
Circumstances may also arise that would cause Enron to engage in the
exploration for and/or development and production of natural gas and crude oil
in competition with EOG. For example, opportunities might arise which would
require financial resources greater than those available to EOG, which are
located in areas or countries in which EOG does not intend to operate or which
involve properties that EOG would be unwilling to acquire. Also, Enron might
acquire a competing oil and gas business as part of a larger acquisition. In
addition, as part of Enron's strategy of securing supplies of natural gas or
capital, Enron may from time to time acquire producing properties or interests
in entities owning producing properties, and thereafter engage in exploration,
development and production activities with respect to such properties or
indirectly engage in such activities through such companies. Enron may also
acquire interests in oil and gas properties or companies in connection with
its financing activities. For example, in its financing activities Enron or
any entity in which it has an interest may make loans secured by oil and gas
properties or securities of oil and gas companies, may acquire production
payments or may receive interests in oil and gas properties as equity
components of lending transactions. As a result of its lending activities,
Enron may also acquire oil and gas properties or companies upon foreclosure of
secured loans or as part of a borrower's rearrangement of its obligations.
Such acquisition, exploration, development and production activities may
directly or indirectly compete with EOG's business. There can be no assurance
that Enron will not engage directly or indirectly through entities other than
EOG, in the natural gas and crude oil exploration, development and production
business in competition with EOG.
Joint Energy Development Investments Limited Partnership ("JEDI"), a
limited partnership in which ECT owns a 50% general partner interest, has
entered into an agreement to acquire a controlling interest in Coda. Coda is
engaged in the exploration for, and the development, production and marketing
of, natural gas and crude oil primarily in North Texas and Oklahoma. Crude oil
accounts for approximately 86% of Coda's proved reserves. At December 31,
1994, Coda reported estimated proved natural gas reserves of 39,808 MMcf and
estimated proved crude oil, condensates and natural gas liquids reserves of
39,207 MBbls. Enron anticipates that the transaction will be consummated in
early 1996, subject to Coda stockholder approval and other conditions.
Conflicts may arise between Coda and JEDI, and if the acquisition of Coda
occurs Enron will be required to resolve such conflicts in a manner that is
consistent with its fiduciary and contractual duties to other investors in
Coda and JEDI and its fiduciary duties to EOG. ECT has entered into an
agreement with JEDI and other investors in Coda designed to minimize certain
conflicts of interest that may arise and providing, among other things, that
EOG has no obligation to offer any business opportunities to Coda.
EOG and Enron and its affiliates have in the past entered into
significant intercompany transactions and agreements incident to their
respective businesses, and EOG and Enron and its affiliates
12
may be expected to enter into material transactions and agreements from time
to time in the future. Such transactions and agreements have related to, among
other things, the purchase and sale of natural gas and crude oil, the
financing of exploration and development efforts by EOG, and the provision of
certain corporate services. Enron believes that its existing transactions and
agreements with EOG have been at least as favorable to Enron as could be
obtained from third parties, and Enron intends that the terms of any future
transactions and agreements between Enron and EOG and its affiliates will be
at least as favorable to Enron as could be obtained from third parties.
USE OF PROCEEDS
The net proceeds from the sale of the Exchangeable Notes will be added to
Enron's general funds and are expected to be used to retire existing
indebtedness and for general corporate purposes. At , 1995 the
weighted average interest rate on such indebtedness was approximately %.
RATIO OF ENRON'S EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
----------------------------------------------------- ENDED
1990 1991 1992 1993 1994 SEPTEMBER, 1995
--------- --------- --------- --------- --------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges... 1.58 1.66 1.74 1.98 2.40 2.87
</TABLE>
The ratio of earnings to fixed charges is 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.
PRICE RANGE OF EOG COMMON STOCK AND CASH DIVIDENDS
The following table sets forth, for the periods indicated, the high and
low sale prices per share for the EOG Common Stock, as reported on the New
York Stock Exchange Composite Tape, and the amount of cash dividends paid per
share. The 1993 and First and Second Quarter 1994 sales prices and cash
dividends per share have been restated to reflect the two-for-one stock split
on May 31, 1994.
PRICE RANGE
-------------------- CASH
HIGH LOW DIVIDENDS
--------- --------- ----------
1993
First Quarter................... $ 20.31 $ 13.38 $.03
Second Quarter.................. 22.50 17.88 .03
Third Quarter................... 26.81 19.88 .03
Fourth Quarter.................. 27.00 17.06 .03
1994
First Quarter................... $ 23.75 $ 19.31 $.03
Second Quarter.................. 24.63 22.38 .03
Third Quarter................... 23.00 18.50 .03
Fourth Quarter.................. 22.75 17.38 .03
1995
First Quarter................... $ 24.88 $ 17.12 $.03
Second Quarter.................. 24.75 20.25 .03
Third Quarter................... 25.38 20.00 .03
Fourth Quarter (through November
7, 1995)...................... 22.75 18.75
The last reported sale price of the EOG Common Stock on November 7, 1995
as reported on the New York Stock Exchange Composite Tape was $20 1/8.
13
As of October 25, 1995, there were approximately 270 record holders of
EOG's Common Stock, including individual participants in security position
listings. There are an estimated 5,100 beneficial owners of EOG's Common
Stock, including shares held in street name.
Following the initial public offering and sale of its Common Stock in
October 1989, EOG paid quarterly dividends of $0.025 per share beginning with
an initial dividend paid in January 1990 with respect to the fourth quarter of
1989. Beginning in January 1993 with respect to the fourth quarter of 1992,
EOG has paid quarterly dividends of $0.03 per share. The determination of the
amount of future cash dividends, if any, to be declared and paid will depend
upon, among other things, the financial condition, funds from operations,
level of exploration and development expenditure opportunities and future
business prospects of EOG.
Enron makes no representation as to the amount of dividends, if any, that
EOG will pay in the future. In any event, holders of the Exchangeable Notes
will not be entitled to receive any dividends that may be payable on the EOG
Common Stock until such time as Enron, if it so elects, delivers EOG Common
Stock at Maturity of the Exchangeable Notes and the record date for such
dividend occurs after such exchange. See "Description of the Exchangeable
Notes."
DESCRIPTION OF THE EXCHANGEABLE NOTES
The Exchangeable Notes are one series of Debt Securities (as defined
below) to be issued under an Indenture dated as of November 1, 1985, between
Enron and Harris Trust and Savings Bank, as trustee, as supplemented by a
First Supplemental Indenture dated as of , 1995, between Enron
and Harris Trust and Savings Bank, as trustee (the "Trustee") (the Indenture
dated as of November 1, 1985, as supplemented from time to time, the
"Indenture"). All references herein to "Indenture Securities" shall refer to
debt securities issued under the Indenture. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified
in its entirety by reference to the Indenture, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. All
capitalized terms have the meanings specified in the Indenture.
GENERAL
The Exchangeable Notes will be unsecured and will rank on a parity with
all other unsecured and unsubordinated indebtedness of Enron. The aggregate
number of Exchangeable Notes to be issued will be 10,000,000, plus such
additional number of Exchangeable Notes as may be issued pursuant to the
over-allotment option granted by Enron to the Underwriters (see
"Underwriting"). The Stated Maturity of the Exchangeable Notes is
, 1998. The Indenture does not limit the amount of Indenture
Securities which may be issued thereunder.
Each Exchangeable Note, which will be issued with a principal amount of
$ , will bear interest at the rate of % of the principal amount per
annum (or $ per annum) from , or from the most recent
Interest Payment Date (as defined below) to which interest has been paid or
provided for until the principal amount thereof is exchanged at Maturity
pursuant to the terms of the Exchangeable Notes. Interest on the Exchangeable
Notes will be payable quarterly in arrears on ,
, and , commencing
, (each, an "Interest Payment Date"), to the persons in whose names
the Exchangeable Notes are registered at the close of business on the
, , , and
immediately preceding such Interest Payment Date; provided
that interest payable at Maturity is payable to the person to whom the
principal is payable. Interest on the Exchangeable Notes will be computed on
the basis of a 360-day year of twelve 30-day months. If an Interest Payment
Date falls on a day that is not a Business Day (as defined below) the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
At Maturity, the principal amount of each Exchangeable Note will be
mandatorily exchanged by Enron into a number of shares of EOG Common Stock at
the Exchange Rate (as defined below) or, at Enron's option, cash with an equal
value. Accordingly, Holders of the Exchangeable Notes will not
14
necessarily receive an amount equal to the principal amount thereof. The
"Exchange Rate" is equal to, subject to adjustment as a result of certain
dilution events (see "Dilution Adjustments" below), (a) if the Maturity Price
(as defined below) of EOG Common Stock is greater than or equal to $ per
share of EOG Common Stock (the "Threshold Appreciation Price"), shares of
EOG Common Stock per Exchangeable Note, (b) if the Maturity Price is less than
the Threshold Appreciation Price but is greater than the Initial Price, a
fractional share of EOG Common Stock per Exchangeable Note so that the value
thereof (determined at the Maturity Price) is equal to the Initial Price and
(c) if the Maturity Price is less than or equal to the Initial Price, one
share of EOG Common Stock per Exchangeable Note. No fractional shares of EOG
Common Stock will be issued at Maturity as provided under "Fractional Shares"
below. Notwithstanding the foregoing, Enron may, at its option, deliver cash
at Maturity in lieu of delivering shares of EOG Common Stock, in an amount
equal to the value of such number of shares of EOG Common Stock at the
Maturity Price. Such option, if exercised, must be exercised with respect to
all of the outstanding Exchangeable Notes. If Enron elects to deliver cash in
lieu of shares of EOG Common Stock upon the mandatory exchange of the
Exchangeable Notes, on or prior to seven Business Days preceding the Stated
Maturity, Enron will so notify the Trustee and publish a notice to that effect
in a daily newspaper of national circulation. If Enron elects to deliver
shares of EOG Common Stock, Holders of the Exchangeable Notes will be
responsible for the payment of any and all brokerage costs upon the subsequent
sale of such stock.
The "Maturity Price" is defined as the average Closing Price per share of
EOG Common Stock for the 20 Trading Days immediately prior to (but not
including) Maturity. The "Closing Price" of any security on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of such security on the NYSE on such
date or, if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United
States securities exchange on which such security is so listed, or if such
security is not so listed on a United States national or regional securities
exchange, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System, or, if such security is not so reported, the last
quoted bid price for such security in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or, if such bid
price is not available, the market value of such security on such date as
determined by a nationally recognized independent investment banking firm
retained for this purpose by Enron. A "Trading Day" is defined as a Business
Day on which the security the Closing Price of which is being determined (A)
is not suspended from trading on any national or regional securities exchange
or association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security. "Business Day" means any day that is not a Saturday
or Sunday or a day on which the NYSE, banking institutions or trust companies
in The City of New York are authorized or obligated by law or executive order
to close.
The Indenture pursuant to which the Exchangeable Notes are issued
contains a covenant by Enron to the effect that should Enron exercise its
option to pay all outstanding Exchangeable Notes in cash, such cash must be
provided by the proceeds from a sale by Enron of its common stock. Such sale
of common stock by Enron must have occurred not more than 540 days prior to
the notice by Enron to Holders of Exchangeable Notes of its election to
deliver cash in lieu of EOG Common Stock.
15
For illustrative purposes only, the following chart shows the number of
shares of EOG Common Stock or the amount of cash that a Holder of Exchangeable
Notes would receive for each Exchangeable Note at various Maturity Prices. The
table assumes that there will be no adjustments to the Exchange Rate described
under "-- Dilution Adjustments" below. There can be no assurance that the
Maturity Price will be within the range set forth below. Given the Initial
Price of $ per Exchangeable Note and the Threshold Appreciation Price of
$ , a Holder of an Exchangeable Note would receive at Maturity the
following number of shares of EOG Common Stock or amount of cash (if Enron
elects to pay the Exchangeable Notes in cash):
MATURITY
PRICE NUMBER OF
OF EOG SHARES OF EOG
COMMON STOCK COMMON STOCK AMOUNT OF CASH
------------- ------------- ---------------
Interest on the Exchangeable Notes will be payable, and delivery of EOG
Common Stock (or, at the option of Enron, its cash equivalent) in exchange for
the Exchangeable Notes at Maturity will be made upon surrender of such
Exchangeable Notes, at the office or agency of Enron maintained for such
purposes, which will initially be the principal corporate trust office of the
Trustee, currently 311 West Monroe, 12th Floor, Chicago, Illinois 60609 or at
the Trustee's office maintained for such purpose in New York, New York,
provided that payment of interest may be made at the option of Enron by check
mailed to the persons in whose names the Exchangeable Notes are registered at
the close of business on , ,
and .
The Exchangeable Notes will be transferable on the books of Enron at any
time and from time to time. No service charge will be made to the Holder for
any such transfer except for any tax or governmental charge incidental
thereto.
The Indenture does not contain any restriction on the ability of Enron to
sell, pledge or otherwise convey all or any portion of the EOG Common Stock
held by it, and no such shares of EOG Common Stock will be pledged or
otherwise held in escrow for use at Maturity of the Exchangeable Notes.
Consequently, in the event of a bankruptcy, insolvency or liquidation of
Enron, the EOG Common Stock, if any, owned by Enron will be subject to the
claims of the creditors of Enron. In addition, as described herein, Enron will
have the option, exercisable in its sole discretion, to satisfy its
obligations pursuant to the mandatory exchange for the principal amount of
each Exchangeable Note at Maturity by delivering to Holders of the
Exchangeable Notes either the specified number of shares of EOG Common Stock
or cash in an amount equal to the value of such number of shares at the
Maturity Price. In the event that Enron does sell, pledge or convey all or a
portion of the EOG Common Stock held by it, Enron may be more likely to
deliver cash in lieu of EOG Common Stock. As a result, there can be no
assurance that Enron will elect at Maturity to deliver EOG Common Stock or, if
it so elects, that it will use all or a portion of its current holdings of EOG
Common Stock to make such delivery. Holders of the Exchangeable Notes will not
be entitled to any rights with respect to the EOG Common Stock (including
without limitation voting rights and rights to receive any dividends or other
distributions in respect thereof) until such time, if any, as Enron shall have
delivered shares of EOG Common Stock to holders of the Exchangeable Notes at
Maturity thereof and the applicable record date, if any, for the exercise of
such rights occurs after such date.
DILUTION ADJUSTMENTS
The Exchange Rate is subject to adjustment if EOG shall (i) pay a stock
dividend or make a distribution with respect to EOG Common Stock in shares of
such stock, (ii) subdivide or split the outstanding shares of EOG Common
Stock, (iii) combine the outstanding shares of EOG Common Stock into a smaller
number of shares, (iv) issue by reclassification of shares of EOG Common Stock
any shares of common stock of EOG, (v) issue rights or warrants to all holders
of EOG Common Stock entitling them to subscribe for or purchase shares of EOG
Common Stock at a price
16
per share less than the market price of the EOG Common Stock (other than
rights to purchase EOG Common Stock pursuant to a plan for the reinvestment of
dividends or interest); or (vi) pay a dividend or make a distribution to all
holders of EOG Common Stock of evidences of indebtedness or other assets
(excluding any dividends or distributions referred to in clause (i) above or
any cash dividends other than any Extraordinary Cash Dividends (as defined
below) or issue to all holders of EOG Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than those referred to
in clause (v) above). In the case of the events referred to in clauses (i),
(ii), (iii) and (iv) above, the Exchange Rate in effect immediately prior to
such event shall be adjusted so that the holder of any Exchangeable Note shall
thereafter be entitled to receive, upon mandatory exchange of the principall
amount of the Exchangeable Note at Maturity, the number of shares of EOG
Common Stock that such holder would have owned or been entitled to receive
immediately following any event described above had such Exchangeable Note
been exchanged immediately prior to such event on any record date with respect
thereto. In the case of the event referred to in clause (v) above, the
Exchange Rate shall be adjusted by multiplying the Exchange Rate in effect
immediately prior to the date of issuance of the rights or warrants referred
to in clause (v) above, by a fraction, the numerator of which shall be the
number of shares of EOG Common Stock outstanding on the date of issuance of
such rights or warrants, immediately prior to such issuance, plus the number
of additional shares of EOG Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and the denominator of which shall be the
number of shares of EOG Common Stock outstanding on the date of issuance of
such rights or warrants, immediately prior to such issuance, plus the number
of additional shares of EOG Common Stock that the aggregate offering price of
the total number of shares of EOG Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at the market
price (determined as the average Closing Price per share of EOG Common Stock
for the 20 Trading Days immediately prior to the date such rights or warrants
are issued), which shall be determined by multiplying such total number of
shares by the exercise price of such rights or warrants and dividing the
product so obtained by such market price. To the extent that shares of EOG
Common Stock are not delivered after the expiration of such rights or
warrants, the Exchange Rate shall be readjusted to the Exchange Rate which
would then be in effect had such adjustments for the issuance of such rights
or warrants been made upon the basis of delivery of only the number of shares
of EOG Common Stock actually delivered. In the case of the event referred to
in clause (vi) above, the Exchange Rate shall be adjusted by multiplying the
Exchange Rate in effect on the record date by a fraction, the numerator of
which shall be the market price per share of the EOG Common Stock on the
record date for the determination of stockholders entitled to receive the
dividend or distribution referred to in clause (vi) above (such market price
being determined as the average Closing Price per share of EOG Common Stock
for the 20 Trading Days immediately prior to such record date), and the
denominator of which shall be such market price per share of EOG Common Stock
less the fair market value (as determined by the Board of Directors of Enron,
whose determination shall be conclusive, and described in a resolution adopted
with respect thereto) as of such record date of the portion of the assets or
evidences of indebtedness so distributed or of such subscription rights or
warrants applicable to one share of EOG Common Stock. An "Extraordinary Cash
Dividend" means, with respect to any 365-day period, all cash dividends on the
EOG Common Stock during such period to the extent such dividends exceed on a
per share basis 10% of the average Closing Price of the EOG Common Stock over
such period (less any such dividends for which a prior adjustment to the
Exchange Rate was previously made). All adjustments to the Exchange Rate will
be calculated to the nearest 1/10,000th of a share of EOG Common Stock (or if
there is not a nearest 1/10,000th of a share to the next lower 1/10,000th of a
share). No adjustment in the Exchange Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; PROVIDED, HOWEVER, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
In the event of (i) any consolidation or merger of EOG, or any surviving
entity or subsequent surviving entity of EOG (an "EOG Successor"), with or
into another entity (other than a merger or consolidation in which EOG is the
continuing corporation and in which the EOG Common Stock outstanding
immediately prior to the merger or consolidation is not exchanged for cash,
securities or
17
other property of EOG or another Person), (ii) any sale, transfer, lease or
conveyance to another Person of the property of EOG or any EOG Successor as an
entirety or substantially as an entirety, (iii) any statutory exchange of
securities of EOG, or any EOG Successor with another Person (other than in
connection with a merger or acquisition); or (iv) any liquidation, dissolution
or winding up of EOG or any EOG Successor (any such event being a
"Reorganization Event"), the Exchange Rate used to determine the amount
payable upon exchange at Maturity for each Exchangeable Note will be adjusted
to provide that each Holder of Exchangeable Notes will receive at Maturity
cash in an amount equal to (a) if the Transaction Value (as defined below) is
greater than or equal to the Threshold Appreciation Price, multiplied by
the Transaction Value, (b) if the Transaction Value is less than the Threshold
Appreciation Price but greater than the Initial Price, the Initial Price and
(c) if the Transaction Value is less than or equal to the Initial Price, the
Transaction Value. "Transaction Value" means (i) for any cash received in any
such Reorganization Event, the amount of cash received per share of EOG Common
Stock, (ii) for any property other than cash or securities received in any
such Reorganization Event, an amount equal to the market value at Maturity of
such property received per share of EOG Common Stock as determined by a
nationally recognized independent investment banking firm retained for this
purpose by Enron and (iii) for any securities received in any such
Reorganization Event, an amount equal to the average Closing Price per share
of such securities for the 20 Trading Days immediately prior to Maturity
multiplied by the number of such securities received for each share of EOG
Common Stock.
Notwithstanding the foregoing, in lieu of delivering cash as provided
above, Enron may at its option deliver an equivalent value of securities or
other property received in such Reorganization Event, determined in accordance
with clause (ii) or (iii) above, as applicable. If Enron elects to deliver
securities or other property, holders of the Exchangeable Notes will be
responsible for the payment of any and all brokerage and other transaction
costs upon the sale of such securities or other property. The kind and amount
of securities into which the Exchangeable Notes shall be exchangeable after
consummation of such transaction shall be subject to adjustment as described
in the immediately preceding paragraph following the date of consummation of
such transaction.
Enron is required, within ten Business Days following the occurrence of
an event that requires an adjustment to the Exchange Rate (or if Enron is not
aware of such occurrence, as soon as practicable after becoming so aware), to
provide written notice to the Trustee for distribution to all Holders of
Exchangeable Notes of the occurrence of such event and a statement in
reasonable detail setting forth the method by which the adjustment to the
Exchange Rate was determined and setting forth the revised Exchange Rate.
FRACTIONAL SHARES
No fractional shares of EOG Common Stock will be issued if Enron
exchanges the Exchangeable Notes for shares of EOG Common Stock. If more than
one Exchangeable Note shall be surrendered for exchange at one time by the
same holder, the number of full shares of EOG Common Stock which shall be
delivered upon exchange shall be computed on the basis of the aggregate number
of Exchangeable Notes so surrendered at Maturity. In lieu of any fractional
share otherwise issuable in respect of all Exchangeable Notes of any Holder
which are exchanged at Maturity, such Holder shall be entitled to receive an
amount in cash equal to the value of such fractional share at the Maturity
Price.
REDEMPTION AND DEFEASANCE
The Exchangeable Notes are not subject to redemption or defeasance prior
to Maturity and do not contain any sinking fund or other mandatory redemption
provisions.
LIMITATIONS ON MORTGAGES AND LIENS
The Indenture provides that so long as any of the Indenture Securities
issued under the Indenture (including the Exchangeable Notes) 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
18
indebtedness (as defined in the Indenture), unless effective provision is made
whereby outstanding Indenture Securities (including the Exchangeable Notes)
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 Subsidiary of goods or
merchandise to customers; or (k) certain other liens or encumbrances.
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.
The holders of at least 50% in principal amount of the outstanding
Indenture Securities under the Indenture (including the Exchangeable Notes)
may waive compliance by Enron with the covenant described above (and certain
other covenants of Enron).
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
19
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.
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 to 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.
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.
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
20
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 Exchangeable Notes)
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) or change the terms under which
any Exchangeable Notes are exchangeable; (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 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.
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
convenant 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
21
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.
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.
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 Securites 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.
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.
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.
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.
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.
22
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. 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.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax
consequences that may be relevant to a citizen or resident of the United
States, a corporation, partnership or other entity created or organized under
the laws of the United States, or an estate or trust the income of which is
subject to U.S. federal income taxation regardless of its source (any of the
foregoing, a "U.S. Person") who is the beneficial owner of Exchangeable Notes
(a "U.S. Holder"). All references to "holders" (including U.S. Holders) are to
beneficial owners of the Exchangeable Notes. This summary is based on current
U.S. federal income tax law and is for general information only.
This summary deals only with holders who are initial holders of the
Exchangeable Notes and who will hold the Exchangeable Notes as capital assets.
It does not address tax considerations applicable to investors that may be
subject to special U.S. federal income tax treatment, such as dealers in
securities or persons holding the Exchangeable Notes as a position in a
"straddle" for U.S. federal income tax purposes or as part of a "synthetic
security" or other integrated investment, and does not address the
consequences under state, local or foreign law.
No statutory, judicial or administrative authority directly addresses the
characterization of the Exchangeable Notes or instruments similar to the
Exchangeable Notes for U.S. federal income tax purposes. As a result,
significant aspects of the U.S. federal income tax consequences of an
investment in the Exchangeable Notes are not certain. No ruling is being
requested from the Internal Revenue Service (the "IRS") with respect to the
Exchangeable Notes and no assurance can be given that the IRS will agree with
the characterization and tax treatment of the Exchangeable Notes described
herein. ACCORDINGLY, A PROSPECTIVE INVESTOR (INCLUDING A TAX-EXEMPT INVESTOR)
IN THE EXCHANGEABLE NOTES SHOULD CONSULT ITS TAX ADVISOR IN DETERMINING THE
TAX CONSEQUENCES OF AN INVESTMENT IN THE EXCHANGEABLE NOTES, INCLUDING THE
APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER TAX LAWS.
Pursuant to the terms of the Indenture, Enron and all holders of the
Exchangeable Notes will agree to treat an Exchangeable Note as a unit (the
"Unit") consisting of (i) an exchange note ("Exchange Note") which is a debt
obligation with a fixed principal amount unconditionally payable at Maturity
equal to the principal amount of the Exchangeable Note, bearing interest at
the stated interest rate on the Exchangeable Note, and (ii) a forward purchase
contract (the "Purchase Contract") pursuant to which the holder agrees to use
the principal payment due on the Exchange Note to purchase at Maturity the EOG
Common Stock which the holder is entitled to receive at that time (subject to
Enron's right to deliver cash in lieu of EOG Common Stock). The Indenture will
require that a U.S. Holder include currently in income payments denominated as
interest that are made with respect to the Exchangeable Notes, in accordance
with such holder's method of accounting, and the amount of OID, if any,
attributable to the Exchangeable Notes.
Pursuant to the agreement to treat the Exchangeable Notes as a Unit, a
holder will be required to allocate the purchase price of the Exchangeable
Note between the two components of the Unit (the Exchange Note and the
Purchase Contract) on the basis of their relative fair market values. The
purchase price so allocated will generally constitute the tax basis for each
component. Pursuant to the terms of the Indenture, Enron and the holders agree
to allocate the entire purchase price of an Exchangeable Note to the Exchange
Note unless the stated interest on the Exchangeable Note
23
represents a yield that is lower than Enron's normal cost of issuing debt with
a similar term to the Exchangeable Note ("Enron's Mid-Term Borrowing Rate").
If the stated interest on the Exchangeable Note represents a yield that is
lower than Enron's Mid-Term Borrowing Rate of percent, Enron and the
holders agree to allocate to the Exchange Note an amount, less than the
principal amount of the Exchange Note, calculated by discounting the cash
flows relating to the Exchange Note at a rate equal to Enron's Mid-Term
Borrowing Rate, and to allocate to the Purchase Contract the remainder of the
purchase price of the Exchangeable Note.
If the amount allocated to the Exchange Note (its deemed issue price) is
less than the stated principal amount of the Exchangeable Note, the Exchange
Note will be treated as having OID. In that event, a U.S. Holder will be
required to include in income OID as it accrues, in accordance with a
constant-yield method, in an aggregate amount equal to the difference between
the stated principal amount of the Exchangeable Note and the deemed issue
price of the Exchange Note. However, if the amount of OID relating to an
Exchange Note is less than three-fourths of one percent of the stated
principal amount of the Exchangeable Note, no amount of OID will be deemed to
exist with respect to the Exchange Note. A U.S. Holder's tax basis in the
Exchange Note will increase over its term by the amount of OID included in
such holder's income with respect to the Exchangeable Note.
Upon the sale or other disposition of an Exchangeable Note, a U.S. Holder
generally will be required to allocate the amount realized between the two
components of the Exchangeble Note on the basis of their then relative fair
market values. A U.S. Holder will recognize gain or loss with respect to each
component equal to the difference between the amount realized on the sale or
other disposition for each such component and the U.S. Holder's tax basis in
such component. Such gain or loss generally will be long-term capital gain or
loss if the U.S. Holder has held the Exchangeable Note for more than a year at
the time of disposition.
At Maturity, pursuant to the agreement to treat the Exchangeable Note as
a Unit, on the repayment of the Exchange Note a U.S. Holder will recognize
capital gain or loss which will be long-term capital gain or loss unless
Maturity occurs within one year of issuance of the Exchangeable Note (as a
result of acceleration or otherwise) equal to any difference beween its tax
basis and the principal amount of the Exchange Note. If Enron delivers EOG
Common Stock at Maturity, a U.S. Holder will recognize no additional gain or
loss on the exchange, pursuant to the Purchase Contract, of the principal
payment due on the Exchange Note for the EOG Common Stock. However, a U.S.
Holder will recognize additional capital gain or loss, which should be
short-term capital gain or loss, equal to the difference between the cash
received in lieu of fractional shares and the portion of the principal amount
of the Exchange Note allocable to fractional shares. A U.S. Holder will have a
tax basis in such shares of EOG Common Stock equal to the principal amount of
the Exchange Note less the amount of the portion of the principal amount of
the Exchange Note allocable to any fractional shares. The U.S. Holder will
have a holding period for the EOG Common Stock that begins on the day after
the Maturity date, and will realize short- or long-term capital gain or loss
upon the subsequent sale or disposition of such stock. Alternatively, at
Maturity, if Enron pays the Exchangeable Note in cash, a U.S. Holder will have
additional gain or loss (which might be ordinary income or loss rather than
capital gain or loss) equal to the difference between the principal amount of
the Exchangeable Note and the amount of cash received from Enron.
Due to the absence of authority as to the proper characterization of the
Exchangeable Note, no assurance can be given that the IRS will accept or that
a court will uphold the characterization agreed to in the Indenture or the tax
treatment described above. Proposed Treasury regulations with respect to
"contingent payment" debt instruments (the "Proposed Regulations") would
provide for a different tax result under some circumstances for instruments
having characteristics similar to the Exchangeable Notes, but the Proposed
Regulations would be effective only for instruments issued 60 days or more
after their publication as final regulations. Under the Proposed Regulations,
the amount of interest included in a holder's taxable income for any year
would generally be determined by projecting the amounts of contingent payments
(which might include the value of the EOG Common Stock to be delivered at
Maturity) and the yield on the instrument. Taxable interest income would be
measured with reference to the projected yield, which might be less than or
greater than the stated interest rate under the instrument. In the event that
the amount of an actual contingent
24
payment differed from the projected amount of that payment, the difference
would generally increase or reduce taxable interest income, or create a loss.
Because of their prospective effective date, the Proposed Regulations, if
finalized in their current form, would not apply to the Exchangeable Notes.
Even in the absence of regulations applicable to the Exchangeable Notes,
the Exchangeable Notes may be characterized under current law in a manner that
results in tax consequences different from those reflected in the agreement
pursuant to the Indenture and as described above. Under alternative
characterizations of the Exchangeable Notes, it is possible, for example, that
(i) a U.S. Holder may be taxed upon the receipt of EOG Common Stock with a
value in excess of the principal amount of the Exchange Note, rather than upon
the sale of such stock, (ii) any gain recognized at Maturity (whether a U.S.
Holder received EOG Common Stock or cash) may be treated as ordinary income
rather than capital gain, (iii) all or part of the interest income on the
Exchange Note may be treated as nontaxable, increasing the gain (or decreasing
the loss) at Maturity or upon disposition of the Exchangeable Note (or
disposition of the EOG Common Stock) or (iv) if the stated interest rate
exceeds Enron's Mid-Term Borrowing Rate, the Exchange Notes could be
considered as issued at a premium which, if amortized, would reduce the amount
of interest income currently includible in income by a holder and increase the
taxable gain (or decrease the loss) realized at Maturity or upon disposition
of the Exchangeable Notes (or disposition of the EOG Common Stock).
The Revenue Reconciliation Act of 1993 added Section 1258 to the Code,
which may require certain holders of the Exchangeable Notes who have entered
into hedging transactions or offsetting positions with respect to the
Exchangeable Notes to recognize ordinary income rather than capital gain upon
the disposition of the Exchangeable Notes. Holders should consult their tax
advisors regarding the applicability of this provision to an investment in the
Exchangeable Notes.
NON-UNITED STATES PERSON
In the case of a holder of the Exchangeable Notes that is not a U.S.
Person, payments made with respect to the Exchangeable Notes should not be
subject to U.S. withholding tax; PROVIDED that such holder complies with
applicable certification requirements. Any capital gain realized upon the sale
or other disposition of the Exchangeable Notes by a holder that is not a U.S.
Person will generally not be subject to U.S. federal income tax if (i) such
gain is not effectively connected with a U.S. trade or business of such holder
and (ii) in the case of an individual, such individual is not present in the
United States for 183 days or more in the taxable year of the sale or other
disposition and either such individual does not have a "tax home" in the
United States or the gain is not attributable to a fixed place of business
maintained by such individual in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of the Exchangeable Notes may be subject to information
reporting requirements and to backup withholding at a rate of 31 percent of
certain amounts paid to the holder unless such holder provides proof of an
applicable exemption or a correct taxpayer identification number, and
otherwise complies with applicable requirements of the backup withholding
rules.
25
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Enron
has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of such Underwriters, for whom Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc
are acting as representatives, has severally agreed to purchase from Enron,
the respective number of Exchangeable Notes set forth opposite its name below:
NUMBER OF
EXCHANGEABLE
UNDERWRITER NOTES
------------------------------------- ------------
Goldman, Sachs & Co..................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............
Salomon Brothers Inc ................
------------
Total...................... 10,000,000
============
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Exchangeable Notes
offered hereby, if any are taken.
The Underwriters propose to offer the Exchangeable Notes in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price
less a concession of $ per Exchangeable Note. The Underwriters may allow,
and each of such dealers may reallow, a concession not exceeding $ per
Exchangeable Note to certain dealers and brokers. After the Exchangeable Notes
are released for sale to the public, the offering price and the other selling
terms may from time to time be varied by the representatives.
Enron has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to 1,000,000 additional
Exchangeable Notes solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of Exchangeable Notes to be purchased
by each of them, as shown in the foregoing table, bears to the 10,000,000
Exchangeable Notes offered.
Enron, EOG and EOG's Chief Executive Officer have agreed that during the
period beginning from the date of this Prospectus and continuing to and
including the date 270 days after the date of this Prospectus, subject to
certain exceptions set forth in the Underwriting Agreement, they will not
offer, sell, contract to sell or otherwise dispose of any EOG Common Stock,
any securities of EOG which are substantially similar to shares of EOG Common
Stock or any securities which are convertible into or exchangeable for EOG
Common Stock or such substantially similar securities without the prior
written consent of Goldman, Sachs & Co., except for the shares of EOG Common
Stock offered in connection with the concurrent Stock Offering.
Application has been made to list the Exchangeable Notes on the NYSE. The
EOG Common Stock (including the shares of EOG Common Stock which may be
received by a holder of Exchangeable Notes at Maturity) is listed on the NYSE.
The representatives and certain of the Underwriters and/or their
affiliates have provided investment banking and financial advisory services to
Enron, its subsidiaries or affiliates in the past, for which they have
received customary compensation and expense reimbursement, and may do so again
in the future.
