<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1997
REGISTRATION NOS. 333-13791
333-13791-1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
ENRON OREGON CORP.
(Exact names of registrants as specified in their charters)
<TABLE>
<C> <C> <C>
OREGON 5172 76-0511381
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
ENRON CORP.*
(Exact names of registrants as specified in their charters)
<TABLE>
<C> <C> <C>
DELAWARE 5172 47-0255140
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
1400 SMITH STREET REX R. ROGERS
HOUSTON, TEXAS 77002-7369 ENRON CORP.
(713) 853-6161 1400 SMITH STREET
(Address, including zip code, and telephone HOUSTON, TEXAS 77002-7369
number, including area code, of (713) 853-3069
registrants' principal executive offices) (Name, address, including zip code, and
telephone number, including area
code, of agent for service)
</TABLE>
Copies to:
<TABLE>
<C> <C> <C>
J. MARK METTS STEVEN H. DAVIS SETH A. KAPLAN
VINSON & ELKINS L.L.P. LEBOEUF, LAMB, GREENE & WACHTELL, LIPTON,
2300 FIRST CITY TOWER MACRAE ROSEN & KATZ
1001 FANNIN 125 WEST 55TH STREET 51 WEST 52ND STREET
HOUSTON, TX 77002-6760 NEW YORK, NY 10019-5389 NEW YORK, NY 10019
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this
Post-Effective Amendment.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
THE REGISTRANTS HEREBY AMEND THIS POST-EFFECTIVE AMENDMENT 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
POST-EFFECTIVE AMENDMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE POST-EFFECTIVE AMENDMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
* SEE THE EXPLANATORY NOTE ON THE FOLLOWING PAGE.
<PAGE> 2
EXPLANATORY NOTE: The Registration Statement to which this Post-Effective
Amendment relates has been filed in connection with the securities to be issued
by Enron Oregon Corp., an Oregon corporation ("New Enron"), to shareholders of
Portland General Corporation, an Oregon corporation ("PGC"), in connection with
the PGC Merger described herein. New Enron is a wholly owned subsidiary of Enron
Corp., a Delaware corporation ("Enron"), formed to succeed to the business of
Enron pursuant to the Reincorporation Merger described herein (together with the
PGC Merger, the "Mergers"). The parties have agreed that, under certain
circumstances described herein, the Reincorporation Merger will not be effected,
in which case the securities issued to PGC shareholders in the PGC Merger will
be securities of Enron instead of New Enron. In the event of such a revised
transaction structure, this Registration Statement will constitute a
Registration Statement of Enron with respect to the issuance of such securities.
In no event will securities be issued by both New Enron and Enron under this
Registration Statement.
The Registration Statement to which this Post-Effective Amendment relates
included a Joint Proxy Statement/Prospectus in connection with the respective
special meetings of the shareholders of Enron and PGC, each of which was held on
November 12, 1996. The Mergers received the requisite shareholder approvals at
such meetings. On April 14, 1997, Enron, New Enron and PGC entered into a First
Amendment to Amended and Restated Merger Agreement (the "First Amendment"),
pursuant to which, among other things, the conversion ratio in the PGC Merger
was reduced. Accordingly, the Proxy Statement/Prospectus included in this
Post-Effective Amendment constitutes a prospectus of Enron with respect to the
issuance of shares to the PGC shareholders in the PGC Merger (after giving
effect to the First Amendment) and a proxy statement of PGC for purposes of its
1997 Annual Meeting of Shareholders, at which the amended merger agreement will
be submitted to the PGC shareholders for approval. No additional Enron
shareholder vote is required.
<PAGE> 3
[PORTLAND GENERAL LOGO]
MAY , 1997
Dear Portland General Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Portland General Corporation ("PGC"), which will be held on Tuesday, June 24,
1997, at Portland General Electric Company, Western Region Center, 14655 SW Old
Scholls Ferry Road, Beaverton, Oregon. The meeting will start at 1:30 p.m.,
local time.
At this important meeting, you will be asked to approve the Amended Merger
Agreement with Enron Corp. ("Enron"). Under the Amended Merger Agreement, Enron
will be reincorporated in Oregon and PGC will be merged into the corporation
surviving the reincorporation transaction. In November of last year you voted on
the initial Merger Agreement, which provided for an exchange ratio of one share
of common stock of reincorporated Enron for each PGC share. The Amended Merger
Agreement provides for an exchange ratio of 0.9825 shares of common stock of
reincorporated Enron for each PGC share. The Amended Merger Agreement also
provides for a proposal by PGC and Enron for merger approval by the Oregon
Public Utility Commission ("OPUC") that includes a commitment that customers of
Portland General Electric Company will receive guaranteed merger-related
benefits of $141 million.
