<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1996
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
<TABLE>
<S> <C> <C>
ENRON CORP. ENRON PREFERRED FUNDING, L.P. ENRON CAPITAL TRUST I
(Exact name of Registrant (Exact name of Registrant as (Exact name of Registrant as
as specified in its charter) specified in its certificate of specified in its certificate of
limited partnership) trust)
DELAWARE DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
Incorporation or organization) Incorporation or organization) Incorporation or organization)
47-0255140 TO BE APPLIED FOR TO BE APPLIED FOR
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
</TABLE>
REX R. ROGERS
ASSISTANT GENERAL COUNSEL
ENRON CORP.
1400 SMITH STREET, HOUSTON, TEXAS 77002
(713) 853-3069
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices and agent for service)
---------------------
<TABLE>
<S> <C>
Copies to:
GARY W. ORLOFF RICHARD T. PRINS
BRACEWELL & PATTERSON, L.L.P. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
711 LOUISIANA, SUITE 2900 919 THIRD AVENUE
HOUSTON, TX 77002 NEW YORK, NEW YORK 10022
(713) 223-2900 (212) 735-3000
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, please 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>
================================================================================================================
PROPOSED
MAXIMUM
PROPOSED AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Enron Capital Trust I Trust Originated Preferred
Securities.................................... 8,000,000 $25 $200,000,000 $60,607
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Enron Preferred Funding, L.P. Partnership
Preferred Securities(2)....................... 8,000,000 $25 $200,000,000 --
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Guarantee of Enron Corp. with respect to Trust
Preferred Securities(3)....................... -- -- -- --
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Guarantee of Enron Corp. with respect to
Partnership Preferred Securities(3)........... -- -- -- --
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Guarantee of Enron Corp. with respect to
debentures of certain of its
subsidiaries(3)............................... -- -- -- --
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Subordinated debenture of Enron Corp.(3) ....... $200,000,000 -- $200,000,000 --
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Total....................................... $200,000,000 $60,607
================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457.
(2) The Partnership Preferred Securities will be purchased by Enron Capital
Trust I with the proceeds of the sale of the Trust Preferred Securities,
together with the proceeds received from Enron Corp. in respect of the
common securities to be issued by Enron Capital Trust I. No separate
consideration will be received for the Partnership Preferred Securities.
(3) No separate consideration will be received for guarantees of Enron Corp.
with respect to the Trust Preferred Securities, the Partnership Preferred
Securities, the debentures of certain of its subsidiaries or the
subordinated debenture of Enron Corp. The debentures of Enron Corp. and its
subsidiaries will be purchased by Enron Preferred Funding, L.P. with the
proceeds of the sale of the Partnership Preferred Securities, together with
a capital contribution from Enron Corp.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
***************************************************************************
* *
* 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
PRELIMINARY PROSPECTUS DATED OCTOBER 28, 1996
PROSPECTUS
- ----------
8,000,000 TRUST PREFERRED SECURITIES
ENRON CAPITAL TRUST I
% TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPRS(SM)")
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
ENRON CORP
---------------------
The % Trust Originated Preferred Securities(SM) (the "TOPrS(SM)" or
"Trust Preferred Securities") offered hereby represent preferred undivided
beneficial ownership interests in the assets of Enron Capital Trust I, a
statutory business trust formed under the laws of the State of Delaware (the
"Trust"). Enron Corp., a Delaware corporation (the "Company" or "Enron"), will
own all the common securities (the "Trust Common Securities" and, together with
the Trust Preferred Securities, the "Trust Securities") representing undivided
beneficial ownership interests in the assets of the Trust. The Trust exists for
the sole purpose of issuing the Trust Securities and investing the proceeds as
described below and engaging in activities incident thereto. The proceeds from
the sale of the Trust Securities will be used by the Trust to purchase
Partnership Preferred Securities ("Partnership Preferred Securities"),
representing the limited partnership interests in Enron Preferred Funding, L.P.,
a Delaware limited partnership (the "Partnership"). All of the partnership
interests in the Partnership other than the limited partnership interests
represented by the Partnership Preferred Securities are owned by Enron, which is
the sole general partner of the Partnership (in such capacity, the "General
Partner"). Substantially all of the proceeds from the sale of the Partnership
Preferred Securities, together with the capital contribution from the General
Partner, will be used by the Partnership to purchase debt instruments of Enron
and certain of its subsidiaries (the "Debentures"). In addition, approximately
one percent of the proceeds from the sale of the Partnership Preferred
Securities and the capital contribution from the General Partner will be used to
purchase certain U.S. government obligations and commercial paper of entities
not affiliated with Enron (the "Eligible Debt Securities"). See "Description of
the Partnership Preferred Securities -- Partnership Investments."
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE TRUST PREFERRED
SECURITIES, INCLUDING CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
Application will be made to list the Trust Preferred Securities on the New
York Stock Exchange, Inc. (the "New York Stock Exchange"). If approved for
listing, trading of the Trust Preferred Securities on the New York Stock
Exchange is expected to commence within a 30-day period after the initial
delivery of the Trust Preferred Securities. See "Underwriting."
---------------------
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.
<TABLE>
<CAPTION>
===========================================================================================================
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
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<S> <C> <C> <C>
Per Trust Preferred Security................ $ (3) $
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Total....................................... $ (3) $
===========================================================================================================
</TABLE>
(1) Plus accrued distributions, if any, from , 1996.
(2) Enron, the Trust and the Partnership have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will be ultimately invested in investment instruments of Enron
and certain of its subsidiaries, Enron has agreed to pay to the Underwriters
as compensation (the "Underwriters' Compensation") $ per Trust
Preferred Security (or $ in the aggregate); provided that such
compensation for sales of or more Trust Preferred Securities to a
single purchaser will be $ per Trust Preferred Security. Therefore,
to the extent of such sales, the actual amount of Underwriters' Compensation
will be less than the aggregate amount specified in the preceding sentence.
See "Underwriting."
(4) Expenses of the offering that are payable by Enron are estimated to be
$ .
---------------------
The Trust Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Trust Preferred Securities will be made only in book-entry
form through the facilities of The Depository Trust Company ("DTC") on or about
, 1996.
---------------------
MERRILL LYNCH & CO.
---------------------
The date of this Prospectus is , 1996.
(SM) "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
<PAGE> 3
(continued from cover page)
Holders of the Trust Preferred Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on each March 31, June 30, September 30, and
December 31, commencing at an annual rate of % of the
liquidation amount of $25 per Trust Preferred Security (equivalent to $ per
Trust Preferred Security) if, as and when the Trust has funds available for
payment. See "Description of the Trust Preferred Securities -- Distributions."
Distributions not paid on the scheduled payment date will accumulate and
compound quarterly at a rate per annum equal to %. The distribution rate
and the distribution payment dates and other payment dates for the Trust
Preferred Securities will correspond to the distribution rate and distribution
payment dates and other payment dates for the Partnership Preferred Securities,
which constitute the sole assets of the Trust. As described above, the assets of
the Partnership will initially consist only of the Debentures and, to a limited
extent, Eligible Debt Securities. The payment of distributions by the Trust and
payments on liquidation of the Trust or the redemption of Trust Preferred
Securities, as described below, are guaranteed by Enron (the "Trust Guarantee")
to the extent the Trust has funds available therefor as described under
"Description of the Trust Guarantee." The payment of distributions by the
Partnership (if, as and when declared) and payments on liquidation of the
Partnership or the redemption of Partnership Preferred Securities, as described
below, are also guaranteed by Enron (the "Partnership Guarantee") to the extent
the Partnership has funds available therefor as described under "Description of
the Partnership Guarantee." In addition, payments in respect of the Debentures
(other than the Company Debenture) are fully and unconditionally guaranteed, on
a subordinated basis, by Enron (the "Investment Guarantees") for the benefit of
the holder of the Partnership Preferred Securities.
The Trust Guarantee, the Partnership Guarantee and the Investment
Guarantees (collectively, the "Guarantees"), when taken together with the
Company Debenture and Enron's obligations to pay all fees and expenses of the
Trust and the Partnership, constitute a guarantee to the extent set forth herein
by Enron of the distribution, redemption and liquidation payments payable to the
holders of the Trust Preferred Securities. The Guarantees do not apply, however,
to current distributions by the Partnership unless and until such distributions
are declared by the Partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in the
Partnership, each as more fully described in the next succeeding paragraph and
under "Risk Factors -- Insufficient Income or Assets Available to Partnership."
Enron's obligations under the Guarantees are subordinate and junior in right of
payment to all other liabilities of Enron and rank pari passu with the most
senior preferred stock issued from time to time by Enron and with any guarantee
now or hereafter entered into by Enron in respect of any preferred security of
any affiliate of Enron, and its obligations under the Company Debenture are
subordinate and junior in right of payment to all senior indebtedness of Enron.
At September 30, 1996, Enron had outstanding consolidated senior indebtedness
aggregating approximately $ , which would have ranked senior to Enron's
obligations under the Guarantees and the Company Debenture. See "Risk
Factors -- Ranking of Subordinate Obligations Under the Guarantees and the
Company Debenture."
Distributions on the Partnership Preferred Securities will be declared and
paid only as determined in the sole discretion of Enron in its capacity as the
General Partner of the Partnership. In addition, the General Partner is not
obligated to declare distributions on the Partnership Preferred Securities at
any time, including upon or following a Partnership Enforcement Event. To the
extent that the issuers (including, where applicable, Enron, as guarantor) of
the securities in which the Partnership invests fail to make any payments in
respect of such securities (or, if applicable, guarantees), the Partnership will
not have sufficient funds to pay and will not declare or pay distributions on
the Partnership Preferred Securities. In addition, as described under "Risk
Factors -- Insufficient Income or Assets Available to Partnership," the
Partnership may not have sufficient funds to pay current or liquidating
distributions on the Partnership Preferred Securities if (i) at any time that
the Partnership is receiving current payments in respect of the securities held
by the Partnership (including the Debentures), the General Partner, in its sole
discretion, does not declare distributions on the Partnership Preferred
Securities and the Partnership receives insufficient amounts to pay the
additional compounded distributions that will accrue in respect of the
Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds
received in respect of the Debentures upon their retirement or at their
2
<PAGE> 4
(continued from cover page)
maturities in Affiliate Investment Instruments and Eligible Debt Securities that
do not generate income in an amount that is sufficient to pay full distributions
in respect of the Partnership Preferred Securities or (iii) the Partnership
invests in equity or debt securities of Investment Affiliates that are not
guaranteed by Enron and that cannot be liquidated by the Partnership for an
amount sufficient to pay such distributions in full. If the Partnership does not
declare and pay distributions on the Partnership Preferred Securities out of
funds legally available for distribution, the Trust will not have sufficient
funds to make distributions on the Trust Preferred Securities, in which event
the Trust Guarantee will not apply to such distributions until the Trust has
sufficient funds available therefor. See "Risk Factors -- Distributions Payable
Only if Declared by General Partner; Restrictions on Certain Payments; Tax
Consequences," "-- Insufficient Income or Assets Available to Partnership,"
"Description of the Trust Preferred Securities -- Distributions" and
"Description of the Partnership Preferred Securities -- Distributions."
If (i) for any distribution period, full distributions on a cumulative
basis on any Trust Preferred Securities have not been paid, (ii) an Investment
Event of Default by any Investment Affiliate in respect of any Affiliate
Investment Instrument has occurred and is continuing or (iii) Enron is in
default of its obligations under any Guarantee, then during such period Enron
shall not (a) declare or pay dividends on, make distributions with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to
any of its capital stock or comparable equity interest (except for dividends or
distributions in shares of its common stock and conversions or exchanges of
common stock of one class into common stock of another class and except as may
be required upon conversion of Enron's existing convertible preferred stock at
the option of any holder thereof) or (b) make any guarantee payments with
respect to the foregoing.
The Partnership Preferred Securities are redeemable by the Partnership, in
whole or in part, from time to time, on or after December 31, 2001 at an amount
per Partnership Preferred Security equal to $25 plus accrued and unpaid
distributions thereon. The Partnership Preferred Securities may also be
redeemed, in whole but not in part, at any time upon the occurrence of a
Partnership Special Event. If the Partnership redeems the Partnership Preferred
Securities, the Trust must redeem Trust Securities on a pro rata basis having an
aggregate liquidation amount equal to the aggregate principal amount of the
Partnership Preferred Securities so redeemed at a redemption price corresponding
to the redemption price of the Partnership Preferred Securities (which includes
all accrued and unpaid distributions thereon to the date fixed for redemption)
(the "Redemption Price"). See "Description of the Trust Preferred
Securities -- Mandatory Redemption." Neither the Partnership Preferred
Securities nor the Trust Preferred Securities have any scheduled maturity or are
redeemable at any time at the option of the holders thereof.
The Trust will be dissolved upon the occurrence of a Trust Special Event.
Upon dissolution of the Trust, the Partnership Preferred Securities will be
distributed to the holders of the Trust Securities, on a pro rata basis, in lieu
of any cash distribution, unless the Partnership Preferred Securities are
redeemed in the limited circumstances described herein. If the Partnership
Preferred Securities are distributed to the holders of the Trust Securities,
Enron will use its best efforts to cause the Partnership Preferred Securities to
be listed on the New York Stock Exchange or such other national securities
exchange or similar organization as the Trust Preferred Securities are then
listed or quoted. See "Description of the Trust Preferred Securities -- Trust
Special Event Redemption or Distribution" and "Description of the Partnership
Preferred Securities."
In the event of any liquidation, dissolution, winding up or termination of
the Trust, the holders of the Trust Preferred Securities will be entitled to
receive for each Trust Preferred Security a liquidation amount of $25 plus
accrued and unpaid distributions thereon, except to the extent, in connection
with such dissolution, Partnership Preferred Securities are distributed to the
holders of the Trust Preferred Securities. Upon (i) the occurrence of an
Investment Event of Default by an Investment Affiliate (including Enron) in
respect of any Affiliate Investment Instrument or (ii) default by Enron on any
of its obligations under any Guarantee, the holders of the Trust Preferred
Securities will have a preference over the holders of the Trust Common
Securities with respect to payments upon liquidation of the Trust. Under no
circumstances will the investment instruments held by the Partnership be
distributed in kind to the holders of the Trust Preferred Securities or
Partnership Preferred Securities. See "Description of the Trust Preferred
Securities -- Liquidation Distribution Upon Dissolution."
3
<PAGE> 5
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY 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.
AVAILABLE INFORMATION
Enron 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 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, 7 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., 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; 440 South LaSalle Street, Chicago,
Illinois 60605; and 301 Pine Street, San Francisco, California 94104. Certain of
such reports, proxy statements and other information filed by Enron are also
available on the Internet at the Commission's World Wide Web site at
http://www.sec.gov.
Enron, the Trust and the Partnership have filed with the Commission a
Registration Statement on Form S-3 (the "Registration Statement," which term
shall include all amendments, exhibits and schedules thereto), pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, with respect to the Trust Preferred
Securities offered hereby (as well as the Partnership Preferred Securities, the
Trust Guarantee, the Partnership Guarantee, the Investment Guarantees and the
Company Debenture). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission, and to which reference is hereby
made. Copies of the Registration Statement (including the exhibits thereto) may
be inspected and copied at the offices of the Commission as set forth above.
No separate financial statements of the Trust or the Partnership have been
included herein. Enron, the Trust and the Partnership do not believe that such
financial statements would be material to holders of the Trust Preferred
Securities offered hereby because the Trust and the Partnership are special
purpose entities, have no operating history and no independent operations and
are not engaged in, and do not propose to engage in, any activity other than the
issuance of the securities and the lending of the proceeds thereof to Enron and
its affiliates as described herein. See "Description of the Trust" and
"Description of the Partnership." Enron beneficially owns all of the
Partnership's partnership interests other than the Partnership Preferred
Securities and beneficially owns all of the undivided beneficial interests in
the assets of the Trust other than the beneficial interests represented by the
Trust Preferred Securities. See "Description of the Trust," "Description of the
Partnership," "Description of the Trust Preferred Securities" and "'Description
of the Partnership Preferred Securities." In future filings under the Exchange
Act, a footnote to Enron's annual financial statements will state that the Trust
and the Partnership are consolidated with Enron, that the sole assets of the
Trust are the Partnership Preferred Securities, that the sole assets of the
Partnership are the Affiliate Investment Instruments and the Eligible Debt
Securities and that the Guarantees, when taken together with the Company
Debenture and the Company's obligations to pay all fees and expenses of the
Trust and the Partnership, constitute a guarantee to the extent set forth herein
by the Company of the distribution, redemption and liquidation payments payable
to the holders of the Trust Preferred Securities.
Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission, reference is made to such exhibit or other filing for
a more complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
4
<PAGE> 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Enron (File No.
1-3423) pursuant to Section 13(a) of the Exchange Act are incorporated herein by
reference as of their respective dates:
(a) Annual Report on Form 10-K for the year ended December 31, 1995;
(b) Current Report on Form 8-K dated March 8, 1996;
(c) Quarterly Report on Form 10-Q for the quarter ended March 31,
1996; and
(d) Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
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 securities offered hereby shall be deemed to
be incorporated herein by reference and to be a part hereof from the date of
filing of such document. Any statement contained herein or in a document all or
a portion of which is incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
Enron will provide without charge to each person to whom a copy of this
Prospectus is delivered, on the request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to the Corporate
Secretary, Enron Corp., at its principal executive offices, 1400 Smith Street,
Houston, Texas 77002 (telephone: (713) 853-6161).
5
<PAGE> 7
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. See "Index of Selected Defined Terms" for a cross
reference to the location in this Prospectus where such terms are defined.
THE COMPANY
Enron 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 transportation
and wholesale marketing of natural gas to markets throughout the United States
and internationally through approximately 37,000 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 announced on July 22, 1996 that it had signed an agreement to merge
with Portland General Corporation ("PGC") in a stock-for-stock transaction. PGC
is an electric utility holding company, serving retail electric customers in
northwest Oregon as well as wholesale electricity customers throughout the
western United States. Enron proposes to issue approximately 51 million common
shares, valued at approximately $2.1 billion as of July 22, 1996, to
shareholders of PGC in a one-for-one exchange of shares, as a result of which
Enron will be the surviving corporation. Following the merger, former PGC
shareholders will own approximately 17% of the outstanding common shares of the
combined entity. The merger agreement provides that, unless certain regulatory
reforms are enacted, Enron will reincorporate as an Oregon corporation prior to
completing the merger with PGC. Enron will consolidate PGC's debt (approximately
$1.1 billion at June 30, 1996) and account for the transaction on a purchase
accounting basis. The merger is conditioned, among other things, upon the
approvals of each company's shareholders at shareholders meetings to be held
November 12, 1996, and the satisfactory receipt of regulatory approvals from the
Oregon Public Utility Commission and the Federal Energy Regulatory Commission.
Regulatory procedures are expected to be completed sometime in 1997. Proxy
materials containing more detailed information about PGC and the proposed merger
have been filed with the Commission and may be obtained as set forth under
"Available Information."
THE OFFERING
The Trust..................... Enron Capital Trust I, a Delaware statutory
business trust. The sole assets of the Trust
will be the Partnership Preferred Securities.
The Partnership............... Enron Preferred Funding, L.P., a Delaware
limited partnership. The assets of the
Partnership will initially consist of the
Debentures and, to a limited extent, certain
Eligible Debt Securities.
Securities Offered............ 8,000,000 % Trust Preferred Securities.
Distributions................. Distributions on the Trust Preferred Securities
will accrue from the date of original issuance
of the Trust Preferred Securities and will be
payable at the annual rate of % of the
liquidation amount of $25 per Trust Preferred
Security (equivalent to $ per Trust
Preferred Security) if, as, and when the Trust
has funds available for payment. Distributions
will be payable quarterly in arrears on each
March 31, June 30, September 30, and December
31, commencing . Distributions not
made on the scheduled payment date will
accumulate and compound quarterly at a rate per
annum equal to %.
6
<PAGE> 8
The ability of the Trust to pay distributions
on the Trust Preferred Securities is entirely
dependent on its receipt of corresponding
distributions with respect to the Partnership
Preferred Securities. The ability of the
Partnership to pay distributions on the
Partnership Preferred Securities is, in turn,
dependent on its receipt of payments with
respect to the Debentures and the Eligible Debt
Securities held by the Partnership.
Distributions on the Partnership Preferred
Securities will be declared and paid only as
determined in the sole discretion of the
Company in its capacity as the General Partner
of the Partnership. However, in the event full
distributions on Trust Preferred Securities
have not been paid, the Company will be
prohibited from, among other things, making
distributions with respect to its capital stock
or comparable equity interests as described
below. See "Risk Factors -- Distributions
Payable Only if Declared by General Partner;
Restrictions on Certain Payments; Tax
Consequences," "Description of the Trust
Preferred Securities -- Distributions" and
"Description of the Partnership Preferred
Securities -- Distributions" and
"-- Partnership Investments."
Rights Upon Non-Payment of
Distributions and Certain
Defaults; Covenants of the
Company..................... If, at any time, (i) arrearages on
distributions on the Trust Preferred Securities
shall exist for six consecutive quarterly
distribution periods, (ii) an Investment Event
of Default occurs and is continuing on any
Affiliate Investment Instrument or (iii) the
Company is in default on any of its obligations
under the Trust Guarantee, then (a) the
Property Trustee, as the holder of the
Partnership Preferred Securities, will have the
right to enforce the terms of the Partnership
Preferred Securities, including the right to
direct the Special Representative to enforce
(1) the Partnership's creditors' rights and
other rights with respect to the Affiliate
Investment Instruments and the Investment
Guarantees and (2) the rights of the holders of
the Partnership Preferred Securities to receive
distributions (but only if, as and when
declared) on the Partnership Preferred
Securities, and (b) the Trust Guarantee Trustee
or the Special Representative, as the holders
of the Trust Guarantee and the Partnership
Guarantee, respectively, shall have the right
to enforce such Guarantees, including the right
to enforce the covenant restricting certain
distributions by the Company described below.