26
Enron and EOG have agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
VALIDITY OF THE EXCHANGEABLE NOTES
The validity of the Exchangeable Notes will be passed upon for Enron by
James V. Derrick, Jr., Senior Vice President and General Counsel of Enron. Mr.
Derrick owns substantially less than 1% of the outstanding shares of Common
Stock of Enron. Certain matters will be passed upon for Enron by Vinson &
Elkins, L.L.P. The validity of the Exchangeable Notes will be passed upon for
the Underwriters by Bracewell & Patterson, L.L.P. Bracewell & Patterson,
L.L.P. currently provides services to Enron and certain of its subsidiaries
and affiliates as outside counsel on matters unrelated to the issuance of the
Exchangeable Notes.
EXPERTS
The consolidated financial statements and schedules included in Enron's
Annual Report on Form 10-K for the year ended December 31, 1994, incorporated
by reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto and are 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, 1994, 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.
27
<PAGE>
*****************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. *
* A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY *
* NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN *
* WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
*****************************************************************************
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1995
APPENDIX A
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
This Prospectus relates to up to 10,000,000 shares of common stock, par
value $.01 per share (the "Common Stock"), of Enron Oil & Gas Company (the
"Company"), which may be delivered by Enron Corp. upon mandatory exchange of
the % Exchangeable Notes due 1998 (the "Exchangeable Notes") of
Enron Corp., subject to Enron Corp.'s right to deliver cash in lieu of such
shares. This Prospectus is Appendix A to a prospectus of Enron Corp. covering
the sale of 10,000,000 Exchangeable Notes (the "Exchangeable Notes
Prospectus"). The Company will not receive any of the proceeds from the sale
of the Exchangeable Notes or the delivery of shares of Common Stock upon
mandatory exchange of the Exchangeable Notes at maturity.
Enron Corp. has granted the underwriters of the Exchangeable Notes a
30-day option to purchase up to an additional 1,000,000 Exchangeable Notes at
the initial offering price per Exchangeable Note, less the underwriting
discount, which may be exchangeable at their maturity for additional shares of
Common Stock. Such option has been granted solely to cover over-allotments, if
any.
Concurrently with the offering of the Exchangeable Notes made by the
Exchangeable Notes Prospectus (the "Exchangeable Notes Offering"), Enron Corp.
is offering for sale 27,000,000 shares of Common Stock (31,050,000 shares if
the underwriters' over-allotment options in such offerings are exercised in
full) in concurrent U.S. and international offerings (collectively, the "Stock
Offerings"). The consummation of the Exchangeable Notes Offering is not
contingent upon the consummation of the Stock Offerings, or vice versa.
On November 7, 1995, the last reported sale price of Common Stock on the
New York Stock Exchange, Inc. Composite Tape was $20 1/8 per share. See "Price
Range of Common Stock and Cash Dividends".
------------------------
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 , 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information 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, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Northeast Regional Office, Seven
World Trade Center, Suite 1300, 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. The Company's Common Stock is listed on the New York Stock
Exchange, Inc. ("NYSE"), and reports, proxy statements and other information
concerning the Company can be inspected and copied at the offices of the New
York Exchange at 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement and to the exhibits relating
thereto for further information with respect to the Company and the shares of
Common Stock offered hereby. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement
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.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1994, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995,
June 30, 1995 and September 30, 1995 and the description of the Common Stock
contained in the Registration Statement on Form 8-A declared effective on
October 3, 1989, are incorporated herein by reference.
Each document filed by the Company 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 shares of Common Stock
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.
The Company 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). Requests
should be directed to Secretary Division, Enron Oil & Gas Company, at its
principal executive offices, 1400 Smith Street, Houston, Texas 77002
(telephone: 713-853-6161).
------------------------
IN CONNECTION WITH THE OFFERING OF THE EXCHANGEABLE NOTES AND COMMON
STOCK OF THE COMPANY BY ENRON CORP., THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE EXCHANGEABLE
NOTES OR THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT 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.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS. IT IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY
BY THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
CERTAIN TERMS ARE DEFINED IN THIS SUMMARY UNDER "CERTAIN DEFINITIONS."
CAPITALIZED TERMS WHICH ARE NOT DEFINED IN THIS SUMMARY ARE USED AS DEFINED
ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Enron Oil & Gas Company (together with its subsidiaries, "the Company")
is one of the largest independent (non-integrated) oil and gas companies in
the United States in terms of domestic proved reserves. It is engaged,
directly and through its subsidiaries, in the exploration for, and the
development, production and marketing of, natural gas and crude oil primarily
in major producing basins in the United States, as well as in Canada, Trinidad
and India and to a lesser extent, selected other international areas. At
December 31, 1994, the Company's estimated net proved natural gas reserves
were 1,910 Bcf and estimated net proved crude oil, condensate and natural gas
liquids reserves were 37 MMBbl, a net increase of 8% and 78%, respectively,
over year end 1993. The Company has increased its reserves for six consecutive
years. At December 31, 1994, approximately 70% of the Company's reserves (on a
natural gas equivalent basis) was located in the United States, 16% in Canada,
11% in Trinidad and 3% in India. At such date, approximately 90% of the
Company's total proved reserves was classified as developed.
While year end reserve evaluations will not be available for some time,
based on the results of the Company's drilling program for the first nine
months of 1995, it is expected that extensions, discoveries and other
additions to reserves for the year will exceed production for both North
America and Trinidad, as well as in total. Additionally, reserves acquired are
expected to substantially exceed those sold, with the resulting replacement of
production from all sources expected to exceed 150%.
BUSINESS STRATEGY. The Company's strategy is to maximize the rate of
return on investment of capital by controlling both operating and capital
costs and enhancing the certainty of future revenues through the use of
various marketing mechanisms. This strategy enhances the generation of both
income and cash flow from each unit of production and allows for the growth of
production on a cost-effective basis by optimizing the reinvestment of cash
flow. Through this strategy, the Company has increased its net income in each
of the last five years, despite the volatile natural gas price environment,
and achieved a return on equity ranging from 8% in 1990 to 15% in 1994. For
the first nine months of 1995, net income increased 5% compared to the same
period for 1994.
The Company refocused its 1995 drilling activity away from natural gas
deliverability and toward natural gas reserve enhancement and crude oil
exploitation in the United States in response to the decline in United States
natural gas prices in recent periods. The Company also is focusing on the
cost-effective utilization of advances in technology associated with
gathering, processing and interpretation of 3-D seismic data, developing
reservoir simulation models and drilling operations through the use of new
and/or improved drill bits, mud motors, mud additives, formation logging
techniques and reservoir fracturing methods. These advanced technologies are
used, as appropriate, throughout the Company to reduce the risks associated
with all aspects of oil and gas reserve exploration, exploitation and
development.
The Company implements its strategy by emphasizing the drilling of
internally generated prospects in order to find and develop low cost reserves.
By following this strategy the Company has increased production in each of the
last four years with a compound annual growth rate of 13.1% while increasing
proved reserves approximately 32%, both on a natural gas equivalent basis. For
1994, net equivalent production reached a new high of 307 Bcfe, an increase of
9% over 1993. Natural gas production in 1994 averaged approximately 749 MMcf
per day, which represents an increase of 6% over 1993. Crude oil and
condensate production averaged 12.6 MBbl per day in 1994
3
which represents an increase of 42% over 1993. Natural gas production for the
first nine months of 1995 averaged 719 MMcf per day, down 24 MMcf per day from
the first nine months of 1994. Lower volumes in 1995 reflect the voluntary
curtailment by the Company of United States production at a higher rate than
in 1994 because United States natural gas prices were down by 26% period to
period, the impact of the sale of reserves and related assets and the effect
of the reduction and redirection of natural gas drilling activities early in
1995. Crude oil and condensate volumes for the first nine months of 1995
averaged 18.6 MBbl per day, an increase of 55% over the first nine months of
1994.
Achieving and maintaining the lowest possible cost structure are also
important goals in the implementation of the Company's strategy. Over the last
five years, the Company has reduced total cash operating expenses, including
lease and well, general and administrative, taxes other than income, and
interest expenses from $.95/Mcfe in 1989 to $.49/Mcfe in 1994, a reduction of
48%. At the same time non-cash expenses (depreciation, depletion and
amortization) have been reduced from $.93/Mcfe in 1989 to $.80/Mcfe in 1994, a
reduction of 14%. For the first nine months of 1995, cash operating expenses
averaged $.56/Mcfe compared to $.50/Mcfe for the first nine months of 1994 and
non-cash expenses averaged $.69/Mcfe and $.81/Mcfe for the two periods,
respectively.
Consistent with the Company's desire to optimize the use of its assets,
the Company also maintains a strategy of selling select oil and gas properties
that for various reasons no longer fit into future operating plans, or which
are not assessed to have sufficient future growth potential and when the
economic value to be obtained by selling the properties and reserves in the
ground is evaluated to be greater than what would be obtained by holding the
properties and producing the reserves over time. As a result, the Company
typically receives each year a varying but substantial level of proceeds
related to such sales which proceeds are available for general corporate use.
Proceeds from property sales in 1994 were $91 million ($71 million after tax)
and in the first nine months of 1995 were $101 million ($77 million after
tax).
NORTH AMERICAN OPERATIONS. The Company's seven principal United States
producing areas are the Big Piney area of Wyoming, South Texas area, East
Texas area, Offshore Gulf of Mexico area, Canyon Trend area of West Texas,
Pitchfork Ranch area of New Mexico and Vernal area of Utah. Properties in
these areas comprised approximately 76% of the Company's United States
reserves (on a natural gas equivalent basis) and 85% of the Company's United
States net natural gas deliverability as of December 31, 1994 and are
substantially all operated by the Company. The Company's other United States
natural gas and crude oil producing properties are located primarily in other
areas of Texas, Utah, New Mexico and in Oklahoma.
At December 31, 1994, 93% of the Company's proved United States reserves
(on a natural gas equivalent basis) was natural gas and 7% was crude oil,
condensate and natural gas liquids.
A substantial portion of the Company's United States natural gas reserves is
in long-lived fields with well-established production histories. The Company
believes that opportunities exist to increase production in many of these
fields through continued infill and other development drilling.
The Company also has natural gas and crude oil producing properties
located in Western Canada, primarily in the provinces of Alberta, Saskatchewan
and Manitoba. The Company produces natural gas from seven major areas and
crude oil from three major areas. The Sandhills area in Southern Saskatchewan
is the largest single producing area, contributing 51% of Canadian
deliverability at September 30, 1995. Canadian natural gas deliverability net
to the Company at September 30, 1995 was approximately 70 MMcf per day and the
Company held approximately 350,000 net undeveloped acres in Canada.
OUTSIDE NORTH AMERICA OPERATIONS. The Company has operations offshore
Trinidad and India and is conducting exploration in selected other
international areas. Properties offshore Trinidad and India comprise 100% of
the Company's current reserves and production outside of North America. The
Company's reserves at December 31, 1994 included 236 Bcf of natural gas and 12
MMBbl of
4
liquids in these two areas. The Company's net production from offshore
Trinidad was approximately 100 MMcf per day of natural gas and 6.2 MBbl per
day of crude oil and condensate at September 30, 1995. The Company's net
production from offshore India was approximately 3.5 MBbl per day of crude oil
net to the Company at September 30, 1995. In addition, the Company is pursuing
other exploitation opportunities in countries, including Mozambique and Qatar,
where indigenous natural gas reserves have been identified, particularly where
synergies in natural gas transportation, processing and power cogeneration can
be optimized with other Enron Corp. affiliated companies.
RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP.
All of the shares of Common Stock offered hereby and in the Stock
Offerings are being sold by Enron Corp., and the Company will receive no
proceeds from such sales. Concurrently with the offering of the Exchangeable
Notes, Enron Corp. is offering for sale 27,000,000 shares of Common Stock
(31,050,000 shares if the Underwriters' over-allotment options in such Stock
Offerings are exercised in full). Following the consummation of the Stock
Offerings, Enron Corp. will own an aggregate of 101,000,000 shares of Common
Stock or approximately 63% of the outstanding shares (or, assuming that the
Underwriters' over-allotment options in the Stock Offerings are exercised in
full, 96,950,000 shares of Common Stock or approximately 61% of the
outstanding shares). At maturity, the Exchangeable Notes must be exchanged for
no more than 10,000,000 shares of Common Stock (no more than 11,000,000 shares
if the over-allotment option of the underwriters in the Exchangeable Notes
Offering is exercised in full), depending on the market price of the Common
Stock at such time, subject to adjustment and to Enron Corp.'s option to pay
an amount of cash in lieu of such mandatory exchange. Assuming the
underwriters' over-allotment options in the Stock Offerings and the
Exchangeable Notes Offering are exercised in full and the maximum number of
shares is mandatorily exchanged at maturity of the Exchangeable Notes, Enron
Corp.'s remaining ownership of Common Stock would be approximately 54%. Any
market that develops in the Exchangeable Notes is likely to influence, and be
influenced by, the market for the Common Stock. For example, the price of the
Common Stock could become more volatile and could be depressed by possible
sales of Common Stock by investors who view the Exchangeable Notes as a more
attractive means of equity participation in the Company and by hedging and
arbitrage activity that may develop involving the Exchangeable Notes and the
Common Stock.
Neither the Stock Offerings nor the delivery of shares of Common Stock
pursuant to the terms of the Exchangeable Notes will affect the existing
agreements between the Company and Enron Corp. and their respective
affiliates, except for the Tax Allocation Agreement which will cease to be
effective from the time at which deconsolidation occurs (when Enron Corp.
ceases to own 80% of the outstanding shares of Common Stock) for future
periods, but will remain in effect with regard to periods prior to
deconsolidation. For issues not addressed in the original agreement, the
Company has entered into a supplemental agreement with Enron Corp. clarifying
future potential adjustments associated with the final settlement on audit of
taxes for periods prior to the deconsolidation. The Company does not believe
that the cessation of consolidated tax reporting with Enron Corp. and
effectiveness of the Tax Allocation Agreement concurrent with deconsolidation
will have a material adverse effect on its financial condition or results of
operations. See "Relationship Between the Company and Enron Corp."
The nature of the respective businesses of the Company and Enron Corp.
and its affiliates is such as to potentially give rise to conflicts of
interest between the two companies. The Company's operations account for
substantially all of Enron Corp.'s natural gas and crude oil exploration and
production operations. An affiliate of Enron Corp. has entered into an
agreement to acquire a controlling interest in Coda Energy, Inc. ("Coda"), a
company engaged in domestic oil and gas exploration, development and
production, with crude oil accounting for approximately 86% of Coda's proved
reserves. At December 31, 1994, Coda reported estimated proved natural gas
5
reserves of 39,808 MMcf and estimated proved crude oil, condensate and natural
gas liquids reserves of 39,207 MBbls. If the transaction is consummated,
conflicts of interest could arise between the Company and Coda, and Enron
Corp. will be required to resolve them in a manner consistent with its
fiduciary obligations. See "Relationship Between the Company and Enron Corp. --
Conflicts of Interest."
THE STOCK OFFERINGS
Common Stock offered by Enron
Corp.(1):
U.S. Offering...................... 21,600,000 shares
International Offering............. 5,400,000 shares
Total........................... 27,000,000 shares
Dividends............................ $0.03 per share, quarterly. See "Price
Range of Common Stock and Cash
Dividends."
New York Stock Exchange symbol....... EOG
Use of proceeds...................... All of the shares of Common Stock being
offered are being offered by Enron Corp.
The Company will not receive any
proceeds from the sale of the shares.
- ------------
(1) Excludes 4,050,000 shares subject to the Underwriters' over-allotment
options.
The offering of 21,600,000 shares of Common Stock in the United States
(the "U.S. Offering") and the offering of 5,400,000 shares of Common Stock
outside the United States (the "International Offering") are collectively
referred to as the "Stock Offerings." The closing of the International
Offering is a condition to the closing of the U.S. Offering, and vice versa.
See "Underwriting."
6
SUMMARY FINANCIAL AND OPERATING INFORMATION
The following table sets forth a summary of selected consolidated
financial and operating data for the Company for each of the five years in the
period ended December 31, 1994 and for the nine-month periods ended September
30, 1994 and 1995. This information should be read in conjunction with the
consolidated financial statements of the Company and related notes thereto
incorporated by reference herein (see "Incorporation of Certain Documents by
Reference") and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus. Financial
information for each of the five years in the period ended December 31, 1994
has been derived from audited financial statements. Financial information for
the nine-month periods ended September 30, 1994 and 1995 has been derived from
unaudited financial statements. The interim data reflects all adjustments
which, in the opinion of the management of the Company, are necessary to
present fairly such information for the interim periods. Results of the
nine-month periods are not necessarily indicative of the results expected for
a full year or any other interim period.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net operating revenues(1)............ $ 403,137 $ 402,588 $ 459,026 $ 581,020 $ 625,823 $ 474,340 $ 492,342
Income before income taxes........... 34,614 45,669 79,844 112,273 153,935 126,166 144,175
Net income........................... 45,468 47,916 97,580 138,025 147,998 105,438 110,731
Earnings per share of common
stock(2)........................... $.30 $.32 $.63 $.86 $.93 $.66 $.69
Average number of common shares(2)... 151,800 151,800 154,533 159,966 159,845 159,826 159,951
BALANCE SHEET DATA (AT PERIOD END):
Net oil and gas properties........... $ 1,305,136 $ 1,339,666 $ 1,468,011 $ 1,546,045 $ 1,684,811 $ 1,637,762 $ 1,843,150
Total assets......................... 1,417,939 1,455,608 1,731,012 1,811,162 1,861,867 1,855,819 2,109,971
Long-term debt
Affiliate........................ 277,918 132,836 --(3) -- 25,000 25,000 16,320
Other............................ 140,442 289,556 150,000(3) 153,000 165,337 158,862 247,552
Deferred revenue..................... -- -- 301,395 227,528 184,183 195,109 224,085
Shareholders' equity................. 610,042 643,185 826,986(3) 933,073 1,043,419 1,019,712 1,140,295
OPERATING DATA:
Wellhead Volumes and Prices
Natural Gas Volumes (MMcf per
day)(4)............................ 455 491 564 709 749 743 719
Average Natural Gas Prices
($/Mcf)(5)......................... $1.51 $1.37 $1.58 $1.92 $1.62 $1.69 $1.23
Crude/Condensate Volumes (MBbl per
day)............................... 8.2 8.2 8.5 8.9 12.6 12.0 18.6
Average Crude/Condensate Prices
($/Bbl)............................ $21.67 $18.78 $17.90 $16.37 $15.62 $15.24 $16.77
</TABLE>
- ------------
(1) Net operating revenues for the years 1990 and 1991 and for the first nine
months of 1994 have been revised to include gains from sales of reserves
and related assets for consistency with current year reporting.
(2) In May 1994, the Board of Directors declared a two-for-one split of the
Company's Common Stock to be effected as a non-taxable dividend of one
share for each share outstanding on May 31, 1994. All share and per share
amounts presented herein are reflected on a post-split basis.
(3) In August 1992, the Company completed the sale of 8.2 million shares of
Common Stock resulting in aggregate net proceeds to the Company of
approximately $112 million used primarily to repay long-term debt. In
September 1992, the Company completed the sale of a volumetric production
payment, resulting in net proceeds of approximately $327 million used to
repay long-term debt and for other general corporate purposes.
(4) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf per
day in 1994 and in the nine-month periods ended September 30, 1994 and
1995 delivered under the terms of a volumetric production payment
agreement effective October 1, 1992, as amended.
(5) Includes an average equivalent wellhead value of $1.70 per Mcf in 1992,
$1.57 per Mcf in 1993, $1.27 per Mcf in 1994 and $1.32 per Mcf and $.76
per Mcf in the nine-month periods ended September 30, 1994 and 1995,
respectively, for the volumes described in note (4), net of transportation
costs.
7
SUMMARY OIL AND GAS RESERVE INFORMATION
The following table sets forth summary information with respect to the
Company's estimates of its net proved natural gas, crude oil, condensate and
natural gas liquids reserves at December 31, 1994. For additional information
relating to reserves, see "Business -- Oil and Gas Exploration and Production
Properties and Reserves."
<TABLE>
<CAPTION>
NATURAL GAS
NATURAL EQUIVALENTS (BCFE)
GAS LIQUIDS ------------------------
(BCF) (MBBL)(1) DEVELOPED UNDEVELOPED
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Net proved reserves at December 31, 1994:
United States.......................................... 1,307 17,787 1,229 185
Canada................................................. 297 7,237 330 10
Trinidad............................................... 206 4,429 233 --
India.................................................. 29 7,585 46 29
-------- ----------- --------- -----------
Total............................................. 1,839 37,038 1,838 224
======== =========== ========= ===========
</TABLE>
Reserve amounts set out above have been revised to exclude volumes
attributable to a volumetric production payment from owned reserves.
The Company's estimates of its net proved natural gas, crude oil,
condensate and natural gas liquids reserves at December 31, 1994, including
amounts attributable to a volumetric production payment, are shown below. This
disclosure is presented as additional information and is not intended to
represent required disclosure pursuant to Statement of Financial Accounting
Standards ("SFAS") No. 69 -- "Disclosures about Oil and Gas Producing
Activities."
<TABLE>
<CAPTION>
NATURAL GAS
NATURAL EQUIVALENTS (BCFE)
GAS LIQUIDS ------------------------
(BCF) (MBBL)(1) DEVELOPED UNDEVELOPED
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Net proved reserves at December 31, 1994, including
amounts attributable to volumetric production
payment:
United States.......................................... 1,378 17,787 1,300 185
Canada................................................. 297 7,237 330 10
Trinidad............................................... 206 4,429 233 --
India.................................................. 29 7,585 46 29
-------- ----------- --------- -----------
Total............................................. 1,910 37,038 1,909 224
======== =========== ========= ===========
</TABLE>
- ------------
(1) Includes crude oil, condensate and natural gas liquids.
8
CERTAIN DEFINITIONS
Unless otherwise indicated in this Prospectus, natural gas volumes are
stated at the legal pressure base of the state, area or country in which the
reserves are located and at 60 Fahrenheit. Natural gas equivalents are
determined using the ratio of 6.0 Mcf of natural gas to 1.0 barrel of crude
oil, condensate or natural gas liquids.
As used herein, the following terms have the specific meanings set out:
"Mcf" means thousand cubic feet, "MMcf" means million cubic feet, "Bcf" means
billion cubic feet, "Bbl" means barrel, "MBbl" means thousand barrels, "MMBbl"
means million barrels, "Mcfe" means thousand cubic feet equivalent, "MMcfe"
means million cubic feet equivalent, "Bcfe" means billion cubic feet
equivalent, "MMBtu" means million British thermal units, "BBtu" means billion
British thermal units and "TBtu" means trillion British thermal units.
With respect to information on the Company's working interest in wells or
acreage, "net" oil and gas wells or acreage are determined by multiplying
"gross" oil and gas wells or acreage by the Company's working interest in the
wells or acreage.
"Exploration and development expenditures" include costs associated with
exploratory and development drilling (including exploratory dry holes),
leasehold acquisitions, seismic data acquisitions, geological and land related
overhead expenditures, delay rentals, producing property acquisitions,
capitalized interest and other miscellaneous capital expenditures. "Total
finding costs" is the ratio of total exploration and development expenditures
to reserves added as a result of the drilling and acquisition program.
Reserves added include the total net natural gas equivalent volume of all
natural gas, crude oil, condensate and natural gas liquids added from
extensions, discoveries and other additions, purchases in place and revisions
of previous estimates.
"Infill drilling" means drilling for the development and production of
net proved undeveloped reserves.
9
USE OF PROCEEDS
The shares of Common Stock of the Company being offered hereby and the
Exchangeable Notes are being sold by Enron Corp. Accordingly, the Company will
not receive any of the proceeds from the Stock Offerings or the sale of the
Exchangeable Notes or delivery of shares of Common Stock pursuant thereto.
PRICE RANGE OF COMMON STOCK AND CASH DIVIDENDS
The following table sets forth, for the periods indicated, the high and
low sale prices per share for the Common Stock, as reported on the New York
Stock Exchange Composite Tape, and the amount of cash dividends paid per
share. The 1993 and First and Second Quarter 1994 sales prices and cash
dividends per share have been restated to reflect the two-for-one stock split
on May 31, 1994.
PRICE RANGE
-------------------- CASH
HIGH LOW DIVIDENDS
--------- --------- ---------
1993
First Quarter................... $ 20.31 $ 13.38 $ .03
Second Quarter.................. 22.50 17.88 .03
Third Quarter................... 26.81 19.88 .03
Fourth Quarter.................. 27.00 17.06 .03
1994
First Quarter................... $ 23.75 $ 19.31 $ .03
Second Quarter.................. 24.63 22.38 .03
Third Quarter................... 23.00 18.50 .03
Fourth Quarter.................. 22.75 17.38 .03
1995
First Quarter................... $ 24.88 $ 17.12 $ .03
Second Quarter.................. 24.75 20.25 .03
Third Quarter................... 25.38 20.00 .03
Fourth Quarter (through November
7, 1995)........................ 22.75 18.75
See the cover page of this Prospectus for the last reported sale price of
the Common Stock on the NYSE as of a recent date.
As of November 1, 1995, there were approximately 270 record holders of
the Company's Common Stock, including individual participants in security
position listings. There are an estimated 5,100 beneficial owners of the
Company's Common Stock, including shares held in street name.
Following the initial public offering and sale of its Common Stock in
October 1989, the Company paid quarterly dividends of $0.025 per share
beginning with an initial dividend paid in January 1990 with respect to the
fourth quarter of 1989. Beginning in January 1993 with respect to the fourth
quarter of 1992, the Company has paid quarterly dividends of $0.03 per share.
The Company currently intends to continue to pay quarterly cash dividends on
its outstanding shares of Common Stock. However, the determination of the
amount of future cash dividends, if any, to be declared and paid will depend
upon, among other things, the financial condition, funds from operations,
level of exploration and development expenditure opportunities and future
business prospects of the Company.
10
BUSINESS
GENERAL
The Company, a Delaware corporation organized in 1985, is engaged, either
directly or through a marketing subsidiary with regard to domestic operations
or through various subsidiaries with regard to international operations, in
the exploration for, and the development, production and marketing of, natural
gas and crude oil primarily in major producing basins in the United States, as
well as in Canada, Trinidad and India and to a lesser extent, selected other
international areas. At December 31, 1994, the Company's estimated net proved
natural gas reserves were 1,910 Bcf and estimated net proved crude oil,
condensate and natural gas liquids reserves were 37 MMBbl. At such date,
approximately 70% of the Company's reserves (on a natural gas equivalent
basis) was located in the United States, 16% in Canada, 11% in Trinidad and 3%
in India.
The Company pursues its oil and gas exploration and development
operations primarily by the acquisition, through various means including but
not limited to leasing, purchasing and farming-in of acreage that is either
undeveloped or lightly developed, and drilling of internally generated
prospects. The Company also maintains a strategy of selling selected oil and
gas properties that, for various reasons, no longer fit into future operating
plans or which are not assessed to have sufficient future growth potential and
when the economic value to be obtained by selling the properties and reserves
in the ground is evaluated to be greater than what would be obtained by
holding the properties and producing the reserves over time. As a result, the
Company typically receives each year a varying but substantial level of
proceeds related to such sales which proceeds are available for general
corporate use.
EXPLORATION AND PRODUCTION
NORTH AMERICAN OPERATIONS
The Company's seven principal United States producing areas are the Big
Piney area, South Texas area, East Texas area, Offshore Gulf of Mexico area,
Canyon Trend area, Pitchfork Ranch area and Vernal area. Properties in these
areas comprised approximately 76% of the Company's United States reserves (on
a natural gas equivalent basis) and 85% of the Company's United States net
natural gas deliverability as of December 31, 1994 and are substantially all
operated by the Company. At September 30, 1995, properties in these areas
comprised approximately 87% of the Company's United States net natural gas
deliverability. The Company's other United States natural gas and crude oil
producing properties are located primarily in other areas of Texas, Utah, New
Mexico and in Oklahoma.
At December 31, 1994, 93% of the Company's proved United States reserves
(on a natural gas equivalent basis) was natural gas and 7% was crude oil,
condensate and natural gas liquids. A substantial portion of the Company's
United States natural gas reserves is in long-lived fields with
well-established production histories. The Company believes that opportunities
exist to increase production in many of these fields through continued infill
and other development drilling.
The Company also has natural gas and crude oil producing properties
located in Western Canada, primarily in the provinces of Alberta, Saskatchewan
and Manitoba.
BIG PINEY AREA. The Company's largest reserve accumulation is located in
the Big Piney area in Sublette and Lincoln counties in southwestern Wyoming.
The Company is the holder of the largest productive acreage base in this area,
with approximately 219,000 net acres under lease directly within field limits.
The Company operates approximately 650 natural gas wells in this area in which
it owns a 91% average working interest. Deliveries from the area net to the
Company averaged 124 MMcf per day of natural gas and 1.5 MBbl per day of crude
oil, condensate, and natural gas liquids in 1994. At September 30, 1995,
natural gas deliverability net to the Company was approximately 138 MMcf per
day.
The current principal producing intervals are the Frontier and Mesaverde
formations. The Frontier formation, which occurs at 6,500-10,000 feet,
contains approximately 66% of the Company's current Big Piney reserves. The
Company drilled 67 wells in the Big Piney area in 1994. Although natural gas
drilling has been curtailed in this area during 1995 in response to market
conditions, numerous drilling opportunities will be available for several
years.
11
During the fourth quarter of 1995, the Company anticipates recording as
proved undeveloped reserves approximately 1,100 Bcf of methane contained,
along with high concentrations of carbon dioxide and nitrogen as well as small
amounts of other gaseous substances in the deep Wyoming Paleozoic formation
located under acreage leased by the Company and held by production in the Big
Piney area. The Company is actively pursuing the consummation of a market or
markets from several different potential sources to facilitate realizing the
value of these reserves.
SOUTH TEXAS AREA. The Company's activities in South Texas are focused in
the Wilcox, Expanded Wilcox, Frio and Lobo producing horizons. The principal
area of activity is in the Lobo Trend which occurs primarily in Webb and
Zapata counties.
The Company operates approximately 470 wells in the South Texas area.
Production is primarily from the Lobo sand of the Wilcox formation at depths
ranging from 7,000 to 11,000 feet. The Company has approximately 250,000 net
acres under lease in this area. Natural gas deliveries net to the Company
averaged 181 MMcf per day in 1994. At September 30, 1995, natural gas
deliverability from this area net to the Company was approximately 150 MMcf
per day which was impacted during 1995 by the sale of selected properties. The
Company drilled 56 wells in the South Texas area in 1994 and anticipates an
active drilling program will continue for several years.
EAST TEXAS AREA. The Company's activities in the East Texas area are
primarily in the Carthage field, located in Panola County, and the North
Milton field, located in northern Harris County.
The Carthage field is the Company's newest area of concentration. This
field is one of the most prolific fields in east Texas with production
primarily from the Cotton Valley, Travis Peak and Pettit formations. In 1995,
properties were acquired that doubled the Company's acreage position to 17,000
acres. An active drilling program is planned for the remainder of 1995 and for
several years. The Company has an average 71% working interest in its
holdings. The Company has continued its activity in the North Milton field
where it now operates 19 wells and holds a 100% working interest in the
acreage. Further drilling is planned for 1996. At September 30, 1995,
deliverability from the East Texas area was approximately 35 MMcf per day of
natural gas with almost 1.0 MBbl per day of condensate, both net to the
Company.
OFFSHORE GULF OF MEXICO AREA. At September 30, 1995, the Company held an
interest in 191 blocks in the Offshore Gulf of Mexico area totaling 561,000
net acres. Of the 191 blocks, 133 are operated by the Company. These interests
are located predominantly in federal waters offshore Texas and Louisiana.
During 1995, the Company acquired a 50% interest in operations previously
owned by Santa Fe Minerals complementing previously owned interests and adding
significantly to the Company's offshore operations. Natural gas deliveries
from this area averaged 83 MMcf per day during 1994 and 118 MMcf per day
during the first nine months of 1995, both net to the Company. A substantial
portion of such deliveries was from interests in the Matagorda trend with
significant volumes also coming from the Mustang Island area. Deliverability
from this area at September 30, 1995 was 160 MMcf per day net to the Company
sourced principally as noted above. The Company has maintained an active
drilling program in this area during 1994 and 1995 and anticipates a similar
program to continue for several years.
CANYON TREND AREA. The Company's activities in this area have been
concentrated in Crockett, Sutton, Terrell and Val Verde Counties, Texas where
the Company drilled 331 natural gas wells during the period 1992 through 1994.
The Company holds approximately 91,800 net acres and now operates
approximately 500 natural gas wells in this area in which it owns a 97%
average working interest. Production is from the Canyon sands and Strawn
limestone at depths from 5,500 to 11,500 feet. In 1994, natural gas deliveries
from this area net to the Company averaged 65 MMcf per day. At September 30,
1995, natural gas deliverability from this area net to the Company was
approximately 54 MMcf per day. The Company has maintained an active drilling
program in the Canyon Trend area during 1995 and expects a similar program to
continue for several years.
PITCHFORK RANCH FIELD. The Pitchfork Ranch field located in Lea County,
New Mexico, produces primarily from the Bone Spring, Atoka and Morrow
formations. In 1994, deliveries net to the Company from this area averaged 36
MMcf per day of natural gas and approximately 2 MBbl per
12
day of crude oil, condensate and natural gas liquids. At September 30, 1995,
deliverability from this area net to the Company was approximately 32 MMcf per
day of natural gas and 3.6 MBbl per day of crude oil, condensate and natural
gas liquids. The Company holds approximately 27,900 net acres and expects to
maintain an active drilling program in this field for several years.
VERNAL AREA. In the Vernal area, located primarily in Uintah County,
Utah, the Company operates approximately 195 producing wells and presently
controls approximately 79,000 net acres. For the first nine months of 1995,
natural gas deliveries, net to the Company from the Vernal area averaged 24
MMcf per day which represents deliverability. Production is from the Green
River and Wasatch formations located at depths between 4,500-8,000 feet. The
Company has an average working interest of approximately 60%. The Company
drilled 20 wells in the Vernal area in 1994 and has maintained a comparable
drilling program during 1995.