The PGC Board of Directors concluded after careful consideration of various
options that approval of the Amended Merger Agreement represents the best
alternative available to PGC shareholders. As a result of the amendment, we were
able to protect most of the value from the original transaction for our
shareholders and also greatly enhance the likelihood of a speedy and successful
resolution by the Oregon Public Utility Commission of Enron's merger
application. The enclosed Proxy Statement/Prospectus describes in detail the
background and reasons for your Board of Directors' approval of the Amended
Merger Agreement.
Your Board of Directors continues to believe that this combination with
Enron represents an outstanding opportunity for PGC shareholders. The combined
enterprise will be well-positioned to take advantage of opportunities in the
rapidly deregulating market for electric power. By combining Enron's collective
marketing and risk management expertise with PGC's physical delivery
capabilities and asset operation experience, the resulting company will have a
strong presence in the wholesale and retail markets.
Based on the capitalization of Enron and PGC on the date of the Amended
Merger Agreement, the common shareholders of PGC would have held approximately
16.5% of the shares of common stock of reincorporated Enron that would have been
outstanding if the merger had been consummated on that date. Your Board of
Directors has received the written opinion of its financial advisor, Goldman,
Sachs & Co., that as of the date of the Proxy Statement/Prospectus and based on
the factors and assumptions described in the opinion, the exchange ratio in the
Amended Merger Agreement is fair to the holders of PGC common stock (other than
Enron or any of its subsidiaries).
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE AMENDED MERGER AGREEMENT, BELIEVES THAT THEY ARE IN THE BEST
INTERESTS OF PGC AND ITS SHAREHOLDERS, AND, BY A
ONE WORLD TRADE CENTER
121 S.W. SALMON STREET, PORTLAND, OR 97204, (503) 464-8820
<PAGE> 4
UNANIMOUS VOTE OF THE DIRECTORS PRESENT, HAS APPROVED THE AMENDED
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED
MERGER AGREEMENT.
Approval of the Amended Merger Agreement by the shareholders of PGC is a
condition to consummation of the transaction. The final decision of the OPUC
with respect to Enron's merger application is currently scheduled for June 4,
1997. All other regulatory approvals and the requisite approval of the
shareholders of Enron have already been obtained. If a favorable OPUC order is
issued, we anticipate that the mergers would be consummated promptly after the
PGC annual meeting of shareholders.
At the meeting, you will also be asked to consider and vote upon nominees
for the Board of Directors of PGC. Such nominees will become directors if for
any reason we are not in a position to consummate the merger with Enron promptly
after the Annual Meeting.
Your vote is important no matter how many shares you hold. Even if you plan
to attend the meeting, we urge you to mark, sign and date the enclosed proxy and
return it promptly. You have the option to revoke it at any time, or to vote
your shares personally on request if you attend the meeting. For the Amended
Merger Agreement to be approved, it must have the support of the majority of the
votes entitled to be cast by the outstanding shares of PGC common stock.
PLEASE RETURN YOUR SIGNED PROXY CARD. IF YOU DO NOT RETURN THE PROXY CARD
AND DO NOT VOTE AT THE MEETING, IT WILL HAVE THE SAME EFFECT AS IF YOU VOTED
AGAINST THE AMENDED MERGER AGREEMENT.
You are urged to review carefully the attached Proxy Statement/Prospectus,
which contains a detailed description of the Amended Merger Agreement.
Promptly after the mergers, a letter of transmittal will be mailed to each
holder of record of shares of PGC common stock. PLEASE DO NOT SEND YOUR PGC
COMMON STOCK CERTIFICATES WITH THE ENCLOSED PROXY. THE LETTER OF TRANSMITTAL TO
BE MAILED TO YOU LATER WILL INCLUDE INSTRUCTIONS AS TO THE PROCEDURE TO BE USED
IN SENDING IN YOUR PGC COMMON STOCK CERTIFICATES.
If you have any questions or need further assistance, please call D.F. King
& Co., who will be assisting PGC with the Annual Meeting, at (800) 549-6650.