Under no circumstances, however, shall the
Special Representative have authority to cause
the General Partner to declare distributions on
the Partnership Preferred Securities. If the
Partnership does not declare and pay
distributions on the Partnership Preferred
Securities out of funds legally available for
distribution, the Trust will not have
sufficient funds to make distributions on the
Trust Preferred Securities. See "Risk
Factors -- Insufficient Income or Assets
Available to Partnership," "Description of the
Trust Preferred Securities -- Trust Enforcement
Events" and "Description of the Partnership
Preferred Securities -- Partnership Enforcement
Events."
7
<PAGE> 9
The Company has agreed that if (a) for any
distribution period, full distributions on a
cumulative basis on any Trust Preferred
Securities have not been paid, (b) an
Investment Event of Default by any Investment
Affiliate in respect of any Affiliate
Investment Instrument has occurred and is
continuing or (c) the Company is in default of
its obligations under the Trust Guarantee, the
Partnership Guarantee or any Investment
Guarantee, then, during such period the Company
shall not (i) declare or pay dividends on, make
distributions with respect to, redeem, purchase
or acquire or make a liquidation payment with
respect to any of its capital stock or
comparable equity interest (except for
dividends or distributions in shares of its
common stock and conversions or exchanges of
common stock of one class into common stock of
another class and except as may be required
upon conversion of Enron's existing convertible
preferred stock at the option of any holder
thereof) or (ii) make any guarantee payments
with respect to the foregoing.
Guarantees.................... The Company will irrevocably guarantee, on a
subordinated basis and to the extent set forth
herein, the payment in full of (i) any accrued
and unpaid distributions on the Trust Preferred
Securities to the extent of funds of the Trust
available therefor, (ii) the amount payable
upon redemption of the Trust Preferred
Securities to the extent of funds of the Trust
available therefor and (iii) generally, the
liquidation amount of the Trust Preferred
Securities to the extent of the assets of the
Trust available for distribution to holders of
Trust Preferred Securities. See "Description of
the Trust Guarantee."
The Company will also irrevocably guarantee, on
a subordinated basis and to the extent set
forth herein, the payment in full of (i) any
accrued and unpaid distributions on the
Partnership Preferred Securities if, as and
when declared out of funds legally available
therefor, (ii) the amount payable upon
redemption of the Partnership Preferred
Securities to the extent of funds of the
Partnership legally available therefor and
(iii) the liquidation amount of the Partnership
Preferred Securities to the extent of the
assets of the Partnership available for
distribution to holders of Partnership
Preferred Securities. See "Description of the
Partnership Guarantee."
The Company will fully and unconditionally
guarantee, on a subordinated basis, payments in
respect of the Debentures (other than the
Company Debenture) for the benefit of the
holders of the Partnership Preferred
Securities, to the extent described under
"Description of the Partnership Preferred
Securities -- Investment Guarantees."
The Guarantees, when taken together with the
Company Debenture and the Company's obligations
to pay all fees and expenses of the Trust and
the Partnership, constitute a guarantee to the
extent set forth herein by the Company of the
distribution, redemption and liquidation
payments payable to the holders of the Trust
Preferred Securities. The Guarantees do not
apply, however, to current distributions by the
Partnership unless and until such distributions
are declared by the Partnership out of funds
legally
8
<PAGE> 10
available for payment or to liquidating
distributions unless there are assets available
for payment in the Partnership, each as more
fully described under "Risk
Factors -- Insufficient Income or Assets
Available to Partnership." The Company's
obligations under the Guarantees are
subordinate and junior in right of payment to
all other liabilities of the Company and rank
pari passu with the most senior preferred stock
issued from time to time by the Company and
with any guarantee now or hereafter entered
into by the Company in respect of any preferred
security of any affiliate of the Company.
Liquidation Amount............ In the event of any liquidation of the Trust,
holders will be entitled to receive $25 per
Trust Preferred Security plus an amount equal
to any accrued and unpaid distributions thereon
to the date of payment (such amount being the
"Trust Liquidation Distribution"), unless
Partnership Preferred Securities are
distributed to such holders in connection with
a Trust Special Event. If, upon a liquidation
of the Trust in which the Partnership Preferred
Securities are not distributed to holders of
the Trust Securities, the Trust Liquidation
Distribution can be paid only in part because
the Trust has insufficient assets available to
pay in full the aggregate Trust Liquidation
Distribution, then the amounts payable directly
by the Trust on the Trust Preferred Securities
shall be paid on a pro rata basis. The holders
of the Trust Common Securities will be entitled
to receive distributions upon any such
liquidation pro rata with the holders of the
Trust Preferred Securities, except that upon
(i) the occurrence of an Investment Event of
Default by an Investment Affiliate (including
the Company) in respect of any Affiliate
Investment Instrument or (ii) default by the
Company on any of its obligations under any
Guarantee, the holders of the Trust Preferred
Securities will have a preference over the
holders of the Trust Common Securities with
respect to payments upon liquidation of the
Trust. See "Description of the Trust Preferred
Securities -- Liquidation Distribution Upon
Dissolution."
Optional Redemption........... The Partnership Preferred Securities will be
redeemable for cash, at the option of the
Partnership, in whole or in part, from time to
time, after December 31, 2001, at an amount per
Partnership Preferred Security equal to $25
plus accrued and unpaid distributions thereon.
Upon any redemption of the Partnership
Preferred Securities, the Trust Preferred
Securities will be redeemed at the Redemption
Price. See "Description of the Partnership
Preferred Securities -- Optional Redemption"
and "Description of the Trust Preferred
Securities -- Mandatory Redemption." Neither
the Partnership Preferred Securities nor the
Trust Preferred Securities have any scheduled
maturity or are redeemable at any time at the
option of the holders thereof.
Special Events Redemptions or
Distributions............... Upon the occurrence of a Trust Tax Event (which
event will generally be triggered upon the
occurrence of certain adverse tax consequences
or the denial of an interest deduction on the
Debentures held by the Partnership) or a Trust
Investment Company Event (which event will
generally be triggered if the Trust is
9
<PAGE> 11
considered an "investment company" under the
Investment Company Act of 1940, as amended (the
"1940 Act")), except in certain limited
circumstances, the Regular Trustees will have
the right to liquidate the Trust and cause
Partnership Preferred Securities to be
distributed to the holders of the Trust
Preferred Securities. In certain circumstances
involving a Partnership Tax Event (which event
will generally be triggered upon the occurrence
of certain adverse tax consequences or the
denial of an interest deduction on the
Debentures held by the Partnership) or a
Partnership Investment Company Event (which
event will generally be triggered if the
Partnership is considered an "investment
company" under the 1940 Act), the Partnership
will have the right to redeem the Partnership
Preferred Securities, in whole (but not in
part), at $25 per Partnership Preferred
Security plus accrued and unpaid distributions
thereon, in lieu of a distribution of the
Partnership Preferred Securities, in which
event the Trust Securities will be redeemed at
the Redemption Price. See "Description of the
Trust Preferred Securities -- Trust Special
Event Redemption or Distribution" and
"Description of the Partnership Preferred
Securities -- Partnership Special Event
Redemption."
Voting Rights................. Generally, holders of the Trust Preferred
Securities will not have any voting rights. The
holders of a majority in liquidation amount of
the Trust Preferred Securities, however, have
the right to direct the time, method and place
of conducting any proceeding for any remedy
available to the Property Trustee, or direct
the exercise of any trust or other power
conferred upon the Property Trustee under the
Declaration, including the right to direct the
Property Trustee, as holder of the Partnership
Preferred Securities, (i) to exercise its
rights in the manner described above under
"Rights Upon Non-Payment of Distributions and
Certain Defaults; Covenants of the Company" and
(ii) to consent to any amendment, modification
or termination of the Limited Partnership
Agreement or the Partnership Preferred
Securities where such consent shall be
required. See "Description of the Trust
Preferred Securities -- Voting Rights."
Form of Trust Preferred
Securities.................... The Trust Preferred Securities will be
represented by a global certificate or
certificates registered in the name of Cede &
Co., as nominee for DTC. Beneficial interests
in the Trust Preferred Securities will be
evidenced by, and transfers thereof will be
effected only through, records maintained by
the participants in DTC. Except as described
herein, Trust Preferred Securities in
certificated form will not be issued in
exchange for the global certificate or
certificates. See "Description of the Trust
Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company."
Use of Proceeds............... All of the proceeds from the sale of the Trust
Securities will be invested by the Trust in the
Partnership Preferred Securities. The
Partnership will use the funds to make
investments in the Debentures and, to a limited
extent, certain Eligible Debt Securities. See
"Use of Proceeds."
10
<PAGE> 12
SUMMARY HISTORICAL FINANCIAL INFORMATION 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 of the six-month periods are not necessarily indicative of the
results expected for a full year or any other interim period.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------ ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues...................................................... $5,698 $6,415 $7,985 $8,984 $9,189 $4,453 $6,015
Costs and expenses
Cost of gas and other products sold......................... 3,646 4,222 5,567 6,517 6,733 3,170 4,652
Operating expenses.......................................... 1,039 1,037 1,146 1,124 1,218 492 578
Oil and gas exploration costs............................... 59 59 76 84 79 43 38
Depreciation, depletion and amortization.................... 366 376 458 441 432 210 230
Taxes, other than income taxes.............................. 75 101 108 102 109 57 70
------ ------ ------ ------ ------ ------ ------
5,185 5,795 7,355 8,268 8,571 3,972 5,568
------ ------ ------ ------ ------ ------ ------
Operating income.............................................. 513 620 630 716 618 481 447
Other income and deductions
Equity in earnings of unconsolidated subsidiaries........... 55 56 73 112 86 28 71
Other, net.................................................. 147 91 95 116 461 93 162
------ ------ ------ ------ ------ ------ ------
Income before interest, minority interest and income taxes.... 715 767 798 944 1,165 602 680
Interest and related charges, net............................. 373 330 300 273 284 138 135
Dividends on preferred stock of subsidiary company............ -- -- 2 20 32 16 16
Minority interest............................................. 7 18 28 31 44 23 38
Income taxes.................................................. 103 90 135 167 285 136 162
------ ------ ------ ------ ------ ------ ------
Income before extraordinary items............................. 232 329 333 453 520 289 329
Extraordinary items........................................... -- (23) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net income(1)................................................. 232 306 333 453 520 289 329
Preferred stock dividends..................................... 25 22 17 15 16 8 8
------ ------ ------ ------ ------ ------ ------
Earnings on common stock...................................... $ 207 $ 284 $ 316 $ 438 $ 504 $ 281 $ 321
====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................................... $10,070 $10,312 $11,504 $11,966 $13,239 $ 14,628
Short-term debt................................................ -- -- -- -- -- --
Long-term debt (including amounts reclassified from
short-term debt)............................................. 3,109 2,459 2,661 2,805 3,065 3,330
Company-obligated preferred stock of subsidiaries.............. -- -- 214 377 377 392
Minority interest.............................................. 101 179 196 290 549 604
Shareholders' equity........................................... 1,901 2,518 2,623 2,880 3,165 3,554
</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.
11
<PAGE> 13
RISK FACTORS
Prospective purchasers of the Trust Preferred Securities should consider
carefully the risk factors set forth below, as well as all other information
contained or incorporated by reference in this Prospectus, in evaluating an
investment in the Trust Preferred Securities. To the extent any of the
information contained or incorporated by reference in this Prospectus
constitutes a "forward-looking statement" as defined in Section 27A(i)(1) of the
Securities Act, the risk factors set forth below are meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those in the forward-looking statement.
DISTRIBUTIONS PAYABLE ONLY IF DECLARED BY GENERAL PARTNER; RESTRICTIONS ON
CERTAIN PAYMENTS; TAX CONSEQUENCES
Distributions on the Partnership Preferred Securities will be payable only
if, as and when declared by the General Partner in its sole discretion. If
interest payments on the Debentures are deferred as permitted thereby, or if
such interest payments are not paid to the Partnership according to their terms
(and guarantee payments on the Investment Guarantees are not made by the
Company), the Partnership will generally lack funds to pay distributions on the
Partnership Preferred Securities. If the Partnership does not make current
distributions on the Partnership Preferred Securities, either because the
General Partner does not declare distributions to be made or because the
Partnership lacks sufficient funds, the Trust will not have funds available to
make current distributions on the Trust Preferred Securities. As described under
"Description of the Trust Guarantee -- Certain Covenants of the Company," the
Company will be restricted from, among other things, making distributions with
respect to its capital stock or comparable equity interests if full
distributions on the Trust Preferred Securities have not been paid.
Should the Partnership fail to pay current distributions on the Partnership
Preferred Securities, each holder of Trust Preferred Securities will generally
be required to accrue income, for United States federal income tax purposes, in
respect of the cumulative deferred distributions (including interest thereon)
allocable to its proportionate share of the Partnership Preferred Securities. As
a result, each holder of Trust Preferred Securities will recognize income for
United States federal income tax purposes in advance of the receipt of cash and
will not receive the cash from the Trust related to such income if such holder
disposes of its Trust Preferred Securities prior to the record date for the
distribution of such cash. See "Certain Federal Income Tax Considerations."
INSUFFICIENT INCOME OR ASSETS AVAILABLE TO PARTNERSHIP
The Trust Preferred Securities are subject to the risk of a mismatch
between the rate paid on the Trust Preferred Securities and the rate paid on the
securities held by the Partnership, including the Debentures and any additional
securities acquired by the Partnership in the future. Such mismatch could occur
if (i) at any time that the Partnership is receiving current payments in respect
of the securities held by the Partnership (including the Debentures), the
General Partner, in its sole discretion, does not declare distributions on the
Partnership Preferred Securities and the Partnership receives insufficient
amounts to pay the additional compounded distributions that will accrue in
respect of the Partnership Preferred Securities, (ii) the Partnership reinvests
the proceeds received in respect of the Debentures upon their retirement or at
their maturities in Affiliate Investment Instruments or Eligible Debt Securities
that do not generate income in an amount that is sufficient to pay full
distributions in respect of the Partnership Preferred Securities at a rate
of % per annum or (iii) the Partnership invests in equity or debt securities
of Investment Affiliates that are not guaranteed by the Company and that cannot
be liquidated by the Partnership for an amount sufficient to pay such
distributions in full. If the reinvestments in the Investment Affiliates
contemplated by the General Partner do not meet the eligibility criteria for
Affiliate Investment Instruments described under "Description of the Partnership
Preferred Securities -- Partnership Investments," the Partnership shall invest
funds available for reinvestment in Eligible Debt Securities. To the extent that
the Partnership lacks sufficient funds to make current or liquidating
distributions on the Partnership Preferred Securities in full, the Trust will
not have sufficient funds available to pay full current or liquidating
distributions on the Trust Preferred Securities.
12
<PAGE> 14
DEPENDENCE ON AFFILIATE INVESTMENT INSTRUMENTS
Approximately 99% of the proceeds from the issuance of the Partnership
Preferred Securities and the General Partner's capital contribution will be
invested in the Debentures, which will consist of debt instruments of Enron and
certain subsidiaries of Enron.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation that would, among other
things, treat as equity for United States federal income tax purposes
instruments with a maximum term of more than 20 years that are not shown as
indebtedness on the consolidated balance sheet of the issuer. If the proposed
legislation were enacted, such legislation is not expected to apply to the
Debentures and, in any event, based on statements by Congressional leaders it is
not expected that the legislation would have a retroactive effective date. There
can be no assurances, however, that legislation enacted after the date hereof
will not adversely affect the tax treatment of the Debentures, or that such tax
treatment will not cause a Partnership Tax Event or a Trust Tax Event resulting
in the redemption of the Partnership Preferred Securities and, consequently, the
Trust Preferred Securities.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Trust Special Event or a Partnership Special Event
(each of which will generally be triggered either upon (i) the occurrence of
certain adverse tax consequences to the Trust or the Partnership, as the case
may be, or the denial of an interest deduction by the related Investment
Affiliate on the Debentures held by the Partnership or (ii) the Trust or
Partnership being considered an "investment company" under the 1940 Act) (each,
a "Special Event"), the Trust will be dissolved with the result, except in the
limited circumstances described below, that the Partnership Preferred Securities
will be distributed to the holders of the Trust Preferred Securities in
connection with the liquidation of the Trust. In certain circumstances, the
Partnership will have the right to redeem the Partnership Preferred Securities,
in whole but not in part, in lieu of a distribution of the Partnership Preferred
Securities by the Trust, in which event the Trust will redeem the Trust
Preferred Securities for cash. See "Description of the Trust Preferred
Securities -- Trust Special Event Redemption or Distribution" and "Description
of the Partnership Preferred Securities -- Partnership Special Event
Redemption."
Unless the liquidation of the Trust occurs as a result of the Trust's being
subject to United States federal income tax with respect to income on the
Partnership Preferred Securities, a distribution of the Partnership Preferred
Securities upon the dissolution of the Trust will not be a taxable event to
holders of the Trust Preferred Securities. If, however, the liquidation of the
Trust were to occur because the Trust is subject to United States federal income
tax with respect to income accrued or received on the Partnership Preferred
Securities, the distribution of Partnership Preferred Securities to holders by
the Trust would be a taxable event to each such holder, and a holder would
recognize gain or loss as if the holder had exchanged its Trust Preferred
Securities for the Partnership Preferred Securities it received upon the
liquidation of the Trust. Similarly, the holders of the Trust Preferred
Securities would recognize gain or loss if the Trust were to dissolve upon an
occurrence of a Partnership Special Event and the holders of Trust Preferred
Securities were to receive cash in exchange for their Trust Preferred
Securities. See "Certain United States Federal Income Tax
Considerations -- Redemption of Trust Preferred Securities for Cash."
There can be no assurance as to the market prices for the Partnership
Preferred Securities that may be distributed in exchange for Trust Preferred
Securities if a dissolution or liquidation of the Trust occurs. Accordingly, the
Trust Preferred Securities that an investor may purchase, whether pursuant to
the offer made hereby or in the secondary market, or the Partnership Preferred
Securities that a holder of Trust Preferred Securities may receive upon
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Trust Preferred Securities offered
hereby. Because holders of Trust Preferred Securities may receive Partnership
Preferred Securities upon the occurrence of a Special Event, prospective
purchasers of Trust Preferred Securities are also making an investment decision
with regard to the Partnership Preferred Securities and should carefully review
all the information regarding the Partnership Preferred
13
<PAGE> 15
Securities contained herein. See "Description of the Partnership Preferred
Securities -- Partnership Special Event Redemption" and "Description of the
Partnership Preferred Securities -- General."
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEES AND THE COMPANY
DEBENTURE
Enron's obligations under the Trust Guarantee, the Partnership Guarantee
and the Investment Guarantees are subordinate and junior in right of payment to
all liabilities of Enron and will rank pari passu with the most senior preferred
stock issued, if any, from time to time by Enron and with any guarantee now or
hereafter entered into by Enron in respect of any preferred security of any
affiliate of the Company, and its obligations under the Company Debenture are
subordinate and junior in right of payment to all senior indebtedness of the
Company. As of September 30, 1996, consolidated senior indebtedness of Enron
aggregated approximately $ . Except under certain limited circumstances
described under "Description of the Partnership Preferred
Securities -- Partnership Investments" with respect to the Company Debenture,
there are no terms in the Trust Preferred Securities, the Partnership Preferred
Securities, the Guarantees or the Debentures that limit the Company's ability to
incur additional indebtedness, including indebtedness that ranks senior to the
Guarantees. See "Description of the Partnership Preferred
Securities -- Partnership Investments" and " -- Investment Guarantees,"
"Description of the Trust Guarantee" and "Description of the Partnership
Guarantee."
ENFORCEMENT OF CERTAIN RIGHTS BY OR ON BEHALF OF HOLDERS OF TRUST PREFERRED
SECURITIES
If a Trust Enforcement Event occurs and is continuing, then (a) the holders
of Trust Preferred Securities will rely on the enforcement by the Property
Trustee of its rights, as a holder of the Partnership Preferred Securities,
including the right to direct the Special Representative to enforce (i) the
Partnership's creditors' rights and other rights with respect to the Affiliate
Investment Instruments and the Investment Guarantees, (ii) the rights of the
holders of the Partnership Preferred Securities under the Partnership Guarantee,
and (iii) the rights of the holders of the Partnership Preferred Securities to
receive distributions (only if and to the extent declared out of funds legally
available therefor) on the Partnership Preferred Securities, and (b) the Trust
Guarantee Trustee shall have the right to enforce the terms of the Trust
Guarantee, including the right to enforce the covenant restricting payments by
the Company of dividends and other distributions with respect to any of its
capital stock or comparable equity interest. Under no circumstances, however,
will the Special Representative have authority to cause the General Partner to
declare distributions on the Partnership Preferred Securities. As a result,
although the Special Representative may be able to enforce the Partnership's
creditors' rights to accelerate and receive payments in respect of the Affiliate
Investment Instruments and the Investment Guarantees, the Partnership would be
entitled to reinvest such payments in additional Affiliate Investment
Instruments, subject to satisfying the reinvestment criteria described under
"Description of the Partnership Preferred Securities -- Partnership
Investments," and in Eligible Debt Securities, rather than declaring and making
distributions on the Partnership Preferred Securities. See "Description of the
Trust Preferred Securities -- Trust Enforcement Events."
LIMITED VOTING RIGHTS
Holders of the Trust Preferred Securities will have limited voting rights
and will not be entitled to vote to appoint, remove or replace, or to increase
or decrease the number of, Trustees, which voting rights are vested exclusively
in the holder of the Trust Common Securities. See "Description of the Trust
Preferred Securities -- Voting Rights."