CANADA. The Company is engaged in the exploration for and the
development, production and marketing of natural gas and crude oil and the
operation of natural gas processing plants in western Canada, principally in
the provinces of Alberta, Saskatchewan, and Manitoba. The Company conducts
operations from offices in Calgary. The Company produces natural gas from
seven major areas and crude oil from three major areas. The Sandhills area in
Southern Saskatchewan is the largest single producing area where 160 wells
were drilled in 1994 resulting in deliverability net to the Company from the
field of approximately 38 MMcf per day at December 31, 1994. Canadian natural
gas deliverability net to the Company at September 30, 1995 was approximately
70 MMcf per day and the Company held approximately 350,000 net undeveloped
acres in Canada. The Company expects to maintain an active drilling program in
Canada for several years.
OUTSIDE NORTH AMERICA OPERATIONS
The Company has operations offshore Trinidad and India and is conducting
exploration in selected other international areas. Properties offshore
Trinidad and India comprised 100% of the Company's proved reserves and
production outside of North America at year end 1994.
TRINIDAD. In November 1992, the Company was awarded a 95% working
interest concession in the South East Coast Consortium ("SECC") block offshore
Trinidad, encompassing three undeveloped fields, previously held by three
government-owned energy companies. The Kiskadee field has been developed, the
Ibis field is under development and the Oil Bird field is anticipated to be
developed over the next three to five years. Existing surplus processing and
transportation capacity at the Pelican field facilities owned and operated by
Trinidad and Tobago government-owned companies is being used to process and
transport the production. Natural gas is being sold into the local market
under a take-or-pay agreement with the National Gas Company of Trinidad and
Tobago. In 1994, deliveries net to the Company averaged 63 MMcf per day of
natural gas and 2.6 MBbl per day of crude oil and condensate. At September 30,
1995, deliverability net to the Company was approximately 166 MMcf per day of
natural gas and 8.0 MBbls per day of crude oil and condensate. The Company's
net production from offshore Trinidad was approximately 100 MMcf per day of
natural gas and 6.2 MBbl per day of crude oil and condensate at September 30,
1995. The Company held approximately 71,000 net undeveloped acres in Trinidad.
The Company recently has been awarded the right to develop the U(a) block
adjacent to the SECC block and is presently negotiating the terms of a
production sharing contract with the Government of Trinidad and Tobago.
INDIA. In December 1994, the Company signed agreements covering profit
sharing, joint operations and product sales, and was granted a 30% working
interest in, the Tapti, Panna and Mukta blocks located offshore Bombay, India.
The Company is designated operator of all three areas. The blocks were
previously operated by the Indian national oil company, Oil & Natural Gas
Corporation Limited, which retained a 40% working interest. The 363,000 acre
Tapti Block contains two major proved gas accumulations delineated by 22
expendable exploration wells that have been plugged. The Company has initiated
a development plan for the Tapti Block accumulations. The 106,000 acre Panna
Block and the 192,000 acre Mukta Block are partially developed with 30 wells
producing from five producing platforms located in the Panna and Mukta fields.
The fields were producing approximately 3.5 MBbl per day of crude oil net to
the Company as of September 30,
13
1995; all associated natural gas was being flared. The Company intends to
continue development of the accumulations and to expand processing capacity to
allow crude oil production at full deliverability as well as to permit natural
gas sales.
OTHER INTERNATIONAL. The Company continues to evaluate other selected
conventional natural gas and crude oil opportunities outside North America.
The Company is pursuing other exploitation opportunities in countries,
including Mozambique and Qatar, where indigenous natural gas reserves have
been identified, particularly where synergies in natural gas transportation,
processing and power cogeneration can be optimized with other Enron Corp.
affiliated companies. In early 1995, the Company and the Qatar General
Petroleum Corporation signed a nonbinding letter of intent concerning the
possible development of a liquefied natural gas project for natural gas to be
produced from the North Dome Field. The Company and Enron Corp. may jointly
hold up to a 40% working interest in the joint venture and drill and develop
to-be-agreed-upon reserves. In addition, the Company signed letters of intent
in early 1995 with the National Oil Corporation of Uzbekistan, and Gazprom,
the Russian natural gas company, to pursue the feasibility of joint venture
development and marketing of previously discovered conventional hydrocarbon
reserves in Uzbekistan. The Company is in discussions with the Chinese
government concerning the potential for conventional oil and gas development
opportunities in China. The Company holds nonoperating working interests in
two conventional oil and gas exploration prospects in the U.K. North Sea.
The Company continues evaluation and assessment of its international
opportunity portfolio in the coalbed methane recovery arena, including
projects in South Wales in the U.K., the Lorraine Basin in France, Galilee
Basin in Queensland, Australia and Hedong basin in China.
MARKETING
WELLHEAD MARKETING
The Company's North America wellhead natural gas production is currently
being sold on the spot market and under long-term natural gas contracts at
market responsive prices. In many instances, the long-term contract prices
closely approximate the prices received for natural gas being sold on the spot
market. Wellhead natural gas volumes from Trinidad are sold at prices that are
based on a fixed price schedule with annual escalations. Natural gas volumes
in India will be sold to the Gas Authority of India, Ltd. under a take-or-pay
contract at a price linked to a basket of world market fuel oil quotations
with floor and ceiling limits. Approximately 45% of the Company's wellhead
natural gas production is currently being sold to pipeline and marketing
subsidiaries of Enron Corp. The Company believes that the terms of its
transactions and agreements with Enron Corp. and/or its affiliates are and
intends that future such transactions and agreements will be at least as
favorable to the Company as could be obtained from third parties.
Substantially all of the Company's wellhead crude oil and condensate is
sold under short-term contracts at market responsive prices.
OTHER MARKETING
Enron Oil & Gas Marketing, Inc. ("EOGM") is a wholly-owned subsidiary of
the Company engaged in various marketing activities. Both the Company and EOGM
contract to provide, under short and long-term agreements, natural gas to
various purchasers and then aggregate the necessary supplies for the sales
with purchases from various sources including third-party producers, marketing
companies, pipelines or from the Company's own production. In addition, EOGM
has purchased and constructed several small gathering systems in order to
facilitate its entry into the gathering business on a strategic basis. Both
the Company and EOGM utilize other short and long-term hedging and trading
mechanisms including sales and purchases utilizing NYMEX-related commodity
market transactions. All of these activities are currently conducted with
companies affiliated with Enron Corp. These marketing activities have provided
an effective balance in managing the Company's exposure to commodity price
risks for both natural gas and crude oil and condensate wellhead prices. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity -- Hedging Transactions".
14
WELLHEAD VOLUMES AND PRICES, AND LEASE AND WELL EXPENSES
The following table sets forth certain information regarding the
Company's wellhead volumes of and average prices for natural gas per Mcf,
crude oil and condensate, and natural gas liquids per Bbl, and average lease
and well expenses per Mcfe delivered during each of the three years in the
period ended December 31, 1994 and the nine-month periods ended September 30,
1994 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
VOLUMES (PER DAY)
Natural Gas (MMcf)
United States(1)........... 534 649 614 609 534
Canada..................... 30 58 72 71 75
Trinidad................... -- 2 63 63 110
--------- --------- --------- --------- ---------
Total(1)................. 564 709 749 743 719
========= ========= ========= ========= =========
Crude Oil and Condensate (MBbl)
United States.............. 6.3 6.6 8.0 7.5 9.1
Canada..................... 2.2 2.2 2.0 1.9 2.4
Trinidad................... -- .1 2.5 2.6 4.8
India...................... -- -- .1 -- 2.3
--------- --------- --------- --------- ---------
Total.................... 8.5 8.9 12.6 12.0 18.6
========= ========= ========= ========= =========
Natural Gas Liquids (MBbl)
United States.............. .3 .2 .3 .2 1.2
Canada..................... .4 .4 .4 .5 .3
--------- --------- --------- --------- ---------
Total.................... .7 .6 .7 .7 1.5
========= ========= ========= ========= =========
AVERAGE PRICES
Natural Gas ($/Mcf)
United States(2)........... $ 1.61 $ 1.97 $ 1.71 $ 1.79 $ 1.33
Canada..................... 1.18 1.34 1.42 1.51 .95
Trinidad................... -- .89 .93 .93 .97
Composite(2)............. 1.58 1.92 1.62 1.69 1.23
Crude Oil and Condensate ($/Bbl)
United States.............. $ 18.29 $ 16.96 $ 16.06 $ 15.64 $ 17.20
Canada..................... 16.80 14.63 14.05 13.72 16.31
Trinidad................... -- 14.36 15.50 15.20 16.16
India...................... -- -- 15.70 -- 16.82
Composite................ 17.90 16.37 15.62 15.24 16.77
Natural Gas Liquids ($/Bbl)
United States.............. $ 11.56 $ 13.85 $ 12.45 $ 12.50 $ 11.76
Canada..................... 10.05 9.46 8.45 7.86 9.69
Composite................ 10.69 11.12 9.90 9.43 11.27
LEASE AND WELL EXPENSES ($/MCFE)
United States.............. $ .20 $ .18 $ .19 $ .19 $ .20
Canada..................... .50 .48 .34 .35 .35
Trinidad................... -- 1.46 .17 .15 .14
India...................... -- -- .13 -- 1.59
Composite................ .22 .21 .20 .20 .23
</TABLE>
- ------------
(1) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf
per day in 1994 and in the nine-month periods ended September 30, 1994
and 1995 delivered under the terms of a volumetric production payment
agreement effective October 1, 1992, as amended.
(2) Includes an average equivalent wellhead value of $1.70 per Mcf in 1992,
$1.57 per Mcf in 1993, $1.27 per Mcf in 1994 and $1.32 per Mcf and $.76
per Mcf in the nine-month periods ended September 30, 1994 and 1995,
respectively, for the volumes described in note (1), net of
transportation costs.
15
OTHER NATURAL GAS MARKETING VOLUMES AND PRICES
The following table sets forth certain information regarding the
Company's volumes of natural gas delivered under other marketing and
volumetric production payment arrangements, and resulting average per unit
gross revenue and per unit amortization of deferred revenues along with
associated costs during each of the three years in the period ended December
31, 1994 and the nine-month periods ended September 30, 1994 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Volumes (MMcf per day)(1)............ 255 293 324 327 266
Average Gross Revenue ($/Mcf)(2)..... $ 2.62 $ 2.57 $ 2.38 $ 2.41 $ 1.87
Associated Costs ($/Mcf)(3)(4)....... 1.99 2.32 2.06 2.13 1.49
--------- --------- --------- --------- ---------
Margin ($/Mcf)....................... $ 0.63 $ 0.25 $ 0.32 $ 0.28 $ 0.38
========= ========= ========= ========= =========
</TABLE>
- ------------
(1) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf
per day in 1994 and in the nine-month periods ended September 30, 1994
and 1995 delivered under the terms of volumetric production payment and
exchange agreements effective October 1, 1992, as amended.
(2) Includes per unit deferred revenue amortization for the volumes detailed
in note (1) at an equivalent of $2.51 per Mcf in 1992, $2.50 per Mcf in
1993, $2.46 per Mcf in 1994 and $2.46 per Mcf and $2.47 per Mcf in the
nine-month periods ended September 30, 1994 and 1995, respectively.
(3) Includes an average value of $2.37 per Mcf in 1992, $2.20 per Mcf in
1993, $1.92 per Mcf in 1994 and $1.99 per Mcf and $1.50 per Mcf in the
nine-month periods ended September 30, 1994 and 1995, respectively,
including average equivalent wellhead value, any applicable
transportation costs and exchange differentials, for the volumes
detailed in note (1).
(4) Including transportation and exchange differentials.
OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES
The following tables set forth the Company's net proved and proved
developed reserves at December 31, 1993 and 1994, and the changes in the net
proved reserves for the year 1994 as estimated by the Company's engineering
staff. The additional disclosures that include volumes attributable to a
volumetric production payment set forth in the following tables are presented
as additional information and are not intended to represent required
disclosure pursuant to SFAS No. 69 -- "Disclosures about Oil and Gas Producing
Activities."
<TABLE>
<CAPTION>
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Natural Gas (Bcf)
Net proved reserves at December
31, 1993...................... 1,313.2 271.0 100.5 -- 1,684.7
Additional disclosures:
Volumes attributable to
volumetric production
payment.................. 87.5 -- -- -- 87.5
------------- ------ -------- --------- ---------
Net proved reserves at December
31, 1993, including volumes
attributable to volumetric
production payment............ 1,400.7 271.0 100.5 -- 1,772.2
============= ====== ======== ========= =========
Net proved reserves at December
31, 1993...................... 1,313.2 271.0 100.5 -- 1,684.7
Revisions of previous
estimates................ (17.1) (6.5) 15.0 -- (8.6)
Purchases in place......... 18.8 9.2 -- 29.3 57.3
Extensions, discoveries and
other additions.......... 233.8 50.2 113.9 -- 397.9
Sales in place............. (29.3) (1.0) -- -- (30.3)
Production................. (212.0) (26.3) (23.2) -- (261.5)
------------- ------ -------- --------- ---------
Net proved reserves at December
31, 1994...................... 1,307.4 296.6 206.2 29.3 1,839.5
16
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- --------- ---------
Additional disclosures:
Volumes attributable to
volumetric production
payment.................. 70.9 -- -- -- 70.9
------------- ------ -------- --------- ---------
Net proved reserves at December
31, 1994, including volumes
attributable to volumetric
production payment............ 1,378.3 296.6 206.2 29.3 1,910.4
============= ====== ======== ========= =========
Liquids (MBbl)(1)
Net proved reserves at December
31, 1993...................... 13,172 5,471 2,218 -- 20,861
Revisions of previous
estimates................ 2,179 (177 ) 455 -- 2,457
Purchases in place......... 358 -- -- 7,617 7,975
Extensions, discoveries and
other additions.......... 5,332 2,848 2,687 -- 10,867
Sales in place............. (257) -- -- -- (257)
Production................. (2,997) (905 ) (931) (32) (4,865)
------------- ------ -------- --------- ---------
Net proved reserves at December
31, 1994...................... 17,787 7,237 4,429 7,585 37,038
============= ====== ======== ========= =========
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- --------- ---------
Net proved developed reserves at
Natural Gas (Bcf)
December 31, 1993.......... 1,079.8 250.6 71.4 -- 1,401.8
December 31, 1994.......... 1,128.2 288.3 206.2 -- 1,622.7
Liquids (MBbl)(1)
December 31, 1993.......... 11,165 5,409 1,591 -- 18,165
December 31, 1994.......... 16,770 7,073 4,429 7,585 35,857
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- --------- ---------
Net proved developed reserves,
including amounts attributable to
volumetric production payment at
Natural Gas (Bcf)
December 31, 1993.......... 1,167.3 250.6 71.4 -- 1,489.3
December 31, 1994.......... 1,199.1 288.3 206.2 -- 1,693.6
Liquids (MBbl)(1)
December 31, 1993.......... 11,165 5,409 1,591 -- 18,165
December 31, 1994.......... 16,770 7,073 4,429 7,585 35,857
</TABLE>
- ------------
(1) Includes crude oil, condensate and natural gas liquids.
Estimates of proved and proved developed reserves at December 31, 1993
and 1994 were based on studies performed by the Company's engineering staff
for reserves in the United States, Canada, Trinidad and India. Opinions by
DeGolyer and MacNaughton, independent petroleum consultants, for the years
ended December 31, 1993 and 1994 covering producing areas containing 65% and
59%, respectively, of proved reserves of the Company on a
net-equivalent-cubic-feet-of-gas basis, indicate that the estimates of proved
reserves prepared by the Company's engineering staff for the properties
reviewed by DeGolyer and MacNaughton, when compared in total on a net-
equivalent-cubic-feet-of-gas basis, do not differ materially from the
estimates prepared by DeGolyer and MacNaughton. Such estimates by DeGolyer and
MacNaughton in the aggregate varied by not more than 5% from those prepared by
the Company's engineering staff. All reports by DeGolyer and MacNaughton were
developed utilizing geological and engineering data provided by the Company.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
producer. The reserve data set forth herein represent only estimates. Reserve
engineering is a subjective process of estimating underground accumulations of
17
natural gas and liquids, including crude oil, condensate and natural gas
liquids, that cannot be measured in an exact manner. The accuracy of any
reserve estimate is a function of the amount and quality of available data and
of engineering and geological interpretation and judgment. As a result,
estimates of different engineers normally vary. In addition, results of
drilling, testing and production subsequent to the date of an estimate may
justify revision of such estimate. Accordingly, reserve estimates are often
different from the quantities ultimately recovered. The meaningfulness of such
estimates is highly dependent upon the accuracy of the assumptions upon which
they were based.
In general, the volume of production from oil and gas properties owned by
the Company declines as reserves are depleted. Except to the extent the
Company acquires additional properties containing proved reserves or conducts
successful exploration and development activities, or both, the proved
reserves of the Company will decline as reserves are produced. Volumes
generated from future activities of the Company are therefore highly dependent
upon the level of success in acquiring or finding additional reserves and the
costs incurred in doing so.
ACREAGE
The following tables summarize the Company's developed and undeveloped
acreage at December 31, 1994 and September 30, 1995. Excluded is acreage in
which the Company's interest is limited to owned royalty, overriding royalty
and other similar interests.
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED TOTAL
-------------------------- ---------------------------- ----------------------------
GROSS NET GROSS NET GROSS NET
------------ ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1994:
United States................... 978,427 637,870 1,952,656 1,705,716 2,931,083 2,343,586
Canada.......................... 501,989 307,996 437,523 353,550 939,512 661,546
India........................... 60,000 18,000 602,207 180,662 662,207 198,662
Trinidad........................ 4,200 3,990 74,851 71,108 79,051 75,098
Other International............. -- -- 13,913,600 11,756,800 13,913,600 11,756,800
------------ ------------ ------------- ------------- ------------- -------------
Total...................... 1,544,616 967,856 16,980,837 14,067,836 18,525,453 15,035,692
============ ============ ============= ============= ============= =============
At September 30, 1995:
United States................... 1,554,024 661,647 2,321,727 1,775,151 3,875,751 2,436,798
Canada.......................... 559,534 335,559 424,302 349,503 983,836 685,062
India........................... 60,000 18,000 602,207 180,662 662,207 198,662
Trinidad........................ 4,200 3,990 74,851 71,108 79,051 75,098
Other International............. -- -- 13,422,400 11,773,100 13,422,400 11,773,100
------------ ------------ ------------- ------------- ------------- -------------
Total...................... 2,177,758 1,019,196 16,845,487 14,149,524 19,023,245 15,168,720
============ ============ ============= ============= ============= =============
</TABLE>
18
DRILLING AND ACQUISITION ACTIVITIES
During the years ended December 31, 1992, 1993 and 1994 and the nine
months ended September 30, 1995 the Company spent approximately $396, $430,
$494 and $401 million, respectively, for exploratory and development drilling
and acquisition of leases and producing properties. The Company drilled,
participated in the drilling of or acquired wells as set out in the table
below for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
-------------------------------------------------------- ----------------
1992 1993 1994 1995
---------------- ---------------- ---------------- ----------------
GROSS NET GROSS NET GROSS NET GROSS NET
----- ------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Development Wells Completed
Domestic
Gas........................ 484 399.06 352 279.00 308 244.23 99 77.78
Oil........................ 19 10.80 45 19.01 34 29.57 36 32.06
Dry........................ 64 56.12 59 46.83 41 32.15 38 30.80
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 567 465.98 456 344.84 383 305.95 173 140.64
International
Gas........................ 2 2.00 227 190.10 250 190.30 116 107.66
Oil........................ 13 11.70 4 3.50 11 5.10 13 8.21
Dry........................ 5 4.05 11 7.60 13 11.50 11 8.38
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 20 17.75 242 201.20 274 206.90 140 124.25
----- ------- ----- ------- ----- ------- ----- -------
Total Development............... 587 483.73 698 546.04 657 512.85 313 264.89
----- ------- ----- ------- ----- ------- ----- -------
Exploratory Wells Completed
Domestic
Gas........................ 11 8.72 14 10.03 13 9.80 4 2.52
Oil........................ 1 .40 3 2.50 3 2.57 3 2.63
Dry........................ 16 13.42 32 22.08 23 18.17 6 4.47
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 28 22.54 49 34.61 39 30.54 13 9.62
International
Gas........................ 7 5.75 14 11.40 9 7.90 2 1.24
Oil........................ 4 3.69 2 .90 1 .50 2 2.00
Dry........................ 4 2.85 10 7.35 14 12.50 5 3.70
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 15 12.29 26 19.65 24 20.90 9 6.94
----- ------- ----- ------- ----- ------- ----- -------
Total Exploratory............... 43 34.83 75 54.26 63 51.44 22 16.56
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 630 518.56 773 600.30 720 564.29 335 281.45
Wells in Progress at end of period... 82 60.75 82 61.09 45 28.79 53 38.72
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 712 579.31 855 661.39 765 593.08 388 320.17
===== ======= ===== ======= ===== ======= ===== =======
Wells Acquired
Gas............................. 641 597.29* 44 26.44* 41 40.90* 271 97.37*
Oil............................. 28 25.80* -- 12.80* 60 38.99* 5 .93*
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 669 623.09 44 39.24 101 79.89 276 98.30
===== ======= ===== ======= ===== ======= ===== =======
</TABLE>
- ------------
* Includes the acquisition of additional interests in certain wells in which
the Company previously held an interest.
All of the Company's drilling activities are conducted on a contract
basis with independent drilling contractors. The Company owns no drilling
equipment.
19
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The following table sets forth a summary of selected consolidated
financial and operating information for the Company for each of the five years
in the period ended December 31, 1994 and the nine-month periods ended
September 30, 1994 and 1995. This information should be read in conjunction
with the consolidated financial statements of the Company and related notes
thereto incorporated by reference herein (see "Incorporation of Certain
Documents by Reference") and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus. Financial information for each of the five years in the period
ended December 31, 1994 has been derived from audited financial statements.
Financial information for the nine-month periods ended September 30, 1994 and
1995 has been derived from unaudited financial statements. The interim data
reflects all adjustments which, in the opinion of the management of the
Company, are necessary to present fairly such information for the interim
periods. Results of the nine-month periods are not necessarily indicative of
the results expected for a full year or any other interim period.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net operating revenues
Natural gas...................... $ 301,645 $ 321,603 $ 388,988 $ 505,162 $ 489,893 $ 365,654 $ 332,015
Crude oil, condensate and natural
gas liquids.................... 66,165 62,836 58,927 55,834 76,338 52,632 90,342
Gains on sales of reserves and
related assets................. 31,802 14,983 6,037 13,318 54,014 52,212 62,546
Other............................ 3,525 3,166 5,074 6,706 5,578 3,842 7,439
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total........................ 403,137 402,588 459,026 581,020 625,823 474,340 492,342
Operating expenses
Lease and well................... 43,806 49,922 49,406 59,344 60,384 44,782 52,918
Exploration...................... 35,031 31,470 33,278 36,921 41,811 29,647 31,590
Dry hole......................... 12,986 14,698 10,764 18,355 17,197 10,803 8,586
Impairment of unproved oil and
gas properties................. 20,571 12,791 15,136 20,467 24,936 17,364 20,453
Depreciation, depletion and
amortization................... 155,877 160,885 179,839 249,704 242,182 181,645 157,875
General and administrative....... 38,254 36,216 36,648 45,274 51,418 38,050 41,186
Taxes other than income.......... 22,966 18,222 28,346 35,396 28,254 22,010 25,606
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total........................ 329,491 324,204 353,417 465,461 466,182 344,301 338,214
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income..................... 73,646 78,384 105,609 115,559 159,641 130,039 154,128
Other income (expense)............... (2,153) (3,215) (3,476) 6,635 2,783 2,238 (1,143)
Interest expense (net of interest
capitalized)....................... 36,879 29,500 22,289 9,921 8,489 6,111 8,810
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes........... 34,614 45,669 79,844 112,273 153,935 126,166 144,175
Income tax provision (benefit)(1).... (10,854) (2,247) (17,736) (25,752)(2) 5,937(3) 20,728 33,444(4)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income........................... $ 45,468 $ 47,916 $ 97,580 $ 138,025 $ 147,998 $ 105,438 $ 110,731
=========== =========== =========== =========== =========== =========== ===========
Earnings per share of common
stock(5)........................... $ .30 $ .32 $ .63 $ .86 $ .93 $ .66 $ .69
=========== =========== =========== =========== =========== =========== ===========
Average number of common shares(5)... 151,800 151,800 154,533 159,996 159,845 159,826 159,951
=========== =========== =========== =========== =========== =========== ===========
BALANCE SHEET DATA (AT PERIOD END):
Net oil and gas properties........... $ 1,305,136 $ 1,339,666 $ 1,468,011 $ 1,546,045 $ 1,684,811 $ 1,637,762 $ 1,843,150
Total assets......................... 1,417,939 1,455,608 1,731,012 1,811,162 1,861,867 1,855,819 2,109,971
Long-term debt
Affiliate........................ 277,918 132,836 --(6) -- 25,000 25,000 16,320
Other............................ 140,442 289,556 150,000(6) 153,000 165,337 158,862 247,552
Deferred revenue..................... -- -- 301,395 227,528 184,183 195,109 224,085
Shareholders' equity................. 610,042 643,185 826,986(6) 933,073 1,043,419 1,019,712 1,140,295
20
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
OPERATING DATA:
Wellhead Volumes and Prices
Natural Gas Volumes (MMcf per day)
United States(7)................. 437 466 534 649 613 609 534
Canada........................... 18 25 30 58 73 71 75
Trinidad......................... -- -- -- 2 63 63 110
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total(7)..................... 455 491 564 709 749 743 719
=========== =========== =========== =========== =========== =========== ===========
Average Natural Gas Prices ($/Mcf)
United States.................... $ 1.51 $ 1.38 $ 1.61 $ 1.97 $ 1.71 $ 1.79 $ 1.33
Canada........................... 1.47 1.32 1.18 1.34 1.42 1.51 .95
Trinidad......................... -- -- -- .89 .93 .93 .97
Composite.................... 1.51 1.37 1.58 1.92 1.62 1.69 1.23
Crude/Condensate Volumes (MBbl per
day)
United States.................... 5.8 5.9 6.3 6.6 8.0 7.5 9.1
Canada........................... 2.4 2.3 2.2 2.2 2.0 1.9 2.4
Trinidad......................... -- -- -- .1 2.5 2.6 4.8
India............................ -- -- -- -- .1 -- 2.3
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total........................ 8.2 8.2 8.5 8.9 12.6 12.0 18.6
=========== =========== =========== =========== =========== =========== ===========
Average Crude/Condensate Prices
($/Bbl)
United States.................... $21.95 $19.24 $18.29 $16.96 $16.06 $15.64 $17.20
Canada........................... 21.01 17.58 16.80 14.63 14.05 13.72 16.31
Trinidad......................... -- -- -- 14.36 15.50 15.20 16.16
India............................ -- -- -- -- 15.70 -- 16.82
Composite.................... 21.67 18.78 17.90 16.37 15.62 15.24 16.77
Natural Gas Liquids Volumes (MBbl per
day)
United States.................... .4 .3 .3 .2 .3 .2 1.2
Canada......................... -- .3 .4 .4 .4 .5 .3
Total........................ .4 .6 .7 .6 .7 .7 1.5
Average Natural Gas Liquids Prices
($/Bbl)
United States.................... $10.59 $10.79 $11.56 $13.85 $12.45 $12.50 $11.76
Canada........................... -- 12.48 10.05 9.46 8.45 7.86 9.69
Composite.................... 10.59 11.64 10.69 11.12 9.90 9.43 11.27
</TABLE>
- ------------
(1) Includes benefits of approximately $17 million, $43 million, $65 million
and $36 million in 1991, 1992, 1993 and 1994, respectively, and $29
million and $16 million in the nine-month periods ended September 30, 1994
and 1995, respectively, relating to tight gas sand federal income tax
credits and $25 million and $7 million in 1990 and 1991, respectively,
associated with the utilization of a net operating loss carryforward.
(2) Includes a benefit of $12 million from the reduction of the Company's
deferred federal income tax liability resulting from a reevaluation of
deferred tax requirements partially offset by an approximate $7 million
predominantly non-cash charge primarily to adjust the Company's
accumulated deferred income tax liability for the increase in the
corporate federal income tax rate from 34% to 35%.
(3) Includes a benefit of approximately $8 million related to reduced
estimated state income taxes and certain franchise taxes, a portion of
which is treated as income tax under SFAS No. 109 -- "Accounting for Income
Taxes", and a $5 million benefit from the reduction of the Company's
deferred federal income tax liability resulting from a reevaluation of
deferred tax requirements.
(4) Includes a $12 million benefit associated with the successful resolution
on audit of federal income taxes for certain prior years.
(5) In May 1994, the Board of Directors declared a two-for-one split of the
Company's Common Stock to be effected as a non-taxable dividend of one
share for each share outstanding. Shares were issued on June 15, 1994 to
shareholders of record as of May 31, 1994. All share and per share amounts
presented herein are reflected on a post-split basis.
(6) In August 1992, the Company completed the sale of an additional 8.2
million shares of Common Stock resulting in aggregate net proceeds to the
Company of approximately $112 million used primarily to repay long-term
debt. In September 1992, the Company completed the sale of a volumetric
production payment, resulting in net proceeds of approximately $327
million used to repay long-term debt and for other general corporate
purposes.
(7) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf per
day in 1994 and in the nine-month periods ended September 30, 1994 and
1995 delivered under the terms of a volumetric production payment
effective October 1, 1992, as amended.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following review of operations for each of the three years in the
period ended December 31, 1994 and for the nine-month periods ended September
30, 1994 and 1995 should be read in conjunction with the consolidated
financial statements of the Company and notes thereto and other financial data
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference."
RESULTS OF OPERATIONS
NET OPERATING REVENUES
Wellhead volume and price statistics for the specified periods were as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- --------------------
1992 1993 1994 1994 1995
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Natural Gas Volumes (MMcf per
day)
North America(1)........... 564 707 686 680 609
Trinidad................... -- 2 63 63 110
---------- ---------- ---------- --------- ---------
Total................. 564 709 749 743 719
========== ========== ========== ========= =========
Average Natural Gas Prices
($/Mcf)
North America(2)........... $ 1.58 $ 1.92 $ 1.68 $ 1.76 $ 1.28
Trinidad................... -- .89 .93 .93 .97
Composite............. 1.58 1.92 1.62 1.69 1.23
Crude/Condensate Volumes (MBbl
per day)
North America.............. 8.5 8.8 10.0 9.4 11.5
Trinidad................... -- .1 2.5 2.6 4.8
India...................... -- -- .1 -- 2.3
---------- ---------- ---------- --------- ---------
Total................. 8.5 8.9 12.6 12.0 18.6
========== ========== ========== ========= =========
Average Crude/Condensate Prices
($/Bbl)
North America.............. $ 17.90 $ 16.39 $ 15.65 $ 15.25 $ 17.01
Trinidad................... -- 14.36 15.50 15.20 16.16
India...................... -- -- 15.70 -- 16.82
Composite............. 17.90 16.37 15.62 15.24 16.77
</TABLE>
- ------------
(1) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf
per day in 1994 and in the nine-month periods ended September 30, 1994
and 1995 delivered under the terms of volumetric production payment and
exchange agreements effective October 1, 1992, as amended.
(2) Includes an average equivalent wellhead value of $1.70 per Mcf in 1992,
$1.57 per Mcf in 1993, $1.27 per Mcf in 1994 and $1.32 per Mcf and $.76
per Mcf in the nine-month periods ended September 30, 1994 and 1995,
respectively, for the volumes detailed in note (1), net of
transportation costs.
NINE MONTHS 1995 COMPARED TO NINE MONTHS 1994. During the first nine
months of 1995, net operating revenues increased $18 million to $492 million
as compared to the same period in 1994.
Average wellhead natural gas prices for the first nine months of 1995
were down approximately 27% from the same period in 1994 reducing net
operating revenues by approximately $90 million. In addition, a decrease of 3%
in wellhead natural gas volumes from the first nine months of 1994 reduced net
operating revenues by approximately $11 million. The Company voluntarily
curtailed its United States wellhead natural gas delivered volumes by an
average of approximately 140 MMcf per day during the first nine months of 1995
compared to approximately 110 MMcf per day during the
22
same period in 1994 due to significantly lower United States wellhead natural
gas prices. In addition, the impact of the sales of oil and gas reserves and
related assets (net of purchases of similar assets) resulted in a reduction of
approximately 40 MMcf per day in delivered volumes for the first nine months
of 1995 as compared to the first nine months of 1994. The Company refocused
its 1995 drilling activity away from natural gas deliverability and toward
natural gas reserve enhancement and crude oil exploitation in the United
States in response to the significant decline in United States natural gas
prices in recent periods. Wellhead crude oil and condensate average prices
increased 10% adding approximately $8 million to net operating revenues
compared to the first nine months of 1994. Crude oil and condensate wellhead
volumes increased 55% adding approximately $27 million to net operating
revenues compared to the same period a year ago primarily reflecting new
production on stream offshore India, and higher volumes offshore Trinidad and
in North America.
Other marketing activities associated with sales and purchases of natural
gas, natural gas price swap transactions, other commodity price hedging of
natural gas and crude oil and condensate prices utilizing NYMEX-related
commodity market transactions, and volumetric production payment related
margins added approximately $91 million to net operating revenues during the
first nine months of 1995, an increase of approximately $67 million from the
same period in 1994. This increase primarily resulted from a gain of $51
million on natural gas commodity price hedging activities utilizing
NYMEX-related commodity market transactions in the first nine months of 1995
compared to a $2 million loss during the same period in 1994 and increased
margins associated with other natural gas marketing activities. The average
associated costs of natural gas marketing, price swap and volumetric
production payment transactions, including, where appropriate, average
wellhead value, transportation costs and exchange differentials, decreased
$.64 per Mcf. The average price received for these transactions decreased $.54
per Mcf. Related other natural gas marketing volumes decreased 19%. The
reduction in other natural gas marketing volumes and prices relates primarily
to the exchange of the fuel contracts noted below, lower wellhead market
prices and decreased other marketing activities. The $.10 per Mcf margin
increase partially offset by the reduction in other natural gas marketing
volumes increased net operating revenues by approximately $3 million compared
to the first nine months of 1994. The Company realized an $11 million gain in
the first nine months of 1995 related to certain NYMEX-related commodity
market transactions with an Enron Corp. affiliated company that were
designated for trading purposes in late 1994. The Company had no open trading
positions at September 30, 1995. See "Trading Transactions."
In March 1995, the Company exchanged existing fuel supply and purchase
contracts and related price swap agreements associated with a Texas City
cogeneration plant for certain natural gas price swap agreements of equivalent
value issued by an Enron Corp. affiliated company. As a result of these
transactions, the Company realized a $8.4 million increase in net operating
revenues in the first nine months of 1995 over the amount realized from the
exchanged fuel supply and purchase contracts in the same period of 1994. See
"Relationship Between the Company and Enron Corp. -- Contractual Agreements."
Gains on sales of reserves and related assets during the first nine
months of 1995 increased $10 million to $63 million when compared to the same
period in 1994 which increase was attributable to the Company's continuing
efforts in optimizing the use of its assets.
1994 COMPARED TO 1993. During 1994, net operating revenues increased to
$626 million, up $45 million as compared to 1993.
Average wellhead natural gas volumes increased approximately 6% compared
to 1993 primarily reflecting the effects of development activities offshore
Trinidad and in Canada partially offset by voluntary curtailments of
production in the United States in 1994. The volume reductions in the United
States as a result of voluntary curtailments were more than offset by the new
natural gas deliveries from the Kiskadee field offshore Trinidad and increased
deliveries in Canada. The increase in wellhead natural gas volumes added $28
million to net operating revenues. Average wellhead natural gas prices were
down significantly from 1993 reducing net operating revenues by
23
approximately $83 million. This 16% reduction in average wellhead natural gas
prices reflects the overall decline in the United States natural gas markets
during the last half of 1994 and increased volumes offshore Trinidad sold
under a long-term contract at a price considerably below North America spot
market prices. A 42% increase in wellhead crude oil and condensate volumes
over 1993 added $22 million to net operating revenues primarily reflecting
development activities offshore Trinidad and increased production in the
United States. A 5% decrease in wellhead crude oil and condensate average
prices decreased net operating revenues by approximately $3 million.
Other marketing activities associated with sales and purchases of natural
gas, natural gas and crude oil price swap transactions, other commodity price
hedging of natural gas and crude oil prices utilizing NYMEX-related commodity
market transactions, and margins relating to the volumetric production payment
added $50 million to net operating revenues during 1994. This increase of $41
million from the same period in 1993 primarily results from a gain of $11
million on natural gas commodity price hedging activities utilizing
NYMEX-related commodity market transactions in 1994 versus an $18 million loss
during 1993 and increased margins associated with other natural gas marketing
activities. The average associated costs of natural gas marketing, price swap
and volumetric production payment transactions, including, where appropriate,
average wellhead value, transportation costs and exchange differentials,
decreased $.26 per Mcf. The average price received for these transactions
decreased $.19 per Mcf. Related other natural gas marketing volumes increased
10%.
Gains on sales of selected oil and gas reserves and related assets were
$54 million in 1994 as compared to $13 million in 1993. While the quantity of
equivalent reserves sold in 1994 was slightly less than 1993, higher average
proceeds received per equivalent unit in 1994 as compared to 1993 primarily
contributed to the increased gain recognition. In continuing its strategy of
fully utilizing its assets in optimizing profitability, cash flow and return
on investments, the Company expects to continue the sale of similar properties
from time to time.
1993 COMPARED TO 1992. During 1993, net operating revenues increased to
$581 million, up $122 million as compared to 1992.
Average wellhead natural gas volumes increased approximately 26% compared
to 1992 primarily reflecting the effects of exploration and development
activities relating to tight gas sand formations. Wellhead natural gas
delivered volumes were curtailed less during portions of 1993 than for the
comparable periods in 1992 due to the significant increases realized in
wellhead natural gas prices in 1993. Average wellhead natural gas prices were
up approximately 22% in 1993 over those received in 1992, adding approximately
$87 million to net operating revenues. Increases in wellhead natural gas
volumes in 1993 added $83 million to net operating revenues compared to 1992.
Average wellhead crude oil and condensate prices in 1993 were down 9% compared
to 1992, reducing net operating revenues by $5 million. Increases in wellhead
crude oil and condensate volumes in 1993 added approximately $2 million to net
operating revenues compared to 1992.
Other marketing activities associated with sales and purchases of natural
gas, natural gas price swap transactions, other commodity price hedging of
natural gas and crude oil and condensate prices utilizing NYMEX-related
commodity market transactions, and margins relating to the volumetric
production payment added $8 million to net operating revenues during 1993.
This decrease of $54 million from 1992 primarily results from shrinking
margins associated with sales under long-term fixed price contracts and
amortization of volumetric production payment deferred revenue due to
increases in market responsive natural gas prices associated with volumes
supplying these dispositions and losses on natural gas commodity price hedging
activities utilizing NYMEX-related commodity market transactions. The average
associated costs of natural gas marketing, price swap and volumetric
production payment transactions, including, where appropriate, average
wellhead value, transportation costs and exchange differentials, increased
$.33 per Mcf. Related other natural gas marketing volumes increased 15%.
24
The impact of the other marketing activities, a substantial portion of
which serve as hedges of commodity price risks for a portion of wellhead
deliveries for the respective periods, were more than offset by reductions in
revenues associated with market responsive prices for wellhead deliveries
during those periods.
OPERATING EXPENSES
NINE MONTHS 1995 COMPARED TO NINE MONTHS 1994. During the first nine
months of 1995, operating expenses of $338 million were $6 million lower than
the $344 million incurred in the same period in 1994. Lease and well expenses
increased approximately $8 million to $53 million primarily due to expanded
international operations including the initiation of operations in India in
late December 1994 partially offset by reductions in United States lease and
well expenses. Exploration expenses increased $2 million to $32 million due to
increased exploration activities. Impairment of unproved oil and gas
properties for the first nine months of 1995 increased $3 million from the
comparable period a year ago primarily due to impairments associated with
certain offshore Gulf of Mexico leases. Depreciation, depletion and
amortization ("DD&A") expense decreased $24 million to $158 million reflecting
a decrease in the average DD&A rate from $.81 per Mcfe in the first nine
months of 1994 to $.69 per Mcfe in the first nine months of 1995. The DD&A
rate decrease is primarily attributable to increased production from
international operations with lower average DD&A rates than incurred for North
America operations. General and administrative expenses increased
approximately $3 million to $41 million due to expanded international
activities and overall higher costs associated with certain employee related
expenses. Taxes other than income were $4 million higher in the first nine
months of 1995 compared to the same period in 1994 primarily due to a
reduction included in 1994 associated with state franchise taxes and higher
production related taxes associated with new production in India in the first
nine months of 1995 partially offset by decreases in state severance taxes due
to lower taxable North America wellhead volumes and average prices in 1995.
The Company reduced its total per unit operating costs for lease and well
expense, DD&A, general and administrative expense, interest expense, and taxes
other than income by $.06 per Mcfe, averaging $1.25 per Mcfe during the first
nine months of 1995 compared to $1.31 per Mcfe during the same period in 1994.
This decrease is primarily attributable to the reduction in the average DD&A
rate as noted above partially offset by increases in per unit lease and well,
general and administrative expenses, and taxes other than income.
1994 COMPARED TO 1993. During 1994, total operating expenses of $466
million were approximately $1 million higher than the $465 million incurred in
1993. Lease and well expenses of $60 million were approximately $1 million
higher than 1993 primarily due to increased expenses related to new operations
offshore Trinidad partially offset by cost reductions in North America.
Exploration expenses of $42 million increased $5 million from the previous
year primarily due to an increased level of exploration activities. Impairment
of unproved oil and gas properties increased $4 million from 1993 primarily
due to impairments associated with certain offshore Gulf of Mexico leases.
DD&A expense decreased from $250 million in 1993 to $242 million in 1994
reflecting a $.09 per Mcfe decrease in the average DD&A rate to $.80 per Mcfe.
The rate decrease is primarily due to increased production from offshore
Trinidad at an average DD&A rate significantly less than the North America
operations DD&A rate and a $.03 per Mcfe reduction in the North America
operations DD&A rate. General and administrative expenses increased $6 million
to $51 million primarily due to overall higher costs associated with expanded
international and domestic operations. Taxes other than income decreased
approximately $7 million from 1993 primarily due to lower taxable United
States wellhead volumes and prices and reductions included in 1994 related to
revisions of certain prior year production taxes. Included in 1994 and 1993
are benefits associated with reductions in state franchise taxes of $4 million
and $3 million, respectively. The Company continues to benefit from certain
state severance tax exemptions allowed on high cost natural gas volumes.
25
Total per unit operating costs for lease and well expense, DD&A, general
and administrative expense, interest expense, and taxes other than income
decreased $.14 per Mcfe, averaging $1.29 per Mcfe during 1994 compared to
$1.43 per Mcfe for 1993. The decrease was primarily due to per unit reductions
in DD&A and taxes other than income as discussed above.
1993 COMPARED TO 1992. During 1993, total operating expenses of $465
million were $112 million higher than the $353 million incurred in 1992. Lease
and well expenses increased approximately $10 million primarily due to
expanded domestic and international operations. Exploration expenses increased
approximately $4 million primarily due to increased exploration activities in
North America. An unsuccessful Gulf of Mexico well added nearly $4 million to
dry hole expenses and a related $3 million to lease impairments in 1993. Dry
hole expenses also reflect the impact of increased drilling activity outside
North America. DD&A expense increased $70 million to $250 million reflecting
an increase in production volumes and an average DD&A rate increase from $.79
per Mcfe in 1992 to $.89 per Mcfe for 1993. The DD&A rate increase is
primarily due, as expected, to factors associated with the tight gas sands
drilling program which costs are being more than offset by benefits realized
in the form of tight gas sand federal income tax credits and certain state
severance tax exemptions. General and administrative expenses increased almost
$9 million to $45 million primarily reflecting cost reductions included in
1992 related to changes associated with certain employee compensation plans
and overall higher costs in 1993 due to an expansion of domestic and
international operations. Taxes other than income increased $7 million
primarily due to increased production volumes and revenues in 1993, partially
offset by continuing benefits associated with certain state severance tax
exemptions allowed on high cost natural gas volumes and a $3 million reduction
of state franchise taxes resulting from refunds of prior year payments
received in 1993.
Total per unit operating costs for lease and well expense, DD&A, general
and administrative expense, interest expense, and taxes other than income
increased $.03 per Mcfe, averaging $1.43 per Mcfe during 1993 compared to
$1.40 per Mcfe for 1992. The total increase was associated with DD&A expense
which was up $.10 per Mcfe as noted above being partially offset by a
reduction of $.07 Mcfe in all other costs.
OTHER INCOME
Other income for 1993 includes $4 million in interest income associated
with the investment of funds temporarily surplus to the Company and $4 million
associated with settlements related to the termination of certain long-term
natural gas contracts.
INTEREST EXPENSE
Net interest expense for the first nine months of 1995 was up $3 million
as compared to the same period in 1994 reflecting primarily a higher level of
debt outstanding during the 1995 period.
Net interest expense in 1994 decreased approximately $1 million to $8
million as compared to 1993 primarily due to favorable interest rates on new
financing acquired by a subsidiary of the Company for operations offshore
Trinidad and the retirement of higher interest rate debt. The estimated fair
value of outstanding interest rate swap agreements at December 31, 1994 was a
negative $0.5 million based on termination values obtained from third parties.
Net interest expense decreased $12 million, or 55%, to $10 million in
1993 as compared to 1992 reflecting the repayment of a substantial portion of
the Company's long-term debt in 1992 with proceeds from the sale of common
stock in August 1992 and the sale of a volumetric production payment in
September 1992. The estimated fair value of outstanding interest rate swap
agreements at December 31, 1993 was a negative $3.3 million based upon
termination values obtained from third parties.
26
INCOME TAXES
Income tax provision increased $13 million for first nine months of 1995
as compared to the same period in 1994 primarily resulting from higher income
before income taxes and lower benefits associated with tight gas sand federal
income tax credits utilized in the first nine months of 1995 as compared to
the same period in 1994 partially offset by a $12 million benefit associated
with the successful resolution on audit of federal income taxes for certain
prior years.
Income tax provision in 1994 includes a benefit of approximately $36
million associated with tight gas sand federal income tax credit utilization,
a benefit of approximately $8 million related to reduced estimated state
income taxes and a portion of certain franchise taxes which is treated as
income tax under SFAS No. 109, and a $5 million benefit from the reduction of
the Company's deferred federal income tax liability resulting from a
reevaluation of deferred tax requirements.
Income tax benefit in 1993 includes a benefit of approximately $65
million associated with tight gas sand federal income tax credit utilization,
an approximate $7 million predominantly one-time non-cash charge recorded in
the third quarter of 1993 primarily to adjust the Company's accumulated
deferred federal income tax liability for the increase in the corporate
federal income tax rate from 34% to 35% and a $12 million benefit from the
reduction of the Company's deferred federal income tax liability resulting
from a reevaluation of deferred tax requirements.
CAPITAL RESOURCES AND LIQUIDITY
CASH FLOW
The primary sources of cash for the Company during the nine-month period
ended September 30, 1995 and for each of the years in the three-year period
ended December 31, 1994 included funds generated from operations, the sale of
Common Stock, the sale of a volumetric production payment, proceeds from the
sale of selected oil and gas reserves and related assets and the issuance of
debt. Primary cash outflows during these periods included funds used in
operations, exploration and development expenditures, dividends and the
repayment of debt.
Discretionary cash flow, a frequently used measure of performance for
exploration and production companies, is generally derived by adjusting net
income to eliminate the effects of depreciation, depletion and amortization,
impairment of unproved oil and gas properties, deferred taxes, gains on sales
of oil and gas reserves and related assets, certain other miscellaneous
non-cash amounts, except for amortization of deferred revenue, and exploration
and dry hole expenses. However, based on the continuing practice of the
Company of selling selected oil and gas reserves and related assets in
furtherance of its strategy of fully utilizing its assets in optimizing
profitability, cash flow and return on investments, it believes that net
proceeds from these transactions should also be considered as available
discretionary cash flow and accordingly is presenting those values for all
periods shown. The Company generated discretionary cash flow of $387 million
during the first nine months of 1995, a 3% decrease from the $401 million
generated for the same period in 1994, primarily reflecting lower net
operating revenues, higher cash expenses and a decrease in benefits associated
with tight gas sand federal income tax credits. The Company generated
discretionary cash flow of approximately $514 million in 1994, $521 million in
1993 and $346 million in 1992. The 1993 amount includes $50 million associated
with a federal income tax refund resulting from the settlement on audit of
federal income taxes paid in certain prior years.
Net operating cash flows for the first nine months of 1995 and for each
of the years in the three-year period ended December 31, 1994 have been
revised to reflect proceeds from the sale of a volumetric production payment
during 1992 and the elimination of the related amortization of deferred
revenues as net operating cash flows rather than as investing cash flows as
previously reported. Net operating cash flows of $229 million for the first
nine months of 1995 decreased approximately $72 million as compared to the
same period in 1994 primarily reflecting the same factors addressed above with
regard to discretionary cash flow and higher working capital requirements. Net
operating cash flows were approximately $383 million in 1994, $406 million in
1993, and
27
$608 million in 1992. Decreased 1994 net operating cash flows were primarily
due to the receipt in 1993 of a refund on settlement on audit of federal
income taxes paid in certain prior years. Decreased 1993 net operating cash
flows were primarily due to the receipt in 1992 of $327 million of proceeds
from the sale of a volumetric production payment, increased net operating
revenues and a decrease in provision for current taxes resulting from both
increased tight gas sand federal income tax credit utilization and the receipt
of a refund on settlement on audit of federal income taxes paid in certain
prior years. In accordance with the requirements of SFAS No. 95 -- "Statement
of Cash Flows", net proceeds from the sale of selected oil and gas reserves
and related assets are not included in the determination of net operating cash
flows.
SALE OF SELECTED OIL AND GAS RESERVES AND RELATED ASSETS
During the first nine months of 1995, the Company received proceeds of
$101 million from the sale of selected oil and gas reserves and related assets
compared to $82 million received in the first nine months of 1994. Taxable
gains from the first nine months of 1995 sales generated income taxes of $24
million leaving, net proceeds of $77 million. During 1994, the Company
received proceeds of $91 million from the sale of selected oil and gas
reserves and related assets compared to $42 million received in 1993. While
the quantity of equivalent reserves sold in 1994 was slightly less than 1993,
higher average proceeds received per equivalent unit of reserves sold in 1994
as compared to 1993 resulted in significantly higher 1994 proceeds. Taxable
gains resulting from the 1994 sales generated income taxes of $20 million,
leaving net proceeds of $71 million. Taxable gains resulting from such sales
in 1993 generated federal income taxes of $8 million, leaving net proceeds of
$34 million.
SALE OF VOLUMETRIC PRODUCTION PAYMENT
In September 1992, the Company sold a volumetric production payment for
$326.8 million to a limited partnership. Under the terms of the production
payment agreements, the Company conveyed a real property interest in
approximately 124 Bcfe (136 TBtu) of certain natural gas and other
hydrocarbons to the purchaser. Effective October 1, 1993, the agreements were
amended providing for the extension of the original term of the volumetric
production payment through March 31, 1999 and including a revised schedule of
daily quantities of hydrocarbons to be delivered which is approximately
one-half of the original schedule. The revised schedule will total
approximately 89.1 Bcfe (97.8 TBtu) versus approximately 87.9 Bcfe (96.4 TBtu)
remaining to be delivered under the original agreement. Daily quantities of
hydrocarbons no longer required to be delivered under the revised schedule
during the period from October 1, 1993 through June 30, 1996 are available for
sale by the Company. The Company retains responsibility for its working
interest share of the cost of operations. In accordance with generally
accepted accounting principles, the Company accounted for the proceeds
received in the transaction as deferred revenue which is being amortized into
revenue and income as natural gas and other hydrocarbons are produced and
delivered to the purchaser during the term, as revised, of the volumetric
production payment thereby matching those revenues with the depreciation of
asset values which remained on the balance sheet following the sale and the
operating expenses incurred for which the Company retained responsibility. The
Company expects the above transaction, as amended, to have minimal direct
impact on future earnings. However, cash made available by the sale of the
volumetric production payment has provided considerable financial flexibility
for the pursuit of investment alternatives.
28
EXPLORATION AND DEVELOPMENT EXPENDITURES
The table below sets out components of actual exploration and development
expenditures for the years ended December 31, 1992, 1993 and 1994, along with
those estimated for the year 1995 and actual components of exploration and
development expenditures for the nine-month periods ended September 30, 1994
and 1995.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
--------------------
EXPENDITURE CATEGORY 1992 1993 1994 1994 1995
- ------------------------------------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Capital
Drilling and Facilities......... $ 260 $ 331 $ 342 $ 257 $ 225
Leasehold Acquisitions.......... 23 29 52 32 17
Producing Property
Acquisitions.................. 65 9 34 14 114
Capitalized Interest and
Other......................... 14 14 14 10 9
--------- --------- --------- --------- ---------
Total...................... 362 383 442 313 365
Exploration Expenses................. 44 55 59 41 40
--------- --------- --------- --------- ---------
Total................................ $ 406 $ 438 $ 501 $ 354 $ 405
========= ========= ========= ========= =========
</TABLE>
Exploration and development expenditures for the first nine months of
1995 increased $51 million compared to the same period in 1994, and primarily
reflect the acquisitions of selected properties to complement existing United
States producing areas.
Exploration and development expenditures increased $63 million, or 14%,
in 1994 compared to 1993. The increase primarily reflects the acquisitions of
selected properties to compliment existing North America producing areas and
the addition of new international activities in India. See
"Business -- Exploration and Production" for additional information detailing
the specific geographic locations of the Company's drilling programs and
"-- Outlook" below for a discussion related to future exploration and
development expenditure plans.
Exploration and development expenditures in 1993 increased to $438
million, an 8% increase, as compared to the $406 million expended in 1992. The
increase was attributable to increased domestic drilling activity with reduced
emphasis on development drilling expenditures associated with tight gas sand
formations. The Company also implemented its first development program outside
of North America during 1993, installing a jacket, platform and production
facilities and initiating natural gas production from the Kiskadee field
offshore the southeast coast of Trinidad.
HEDGING TRANSACTIONS
With the objective of enhancing the certainty of future revenues, the
Company has, as of October 23, 1995, entered into hedging transactions for
approximately 400 BBtu per day (approximately 381 MMcf per day) and 529 BBtu
per day (approximately 504 MMcf per day) of its North America natural gas
volumes for the last three months of 1995 and the year 1996, respectively. A
significant portion of the 1995 and substantially all of the 1996 hedge
transactions involve NYMEX-based commodity price swap agreements totaling 260
BBtu per day at an average price of $1.98 per MMBtu and 447 BBtu per day at an
average price of $2.00 per MMBtu for the last three months of 1995 and the
year 1996, respectively. The remaining hedge transactions of 140 BBtu per day
and 82 BBtu per day for the last three months of 1995 and the year 1996,
respectively, include notional and physical transactions that involve fixed
price sales contracts and volumetric production payment and exchange
agreements. Included in the 1996 hedge transactions are commodity price swap
agreements totaling 200 BBtu per day of notional volumes at a weighted average
NYMEX-based price of $1.97 per MMbtu which include one-time options
exercisable by the counterparty on or before December 17, 1996 totaling 200
BBtu per day of notional volumes in 1997 and 1998 at the same weighted average
NYMEX-based price of $1.97 per MMBtu. The Company has also, as of October 16,
1995, hedged approximately 10,100 Bbl per day and 9,600 Bbl per day of its
North
29
America crude oil and condensate volumes using commodity price swap agreements
at NYMEX-based West Texas Intermediate Crude Oil ("WTI") prices averaging
$18.77 per Bbl and $18.90 per Bbl for the last three months of 1995 and the
year 1996, respectively. Included in the 1995 and 1996 hedge transactions are
commodity price swap agreements totaling up to 3,000 Bbl per day at WTI prices
ranging between $18.70 and $18.80 per Bbl each of which includes a one-time
option exercisable by the counterparty at various times up to and including
December 31, 1996 and for various periods some of which extend through
December 31, 2000 at the same respective NYMEX-based prices as are applicable
in the individual agreements for the 1995 and 1996 periods. The Company
continues to evaluate the potential for entering into and may enter into,
additional hedging transactions related to certain of the remaining months in
1995, and in future years. In addition, the Company also may close out any
portion of the existing or yet to be entered into hedges as determined
appropriate by management of the Company.
TRADING TRANSACTIONS
Subsequent to September 30, 1995, the Company sold call options with a
notional volume of 50 BBtu per day at an average price of $2.10 per MMBtu for
the period January through December, 1996.
FINANCING
The Company's long-term debt-to-total-capital ratio was 19%, 15% and 14%
as of September 30, 1995 and December 31, 1994 and 1993, respectively. The
Company has entered into an agreement with Enron Corp. pursuant to which the
Company may borrow funds from Enron Corp. at a representative market rate of
interest on a revolving basis. During 1994, there were no funds borrowed by
the Company under this agreement. During the first nine months of 1995, the
average of the daily balances of funds borrowed by the Company under the
agreement was $2.3 million, and the balance at September 30, 1995 was $16.3
million. Under a promissory note effective January 1, 1993 at a fixed interest
rate of 7%, the Company may advance funds temporarily surplus to the Company
to Enron Corp. for investment purposes. Daily outstanding balances of funds
advanced to Enron Corp. under the note averaged $200,000 during the first nine
months of 1995 and $69 million during 1994 with no balance outstanding at
December 31, 1994 or September 30, 1995. There was a balance of $7 million
outstanding at December 31, 1994 under a commercial paper program initiated in
1990. Proceeds from the commercial paper program were used to fund current
transactions. During 1994, total long-term debt increased $37 million to $190
million as a result of $23 million of new borrowings related to certain
international drilling activities, a $7 million increase in commercial paper,
and the recording of an $8 million capital lease obligation. The estimated
fair value of the Company's long-term debt, including current maturities of $2
million and $30 million, at December 31, 1994 and 1993 was $186 million and
$192 million, respectively, based upon quoted market prices and, where such
prices were not available, upon interest rates currently available to the
Company at year end.
OUTLOOK
Uncertainty continues to exist as to the direction of future North
America natural gas price trends and there is a wide divergence in the
opinions held by some in the industry. However, recent history would tend to
support, and it seems there is emerging among a larger number of industry
representatives somewhat of a consensus, that natural gas prices will remain
below parity with crude oil, condensate and natural gas liquids for some time.
This situation is being impacted by improvements in the technology used in
drilling and completing oil and gas wells that are tending to mitigate the
impacts of fewer oil and gas wells being drilled, the deregulation of the
natural gas market under Federal Energy Regulatory Commission Order 636 and
subsequent related orders, and improvements being realized in the availability
and utilization of natural gas storage capacity. However, the continually
increasing recognition of natural gas as a more environmentally friendly
source of energy along with the availability of significant domestically
sourced supplies should result
30
in further increases in demand and a supporting/strengthening of the overall
natural gas market over time. Being primarily a natural gas producer, the
Company is more significantly impacted by changes in natural gas prices than
by changes in crude oil and condensate prices. Based on the portion of the
Company's anticipated natural gas volumes for which prices have not, in
effect, been hedged using NYMEX-related commodity market transactions,
long-term marketing contracts and the sale of a volumetric production payment,
the Company's net income and cash flow sensitivity to changing natural gas
prices is approximately $4.0 million for each $.10 per Mcf change in average
wellhead natural gas prices. Using various commodity price hedging mechanisms,
the Company has, in effect, locked in prices for an average of about 50% of
its anticipated wellhead natural gas volumes and about 30% of its anticipated
wellhead crude oil and condensate volumes for the year 1995 and about 65% of
its anticipated wellhead natural gas volumes and about 40% of its anticipated
wellhead crude oil and condensate volumes for the year 1996. The percentage of
volumes hedged may change during the remainder of 1995 and will change in
future years.
Other factors representing positive impacts that are more certain
continue to hold good potential for the Company in future periods. While the
drilling qualification period for the tight gas sand federal income tax credit
expired on December 31, 1992, the Company has continued in 1995, and should
continue in the future, to realize significant benefits associated with
production from wells drilled during the qualifying period as it will be
eligible for the federal income tax credit through the year 2002. However, all
other factors remaining equal, the annual benefit, which was $36 million in
1994 and is estimated to be approximately $21 million for 1995, is expected to
continue to decline in future periods as production from the qualified wells
declines. The drilling qualification period for a certain state severance tax
exemption available on qualifying high-cost natural gas revenues continues
through August 1996 in its current form and in a modified and somewhat reduced
form from that point through August 2002. Consequently, new qualifying
production will be added prospectively to that presently qualified. Other
natural gas marketing activities are also expected to continue to contribute
meaningfully to financial results. The Company completed a fairly significant
restructure of its other natural gas marketing portfolio during 1992 with the
sale of a volumetric production payment of approximately 124 Bcfe (136 TBtu)
for $326.8 million that was subsequently revised in 1993 and elimination of
most delivery obligations under four long-term fixed price marketing
contracts. The proceeds from the sale of the volumetric production payment
added substantially to the financial flexibility of the Company supporting
future development while the combined effect of all elements of the
restructuring on net income has not been, and will not in the future be,
significant. These factors are expected to contribute significantly to
earnings, cash flow, and the ability of the Company to pursue the continuation
of an active exploration, development and selective acquisition program.
The Company plans to continue to focus a substantial portion of its
development and certain exploration expenditures in its major producing areas
in North America. However, based on the continuing uncertainty associated with
North America natural gas prices and the continuing weakness in that market,
and as a result of the recent success realized offshore Trinidad and
opportunities available to the Company in conjunction with the recent signing
of agreements in India, the Company anticipates expending an increasing
portion of its available funds in the further development of these
opportunities. In addition, the Company expects to include limited but
meaningful exploratory exposure in other areas outside of North America in its
expenditure plans and will continue to evaluate the potential for involvement
in other exploitation type opportunities. The continuation of expenditures in
other areas outside of North America in the near term is expected to be
primarily for the evaluation of conventional oil and gas exploration and
exploitation opportunities in the U.K. North Sea and China, respectively, and
coalbed methane recovery prospects in Australia and China. Other prospects in
various locations will also attract the expenditure of some funds. (See
"Business -- Exploration and Production" for additional information detailing
the specific geographic locations of the related drilling programs). The
Company continues to pursue a strategy of funding
31
exploration, development and acquisition activities primarily from available
internally generated cash flow.
The level of exploration and development expenditures will vary in future
periods depending on energy market conditions and other related economic
factors. Based upon existing economic and market conditions, the Company
believes net operating cash flow and available financing alternatives will be
sufficient to fund its net investing cash requirements for the near term.
However, the Company has significant flexibility with respect to its financing
alternatives and adjustment of its exploration and development expenditure
plans as circumstances warrant. While the Company has certain continuing
commitments associated with expenditure plans related to operations in India,
they are not anticipated to be material when considered in relation to the
total financial capacity of the Company.
OTHER
The cost of environmental compliance has not been material to the
Company.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121 -- "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (the "Standard"). The Standard requires, among other
things, that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company is required to adopt the Standard no later than the
first quarter of 1996. While the Company has not finalized its evaluation of
the effect of adoption of the Standard, its evaluation to date indicates that
application of the Standard to its current portfolio of assets could result in
impairment charges ranging from $5 million to $60 million before federal
income taxes ($3 million to $39 million after federal income taxes). However,
such impairment charges would be non-cash charges.
32
MANAGEMENT
The current directors and executive officers of the Company and their
names and ages are as follows:
NAME AGE POSITION
Forrest E. Hoglund................. 62 Chairman of the Board, President and
Chief Executive Officer; Director
Fred C. Ackman..................... 64 Director
Richard D. Kinder.................. 51 Director
Kenneth L. Lay..................... 53 Director
Edward Randall, III................ 68 Director
Joe Michael McKinney............... 55 President-International Operations
Mark G. Papa....................... 49 President-North American Operations
Walter C. Wilson................... 53 Senior Vice President and Chief
Financial Officer
Ben B. Boyd........................ 54 Vice President and Controller
Dennis M. Ulak..................... 41 Vice President and General Counsel
Forrest E. Hoglund joined the Company as Chairman of the Board, Chief
Executive Officer and Director in September 1987. Since May 1990, he has also
served as President of the Company. Mr. Hoglund was a director of USX
Corporation from February 1986 until September 1987. He joined Texas Oil & Gas
Corp. ("TXO") in 1977 as president, was named Chief Operating Officer in 1979,
Chief Executive Officer in 1982, and served TXO in those capacities until
September 1987. Mr. Hoglund is also an advisory director of Texas Commerce
Bank National Association.
Fred C. Ackman is the former Chairman, President and Chief Executive
Officer of The Superior Oil Company. For over five years Mr. Ackman has been a
consultant to the oil and gas industry and has interests in ranching and
investments.
Richard D. Kinder has been President and Chief Operating Officer of Enron
Corp. since October 1990. From December 1988 until October 1990, he served
Enron Corp. as Vice Chairman of the Board. For over five years prior to his
election as Vice Chairman, Mr. Kinder served in various management and legal
positions with Enron Corp. and its affiliates. Mr. Kinder is also a director
of Enron Corp., Enron Global Power & Pipelines L.L.C., EOTT Energy Corp. (the
general partner of EOTT Energy Partners, L.P.), Enron Liquids Pipeline Company
(the general partner of Enron Liquids Pipeline, L.P.), Sonat Offshore Drilling
Inc. and Baker Hughes Incorporated.
Kenneth L. Lay has been Chairman of the Board and Chief Executive Officer
of Enron Corp. for over five years. From February 1989 until October 1990, he
also served as President of Enron Corp. Mr. Lay is also a director of Eli
Lilly and Company, Compaq Computer Corporation, Trust Company of the West,
EOTT Energy Corp. (the general partner of EOTT Energy Partners, L.P.), and
Enron Corp.
Edward Randall, III is principally involved in investments. Mr. Randall
is also a director of KN Energy, Inc. and PaineWebber Group Inc.
Joe Michael McKinney has been President-International Operations since
February 1994 with responsibilities for all exploration, drilling, production
and engineering activities for the Company's international ventures outside
North America. Mr. McKinney joined Enron Oil & Gas International, Inc., a
wholly-owned subsidiary of the Company, in December 1991 as Senior Vice
President of Operations and was elected President and Chief Operating Officer
of Enron Oil & Gas International, Inc. in April 1993, a capacity in which he
continues to serve. Prior to joining the Company, Mr. McKinney held operations
management positions with Union Texas Petroleum Company, The Superior Oil
Company and Exxon Company, USA.
33
Mark G. Papa has been President-North American Operations since February
1994. From May 1986 through January 1994, Mr. Papa served as Senior Vice
President-Operations. Mr. Papa joined Belco Petroleum Corporation, a
predecessor of the Company, in 1981 as Division Production Coordinator and
served as Senior Vice President-Drilling and Production, BelNorth Petroleum
Corporation from May 1984 until May 1986.
Walter C. Wilson has been Senior Vice President and Chief Financial
Officer since May 1991. Mr. Wilson joined the Company in November 1987 as Vice
President and Controller and was named Senior Vice President-Finance in
October 1988. Prior to joining the Company Mr. Wilson held financial
management positions with Exxon Company, USA for 16 years and The Superior Oil
Company for four years.
Ben B. Boyd has been Vice President and Controller since March 1991. Mr.
Boyd joined the Company in March 1989 as Director of Accounting and was named
Controller in May 1990. Prior to joining the Company, Mr. Boyd held financial
management positions with DeNovo Oil & Gas, Inc., Scurlock Oil Company and
Coopers & Lybrand.
Dennis M. Ulak has been Vice President and General Counsel since March
1992. Mr. Ulak joined the Company in March 1987 as Senior Counsel and was
named Assistant General Counsel in August 1990. Prior to joining the Company,
Mr. Ulak held various legal positions with Enron Corp. and Northern Natural
Gas Company.
THE SELLING STOCKHOLDER
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE STOCK OFFERINGS AFTER STOCK OFFERINGS(1)(2)
----------------------------- SHARES TO -----------------------------
SELLING STOCKHOLDER SHARES PERCENTAGE BE SOLD(1) SHARES PERCENTAGE
- ------------------------------------- -------------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Enron Corp. 128,000,000 80% 27,000,000 101,000,000 63%
</TABLE>
- ------------
(1) Assumes that the Underwriters' over-allotment options in the Stock
Offerings are not exercised. If such options are exercised in full, Enron
Corp. will sell 31,050,000 shares of Common Stock in the Stock Offerings
and will beneficially own 96,950,000 shares of Common Stock (approximately
61% of the outstanding shares) after the Stock Offerings.