TRADING CHARACTERISTICS OF TRUST PREFERRED SECURITIES
The price at which the Trust Preferred Securities may trade may not fully
reflect the value of the accrued but unpaid distributions on the Trust Preferred
Securities (which will equal the accrued but unpaid distributions on the
Partnership Preferred Securities). In addition, as a result of the right of the
General Partner not to declare current distributions on the Partnership
Preferred Securities, the market price of the Trust Preferred Securities (which
represent undivided beneficial ownership interests in the Partnership Preferred
Securities) may be more volatile than other similar securities where there is no
such right to defer
14
<PAGE> 16
current distributions. For United States federal income tax purposes, a holder
who disposes of its Trust Preferred Securities will be required to include in
income as ordinary income accrued but unpaid distributions on the Partnership
Preferred Securities through the date of disposition (to the extent not
previously included in income) and to add such amount to its adjusted tax basis
in its pro rata share of the Partnership Preferred Securities deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax basis
(which will include all accrued but unpaid distributions), a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income tax
purposes. See "Certain Federal Income Tax Considerations."
NO PRIOR MARKET FOR THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities constitute a new issue of securities with no
established trading market. Application has been made to list the Trust
Preferred Securities on the New York Stock Exchange. There can be no assurance
that an active market for the Trust Preferred Securities will develop or be
sustained in the future on the New York Stock Exchange. Although the
Underwriters have indicated to the Company that they intend to make a market in
the Trust Preferred Securities, as permitted by applicable laws and regulations,
they are not obligated to do so and may discontinue any such market-making at
any time without notice. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Trust Preferred Securities.
15
<PAGE> 17
USE OF PROCEEDS
The proceeds to be received by the Trust from the sale of the Trust
Preferred Securities and the Trust Common Securities will be used by the Trust
to purchase Partnership Preferred Securities and will be applied by the
Partnership to invest in the Debentures and Eligible Debt Securities. See
"Description of the Partnership Preferred Securities -- Partnership
Investments." After payment of the Underwriters' Compensation and other expenses
of this offering, the Company will, and will cause the subsidiaries of the
Company that are issuers of the Debentures to, use the proceeds of $ million
from the sale of such Debentures to the Partnership for general corporate
purposes.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
------------------------------------ ENDED
1991 1992 1993 1994 1995 JUNE 30, 1996
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 1.66 1.74 1.98 2.34 2.92 3.47
</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.
16
<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of Enron and its
consolidated subsidiaries as of June 30, 1996, and as adjusted to give effect to
the issuance of the Trust Preferred Securities offered hereby and the use of the
proceeds therefrom.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
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....................... 309,631
Notes due 1996-2023 (6 3/4% to 10%)............................ 1,699,206 1,699,206
Exchangeable Notes due 1998 (6 1/4%)........................... 228,375 228,375
Subsidiary companies:
Notes due 1998-2005 (4.52% to 9.2%)............................ 556,600 556,600
Notes due 1998-1999 (floating rates)........................... 160,000 160,000
Other.......................................................... 41,625 41,625
Enron:
Senior subordinated debenture due 2005-2012 (6.75%-8.25%)...... 350,000 350,000
Unamortized debt discount and premium............................. (15,641) (15,641)
---------- ----------
Total long-term debt...................................... 3,329,796
---------- ----------
Minority interests.................................................. 604,160 604,160
---------- ----------
Company-obligated preferred stock of subsidiaries................... 391,750 391,750
---------- ----------
Company-obligated Trust Preferred Securities........................ --
Shareholders' equity
Convertible preferred stock....................................... 137,218 137,218
Common stock...................................................... 25,596 25,596
Additional paid-in capital........................................ 1,904,215 1,904,215
Retained earnings................................................. 1,863,397 1,863,397
Cumulative foreign currency translation adjustment................ (153,078) (153,078)
Common stock held in treasury..................................... (50,475) (50,475)
Other, including Flexible Equity Trust............................ (173,009) (173,009)
---------- ----------
Total shareholders' equity................................ 3,553,864 3,553,864
---------- ----------
Total capitalization...................................... $7,879,570 $
========== ==========
</TABLE>
17
<PAGE> 19
THE COMPANY
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 transportation and wholesale marketing of natural gas
to markets throughout the United States and internationally through
approximately 37,000 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.
Enron has its principal executive offices at 1400 Smith Street, Houston,
Texas 77002, and its telephone number is (713) 853-6161.
Additional information concerning Enron and its subsidiaries is included in
the documents filed with the Commission and incorporated by reference herein.
See "Incorporation of Certain Documents by Reference."
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 and pipeline interconnects on the east end of the Transwestern
system. 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 approximate 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. Enron is considering the sale of its interest in Enron
Liquids Pipeline, L.P. and certain other natural gas liquids assets. However, if
no acceptable offers are submitted, Enron will continue to own and operate these
assets.
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-term 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.
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<PAGE> 20
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 and other liquid
fuels. As is the case in the United States, Enron's emphasis is on businesses in
which natural gas or its components play a significant role. Development
projects are focused on power plants, gas processing and 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, the Dominican Republic, the Philippines
and China; pipeline systems in Argentina and Colombia; retail gas and propane
sales in the Caribbean basin; processing of natural gas liquids at Teesside,
England; and marketing of natural gas liquids and other liquid fuels worldwide.
Enron is also involved in power, pipeline and liquified natural gas projects in
varying stages of development in China, Guam, India, Puerto Rico, Italy, Qatar,
Vietnam, Israel, Jordan, Turkey, Bolivia, 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 acquire, 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 assets consist of interests contributed by Enron in two
power plants in the Philippines (with 226 megawatts of aggregate net generating
capacity), a power plant in Guatemala (with 110 megawatts of net generating
capacity), a 6,548 kilometer (4,069 mile) natural gas pipeline system in
Argentina, a 575 kilometer (357 mile) natural gas pipeline in Colombia and a 185
megawatt power plant in the Dominican Republic. The public offering of common
shares of EPP was completed in November 1994. Enron owns approximately 59% 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 Enron Oil & Gas Company
("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, 1995, EOG had
estimated net proved natural gas reserves of 3,343 billion cubic feet (including
54.2 billion cubic feet attributable to a volumetric production payment) and
estimated net proved crude oil, condensate and natural gas liquids reserves of
50 million barrels, and at such date approximately 78% of EOG's reserves (on a
natural gas equivalent basis) was located in the United States, 10% in Canada,
8% in Trinidad and 4% in India. Enron owns approximately 59% of the common stock
of EOG.
PENDING ACQUISITION OF PORTLAND GENERAL CORPORATION
Enron announced on July 22, 1996 that it had signed an agreement to merge
with Portland General Corporation ("PGC") in a stock-for-stock transaction. PGC
is an electric utility holding company, serving retail electric customers in
northwest Oregon as well as wholesale electricity customers throughout the
western United States. Enron proposes to issue approximately 51 million common
shares, valued at approximately $2.1 billion as of July 22, 1996, to
shareholders of PGC in a one-for-one exchange of shares, as a result of which
Enron will be the surviving corporation. Following the merger, former PGC
shareholders will own approximately 17% of the outstanding common shares of the
combined entity. The merger agreement provides that, unless certain regulatory
reforms are enacted, Enron will reincorporate as an Oregon corporation prior to
completing the merger with PGC. Enron will consolidate PGC's debt (approximately
$1.1 billion at June 30, 1996) and account for the transaction on a purchase
accounting basis. The merger is conditioned, among other things, upon the
approvals of each company's shareholders at shareholders meetings to be held
November 12, 1996, and the satisfactory receipt of regulatory approvals from the
Oregon Public Utility Commission and the
19
<PAGE> 21
Federal Energy Regulatory Commission. Regulatory procedures are expected to be
completed sometime in 1997. Proxy materials containing more detailed information
about PGC and the proposed merger have been filed with the Commission and may be
obtained as set forth under "Available Information."
DESCRIPTION OF THE TRUST
Enron Capital Trust I (the "Trust") is a statutory business trust formed
under the Delaware Business Trust Act, as amended (the "Trust Act"), pursuant to
a declaration of trust and the filing of a certificate of trust with the
Secretary of State of the State of Delaware. Such declaration will be amended
and restated in its entirety (as so amended and restated, the "Declaration")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Trust Preferred Securities, the purchasers
thereof will own all the Trust Preferred Securities. See "Description of the
Trust Preferred Securities." The Company will acquire Trust Common Securities in
an aggregate liquidation amount equal to at least 3% of the total capital of the
Trust. The Trust will use all the proceeds derived from the issuance of the
Trust Securities to purchase the Partnership Preferred Securities from the
Partnership, and accordingly the assets of the Trust will consist solely of the
Partnership Preferred Securities. The Trust exists for the exclusive purpose of
(i) issuing the Trust Securities representing undivided beneficial ownership
interests in the assets of the Trust, (ii) investing the gross proceeds of the
Trust Securities in the Partnership Preferred Securities, and (iii) engaging in
only those other activities necessary or incidental thereto.
Pursuant to the Declaration, there will initially be five trustees (the
"Trustees") for the Trust. Three of the Trustees (the "Regular Trustees") will
be individuals who are employees or officers of or who are affiliated with the
Company. The fourth trustee will be a financial institution that is unaffiliated
with the Company and is indenture trustee for purposes of compliance with the
provisions of the Trust Indenture Act (the "Property Trustee"). The fifth
trustee will be an entity that maintains its principal place of business in the
State of Delaware (the "Delaware Trustee"). Initially, The Chase Manhattan Bank
will act as Property Trustee and Chase Manhattan Bank Delaware will serve as
Delaware Trustee until, in each case, removed or replaced by the holder of the
Trust Common Securities. For purposes of compliance with the Trust Indenture
Act, The Chase Manhattan Bank will also act as trustee under the Trust Guarantee
(the "Trust Guarantee Trustee"). The address of The Chase Manhattan Bank is 450
West 33rd Street, 15th Floor, New York, New York 10001. The address of Chase
Manhattan Bank Delaware is 1201 Market Street, Wilmington, Delaware 19801.
The Property Trustee will hold title to the Partnership Preferred
Securities for the benefit of the holders of the Trust Securities, and the
Property Trustee will have the power to exercise all rights, powers and
privileges with respect to the Partnership Preferred Securities under the
Amended and Restated Agreement of Limited Partnership (the "Limited Partnership
Agreement") to be entered into by the Company, as General Partner, and the Trust
as the holder of the limited partner interests consisting of the Partnership
Preferred Securities. In addition, the Property Trustee will maintain exclusive
control of a segregated non-interest bearing bank account (the "Property
Account") to hold all payments made in respect of the Partnership Preferred
Securities for the benefit of the holders of the Trust Securities. The Trust
Guarantee Trustee will hold the Trust Guarantee for the benefit of the holders
of the Trust Preferred Securities. The Company, as the holder of all the Trust
Common Securities, will have the right to appoint, remove or replace any of the
Trustees and to increase the number of trustees; provided, however, that there
must be at least one Delaware Trustee, at least one Property Trustee (which may
also be the Delaware Trustee) and at least one Regular Trustee. The Company will
pay all fees and expenses related to the organization and operations of the
Trust (including any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the United States or
any other domestic taxing authority upon the Trust) and the offering of the
Trust Preferred Securities. The Company will also be responsible for all debts
and obligations of the Trust (other than with respect to distributions on the
Trust Securities).
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<PAGE> 22
For so long as the Trust Preferred Securities remain outstanding, the
Company will covenant (i) to maintain direct ownership of 100% of the Trust
Common Securities, (ii) to cause the Trust to remain a statutory business trust
and not to voluntarily dissolve, wind-up, liquidate or be terminated, except as
permitted by the Declaration of the Trust, (iii) to use its commercially
reasonable efforts to ensure that the Trust will not be an "investment company"
for purposes of the 1940 Act and (iv) to take no action which would be
reasonably likely to cause the Trust to be classified as an association taxable
as a corporation for United States federal income tax purposes.
The rights of the holders of the Trust Preferred Securities, including
economic rights, rights to information and voting rights, are as set forth in
the Declaration and the Trust Act. See "Description of the Trust Preferred
Securities." The Declaration and the Trust Guarantee also incorporate by
reference the terms of the Trust Indenture Act.
The location of the principal executive office of the Trust is c/o Enron
Corp., 1400 Smith Street, Houston, Texas 77002, and its phone number at such
address is (713) 853-6161.
DESCRIPTION OF THE PARTNERSHIP
Enron Preferred Funding, L. P. (the "Partnership") is a limited partnership
formed under the Delaware Revised Uniform Limited Partnership Act, as amended
(the "Partnership Act"). Pursuant to the certificate of limited partnership, as
amended, and the Limited Partnership Agreement, the Company is the sole general
partner of the Partnership (in such capacity the "General Partner"). Upon the
issuance of the Partnership Preferred Securities, which securities represent
limited partnership interests in the Partnership, the Trust will be the sole
limited partner of the Partnership. Contemporaneous with the issuance of the
Partnership Preferred Securities, the General Partner will contribute capital to
the Partnership in an amount sufficient to establish its initial capital account
at an amount equal to at least 15% of the total capital of the Partnership.
The Partnership will be managed by the General Partner and exists for the
sole purpose of (i) issuing its partnership interests, (ii) investing the
proceeds thereof in Affiliate Investment Instruments and Eligible Debt
Securities and (iii) engaging in only those other activities necessary or
incidental thereto. To the extent that aggregate payments to the Partnership on
the Affiliate Investment Instruments and on Eligible Debt Securities exceed
distributions payable with respect to the Partnership Preferred Securities, the
Partnership may at times have excess funds which shall be allocated to and may,
in the General Partner's sole discretion, be distributed to the General Partner.
For so long as the Partnership Preferred Securities remain outstanding, the
Company will covenant in the Limited Partnership Agreement (i) to remain the
sole general partner of the Partnership and to maintain direct ownership of 100%
of the General Partner's interest in the Partnership, which interest will at all
times represent at least 1% of the total capital of the Partnership, (ii) to
cause the Partnership to remain a limited partnership and not to voluntarily
dissolve, liquidate, wind-up or be terminated, except as permitted by the
Limited Partnership Agreement, (iii) to use its commercially reasonable efforts
to ensure that the Partnership will not be an "investment company" for purposes
of the 1940 Act and (iv) to take no action that would be reasonably likely to
cause the Partnership to be classified as an association taxable as a
corporation for United States federal income tax purposes.
The rights of the holders of the Partnership Preferred Securities,
including economic rights, rights to information and voting rights, are set
forth in the Limited Partnership Agreement and the Partnership Act. See
"Description of the Partnership Preferred Securities."
The Limited Partnership Agreement provides that the General Partner will
have liability for the fees and expenses of the Partnership (including any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States or any other domestic
taxing authority upon the Partnership) and be responsible for all debts and
obligations of the Partnership (other than with respect to distributions on the
Partnership Preferred Securities). Under Delaware law, assuming a limited
partner in a Delaware limited partnership such as the Partnership (i.e., a
holder of the Partnership Preferred Securities) does not participate in the
control of the business of the limited partnership, such limited partner
21
<PAGE> 23
will not be personally liable for the debts, obligations and liabilities of such
limited partnership, whether arising in contract, tort or otherwise, solely by
reason of being a limited partner of such limited partnership (subject to any
obligation such limited partner may have to repay any funds that may have been
wrongfully distributed to it).
The location of the principal executive offices of the Partnership is c/o
Enron Corp., 1400 Smith Street, Houston, Texas 77002, and its phone number at
such address is (713) 853-6161.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, The Chase Manhattan Bank, will act as
trustee for the Trust Preferred Securities under the Declaration for purposes of
compliance with the provisions of the Trust Indenture Act. The terms of the
Trust Preferred Securities will include those stated in the Declaration and
those made part of the Declaration by the Trust Indenture Act.
The following summary of the material terms and provisions of the Trust
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Declaration, a copy of which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part, the Trust Act and the Trust Indenture Act.
GENERAL
The Trust Preferred Securities will be issued in fully registered form
without coupons. Trust Preferred Securities will not be issued in bearer form.
See " -- Book-Entry Only Issuance -- The Depository Trust Company."
The Declaration authorizes the Regular Trustees of the Trust to cause the
Trust to issue the Trust Securities, which represent undivided beneficial
ownership interests in the assets of the Trust. Title to the Partnership
Preferred Securities will be held by the Property Trustee for the benefit of the
holders of the Trust Securities. The Declaration does not permit the Trust to
acquire any assets other than the Partnership Preferred Securities, issue any
securities other than the Trust Securities or incur any indebtedness. The
payment of distributions out of money held by the Trust, including payments out
of money held by the Trust upon redemption of the Trust Preferred Securities or
liquidation of the Trust, are guaranteed by the Company to the extent described
under "Description of the Trust Guarantee." The Trust Guarantee will be held by
The Chase Manhattan Bank, the Trust Guarantee Trustee, for the benefit of the
holders of the Trust Preferred Securities. The Trust Guarantee does not cover
payment of distributions when the Trust does not have sufficient available funds
to pay such distributions. In such event, holders of Trust Preferred Securities
will have the remedies described below under " -- Trust Enforcement Events."
DISTRIBUTIONS
The distribution rate on Trust Preferred Securities will be fixed at a rate
per annum of % of the stated liquidation amount of $25 per Trust Preferred
Security if, as and when the Trust has funds available for payment.
Distributions not paid on the scheduled payment date will accumulate and
compound quarterly at a rate per annum equal to %. The term "distribution"
as used herein includes any such compounded amounts unless otherwise stated or
the context otherwise requires. The amount of distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Trust Preferred Securities will be cumulative, will
accrue from the date of initial issuance and will be payable quarterly in
arrears on each March 31, June 30, September 30 and December 31, commencing
, 199 , if, as and when the Trust has funds available for
payment, by the Property Trustee, except as otherwise described below. If
distributions are not paid when scheduled, the accrued distributions shall be
paid to the holders of record of Trust Preferred Securities as they appear on
the books and records of the Trust on the record date with respect to the
payment date for the Trust Preferred Securities,
22
<PAGE> 24
which will correspond to the payment date fixed by the Partnership with respect
to the payment of cumulative distributions on the Partnership Preferred
Securities.
Distributions on the Trust Preferred Securities will be made to the extent
that the Trust has funds available for the payment of such distributions in the
Property Account. Amounts available to the Trust for distribution to the holders
of the Trust Preferred Securities will be limited to payments received by the
Trust from the Partnership with respect to the Partnership Preferred Securities
or from the Company on the Partnership Guarantee or the Trust Guarantee.
Distributions on the Partnership Preferred Securities will be paid only if, as
and when declared in the sole discretion of the Company, as the General Partner
of the Partnership. Pursuant to the Limited Partnership Agreement, the General
Partner is not obligated to declare distributions on the Partnership Preferred
Securities at any time, including upon or following a Partnership Enforcement
Event. See "Description of Partnership Preferred Securities -- Partnership
Enforcement Events."
The assets of the Partnership consist only of Affiliate Investment
Instruments (which initially will be the Debentures) and Eligible Debt
Securities. To the extent that the issuers (including, where applicable, the
Company, as guarantor) of the securities in which the Partnership invests fail
to make any payment in respect of such securities (or, if applicable, such
guarantees), the Partnership may not have sufficient funds to pay and may not
declare or pay distributions on the Partnership Preferred Securities. To the
extent that the Partnership does not declare and pay distributions on the
Partnership Preferred Securities out of funds legally available for
distribution, the Trust will not have sufficient funds to make corresponding
distributions on the Trust Preferred Securities, in which event the Trust
Guarantee will not apply to such distributions until the Trust has sufficient
funds available therefor. See "Description of the Partnership Preferred
Securities -- Distributions" and "Description of the Trust Guarantee." In
addition, as described under "Risk Factors -- Insufficient Income or Assets
Available to Partnership," the Partnership may not have sufficient funds to pay
current or liquidating distributions on the Partnership Preferred Securities if
(i) at any time that the Partnership is receiving current payments in respect of
the securities held by the Partnership (including the Debentures), the General
Partner, in its sole discretion, does not declare distributions on the
Partnership Preferred Securities and the Partnership receives insufficient
amounts to pay the additional compounded distributions that will accrue in
respect of the Partnership Preferred Securities, (ii) the Partnership reinvests
the proceeds received in respect of the Debentures upon their retirement or at
their maturities in Affiliate Investment Instruments that do not generate income
in an amount that is sufficient to pay full distributions in respect of the
Partnership Preferred Securities or (iii) the Partnership invests in equity or
debt securities of Investment Affiliates that are not guaranteed by the Company
and that cannot be liquidated by the Partnership for an amount sufficient to pay
such distributions in full.
Distributions on the Trust Preferred Securities will be payable to the
holders thereof as they appear on the books and records of the Trust on the
relevant record dates, which will be one Business Day prior to the relevant
payment dates. Such distributions will be paid through the Property Trustee who
will hold amounts received in respect of the Partnership Preferred Securities in
the Property Account for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "-- Book-Entry
Only Issuance -- The Depository Trust Company" below. In the event that the
Trust Preferred Securities do not remain in book-entry only form, the relevant
record dates shall be the 15th day of the month of the relevant payment dates.
In the event that any date on which distributions are payable on the Trust
Preferred Securities is not a Business Day, payment of the distribution payable
on such date will be made on the next succeeding day which is a Business Day
(without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day. A "Business Day" shall
mean any day other than a day on which banking institutions in The City of New
York are authorized or required by law to close.
TRUST ENFORCEMENT EVENTS
The occurrence, at any time, of (i) arrearages on distributions on the
Trust Preferred Securities that shall exist for six consecutive quarterly
distribution periods, (ii) a default by the Company in respect of any of its
23
<PAGE> 25
obligations under the Trust Guarantee or (iii) a Partnership Enforcement Event
under the Limited Partnership Agreement, will constitute an enforcement event
under the Declaration with respect to the Trust Securities (a "Trust Enforcement
Event"); provided, that pursuant to the Declaration, the holder of the Trust
Common Securities will be deemed to have waived any Trust Enforcement Event with
respect to the Trust Common Securities until all Trust Enforcement Events with
respect to the Trust Preferred Securities have been cured, waived or otherwise
eliminated. Until such Trust Enforcement Events with respect to the Trust
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the holders of
the Trust Preferred Securities, and only the holders of the Trust Preferred
Securities will have the right to direct the Property Trustee with respect to
certain matters under the Declaration and, therefore, the Special Representative
with respect to certain matters under the Limited Partnership Agreement. See
"Description of the Partnership Preferred Securities -- Partnership Enforcement
Events" for a description of the events which will trigger the occurrence of a
Partnership Enforcement Event.