(2) Concurrently with the Stock Offerings, Enron Corp. is offering
Exchangeable Notes, which at maturity must be exchanged for no more than
10,000,000 shares of Common Stock owned by Enron Corp., depending on the
market price of the Common Stock at such time, subject to adjustment and
to Enron Corp.'s option to pay an amount in cash in lieu of such mandatory
exchange. Following consummation of the Exchangeable Notes Offering, the
shares that may be delivered upon exchange therefor will continue to be
beneficially owned by Enron Corp. until such time, if any, as they are
delivered at maturity of the Exchangeable Notes. If the Underwriters'
over-allotment options in the Stock Offerings and the Exchangeable Notes
Offering are exercised in full and the maximum number of shares of Common
Stock are delivered at maturity of the Exchangeable Notes, Enron Corp.
will beneficially own 85,950,000 shares of Common Stock or approximately
54% of the outstanding shares.
The registration related to the Stock Offerings and the Common Stock
deliverable upon exchange of the Exchangeable Notes is being provided pursuant
to the terms of a Stock Restriction and Registration Agreement with Enron
Corp., under which the Company has agreed that upon the request of Enron Corp.
(or certain assignees), the Company will register under the Securities Act and
applicable state securities laws the sale of Common Stock owned by Enron Corp.
The Company's obligation is subject to certain limitations relating to a
minimum amount of Common Stock required for registration, the timing of
registration and other similar matters. The Company is obligated to pay all
expenses incidental to such registration, excluding underwriters' discounts
and commissions and certain legal fees and expenses.
34
RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP.
OWNERSHIP OF COMMON STOCK
Through its ability to elect all of the directors of the Company, Enron
Corp. has the ability to control all matters relating to the management of the
Company, including any determination with respect to acquisition or
disposition of Company assets, future issuance of Common Stock or other
securities of the Company and any dividends payable on the Common Stock. Enron
Corp. also has the ability to control the Company's exploration, development,
acquisition and operating expenditure plans. There is no agreement between
Enron Corp. and the Company that would prevent Enron Corp. from acquiring
additional shares of Common Stock of the Company.
The sale by Enron Corp. of the shares of Common Stock of the Company will
cause Enron Corp.'s ownership interest in the Company to fall below 80% with
the result that (i) the Company will cease to be included in the consolidated
federal income tax return filed by Enron Corp. and (ii) the Tax Allocation
Agreement between the Company and Enron Corp. described below will cease to be
effective from the time at which deconsolidation occurs for future periods,
but will remain in effect with regard to periods prior to deconsolidation. The
Company has entered into a supplemental agreement with Enron Corp. clarifying
future potential adjustments associated with the final settlement on audit of
taxes for periods prior to the deconsolidation for issues not addressed in the
original agreement. The Company does not believe that the cessation of
consolidated tax reporting with Enron Corp. and effectiveness of the Tax
Allocation Agreement concurrent with deconsolidation will have a material
adverse effect on its financial condition or results of operations.
CONTRACTUAL ARRANGEMENTS
The Company entered into a Services Agreement (the "Services Agreement")
with Enron Corp. effective January 1994, pursuant to which Enron Corp.
provides various services, such as maintenance of certain employee benefit
plans, provision of telecommunications and computer services, lease of office
space and the provision of purchasing and operating services and certain other
corporate staff and support services. Such services historically have been
supplied to the Company by Enron Corp., and the Services Agreement provides
for the further delivery of such services substantially identical in nature
and quality to those services previously provided. The Company has agreed to a
fixed rate for the rental of office space and to reimburse Enron Corp. for all
other direct costs incurred in rendering services to the Company under the
contract and to pay Enron Corp. for allocated indirect costs incurred in
rendering such services up to a maximum of $6.7 million for 1994, such cap to
be increased in subsequent years for inflation and certain changes in the
Company's allocation bases with any increase not to exceed 7.5% per year.
Approximately $6.6 million was paid under the Services Agreement by the
Company to Enron Corp. in 1994. The Services Agreement is for an initial term
of five years through December 1998 and will continue thereafter until
terminated by either party.
In March 1995, in a series of transactions with Enron Corp. and an
affiliate of Enron Corp., the Company exchanged all of its fuel supply and
purchase contracts and related price swap agreements associated with a Texas
City cogeneration plant (the "Cogen Contracts") for certain natural gas price
swap agreements (the "Swap Agreements") of equivalent value. As a result of
the transactions, the Company has been relieved of all performance obligations
associated with the Cogen Contracts. The Company will realize net operating
revenues and receive corresponding cash payments of approximately $91 million
during the period extending through December 31, 1999 under the terms of the
Swap Agreements. The estimated fair value of the Swap Agreements was
approximately $81 million at the date the Swap Agreements were received. The
net of this series of transactions will result in increases in net operating
revenues and cash receipts for the Company during 1995 and 1996 of
approximately $13 million and $7 million, respectively, with offsetting
decreases in 1998 and 1999 versus that anticipated under the Cogen Contracts.
35
The Company has been included in the consolidated federal income tax
return filed by Enron Corp. as the common parent for itself and its
subsidiaries and affiliated companies, excluding any foreign subsidiaries.
Consistent therewith and pursuant to a Tax Allocation Agreement between the
Company, the Company's subsidiaries and Enron Corp., either Enron Corp. has
paid to the Company and each subsidiary an amount equal to the tax benefit
realized in the Enron Corp. consolidated federal income tax return resulting
from the utilization of the Company's or the subsidiary's net operating losses
and/or tax credits, or the Company and each subsidiary has paid to Enron Corp.
an amount equal to the federal income tax computed on its separate taxable
income less the tax benefits associated with any net operating losses and/or
tax credits generated by the Company or the subsidiary which were utilized in
the Enron Corp. consolidated return. Enron Corp. has paid the Company and each
subsidiary for the tax benefits associated with their net operating losses and
tax credits utilized in the Enron Corp. consolidated return, provided that a
tax benefit was realized except as discussed below, even if such benefits
could not have been used by the Company or the subsidiary on a separately
filed tax return. The Company entered into an agreement with Enron Corp.
providing for the Company to be paid for all realizable benefits associated
with tight gas sand federal income tax credits concurrent with tax reporting
and settlement for the periods in which they were generated. The Tax
Allocation Agreement applies to the Company and each of its subsidiaries for
all years in which the Company or any of its subsidiaries are or were included
in the Enron Corp. consolidated return. To the extent a state or other taxing
jurisdiction requires or permits a consolidated, combined, or unitary tax
return to be filed and such return includes the Company or any of its
subsidiaries, the principles expressed with respect to consolidated federal
income tax allocation shall apply. The Tax Allocation Agreement will cease to
be effective from the time at which deconsolidation occurs for future periods,
but will remain in effect with regard to periods prior to deconsolidation. For
issues not addressed in the original agreement, the Company has entered into a
supplemental agreement with Enron Corp. clarifying future potential
adjustments associated with the final settlement on audit of taxes for periods
prior to the deconsolidation. The Company does not believe that the cessation
of consolidated tax reporting with Enron Corp. and effectiveness of the Tax
Allocation Agreement concurrently with deconsolidation will have a material
adverse effect on its financial condition or results of operations.
For a discussion of transactions between the Company and Enron Corp. and
its affiliates, see the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 incorporated herein by reference. See "Incorporation
of Certain Documents by Reference."
CONFLICTS OF INTEREST
The nature of the respective businesses of the Company and Enron Corp.
and its affiliates is such as to potentially give rise to conflicts of
interest between the two companies. Conflicts could arise, for example, with
respect to transactions involving purchases, sales and transportation of
natural gas and other business dealings between the Company and Enron Corp.
and its affiliates, potential acquisitions of businesses or oil and gas
properties, the issuance of additional shares of voting securities, the
election of directors or the payment of dividends by the Company.
Circumstances may also arise that would cause Enron Corp. to engage in
the exploration for and/or development and production of natural gas and crude
oil in competition with the Company. For example, opportunities might arise
which would require financial resources greater than those available to the
Company, which are located in areas or countries in which the Company does not
intend to operate or which involve properties that the Company would be
unwilling to acquire. Also, Enron Corp. might acquire a competing oil and gas
business as part of a larger acquisition. In addition, as part of Enron
Corp.'s strategy of securing supplies of natural gas or capital, Enron Corp.
may from time to time acquire producing properties or interests in entities
owning producing properties, and thereafter engage in exploration, development
and production activities with respect to such properties or indirectly engage
in such activities through such companies. Enron Corp. may also acquire
interests in oil and gas properties or companies in connection with its
financing
36
activities. For example, in its financing activities Enron Corp. or any entity
in which it has an interest may make loans secured by oil and gas properties
or securities of oil and gas companies, may acquire production payments or may
receive interests in oil and gas properties as equity components of lending
transactions. As a result of its lending activities, Enron Corp. may also
acquire oil and gas properties or companies upon foreclosure of secured loans
or as part of a borrower's rearrangement of its obligations. Such acquisition,
exploration, development and production activities may directly or indirectly
compete with the Company's business. There can be no assurances that Enron
Corp. will not engage directly or indirectly through entities other than the
Company, in the natural gas and crude oil exploration, development and
production business in competition with the Company.
Joint Energy Development Investments Limited Partnership ("JEDI"), a
limited partnership in which Enron Capital & Trade Resources Corp. ("ECT"), a
wholly owned subsidiary of Enron Corp., owns a 50% general partner interest,
has entered into an agreement to acquire a controlling interest in Coda. Coda
is engaged in the exploration for, and the development, production and
marketing of, natural gas and crude oil primarily in North Texas and Oklahoma.
Crude oil accounted for approximately 86% of Coda's proved reserves. At
December 31, 1994, Coda reported estimated proved natural gas reserves of
39,808 MMcf and estimated proved crude oil, condensate and natural gas liquids
reserves of 39,207 MBbls. Enron anticipates that the transaction will be
consummated in early 1996, subject to Coda stockholder approval and other
conditions. Conflicts may arise between Coda and JEDI, and if the acquisition
of Coda occurs Enron will be required to resolve such conflicts in a manner
that is consistent with its fiduciary and contractual duties to other
investors in Coda and JEDI and its fiduciary duties to the Company. ECT has
entered into an agreement with JEDI and other investors in Coda designed to
minimize certain conflicts of interest that may arise and providing, among
other things, that the Company has no obligation to offer any business
opportunities to Coda.
The Company and Enron Corp. and its affiliates have in the past entered
into material intercompany transactions and agreements incident to their
respective businesses, and the Company and Enron Corp. and its affiliates may
be expected to enter into material transactions and agreements from time to
time in the future. Such transactions and agreements have related to, among
other things, the purchase and sale of natural gas and crude oil, the
financing of exploration and development efforts by the Company, and the
provision of certain corporate services. The Company believes that its
existing transactions and agreements with Enron Corp. and its affiliates have
been at least as favorable to the Company as could be obtained from third
parties, and the Company intends that the terms of any future transactions and
agreements between the Company and Enron Corp. and its affiliates will be at
least as favorable to the Company as could be obtained from third parties.
37
DESCRIPTION OF COMMON STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 160,000,000
shares of Common Stock, $.01 par value, of which 159,799,955 shares were
outstanding on October 31, 1995. The following summary description of the
capital stock of the Company is qualified in its entirety by reference to the
Restated Certificate of Incorporation of the Company, as amended, a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
The Common Stock possesses ordinary voting rights for the election of
directors and in respect to other corporate matters, each share being entitled
to one vote. There are no cumulative voting rights, meaning that the holders
of a majority of the shares voting for the election of directors can elect all
the directors if they choose to do so. The Common Stock carries no preemptive
rights and is not convertible, redeemable or assessable, or entitled to the
benefits of any sinking fund. The holders of Common Stock are entitled to
dividends in such amounts and at such times as may be declared by the Board of
Directors out of funds legally available therefor.
Upon liquidation or dissolution, holders of Common Stock are entitled to
share ratably in all net assets available for distribution to stockholders
after payment of any corporate debts. All outstanding shares of Common Stock
are duly authorized, validly issued, fully paid and nonassessable.
The transfer agent and registrar of the Common Stock is First Chicago
Trust Company of New York, Jersey City, New Jersey.
LIMITATION ON DIRECTORS' LIABILITY
Delaware corporation law authorizes corporations to limit or eliminate
the personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. The duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by such laws,
directors are accountable to corporations and their stockholders for monetary
damages for conduct constituting gross negligence in the exercise of their
duty of care. The Delaware laws enable corporations to limit available relief
to equitable remedies such as injunction or rescission. The Restated
Certificate of Incorporation, as amended, of the Company limits the liability
of directors of the Company to the Company or its stockholders (in their
capacity as directors but not in their capacity as officers) to the fullest
extent permitted by the Delaware law. Specifically, directors of the Company
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 the Company 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.
This provision in the Restated Certificate of Incorporation may have the
effect of reducing the likelihood of derivative litigation against directors,
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefited the Company and its
stockholders.
38
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
FOR NON-UNITED STATES HOLDERS OF COMMON STOCK
The following is a summary of certain United States federal income tax
consequences of the acquisition, ownership and disposition of Common Stock by
a holder that, for United States federal income and estate tax purposes, is a
Non-United States Holder. For purposes of this discussion, a "Non-United
States Holder" means a corporation, individual or partnership that is, as to
the United States, a foreign corporation, a non-resident alien individual or a
foreign partnership, or a trust or estate other than one the income of which
is subject to United States federal income tax regardless of its source. This
summary does not address all aspects of United States federal income and
estate taxation and does not deal with foreign, state and local tax
consequences that may be relevant to Non-United States Holders in light of
their specific circumstances. Furthermore, this summary is based on the
provisions of the United States Internal Revenue Code of 1986, as amended, and
the regulations, rulings and judicial decisions thereunder, all of which are
subject to change. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE UNITED STATES TAX CONSEQUENCES TO THEM OF
ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR
OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends paid to a Non-United States Holder generally will be subject to
withholding of United States federal income tax at a rate of 30% (or a lower
rate prescribed by an applicable tax treaty). If the dividends are effectively
connected with the conduct of a trade or business within the United States by
the Non-United States Holder, the dividends will be subject to the ordinary
United States federal income tax on net income that applies to United States
persons and will not be subject to withholding if the Non-United States Holder
files a United States Internal Revenue Service Form 4224 with the Company or
its dividend paying agent. In the case of corporate holders, such dividends
might also be subject to the United States branch profits tax at a rate of 30%
(or a lower rate prescribed by an applicable tax treaty). A Non-United States
Holder may be required to satisfy certain certification requirements in order
to obtain any reduction of or exemption from withholding under the foregoing
rules and may obtain a refund of any excess amounts currently withheld by
filing an appropriate refund claim with the United States Internal Revenue
Service.
Distributions in excess of the Company's current and accumulated earnings
and profits, as determined for United States federal income tax purposes, will
be treated first as a return of capital to the extent of the Non-United States
Holder's tax basis in the Common Stock (and will be applied against and reduce
such holder's tax basis in the Common Stock) and thereafter as gain from the
sale of Common Stock. The portion treated as a return of capital will not be
subject to United States federal income tax and the portion, if any, treated
as gain will be subject to the rules described under " -- Gain on Disposition"
below. Because the Company will not be able to determine whether a
distribution should properly be treated as a dividend or as a return of
capital at the time of payment, it is required to treat all distributions as
dividends for United States withholding tax purposes. Non-United States
Holders will be eligible to claim a refund to the extent that a distribution
represents a return of capital and may in certain circumstances be eligible to
claim a refund to the extent that a distribution is treated as gain.
Non-United States Holders should consult their own tax advisors with respect
to distributions in excess of current and accumulated earnings and profits.
GAIN ON DISPOSITION
GENERAL RULE
Subject to special rules for individuals described below, a Non-United
States Holder generally will not be subject to United States federal income
tax on gain recognized on a sale or other disposition of Common Stock unless
(a) the gain is effectively connected with the conduct of a trade or business
within the United States by the Non-United States Holder (in which case the
United States branch profits tax described above may also apply to corporate
holders) or (b) the gain is
39
treated as effectively connected with the conduct of a trade or business
within the United States because the Company is or has been a "United States
real property holding corporation" for United States federal income tax
purposes (in which case, withholding of such tax may also apply). The Company
believes that it is currently, and is likely to remain, a United States real
property holding corporation. The preceding sentence notwithstanding, under
currently effective United States federal income tax laws, gain recognized by
a Non-United States Holder will not be treated as effectively connected with
the conduct of a trade or business within the United States (or subject to
withholding) unless such Non-United States Holder held, directly or
indirectly, at any time during the five-year period ending on the date of
disposition, more than five percent of the Common Stock. Non-United States
Holders should consult applicable tax treaties, which may provide for
different rules (including possibly the exemption of certain capital gains
from tax).
INDIVIDUALS
In addition to the rules described above, an individual Non-United States
Holder who holds Common Stock as a capital asset generally will be subject to
tax on any gain recognized on the disposition of such stock if such individual
is present in the United States for 183 days or more in the taxable year of
disposition and either (a) has a "tax home" in the United States (as
specifically defined under the United States federal income tax laws) or (b)
maintains an office or other fixed place of business in the United States to
which the gain from the sale of the stock is attributable. Certain individual
Non-United States Holders may also be subject to tax pursuant to provisions of
United States federal income tax law applicable to United States expatriates.
FEDERAL ESTATE TAX
Common Stock owned or treated as owned by an individual Non-United States
Holder at the date of death will be subject to United States federal estate
tax, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company or its designated paying agent (the "payor") must report
annually to the United States Internal Revenue Service and to each Non-United
States Holder the amount of dividends paid to and the tax, if any, withheld
with respect to such holder. That information may also be made available to
the tax authorities of the country in which the Non-United States Holder
resides.
United States information reporting requirements (other than the
reporting of dividend payments described in the preceding paragraph) and
United States backup withholding (imposed at a 31% rate) generally will not
apply to dividends paid to a Non-United States Holder at an address outside
the United States, unless the payor has knowledge that the payee is a United
States person. Otherwise, information reporting and backup withholding may
apply to dividends paid on the Common Stock to a Non-United States Holder who
fails to furnish certain information, including a tax identification number,
in the manner required by United States law and applicable regulations.
Payment of the proceeds of a disposition of Common Stock by a United
States office of a broker is subject to backup withholding and information
reporting, unless the holder certifies to the broker under penalties of
perjury as to its name, address and status as a Non-United States Holder or
the holder otherwise establishes an exemption. Neither backup withholding nor
information reporting generally will apply to a payment of the proceeds of a
disposition of Common Stock by a foreign office of a foreign broker that is
not a United States Related Person (as defined below). Information reporting
requirements (but not backup withholding) will apply to a payment of the
proceeds of a disposition of Common Stock by a foreign office of a broker that
is a United States person or a United States Related Person, unless the broker
has documentary evidence in its records that the holder is a Non-United States
Related Person and certain other conditions are met, or the holder otherwise
establishes an exemption. For this purpose, a "United States Related Person"
is (a) a foreign broker, 50% or more of whose gross income for certain periods
is effectively connected with the conduct of a trade or business in the United
States or (b) a foreign broker that is a "controlled foreign corporation" for
United States federal income tax purposes.
40
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be refunded or credited against the
Non-United States Holder's United States federal income tax liability,
provided that required information is furnished to the United States Internal
Revenue Service.
PLAN OF DISTRIBUTION
This Prospectus relates to the 11,000,000 shares of Common Stock that may
be delivered by Enron Corp. pursuant to the Exchangeable Notes and is Appendix
A to the Enron Corp. Exchangeable Notes Prospectus. At maturity of the
Exchangeable Notes the principal amount of each such note will be mandatorily
exchanged by Enron Corp. into shares of Common Stock or, at the option of
Enron Corp., cash in lieu of such mandatory exchange. For a description of the
Exchangeable Notes, see "Description of the Exchangeable Notes" in the Enron
Corp. Exchangeable Notes Prospectus.
Enron Corp., the Company and the Company's Chief Executive Officer have
agreed that during the period beginning from the date of this Prospectus and
continuing to and including the date 270 days after the date of this
Prospectus, subject to certain exceptions set forth in the Underwriting
Agreement, they will not offer, sell, contract to sell or otherwise dispose of
Common Stock, any securities of the Company which are substantially similar to
shares of Common Stock or any securities which are convertible into or
exchangeable for Common Stock or such substantially similar securities without
the prior written consent of Goldman, Sachs & Co., except for the shares of
Common Stock offered in connection with the concurrent Stock Offerings.
In connection with the distribution of the Exchangeable Notes, Enron
Corp. and the Company have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act,
or to contribute to payments the Underwriters may be required to make in
respect thereof.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock deliverable upon exchange of
the Exchangeable Notes will be passed upon for the Company by Dennis M. Ulak,
Esq., Vice President and General Counsel of the Company, and for the
Underwriters by Bracewell & Patterson, L.L.P. Certain matters will be passed
upon for Enron Corp. by Vinson & Elkins L.L.P. Mr. Ulak owns substantially
less than 1% of the outstanding shares of Common Stock of the Company or
common stock of Enron Corp. Bracewell & Patterson, L.L.P. provides services to
Enron Corp. and certain of its subsidiaries (including the Company) and
affiliates on matters unrelated to the offering of the Exchangeable Notes, the
delivery of the Common Stock upon exchange thereof and the Stock Offerings.
EXPERTS
The consolidated financial statements and schedule included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing in
giving said report.
The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1994, and the estimates from the reports
of that firm appearing in such Annual Report, are incorporated by reference on
the authority of said firm as experts in petroleum engineering and in giving
such reports.
41
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS 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 NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
-----
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Prospectus Summary................... 3
Use of Proceeds...................... 10
Price Range of Common
Stock and Cash Dividends........... 10
Business............................. 11
Selected Consolidated Financial and
Operating Information.............. 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Management........................... 33
The Selling Stockholder.............. 34
Relationship Between the
Company and Enron Corp............. 35
Description of Common Stock.......... 38
Certain United States Federal Tax
Consequences For Non-United States
Holders of Common Stock............ 39
Plan of Distribution................. 41
Validity of Common Stock............. 41
Experts.............................. 41
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
PROSPECTUS
------------------------
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS 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 NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
-----
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Prospectus Summary................... 3
Use of Proceeds...................... 10
Price Range of Common
Stock and Cash Dividends........... 10
Business............................. 11
Selected Consolidated Financial and
Operating Information.............. 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Management........................... 33
The Selling Stockholder.............. 34
Relationship Between the
Company and Enron Corp............. 35
Description of Common Stock.......... 38
Certain United States Federal Tax
Consequences For Non-United States
Holders of Common Stock............ 39
Plan of Distribution................. 41
Validity of Common Stock............. 41
Experts.............................. 41
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
PROSPECTUS
------------------------
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS 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 NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ENRON SINCE THE DATE HEREOF OR THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
-----
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Prospectus Summary................... 3
Risk Factors Relating to Exchangeable
Notes.............................. 5
Enron Corp........................... 6
Selected Financial Data of Enron..... 9
Capitalization....................... 10
Relationship Between Enron and EOG.. 11
Use of Proceeds...................... 13
Ratio of Enron's Earnings to Fixed
Charges............................ 13
Price Range of EOG Common Stock and
Cash Dividends..................... 13
Description of the Exchangeable
Notes.............................. 14
Certain United States Federal Income
Tax Considerations................. 23
Underwriting......................... 26
Validity of the Exchangeable Notes... 27
Experts.............................. 27
Prospectus Relating to Common Stock
of Enron Oil & Gas Company......... Appendix A
10,000,000 EXCHANGEABLE NOTES
ENRON CORP. [LOGO]
% EXCHANGEABLE NOTES
DUE , 1998
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
REPRESENTATIVES OF THE UNDERWRITERS
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth those expenses to be incurred by Enron in
connection with the issuance and distribution of the securities being
registered. Except for the Securities and Exchange Commission registration
fee, all amounts shown are estimates.
Securities and Exchange Commission
Registration Fee................... $ 75,388
NASD Filing Fees..................... 22,365
Accounting Fees and Expenses......... *
Legal Fees and Expenses.............. *
Fees and Expenses of Transfer Agent
and Trustee........................ *
Blue Sky Fees and Expenses, Including
Counsel Fees....................... *
Listing Fees......................... *
Printing and Engraving Expenses...... *
Miscellaneous........................ *
-----------
Total...................... $ *
===========
- ------------
* To be provided by amendment
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of Chapter 1 of Title 8 of the Delaware Code provides that
every corporation created under the provisions thereof shall have the power to
indemnify its directors, officers, employees and agents against certain
liabilities.
The Restated Certificate of Incorporation, as amended, of Enron contains
the following provisions relating to indemnification of directors and
officers:
1. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
2. (A) Each person who was or is made a party or is threatened to
be made a party to or is involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom
he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by such
person in connection therewith, and such indemnification shall continue
as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her
II-1
heirs, executors and administrators; provided, however, that, except as
provided in paragraph (B) hereof, the Corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or
part thereof) initiated by such person only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The
right to indemnification conferred in this Section shall be a contract
right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its
final disposition; provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition
of the proceeding, shall be made only upon delivery to the Corporation of
an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section
or otherwise. The Corporation may, by action of its Board of Directors,
provide indemnification to employees and agents of the Corporation with
the same scope and effect as the foregoing indemnification of directors
and officers.
(B) If a claim under paragraph 2(A) of this Article XVI is not paid
in full by the Corporation within thirty days after a written claim has
been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall
be a defense to any such action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required,
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of
conduct.
(C) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Section shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders
or disinterested directors or otherwise.
(D) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation
Law."
Enron has purchased liability insurance policies covering its directors
and officers to provide protection where Enron cannot legally indemnify a
director or officer and where a claim arises under the Employee Retirement
Income Security Act of 1974 against a director or officer based on an alleged
breach of fiduciary duty or other wrongful act.
II-2
ITEM 16. EXHIBITS
1 -- Form of Underwriting Agreement for Exchangeable Notes.
*4(a) -- Indenture dated as of November 1, 1985, between Enron
and Harris Trust and Savings Bank (Form T-3
Application for Qualification of Indentures under the
Trust Indenture Act of 1939, File No. 22-14390, filed
October 24, 1985).
4(b) -- Form of First Supplemental Indenture between Enron and
Harris Trust and Savings Bank, as Trustee.
**5 -- Opinion of James V. Derrick, Jr., Esq., Senior Vice
President and General Counsel of Enron, as to validity
of the Exchangeable Notes.
12 -- Computations of Ratios of Earnings to Fixed Charges.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of DeGolyer and MacNaughton.
23(c)] -- The consent of James V. Derrick, Jr., Esq., is
contained in his opinion filed as Exhibit 5 hereto.
24 -- Powers of Attorney.
25 -- Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Harris Trust and Savings
Bank.
- ------------
* Incorporated by reference as indicated.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of
Enron's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the provisions described under Item 15
above, or otherwise, the Registrants have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of such registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, such
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial BONA FIDE offering thereof.
II-3
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ENRON
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON AND STATE OF TEXAS, ON THE
7TH DAY OF NOVEMBER, 1995.
ENRON CORP.
(Registrant)
By: _________KURT S. HUNEKE________
KURT S. HUNEKE
VICE PRESIDENT, FINANCE AND
TREASURER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES WITH ENRON CORP. INDICATED AND ON THE 7TH DAY OF NOVEMBER,
1995.
SIGNATURE TITLE
- ---------------------------- --------------------------------------------------
KENNETH L. LAY Chairman of the Board, Chief Executive Officer and
(KENNETH L. LAY) Director (Principal Executive Officer)
JACK I. TOMPKINS Senior Vice President and Chief Information,
(JACK I. TOMPKINS) Administrative and Accounting Officer (Principal
Accounting Officer)
KURT S. HUNEKE Vice President, Finance and Treasurer (Principal
(KURT S. HUNEKE) Financial Officer)
ROBERT A. BELFER* Director
(ROBERT A. BELFER)
NORMAN P. BLAKE, JR.* Director
(NORMAN P. BLAKE, JR.)
JOHN H. DUNCAN* Director
(JOHN H. DUNCAN)
JOE H. FOY* Director
(JOE H. FOY)
WENDY L. GRAMM* Director
(WENDY L. GRAMM)
ROBERT K. JAEDICKE* Director
(ROBERT K. JAEDICKE)
II-4
SIGNATURE TITLE
- ---------------------------------- --------------------------------------------
RICHARD D. KINDER* Director and President and Chief
(RICHARD D. KINDER) Operating Officer
CHARLES A. LEMAISTRE* Director
(CHARLES A. LEMAISTRE)
JOHN A. URQUHART* Director
(JOHN A. URQUHART)
JOHN WAKEHAM* Director
(JOHN WAKEHAM)
CHARLS E. WALKER* Director
(CHARLS E. WALKER)
HERBERT S. WINOKUR, JR.* Director
(HERBERT S. WINOKUR, JR.)
*By: PEGGY B. MENCHACA
PEGGY B. MENCHACA
(ATTORNEY-IN-FACT FOR PERSONS
INDICATED)
II-5
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- --------------------- ---------------------------------------------------------
1 -- Form of Underwriting Agreement for Exchangeable Notes.
*4(a) -- Indenture dated as of November 1, 1985, between Enron and
Harris Trust and Savings Bank (Form T-3 Application for
Qualification of Indentures under the Trust Indenture Act
of 1939, File No. 22-14390, filed October 24, 1985).
4(b) -- Form of First Supplemental Indenture between Enron and
Harris Trust and Savings Bank, as Trustee.
**5 -- Opinion of James V. Derrick, Jr., Esq., Senior Vice
President and General Counsel of Enron, as to validity of
the Exchangeable Notes.
12 -- Computations of Ratios of Earnings to Fixed Charges.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of DeGolyer and MacNaughton.
23(c) -- The consent of James V. Derrick, Jr., Esq., is contained
in his opinion filed as Exhibit 5 hereto.
24 -- Powers of Attorney.
25 -- Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Harris Trust and Savings Bank.
- ----------
* Incorporated by reference as indicated.
** To be filed by amendment.
<PAGE>
EXHIBIT 1
ENRON CORP.
% EXCHANGEABLE NOTES DUE, 1998
UNDERWRITING AGREEMENT
(U.S. VERSION)
. . . . . , 1995
Goldman, Sachs & Co.,
Merrill Lynch & Co.
Salomon Brothers Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Enron Corp., a Delaware corporation (the "Company"), proposes, subject to
the terms and conditions stated herein, to sell to the Underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of 10,000,000 Exchangeable
Notes (the "Firm Notes") and, at the election of the Underwriters, up to
1,000,000 additional Exchangeable Notes (the "Optional Notes"), of __%
Exchangeable Notes due _____, 1998 of the Company ("Exchangeable Notes") (the
Firm Notes and the Optional Notes which the Underwriters elect to purchase
pursuant to Section 2 hereof being collectively called the "Notes"). At maturity
(including as a result of acceleration or otherwise), the principal amount of
each Note will be mandatorily exchangeable by the Company into shares of common
stock of Enron Oil & Gas Company, a Delaware corporation ("EOG"), $.01 par value
("EOG Common Stock"), (or at the Company's option, cash with an equal value) at
the rate specified in the Company Prospectus (as defined below).
The Company and EOG are concurrently entering into an agreement (the "U.S.
Common Stock Underwriting Agreement") providing for the sale by the Company of
21,600,000 shares of EOG Common Stock (24,840,000 shares if the underwriters'
over-allotment option in such offering is exercised in full) through Goldman,
Sachs & Co. and Smith Barney Inc. as representatives of the several underwriters
named therein and an agreement (together with the U.S. Common Stock
1
Underwriting Agreement, the "Common Stock Underwriting Agreements") providing
for the sale by the Company of 5,400,000 shares of EOG Common Stock, (6,210,000
shares if the underwriters' over-allotment option in such offerings is exercised
in full) through Goldman Sachs International and SBC Warburg as representatives
of the several underwriters named therein. The closings under this Agreement are
not conditioned on the closings under the Common Stock Underwriting Agreements.
1. (a) The Company represents and warrants to, and agrees with, each of the
Underwriters and EOG that:
(i) A registration statement on Form S-3 (File No. 33-....) (the
"Initial Company Registration Statement") in respect of the Firm Notes
and Optional Notes has been filed or transmitted for filing with the
Securities and Exchange Commission (the "Commission"); the Initial
Company Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference
in the prospectus contained therein, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering ("Rule 462(b) Registration Statement"), filed pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the
"Act"), which became effective upon filing, no other document with
respect to the Initial Company Registration Statement or document
incorporated by reference therein has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Company Registration Statement, any post-effective amendment
thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or, to the
Company's knowledge, threatened by the Commission (any preliminary
prospectus included in the Initial Company Registration Statement or
filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act, is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial Company
Registration Statement, any post-effective amendment thereto or the
Rule 462(b) Registration Statement, if any, including all exhibits
thereto but excluding the Form T-1 and including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section
5(a)(i) hereof and deemed by virtue of Rule 430A under the Act to be
part of the registration statement at the time it was declared
effective and (ii) the documents incorporated by reference in the
prospectus contained in the Initial Company Registration Statement at
the time such part of the registration statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of
the registration statement became effective, are hereinafter
collectively called the "Company Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Company Prospectus"; any reference
herein to any Company Preliminary Prospectus or the Company Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act, as of
the date of such Company Preliminary Prospectus or Company Prospectus,
as the case may be; any reference to any amendment or supplement to any
Company Preliminary Prospectus or the Company Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Company Preliminary Prospectus or Company Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"),
2
and incorporated by reference in such Company Preliminary Prospectus or
Company Prospectus, as the case may be; and any reference to any
amendment to the Initial Company Registration Statement shall be deemed
to refer to and include any annual report of the Company filed pursuant
to Section 13(a) or 15(d) of the Exchange Act after the effective date
of the Company Registration Statement that is incorporated by reference
in the Registration Statement);
(ii) No order preventing or suspending the use of any Company
Preliminary Prospectus has been issued by the Commission, and each
Company Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the Act and
the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and the rules and regulations of the Commission thereunder, and
did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; PROVIDED, HOWEVER, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Goldman, Sachs & Co. expressly
for use therein;
(iii) The documents incorporated by reference in the Company
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents
so filed and incorporated by reference in the Company Prospectus or any
further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iv) The Company Registration Statement conforms, and the Company
Prospectus and any further amendments or supplements to the Company
Registration Statement or the Company Prospectus will conform, in all
material respects to the requirements of the Act and the Trust
Indenture Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as of the Company Registration Statement and any amendment thereto and
as of the applicable filing date as to the Company Prospectus and any
amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
3
(v) Neither the Company nor any of its subsidiaries listed on
Schedule II hereto ("Material Subsidiaries") has sustained since the
date of the latest audited financial statements included or
incorporated by reference in the Company Prospectus any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Company Prospectus; and, since
the respective dates as of which information is given in the Company
Registration Statement and the Company Prospectus, there has not been
any change in the capital stock (other than changes in common stock
resulting from employee benefit plan or dividend reinvestment plan
transactions, purchases pursuant to the Company's stock repurchase
program, conversions of outstanding convertible securities and other
changes occurring in the ordinary course of business, as disclosed to
the Underwriters in writing) or combined short-term and long-term debt
(except as incurred in the ordinary course of business, as disclosed to
the Underwriters in writing) of the Company or any change in the
capital stock of any of its Material Subsidiaries or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Company Prospectus;
(vi) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Company
Prospectus, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the failure
to be so qualified in any such jurisdiction; and each Material
Subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in
the Company Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction;
(vii) The Company has an authorized capitalization as set forth in
the Company Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description of the
capital stock contained in the Company Prospectus; all of the issued
shares of capital stock of each Material Subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (other than contractual covenants
restricting disposition thereof, none of which relate to the capital
stock of EOG), except for (A) EOG, 80% of which capital stock is, prior
to the sales to be effected pursuant to the Common Stock Underwriting
Agreements, owned by the Company, (B) Citrus Corp., 50% of which
capital stock is indirectly owned by the Company, and (C) Florida Gas
Transmission Company, 100% of which capital stock is
4
owned by Citrus Corp.; and the Company has good and valid title to all
of the shares of EOG Common Stock to be delivered upon exchange of the
Notes, and owns such shares free and clear of all liens, encumbrances,
equities or claims;
(viii) The Notes have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the Indenture dated as of November 1, 1985 between the
Company and Harris Trust Savings Bank, as Trustee (the "Trustee"), as
supplemented by the First Supplemental Indenture dated as of ________,
1995 by and between the Company and the Trustee (the "First
Supplemental Indenture", such Indenture, as so supplemented by the
First Supplemental Indenture, being herein referred to as the
"Indenture"), under which the Notes are to be issued, which is
substantially in the form filed as an exhibit to the Company
Registration Statement; the Indenture has been duly authorized and duly
qualified under the Trust Indenture Act; the Indenture dated as of
November 1, 1985 has been duly executed and delivered by the Company
and the Trustee, and when the First Supplemental Indenture has been
executed and delivered by the Company and the Trustee, the Indenture
will constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Notes and the Indenture will conform to the
descriptions thereof in the Company Prospectus;
(ix) The issue and sale of the Notes by the Company hereunder and
the compliance with all of the provisions of the Notes, the Indenture
and this Agreement and the consummation of the transactions herein and
therein contemplated (including the delivery of the EOG Common Stock
upon exchange of the Notes), will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or the charter or by-laws of
any of its subsidiaries or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties; and
no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the sale of the Notes or the consummation by the
Company of the transactions contemplated by this Agreement (including
the delivery of the EOG Common Stock upon exchange of the Notes),
except the registration under the Act of the Notes, the EOG Common
Stock deliverable upon exchange of the Notes, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Trust Indenture Act or state or foreign securities
or Blue Sky laws in connection with the purchase and distribution of
the Notes by the Underwriters;
(x) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or charter, as the case may be, or
By-laws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
5
agreement or instrument to which it is a party or by which it or any
of its properties may be bound;
(xi) The statements set forth in the Company Prospectus under the
caption "Description of the Exchangeable Notes", insofar as they
purport to constitute a summary of the terms of the Exchangeable Notes,
and under the caption "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate, complete and fair;
(xii) Other than as set forth or contemplated in the Company
Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(xiii) Neither the Company nor any of its subsidiaries has taken or
will take, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in the stabilization
or manipulation of the price of the Notes or the EOG Common Stock;
(xiv) The Company is not and, after giving effect to the offering
and sale of the Notes (and, if consummated, the sale of the shares of
EOG Common Stock pursuant to the Common Stock Underwriting Agreements),
will not be an "investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act");
(xv) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes; and
(xvi) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(b) EOG represents and warrants to, and agrees with, each of the
Underwriters and the Company that:
(i) A registration statement on Form S-3 (File No. 33-....) (the
"Initial EOG Registration Statement") in respect of the EOG Common
Stock deliverable upon exchange of the Notes has been filed with the
Commission; the Initial EOG Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you
for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering ("Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Act, which became
6
effective upon filing, no other document with respect to the Initial
EOG Registration Statement or document incorporated by reference
therein has heretofore been filed with the Commission; and no stop
order suspending the effectiveness of the Initial EOG Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or, EOG's knowledge, threatened by the
Commission (any preliminary prospectus included in the Initial EOG
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act),
is hereinafter called an "EOG Preliminary Prospectus"; the various
parts of the Initial EOG Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section
5(b)(i) hereof and deemed by virtue of Rule 430A under the Act to be
part of the registration statement at the time it was declared
effective and (ii) the documents incorporated by reference in the
prospectus contained in the Initial EOG Registration Statement at the
time such part of the registration statement became effective or such
part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of
the registration statement became effective, are hereinafter
collectively called the "EOG Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "EOG Prospectus"; any reference herein
to any EOG Preliminary Prospectus or the EOG Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of such
EOG Preliminary Prospectus or EOG Prospectus, as the case may be; any
reference to any amendment or supplement to any EOG Preliminary
Prospectus or the EOG Prospectus shall be deemed to refer to and
include any documents filed after the date of such EOG Preliminary
Prospectus or EOG Prospectus, as the case may be, under the Exchange
Act, and incorporated by reference in such EOG Preliminary Prospectus
or EOG Prospectus, as the case may be; and any reference to any
amendment to the Initial EOG Registration Statement shall be deemed to
refer to and include any annual report of EOG filed pursuant to Section
13(a) or 15(d) of the Exchange Act after the effective date of the EOG
Registration Statement that is incorporated by reference in the EOG
Registration Statement);
(ii) No order preventing or suspending the use of any EOG
Preliminary Prospectus has been issued by the Commission, and each EOG
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act, and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to EOG by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iii) The documents incorporated by reference in the EOG
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of
7
such documents contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and any
further documents so filed and incorporated by reference in the EOG
Prospectus or any further amendment or supplement thereto, when such
documents become effective or are filed with the Commission, as the
case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to EOG by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iv) The EOG Registration Statement conforms, and the EOG
Prospectus and any further amendments or supplements to the EOG
Registration Statement or the EOG Prospectus will conform, in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and do not and will not, as of
the applicable effective date as of the EOG Registration Statement and
any amendment thereto and as of the applicable filing date as to the
EOG Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to EOG by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(v) Neither EOG nor any of its subsidiaries listed on Schedule III
hereto (the "EOG Material Subsidiaries") has sustained since the date
of the latest audited financial statements included or incorporated by
reference in the EOG Prospectus any material loss or interference with
its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the EOG Prospectus; and, since the respective dates as
of which information is given in the EOG Registration Statement and the
EOG Prospectus, there has not been any change in the capital stock or
any increase in long-term debt of the EOG or any of the EOG Material
Subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity
or results of operations of EOG and its subsidiaries, otherwise than as
set forth or contemplated in the EOG Prospectus;
(vi) EOG has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the EOG Prospectus, and has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each Material Subsidiary of the
Company has been duly incorporated and is validly existing as a
corporation in good standing
8
under the laws of its jurisdiction of incorporation, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction;
(vii) EOG and its subsidiaries have good and marketable title to
their producing oil and gas properties, free and clear of all liens,
encumbrances and defects, except (a) those described in the EOG
Prospectus, (b) liens securing taxes and other governmental charges, or
claims of materialmen, mechanics and similar persons, not yet due and
payable, (c) liens and encumbrances under operating agreements,
unitization and pooling agreements, and gas sales contracts, securing
payment of amounts not yet due and payable and of a scope and nature
customary in the oil and gas industry and (d) liens, encumbrances and
defects that do not, singly or in the aggregate, materially affect the
value of such oil and gas properties or materially interfere with the
use made or proposed to be made of such properties by EOG and its
subsidiaries;
(viii) EOG has an authorized capitalization as set forth in the EOG
Prospectus, and all of the issued shares of capital stock of EOG
(including the shares of EOG Common Stock deliverable upon exchange of
the Notes) have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description of the EOG
capital stock contained in the EOG Prospectus; and all of the issued
shares of capital stock of each EOG Material Subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable
and (except for directors' qualifying shares) are owned directly or
indirectly by EOG, free and clear of all liens, encumbrances, equities
or claims;
(ix) The issuance and sale of the Notes by the Company, the
compliance by EOG with all of the provisions of this Agreement and the
consummation of the transactions herein and therein contemplated
(including the delivery of the EOG Common Stock upon exchange of the
Notes), will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which EOG or any of its subsidiaries is a party or by
which EOG or any of its subsidiaries is bound or to which any of the
property or assets of EOG or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of EOG or the charter or
by-laws of any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over EOG or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required to be obtained by EOG for the sale of the
Notes or the consummation by EOG of the transactions contemplated by
this Agreement (including the delivery of the EOG Common Stock upon
exchange of the Notes), except the registration under the Act of the
Notes, the EOG Common Stock deliverable upon exchange of the Notes, and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state
9
securities or Blue Sky laws in connection with the purchase and
distribution of the Notes by the Underwriters;
(x) Neither EOG nor any of its subsidiaries is in violation of its
Certificate of Incorporation or charter, as the case may be, or By-laws
or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
(xi) The shares of EOG Common Stock deliverable upon exchange of
the Notes have been duly and validly authorized and issued and are
fully paid and non-assessable and conform to the description of the EOG
Common Stock contained in the EOG Prospectus;
(xii) The statements set forth in the EOG Prospectus under the
caption "Description of Common Stock", insofar as they purport to
constitute a summary of the terms of the EOG Common Stock, and under
the caption "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate,
complete and fair;
(xiii) Other than as set forth or contemplated in the EOG
Prospectus, there are no legal or governmental proceedings pending to
which EOG or any of its subsidiaries is a party or of which any
property of EOG or any of its subsidiaries is the subject which, if
determined adversely to EOG or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders' equity
or results of operations of EOG and its subsidiaries; and, to the best
of EOG's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(xiv) Neither EOG nor any of its subsidiaries has taken or will
take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in the stabilization or
manipulation of the price of the Notes or the EOG Common Stock;
(xv) EOG is not and, after giving effect to the offering and sale
of the Notes (and, if consummated, the sale of the shares of EOG Common
Stock pursuant to the Common Stock Underwriting Agreements), will not
be an "investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act");
(xvi) Neither EOG nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes; and
(xvii) Arthur Andersen LLP, who have certified certain financial
statements of EOG and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and
10
not jointly, to purchase from the Company, at a purchase price per Note of
$...................., the number of Firm Notes to be purchased by such
Underwriter as set forth opposite the name of such Underwriter in Schedule I
hereto and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Notes as provided below, the Company
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the purchase price
per note set forth in clause (a) of this Section 2, that portion of the number
of Optional Notes as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional Notes) determined by multiplying
such number of Optional Notes by a fraction the numerator of which is the
maximum number of Optional Notes which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Notes that all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 1,000,000 Optional Notes, at the purchase price per Note
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Notes. Any such election to purchase
Optional Notes may be exercised by written notice from you to the Company, given
within a period of 30 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Notes to be purchased and the date on
which such Optional Notes are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Company otherwise agree in writing, earlier than two or
later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Notes, the
several Underwriters propose to offer the Firm Notes for sale upon the terms and
conditions set forth in the Company Prospectus.
4. (a) The Notes to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered
in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company shall be delivered by
or on behalf of the Company to Goldman, Sachs & Co., through the
facilities of The Depository Trust Company ("DTC"), for the account of
such Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by certified or official bank check or
checks, payable to the order of the Company in New York Clearing House
(next day) funds. The Company will cause the certificates representing
the Notes to be made available for checking and packaging at least
twenty- four hours prior to the Time of Delivery (as defined below)
with respect thereto at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Notes, 9:30 a.m., New York
City time, on ............., 1995 or on such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing, and,
with respect to the Optional Notes, 9:30 a.m., New York City time, on
the date specified by Goldman, Sachs & Co. in the written notice given
by Goldman, Sachs & Co. of the Underwriters' election to purchase such
Optional Notes, or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing. Such time and date for
delivery of the Firm Notes is herein called the "First Time of
Delivery", such time and date for delivery of the Optional Notes, if
not the First Time of Delivery, is herein called the "Second Time
11
of Delivery", and each such time and date for delivery is herein called
a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including
the cross-receipt for the Notes and any additional documents requested
by the Underwriters pursuant to Section 7(l) hereof, will be delivered
at the offices of Bracewell & Patterson, L.L.P., 711 Louisiana Street,
Houston, Texas 77002 (the "Closing Location"), and the Notes will be
delivered at the Designated Office, all at each Time of Delivery. A
meeting will be held at the Closing Location at ..............p.m., New
York City time, on the New York Business Day next preceding each Time
of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to
close.
5. (a) The Company agrees with each of the Underwriters:
(i) To prepare the Company Prospectus in a form approved by you and
to file such Company Prospectus pursuant to Rule 424(b) under the Act
not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement,
or, if applicable, such earlier time as may be required by Rule
430A(a)(3) under the Act; to make no further amendment or any
supplement to the Company Registration Statement or Company Prospectus
prior to the last Time of Delivery which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Company Registration Statement has been filed or becomes effective or
any supplement to the Company Prospectus or any amended Company
Prospectus has been filed and to furnish you with copies thereof; to
file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Company Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Notes; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Company Preliminary
Prospectus or prospectus, of the suspension of the qualification of the
Notes for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request
by the Commission for the amending or supplementing of the Company
Registration Statement or Company Prospectus or for additional
information; and, in the event of the issuance of any stop order or of
any order preventing or suspending the use of any Company Preliminary
Prospectus or prospectus or suspending any such qualification, promptly
to use its best efforts to obtain the withdrawal of such order;
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the Notes for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Notes, provided that in connection
12
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(iii) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Company
Prospectus in New York City in such quantities as you may reasonably
request, and, if the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the
Company Prospectus in connection with the offering or sale of the Notes
and if at such time any events shall have occurred as a result of which
the Company Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Company Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Company
Prospectus or to file under the Exchange Act any document incorporated
by reference in the Company Prospectus in order to comply with the Act
or the Exchange Act, to notify you and upon your request to file such
document and to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as you may from time to
time reasonably request of an amended Company Prospectus or a
supplement to the Company Prospectus which will correct such statement
or omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Notes at any time nine months or more after the time of issue of the
Company Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies
as you may request of an amended or supplemented Company Prospectus
complying with Section 10(a)(3) of the Act;
(iv) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
the date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act;
(v) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Company Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Company and
its subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158);
(vi) During the period beginning from the date hereof and
continuing to and including the date 270 days after the date of the EOG
Prospectus, not to, except pursuant to the Common Stock Underwriting
Agreements, (x) offer, sell, contract to sell or otherwise dispose of
any shares of EOG Common Stock, or securities convertible into or
exchangeable for EOG Common Stock, or rights or warrants to acquire EOG
Common Stock, or any other securities substantially similar to EOG
Common Stock or Notes except as may be required pursuant to the
Indenture, or (y) file any registration statement under the Act with
respect to securities convertible into or exchangeable for
13
EOG Common Stock, rights or warrants to acquire EOG Common Stock, or
any other securities substantially similar to EOG Common Stock or
Notes, in each case without the prior written consent of Goldman, Sachs
& Co.;
(vii) To deliver to EOG copies of the opinion and certificates
delivered pursuant to Sections 7(c) and (m), in each case also
addressed to EOG or otherwise entitling EOG to rely on such opinions
and certificates as if they were so addressed;
(viii) During a period of five years from the effective date of the
Company Registration Statement, to supply to the Representatives of the
Underwriters, and to each other Underwriter who may so request in
writing, copies of any financial statements and other periodic and
special reports as the Company may from time to time distribute
generally to its lenders or to the holders of any class of its
securities registered under Section 12 of the Exchange Act and to
furnish to the Underwriters or the Representatives of the Underwriters
a copy of each annual or other report it shall be required to file with
the Commission; and
(ix) To use its best efforts to list, subject to notice of issuance,
the Notes on the New York Stock Exchange.
(b) EOG agrees with each of the Underwriters:
(i) To prepare the EOG Prospectus in a form approved by you and to
file such EOG Prospectus pursuant to Rule 424(b) under the Act not
later than the Commission's close of business on the second business
day following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
EOG Registration Statement or EOG Prospectus prior to the last Time of
Delivery which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice
thereof, of the time when any amendment to the EOG Registration
Statement has been filed or becomes effective or any supplement to the
EOG Prospectus or any amended EOG Prospectus has been filed and to
furnish you with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by EOG
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the EOG Prospectus and for
so long as the delivery of a prospectus is required in connection with
the offering or sale of the Notes; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any EOG
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the EOG Common Stock for delivery in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the EOG Registration Statement or EOG Prospectus or
for additional information; and, in the event of the issuance of any
stop order or of any order preventing or suspending the use of any EOG
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the EOG Common Stock deliverable upon
exchange of the Notes under the securities laws of such jurisdictions
as you may request and to comply with
14
such laws so as to permit the continuance of sales and dealings therein
in such jurisdictions for as long as may be necessary to complete the
distribution of the Notes, provided that in connection therewith EOG
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction;
(iii) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the EOG Prospectus
in New York City in such quantities as you may reasonably request, and,
if the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the EOG Prospectus
in connection with the offering or sale of the Notes and if at such
time any events shall have occurred as a result of which the EOG
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such EOG Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the EOG Prospectus
or to file under the Exchange Act any document incorporated by
reference in the EOG Prospectus in order to comply with the Act or the
Exchange Act, to notify you and upon your request to file such document
and to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended EOG Prospectus or a supplement to the
EOG Prospectus which will correct such statement or omission or effect
such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Notes at any time
nine months or more after the time of issue of the EOG Prospectus, upon
your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an
amended or supplemented EOG Prospectus complying with Section 10(a)(3)
of the Act;
(iv) If EOG elects to rely upon Rule 462(b), EOG shall file a Rule
462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and EOG shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to
Rule 111(b) under the Act;
(v) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the EOG Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of EOG and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(vi) During the period beginning from the date hereof and
continuing to and including the date 270 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, other than pursuant to the Common
Stock Underwriting Agreements, any EOG Common Stock or any securities
of EOG that are substantially similar to the EOG Common Stock,
including but not limited to any securities that are convertible into
or exchangeable for, or that represent the right to receive, EOG Common
Stock or any such substantially similar
15
securities (other than pursuant to employee stock option plans existing
on the date of this Agreement), without the prior written consent of
Goldman, Sachs & Co., and to cause EOG's Chairman of the Board,
President and Chief Executive Officer to agree not to offer, sell,
contract to sell or otherwise dispose of any EOG Common Stock, any
securities of EOG substantially similar to the EOG Common Stock, or any
securities convertible into or exchangeable for EOG Common Stock or
such substantially similar securities (other than pursuant to employee
stock option plans existing on the date of this Agreement), during such
period, without the prior written consent of Goldman, Sachs & Co.;
(vii) To furnish to its stockholders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of EOG
and its subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three
quarters of each fiscal year (beginning with the fiscal quarter ending
after the effective date of the EOG Registration Statement),
consolidated summary financial information of EOG and its subsidiaries
for such quarter in reasonable detail;
(viii) To deliver to the Company, copies of the opinion and
certificates delivered pursuant to Sections 7(d) and (m), in each case
also addressed to the Company or otherwise entitling the Company to
rely on such opinions and certificates as if they were so addressed;
and
(ix) During a period of five years from the effective date of the
Company Registration Statement to furnish to you copies of all reports
or other communications (financial or other) furnished to
securityholders, and to deliver to you (i) as soon as they are
available, copies of any reports and financial statements furnished to
or filed with the Commission or any national securities exchange on
which any class of securities of EOG is listed; and (ii) such
additional information concerning the business and financial condition
of EOG as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent that the
accounts of EOG and its subsidiaries are consolidated in reports
furnished to its securityholders generally or to the Commission),
provided that prior to EOG's furnishing any such additional information
that is material and non-public you shall enter into such agreement
respecting the confidentiality thereof as EOG may reasonably request.
6. The Company and EOG covenant and agree with one another and the several
Underwriters that (a) the Company will pay or cause to be paid the following:
(i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Notes under the Act and
all other expenses in connection with the preparation, printing and filing of
the Company Registration Statement, any Company Preliminary Prospectus, the
Company Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the
Selling Agreements, the Indenture, the Blue Sky and Legal Investment Memorandum
and any other documents in connection with the offering, purchase, sale and
delivery of the Notes; (iii) all expenses in connection with the qualification
of the Notes for offering and sale under state securities laws as provided in
Section 5(a)(ii) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky and legal investment surveys; (iv) the filing fees incident to securing
any required
16
review by the National Association of Securities Dealers, Inc. of the terms of
the sale of the Notes; (v) the cost of preparing the Notes; (vi) the fees and
expenses of the Trustee and any agent of the Trustee and the fes and
disbursements of counsel to the Trustee in connection with the Indenture and the
Notes; (vii) any fees charged by securities rating agencies for rating the
Notes; and (viii) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section; and (b) EOG will pay or cause to be paid the following: (i) the
fees, disbursements and expenses of EOG's counsel and accountants in connection
with the registration of the EOG Common Stock under the Act and all other
expenses in connection with the preparation, printing and filing of the EOG
Registration Statement, any EOG Preliminary Prospectus, the EOG Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Blue Sky Memorandum and any Legal Investment Memorandum and any other
documents in connection with the EOG Common Stock deliverable upon exchange of
the Notes; (iii) all expenses in connection with the qualification of the EOG
Common Stock deliverable upon exchange of the Notes under state securities laws
as provided in Section 5(b)(ii) hereof, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with such Blue Sky or legal investment surveys; (iv) the cost of
preparing stock certificates; (v) the cost and charges of any transfer agent or
registrar; and (vi) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section. It is understood, however, that the Underwriters will pay all
of their own costs and expenses, including the fees and expenses of their
counsel and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Notes to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of EOG herein, are, at and as of such Time of Delivery, true and
correct, the condition that the Company and EOG each shall have performed all of
its obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) Each of the Company Prospectus and the EOG Prospectus shall
have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing by the rules and
regulations under the Act and in accordance with Sections 5(a) and 5(b)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00
P.M., Washington, D.C. time, on the date of this Agreement; no stop
order suspending the effectiveness of the Company Registration
Statement or the EOG Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Bracewell & Patterson, L.L.P., counsel for the Underwriters,
shall have furnished to you such opinion or opinions (a draft of each
such opinion is attached as Annex III(a) hereto), dated such Time of
Delivery, with respect to certain of the matters covered in paragraphs
(i), (iii), (iv), (v), (xi) and (xii) of subsection (c) below and in
paragraphs (i), (ii), (vi), (x), (xi) and (xii) of subsection (d) below
as well as such other
17
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) James V. Derrick, Jr., Senior Vice President and General
Counsel of the Company, shall have furnished to you his written opinion
(a draft of each such opinion is attached as Annex III(b) hereto),
dated as of such Time of Delivery, in form and substance satisfactory
to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with all necessary corporate power and
authority to own its properties and conduct its business as
described in the Company Prospectus;
(ii) Each Material Subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with all necessary
corporate power and authority to own its properties and conduct
its business as described in the Company Prospectus;
(iii) This Agreement has been duly authorized, executed and
delivered by the Company;
(iv) The Notes are in the form contemplated by the Indenture
and have been duly authorized by all necessary corporate action
on the part of the Company; the Notes, when executed and
authenticated as specified in the Indenture (which facts, such
counsel may state, such counsel has not determined by an
inspection of the individual Notes) and issued and delivered
against payment pursuant to this Agreement, will constitute
valid and legally binding obligations of the Company entitled to
the benefits provided by the Indenture; and the Notes and the
Indenture conform in all material respects to the descriptions
thereof in the Company Prospectus;
(v) The Indenture has been duly authorized, executed and
delivered by the Company, and assuming due authorization,
execution and delivery by the Trustee, constitutes a valid and
legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws
relating to or affecting creditor's rights generally and to
general equity principles; and the Indenture has been duly
qualified under the Trust Indenture Act;
(vi) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material
liability or disability by reason of failure to be so qualified
in any such jurisdiction (such counsel being entitled to rely in
respect of the opinion in this clause upon certificates of
public officials);
(vii) Each Material Subsidiary has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws
18
of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or
disability by reason of failure to be so qualified in any such
jurisdiction; and all of the issued shares of capital stock of
each such subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for
directors' qualifying shares) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances,
equities or claims (other than contractual covenants restricting
the disposition thereof, none of which relate to the capital
stock of EOG) except for (A) EOG, 80% of which capital stock,
prior to the sale to be effected pursuant to the Common Stock
Underwriting Agreements, is owned by the Company, (B) Citrus
Corp., 50% of which capital stock is owned indirectly by the
Company and (C) Florida Gas Transmission Company, 100% of which
capital stock is owned by Citrus Corp. (such counsel being
entitled to rely in respect of the opinion in this clause upon,
in respect of matters of fact, certificates of officers of the
Company or its subsidiaries, provided that such counsel shall
state that he believes that he is justified in so relying upon
such certificates, or certificates of public officials);
(viii) To such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of the Material
Subsidiaries is a party or of which any property of the Company
or any of the Material Subsidiaries is the subject which would
be required to be described in the Company Prospectus and is not
described as required;
(ix) The compliance by the Company with all of the
provisions of this Agreement and the consummation of the
transactions herein contemplated (including the delivery of the
shares of EOG Common Stock upon exchange of the Notes) will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or the charter or by-laws of any of its subsidiaries or
any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any
of their properties;
(x) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental
agency or body is required for the sale of the Notes, the
delivery of the EOG Common Stock upon exchange of the Notes or
the consummation by the Company of the transactions contemplated
by this Agreement, except such as have been obtained under the
Act or the Trust Indenture Act, and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Notes by the
Underwriters;
19
(xi) The documents incorporated by reference in the Company
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and he
has no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(xii) The Company Registration Statement and the Company
Prospectus and any further amendments and supplements thereto
made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the
rules and regulations thereunder; although he does not assume
any responsibility for the accuracy, completeness or fairness of
the statements contained in the Company Registration Statement
or the Company Prospectus, he has no reason to believe that, as
of its effective date, the Company Registration Statement or any
further amendment thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the Company Prospectus or any further
amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and
related schedules and reports of experts pertaining to natural
resource reserves therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time of
Delivery, either the Company Registration Statement or the
Company Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules and
reports of experts pertaining to natural resource reserves
therein, as to which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading; and he does not know of any amendment to the
Company Registration Statement required to be filed or of any
contracts or other
20
documents of a character required to be filed as an exhibit to
the Company Registration Statement or required to be
incorporated by reference into the Prospectus or required to be
described in the Company Registration Statement or the Company
Prospectus which are not filed or incorporated by reference or
described as required.
In rendering such opinion, such counsel may state that he
expresses no opinion as to the laws of any jurisdiction outside
the United States and, with respect to the opinion in paragraph
(iii) above, may rely, as to matters of New York law, upon the
opinion of Vinson & Elkins L.L.P. delivered pursuant to
subsection 7(e) hereof.
(d) Dennis M. Ulak, Vice President and General Counsel of
EOG, shall have furnished to you his written opinion (a draft of
each such opinion is attached as Annex III(c) hereto), dated as
of such Time of Delivery, in form and substance satisfactory to
you, to the effect that:
(i) EOG has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with all necessary corporate power and authority to
own its properties and conduct its business as described in the
Prospectus;
(ii) EOG has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of
EOG (including the shares of EOG Common Stock deliverable upon
exchange of the Notes) have been duly and validly authorized and
issued and are fully paid and non-assessable; and the EOG Common
Stock conforms to the description of such stock contained in the
EOG Prospectus;
(iii) EOG has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or
disability by reason of failure to be so qualified in any such
jurisdiction (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of EOG,
provided that such counsel shall state that he believes that
both you and he are justified in relying upon such opinions and
certificates);
(iv) Each EOG Material Subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has been duly
qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, or is subject
to no material liability or disability by reason of failure to
be so qualified in any such jurisdiction; and all of the issued
shares of capital stock of each such subsidiary have been duly
and validly authorized and issued, are fully paid and
non-assessable, and (except for directors' qualifying shares)
are owned directly or indirectly by EOG, free and clear of all
liens, encumbrances, equities or claims (such counsel being
entitled to rely
21
in respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of
officers of EOG or its subsidiaries, provided that such counsel
shall state that he believes that both you and he are justified
in relying upon such opinions and certificates);
(v) To the best of such counsel's knowledge and other than
as set forth in the EOG Prospectus, there are no legal or
governmental proceedings pending to which EOG or any of its
subsidiaries is a party or of which any property of EOG or any
of its subsidiaries is the subject which, if determined
adversely to EOG or any of its subsidiaries, would individually
or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders'
equity or results of operations of EOG and its subsidiaries;
and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by EOG;
(vii) The compliance by EOG with all of the provisions of
this Agreement and the consummation of the transactions herein
contemplated (including the delivery of the EOG Common Stock
upon exchange of the Notes), will not conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to
such counsel to which EOG or any of its subsidiaries is a party
or by which EOG or any of its subsidiaries is bound or to which
any of the property or assets of EOG or any of its subsidiaries
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of EOG
or the charter or by-laws of any of its subsidiaries or any
statute or any order, rule or regulation known to such counsel
of any court or governmental agency or body having jurisdiction
over EOG or any of its subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required in connection with the
consummation by EOG of the transactions contemplated by this
Agreement, except the registration under the Act of the EOG
Common Stock, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the registration
of the EOG Common Stock;
(ix) Neither EOG nor any of its subsidiaries is in violation
of its Certificate of Incorporation or charter, as the case may
be, or By-laws or in default in the performance or observance of
any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is
a party or by which it or any of its properties may be bound;
(x) The statements set forth in the EOG Prospectus under the
caption "Description of Common Stock", insofar as they purport
to constitute a summary of the terms of the EOG Common Stock,
and under the caption "Underwriting",
22
insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate, complete and
fair;
(xi) The documents incorporated by reference in the EOG
Prospectus or any further amendment or supplement thereto made
by EOG prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(xii) The EOG Registration Statement and the EOG Prospectus
and any further amendments and supplements thereto made by EOG
prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules
and regulations thereunder; although he does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the EOG Registration Statement or the
EOG Prospectus, except for those referred to in the opinion in
subsection (x) of this Section 7(d), he has no reason to believe
that, as of its effective date, the EOG Registration Statement
or any further amendment thereto made by EOG prior to such Time
of Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the EOG Prospectus or any further
amendment or supplement thereto made by EOG prior to such Time
of Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time of
Delivery, either the EOG Registration Statement or the EOG
Prospectus or any further amendment or supplement thereto made
by EOG prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances
23
under which they were made, not misleading; and he does not know
of any amendment to the EOG Registration Statement required to
be filed or of any contracts or other documents of a character
required to be filed as an exhibit to the EOG Registration
Statement or required to be incorporated by reference into the
EOG Prospectus or required to be described in the EOG
Registration Statement or the EOG Prospectus which are not filed
or incorporated by reference or described as required.
In rendering such opinion, such counsel may state that he expresses no
opinion as to the laws of any jurisdiction outside the United States and, with
respect to the opinion in paragraph (iv) above, may rely, as to matters of New
York law, upon an opinion of Vinson & Elkins L.L.P. delivered therewith.
(e) Vinson & Elkins L.L.P., counsel to the Company and EOG, shall have
furnished to you their written opinion (a draft of each such opinion is attached
as Annex III(d) hereto) dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Agreement has been duly authorized, executed and
delivered by the Company and EOG;
(ii) The statements set forth in the Company Prospectus
under the caption "Description of Exchangeable Notes", insofar
as they purport to constitute a summary of the terms of the
Exchangeable Notes, and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws
and docuemnts referred to therein, and the statements set forth
in the EOG Prospectus under the caption "Description of Capital
Stock", insofar as they purport to constitute a summary of the
terms of the EOG Common Stock, and under the caption
"Underwriting", insofar as they purport to describe the
provisions of the laws and docuemnts referred to therein, are
accurate, complete and fair;
(iii) Each of the Company and EOG is not, and after the
consummation of the transactions contemplated by this Agreement
and the Common Stock Underwriting Agreements will not be, an
"investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company
Act;
(iv) The documents incorporated by reference in the EOG
Prospectus or any further amendment or supplement thereto made
by EOG prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue
24
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made when such
documents were so filed, not misleading; and
(v) The documents incorporated by reference in the Company
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(vi) The EOG Registration Statement and the EOG Prospectus
and any further amendments and supplements thereto made by EOG
prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules
and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the EOG Registration Statement or the
EOG Prospectus, except for those referred to in the opinion in
subsection (ii) of this Section 7(e), they have no reason to
believe that, as of its effective date, the EOG Registration
Statements or any further amendment thereto made by EOG prior to
such Time of Delivery (other than the financial statements and
related schedules and reports of experts pertaining to natural
resource reserves therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the EOG Prospectus or any further
amendment or supplement thereto made by EOG prior to such Time
of Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time of
Delivery, either the EOG Registration Statement or the EOG
Prospectus or any further amendment or supplement thereto made
by EOG prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material
25
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
and they do not know of any amendment to the EOG Registration
Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to
the EOG Registration Statement or required to be incorporated by
reference into the EOG Prospectus or required to be described in
the EOG Registration Statement or the EOG Prospectus which are
not filed or incorporated by reference or described as required.
(vii) The Company Registration Statement and the Company
Prospectus and any further amendments and supplements thereto
made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the
rules and regulations thereunder; although they do not assume
any responsibility for the accuracy, completeness or fairness of
the statements contained in the Company Registration Statement
or the Company Prospectus, except for those referred to in the
opinion in subsection (ii) of this Section 7(e), they have no
reason to believe that, as of its effective date, the Company
Registration Statements or any further amendment thereto made by
the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Company Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules and
reports of experts pertaining to natural resource reserves
therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading or that, as of such Time of Delivery, either the
Company Registration Statement or the Company Prospectus or any
further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
they do not know of any amendment to the Company Registration
Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to
the Company Registration Statement or required to be
incorporated by reference into the Company Prospectus or
required to be described in the Company Registration Statement
or the Company Prospectus which are not filed or incorporated by
reference or described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States.