Upon the occurrence of a Trust Enforcement Event, (a) the Property Trustee,
as the holder of the Partnership Preferred Securities, shall have the right to
enforce the terms of the Partnership Preferred Securities, including the right
to direct the Special Representative to enforce (i) the Partnership's creditors'
rights and other rights with respect to the Affiliate Investment Instruments and
the Investment Guarantees, (ii) the rights of the holders of the Partnership
Preferred Securities under the Partnership Guarantee and (iii) the rights of the
holders of the Partnership Preferred Securities to receive distributions (only
if and to the extent declared out of funds legally available therefor) on the
Partnership Preferred Securities, and (b) the Trust Guarantee Trustee shall have
the right to enforce the terms of the Trust Guarantee, including the right to
enforce the covenant restricting certain distributions by the Company.
If the Property Trustee fails to enforce its rights under the Partnership
Preferred Securities after a holder of Trust Preferred Securities has made a
written request, such holder of Trust Preferred Securities may directly
institute a legal proceeding against the Partnership and the Special
Representative to enforce the Property Trustee's rights under the Partnership
Preferred Securities without first instituting any legal proceeding against the
Property Trustee, the Trust or any other person or entity. In addition, for so
long as the Trust holds any Partnership Preferred Securities, if the Special
Representative fails to enforce its rights on behalf of the Partnership under
the Affiliate Investment Instruments after a holder of Trust Preferred
Securities has made a written request, a holder of Trust Preferred Securities
may on behalf of the Partnership directly institute a legal proceeding against
the Investment Affiliates under the Affiliate Investment Instruments, without
first instituting any legal proceeding against the Property Trustee, the Trust,
the Special Representative, the Partnership or any other person or entity. In
any event, for so long as the Trust is the holder of any Partnership Preferred
Securities, if a Trust Enforcement Event has occurred and is continuing and such
event is attributable to the failure of an Investment Affiliate to make any
required payment when due on any Affiliate Investment Instrument or the failure
of the Company to make any required payment when due on any Investment
Guarantee, then a holder of Trust Preferred Securities may on behalf of the
Partnership directly institute a proceeding against such Investment Affiliate
with respect to such Affiliate Investment Instrument or against the Company with
respect to any such Investment Guarantee, in each case for enforcement of
payment.
Under no circumstances, however, shall the Special Representative have
authority to cause the General Partner to declare distributions on the
Partnership Preferred Securities. As a result, although the Special
Representative may be able to enforce the Partnership's creditors' rights to
accelerate and receive payments in respect of the Affiliate Investment
Instruments and the Investment Guarantees, the Partnership would be entitled to
reinvest such payments in additional Affiliate Investment Instruments, subject
to satisfying the reinvestment criteria described under "Description of the
Partnership Preferred Securities -- Partnership Investments," and in Eligible
Debt Securities, rather than declaring and making distributions on the
Partnership Preferred Securities.
The Company and the Trust are each required to file annually with the
Property Trustee an officer's certificate as to its compliance with all
conditions and covenants under the Declaration.
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<PAGE> 26
MANDATORY REDEMPTION
The Partnership Preferred Securities may be redeemed by the Partnership at
the option of the General Partner, in whole or in part, at any time on or after
December 31, 2001 or at any time in certain circumstances upon the occurrence of
a Partnership Special Event. Upon the repayment of the Partnership Preferred
Securities upon such redemption (either at the option of the General Partner or
pursuant to a Partnership Special Event), the proceeds from such repayment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Partnership Preferred Securities so repaid at an
amount equal to the amount received in respect of the redeemed Partnership
Preferred Securities; provided, that holders of the Trust Securities shall be
given not less than 30 nor more than 60 days' notice of such redemption. See
"Description of the Partnership Preferred Securities -- General" and
"Description of the Partnership Preferred Securities -- Optional Redemption."
TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Trust Tax Event or a Trust Investment Company Event
(each as hereinafter defined, and each, a "Trust Special Event") shall occur and
be continuing, the Regular Trustees shall, unless the Partnership Preferred
Securities are redeemed in the limited circumstances described below, within 90
days following the occurrence of such Trust Special Event elect to either (i)
dissolve the Trust upon not less than 30 nor more than 60 days' notice with the
result that, after satisfaction of creditors of the Trust, if any, Partnership
Preferred Securities (which will have an aggregate stated amount equal to the
aggregate stated liquidation amount of, a distribution rate identical to the
distribution rate of, accrued and unpaid distributions equal to accrued and
unpaid distributions on, and a record date for payment the same as, the Trust
Preferred Securities and the Trust Common Securities outstanding at such time)
will be distributed on a pro rata basis to the holders of the Trust Preferred
Securities and the Trust Common Securities in liquidation of such holders'
interests in the Trust; provided, however, that if at the time there is
available to the Trust the opportunity to eliminate, within such 90-day period,
the Trust Special Event by taking some ministerial action, such as filing a form
or making an election, or pursuing some other similar reasonable measure which
in the sole judgment of the Company has or will cause no adverse effect on the
Trust, the Partnership, the Company or the holders of the Trust Securities and
will involve no material cost, the Trust will pursue such measure in lieu of
dissolution or (ii) cause the Trust Preferred Securities to remain outstanding,
provided that in the case of this clause (ii), the Company shall pay any and all
expenses incurred by or payable by the Trust attributable to the Trust Special
Event. Furthermore, if in the case of the occurrence of a Trust Tax Event, the
Regular Trustees have received an opinion (a "Trust Redemption Tax Opinion") of
nationally recognized independent tax counsel experienced in such matters that
there is more than an insubstantial risk that interest payable by one or more of
the Investment Affiliates with respect to the Debentures issued by such
Investment Affiliate is not, or will not be, deductible by such Investment
Affiliate for United States federal income tax purposes even if the Partnership
Preferred Securities were distributed to the holders of the Trust Securities in
liquidation of such holders' interests in the Trust as described above, then the
General Partner shall have the right, within 90 days following the occurrence of
such Trust Tax Event, to elect to cause the Partnership to redeem the
Partnership Preferred Securities in whole (but not in part) for cash upon not
less than 30 nor more than 60 days' notice, and promptly following such
redemption the Trust Preferred Securities and Trust Common Securities will be
redeemed by the Trust at the Redemption Price.
"Trust Tax Event" means that the Company shall have requested and received
and shall have delivered to the Regular Trustees an opinion of nationally
recognized independent tax counsel experienced in such matters (a "Trust
Dissolution Tax Opinion") to the effect that there has been (a) an amendment to,
change in or announced proposed change in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) a judicial decision interpreting, applying or
clarifying such laws or regulations, (c) an administrative pronouncement or
action that represents an official position (including a clarification of an
official position) of the governmental authority or regulatory body making such
administrative pronouncement or taking such action, or (d) a threatened
challenge asserted in connection with an audit of the Company or any of its
subsidiaries, the Partnership or the Trust, or a threatened challenge asserted
in writing against any other taxpayer that has raised capital through the
issuance
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of securities that are substantially similar to the Debentures, the Partnership
Preferred Securities or the Trust Preferred Securities, that occurs on or after
the date of this Prospectus (collectively a "Tax Action") and that results in
there being more than an insubstantial risk that (i) the Trust is or will be
subject to United States federal income tax with respect to income accrued or
received on the Partnership Preferred Securities, (ii) the Trust is or will be
subject to more than a de minimis amount of other taxes, duties or other
governmental charges or (iii) interest payable by an Investment Affiliate with
respect to the Debenture issued by such Investment Affiliate is not, or will not
be, deductible by such Investment Affiliate for United States federal income tax
purposes.
"Trust Investment Company Event" means that the Company shall have
requested and received and shall have delivered to the Regular Trustees an
opinion of nationally recognized independent legal counsel experienced in such
matters to the effect that as a result of the occurrence on or after the date
hereof of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or
will be considered an "investment company" which is required to be registered
under the 1940 Act.
If the Partnership Preferred Securities are distributed to the holders of
the Trust Preferred Securities, the Company will use its best efforts to cause
the Partnership Preferred Securities to be listed on the New York Stock Exchange
or on such other national securities exchange or similar organization as the
Trust Preferred Securities are then listed or quoted.
On the date fixed for any distribution of Partnership Preferred Securities,
upon dissolution of the Trust, (i) the Trust Preferred Securities and the Trust
Common Securities will no longer be deemed to be outstanding and (ii)
certificates representing Trust Securities will be deemed to represent the
Partnership Preferred Securities having an aggregate principal amount equal to
the stated liquidation amount of, and bearing accrued and unpaid distributions
equal to accrued and unpaid distributions on, such Trust Securities until such
certificates are presented to the Company or its agent for transfer or
reissuance.
There can be no assurance as to the market price for the Partnership
Preferred Securities which may be distributed in exchange for Trust Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Partnership Preferred Securities which an investor may
subsequently receive on dissolution and liquidation of the Trust may trade at a
discount to the price of the Trust Preferred Securities exchanged.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Trust Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Trust Preferred Securities for all quarterly distribution periods terminating on
or prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Trust Preferred
Securities (which notice will be irrevocable), and if the Company has paid to
the Property Trustee a sufficient amount of cash in connection with the related
redemption of the Partnership Preferred Securities, then, by 12:00 noon, New
York time, on the redemption date, the Trust will irrevocably deposit with the
DTC funds sufficient to pay the amount payable on redemption of all book-entry
certificates and will give DTC irrevocable instructions and authority to pay
such amount to holders of the Trust Preferred Securities. See " -- Book-Entry
Only Issuance -- The Depository Trust Company." If notice of redemption shall
have been given and funds are deposited as required, then upon the date of such
deposit all rights of holders of such Trust Preferred Securities so called for
redemption will cease, except the right of the holders of such Trust Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price. In the event that any date fixed for redemption of Trust
Preferred Securities is not a Business Day, then payment of the amount payable
on such date will be made on the next succeeding day which is a Business Day
(without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of Trust Preferred Securities is improperly withheld
or refused and not paid either by the Trust or by the Company pursuant to the
Trust Guarantee described under "Description of the Trust Guarantee,"
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distributions on such Trust Preferred Securities will continue to accrue at the
then applicable rate, from the original redemption date to the date of payment.
In the event that fewer than all of the outstanding Trust Preferred
Securities are to be redeemed, the Trust Preferred Securities will be redeemed
in accordance with the procedures of DTC. See " -- Book-Entry Only
Issuance -- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time and from time to time purchase outstanding Trust Preferred Securities
by tender, in the open market or by private agreement.
SUBORDINATION OF TRUST COMMON SECURITIES
Payment of amounts upon liquidation of the Trust Securities shall be made
pro rata based on the liquidation amount of the Trust Securities; provided,
however, that upon (i) the occurrence of an Investment Event of Default by an
Investment Affiliate (including the Company) in respect of any Affiliate
Investment Instrument or (ii) default by the Company on any of its obligations
under any Guarantee, the holders of the Trust Preferred Securities will have a
preference over the holders of the Trust Common Securities with respect to
payments upon liquidation of the Trust.
In the case of any Trust Enforcement Event, the holder of Trust Common
Securities will be deemed to have waived any such Trust Enforcement Event until
all such Trust Enforcement Events with respect to the Trust Preferred Securities
have been cured, waived or otherwise eliminated. Until all Trust Enforcement
Events with respect to the Trust Preferred Securities have been so cured, waived
or otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of the Trust Preferred Securities and not on behalf of the holder of the
Trust Common Securities, and only the holders of the Trust Preferred Securities
will have the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Trust Liquidation"), the then
holders of the Trust Preferred Securities will be entitled to receive out of the
assets of the Trust, after satisfaction of liabilities to creditors,
distributions in cash or other immediately available funds in an amount equal to
the aggregate of the stated liquidation amount of $25 per Trust Preferred
Security plus accrued and unpaid distributions thereon to the date of payment
(the "Trust Liquidation Distribution"), unless, in connection with such Trust
Liquidation, Partnership Preferred Securities (which will have an aggregate
stated principal amount equal to the aggregate stated liquidation amount of, a
distribution rate identical to the distribution rate of, and accrued and unpaid
distributions equal to accrued and unpaid distributions on, the Trust Preferred
Securities) have been distributed on a pro rata basis to the holders of the
Trust Preferred Securities.
If, upon any such Trust Liquidation, the Trust Liquidation Distribution can
be paid only in part because the Trust has insufficient assets available to pay
in full the aggregate Trust Liquidation Distribution, then the amounts payable
directly by the Trust on the Trust Preferred Securities shall be paid on a pro
rata basis, and the holders of the Trust Common Securities will be entitled to
receive distributions upon any such liquidation as described above under
" -- Subordination of Trust Common Securities."
Pursuant to the Declaration, the Trust shall terminate (i) upon the
bankruptcy of the Company, (ii) upon the filing of a certificate of dissolution
or the equivalent with respect to the Company, the filing of a certificate of
cancellation with respect to the Trust after having obtained the consent of at
least a majority in liquidation amount of the Trust Securities, voting together
as a single class, to file such certificate of cancellation, or the revocation
of the charter of the Company and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iii) upon the distribution of all
of the Partnership Preferred Securities upon the occurrence of a Trust Special
Event, (iv) upon the entry of a decree of a judicial dissolution of the Company
or the Trust, or (v) upon the redemption of all the Trust Securities. A merger
of the Company with or into another entity will not constitute one of the
foregoing events.
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VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of the Trust Guarantee -- Amendments and Assignment," and
as otherwise required by law and the Declaration, the holders of the Trust
Preferred Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
as set forth in the last sentence of this paragraph, the holders of a majority
in liquidation amount of the Trust Preferred Securities have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Property Trustee, or direct the exercise of any trust or power conferred
upon the Property Trustee under the Declaration, including the right to direct
the Property Trustee, as holder of the Partnership Preferred Securities, to (i)
exercise the remedies available to it under the Limited Partnership Agreement as
a holder of the Partnership Preferred Securities, including the right to direct
the Special Representative to exercise its rights in the manner described above
under " -- Trust Enforcement Events" and (ii) consent to any amendment,
modification or termination of the Limited Partnership Agreement or the
Partnership Preferred Securities where such consent shall be required; provided,
however, that where a consent or action under the Limited Partnership Agreement
would require the consent or act of the holders of more than a majority of the
aggregate liquidation amount of Partnership Preferred Securities affected
thereby, only the holders of the percentage of the aggregate stated liquidation
amount of the Trust Securities which is at least equal to the percentage
required under the Limited Partnership Agreement may direct the Property Trustee
to give such consent or take such action on behalf of the Trust. See
"Description of the Partnership Preferred Securities -- Voting Rights." The
Property Trustee shall notify all holders of the Trust Preferred Securities of
any notice of any Partnership Enforcement Event received from the General
Partner with respect to the Partnership Preferred Securities and the Affiliate
Investment Instruments. Such notice shall state that such Partnership
Enforcement Event also constitutes a Trust Enforcement Event. Except with
respect to directing the time, method, and place of conducting a proceeding for
a remedy as described above, the Property Trustee shall be under no obligation
to take any of the actions described in clauses (i) or (ii) above unless the
Property Trustee has obtained an opinion of independent tax counsel to the
effect that as a result of such action, for United States federal income tax
purposes, the Trust will not fail to be classified as a grantor trust and each
holder will be treated as owning an undivided beneficial ownership interest in
the Partnership Preferred Securities.
A waiver of a Partnership Enforcement Event with respect to the Partnership
Preferred Securities held by the Property Trustee will constitute a waiver of
the corresponding Trust Enforcement Event.
Any required approval or direction of holders of Trust Preferred Securities
may be given at a separate meeting of holders of Trust Preferred Securities
convened for such purpose, at a meeting of all of the holders of Trust
Securities or pursuant to written consent. The Regular Trustees will cause a
notice of any meeting at which holders of Trust Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be mailed to each holder of record of Trust Preferred
Securities. Each such notice will include a statement setting forth the
following information: (i) the date of such meeting or the date by which such
action is to be taken; (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote or of such
matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holders of Trust
Preferred Securities will be required for the Trust to redeem and cancel Trust
Preferred Securities or distribute Partnership Preferred Securities in
accordance with the Declaration.
Notwithstanding that holders of Trust Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the Trust
Securities that are owned at such time by the Company or any entity directly or
indirectly controlled by, or under direct or indirect common control with, the
Company, shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if such Trust Securities were not
outstanding; provided, however, that persons (other than affiliates of the
Company) to whom the Company or any of its subsidiaries have pledged Trust
Preferred Securities may vote or consent with respect to such pledged Trust
Preferred Securities under any of the circumstances described herein.
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The procedures by which holders of Trust Preferred Securities represented
by the global certificates may exercise their voting rights are described below.
See "-- Book-Entry Only Issuance -- The Depository Trust Company."
Holders of the Trust Preferred Securities will have no rights to appoint or
remove the Regular Trustees, who may be appointed, removed or replaced solely by
the Company, as the holder of all of the Trust Common Securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity without the
consent of the holders of the Trust Securities, except in certain limited
circumstances and upon compliance with certain specified conditions. The Trust
shall not, however, except with the consent of holders of 100% in liquidation
amount of the Trust Preferred Securities, consolidate, amalgamate, merge with or
into, or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it, if such
consolidation, amalgamation, merger or replacement would cause the Trust or the
successor entity to be classified as an association taxable as a corporation for
United States federal income tax purposes.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of
the Regular Trustees (and in certain circumstances the Property Trustee and the
Delaware Trustee), provided, that if any proposed amendment provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the holders of
Trust Securities, whether by way of amendment to the Declaration or otherwise or
(ii) the dissolution, winding-up or termination of the Trust other than pursuant
to the terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of the holders of at least a majority in liquidation amount of the
Trust Securities affected thereby; provided, further that if any amendment or
proposal referred to in clause (i) above would adversely affect only the Trust
Preferred Securities or the Trust Common Securities, then only the affected
class of security holders will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of a majority in liquidation amount of such class of security holders.
The Declaration may be amended without the consent of any holders of the
Trust Securities to (i) cure any ambiguity, (ii) correct or supplement any
provision in the Declaration that may be defective or inconsistent with any
other provision of the Declaration, (iii) add to the covenants, restrictions or
obligations of the Company, (iv) conform to any change in the 1940 Act, the
Trust Indenture Act or the rules or regulations of either such Act and (v)
modify, eliminate and add to any provision of the Declaration to such extent as
may be necessary or desirable; provided that no such amendment shall have a
material adverse effect on the rights, preferences or privileges of the holders
of the Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
fail to be classified as a grantor trust for United States federal income tax
purposes, (ii) cause the Partnership to be classified as an entity taxable as a
corporation for such purposes, (iii) reduce or otherwise adversely affect the
powers of the Property Trustee or (iv) cause the Trust or the Partnership to be
deemed an "investment company" which is required to be registered under the 1940
Act.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depository (the
"Depository") for the Trust Preferred Securities and, to the extent distributed
to the holders of Trust Preferred Securities, the Partnership Preferred
Securities. The Trust Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Trust
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Preferred Securities certificates ("Global Certificates"), representing the
total aggregate number of Trust Preferred Securities, will be issued and will be
deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Trust Preferred Securities within the DTC system must be made
by or through Participants, which will receive a credit for the Trust Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Trust Preferred Securities ("Beneficial Owner") is in turn to be recorded on the
Participants' and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial Owners
are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Participants or Indirect Participants through which the Beneficial Owners
purchased Trust Preferred Securities. Transfers of ownership interests in the
Trust Preferred Securities are to be accomplished by entries made on the books
of Participants and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Trust Preferred Securities, except in the event that use of the
book-entry system for the Trust Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Trust Preferred
Securities; DTC's records reflect only the identity of the Participants to whose
accounts such Trust Preferred Securities are credited, which may or may not be
the Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Trust Preferred Securities represented thereby
for all purposes under the Declaration and the Trust Preferred Securities. No
beneficial owner of an interest in a Global Certificate will be able to transfer
that interest except in accordance with DTC's applicable procedures, in addition
to those provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Trust Preferred Securities only at the direction of one or
more Participants to whose account the DTC interests in the Global Certificates
are credited and only in respect of such portion of the aggregate liquidation
amount of Trust Preferred Securities as to which such Participant or
Participants has or have given such direction. However, if there is a Trust
Enforcement Event under the Trust Preferred Securities, DTC will exchange the
Global Certificates for Certificated Securities, which it will distribute to its
Participants in accordance with its customary procedures.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
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Redemption notices in respect of the Trust Preferred Securities held in
book-entry form will be sent to Cede & Co. If less than all of the Trust
Preferred Securities are being redeemed, DTC will determine the amount of the
interest of each Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Trust Preferred Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Trust Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Participants to whose accounts the Trust Preferred
Securities are allocated on the record date (identified in a listing attached to
the Omnibus Proxy).
Distributions on the Trust Preferred Securities held in book-entry form
will be made to DTC in immediately available funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payments on such payment date. Payments by Participants and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and Indirect Participants and not of DTC, the Trust or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of any distributions to DTC is the responsibility of the
Trust, disbursement of such payments to Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Trust Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Trust Preferred Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trust will have any responsibility for the performance by DTC or its
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depository with
respect to the Trust Preferred Securities at any time by giving notice to the
Trust. Under such circumstances, in the event that a successor securities
depository is not obtained, Trust Preferred Security certificates are required
to be printed and delivered to the Property Trustee. Additionally, the Trust
(with the consent of the Company) may decide to discontinue use of the system of
book-entry transfers through DTC or any successor depository. In that event,
certificates for the Trust Preferred Securities will be printed and delivered to
the Property Trustee. In each of the above circumstances, the Company will
appoint a paying agent with respect to the Trust Preferred Securities.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Trust
Preferred Securities as represented by a Global Certificate.
PAYMENT
Payments in respect of the Trust Preferred Securities represented by the
Global Certificates shall be made to DTC, which shall credit the relevant
accounts at DTC on the scheduled payment dates or, in the case of certificated
securities, if any, such payments shall be made by check mailed to the address
of the holder entitled thereto as such address shall appear on the register. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Regular Trustees. In the event that The Chase Manhattan Bank shall
no longer be the Paying Agent, the Regular Trustees shall appoint a successor to
act as Paying Agent (which shall be a bank or trust company).