26
(f) On the respective dates of the Company Prospectus and the EOG
Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New
York City time, on the respective effective dates of the Company Registration
Statement and the EOG Registration Statement and the effective date of any
post-effective amendment to the Company Registration Statement and the EOG
Registration Statement and also at each Time of Delivery, Arthur Andersen LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto in the case of the Company and Annex II hereto in the
case of EOG (the executed copy of the letter in respect of the Company
Registration Statement delivered prior to the execution of this Agreement is
attached as Annex I(a) hereto and the executed copy of the letter in respect of
the EOG Registration Statement delivered prior to the execution of this
Agreement is attached as Annex II(a) hereto, and a draft of the form of letter
to be delivered on the effective date of any post-effective amendment to the
Company Registration Statement and as of each Time of Delivery is attached as
Annex I(b) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the EOG Registration Statement
and as of each Time of Delivery is attached as Annex II(b) hereto);
(g) The Company and EOG shall have complied with the provisions of Section
5(a)(iii) and 5(b)(iii), as the case may be, with respect to the furnishing of
prospectuses on the New York Business Day next succeeding the date of this
Agreement;
(h) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Company Prospectus any loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Company
Prospectus; (ii) since the respective dates as of which information is given in
the Company Prospectus there shall not have been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Company Prospectus; (iii) neither EOG nor any of its
subsidiaries shall have sustained since the date of the latest audited financial
statements included or incorporated by reference in the EOG Prospectus any loss
or interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the EOG Prospectus; and (iv) since the respective dates as of
which information is given in the EOG Prospectus there shall not have been any
change in the capital stock or long-term debt of EOG or any of its subsidiaries
or any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position, stockholders'
equity or results of operations of EOG and its subsidiaries, otherwise than as
set forth or contemplated in the EOG Prospectus, the effect of which, in any
such case described in clause (i), (ii), (iii) or (iv), is in the judgment of
the Representatives of the Underwriters so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Notes being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Company Prospectus;
(i) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's or EOG's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2)
27
under the Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of any of the Company's or EOG's debt securities;
(j) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange (the "Exchange"); (ii) a suspension or
material limitation in trading in the Company's or EOG's securities on the
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Notes being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(k) The Notes, subject to notice of issuance, and the EOG Common Stock to
be delivered by the Company upon exchange of the Notes, shall have been duly
listed on the Exchange;
(l) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from the Company's Chairman of the Board, President and
Chief Executive Officer to the effect set forth in Subsection 5(b)(v) hereof in
form and substance satisfactory to you;
(m) The Company and EOG shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company and of EOG
respectively, satisfactory to you as to the accuracy of the representations and
warranties of the Company and EOG respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and EOG of all of their
respective obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as you may reasonably request, and the
Company and EOG shall have furnished or caused to be furnished certificates as
to the matters set forth in subsections (a) and (h) of this Section, and as to
such other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Company Preliminary Prospectus, the Company
Registration Statement or the Company Prospectus (in each case including any EOG
Preliminary Prospectus or EOG Prospectus included therein), or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Company Preliminary
Prospectus, the Company Registration Statement or the Company Prospectus or any
such amendment or supplement in reliance upon and in
28
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein; and provided, further,
that the Company shall not be liable to any Underwriter under this indemnity
agreement in this subsection (a) with respect to any Company Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact such Underwriter sold Notes to a person as to
whom it shall be established that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the applicable Company
Prospectus or of the applicable prospectus as then amended or supplemented in
any case where such delivery is required by the Act if the Company has
previously furnished copies thereof to such Underwriter and the loss, claim,
damage or liability of such Underwriter results from an untrue statement or
omission of a material fact contained in the Company Preliminary Prospectus
which was corrected in the Company Prospectus or in the Company Prospectus as
then amended or supplemented and delivered to the Underwriter.
(b) EOG will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any EOG Preliminary Prospectus, the EOG Registration
Statement or the EOG Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that EOG shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any EOG Preliminary Prospectus, the EOG Registration
Statement or the EOG Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to EOG by any
Underwriter through Goldman, Sachs & Co. expressly for use therein; and
provided, further, that EOG shall not be liable to any Underwriter under this
indemnity agreement in this subsection (b) with respect to any EOG Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact such Underwriter sold Notes to a person as to
whom it shall be established that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the applicable Company
Prospectus or of the applicable prospectus as then amended or supplemented in
any case where such delivery is required by the Act if the Company has
previously furnished copies thereof to such Underwriter and the loss, claim,
damage or liability of such Underwriter results from an untrue statement or
omission of a material fact contained in the EOG Preliminary Prospectus which
was corrected in the EOG Prospectus or the EOG Prospectus as then amended or
supplemented and delivered to the Underwriter.
(c) Each Underwriter will indemnify and hold harmless the Company and EOG
against any losses, claims, damages or liabilities to which the Company or EOG
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Company or EOG Preliminary Prospectus, the Company or EOG
Registration Statement or the Company or EOG Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements
29
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Company or EOG Preliminary Prospectus, the Company or
EOG Registration Statement or the Company or EOG Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or EOG by such Underwriter through Goldman,
Sachs & Co. expressly for use therein; and will reimburse the Company and EOG
for any legal or other expenses reasonably incurred by the Company or EOG in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and EOG on the one hand and the Underwriters on the
other from the offering of the Notes. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (d) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and EOG on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and EOG on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net
30
proceeds from the offering of the Notes purchased under this Agreement (before
deducting expenses) received by the Company and EOG bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Notes purchased under this Agreement, in each case as set forth in the
table on the cover page of the Company Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or EOG on the one
hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, EOG and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this subsection (e) were
determined by PRO RATA allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Notes underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and EOG under this Section 8 shall be in
addition to any liability which the Company and EOG may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company or EOG and to
each person, if any, who controls the Company or EOG within the meaning of the
Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Notes which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Notes on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Notes,
then the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Notes on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Notes, or the Company notifies you that they have so arranged
for the purchase of such Notes, you or the Company shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the Company or
EOG Registration Statement or the Company or EOG Prospectus, or in any other
documents or arrangements, and the Company and EOG agree to file promptly any
amendments to the Company or EOG Registration Statement or the Company or EOG
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement
31
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Notes.
(b) If, after giving effect to any arrangements for the purchase of the
Notes of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Notes which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
of the Notes to be purchased at such Time of Delivery, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of Notes which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Notes which such Underwriter
agreed to purchase hereunder) of the Notes of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Notes of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Notes which
remains unpurchased exceeds one-eleventh of the aggregate number of all of the
Notes to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Notes of a defaulting Underwriter or Underwriters, then
this Agreement (or, with respect to the Second Time of Delivery, the obligations
of the Underwriters to purchase and of the Company to sell the Optional Notes)
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or EOG except for the expenses to be borne by the
Company and EOG and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, EOG and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or EOG, or any officer or director or controlling person of the Company or of
EOG, and shall survive delivery of and payment for the Notes.
Anything herein to the contrary notwithstanding, the indemnity agreement of
the Company in subsection (a) of Section 8 hereof, the representations and
warranties in subsections (a)(ii), (a)(iii) and (a)(iv) of Section 1 hereof and
any representation or warranty as to the accuracy of the Company Registration
Statement or the Company Prospectus contained in any certificate furnished by
the Company pursuant to Section 7 hereof, the indemnity agreement of EOG in
subsection (b) of Section 8 hereof, the representations and warranties in
subsections (b)(ii), (b)(iii) and (b)(iv) of Section 1 hereof and any
representation or warranty as to the accuracy of the EOG Registration Statement
or the EOG Prospectus contained in any certificate furnished by the Company or
EOG pursuant to Section 7 hereof insofar as they may constitute a basis for
indemnification for liabilities (other than payment by the Company or EOG of
expenses incurred or paid in the successful defense of any action, suit or
proceeding) arising under the Act, shall not extend to the extent of any
interest therein of a controlling person or partner of an Underwriter who is a
director, officer or controlling person of the Company or EOG when the
applicable registration statement has become effective, except in each case to
the extent that an interest of such character shall have been determined by a
court of appropriate jurisdiction as not against public policy as expressed in
the Act. Unless in the opinion of
32
counsel for the Company and/or EOG, as the case may be, the matter has been
settled by controlling precedent, the Company and/or EOG, as the case may be,
will, if a claim for such indemnification is asserted, submit to a court of
appropriate jurisdiction the question of whether such interest is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor EOG shall then be under any liability to any Underwriter
except as provided in Sections 6 and 8 hereof; but, if for any other reason any
Notes are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Notes not so delivered, but the Company and
EOG shall then be under no further liability to any Underwriter in respect of
the Notes not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you or by Goldman, Sachs & Co.
on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the Company Attention: Secretary, at its address set
forth in the Company Registration Statement; and if to EOG shall be delivered or
sent by mail, telex or facsimile transmission to the address of EOG set forth in
the EOG Registration Statement, Attention: Secretary; provided, however, that
any notice to an Underwriter pursuant to Section 8(d) hereof shall be delivered
or sent by mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company or EOG by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and EOG and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and EOG and
each person who controls the Company, EOG or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Notes from any Underwriter shall be deemed
a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
33
If the foregoing is in accordance with your understanding, please sign and
return to us . . . counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and EOG. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company and EOG for examination upon request, but without warranty on your part
as to the authority of the signers thereof.
34
Very truly yours,
Enron Corp.
By: __________________________________________
Name:
Title:
Enron Oil & Gas Company
By: __________________________________________
Name:
Title:
Accepted as of the date hereof at ........,
...............:
Goldman, Sachs & Co.
Merrill Lynch & Co.
Salomon Brothers Inc.
By:.........................................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
35
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
NOTES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM NOTES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co....................................................
Merrill Lynch & Co.....................................................
Salomon Brothers Inc...................................................
Total.............................................
</TABLE>
36
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Company
Registration Statement or the Company Prospectus comply as to form in
all material respects with the applicable accounting requirements of
the Act or the Exchange Act, as applicable, and the related published
rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American
Institute of Certified Public Accountants of the consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Company Prospectus and/or included in the Company's
Quarterly Report on Form 10-Q incorporated by reference into the
Company Prospectus as indicated in their reports thereon copies of
which have been separately furnished to the Representatives; and on the
basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed consolidated financial
statements referred to in paragraph (vi)(A)(i) below comply as to form
in all material respects with the applicable accounting requirements of
the Act and the Exchange Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Company
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
37
(v) They have compared the information in the Company Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing procedures
that caused them to believe that this information does not conform in
all material respects with the disclosure requirements of Items 301,
302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Company Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements
of cash flows included in the Company Prospectus and/or included
or incorporated by reference in the Company's Quarterly Reports
on Form 10-Q incorporated by reference in the Company Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act and the
related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the
Company Prospectus or included in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the Company
Prospectus, for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Company Prospectus do not agree with
the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not
included in the Company Prospectus but from which were derived
the unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and balance
sheet items included in the Company Prospectus and referred to
in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited financial statements
included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Company
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
38
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or net assets or
other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet included
or incorporated by reference in the Company Prospectus, except
in each case for changes, increases or decreases which the
Company Prospectus discloses have occurred or may occur or which
are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Company
Prospectus to the specified date referred to in Clause (E) there
were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding
year and with any other period of corresponding length specified
by the Representatives, except in each case for increases or
decreases which the Company Prospectus discloses have occurred
or may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Company Prospectus and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Company Prospectus (excluding documents incorporated by reference)
or in Part II of, or in exhibits and schedules to, the Company
Registration Statement specified by the Representatives or in documents
incorporated by reference in the Company Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company
and its subsidiaries and have found them to be in agreement.
39
ANNEX II
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to EOG and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the EOG Registration
Statement or the EOG Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act or the
Exchange Act, as applicable, and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial information,
financial forecasts and/or condensed financial statements derived from
audited financial statements of EOG for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the EOG Prospectus and/or included in EOG's Quarterly
Report on Form 10-Q incorporated by reference into the EOG Prospectus
as indicated in their reports thereon copies of which have been
separately furnished to the Representatives; and on the basis of
specified procedures including inquiries of officials of EGO who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing
came to their attention that caused them to believe that the unaudited
condensed consolidated financial statements do not comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of EOG
for the five most recent fiscal years included in the EOG Prospectus
and included or incorporated by reference in Item 6 of EOG's Annual
Report on Form 10-K for the most recent fiscal year agrees with the
corresponding amounts (after restatement where applicable) in the
audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in EOG's Annual
Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the EOG Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited
40
procedures specified in such letter nothing came to their attention as
a result of the foregoing procedures that caused them to believe that
this information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of EOG and its subsidiaries, inspection of
the minute books of EOG and its subsidiaries since the date of the
latest audited financial statements included or incorporated by
reference in the EOG Prospectus, inquiries of officials of EOG and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements
of cash flows included in the EOG Prospectus and/or included or
incorporated by reference in EOG's Quarterly Reports on Form
10-Q incorporated by reference in the EOG Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the EOG
Prospectus or included in EOG's Quarterly Reports on Form 10-Q
incorporated by reference in the EOG Prospectus, for them to be
in conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the EOG Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included or incorporated by reference in EOG's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not
included in the EOG Prospectus but from which were derived the
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the EOG Prospectus and referred to in Clause
(B) were not determined on a basis substantially consistent with
the basis for the audited financial statements included or
incorporated by reference in EOG's Annual Report on Form 10-K
for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the EOG
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock or any
41
increase in the consolidated long-term debt of EOG and its
subsidiaries, or any decreases in consolidated net current
assets or net assets or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in
the latest balance sheet included or incorporated by reference
in the EOG Prospectus, except in each case for changes,
increases or decreases which the EOG Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the EOG
Prospectus to the specified date referred to in Clause (E) there
were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding
year and with any other period of corresponding length specified
by the Representatives, except in each case for increases or
decreases which the EOG Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the EOG Prospectus and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of EOG and its subsidiaries, which appear in the EOG
Prospectus (excluding documents incorporated by reference) or in Part
II of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the EOG Prospectus specified by the Representatives, and
have compared certain of such amounts, percentages and financial
information with the accounting records of EOG and its subsidiaries and
have found them to be in agreement.
42
EXHIBIT 4(b)
ENRON CORP.
AND
HARRIS TRUST AND SAVINGS BANK
TRUSTEE
-----------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of , 1995
-----------------
SUPPLEMENTAL INDENTURE TO INDENTURE DATED AS OF NOVEMBER 1, 1985
1
FIRST SUPPLEMENTAL INDENTURE dated as of , 1995 (this "Supplemental
Indenture"), made and entered into by and between ENRON CORP., a corporation
organized and existing under the laws of the State of Delaware having its
principal office at 1400 Smith Street, Houston, Texas 77002 (the "Company") and
HARRIS TRUST AND SAVINGS BANK, a corporation duly organized and existing under
the laws of the State of Illinois, as trustee (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS the Company entered into an Indenture dated as of November 1,
1985 with the Trustee (the "Indenture") for the purpose of issuing notes,
debentures or other evidences of indebtedness to be issued in one or more series
(the "Securities"), in such principal amount or amounts as may from time to time
be authorized by or pursuant to the authority granted in one or more resolutions
of the Board of Directors of the Company; and
WHEREAS the Company proposes to issue a series of Securities
denominated its " % Exchangeable Notes due , 1998 " representing up to of its
Exchangeable Notes (such Securities being referred to herein as the
"Exchangeable Notes"), the principal amount at Maturity of which is mandatorily
exchangeable into shares of common stock, par value $.01 per share, of Enron Oil
& Gas Company, or, at the option of the Company, cash, in either case at the
Exchange Rate as described herein; and
WHEREAS Section 901(7) and (9) of the Indenture provide that without
the consent of the Holders of outstanding Securities, the Company, when
authorized by or pursuant to the authority granted in a resolution of the Board
of Directors, may enter into one or more indentures supplemental to the
Indenture to establish the form or terms of Securities of any series as
permitted by Section 201 and 301 thereof, to cure any ambiguity, to correct or
supplement any provision in the Indenture which may be inconsistent with any
other provision of the Indenture, or to make any other provisions with respect
to matters or questions arising under the Indenture, provided such action shall
not adversely affect the interests of the Holders of Securities of any series in
any material respect, and
WHEREAS the entry into this Supplemental Indenture by the parties
hereto is in all respects authorized by the provisions of the Indenture; and
WHEREAS all things necessary to make this Supplemental Indenture a
valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, in consideration of the premises and purchase of the
Securities by the Holders thereof, and for other valuable consideration, the
receipt whereof is hereby acknowledged, the Company, for itself and its
successors, does hereby covenant and agree to and with the Trustee and its
successors in said trust for the equal and proportionate benefit of all Holders
of the Securities or of series thereof, without preference, priority or
distinction of any Securities over any of the others by reason of difference in
series or priority in time of issuance, negotiation or maturity thereof, or
otherwise except as otherwise provided in the Indenture or this Supplemental
Indenture, as follows:
SECTION 1. The Indenture is hereby amended by amending Section 301 of
the Indenture by (i) adding as new subparagraph (10) the following:
"(10) the obligation, if any, of the Company to permit the
conversion or exchange of Securities of such series into other
securities (whether or not issued by, or the obligation of, the
Company), and the terms and conditions upon which such conversion or
exchange
2
shall be effected (including without limitation, the initial conversion
or exchange price or rate, the conversion or exchange period and any
other provisions in addition to or in lieu of those set forth in this
Indenture relative to such obligation)";
(ii) renumbering current subparagraphs (10) and (11) of Section 301 of the
Indenture to new subparagraphs (11) and (12), respectively; and (iii) adding as
new Section 311 the following:
"Section 311 GLOBAL DEBT SECURITIES; DEPOSITARY.
For the purposes of this Indenture, the term "Agent Member"
shall mean a member of, or participant in, a Depositary; the term
"Depositary" shall mean, with respect to Securities issuable or issued
in whole or in part in the form of one or more Global Securities, the
clearing agency registered under the Securities Exchange Act of 1934
designated as Depositary in a Board Resolution, or in an indenture
supplemental hereto, pursuant to Section 301, and if at any time there
is more than one such agency, "Depositary" as used with respect to the
Debt Securities shall mean the respective Depositary with respect to a
particular series of Securities; and the term "Global Security" shall
mean a global certificate evidencing all or part of the series of
Securities, executed by the Company, authenticated by the Trustee and
issued to the Depositary for the series or such portion of the series,
and registered in the name of such Depositary or its nominee.
If a particular series of Securities are to be issued in whole
or in part in the form of one or more Global Securities, as specified
in a Board Resolution, or in an indenture supplemental hereto, pursuant
to Section 301, then the Company shall execute and the Trustee shall,
in accordance with Section 303 with respect to such series,
authenticate and deliver each such Global Security, which (i) shall
represent and shall be denominated in a principal amount equal to the
aggregate principal amount of the Securities of each such series to be
represented by such Global Security, (ii) shall be registered in the
name of the Depositary for such Global Security or its nominee, (iii)
shall be delivered by the Trustee to such Depositary or pursuant to
such Depositary's instruction and (iv) unless otherwise specified in
such Board Resolution or indenture supplemental hereto, shall bear a
legend substantially to the following effect: "THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE
OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY."
Notwithstanding Section 305, except as otherwise specified in
a Board Resolution, or in an indenture supplemental hereto, as
contemplated by Section 301, any Global Security shall be exchangeable
only as provided in this paragraph. A Global Security shall be
exchangeable pursuant to this Section if (a)(i) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary
for such Global Security or if at any time the Depositary ceases to be
a clearing agency registered under the Securities Exchange Act
3
of 1934 and (ii) the Company is unable to arrange for a qualified
successor, (b) the Company in its sole discretion determines that all
Global Securities of any series then outstanding shall be exchangeable
for definitive Securities of such series in registered form or (c) an
Event of Default, with respect to the Securities of the series
represented by such Global Security has occurred and is continuing. Any
Global Securities of such series that are exchangeable pursuant to the
preceding sentence shall be exchangeable for definitive Securities of
such series in registered form, bearing interest (if any) at the same
rate or pursuant to the same formula, having the same date of issuance,
redemption provisions, if any, currency of payment, date of maturity
and other terms and of differing denominations aggregating a like
amount. Such definitive Securities of such series shall be registered
in the names of the owners of the beneficial interests in such Global
Securities of such series as such names are from time to time provided
by the relevant participants in the Depositary holding such Global
Securities (as such participants are identified from time to time by
such Depositary).
No Global Security may be transferred except as a whole (i) by
the Depositary to a nominee of the Depositary or (ii) by a nominee of
the Depositary to the Depositary or another nominee of the Depositary
or (iii) by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. Except as
provided above, owners solely of beneficial interests in a Global
Security shall not be entitled to receive physical delivery of
Securities of such series in definitive form and will not be considered
the Holders thereof for any purpose under this Indenture.
In the event that a Global Security is surrendered for
redemption in part pursuant to Article Eleven or Twelve, the Company
shall execute, and the Trustee shall authenticate and deliver to the
Depositary for such Global Security, without service charge, a new
Global Security in a denomination and tenor equal to and in exchange
for the unredeemed portion of the principal for the Global Security so
surrendered.
Neither the Company nor the Trustee nor any agent of the
Company or the Trustee shall have any responsibility or liability for
any aspect of the records relating to or payments made on account of
any beneficial ownership interest in any Global Security or for
maintaining, supervising or reviewing any records relating to such
beneficial ownership interest. The Agent Members shall have no rights
under this Indenture with respect to any Global Security held on their
behalf by a Depositary, and such Depositary may be treated by the
Company, the Trustee, and any agent of the Company or the Trustee as
the owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee, or any agent of the Company or the Trustee, from
giving effect to any written certification, proxy or other
authorization furnished by a Depositary or impair, as between a
Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of a Security of any
series, including without limitation the granting of proxies or other
authorization, direction, notice, consent, waiver or other action which
a Holder is entitled to give or take under this Indenture."
SECTION 2. The Indenture is hereby amended, solely with respect to a
series of Securities that consists of Exchangeable Notes, as follows:
4
(a) By amending Section 101 to add new definitions
thereto, in the appropriate alphabetical sequence, as follows:
"Business Day" for purposes of the Exchangeable Notes has the meaning
specified in Section 1401.
"Closing Price" has the meaning specified in Section 1401.
"Extraordinary Cash Dividend" has the meaning specified in Section
1403.
"EOG" has the meaning specified in Section 1401.
"EOG Common Stock" has the meaning specified in Section 1401.
"EOG Successor" has the meaning specified in Section 1403.
"Initial Price" has the meaning specified in Section 1401.
"Maturity Price" has the meaning specified in Section 1401.
"NYSE" has the meaning specified in Section 1401.
"Reorganization Event" has the meaning specified in Section 1403.
"Threshold Appreciation Price" has the meaning specified in Section
1401.
"Trading Date" has the meaning specified in Section 1401.
"Transaction Value" has the meaning specified in Section 1403.
(b) By amending Section 902 of the Indenture by adding as
new subparagraph (4) the following: "(4) change the terms under which the
Exchangeable Notes are exchangeable or payable in cash as set forth in Article
Fourteen of this Indenture."
(c) By adding the following Article Fourteen:
"ARTICLE FOURTEEN.
EXCHANGE INTO EOG COMMON STOCK
Section 1401. EXCHANGE AT MATURITY.
At Maturity, the principal amount payable with
respect to each Exchangeable Note shall be automatically and
mandatorily exchanged into a number of shares of common stock,
par value $.01 ("EOG Common Stock"), of Enron Oil & Gas
Company ("EOG") at the Exchange Rate (as defined below). As a
result, Holders of the Exchangeable Notes may not receive a
payment representing the principal amount of such Exchangeable
Notes. The "Exchange Rate" is equal to, subject to adjustment
as a result of certain dilution events relating to the EOG
Common Stock as provided for in Section 1403, (a) if the
Maturity
5
Price (as defined below) is greater than or equal to $_______
per share of EOG Common Stock (the "Threshold Appreciation
Price"), ________ shares of EOG Common Stock per Exchangeable
Note, (b) if the Maturity Price is less than the Threshold
Appreciation Price but is greater than $_______ per share of
EOG Common Stock (the "Initial Price"), a fractional share of
EOG Common Stock per Exchangeable Note so that the value
thereof (determined at the Maturity Price) is equal to the
Initial Price (such fractional share being calculated to the
nearest 1/10,000th of a share or, if there is not a nearest
1/10,000th of a share, to the next highest 1/10,000th of a
share) and (c) if the Maturity Price is less than or equal to
the Initial Price, one share of EOG Common Stock per
Exchangeable Note. No fractional shares of EOG Common Stock
will be issued at Maturity as provided in Section 1402.
Notwithstanding the foregoing, the Company may, at its option
in lieu of delivering shares of EOG Common Stock, deliver cash
in an amount (calculated to the nearest 1/100th of a dollar
per Exchangeable Note or, if there is not a nearest 1/100th of
a dollar, then to the next higher 1/100th of a dollar) equal
to the value of such number of shares of EOG Common Stock at
the Maturity Price. In determining the amount of cash
deliverable in exchange for the Exchangeable Note in lieu of
shares of EOG Common Stock pursuant to the prior sentence
hereof, if more than one Exchangeable Note shall be
surrendered for exchange at one time by the same Holder, the
amount of cash which shall be delivered upon exchange shall be
computed on the basis of the aggregate number of Exchangeable
Notes so surrendered at Maturity.
The "Maturity Price" is defined as the average
Closing Price per share of EOG Common Stock on the 20 Trading
Days immediately prior to Maturity. The "Closing Price" of any
security on any date of determination means the closing sale
price (or, if no closing price is reported, the last reported
sale price) of such security on the New York Stock Exchange
(the "NYSE") on such date or, if such security is not listed
for trading on the NYSE on any such date, as reported in the
composite transactions for the principal United States
securities exchange on which such security is so listed, or if
such security is not so listed on a United States national or
regional securities exchange, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation
System, or, if such security is not so reported, the last
quoted bid price for such security in the over-the-counter
market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the
market value of such security on such date as determined by a
nationally recognized independent investment banking firm
retained for this purpose by the Company. A "Trading Day" is
defined as a Business Day on which the security the Closing
Price of which is being determined (A) is not suspended from
trading on any national or regional securities exchange or
association or over-the-counter market at the close of
business and (B) has traded at least once on the national or
regional securities exchange or association or
over-the-counter market that is the primary market for the
trading of such security. "Business Day" means any day that is
not a Saturday, a Sunday or a day on which the NYSE, banking
institutions or trust companies in The City of New York are
authorized or obligated by law or executive order to close.
Section 1402. NO FRACTIONAL SHARES.
No fractional shares or scrip representing fractional
shares of EOG Common Stock shall be issued or delivered upon
the exchange at Maturity of any Exchangeable Note. If more
than one Exchangeable Note shall be surrendered for exchange
at one time by the
6
same Holder, the number of full shares of EOG Common Stock
which shall be delivered upon exchange, in whole or in part,
as the case may be, shall be computed on the basis of the
aggregate number of Exchangeable Notes so surrendered at
Maturity. Instead of any fractional share of EOG Common Stock
which would otherwise be deliverable upon exchange of any
Exchangeable Note at Maturity, the Company, through any
applicable Paying Agent, shall make a cash payment in respect
of such fractional interest in an amount equal to the value of
such fractional shares at the Maturity Price. The Company
shall, upon exchange of any Exchangeable Note, provide cash to
any applicable Paying Agent in an amount equal to the cash
payable with respect to any fractional shares of EOG Common
Stock deliverable upon exchange of such Exchangeable Note, and
the Company shall retain such fractional shares of EOG Common
Stock.
Section 1403. ADJUSTMENT OF EXCHANGE RATE.
(a) ADJUSTMENT FOR DISTRIBUTIONS,
RECLASSIFICATIONS, ETC. The Exchange Rate shall be subject to
adjustment from time to time as follows:
(i) If EOG shall:
(A) pay a dividend or make a
distribution with respect
to the EOG Common Stock in
shares of such stock;
(B) subdivide or split the
outstanding shares of EOG
Common Stock into a greater
number of shares;
(C) combine the outstanding
shares of EOG Common Stock
into a smaller number of
shares; or
(D) issue by reclassification
of shares of EOG Common
Stock any shares of common
stock of EOG;
then, in any such event, the Exchange Rate in effect
immediately prior to such event shall be adjusted so
that the Holder of any Exchangeable Note shall
thereafter be entitled to receive, upon mandatory
exchange of the principal amount of such Exchangeable
Note at Maturity, as set forth in Section 1401, the
number of shares of EOG Common Stock which such
Holder would have owned or been entitled to receive
immediately following any event described above had
such Exchangeable Note been exchanged immediately
prior to such event or any record date with respect
thereto. Each such adjustment shall become effective
at the opening of business on the Business Day next
following the record date for determination of
holders of EOG Common Stock entitled to receive such
dividend or distribution in the case of a dividend or
distribution and shall become effective immediately
after the effective date in the case of a
subdivision, split, combination or reclassification.
Each such adjustment shall be made successively.
(ii) If EOG shall, after the date hereof,
issue rights or warrants to all holders of EOG Common
Stock entitling them to subscribe for or purchase
shares of EOG Common Stock (other than rights to
purchase EOG Common Stock
7
pursuant to a plan for the reinvestment of dividends
or interest) at a price per share less than the
current market price of EOG Common Stock (determined
for purposes of this clause (ii) as the average
Closing Price per share of EOG Common Stock on the 20
Trading Days immediately prior to the date such
rights or warrants are issued), then in each case the
Exchange Rate shall be adjusted by multiplying the
Exchange Rate in effect immediately prior to the date
of issuance of such rights or warrants, by a
fraction, of which the numerator shall be the number
of shares of EOG Common Stock outstanding on the date
of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional
shares of EOG Common Stock offered for subscription
or purchase pursuant to such rights or warrants, and
of which the denominator shall be the number of
shares of EOG Common Stock outstanding on the date of
issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional
shares of EOG Common Stock which the aggregate
offering price of the total number of shares of EOG
Common Stock so offered for subscription or purchase
pursuant to such rights or warrants would purchase at
such current market price (calculated as the average
Closing Price per share of EOG Common Stock for the
20 Trading Days immediately prior to the date such
rights or warrants are issued), which shall be
determined by multiplying such total number of shares
by the exercise price of such rights or warrants and
dividing the product so obtained by such current
market price. Such adjustment shall become effective
at the opening of business on the Business Day next
following the record date for the determination of
stockholders entitled to receive such rights or
warrants. To the extent that shares of EOG Common
Stock are not delivered after the expiration of such
rights or warrants, the Exchange Rate shall be
readjusted to the Exchange Rate which would then be
in effect had such adjustments for the issuance of
such rights or warrants been made upon the basis of
delivery of only the number of shares of EOG Common
Stock actually delivered. Each such adjustment shall
be made successively.
(iii) If EOG shall pay a dividend or make a
distribution to all holders of EOG Common Stock of
evidence of its indebtedness or other assets
(excluding any dividends or distributions referred to
in subparagraph (i) above or any ordinary periodic
cash dividends that do no constitute Extraordinary
Cash Dividends (as defined in clause (vi) below)) or
shall issue to all holders of EOG Common Stock rights
or warrants to subscribe for or purchase any of its
securities (other than those referred to in
subparagraph (ii) above), then in each such case, the
Exchange Rate shall be adjusted by multiplying the
Exchange Rate in effect on the record date mentioned
below, by a fraction of which the numerator shall be
the current market price per share of the EOG Common
Stock on the record date for the determination of
stockholders entitled to receive such dividend or
distribution (such current market price being
determined for purposes of this clause (iii) as the
average Closing Price per share of EOG Common Stock
on the 20 Trading Days immediately prior to such
record date), and of which the denominator shall be
such current market price per share of EOG Common
Stock less the fair market value (as determined by
the Board of Directors of the Company, whose
determination shall be conclusive, and described in a
resolution adopted with respect thereto) as of such
record date of the portion of the assets or evidences
of indebtedness so distributed or of such
subscription rights or warrants applicable to one
share of EOG Common
8
Stock. Each such adjustment shall become effective on
the opening of business on the Business Day next
following the record date for the determination of
stockholders entitled to receive such dividend or
distribution. Each such adjustment shall be made
successively.
(iv) Any shares of EOG Common Stock issuable
in payment of a dividend shall be deemed to have been
issued immediately prior to the close of business on
the record date for such dividend for purposes of
calculating the number of outstanding shares of EOG
Common Stock under subparagraph (ii) above.
(v) All adjustments to the Exchange Rate
shall be calculated to the nearest 1/10,000th of a
share of EOG Common Stock (or if there is not a
nearest 1/10,000th of a share to the next lower
1/10,000th of a share). No adjustment in the Exchange
Rate shall be required unless such adjustment would
require an increase or decrease of at least one
percent therein; provided, however, that any
adjustments which by reason of this subparagraph are
not required to be made shall be carried forward and
taken into account in any subsequent adjustment. If
an adjustment is made to the Exchange Rate pursuant
to subparagraph (i), (ii) or (iii) of this Section
1403(a), an adjustment shall also be made to the
Maturity Price solely to determine which of
paragraphs (a), (b) or (c) of the definition of
Exchange Rate in Section 1401 will apply at Maturity.
The required adjustment shall be determined by
multiplying the Maturity Price by the number
determined under subparagraph (i), (ii) or (iii) by
which the then existing Exchange Rate was multiplied
to adjust such rate. This subparagraph (v) shall be
so used to adjust the definition of Maturity Price
only as such term is used for the first time in each
of subparagraphs (a), (b) and (c) of the definition
of Exchange Rate.
(vi) For purposes of the foregoing, the term
"Extraordinary Cash Dividend" shall mean, with
respect to any consecutive 365-day period, any cash
dividend with respect to EOG Common Stock the amount
of which together with the aggregate amount of all
other such cash dividends on the EOG Common Stock
occurring in such 365-day period, exceeds on a per
share basis 10% of the average of the Closing Prices
per share of the EOG Common Stock over such 365-day
period, and for purposes of applying the formula set
forth in clause (iii) above, the fair market value of
such dividends being calculated pursuant to such
clause (iii) shall be equal to (x) the aggregate
amount of such cash dividend together with the
amounts of such other cash dividends occurring in
such period minus (y) the aggregate amount of such
other cash dividends occurring in such period for
which a prior adjustment in the Exchange Rate was
previously made under this Section 1403(a). In making
the determinations required by the foregoing
sentence, the amount of cash dividends paid on a per
share basis shall be appropriately adjusted to
reflect the occurrence during such period of any
event described in Section 1403(a).
(b) ADJUSTMENT FOR CONSOLIDATION, MERGER OR
OTHER REORGANIZATION EVENT. In the event of (i) any
consolidation or merger of EOG, or any surviving entity or
subsequent surviving entity of EOG (an "EOG Successor"), with
or into another entity (other than a
9
merger or consolidation in which EOG is the continuing
corporation and in which the EOG Common Stock outstanding
immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of EOG or
another Person), (ii) any sale, transfer, lease or conveyance
to another Person of the property of EOG or any EOG Successor
as an entirety or substantially as an entirety, (iii) any
statutory exchange of securities of EOG or any EOG Successor
with another Person (other than in connection with a merger or
acquisition) or (iv) any liquidation, dissolution or winding
up of EOG or any EOG Successor (any such event, a
"Reorganization Event"), the Exchange Rate used to determine
the amount payable upon exchange at Maturity for each
Exchangeable Note will be adjusted to provide that each holder
of Exchangeable Notes will receive at Maturity cash in an
amount equal to (a) if the Transaction Value (as defined
below) is greater than or equal to the Threshold Appreciation
Price, _____ multiplied by the Transaction Value, (b) if the
Transaction Value is less than the Threshold Appreciation
Price but greater than the Initial Price, the Initial Price
and (c) if the Transaction Value is less than or equal to the
Initial Price, the Transaction Value. "Transaction Value"
means (x) for any cash received in any such Reorganization
Event, the amount of cash received per share of EOG Common
Stock, (y) for any property other than cash or securities
received in any such Reorganization Event, an amount equal to
the market value at Maturity of such property received per
share of EOG Common Stock as determined by a nationally
recognized independent investment banking firm retained for
this purpose by the Company and (z) for any securities
received in any such Reorganization Event, an amount equal to
the average Closing Price per share of such securities on the
20 Trading Days immediately prior to Maturity, multiplied by
the number of such securities received for each share of EOG
Common Stock. Notwithstanding, the foregoing, in lieu of
delivering cash as provided above, the Company may at its
option deliver an equivalent value of securities or other
property received in such Reorganization Event, determined in
accordance with clause (y) or (z) above, as applicable. The
kind and amount of securities into which the Exchangeable Note
shall be exchangeable after consummation of such transaction
shall be subject to adjustment as described in paragraph (a)
above following the date of consummation of such transaction.
Section 1404. NOTICE OF ADJUSTMENTS AND CERTAIN
OTHER EVENTS.
(a) Whenever the Exchange Rate is adjusted as herein
provided, the Company shall:
(i) forthwith compute the adjusted Exchange
Rate in accordance with Section 1403 and prepare a
certificate signed by an officer of the Company
setting forth the adjusted Exchange Rate, the method
of calculation thereof in reasonable detail, and the
facts requiring such adjustment and upon which such
adjustment is based, which certificate shall be
conclusive, final and binding evidence of the
correctness of the adjustment, and file such
certificate forthwith with the Trustee for the
Exchangeable Notes; and
(ii) within 10 Business Days following the
occurrence of an event that permits or requires an
adjustment to the Exchange Rate pursuant to Section
1403 (or if the Company is not aware of such
occurrence, as soon as practicable after becoming so
aware), provide written notice to the Trustee and to
the Holders of the Outstanding Exchangeable Notes of
the occurrence of such event and a statement in
reasonable detail setting forth the method by which
the adjustment to the
10
Exchange Rate was determined and setting forth the
revised Exchange Rate per Exchangeable Note.
(b) In case at any time while any of the
Exchangeable Notes are outstanding the Company receives notice
that:
(i) EOG shall declare a dividend (or any
other distribution) on or in respect of the EOG
Common Stock to which Section 1403(a)(i) or (ii)
shall apply (other than any cash dividends and
distributions, if any, paid from time to time by EOG
that do not constitute Extraordinary Cash Dividends);
(ii) EOG shall authorize the issuance to all
holders of EOG Common Stock of rights or warrants to
subscribe for or purchase shares of EOG Common Stock
or of any other subscription rights or warrants;
(iii) there shall occur any conversion or
reclassification of EOG Common Stock (other than a
subdivision or combination of outstanding shares of
such EOG Common Stock) or any consolidation, merger
or reorganization to which EOG is a party and for
which approval of any stockholders of EOG is
required, or the sale or transfer of all or
substantially all of the assets of EOG; or
(iv) there shall occur the voluntary or
involuntary dissolution, liquidation or winding up of
EOG;
then, the Company shall promptly cause to be delivered to the
Trustee and any applicable Paying Agent and filed at the
office or agency maintained for the purpose of exchange of
Exchangeable Notes at Maturity in the Borough of Manhattan, in
The City of New York by the Trustee (or any applicable Paying
Agent), and shall promptly cause to be mailed to the Holders
of Exchangeable Notes at their last addresses as they shall
appear upon the registration books of the Securities
Registrar, at least 10 days before the date hereinafter
specified (or the earlier of the dates hereinafter specified,
in the event that more than one is specified), a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution or grant of rights or
warrants, or, if a record is not to be taken, the date as of
which the holders of EOG Common Stock of record to be entitled
to such dividend, distribution or grant of rights or warrants
are to be determined, or (y) the date, if known by the
Company, on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up
is expected to become effective.
(c) In the event that the Company elects to deliver
cash (or any other property or securities that may be
delivered pursuant to Section 1403(b)) upon the mandatory
exchange of the principal amount of the Exchangeable Notes in
accordance with Section 1401, on or prior to seven Business
Days preceding the Stated Maturity of the Exchangeable Notes,
the Company will notify the Trustee and will publish a notice
in a daily newspaper of national circulation stating that the
Company has elected to deliver cash in lieu of EOG Common
Stock.
11
Section 1405. TAXES.
(a) The Company will pay any and all documentary,
stamp, transfer or similar taxes that may be payable in
respect of the transfer and delivery of EOG Common Stock
pursuant hereto; provided, however, that the Company shall not
be required to pay any such tax which may be payable in
respect of any transfer involved in the delivery of EOG Common
Stock in a name other than that in which the Exchangeable
Notes so exchanged were registered, and no such transfer or
delivery shall be made unless and until the Person requesting
such transfer has paid to the Company the amount of any such
tax, or has established, to the satisfaction of the Company,
that such tax has been paid.
(b) The parties hereto hereby agree, and each Holder
of an Exchangeable Note by its purchase of an Exchangeable
Note hereby agrees:
(i) to treat, for U.S. federal income tax
purposes, each Exchangeable Note as a unit (the "unit
characterization") consisting of (A) a debt
obligation with a fixed principal amount and issue
price equal to the principal amount of the
Exchangeable Note, bearing interest at the stated
interest rate, and with the principal amount
unconditionally payable at Maturity, and (B) a
forward purchase contract (the "Purchase Contract")
pursuant to which the Holder agrees to use the
principal payment due on the Exchangeable Note to
purchase, at Maturity, the EOG Common Stock which the
Holder is entitled to receive at that time (subject
to the Company's right to deliver cash in lieu of
such EOG Common Stock);
(ii) to include in income as interest, in
accordance with its method of accounting, all
payments made with respect to the Exchangeable Note
that are denominated as interest and to include any
original issue discount in income on the basis of the
allocation described in paragraph (iii) below (in the
case of an initial purchaser) or on the basis of a
similar method (in the case of a subsequent
purchaser);
(iii) in the case of any initial purchaser,
to allocate the entire purchase price of an
Exchangeable Note to the Exchangeable Note and to
allocate no part thereof to the Purchase Contract,
unless the stated interest on the Exchangeable Notes
represents a yield that is lower than the Company's
normal cost of issuing debt with a similar term to
the Exchangeable Notes (the "Company's Mid-Term
Borrowing Rate"), in which case each Holder agrees to
allocate to the Exchangeable Note an amount, less
than the principal amount of the Exchangeable Note,
calculated by discounting the cash flows relating to
the Exchangeable Note at a rate equal to the
Company's Mid-Term Borrowing Rate, and to allocate to
the Purchase Contract the remainder of the purchase
price of the Exchangeable Note; and
(iv) to file all U.S. federal, state and
local income and franchise tax returns consistent
with the unit characterization and the foregoing
methods (unless required otherwise by an applicable
taxing authority).
12
Section 1406. SHARES FREE AND CLEAR.
The Company hereby warrants that upon exchange of an
Exchangeable Note at Maturity pursuant to this Indenture, the
Holder of an Exchangeable Note shall receive all rights held
by the Company in the EOG Common Stock for which such
Exchangeable Note is at such time exchangeable pursuant to
this Indenture, free and clear of any and all liens, claims,
charges and encumbrances other than any liens, claims, charges
and encumbrances which may have been placed on any EOG Common
Stock by the prior owner thereof, prior to the time such EOG
Common Stock was acquired by the Company. Except as provided
in Section 1405(a), the Company will pay all taxes and charges
with respect to the delivery of EOG Common Stock delivered in
exchange for Exchangeable Notes hereunder.
Section 1407. CANCELLATION OF SECURITY.
Upon receipt by the Trustee of Exchangeable Notes
delivered to it for exchange under this Article Fourteen, the
Trustee shall cancel and dispose of the same as provided in
Section 309.
Section 1408. LIMITATIONS ON TRADING DURING
CERTAIN DAYS.
The Company hereby agrees that it will not, and it
will cause each of its Majority-Owned Subsidiaries (as defined
below) not to, buy or sell shares of EOG Common Stock for its
or their own account during the 20 Trading Days prior to
Stated Maturity of the Exchangeable Notes. For purposes
hereof, "Majority-Owned Subsidiary" with respect to the
Company means a subsidiary more than 50% of whose outstanding
securities representing the right, other than as affected by
events of default, to vote for the election of directors, is
owned by the Company and/or one or more of the Company's other
Majority-Owned Subsidiaries.
Section 1409. LIMITATION ON CASH OPTION.
The Company will not redeem any of the Exchangeable
Notes for cash except with the proceeds from a sale by the
Company of shares of common stock of the Company which sale
shall have occurred not more than 540 days prior to the notice
by the Company, given in accordance with Section 1404(c)
hereof, of its election to deliver cash in lieu of EOG Common
Stock at Stated Maturity.
Section 1410. REDEMPTION AND DEFEASANCE.
The Exchangeable Notes are not subject to redemption,
defeasance or any sinking fund prior to their Stated
Maturity."
(d) By amending the table of contents of the Indenture to reflect
the additions described in Section 1 and subsections (a) and (c) of this
Section 2.
SECTION 3. The form of Exchangeable Note attached hereto as Exhibit A
is hereby adopted, pursuant to Section 901(7) of the Indenture, as a form of
Securities of a series that consists of Exchangeable Notes.
13
SECTION 4. Except as specifically supplemented and amended by this
Supplemental Indenture, the terms and provisions of the Indenture shall remain
in full force and effect. The Indenture, as supplemented and amended by this
Supplemental Indenture and all other indentures supplemental thereto, is in all
respects ratified and confirmed, and the Indenture, this Supplemental Indenture
and all indentures supplemental thereto shall be read, taken and construed as
one and the same instrument.
SECTION 5. If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Supplemental
Indenture by any of the provisions of the Trust Indenture Act, such required
provision shall control.
SECTION 6. All covenants and agreements in this Supplemental Indenture
by the Company shall bind its successors and assigns, whether so expressed or
not.
SECTION 7. In case any provision in this Supplemental Indenture or in
the Securities of any series shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions (or of the
other series of Securities) shall not in any way be affected or impaired
thereby.
SECTION 8. Nothing in this Supplemental Indenture, expressed or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Holders of each series of Securities any benefit
or any legal or equitable right, remedy or claim under this Supplemental
Indenture.
SECTION 9. This Supplemental Indenture and each Security of any series
shall be deemed to be a contract made under the laws of the State of New York
and this Supplemental Indenture and each such Security for all purposes shall be
governed by and construed in accordance with the laws of the State of New York.
SECTION 10. All terms used in this Supplemental Indenture not otherwise
defined herein that are defined in the Indenture shall have the meanings set
forth therein.
SECTION 11. This Supplemental Indenture may be executed in any number
of counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 12. The recitals contained herein and in the Securities, except
the certificate of authentication of the Trustee thereon, shall be taken as
statements of the Company, and the Trustee assumes no responsibility for their
accuracy or completeness. The Trustee makes no representations as to the
validity or sufficiency of the Indenture, this Supplemental Indenture or of the
Securities and shall not be accountable for the use or application by the
Company of the Securities or the proceeds thereof.
14
IN WITNESS WHEREOF, the parties hereto have cause this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
ENRON CORP.
By:
Name:
Title:
[Seal]
ATTEST:
HARRIS TRUST AND SAVINGS BANK
By:
Name:
Title:
[Seal]
ATTEST:
15
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
Before me, the undersigned authority, on this day personally appeared
______________, __________ of Enron Corp., known to me to the person whose name
is subscribed to the foregoing instrument, and acknowledged to me that he
executed the same for the purposes and consideration therein expressed, in the
capacity therein stated, and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _____ day of __________,
1995.
Notary Public in and for the
State of Texas
16
STATE OF ILLINOIS ss.
ss.
COUNTY OF COOK ss.
Before me, the undersigned authority, on this day personally appeared
______________, a Vice President of Harris Trust and Savings Bank, known to me
to the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and consideration
therein expressed, in the capacity therein stated, and as the act and deed of
said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _____ day of __________,
1995.
Notary Public in and for the
State of Illinois
EXHIBIT A
[FORM OF FACE OF EXCHANGEABLE NOTES]
ENRON CORP.
CUSIP NO.
% EXCHANGEABLE NOTES DUE , 1998
(Subject to Exchange at Maturity into Shares of Common Stock, Par Value
$.01 per Share, of Enron Oil & Gas Company)
NO. $
ENRON CORP., a corporation duly organized and existing under the laws
of the State of Delaware (hereinafter called the "Company," which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to [ ], or registered assigns, the
principal sum of [ ] DOLLARS (or $[ ] for each Exchangeable Note represented by
this note) (subject to the mandatory exchange provisions at Maturity discussed
below), and to pay interest (computed on the basis of a 360-day year of twelve
30-day months) thereon from [ ], or from the most recent Interest Payment Date
to which interest has been paid or duly provided for on [ ], [ ], [ ] and [ ] in
each year, commencing [ ], 199[ ], at the rate per annum specified in the title
of this note computed quarterly for each Holder (a) in the case of the first
quarterly interest payment payable on [ ], 199[ ], $[ ] per Exchangeable Note
multiplied by the aggregate number of Exchangeable Notes registered in such
Holder's name and (b) in the case of each quarterly interest payment thereafter,
$[ ] per Exchangeable Note multiplied by the aggregate number of Exchangeable
Notes registered in such Holder's name (in each of (a) and (b), calculated to
the nearest 1/100th of a dollar or, if there is not a nearest 1/100th of a
dollar, then to the next higher 1/100th of a dollar), until the principal hereof
is paid or made available for payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
said Indenture, be paid to the Person in whose name this Exchangeable Note (or
one ore more Predecessor Notes) is registered at the close of business on the
Regular Record Date for such interest, which shall be [ ], [ ], or [ ] as the
case may be, next preceding such Interest Payment Date, provided that interest
payable at Maturity shall be payable to the person to whom the principal hereof
is payable. In any case where such Interest Payment Date shall not be a Business
Day, then (notwithstanding any other provisions of said Indenture or the
Exchangeable Notes) payment of such interest need not be made on such date, but
may be made on the next succeeding Business Date with the same force and effect
as if made on such date, and, if such payment is so made, no interest shall
accrue for the period from and after such date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
registered Holder on such Regular Record Date, and may either be paid to the
Person in whose name this Exchangeable Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee for the
Exchangeable Notes, notice whereof shall be given to Holders of Notes not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Exchangeable Notes may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
<PAGE>
At Maturity, the principal amount of this Exchangeable Note will be
mandatorily exchanged into a number of shares of Common Stock, par value $.01
per share (EOG Common Stock"), of Enron Oil & Gas Company ("EOG") at the
Exchange Rate (as defined below) and, as a result, the Holder of this Note will
not necessarily receive an amount equal to the principal amount hereof. The
"Exchange Rate" is equal to, subject to adjustment as a result of certain
dilution events relating to the EOG Common Stock as provided for in the
Indenture, (a) if the Maturity Price (as defined below) per share of EOG Common
Stock is greater than or equal to $ [ ] per share of EOG Common Stock (the
"Threshold Appreciation Price"), [ ] shares of EOG Common Stock per Note, (b) if
the Maturity Price is less than the Threshold Appreciation Price but is greater
than $ [ ] per share of EOG Common Stock (the "Initial Price"), a fractional
share of EOG Common Stock per Note so that the value thereof (determined at the
Maturity Price) is equal to the Initial Price and (c) if the Maturity Price is
less than or equal to the Initial Price, one share of EOG Common Stock per Note.
No fractional shares of EOG Common Stock will be issued at Maturity as provided
in the Indenture. Notwithstanding the foregoing, the Company may, at its option
in lieu of delivering shares of EOG Common Stock, deliver cash in an amount
equal to the value of such number of shares of EOG Common Stock at the Maturity
Price as provided in the Indenture.
The "Maturity Price" is defined as the average Closing Price per share
of EOG Common Stock on the 20 Trading Days immediately prior to, but not
including, Maturity. The "Closing Price" of any security on any date of
determination means the closing sale price (or, if no closing price is reported,
the last reported sale price) of such security on the New York Stock Exchange
(the "NYSE") on such date or, if such security is not listed for trading on the
NYSE on any such date, as reported in the composite transactions for the
principal United States securities exchange on which such security is so listed,
or if such security is not so listed on a United States national or regional
securities exchange, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System, or, if such security is not so
reported, the last quoted bid price for such security in the over-the-counter
market as reported by the National Quotation Bureau or similar organization, or,
if such bid price is not available, the market value of such security on such
date as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Company. A "Trading Day" is defined as a
day on which the security the Closing Price of which is being determined (A) is
not suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security. "Business Day" means any day, other than a Saturday or
Sunday, on which the NYSE, banking institutions and trust companies in The City
of New York are open for business.
Interest on this Exchangeable Note will be payable, and delivery of EOG
Common Stock (or, at the Company's option, cash in an amount equal to the value
of such EOG Common Stock) in exchange for the principal amount of this
Exchangeable Note at Maturity will be made upon surrender of this Exchangeable
Note, at the office or agency of the Company maintained for that purpose in The
City of New York, New York, and payment of interest on (and, if the Company
elects not to deliver EOG Common Stock upon exchange at Maturity, the cash
equivalent thereof payable upon exchange for the principal amount of) this
Exchangeable Note will be made in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company, payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear on the Securities Register at the close of
business on the Regular Record Date.
ADDITIONAL PROVISIONS OF THIS EXCHANGEABLE NOTE ARE CONTAINED ON THE
REVERSE HEREOF AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY
SET FORTH IN THIS PLACE.
<PAGE>
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee for this Exchangeable Note by manual signature, this
Exchangeable Note shall not be entitled to any benefit under the Indenture, or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, Enron Corp., has caused this instrument to be duly
executed under its corporate seal.
Dated:
ENRON CORP.
By:
Name:
Title:
Attest:
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein and
referred to in the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK,
as Trustee,
By:
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF EXCHANGEABLE NOTES]
ENRON CORP.
Exchangeable Note due ,1998
(Subject to Exchange at Maturity into Shares of
Common Stock, Par Value $.01 Per Share,
of Enron Oil & Gas Company)
This Exchangeable Note is one of a duly authorized issue of debentures,
notes or other evidences of indebtedness (hereinafter called the "Securities")
of the Company of the series hereinafter specified, which series is limited to
Exchangeable Notes, all such Securities issued and to be issued under an
indenture dated as of November 1, 1985, between the Company and Harris Trust and
Savings Bank, as Trustee, as supplemented by a First Supplemental Indenture
dated as of [ ], 1995, between the Company and Harris Trust and Savings Bank, as
Trustee (herein collectively, the "Indenture"), pursuant to which the Company
has designated Harris Trust and Savings Bank, as Trustee for the Exchangeable
Notes, to which Indenture and all other indentures supplemental thereto
reference is hereby made for a statement of the rights and limitation of rights
thereunder of the Holders of the Securities and of the rights, obligations,
duties and immunities of the Trustee for each series of Securities and of the
Company, and the terms upon which the Securities are and are to be authenticated
and delivered. As provided in the Indenture, the Securities may be issued in one
or more series, which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear interest, if any, at
different rates, may be subject to different redemption provisions, if any, may
be subject to different sinking, purchase or analogous funds, if any, may be
subject to different covenants and Events of Default and may otherwise vary as
in the Indenture provided or permitted. This Exchangeable Note is one of a
series of the Securities designated as [ ]% Exchangeable Notes Due [ ], 1998.
The Exchangeable Notes may not be redeemed, defeased or entitled to any
sinking fund prior to Maturity Date.
The provisions contained in the Indenture for legal defeasance and
discharge of the entire principal of all the Securities of any series (or of
certain covenants in the Indenture) upon compliance by the Company with certain
conditions set forth therein will not be applicable to the Exchangeable Notes.
If an Event of Default with respect to the Exchangeable Notes, as
defined in the Indenture, shall occur and be continuing, the principal of all
Exchangeable Notes may be declared due and payable and therefore will result in
the mandatory exchange of the principal amount thereof for EOG Common Stock (or,
at the Company's option, cash), all in the manner and with the effect provided
in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company with the consent of the Holders of not less than a
majority in aggregate principal amount of the Securities at the time Outstanding
of each series to be affected thereby. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Securities of any series at the time Outstanding, on behalf of the Holders
of all the Securities of such series, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences with respect to such series. Any such consent
or waiver by the Holder of this Exchangeable Note shall be conclusive and
binding upon such Holder and upon all
<PAGE>
future Holders of this Exchangeable Note and of any Exchangeable Notes issued
upon the transfer hereof or in exchange therefor or in lieu hereof whether or
not notation of such consent of waiver is made upon this Exchangeable Note.
No reference herein to the Indenture and no provision of this
Exchangeable Note or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
interest on this Exchangeable Note at the times, place and rate, and in the
manner, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, this Exchangeable Note is transferable on the Security Register of
the Company, upon surrender of this Exchangeable Note for registration of
transfer at the office or agency of the Company to be maintained for that
purpose in The City of New York, New York, or at any other office or agency of
the Company maintained for that purpose, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing and thereupon one or more new Exchangeable Note, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
No service charge shall be made for any such transfer or exchange, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of such transfer
or exchange, other than certain exchanges not involving any transfer.
All terms used in this Security which are defined in the Indenture have
the meanings set forth therein.
This Security shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.
Prior to due presentment of the Security for registration of transfer,
the Company, the Trustee for the Exchangeable Notes and any agent of the Company
or such Trustee may treat the Person in whose name this Exchangeable Note is
registered as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Exchangeable Note be
overdue, and neither the Company, such Trustee nor any such agent shall be
affected by notice to the contrary.
<PAGE>
------------------------------------
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT
MIN ACT _____________ Custodian _____________
(Cust) (Minor)
Under Uniform Gifts to Minors Act
--------------------
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY OR TAXPAYER I.D.
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(Please print or typewrite name and address including postal size code
of assignee) ___________________________________________________________________
the within the Exchangeable Note and all rights thereunder, hereby irrevocably
constituting and appointing ____________________________________________________
attorney to transfer said Exchangeable Note on the books of the Company, with
full power or substitution in the premises.
Dated:
NOTICE: The signature to
this assignment must
correspond with the name as
written up on the face of
the within Exchangeable
Note in every particular,
without alteration or
enlargement or any change
whatever.
EXHIBIT 12
ENRON CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
9/30/95 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges
Net income $389,579 $ 453,410 $332,522 $328,800 $232,146 $202,180
Less:
Undistributed earnings and losses
of less than 50% owned affiliates 16,040 (9,453) (20,232) (32,526) (8,890) (15,468)
Capitalized interest of
nonregulated companies (6,390) (9,007) (25,434) (66,401) (36,537) (8,145)
Add:
Fixed charges (1) 330,186 467,383 471,278 452,014 454,607 425,177
Minority interest 22,146 31,041 27,605 17,632 7,210 7,129
Income tax expense 195,711 190,081 148,104 88,630 105,859 62,739
----------------------------------------------------------------------------
Total $947,272 $1,123,455 $933,843 $788,149 $754,395 $673,612
============================================================================
Fixed Charges
Interest expense (1) $294,173 $ 424,893 $436,211 $430,406 $425,945 $400,548
Rental expense representative of
interest factor 36,013 42,490 35,067 21,608 28,662 24,629
----------------------------------------------------------------------------
Total $330,186 $ 467,383 $471,278 $452,014 $454,607 $425,177
============================================================================
Ratio of earnings to fixed charges 2.87 2.40 1.98 1.74 1.66 1.58
============================================================================
</TABLE>
(1) AMOUNTS EXCLUDE COSTS INCURRED ON SALES OF ACCOUNTS RECEIVABLES.
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated February 17, 1995
included in Enron Corp.'s Annual Report on Form 10-K for the year ended December
31, 1994 and to all references to our Firm included in this Registration
Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
November 3, 1995
EXHIBIT 23(b)
DEGOLYER AND MACNAUGHTON
One Energy Square
Dallas, Texas 75206
October 25, 1995
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Gentlemen:
DeGolyer and MacNaughton hereby consents to the incorporation by reference
in the Registration Statement on Form S-3, to be filed with the Securities and
Exchange Commission on or about October 26, 1995 (the Registration Statement),
of the references to our firm and to the opinions delivered to Enron Oil & Gas
Company (the Company) relating to the comparison of estimates prepared by
DeGolyer and MacNaughton to those furnished by the Company of proved oil,
condensate, natural gas liquids, and natural gas reserves of certain selected
properties owned by the Company. The opinions are contained in DeGolyer and
MacNaughton's letter reports dated January 20, 1993, January 27, 1994, and
January 13, 1995, for estimates as of January 1, 1993, January 1, 1994, and
January 1, 1995, respectively, and are included in the section "Oil and Gas
Exploration and Production Properties and Reserves -- Reserve Information" in
Enron Corp.'s Annual Report on Form 10-K for the year ended December 31, 1994,
and in Note 18 to the Enron Corp. consolidated financial statements included in
Enron Corp.'s Form 10-K for the year ended December 31, 1994. DeGolyer and
MacNaughton also consents to the incorporation by reference in the Registration
Statement of its letter report, dated January 13, 1995, addressed to the
Company, which is included as Exhibit 24.03 to Enron Corp.'s Annual Report on
Form 10-K for the year ended December 31, 1994, and to the reference to it in
the section "Experts" in the Prospectus that is a part of the Registration
Statement.
Very truly yours,
DeGOLYER and MacNAUGHTON
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ ROBERT A. BELFER
--------------------------------
Robert A. Belfer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ NORMAN P. BLAKE, JR.
--------------------------------
Norman P. Blake, Jr.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ JOHN H. DUNCAN
--------------------------------
John H. Duncan
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ JOE H. FOY
--------------------------------
Joe H. Foy
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), her true and lawful attorney-in-fact and agent, for her and
on her behalf and in her name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set her hand
this 7th day of November, 1995.
/s/ WENDY L. GRAMM
--------------------------------
Wendy L. Gramm
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ ROBERT K. JAEDICKE
--------------------------------
Robert K. Jaedicke
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ RICHARD D. KINDER
--------------------------------
Richard D. Kinder
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ KENNETH L. LAY
--------------------------------
Kenneth L. Lay
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ CHARLES A. LEMAISTRE
--------------------------------
Charles A. LeMaistre
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ JOHN A. URQUHART
--------------------------------
John A. Urquhart
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ JOHN WAKEHAM
--------------------------------
John Wakeham
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ CHARLS E. WALKER
--------------------------------
Charls E. Walker
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the
proposed registration by Enron Corp., a Delaware corporation (the "Company"), of
Exchangeable Notes, which will be mandatorily exchanged by the Company into a
number of shares of Enron Oil & Gas Company Common Stock or, at the Company's
option, cash with equal value, the undersigned officer or director of the
Company hereby constitutes and appoints Kenneth L. Lay, Jack I. Tompkins, Kurt
S. Huneke and Peggy B. Menchaca, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, for him and
on his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file a registration statement on Form S-3 relating to such
securities to be filed with the Securities and Exchange Commission, together
with all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand
this 7th day of November, 1995.
/s/ HERBERT S. WINOKUR, JR.
--------------------------------
Herbert S. Winokur, Jr.
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) _______________
HARRIS TRUST AND SAVINGS BANK
(NAME OF TRUSTEE)
Illinois 36-1194448
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
111 West Monroe Street; Chicago, Illinois 60603
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Frank A. Pierson; Harris Trust and Savings Bank;
311 West Monroe Street; Chicago, Illinois, 60606
312/461-2533
(NAME, ADDRESS AND TELEPHONE NUMBER FOR AGENT FOR SERVICE)
ENRON CORPORATION
(NAME OF OBLIGOR)
Delaware
(STATE OF INCORPORATION)
47-0255140
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1400 Smith Street
Houston, Texas 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Debt Securities
(TITLE OF INDENTURE SECURITIES)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164
West Jackson Boulevard, Chicago, Illinois; Federal Deposit
Insurance Corporation, Washington, D.C.; The Board of
Governors of the Federal Reserve System,Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise
corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee is now in
effect which includes the authority of the trustee to commence
business and to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between
Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc.
which constitutes the articles of association of the Trustee as
now in effect and includes the authority of the Trustee to
commence business and to exercise corporate trust powers was filed
in connection with the Registration Statement of Louisville Gas
and Electric Company, File No. 2-44295, and is incorporated herein
by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in
connection with the Registration Statement of C-Cube Microsystems,
Inc.; File No. 33-97166, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.
(included as Exhibit B on page 3 of this statement)
1
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 24th day of October, 1995.
HARRIS TRUST AND SAVINGS BANK
By: ___________________________________
Frank A. Pierson
Vice President
EXHIBIT A
The consents of the Trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
HARRIS TRUST AND SAVINGS BANK
By: ___________________________________
Frank A. Pierson
Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of June 30, 1995, as published in accordance with a
call made by the State Banking Authority and by the Federal Reserve Bank of the
Seventh Reserve District.
[GRAPHIC OMITTED] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on June 30, 1995, a state banking institution organized and operating
under the banking laws of this State and a member of the Federal Reserve System.
Published in accordance with a call made by the Commissioner of Banks and Trust
Companies of the State of Illinois and by the Federal Reserve Bank of this
District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
----------
<S> <C> <C>
CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS:
NON-INTEREST BEARING BALANCES AND CURRENCY AND
COIN ....................................................................................... $ 975,130
INTEREST BEARING
BALANCES ................................................................................... $ 619,550
SECURITIES: ................................................................................
A. HELD-TO-MATURITY SECURITIES ............................................................ $ 654,606
B. AVAILABLE-FOR-SALE SECURITIES .......................................................... $ 1,597,462
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL IN
DOMESTIC OFFICES OF THE BANK AND OF ITS EDGE AND AGREEMENT SUBSIDIARIES,
AND IN IBF'S:
FEDERAL FUNDS
SOLD ....................................................................................... $ 272,684
SECURITIES PURCHASED UNDER AGREEMENTS TO
RESELL ..................................................................................... $ 0
LOANS AND LEASE FINANCING RECEIVABLES:
LOANS AND LEASES, NET OF UNEARNED
INCOME ..................................................................................... $ 7,184,420
LESS: ALLOWANCE FOR LOAN AND LEASE
LOSSES ..................................................................................... $ 91,061
-----------
LOANS AND LEASES, NET OF UNEARNED INCOME, ALLOWANCE, AND RESERVE
(ITEM 4.A MINUS
4.B) ....................................................................................... $ 7,093,359
ASSETS HELD IN TRADING
ACCOUNTS ................................................................................... $ 335,699
PREMISES AND FIXED ASSETS (INCLUDING CAPITALIZED
LEASES) .................................................................................... $ 139,368
OTHER REAL ESTATE
OWNED ...................................................................................... $ 1,018
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED
COMPANIES .................................................................................. $ 195
CUSTOMER'S LIABILITY TO THIS BANK ON ACCEPTANCES
OUTSTANDING ................................................................................ $ 120,891
INTANGIBLE
ASSETS ..................................................................................... $ 21,763
OTHER
ASSETS ..................................................................................... $ 246,739
------------------------------
TOTAL ASSETS ............................................................................... $12,078,464
==============================
LIABILITIES
DEPOSITS:
IN DOMESTIC
OFFICES .................................................................................... $ 4,184,673
NON-INTEREST
BEARING .................................................................................... $ 2,391,354
INTEREST
BEARING .................................................................................... $ 1,793,319
IN FOREIGN OFFICES, EDGE AND AGREEMENT SUBSIDIARIES, AND
IBF'S ...................................................................................... $ 2,559,227
NON-INTEREST
BEARING .................................................................................... $ 33,115
INTEREST
BEARING .................................................................................... $ 2,526,112
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE IN DOMESTIC
OFFICES OF THE BANK AND OF ITS EDGE AND AGREEMENT SUBSIDIARIES, AND IN IBF'S:
FEDERAL FUNDS
PURCHASED .................................................................................. $ 1,361,248
SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE ................................................................................. $ 1,496,277
TRADING LIABILITIES ........................................................................ $ 264,633
OTHER BORROWED
MONEY:
A. WITH ORIGINAL MATURITY OF ONE YEAR OR LESS ............................................. $ 883,157
B. WITH ORIGINAL MATURITY OF MORE THAN ONE YEAR ........................................... $ 13,390
BANK'S LIABILITY ON ACCEPTANCES EXECUTED AND OUTSTANDING ................................... $ 120,891
SUBORDINATED NOTES AND
DEBENTURES ................................................................................. $ 235,000
OTHER
LIABILITIES ................................................................................ $ 178,632
==============================
TOTAL LIABILITIES .......................................................................... $ 11,297,128
==============================
EQUITY CAPITAL
COMMON
STOCK ...................................................................................... $ 100,000
SURPLUS .................................................................................... $ 275,000
A. UNDIVIDED PROFITS AND CAPITAL RESERVES ................................................. $ 409,797
B. NET UNREALIZED HOLDING GAINS (LOSSES) ON AVAILABLE-FOR-SALE SECURITIES ................. ($ 3,461)
------------------------------
TOTAL EQUITY CAPITAL ....................................................................... $ 781,336
==============================
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND EQUITY
CAPITAL .................................................................................... $ 12,078,464
==============================
</TABLE>
I, Steve Neudecker, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
STEVE NEUDECKER
7/28/95
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
ALAN G. McNALLY,
DONALD S. HUNT,
JAMES J. GLASSER,
Directors.