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REGISTRAR, TRANSFER AGENT, AND PAYING AGENT
The Property Trustee will act as Registrar, Transfer Agent and Paying Agent
for the Trust Preferred Securities.
Registration of transfers of Trust Preferred Securities will be effected
without charge by or on behalf of the Trust, but upon payment (with the giving
of such indemnity as the Trust or the Company may require) in respect of any tax
or other government charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Trust Preferred Securities after such Trust Preferred Securities
have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is under no obligation
to exercise any of the powers vested in it by the Declaration at the request of
any holder of Trust Preferred Securities, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Trust Preferred Securities will not be required to offer
such indemnity in the event such holders, by exercising their voting rights,
direct the Property Trustee to take any action following a Trust Enforcement
Event.
GOVERNING LAW
The Declaration and the Trust Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an "investment company" required to be registered under the 1940 Act or
characterized as an association taxable as a corporation for United States
federal income tax purposes. In this connection, the Regular Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust or the Declaration that the Regular Trustees determine in
their discretion to be necessary or desirable for such purposes as long as such
action does not adversely affect the interests of the holders of the Trust
Preferred Securities.
Holders of the Trust Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE TRUST GUARANTEE
Set forth below is a summary of information concerning the Trust Guarantee
which will be executed and delivered by the Company for the benefit of the
holders from time to time of Trust Preferred Securities. The summary does not
purport to be complete and is subject in all respects to the provisions of, and
is qualified in its entirety by reference to, the Trust Guarantee, which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The Trust Guarantee incorporates by reference the terms of, and will be
qualified as an indenture under, the Trust Indenture Act. The Chase Manhattan
Bank, as the Trust Guarantee Trustee, will hold the Trust Guarantee for the
benefit of the holders of the Trust Preferred Securities and will act as
indenture trustee for the purposes of compliance with the Trust Indenture Act.
GENERAL
Pursuant to the Trust Guarantee, the Company will irrevocably agree, on a
subordinated basis and to the extent set forth therein, to pay in full to the
holders of the Trust Preferred Securities (except to the extent paid by the
Trust), as and when due, regardless of any defense, right of set off or
counterclaim which the Trust may have or assert, the following payments (the
"Trust Guarantee Payments"), without duplication: (i) any accrued and unpaid
distributions on the Trust Preferred Securities to the extent the Trust has
funds available therefor, (ii) the Redemption Price with respect to any Trust
Preferred Securities called for redemption by the Trust to the extent the Trust
has funds available therefor and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Partnership Preferred Securities to the holders of
Trust Preferred Securities) or upon the redemption of all of the Trust Preferred
Securities, the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Trust Preferred Securities and (b) the
amount of assets of the Trust remaining available for distribution to holders of
Trust Preferred Securities upon the liquidation of the Trust. The Company's
obligation to make a Trust Guarantee Payment may be satisfied by direct payment
of the required amounts by the Company to the holders of Trust Preferred
Securities.
The Trust Guarantee will be a guarantee on a subordinated basis with
respect to the Trust Preferred Securities from the time of issuance of such
Trust Preferred Securities but will only apply to any payment of distributions
or Redemption Price, or to payments upon the dissolution, winding-up or
termination of the Trust, to the extent the Trust shall have funds available
therefor. If the Partnership fails to declare distributions on Partnership
Preferred Securities, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Trust Preferred Securities
or otherwise, and in such event holders of the Trust Preferred Securities would
not be able to rely upon the Trust Guarantee for payment of such amounts.
Instead, holders of the Trust Preferred Securities will have the remedies
described herein under "Description of the Trust Preferred Securities -- Trust
Enforcement Events", including the right to direct the Trust Guarantee Trustee
to enforce the covenant restricting certain distributions by the Company. See
"-- Certain Covenants of the Company" below.
The Guarantees, when taken together with the Company Debenture and the
Company's obligations to pay all fees and expenses of the Trust and the
Partnership, constitute a guarantee to the extent set forth herein by the
Company of the distribution, redemption and liquidation payments payable to the
holders of the Trust Preferred Securities. The Guarantees do not apply, however,
to current distributions by the Partnership unless and until such distributions
are declared by the Partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in the
Partnership, each as more fully described under "Risk Factors -- Insufficient
Income or Assets Available to Partnership."
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant in the Trust Guarantee that if (a) for any
distribution period, full distributions on a cumulative basis on any Trust
Preferred Securities have not been paid, (b) an Investment Event of Default by
any Investment Affiliate in respect of any Affiliate Investment Instrument has
occurred and is continuing or (c) the Company is in default of its obligations
under the Trust Guarantee, the Partnership Guarantee or any Investment
Guarantee, then, during such period the Company shall not
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(i) declare or pay dividends on, make distributions with respect to, redeem,
purchase or acquire or make a liquidation payment with respect to any of its
capital stock or comparable equity interest (except for dividends or
distributions in shares of its common stock and conversions or exchanges of
common stock of one class into common stock of another class and except as may
be required upon conversion of Enron's existing convertible preferred stock at
the option of any holder thereof) or (ii) make any guarantee payments with
respect to the foregoing.
EVENTS OF DEFAULT; ENFORCEMENT OF TRUST GUARANTEE
An event of default under the Trust Guarantee will occur upon the failure
of the Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Trust Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trust Guarantee Trustee or to direct
the exercise of any trust or power conferred upon the Trust Guarantee Trustee
under the Trust Guarantee. If the Trust Guarantee Trustee fails to enforce its
rights under the Trust Guarantee after a holder of Trust Preferred Securities
has made a written request, such holder may institute a legal proceeding
directly against the Company to enforce the Trust Guarantee Trustee's rights
under the Trust Guarantee, without first instituting a legal proceeding against
the Trust, the Trust Guarantee Trustee or any other person or entity. In any
event, if the Company has failed to make a guarantee payment under the Trust
Guarantee, a holder of Trust Preferred Securities may directly institute a
proceeding in such holder's own name against the Company for enforcement of the
Trust Guarantee for such payment.
STATUS OF THE TRUST GUARANTEE; SUBORDINATION
The Trust Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior to all other liabilities of the Company and
will rank pari passu with the most senior preferred stock issued from time to
time by the Company and with any guarantee now or hereafter entered into by the
Company in respect of any preferred security of any affiliate of the Company.
The terms of the Trust Preferred Securities provide that each holder of Trust
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Trust Preferred Securities (in which case no vote will
be required), the Trust Guarantee may be amended only with the prior approval of
the holders of at least a majority in liquidation amount of all the outstanding
Trust Preferred Securities. The manner of obtaining any such approval of holders
of the Trust Preferred Securities will be as set forth under "Description of the
Trust Preferred Securities -- Voting Rights." All guarantees and agreements
contained in the Trust Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Trust Preferred Securities then outstanding. Except in
connection with any permitted merger or consolidation of the Company with or
into another entity or any permitted sale, transfer or lease of the Company's
assets to another entity, the Company may not assign its rights or delegate its
obligations under the Trust Guarantee without the prior approval of the holders
of at least a majority of the aggregate stated liquidation amount of the Trust
Preferred Securities then outstanding.
TERMINATION OF THE TRUST GUARANTEE
The Trust Guarantee will terminate as to each holder of Trust Preferred
Securities upon (i) full payment of the Redemption Price of all Trust Preferred
Securities, (ii) distribution of the Partnership Preferred Securities held by
the Trust to the holders of the Trust Preferred Securities or (iii) full payment
of the amounts payable in accordance with the Declaration upon liquidation of
the Trust. The Trust Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Trust Preferred
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Securities must restore payment of any sum paid under such Trust Preferred
Securities or such Trust Guarantee.
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
The Trust Guarantee Trustee, prior to the occurrence of a default with
respect to the Trust Guarantee, undertakes to perform only such duties as are
specifically set forth in the Trust Guarantee and, after default with respect to
the Trust Guarantee, shall exercise the same degree of care as a prudent person
would exercise in the conduct of his own affairs. Subject to such provision, the
Trust Guarantee Trustee is under no obligation to exercise any of the powers
vested in it by the Trust Guarantee at the request of any holder of Trust
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
laws of the State of New York.
DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES
GENERAL
All of the partnership interests in the Partnership other than the
Partnership Preferred Securities acquired by the Trust are owned directly by the
Company. The Company is the sole general partner of the Partnership. The Limited
Partnership Agreement authorizes and creates the Partnership Preferred
Securities, which represent limited partnership interests in the Partnership.
The limited partnership interests represented by the Partnership Preferred
Securities will have a preference with respect to distributions and amounts
payable on redemption or liquidation over the General Partner's interest in the
Partnership. Except as otherwise described herein or provided in the Limited
Partnership Agreement, the Limited Partnership Agreement does not permit the
issuance of any additional partnership interests or the incurrence of any
indebtedness by the Partnership.
The summary of certain material terms and provisions of the Partnership
Preferred Securities set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Limited
Partnership Agreement, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, and the Partnership Act.
DISTRIBUTIONS
Holders of Partnership Preferred Securities will be entitled to receive
cumulative cash distributions, if, as and when declared by the General Partner
in its sole discretion out of assets of the Partnership legally available for
payment. The distributions payable on each Partnership Preferred Security will
be fixed at a rate per annum of % of the stated liquidation preference of
$25 per Partnership Preferred Security. Distributions not paid on the scheduled
payment date will accumulate and compound quarterly at the rate per annum equal
to %. The amount of distributions payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months.
Distributions on the Partnership Preferred Securities will be payable
quarterly in arrears on March 31, June 30, September 30, and December 31 of each
year, commencing . If distributions are not declared and paid
when scheduled, the accrued distributions shall be paid to the holders of record
of Partnership Preferred Securities as they appear on the books and records of
the Partnership on the record date with respect to the payment date for the
Partnership Preferred Securities.
The Partnership's funds available for distribution to the holders of the
Partnership Preferred Securities will be limited to payments received by the
Partnership on the Affiliate Investment Instruments, the Investment Guarantees
and the Eligible Debt Securities in which the Partnership has invested from time
to time. See "-- Partnership Investments." To the extent that the issuers
(including, where applicable, the
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Company, as guarantor) of the securities in which the Partnership invests fail
to make any payment in respect of such securities (or, if applicable, such
guarantees), the Partnership will not have sufficient funds to pay and will not
declare or pay distributions on the Partnership Preferred Securities, in which
event the Partnership Guarantee will not apply to such distributions until the
Partnership has sufficient funds available therefor and declares such
distributions. See "Description of the Partnership Guarantee." In addition,
distributions on the Partnership Preferred Securities may be declared and paid
only as determined in the sole discretion of the Company, as the General Partner
of the Partnership. If the Partnership fails to declare and pay distributions on
the Partnership Preferred Securities out of funds legally available for
distribution, the Trust will not have sufficient funds to make distributions on
the Trust Preferred Securities, in which event the Trust Guarantee will not
apply to such distributions until the Trust has sufficient funds available
therefor. In addition, as described under "Risk Factors -- Insufficient Income
or Assets Available to Partnership," the Partnership may not have sufficient
funds to pay current or liquidating distributions on the Partnership Preferred
Securities if (i) at any time that the Partnership is receiving current payments
in respect of the securities held by the Partnership (including the Debentures),
the General Partner, in its sole discretion, does not declare distributions on
the Partnership Preferred Securities and the Partnership receives insufficient
amounts to pay the additional compounded distributions that will accrue in
respect of the Partnership Preferred Securities, (ii) the Partnership reinvests
the proceeds received in respect of the Debentures upon their retirement or at
their maturities in Affiliate Investment Instruments that do not generate income
in an amount that is sufficient to pay full distributions in respect of the
Partnership Preferred Securities or (iii) the Partnership invests in equity or
debt securities of Investment Affiliates that are not guaranteed by the Company
and that cannot be liquidated by the Partnership for an amount sufficient to pay
such distributions in full.
Distributions on the Partnership Preferred Securities will be payable to
the holders thereof as they appear on the books and records of the Partnership
on the relevant record dates, which, as long as the Trust Preferred Securities
remain (or, in the event that the Trust is liquidated in connection with a Trust
Special Event, as long as the Partnership Preferred Securities remain) in
book-entry only form, will be one Business Day prior to the relevant payment
dates. In the event the Trust Preferred Securities (or in the event that the
Trust is liquidated in connection with a Trust Special Event, the Partnership
Preferred Securities) shall not continue to remain in book-entry only form, the
relevant record dates shall be the 15th day of the month of the relevant payment
dates. In the event that any date on which distributions are payable on the
Partnership Preferred Securities is not a Business Day, then payment of the
distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day.
PARTNERSHIP ENFORCEMENT EVENTS
If one or more of the following events shall occur and be continuing (each
a "Partnership Enforcement Event"): (i) arrearages on distributions on the
Partnership Preferred Securities shall exist for six consecutive quarterly
distribution periods, (ii) the Company is in default on any of its obligations
under the Partnership Guarantee or any Investment Guarantee or (iii) an
Investment Event of Default occurs and is continuing on any Affiliate Investment
Instrument, then holders of the Partnership Preferred Securities, by the vote of
a majority in aggregate liquidation preference of such holders (or, for so long
as the Partnership Preferred Securities are held by the Property Trustee, the
Property Trustee, as the holder of the Partnership Preferred Securities), will
have the right (a) under the Limited Partnership Agreement to enforce the terms
of the Partnership Preferred Securities, including the right to appoint and
authorize a special representative of the Partnership and the limited partners
(a "Special Representative") to enforce (1) the Partnership's creditors' rights
and other rights with respect to the Affiliate Investment Instruments and the
Investment Guarantees, (2) the rights of the holders of the Partnership
Preferred Securities under the Partnership Guarantee and (3) the rights of the
holders of the Partnership Preferred Securities to receive distributions (only
if and to the extent declared out of funds legally available therefor) on the
Partnership Preferred Securities, and (b) under the Partnership Guarantee to
enforce the terms of the Partnership Guarantee, including the right to enforce
the covenant restricting certain distributions by the Company.
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If the Special Representative fails to enforce its rights under the
Affiliate Investment Instruments after a holder of Partnership Preferred
Securities has made a written request, such holder of Partnership Preferred
Securities may directly institute a legal proceeding against the Company to
enforce the rights of the Special Representative and the Partnership under the
Affiliate Investment Instruments without first instituting any legal proceeding
against the Special Representative, the Partnership or any other person or
entity. In any event, if a Partnership Enforcement Event has occurred and is
continuing and such event is attributable to the failure of an Investment
Affiliate to make any required payment when due on any Affiliate Investment
Instrument, then a holder of Partnership Preferred Securities may on behalf of
the Partnership directly institute a proceeding against such Investment
Affiliate with respect to such Affiliate Investment Instrument for enforcement
of payment. A holder of Partnership Preferred Securities may also bring a direct
action against the Company to enforce such holder's right under the Partnership
Guarantee. See "Description of the Partnership Guarantee -- Events of Default;
Enforcement of Partnership Guarantee."
Under no circumstances, however, shall the Special Representative have
authority to cause the General Partner to declare distributions on the
Partnership Preferred Securities. As a result, although the Special
Representative may be able to enforce the Partnership's creditors' rights to
accelerate and receive payments in respect of the Affiliate Investment
Instruments and the Investment Guarantees, the Partnership would be entitled to
reinvest such payments in additional Affiliate Investment Instruments, subject
to satisfying the reinvestment criteria described under "Description of the
Partnership Preferred Securities -- Partnership Investments," and in Eligible
Debt Securities, rather than declaring and making distributions on the
Partnership Preferred Securities. The Special Representative shall not, by
virtue of acting in such capacity, be admitted as a general partner in the
Partnership or otherwise be deemed to be a general partner in the Partnership
and shall have no liability for the debts, obligations or liabilities of the
Partnership.
PARTNERSHIP INVESTMENTS
Approximately 99% of the proceeds from the issuance of the Partnership
Preferred Securities and the General Partner's contemporaneous capital
contribution (the "Initial Partnership Proceeds") will be used by the
Partnership to purchase debt instruments of Enron and its subsidiaries (the
"Affiliate Investment Instruments") and the remaining 1% of the Initial
Partnership Proceeds will be used to purchase Eligible Debt Securities. The
purchase of the Debentures by the Partnership will occur contemporaneously with
the issuance of the Partnership Preferred Securities.
The initial Affiliate Investment Instruments purchased by the Partnership
will consist of three or more debt instruments (the "Debentures"). Approximately
% of the of the Initial Partnership Proceeds will be used to purchase a
Debenture of the Company (the "Company Debenture"), and approximately % of the
Initial Partnership Proceeds will be used to purchase Debentures of
wholly owned subsidiaries of the Company (the "Affiliate
Debentures"). Each Debenture is expected to have a term of 20 years and to
provide for interest payable at market rates for such Debentures. The Debentures
will be general unsecured debt obligations of the relevant issuer, except that
the Company Debenture will rank subordinate and junior to all senior
indebtedness of the Company.
The payment of interest on each of the Debentures may be deferred at any
time, and from time to time, by the relevant issuer for a period not exceeding
six consecutive quarters. If an issuer were to so defer the payment of interest,
interest would continue to accrue and compound at the stated interest rate on
such Debenture. The Debentures will contain covenants appropriate for unsecured
debt securities issued by similar borrowers pursuant to a public offering or
private placement under Rule 144A of a comparable debt security, including a
limitation on consolidation, merger or a sale or conveyance of all or
substantially all of the assets of the relevant issuer and a limitation on
incurrence of secured debt and, in the case of the Company Debenture, a
limitation on its ability to incur senior indebtedness unless at least one
nationally recognized rating agency rates the Company's long-term senior
unsecured indebtedness in one of its generic rating categories which signifies
investment grade. The Debentures will contain a mandatory redemption provision
that is triggered upon a change of control of the relevant issuer, as well as
redemption provisions that correspond to the redemption provisions applicable to
the Partnership Preferred Securities, including an option to redeem the
Debentures by the relevant issuer, in whole or in part, from time to time, on or
after December 31, 2001 and
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following the occurrence of a Partnership Special Event, in each case, in the
same manner described under "-- Optional Redemption" and "-- Partnership Special
Event Redemption." The Debentures, and any other Affiliate Investment
Instruments that are debt instruments acquired by the Partnership in the future,
will also contain customary events of default (the "Investment Events of
Default"), including events of default for defaults in payments on such
securities when due (provided that no default shall occur upon a valid deferral
of an interest payment by an issuer), defaults in the performance of the
relevant issuer's obligations under its Debenture or Affiliate Investment
Instruments, as the case may be, and certain bankruptcy, insolvency or
reorganization events (subject to customary exceptions and grace periods).
The payment of interest and principal when due and other payment terms of
the Debentures (other than the Company Debenture), will be guaranteed to the
extent described herein (each, an "Investment Guarantee") by the Company for the
benefit of the holders of Partnership Preferred Securities. See "-- Investment
Guarantees."
Approximately 1% of the Initial Partnership Proceeds will be invested in
Eligible Debt Securities. "Eligible Debt Securities" means cash or book-entry
securities, negotiable instruments, or other securities of entities not
affiliated with the Company represented by instruments in registered form which
evidence any of the following: (a) any security issued or guaranteed as to
principal or interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United States, or
any certificate of deposit for any of the foregoing; (b) commercial paper issued
pursuant to Section 3(a)(3) of the Securities Act and having, at the time of the
investment or contractual commitment to invest therein, a rating from each of
S&P and Moody's in the highest investment rating category granted by such rating
agency and having a maturity not in excess of nine months; (c) demand deposits,
time deposits and certificates of deposit which are fully insured by the Federal
Deposit Insurance Corporation ("FDIC"); (d) repurchase obligations with respect
to any security that is a direct obligation of, or fully guaranteed by, the
Government of the United States of America or any agency or instrumentality
thereof, the obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a depository
institution or trust company which is an Eligible Institution (as defined
herein) and the deposits of which are insured by the FDIC; and (e) any other
security which is identified as a permitted investment of a finance subsidiary
pursuant to Rule 3a-5 under the 1940 Act at the time it is acquired by the
Partnership.
"Eligible Institution" means (a) a depository institution organized under
the laws of the United States or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), (1)(i) which has either
(A) a long-term unsecured debt rating of AA or better by S&P and Aa or better by
Moody's or (B) a short-term unsecured debt rating or a certificate of deposit
rating of A-1+ by S&P and P-1 by Moody's and (ii) whose deposits are insured by
the FDIC or (2)(i) the parent of which has a long-term or short-term unsecured
debt rating which signifies investment grade and (ii) whose deposits are insured
by the FDIC.
The Partnership may, from time to time and subject to the restrictions
described below, reinvest payments received with respect to the Affiliate
Investment Instruments (including the Debentures) and the Eligible Debt
Securities in additional Affiliate Investment Instruments and Eligible Debt
Securities. As of the date of this Prospectus, the Company, as the General
Partner, does not intend to cause the Partnership to reinvest payments received
by the Partnership in the manner described below, although there can be no
assurance that the General Partner's intention in respect of such reinvestments
will not change in the future.
Certain financial terms of all Affiliate Investment Instruments (including
the Debentures) will be reviewed by a nationally recognized investment banking
firm that does not (and whose directors, officers, employees and affiliates do
not) have a direct or indirect material equity interest in the Company or any of
its subsidiaries and which is either among the five largest underwriters of debt
or preferred securities in the United States or was selected by the Company and
approved by the holders of a majority in liquidation amount of the Partnership
Preferred Securities (the "Independent Financial Advisor"). Merrill Lynch & Co.
will serve as the initial Independent Financial Advisor.
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The Partnership may reinvest in additional Affiliate Investment Instruments
only if certain procedures and criteria are satisfied with respect to such
Affiliate Investment Instrument, including the satisfaction of the following
conditions: (i) the Partnership did not hold debt or equity securities of the
issuer of the proposed Affiliate Investment Instrument within the three-year
period ending on the date of such proposed investment; (ii) there was never a
default on any debt obligation of, or arrearages of dividends on preferred stock
issued by, the issuer of the proposed Affiliate Investment Instrument that was
previously or is currently owned by the Partnership; and (iii) the applicable
financial terms with respect to the proposed Affiliate Investment Instrument
have been determined by the Independent Financial Advisor to be at least as
favorable as terms which could be obtained by the Partnership in a public
offering or private placement under Rule 144A of a comparable security issued by
the relevant Investment Affiliate and (iv) the requesting Investment Affiliate
shall not be deemed to be an investment company by reason of Section 3(a) or
3(b) of the 1940 Act. The term "Investment Affiliate" means the Company or any
corporation, partnership, limited liability company or other entity (other than
the Partnership or the Trust) that is controlled by the Company. If the
Partnership is unable to reinvest payments and proceeds from Affiliate
Investment Instruments in additional Affiliate Investment Instruments meeting
the above criteria, the Partnership may only invest such funds in Eligible Debt
Securities (subject to restrictions of applicable law, including the 1940 Act).
INVESTMENT GUARANTEES
General. The Company will agree, on a subordinated basis and to the extent
set forth therein, to execute and deliver an Investment Guarantee for the
benefit of the holders of Partnership Preferred Securities with respect to each
Debenture issued by an Investment Affiliate (other than the Company Debenture)
to the extent set forth below. The Investment Guarantees shall be enforceable
regardless of any defense, right of set-off or counterclaim that the Company may
have or assert. The Investment Guarantees will be full and unconditional
guarantees with respect to the applicable Debentures from the time of issuance.
To the extent that, as described above, the Partnership invests in additional
Affiliate Investment Instruments, the determination as to whether such Affiliate
Investment Instrument will contain an Investment Guarantee will be made at the
date of its issuance and will be based, among other things, upon its approval by
the Independent Financial Advisor in accordance with the reinvestment criteria
described above.
The Investment Guarantees will constitute guarantees of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the applicable
Investment Guarantee without instituting a legal proceeding against any other
person or entity). If no Special Representative has been appointed to enforce
any Investment Guarantee, the General Partner has the right to enforce such
Investment Guarantee on behalf of the holders of the Partnership Preferred
Securities. The holders of not less than a majority in aggregate liquidation
preference of the Partnership Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available in
respect of any Investment Guarantee, including the giving of directions to the
General Partner or the Special Representative, as the case may be. If the
General Partner or the Special Representative fails to enforce any Investment
Guarantee as above provided, any holder of Trust Preferred Securities may
institute its own legal proceeding to enforce such Investment Guarantee. No
Investment Guarantee will be discharged except by payment in full of all amounts
guaranteed by such Investment Guarantee (without duplication of amounts
theretofore paid by the relevant Investment Affiliate).
Amendments and Assignment. Except with respect to any changes that do not
adversely affect the rights of holders of Partnership Preferred Securities (in
which case no consent will be required), the Investment Guarantees may be
amended only with the prior approval of the holders of not less than a majority
in liquidation preference of the outstanding Partnership Preferred Securities,
provided that for so long as the Property Trustee of the Trust is the holder of
the Partnership Preferred Securities, such amendment will not be effective
without the prior written approval of a majority in liquidation preference of
the outstanding Trust Preferred Securities. All guarantees and agreements
contained in the Investment Guarantees shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of Partnership Preferred Securities.
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Status of the Investment Guarantees. The Company's obligations under the
Investment Guarantees will constitute unsecured obligations of the Company and
will rank subordinate and junior to all other liabilities of the Company and
will rank pari passu with the most senior preferred stock issued from time to
time by the Company and with any guarantee now or hereafter entered into by the
Company in respect of any preferred security of any affiliate of the Company.
Governing Law. The Investment Guarantees will be governed by and construed
in accordance with the laws of the State of New York.
OPTIONAL REDEMPTION
The Partnership Preferred Securities are redeemable, at the option of the
General Partner, in whole or in part, from time to time, on or after December
31, 2001, upon not less than 30 nor more than 60 days' notice, at an amount per
Partnership Preferred Security equal to $25 plus accrued and unpaid
distributions thereon. If the Partnership redeems Partnership Preferred
Securities in accordance with the terms thereof, Trust Securities will be
mandatorily redeemed at the Redemption Price. If a partial redemption would
result in the delisting of the Trust Preferred Securities (or, if the Trust is
liquidated in connection with a Trust Special Event, the delisting of the
Partnership Preferred Securities), the Partnership may only redeem the
Partnership Preferred Securities in whole.
PARTNERSHIP SPECIAL EVENT REDEMPTION
If, at any time, a Partnership Tax Event or a Partnership Investment
Company Event (each as hereinafter defined, and each a "Partnership Special
Event") shall occur and be continuing, the General Partner shall, within 90 days
following the occurrence of such Partnership Special Event, elect to either (i)
redeem the Partnership Preferred Securities in whole (but not in part), upon not
less than 30 or more than 60 days' notice at the Redemption Price, provided
that, if at the time there is available to the Partnership the opportunity to
eliminate, within such 90-day period, the Partnership Special Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable such measure that in the sole judgment of
the Company has or will cause no adverse effect on the Partnership, the Trust or
the Company, the General Partner will pursue such measure in lieu of redemption;
or (ii) cause the Partnership Preferred Securities to remain outstanding,
provided that in the case of this clause (ii), the General Partner shall pay any
and all costs and expenses incurred by or payable by the Partnership
attributable to the Partnership Special Event.
"Partnership Tax Event" means that the General Partner shall have requested
and received an opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that there has been a Tax Action that
results in there being more than an insubstantial risk that (i) the Partnership
is, or will be, subject to United States federal income tax with respect to
income accrued or received on the Affiliate Investment Instruments or the
Eligible Debt Securities, (ii) the Partnership is, or will be, subject to more
than a de minimis amount of other taxes, duties or other governmental charges or
(iii) interest payable by an Investment Affiliate with respect to the Debenture
issued by such Investment Affiliate to the Partnership is not, or will not be,
deductible by such Investment Affiliate for United States federal income tax
purposes.
"Partnership Investment Company Event" means that the General Partner shall
have requested and received an opinion of nationally recognized independent
legal counsel experienced in such matters to the effect that as a result of the
occurrence on or after the date hereof of a Change in 1940 Act Law, the
Partnership is or will be considered an "investment company" which is required
to be registered under the 1940 Act.
REDEMPTION PROCEDURES
The Partnership may not redeem fewer than all the outstanding Partnership
Preferred Securities unless all accrued and unpaid distributions have been paid
on all Partnership Preferred Securities for all quarterly distribution periods
terminating on or prior to the date of redemption.
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If the Partnership gives a notice of redemption in respect of Partnership
Preferred Securities (which notice will be irrevocable) then, by 12:00 noon, New
York City time, on the redemption date, the Partnership (i) if the Partnership
Preferred Securities are in book-entry form with DTC, will deposit irrevocably
with DTC funds sufficient to pay the applicable Redemption Price and will give
DTC irrevocable instructions and authority to pay the Redemption Price in
respect of the Partnership Preferred Securities held through DTC in global form
or (ii) if the Partnership Preferred Securities are held in certificated form,
will deposit with the paying agent for the Partnership Preferred Securities
funds sufficient to pay such amount in respect of any Partnership Preferred
Securities in certificated form and will give such paying agent irrevocable
instructions and authority to pay such amounts to the holders of Partnership
Preferred Securities upon surrender of their certificates. See "-- Book-Entry
Only Issuance -- The Depository Trust Company."
If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of holders of such
Partnership Preferred Securities so called for redemption will cease, except the
right of the holders of such Partnership Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price. In the event
that any date fixed for redemption of Partnership Preferred Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Partnership Preferred Securities is improperly withheld or refused
and not paid either by the Partnership or by the Company pursuant to the
Partnership Guarantee described under "Description of the Partnership
Guarantee," distributions on such Partnership Preferred Securities will continue
to accrue, from the original redemption date to the date of payment.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or any of its subsidiaries
may at any time and from time to time purchase outstanding Partnership Preferred
Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Partnership, the holders of the Partnership Preferred
Securities at the time will be entitled to receive out of the assets of the
Partnership available for distribution to partners after satisfaction of
liabilities of creditors as required by the Partnership Act, before any
distribution of assets is made to the General Partner, an amount equal to, in
the case of holders of Partnership Preferred Securities, the aggregate of the
stated liquidation preference of $25 per Partnership Preferred Security plus
accrued and unpaid distributions thereon to the date of payment (such amount
being the "Partnership Liquidation Distribution").
The Limited Partnership Agreement provides that the Partnership shall be
dissolved and its affairs shall be wound up: (i) upon the bankruptcy of the
General Partner, (ii) upon the assignment by the General Partner of its entire
interest in the Partnership when the assignee is not admitted to the Partnership
as a general partner of the Partnership in accordance with the Limited
Partnership Agreement, or the filing of a certificate of dissolution or its
equivalent with respect to the General Partner, or the revocation of the General
Partner's charter and the expiration of 90 days after the date of notice to the
General Partner of revocation without a reinstatement of its charter, or if any
other event occurs that causes the General Partner to cease to be a general
partner of the Partnership under the Partnership Act, unless the business of the
Partnership is continued in accordance with the Partnership Act, (iii) if the
Partnership has redeemed or otherwise purchased all the Partnership Preferred
Securities, (iv) upon the entry of a decree of judicial dissolution or (v) upon
the written consent of all partners of the Partnership.
VOTING RIGHTS
Except as provided below and under "Description of the Partnership
Guarantee -- Amendments and Assignment" and as otherwise required by law and the
Limited Partnership Agreement, the holders of the Partnership Preferred
Securities will have no voting rights.
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Not later than 30 days after any Partnership Enforcement Event occurs, the
General Partner will convene a meeting for the purpose of appointing a Special
Representative. If the General Partner fails to convene such meeting within such
30-day period, the holders of 10% in liquidation preference of the outstanding
Partnership Preferred Securities will be entitled to convene such meeting. The
provisions of the Limited Partnership Agreement relating to the convening and
conduct of the meetings of the partners will apply with respect to any such
meeting. In the event that, at any such meeting, holders of less than a majority
in aggregate liquidation preference of Partnership Preferred Securities entitled
to vote for the appointment of a Special Representative vote for such
appointment, no Special Representative shall be appointed. Any Special
Representative appointed shall cease to be a Special Representative of the
Partnership and the limited partners if (i) the Partnership (or the Company
pursuant to the Partnership Guarantee) shall have paid in full all accrued and
unpaid distributions on the Partnership Preferred Securities, (ii) any
Investment Event of Default giving rise to the Partnership Enforcement Event
shall have been cured, and (iii) the Company is in compliance with all its
obligations under the Partnership Guarantee and the Company, in its capacity as
the General Partner, shall continue the business of the Partnership without
dissolution. Notwithstanding the appointment of any such Special Representative,
the Company shall continue as General Partner and shall retain all rights under
the Limited Partnership Agreement, including the right to declare, in its sole
discretion, the payment of distributions on the Partnership Preferred Securities
for which the failure of such declaration would not constitute a default under
the Limited Partnership Agreement.
If any proposed amendment to the Limited Partnership Agreement provides
for, or the General Partner otherwise proposes to effect, (i) any action that
would adversely affect the powers, preferences or special rights of the
Partnership Preferred Securities, whether by way of amendment to the Limited
Partnership Agreement or otherwise (including, without limitation, the
authorization or issuance of any limited partner interests in the Partnership
ranking, as to participation in the profits or distributions or in the assets of
the Partnership, senior to the Partnership Preferred Securities), or (ii) the
dissolution, winding-up or termination of the Partnership, other than (x) in
connection with the occurrence of a Partnership Special Event or (y) in certain
limited circumstances described under "-- Merger, Consolidation or Amalgamation
of the Partnership," then the holders of outstanding Partnership Preferred
Securities will be entitled to vote on such amendment or proposal of the General
Partner (but not on any other amendment or proposal) as a class, and such
amendment or proposal shall not be effective except with the approval of the
holders of a majority in liquidation preference of such outstanding Partnership
Preferred Securities having a right to vote on the matter; provided, however,
that if the Property Trustee on behalf of the Trust is the holder of the
Partnership Preferred Securities, any such amendment or proposal not excepted by
clauses (x) and (y) above shall not be effective without the prior or concurrent
approval of the holders of a majority in liquidation amount of the outstanding
Trust Preferred Securities having a right to vote on such matters.
The General Partner shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available, (ii) waive any Investment
Event of Default that is waivable under the Affiliate Investment Instruments,
(iii) exercise any right to rescind or annul a declaration that the principal of
any Affiliate Investment Instruments which are debt instruments shall be due and
payable, (iv) waive the breach of the covenant by the Company to restrict
certain payments by the Company and its majority owned subsidiaries, or (v)
consent to any amendment, modification or termination of any Affiliate
Investment Instrument, where such consent shall be required from the investor,
without, in each case, obtaining the prior approval of the holders of at least a
majority in liquidation preference of the Partnership Preferred Securities;
provided, however, that if the Property Trustee on behalf of the Trust is the
holder of the Partnership Preferred Securities, such waiver, consent or
amendment or other action shall not be effective without the prior or concurrent
approval of at least a majority in liquidation amount of the outstanding Trust
Preferred Securities having a right to vote on such matters. The General Partner
shall not revoke any action previously authorized or approved by a vote of the
holders of the Partnership Preferred Securities. The General Partner shall
notify all holders of the Partnership Preferred Securities of any notice of an
Investment Event of Default received with respect to any Affiliate Investment
Instrument.
Any required approval of holders of Partnership Preferred Securities may be
given at a separate meeting of holders of Partnership Preferred Securities
convened for such purpose, at a meeting of all of the partners in
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the Partnership or pursuant to written consent. The Partnership will cause a
notice of any meeting at which holders of Partnership Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be mailed to each holder of record of Partnership
Preferred Securities. Each such notice will include a statement setting forth
(i) the date of such meeting or the date by which such action is to be taken,
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matters upon which written
consent is sought and (iii) instruction for the delivery of proxies or consents.
No vote or consent of the holders of Partnership Preferred Securities will be
required for the Partnership to redeem and cancel Partnership Preferred
Securities in accordance with the Limited Partnership Agreement.
Notwithstanding that holders of Partnership Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Partnership Preferred Securities at such time that are owned by the
Company or by any entity more than 50% of which is owned by the Company, either
directly or indirectly, shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding;
provided, however, that persons (other than affiliates of the Company) to whom
the Company or any of its subsidiaries have pledged Trust Preferred Securities
may vote or consent with respect to such pledged Trust Preferred Securities
under any of the circumstances described herein.
Holders of the Partnership Preferred Securities will have no rights to
remove or replace the General Partner.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE PARTNERSHIP
The Partnership may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, without the
consent of the holders of the Partnership Preferred Securities, except in
certain limited circumstances and upon compliance with certain specified
conditions. In any event, the Partnership will not take any such action unless,
prior to such merger, consolidation, amalgamation or replacement, the Company
has received an opinion of nationally recognized independent counsel to the
Partnership experienced in such matters to the effect that (A) such successor
entity will be treated as a partnership for United States federal income tax
purposes, (B) such merger, consolidation, amalgamation or replacement would not
cause the Trust to be classified as an association taxable as a corporation for
United States federal income tax purposes, (C) following such merger,
consolidation, amalgamation or replacement, the Company and such successor
entity will be in compliance with the 1940 Act without registering thereunder as
an investment company, and (D) such merger, consolidation, amalgamation or
replacement will not adversely affect the limited liability of the holders of
the Partnership Preferred Securities.
BOOK-ENTRY AND SETTLEMENT
If the Partnership Preferred Securities are distributed to holders of Trust
Preferred Securities in connection with the involuntary or voluntary
dissolution, winding-up or liquidation of the Trust as a result of the
occurrence of a Trust Special Event, the Partnership Preferred Securities will
be issued in the form of one or more global certificates (each a "Global
Partnership Security") registered in the name of DTC as the depository or its
nominee. For a description of DTC and the specific terms of the Depository
arrangements, see "Description of the Trust Preferred Securities -- Book-Entry
Only Issuance -- The Depository Trust Company." As of the date of this
Prospectus, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Trust Preferred Securities apply in all material respects to any
Partnership Preferred Securities represented by one or more Global Partnership
Securities.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The General Partner will act as registrar, transfer agent and paying agent
for the Partnership Preferred Securities for so long as the Partnership
Preferred Securities are held by the Trust or, if the Trust is liquidated in
connection with a Trust Special Event, for so long as the Partnership Preferred
Securities remain in book-
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entry only form. In the event the Partnership Preferred Securities are
distributed in connection with a Trust Special Event and the book-entry system
for the Partnership Preferred Securities is discontinued, it is anticipated that
The Chase Manhattan Bank or one of its affiliates will act as registrar,
transfer agent and paying agent for the Partnership Preferred Securities.
Registration of transfers of Partnership Preferred Securities will be
effected without charge by or on behalf of the Partnership, but upon payment
(with the giving of such indemnity as the Partnership or the General Partner may
require) in respect of any tax or other governmental charges that may be imposed
in relation to it.
The Partnership will not be required to register or cause to be registered
the transfer of Partnership Preferred Securities after such Partnership
Preferred Securities have been called for redemption.
MISCELLANEOUS
The General Partner is authorized and directed to conduct its affairs and
to operate the Partnership in such a way that (i) the Partnership will not be
deemed to be an "investment company" required to be registered under the 1940
Act, (ii) the Affiliate Investment Instruments that are debt instruments will be
treated as indebtedness of the issuer of such debt instruments for United States
federal income tax purposes and (iii) the Partnership will not be treated as an
association taxable as a corporation. In this connection, the General Partner is
authorized to take any action, not inconsistent with applicable law, the
certificate of limited partnership of the Partnership or the Limited Partnership
Agreement, that the General Partner determines in its discretion to be necessary
or desirable for such purposes as long as such action does not adversely affect
the interests of the holders of the Partnership Preferred Securities.
DESCRIPTION OF THE PARTNERSHIP GUARANTEE
Set forth below is a summary of information concerning the Partnership
Guarantee that will be executed and delivered by the Company for the benefit of
the holders from time to time of Partnership Preferred Securities. The summary
does not purport to be complete and is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the Partnership Guarantee,
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The General Partner will hold the Partnership Guarantee
for the benefit of the holders of the Partnership Preferred Securities.
GENERAL
Pursuant to the Partnership Guarantee, the Company will irrevocably agree,
on a subordinated basis to the extent set forth therein, to pay in full to the
holders of the Partnership Preferred Securities (without duplication of amounts
theretofore paid by the Partnership), as and when due, regardless of any
defense, right of set-off or counterclaim that the Partnership may have or
assert, the following payments (the "Partnership Guarantee Payments"): (i) any
accrued and unpaid distributions that have theretofore been declared on the
Partnership Preferred Securities out of funds legally available therefor, (ii)
the redemption price with respect to any Partnership Preferred Securities called
for redemption by the Partnership out of funds legally available therefor, and
(iii) upon a liquidation of the Partnership, the lesser of (a) the aggregate of
the liquidation preference and all accrued and unpaid distributions on the
Partnership Preferred Securities to the date of payment and (b) the amount of
assets of the Partnership after satisfaction of all liabilities remaining
available for distribution to holders of Partnership Preferred Securities in
liquidation of the Partnership. The Company's obligation to make a Partnership
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Company to the holders of Partnership Preferred Securities or by causing the
Partnership to pay such amounts to such holders.
The Partnership Guarantee will be a guarantee on a subordinated basis with
respect to the Partnership Preferred Securities from the time of issuance of
such Partnership Preferred Securities but will not apply to
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any payment of distributions or Redemption Price, or to payments upon the
dissolution, winding-up or termination of the Trust, except to the extent the
Partnership shall have funds available therefor. If Investment Affiliates
(including, where applicable, the Company, as guarantor) of the Affiliate
Investment Instruments in which the Partnership invests fail to make any payment
in respect of such securities (or, if applicable, guarantees), the Partnership
may not declare or pay dividends on the Partnership Preferred Securities. In
such event, holders of the Partnership Preferred Securities would not be able to
rely upon the Partnership Guarantee for payment of such amounts. Instead,
holders of the Partnership Preferred Securities will have the remedies described
herein under "Description of the Partnership Preferred Securities -- Partnership
Enforcement Events," including the right to direct the General Partner or the
Special Representative, as the case may be, to enforce the covenant restricting
certain distributions by the Company. See "-- Certain Covenants of the Company"
below.
The Guarantees, when taken together with the Company Debenture and the
Company's obligations to pay all fees and expenses of the Trust and the
Partnership, constitute a guarantee to the extent set forth herein by the
Company of the distribution, redemption and liquidation payments payable to the
holders of the Trust Preferred Securities. The Guarantees do not apply, however,
to current distributions by the Partnership unless and until such distributions
are declared by the Partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in the
Partnership, each as more fully described under "Risk Factors -- Insufficient
Income or Assets Available to Partnership."
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant in the Partnership Guarantee that if (a) for any
distribution period, full distributions on a cumulative basis on any Partnership
Preferred Securities have not been paid or declared and set apart for payment,
(b) an Investment Event of Default by any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and is continuing or (c) the
Company is in default of its obligations under the Trust Guarantee, the
Partnership Guarantee or any Investment Guarantee, then, during such period the
Company shall not (i) declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to any of its capital stock or comparable equity interest (except for
dividends or distributions in shares of its common stock and conversions or
exchanges of common stock of one class into common stock of another class and
except as may be required upon conversion of Enron's existing convertible
preferred stock at the option of any holder thereof) and (ii) make any guarantee
payments with respect to the foregoing.
EVENTS OF DEFAULT; ENFORCEMENT OF PARTNERSHIP GUARANTEE
An event of default under the Partnership Guarantee will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Partnership
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Special Representative
in respect of the Partnership Guarantee or to direct the exercise of any trust
or power conferred upon the Special Representative under the Partnership
Guarantee. If the Special Representative fails to enforce its rights under the
Partnership Guarantee, after a holder of Partnership Preferred Securities has
made a written request, such holder of Partnership Preferred Securities may
institute a legal proceeding directly against the Company to enforce the Special
Representative's rights under the Partnership Guarantee without first
instituting a legal proceeding against the Partnership, the Special
Representative or any other person or entity. Notwithstanding the foregoing, if
the Company has failed to make a guarantee payment, a holder of Partnership
Preferred Securities may directly institute a proceeding against the Company for
enforcement of the Partnership Guarantee for such payment.
STATUS OF THE PARTNERSHIP GUARANTEE; SUBORDINATION
The Partnership Guarantee will constitute an unsecured obligation of the
Company and will rank subordinate and junior to all other liabilities of the
Company and will rank pari passu with the most senior preferred stock issued
from time to time by the Company and with any guarantee now or hereafter entered
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into by the Company in respect of any preferred security of any affiliate of the
Company. The Limited Partnership Agreement provides that each holder of
Partnership Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Partnership Guarantee.
The Partnership Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the Partnership
Guarantee without instituting a legal proceeding against any other person or
entity).
The Partnership Guarantee will be deposited with the General Partner to be
held for the benefit of the holders of the Partnership Preferred Securities. In
the event of the appointment of a Special Representative to, among other things,
enforce the Partnership Guarantee, the Special Representative may take
possession of the Partnership Guarantee for such purpose. If no Special
Representative has been appointed to enforce the Partnership Guarantee, the
General Partner has the right to enforce the Partnership Guarantee on behalf of
the holders of the Partnership Preferred Securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Partnership Preferred Securities (in which case no consent will be
required), the Partnership Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation preference of the
outstanding Partnership Preferred Securities. All guarantees and agreements
contained in the Partnership Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Partnership Preferred Securities then outstanding.
Except in connection with any permitted merger or consolidation of the Company
with or into another entity or any permitted sale, transfer or lease of the
Company's assets to another entity as described above under "Description of the
Partnership Preferred Securities -- Merger, Consolidation or Amalgamation of the
Partnership," the Company may not assign its rights or delegate its obligations
under the Partnership Guarantee without the prior approval of the holders of at
least a majority of the aggregate stated liquidation amount of the Partnership
Preferred Securities then outstanding.
TERMINATION OF THE PARTNERSHIP GUARANTEE
The Partnership Guarantee will terminate and be of no further force and
effect as to the Partnership Preferred Securities upon (i) full payment of the
redemption price of all Partnership Preferred Securities or (ii) full payment of
the amounts payable in accordance with the Limited Partnership Agreement upon
liquidation of the Partnership. The Partnership Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Partnership Preferred Securities must in accordance with the Partnership Act
restore payment of any sums paid under the Partnership Preferred Securities or
the Partnership Guarantee. The Partnership Act provides that a limited partner
of a limited partnership who wrongfully receives a distribution may be liable to
the limited partnership for the amount of such distribution.
GOVERNING LAW
The Partnership Guarantee will be governed by and construed in accordance
with the laws of the State of New York.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a summary of the material United States federal income tax
considerations that may be relevant to the purchase, ownership and disposition
of Trust Preferred Securities and represents the opinion of Vinson & Elkins
L.L.P., counsel to the Company, the Trust and the Partnership ("Tax Counsel"),
insofar as it relates to matters of law and legal conclusions. Unless otherwise
stated, this summary deals only with Trust Preferred Securities held as capital
assets by United States Persons (defined below) who purchase the Trust Preferred
Securities upon original issuance. As used herein, a "United States Person"
means a person that is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust which is not treated as a foreign estate or foreign trust for United
States federal tax purposes. The tax treatment of a holder may vary depending on
its particular situation. This summary does not address all the tax consequences
that may be relevant to holders who may be subject to special tax treatment,
such as banks, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
or foreign investors. This summary does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Trust
Preferred Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury regulations promulgated thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
The Trust Preferred Securities are not being marketed to persons that are
not United States Persons ("non-United States Persons") and, consequently, the
following discussion does not discuss the tax consequences that might be
relevant to non-United States Persons. Moreover, in order to protect the Trust
and the Partnership from potential adverse consequences, non-United States
Persons will be subject to withholding on distributions on the Trust Preferred
Securities held by such non-United States Persons at a rate of 30%. In
determining a holder's status, the United States entity otherwise required to
withhold taxes may rely on an IRS form W-8, an IRS form W-9, or a holder's
certification of its non-foreign status signed under penalty of perjury.
Non-United States Persons should consult their own tax advisors as to the
specific United States federal income tax consequences of the purchase,
ownership, and disposition of Trust Preferred Securities.
Tax Counsel has advised that there is no authority directly on point
dealing with securities such as the Trust Preferred Securities or transactions
of the type described herein and that the opinions of Tax Counsel are not
binding on the Internal Revenue Service ("IRS") or the courts, either of which
could take a contrary position. No rulings have been or will be sought from the
IRS. Accordingly, there can be no assurance that the IRS will not challenge the
opinions expressed herein or that a court would not sustain such a challenge.
Nevertheless, Tax Counsel has advised that it is of the view that, if
challenged, the opinions expressed herein would be sustained by a court with
jurisdiction in a properly presented case.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE
TRUST PREFERRED SECURITIES OR REDEMPTION OF THE PARTNERSHIP PREFERRED SECURITIES
UPON THE OCCURRENCE OF CERTAIN TAX EVENTS, SEE "DESCRIPTION OF THE TRUST
PREFERRED SECURITIES -- TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION" AND
"DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES -- PARTNERSHIP SPECIAL
EVENT REDEMPTION" RESPECTIVELY.
CLASSIFICATION OF THE TRUST
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the Trust will
not be classified for United States federal income tax
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purposes as an association taxable as a corporation. Accordingly, for United
States federal income tax purposes, each holder of Trust Preferred Securities
will be required to include in its gross income its distributive share of income
attributable to the Partnership, which generally will be equal to such holder's
allocable share of amounts accrued on the Partnership Preferred Securities. No
amount included in income with respect to the Trust Preferred Securities will be
eligible for the corporate dividends-received deduction.
CLASSIFICATION OF THE PARTNERSHIP
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the
Partnership will be classified for United States federal income tax purposes as
a partnership and not as an association taxable as a corporation.
The General Partner has represented that it intends to operate the
Partnership in a manner such that it will continue to constitute a partnership
for all taxable years in which any Partnership Preferred Securities remain
outstanding. In particular, pursuant to the Limited Partnership Agreement, the
General Partner is prohibited from taking any action that would cause the
Partnership to constitute a "publicly traded partnership" taxable as a
corporation under section 7704(a) of the Code. Accordingly, it is expected that
the Partnership will continue to qualify as a partnership, and therefore will
not constitute a publicly traded partnership taxable as a corporation, for all
taxable years in which the Partnership Preferred Securities remain outstanding.
If, however, the Partnership were to constitute a publicly traded partnership
taxable as a corporation with respect to a future taxable year, the
Partnership's net income would be subject to United States federal income tax at
the applicable corporate rates.
CLASSIFICATION OF THE DEBENTURES
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the Debentures
will be classified as indebtedness of the issuer owned by the Partnership for
United States federal income tax purposes.
INCOME AND DEDUCTIONS
The Partnership will be an accrual basis taxpayer for United States federal
income tax purposes. Accordingly, income will accrue on the Trust Preferred
Securities and will be allocated to holders of Trust Preferred Securities on a
daily accrual basis, generally at a rate that is expected to be equal to (and
that will not be greater than) the distribution rate on the Trust Preferred
Securities, regardless of the holders' method of accounting. Actual cash
distributions on the Trust Preferred Securities, however, will not be separately
reported as taxable income to the holders at the time they are received.
Therefore, if quarterly distributions on the Trust Preferred Securities are paid
currently, the amount of income recognized by a holder during a taxable year
generally will equal the cash distributions received by the holder with respect
to its Trust Preferred Securities.
If, however, distributions on the Partnership Preferred Securities are not
made currently, the corresponding distributions on the Trust Preferred
Securities will not be made currently. Because the Partnership is an accrual
basis taxpayer it can be expected that during a period in which payment on the
Debentures or distributions on the Partnership Preferred Securities are deferred
(for whatever reason), holders will generally recognize income in advance of
their receipt of any cash distributions with respect to their Trust Preferred
Securities. The amount of income that will be allocated to holders of Trust
Preferred Securities during any such deferral period will equal their pro rata
share of the amount accruing on the Partnership Preferred Securities during such
deferral period.
RECEIPT OF PARTNERSHIP PREFERRED SECURITIES UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Trust Preferred Securities -- Trust Special Event Redemption or
Distribution," Partnership Preferred Securities may be distributed to holders of
Trust Preferred Securities in exchange for their Trust Preferred Securities and
in liquidation of the Trust. Unless the liquidation of the Trust occurs as a
result of the Trust's being subject to
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United States federal income tax with respect to income accrued or received on
the Partnership Preferred Securities, such a distribution to holders would be
treated as a nontaxable event to each holder, each holder would receive an
aggregate tax basis in the Partnership Preferred Securities equal to such
holder's aggregate tax basis in its Trust Preferred Securities, and a holder's
holding period for the Partnership Preferred Securities so received in
liquidation of the Trust would include the period during which the Trust
Preferred Securities were held by such holder. If, however, the liquidation of
the Trust were to occur because the Trust is subject to United States federal
income tax with respect to income accrued or received on the Partnership
Preferred Securities, the distribution of Partnership Preferred Securities to
holders by the Trust would be a taxable event to each holder, and a holder would
recognize gain or loss measured by the difference between the holder's tax basis
in the Trust Preferred Securities and the fair market value of the Partnership
Preferred Securities received in exchange therefor upon the liquidation of the
Trust.
REDEMPTION OF TRUST PREFERRED SECURITIES FOR CASH
Under certain circumstances, as described under the caption "Description of
the Trust Preferred Securities -- Mandatory Redemption," "Description of the
Trust Preferred Securities -- Trust Special Event Redemption or Distribution"
and "Description of the Partnership Preferred Securities -- Partnership Special
Event Redemption," the General Partner may cause the Partnership to redeem the
Partnership Preferred Securities for cash, in which event the Trust would use
the proceeds of such redemption to redeem the Trust Preferred Securities. Upon
such a redemption, a holder would recognize gain to the extent the amount of
cash received exceeded the holder's tax basis in its Trust Preferred Securities,
and would recognize loss only if all of the holder's Trust Preferred Securities
were redeemed and if (and to the extent that) the cash received were less than
the holder's tax basis for its Trust Preferred Securities. See "-- Disposition
of Trust Preferred Securities."
DISPOSITION OF TRUST PREFERRED SECURITIES
A holder that sells Trust Preferred Securities will recognize gain or loss
equal to the difference between the amount realized on the sale of the Trust
Preferred Securities and the holder's tax basis in such Trust Preferred
Securities. Such gain or loss will be a capital gain or loss and will be a
long-term capital gain or loss if the Trust Preferred Securities have been held
for more than one year at the time of the sale. A holder will be required to
include the holder's allocable portion of the accrued but unpaid interest on the
Debentures through the date of disposition in income as ordinary income (to the
extent not previously included in income) and to add such amount to the adjusted
tax basis of its Trust Preferred Securities. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
A holder's tax basis in its Trust Preferred Securities generally will be
equal to (i) the amount paid by such holder for its Trust Preferred Securities,
(ii) increased by the amount includible in income by such holder, and (iii)
reduced by the amount of cash or other property distributed to such holder with
respect to its Trust Preferred Securities.
OTHER PARTNERSHIP PROVISIONS
Section 708. Under Section 708 of the Code, the Partnership will be deemed
to terminate for United States federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a deemed termination were to occur, the Partnership
would be considered to have distributed its assets to the partners who would
then be treated as having recontributed those assets to a new partnership. If
any such constructive termination occurs, the General Partner may be unable to
comply with certain technical requirements that might be applicable for various
reasons including the likely lack of relevant data. As a result, the Partnership
may be subject to certain tax penalties and may incur additional expenses, which
would be the obligation of the General Partner. Proposed Treasury regulations,
should they become effective, will mitigate some of the effects of a
constructive termination.
49
<PAGE> 51
Section 701. The Department of Treasury has promulgated regulations under
Section 701 of the Code that permit it to disregard or recast a transaction if a
partnership is formed or availed of with a principal purpose to reduce
substantially the present value of the partners' aggregate tax liability in a
manner inconsistent with the intent of the partnership provisions of the Code.
Although there is no precedent that applies to the transactions contemplated
herein, Tax Counsel believes that the Partnership is not of the type intended to
fall within the scope of these regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Income on the Trust Preferred Securities will be reported to holders on an
IRS Form 1099, which should be mailed to holders of Trust Preferred Securities
by January 31 following each calendar year. Payments made on and proceeds from
the sale of Trust Preferred Securities may be subject to a "back-up" withholding
tax of 31% unless the holder complies with certain identification requirements.
Any withheld amount generally will be allowed as a credit against the holder's
United States federal income tax, provided the required information is timely
filed with the IRS.
PROPOSED LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation that would, among other
things, treat as equity for United States federal income tax purposes
instruments with a maximum term of more than 20 years that are not shown as
indebtedness on the consolidated balance sheet of the issuer. If the proposed
legislation were enacted, such legislation is not expected to apply to the
Debentures and, in any event, based on statements by Congressional leaders it is
not expected that the legislation would have a retroactive effective date. There
can be no assurances, however, that legislation enacted after the date hereof
will not adversely affect the tax treatment of the Debentures, or that such tax
treatment will not cause a Partnership Tax Event or a Trust Tax Event that may
result in the redemption of the Partnership Preferred Securities and,
consequently, the Trust Preferred Securities.
50
<PAGE> 52
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the Underwriters
named below, and each of the Underwriters, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated is acting as representative (the "Representative"),
has severally agreed to purchase the number of Trust Preferred Securities set
forth opposite its name below. In the Purchase Agreement, the several
Underwriters have agreed, subject to the terms and conditions set forth therein,
to purchase all the Trust Preferred Securities offered hereby if any of the
Trust Preferred Securities are purchased. In the event of default by an
Underwriter, the Purchase Agreement provides that, in certain circumstances, the
purchase commitments of the non-defaulting Underwriters may be increased or the
Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
TRUST PREFERRED
UNDERWRITER SECURITIES
---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..............................................
---------
Total..................................................... 8,000,000
=========
</TABLE>
The Underwriters propose to offer the Trust Preferred Securities, 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 Trust Preferred Security. The
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $ per Trust Preferred Security to certain brokers and dealers.
After the Trust Preferred Securities are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Representative.
In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will ultimately be used to purchase the investment instruments of the
Company and its subsidiaries, the Purchase Agreement provides that the Company
will pay as compensation ("Underwriters' Compensation") to the Underwriters
arranging the investment therein of such proceeds, an amount in immediately
available funds of $ per Trust Preferred Security (or $ in the
aggregate) for the accounts of the several Underwriters; provided that, such
compensation for sales of 10,000 or more Trust Preferred Securities to any
single purchaser will be $ per Trust Preferred Security. Therefore, to
the extent of such sales, the actual amount of Underwriters' Compensation will
be less than the aggregate amount specified in the preceding sentence.
During a period of 30 days from the date of the Prospectus, neither the
Trust nor the Company will, without the prior written consent of the
Underwriters, directly or indirectly, sell, offer to sell, grant any option for
sale of, or otherwise dispose of, any Trust Preferred Securities, any
Partnership Preferred Securities, any preferred stock of the Company or any
security convertible into or exchangeable into or exercisable for Trust
Preferred Securities or Partnership Preferred Securities or any preferred stock
of the Company.
Application has been made to list the Trust Preferred Securities on the New
York Stock Exchange. Trading of the Trust Preferred Securities on the New York
Stock Exchange is expected to commence within a 30-day period after the initial
delivery of the Trust Preferred Securities. The Representative has advised the
Trust that the Underwriters intend to make a market in the Trust Preferred
Securities prior to the
51
<PAGE> 53
commencement of trading on the New York Stock Exchange. The Underwriters will
have no obligation to make a market in the Trust Preferred Securities, however,
and may cease market making activities, if commenced, at any time.
Prior to this offering there has been no public market for the Trust
Preferred Securities. In order to meet one of the requirements for listing the
Trust Preferred Securities on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more Trust Preferred Securities to a minimum of
400 beneficial holders.
The Company, the Trust and the Partnership have agreed to indemnify the
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
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.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Trust, the Partnership and Enron by James V. Derrick, Jr., Esq., Senior Vice
President and General Counsel of Enron. Mr. Derrick owns substantially less than
1% of the outstanding shares of Common Stock of Enron. The federal income tax
consequences of the Trust Preferred Securities have been passed upon by Vinson &
Elkins L.L.P. The validity of the securities offered hereby will be passed upon
on behalf of the Underwriters by Bracewell & Patterson, L.L.P. and Skadden,
Arps, Slate, Meagher & Flom LLP, counsel to the Underwriters. Each of Bracewell
& Patterson, L.L.P. and Skadden, Arps, Slate, Meagher & Flom LLP currently
provides services to Enron and certain of its subsidiaries and affiliates as
outside counsel on matters unrelated to the issuance of the securities offered
hereby.
EXPERTS
The consolidated financial statements and schedules included in Enron's
Annual Report on Form 10-K for the year ended December 31, 1995, incorporated by
reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto. The consolidated financial statements and schedules referred to above
and such reports have been incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to Enron's Annual Report on Form 10-K for
the year ended December 31, 1995, 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.
52
<PAGE> 54
INDEX OF SELECTED DEFINED TERMS
<TABLE>
<S> <C>
1940 Act................................................................................ 10
Affiliate Debentures.................................................................... 37
Affiliate Investment Instruments........................................................ 37
Beneficial Owner........................................................................ 30
Business Day............................................................................ 23
Change in 1940 Act Law.................................................................. 26
Code.................................................................................... 47
Company................................................................................. 1
Commission.............................................................................. 4
Company Debenture....................................................................... 37
Debentures.............................................................................. 1
Declaration............................................................................. 20
Delaware Trustee........................................................................ 20
Depository.............................................................................. 29
DTC..................................................................................... 1
DTC's nominee........................................................................... 29
Earnings................................................................................ 16
Eligible Debt Securities................................................................ 1
Eligible Institution.................................................................... 38
Enron................................................................................... 1
Exchange Act............................................................................ 4
FDIC.................................................................................... 38
Fixed Charges........................................................................... 16
General Partner......................................................................... 1
Global Certificates..................................................................... 30
Global Partnership Security............................................................. 43
Guarantees.............................................................................. 2
Independent Financial Advisor........................................................... 38
Indirect Participants................................................................... 30
Initial Partnership Proceeds............................................................ 37
Investment Affiliate.................................................................... 39
Investment Events of Default............................................................ 38
Investment Guarantees................................................................... 2
Limited Partnership Agreement........................................................... 20
New York Stock Exchange................................................................. 1
non-United States Persons............................................................... 47
Participants............................................................................ 30
Partnership............................................................................. 1
Partnership Act......................................................................... 21
Partnership Enforcement Event........................................................... 36
Partnership Guarantee................................................................... 2
Partnership Guarantee Payments.......................................................... 50
Partnership Investment Company Event.................................................... 40
Partnership Liquidation Distribution.................................................... 41
Partnership Preferred Securities........................................................ 1
Partnership Special Event............................................................... 40
Partnership Tax Event................................................................... 40
Property Account........................................................................ 20
Property Trustee........................................................................ 20
Purchase Agreement...................................................................... 51
Redemption Price........................................................................ 3
</TABLE>
53
<PAGE> 55
<TABLE>
<S> <C>
Registration Statement.................................................................. 4
Regular Trustees........................................................................ 20
Representatives......................................................................... 51
Securities Act.......................................................................... 4
Special Event........................................................................... 13
Special Representative.................................................................. 36
Tax Action.............................................................................. 36
Tax Counsel............................................................................. 47
TOPrS(SM)............................................................................... 1
Trust................................................................................... 1
Trust Act............................................................................... 20
Trust Common Securities................................................................. 1
Trust Dissolution Tax Opinion........................................................... 25
Trust Enforcement Event................................................................. 24
Trust Guarantee......................................................................... 2
Trust Guarantee Payments................................................................ 33
Trust Guarantee Trustee................................................................. 20
Trust Indenture Act..................................................................... 20
Trust Investment Company Event.......................................................... 26
Trust Liquidation....................................................................... 27
Trust Liquidation Distribution.......................................................... 9
Trust Preferred Securities.............................................................. 1
Trust Redemption Tax Opinion............................................................ 25
Trust Securities........................................................................ 1
Trust Special Event..................................................................... 25
Trust Tax Event......................................................................... 25
Trustees................................................................................ 20
United States Person.................................................................... 47
Underwriters' Compensation.............................................................. 51
</TABLE>
54
<PAGE> 56
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE TRUST, THE PARTNERSHIP OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY THE
TRUST PREFERRED SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. 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, THE TRUST OR THE PARTNERSHIP SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Incorporation of Certain Documents by
Reference........................... 5
Prospectus Summary.................... 6
Risk Factors.......................... 12
Use of Proceeds....................... 16
Ratio of Earnings to Fixed Charges.... 16
Capitalization........................ 17
The Company........................... 18
Description of the Trust.............. 20
Description of the Partnership........ 21
Description of the Trust Preferred
Securities.......................... 22
Description of the Trust Guarantee.... 33
Description of the Partnership
Preferred Securities................ 35
Description of the Partnership
Guarantee........................... 44
Certain Federal Income Tax
Considerations...................... 47
Underwriting.......................... 51
Legal Matters......................... 52
Experts............................... 52
Index of Selected Defined Terms....... 53
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
8,000,000
TRUST PREFERRED SECURITIES
ENRON CAPITAL TRUST I
% TRUST ORIGINATED
PREFERRED SECURITIES(SM)
("TOPrS(SM)")
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
ENRON CORP
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
, 1996
(SM)"Trust Originated Preferred Securities" and
"TOPrS" are service marks of Merrill Lynch & Co., Inc.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 57
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.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee...................... $ 60,607
Accounting Fees and Expenses.............................................
Legal Fees and Expenses..................................................
Fees and Expenses of Transfer Agent, Trustee and Depository..............
Blue Sky Fees and Expenses, Including Counsel Fees.......................
Listing Fees.............................................................
Rating Agency Fees.......................................................
Printing Expenses........................................................
Miscellaneous............................................................
----------
Total.......................................................... $
==========
</TABLE>
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 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
II-1
<PAGE> 58
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.
The Declaration of Trust provides that to the fullest extent permitted by
applicable law, the Company shall indemnify and hold harmless each of the
Regular Trustees, any Affiliate of any Regular Trustee, any officer, director,
shareholder, member, partner, employee, representative or agent of any Regular
Trustee, or any officer, director, shareholder, member, partner, employee,
representative or agent of the Trust or its Affiliates (each a "Company
Indemnified Person"), from and against any loss, damage or claim incurred by
such Company Indemnified Person by reason of any act or omission performed or
omitted by such Company Indemnified Person in good faith on behalf of the Trust
and in a manner such Company Indemnified Person reasonably believed to be within
the scope of authority conferred on such Company Indemnified Person by the
Declaration of Trust, except that no Company Indemnified Person shall be
entitled to be indemnified in
II-2
<PAGE> 59
respect of any loss, damage or claim incurred by such Company Indemnified Person
by reason of gross negligence (or, in the case of the Property Trustee,
negligence) or willful misconduct with respect to such acts or omissions. The
Declaration of Trust also provides that, to the fullest extent permitted by
applicable law, expenses (including legal fees) incurred by a Company
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Company prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the Company of an undertaking by or on behalf of the Company Indemnified Person
to repay such amount if it shall be determined that the Company Indemnified
Person is not entitled to be indemnified as authorized in the Declaration of
Trust. The Declaration of Trust further provides that no Company Indemnified
Person shall be liable, responsible or accountable in damages or otherwise to
the Trust or any Covered Person (as defined therein) or for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Company Indemnified Person in good faith on behalf of the Trust and in a manner
such Company Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Company Indemnified Person by the Declaration of
Trust or by law, except that a Company Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Company Indemnified
Person's gross negligence or willful misconduct with respect to acts or
omissions.
The Limited Partnership Agreement provides that to the fullest extent
permitted by applicable law, the Company shall indemnify and hold harmless each
of the General Partner, and any Special Representative, any Affiliate of the
General Partner or any Special Representative, any officer, director,
shareholder, member, partner, employee, representative or agent of the General
Partner or any Special Representative, or any employee or agent of the
Partnership or its Affiliates (each a "Partnership Indemnified Person"), from
and against any loss, damage or claim incurred by such Partnership Indemnified
Person by reason of any act or omission performed or omitted by such Partnership
Indemnified Person in good faith on behalf of the Partnership and in a manner
such Partnership Indemnified Person reasonably believed to be within the scope
of authority conferred on such Partnership Indemnified Person by the Limited
Partnership Agreement, except that no Partnership Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
such Partnership Indemnified Person by reason of gross negligence or willful
misconduct with respect to such acts or omissions. The Limited Partnership
Agreement also provides that, to the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by a Partnership Indemnified Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of an undertaking
by or on behalf of the Partnership Indemnified Person to repay such amount if it
shall be determined that the Partnership Indemnified Person is not entitled to
be indemnified as authorized in the Limited Partnership Agreement. The Limited
Partnership Agreement further provides that no Partnership Indemnified Person
shall be liable, responsible or accountable in damages or otherwise to the
Partnership or any Covered Person (as defined therein) or for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Partnership Indemnified Person in good faith on behalf of the Partnership and in
a manner such Partnership Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Partnership Indemnified Person by
the Limited Partnership Agreement or by law, except that a Partnership
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Partnership Indemnified Person's gross negligence or willful
misconduct with respect to acts or omissions.
The Regular Trustees of the Trust are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Act, which might be incurred by them in such capacities and
against which they cannot be indemnified by the Trust. Any agents, dealers or
underwriters who execute the agreement filed as Exhibit 1 of this Registration
Statement will agree to indemnify the Company's directors and their officers and
the Trustees who signed the Registration Statement against certain liabilities
that may arise under the Securities Act with respect to information furnished to
the Company or the Trust by or on behalf of any such indemnifying party.
II-3
<PAGE> 60
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1* -- Form of Purchase Agreement for the offering of the Preferred
Securities being registered under this Registration Statement.
2 -- Amended and Restated Agreement and Plan of Merger dated as of July
20, 1996 and amended and restated as of September 24, 1996 among
Enron Corp., Enron Oregon Corp. and Portland General Corporation
(Incorporated by reference to Exhibit 2.1 to Enron's Registration
Statement on Form S-4, File No. 333-13791).
3(a) -- Restated Certificate of Incorporation of Enron, as amended
(Incorporated by reference to Exhibit 3.01 to Enron's Form 10-K
Annual Report for 1994, File No. 1-3423).
3(b) -- Bylaws of Enron (Incorporated by reference to Exhibit 3.02 to Enron
Form 10-K Annual Report for 1990, File No. 1-3423).
4(a)* -- Certificate of Trust of Enron Capital Trust I.
4(b)* -- Form of Amended and Restated Declaration of Trust dated ,
1996, of Enron Capital Trust I.
4(c)* -- Certificate of Limited Partnership of Enron Preferred Funding, L. P.
4(d)* -- Form of Amended and Restated Agreement of Limited Partnership of
Enron Preferred Funding, L. P.
4(e)* -- Form of Trust Preferred Securities Guarantee Agreement dated
, 1996 between Enron Corp. and The Chase Manhattan Bank,
as guarantee trustee.
4(f)* -- Form of Partnership Preferred Securities Guarantee Agreement dated
, 1996 between Enron Corp. and The Chase Manhattan Bank,
as guarantee trustee.
4(g)* -- Form of Indenture between Enron Corp. and The Chase Manhattan Bank,
as trustee.
4(h)* -- Form of Affiliate Debenture Guarantee Agreement by Enron Corp. and
The Chase Manhattan Bank, as guarantee trustee.
4(i)* -- Form of Trust Preferred Security (included in Exhibit 4(b) above).
4(j)* -- Form of Partnership Preferred Security (included in Exhibit 4(d)
above).
4(k)* -- Form of Subordinated Debenture (included in Exhibit 4(g) above).
4(l) -- Indenture dated as of November 1, 1985, between Enron and Harris
Trust and Savings Bank (Incorporated by reference to Form T-3
Application for Qualification of Indentures under the Trust Indenture
Act of 1939, File No. 22-14390, filed October 24, 1985).
4(m) -- Form of First Supplemental Indenture between Enron and Harris Trust
and Savings Bank, as Trustee (Incorporated by reference to Exhibit
4(b) to Enron's Registration Statement No. 33-64057, filed November
8, 1995).
4(n) -- Form of Amended and Restated Agreement of Limited Partnership of
Enron Capital Resources, L.P. (Incorporated by reference to Exhibit
3.1 to Enron's Form 8-K dated August 2, 1994).
4(o) -- Form of Payment and Guarantee Agreement dated as of August 3, 1994,
executed by Enron Corp. for the benefit of the holders of Enron
Capital Resources, L.P. 9% Cumulative Preferred Securities, Series A
(Incorporated by reference to Exhibit 4.1 to Enron's Form 8-K dated
August 2, 1994).
</TABLE>
II-4
<PAGE> 61
<TABLE>
<C> <S>
4(p) -- Form of Loan Agreement, dated as of August 3, 1994, between Enron
Corp. and Enron Capital Resources, L.P. (Incorporated by reference to
Exhibit 4.2 to Enron's Form 8-K dated August 2, 1994).
4(q) -- Form of Deposit Agreement between Enron and the Depositary
(Incorporated by reference to Exhibit 4(f) to Enron's Registration
Statement No. 33-50641, filed October 15, 1993).
4(r) -- Articles of Association of Enron Capital LLC (Incorporated by
reference to Exhibit 9 to Enron's Form 8-K dated November 12, 1993).
4(s) -- Form of Payment and Guarantee Agreement of Enron Corp., dated as of
November 15, 1993, in favor of the holders of Enron Capital LLC 8%
Cumulative Guaranteed Monthly Income Preferred Shares (Incorporated
by reference to Exhibit 2 to Enron's Form 8-K dated November 12,
1993).
4(t) -- Form of Loan Agreement, dated as of November 15, 1993, between Enron
Corp. and Enron Capital LLC (Incorporated by reference to Exhibit 3
to Enron's
Form 8-K dated November 12, 1993).
Note: Certain other instruments defining the rights of holders of long
term debt of Enron which relate to indebtedness that does not exceed
10% of the consolidated assets of Enron and its subsidiaries have not
been filed as exhibits to this Registration Statement. Enron hereby
agrees to furnish the Commission with a copy of such instruments upon
request.
5* -- Opinion of James V. Derrick, Jr., Esq., Senior Vice President and
General Counsel of Enron, as to validity of the Trust Preferred
Securities.
8* -- Opinion of Vinson & Elkins L.L.P. as to certain federal income tax
matters.
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)* -- Consent of James V. Derrick, Jr., Esq. (included in Exhibit 5).
23(d)* -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 8).
24 -- Powers of Attorney of certain directors of Enron.
25* -- Form T-1 Statements of Eligibility under the Trust Indenture Act of
1939 of The Chase Manhattan Bank under the Declaration of Trust, the
Trust Preferred Securities Guarantee Agreement, the Investment
Guarantee Agreements and the Indenture relating to the Company
Debenture.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned registrants hereby undertake:
(i) that 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 registrants 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;
(ii) that for the purpose 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
the time shall be deemed to be the initial bona fide offering thereof; and
II-5
<PAGE> 62
(iii) that for purposes of determining any liability under the
Securities Act of 1933, each filing of the Company'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 this registration statement shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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 a
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.
II-6
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Enron Capital
Trust I 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 28th day of
October, 1996.
ENRON CAPITAL TRUST I
(Registrant)
By: /s/ KEITH A. CRANE
----------------------------------
Keith A. Crane
Regular Trustee
Pursuant to the requirements of the Securities Act of 1933, Enron Preferred
Funding, L.P. 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 28th day of October, 1996.
ENRON PREFERRED FUNDING, L.P.
(Registrant)
By: ENRON CORP., as
General Partner
By: /s/ EDMUND P. SEGNER, III
----------------------------------
Edmund P. Segner, III
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, Enron Corp.
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 28th day of
October, 1996.
ENRON CORP.
(Registrant)
By: /s/ EDMUND P. SEGNER, III
----------------------------------
Edmund P. Segner, III
Executive Vice President
II-7
<PAGE> 64
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., on its own behalf and as general partner of
Enron Preferred Funding, L.P., on the 28th day of October, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
KENNETH L. LAY Chairman of the Board, Chief Executive Officer
- --------------------------------------------- and Director (Principal Executive Officer)
(Kenneth L. Lay)
ROBERT H. BUTTS Vice President and Controller (Principal
- --------------------------------------------- Accounting Officer)
(Robert H. Butts)
WILLIAM D. GATHMANN Vice President, Finance and Treasurer
- --------------------------------------------- (Principal Financial Officer)
(William D. Gathmann)
ROBERT A. BELFER* Director
- ---------------------------------------------
(Robert A. Belfer)
NORMAN P. BLAKE, JR.* Director
- ---------------------------------------------
(Norman P. Blake, Jr.)
RONNIE C. CHAN* Director
- ---------------------------------------------
(Ronnie C. Chan)
JOHN H. DUNCAN* Director
- ---------------------------------------------
(John A. Duncan)
JOE H. FOY* Director
- ---------------------------------------------
(Joe H. Foy)
WENDY L. GRAMM* Director
- ---------------------------------------------
(Wendy L. Gramm)
ROBERT L. JAEDICKE* Director
- ---------------------------------------------
(Robert L. Jaedicke)
RICHARD D. KINDER* Director and President and Chief Operating
- --------------------------------------------- Officer
(Richard D. Kinder)
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: /s/ PEGGY B. MENCHACA
- ---------------------------------------------
(Peggy B. Menchaca)
(Attorney-in-fact for persons indicated)
</TABLE>
II-8
<PAGE> 65
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
ITEM NO.
- --------------------
<C> <S>
1* -- Form of Purchase Agreement for the offering of the Preferred
Securities being registered under this Registration Statement.
2 -- Amended and Restated Agreement and Plan of Merger dated as of July
20, 1996 and amended and restated as of September 24, 1996 among
Enron Corp., Enron Oregon Corp. and Portland General Corporation
(Incorporated by reference to Exhibit 2.1 to Enron's Registration
Statement on Form S-4, File No. 333-13791).
3(a) -- Restated Certificate of Incorporation of Enron, as amended
(Incorporated by reference to Exhibit 3.01 to Enron's Form 10-K
Annual Report for 1994, File No. 1-3423).
3(b) -- Bylaws of Enron (Incorporated by reference to Exhibit 3.02 to Enron
Form 10-K Annual Report for 1990, File No. 1-3423).
4(a)* -- Certificate of Trust of Enron Capital Trust I.
4(b)* -- Form of Amended and Restated Declaration of Trust dated ,
1996, of Enron Capital Trust I.
4(c)* -- Certificate of Limited Partnership of Enron Preferred Funding, L. P.
4(d)* -- Form of Amended and Restated Agreement of Limited Partnership of
Enron Preferred Funding, L. P.
4(e)* -- Form of Trust Preferred Securities Guarantee Agreement dated
, 1996 between Enron Corp. and The Chase Manhattan Bank,
as guarantee trustee.
4(f)* -- Form of Partnership Preferred Securities Guarantee Agreement dated
, 1996 between Enron Corp. and The Chase Manhattan Bank,
as guarantee trustee.
4(g)* -- Form of Indenture between Enron Corp. and The Chase Manhattan Bank,
as trustee.
4(h)* -- Form of Affiliate Debenture Guarantee Agreement by Enron Corp. and
The Chase Manhattan Bank, as guarantee trustee.
4(i)* -- Form of Trust Preferred Security (included in Exhibit 4(b) above).
4(j)* -- Form of Partnership Preferred Security (included in Exhibit 4(d)
above).
4(k)* -- Form of Subordinated Debenture (included in Exhibit 4(g) above).
4(l) -- Indenture dated as of November 1, 1985, between Enron and Harris
Trust and Savings Bank (Incorporated by reference to Form T-3
Application for Qualification of Indentures under the Trust Indenture
Act of 1939, File No. 22-14390, filed October 24, 1985).
4(m) -- Form of First Supplemental Indenture between Enron and Harris Trust
and Savings Bank, as Trustee (Incorporated by reference to Exhibit
4(b) to Enron's Registration Statement No. 33-64057, filed November
8, 1995).
4(n) -- Form of Amended and Restated Agreement of Limited Partnership of
Enron Capital Resources, L.P. (Incorporated by reference to Exhibit
3.1 to Enron's Form 8-K dated August 2, 1994).
4(o) -- Form of Payment and Guarantee Agreement dated as of August 3, 1994,
executed by Enron Corp. for the benefit of the holders of Enron
Capital Resources, L.P. 9% Cumulative Preferred Securities, Series A
(Incorporated by reference to Exhibit 4.1 to Enron's Form 8-K dated
August 2, 1994).
4(p) -- Form of Loan Agreement, dated as of August 3, 1994, between Enron
Corp. and Enron Capital Resources, L.P. (Incorporated by reference to
Exhibit 4.2 to Enron's Form 8-K dated August 2, 1994).
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
ITEM NO.
- --------------------
<S> <C>
4(q) -- Form of Deposit Agreement between Enron and the Depositary
(Incorporated by reference to Exhibit 4(f) to Enron's Registration
Statement No. 33-50641, filed October 15, 1993).
4(r) -- Articles of Association of Enron Capital LLC (Incorporated by
reference to Exhibit 9 to Enron's Form 8-K dated November 12, 1993).
4(s) -- Form of Payment and Guarantee Agreement of Enron Corp., dated as of
November 15, 1993, in favor of the holders of Enron Capital LLC 8%
Cumulative Guaranteed Monthly Income Preferred Shares (Incorporated
by reference to Exhibit 2 to Enron's Form 8-K dated November 12,
1993).
4(t) -- Form of Loan Agreement, dated as of November 15, 1993, between Enron
Corp. and Enron Capital LLC (Incorporated by reference to Exhibit 3
to Enron's
Form 8-K dated November 12, 1993).
Note: Certain other instruments defining the rights of holders of long
term debt of Enron which relate to indebtedness that does not exceed
10% of the consolidated assets of Enron and its subsidiaries have not
been filed as exhibits to this Registration Statement. Enron hereby
agrees to furnish the Commission with a copy of such instruments upon
request.
5* -- Opinion of James V. Derrick, Jr., Esq., Senior Vice President and
General Counsel of Enron, as to validity of the Trust Preferred
Securities.
8* -- Opinion of Vinson & Elkins L.L.P. as to certain federal income tax
matters.
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)* -- Consent of James V. Derrick, Jr., Esq. (included in Exhibit 5).
23(d)* -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 8).
24 -- Powers of Attorney of certain directors of Enron.
25* Form T-1 Statements of Eligibility under the Trust Indenture Act of 1939
of The Chase Manhattan Bank under the Declaration of Trust, the Trust
Preferred Securities Guarantee Agreement, the Investment Guarantee
Agreements and the Indenture relating to the Company Debenture.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibit 12
ENRON CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
----------------------------------------------------------------------------
6/30/96 1995 1994 1993 1992 1991
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges
Net income $329,492 $519,694 $453,410 $332,522 $ 328,800 $232,146
Less:
Undistributed earnings and
losses of less than 50% owned
affiliates (6,571) (13,505) (9,453) (20,232) (32,526) (8,890)
Capitalized interest of
nonregulated companies (2,893) (8,315) (9,007) (25,434) (66,401) (36,537)
Add:
Fixed charges (1) 210,703 435,681 487,258 471,278 452,014 454,607
Minority interest 29,565 27,260 29,600 27,605 17,632 7,210
Income tax expense 170,478 310,264 190,081 148,104 88,630 105,859
----------------------------------------------------------------------------
Total $730,774 1,271,079 1,141,889 $933,843 $ 788,149 $754,395
============================================================================
Fixed Charges
Interest expense (1) $194,315 $385,995 $444,768 $436,211 $ 430,406 $425,945
Rental expense representative of
interest factor 16,388 49,686 42,490 35,067 21,608 28,662
----------------------------------------------------------------------------
Total $210,703 $435,681 $487,258 $471,278 $ 452,014 $454,607
============================================================================
Ratio of earnings to fixed charges 3.47 2.92 2.34 1.98 1.74 1.66
============================================================================
</TABLE>
(1) Amounts exclude costs incurred on sales of accounts receivables.
<PAGE> 1
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 16,
1996, included in Enron Corp.'s Current Report on Form 8-K dated March 8, 1996
and Annual Report on Form 10-K for the year ended December 31, 1995, and to all
references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
October 28, 1996
<PAGE> 1
EXHIBIT 23(b)
[DeGOLYER AND MacNAUGHTON LETTERHEAD]
October 28, 1996
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Enron Preferred Funding, L.P.
1400 Smith Street
Houston, Texas 77002
Enron Capital Trust I
1400 Smith Street
Houston, Texas 77002
Gentlemen:
In connection with the Registration Statement on Form S-3 (the Registration
Statement), to be filed with the Securities and Exchange Commission on or about
October 28, 1996, by Enron Corp., Enron Preferred Funding, L.P., and Enron
Capital Trust I, DeGolyer and MacNaughton hereby consents to the incorporation
in said Registration Statement of the references to our firm and to the opinions
delivered to Enron Oil & Gas Company (the Company) regarding our comparison of
estimates prepared by us with those furnished to us by the Company of the proved
oil, condensate, natural gas liquids, and natural gas reserves of certain
selected properties owned by the Company. The opinions are contained in our
letter reports dated January 27, 1994, January 13, 1995, and January 22, 1996,
for estimates, as of January 1, 1994, January 1, 1995, and December 31, 1995,
respectively. The opinions are referred to 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, 1995, 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, 1995. DeGolyer and
MacNaughton also consents to the incorporation by reference in the Registration
Statement of its letter report, dated January 22, 1996, 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, 1995, and to the
<PAGE> 2
reference to it in the section "Experts" in the Prospectus that is a part of
the Registration Statement.
Very truly yours,
DeGOLYER and MacNAUGHTON
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ ROBERT A. BELFER
--------------------
Robert A. Belfer
Director
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ NORMAN P. BLAKE, JR.
------------------------
Norman P. Blake, Jr.
Director
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ RONNIE C. CHAN
------------------
Ronnie C. Chan
Director
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ JOHN H. DUNCAN
------------------
John H. Duncan
Director
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ JOE H. FOY
--------------
Joe H. Foy
Director
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ WENDY L. GRAMM
------------------
Wendy L. Gramm
Director
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ ROBERT K. JAEDICKE
----------------------
Robert K. Jaedicke
Director
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ RICHARD D. KINDER
---------------------------------
Richard D. Kinder
Director
<PAGE> 9
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ KENNETH L. LAY
------------------
Kenneth L. Lay
Director
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ CHARLES A. LeMAISTRE
------------------------
Charles A. LeMaistre
Director
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ JOHN A. URQUHART
--------------------
John A. Urquhart
Director
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ JOHN WAKEHAM
----------------
John Wakeham
Director
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ CHARLS S. WALKER
--------------------
Charls S. Walker
Director
<PAGE> 14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration of Trust Originated Preferred Securities and certain other
Securities related thereto by Enron Corp., a Delaware corporation (the
"Company"), Enron Preferred Funding, L.P., a Delaware limited partnership, and
Enron Capital Trust I, a Delaware trust, the undersigned officer or director of
the Company hereby constitutes and appoints Kenneth L. Lay, William D. Gathmann
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 28th
day of October, 1996.
/s/ HERBERT S. WINOKUR, JR.
---------------------------
Herbert S. Winokur, Jr.
Director