Sincerely,
/s/ KEN L. HARRISON
Ken L. Harrison
Chairman, Chief Executive Officer
and President
<PAGE> 5
[PORTLAND GENERAL CORPORATION LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 24, 1997
To the Shareholders of Portland General Corporation:
The Annual Meeting of Shareholders (the "Annual Meeting") of Portland
General Corporation, an Oregon corporation ("PGC"), will be held on Tuesday,
June 24, 1997 at 1:30 p.m., local time, at Portland General Electric Company,
Western Region Center, 14655 SW Old Scholls Ferry Road, Beaverton, Oregon, for
the following purposes:
1. To consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger by and among Enron Corp. ("Enron"),
Portland General Corporation ("PGC") and Enron Oregon Corp. ("New Enron"),
a wholly-owned subsidiary of Enron, dated as of July 20, 1996 and amended
and restated as of September 24, 1996, as amended by the First Amendment
thereto dated as of April 14, 1997 (as so amended, the "Amended Merger
Agreement") providing for the merger (the "PGC Merger") of PGC with and
into New Enron, as a result of which New Enron will be the surviving
corporation and each share of common stock, par value $3.75 per share, of
PGC ("PGC Common Stock") issued and outstanding at the effective time of
the PGC Merger will be converted into 0.9825 shares of the common stock,
without par value, of New Enron ("New Enron Common Stock") (subject to
adjustment in certain circumstances). Pursuant to the Amended Merger
Agreement, immediately prior to the consummation of the PGC Merger, New
Enron will succeed to the business of Enron by means of the merger of Enron
with and into New Enron (the "Reincorporation Merger"). The Amended Merger
Agreement provides that if certain regulatory reforms are enacted, the
structure of the transactions contemplated by the Amended Merger Agreement
will be revised to eliminate the Reincorporation Merger. Information
concerning the Amended Merger Agreement and the transactions contemplated
thereby is set forth in the accompanying Proxy Statement/Prospectus and in
the Amended Merger Agreement, a copy of which is included as Annex A
thereto.
2. To elect three Class II members of the Board of Directors to hold
office until the 2000 Annual Meeting or until their successors are elected
and qualified.
3. To ratify appointment of Arthur Andersen LLP as independent public
accountants for the year ending December 31, 1997.
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
It is anticipated that if the requisite approval of the Oregon Public
Utility Commission is obtained prior to the Annual Meeting, and the Amended
Merger Agreement receives the approval of the PGC shareholders, then the PGC
Merger will be consummated promptly after the Annual Meeting, and it will not be
necessary for the three Class II members of the Board of Directors to assume
office.
The Board of Directors has fixed the close of business on May 9, 1997 as
the record date for the determination of holders of PGC Common Stock entitled to
notice of, and to vote at, the Annual Meeting or any adjournment(s) thereof.
Only holders of record of shares of PGC Common Stock at the close of business on
the record date are entitled to notice of, and to vote at, the Annual Meeting. A
complete list of such
ONE WORLD TRADE CENTER
121 S.W. SALMON STREET, PORTLAND, OR 97204, (503) 464-8820
<PAGE> 6
shareholders will be available for inspection at the offices of PGC in Portland,
Oregon during normal business hours upon written demand by any PGC shareholder
or the shareholder's agent or attorney beginning two business days after the
date of this notice and continuing through the Annual Meeting. Any shareholder
or shareholder's agent or attorney may, upon written notice and subject to
Section 60.774(3) of the Oregon Revised Statutes, copy the list of shareholders
during regular business hours during the inspection period at the shareholder's
expense. If you have shares registered in the name of a brokerage firm or
trustee and plan to attend the Annual Meeting, please obtain from the firm or
trustee a letter, account statement or other evidence of your beneficial
ownership of those shares to facilitate your admittance to the meeting.
Under applicable law, dissenters' rights do not apply to the holders of PGC
Common Stock in connection with the transactions contemplated by the Amended
Merger Agreement.
YOUR VOTE IS IMPORTANT. The affirmative vote of the holders of a majority
of the outstanding shares of PGC Common Stock is required for approval of the
Amended Merger Agreement. Even if you plan to attend the Annual Meeting in
person, please sign and return the enclosed proxy card to ensure that your
shares will be represented at the Annual Meeting if you are unable to attend. If
you do attend the Annual Meeting and wish to vote in person, you may withdraw
your proxy and vote in person.
By Order of the Board of Directors
/s/ ALVIN L. ALEXANDERSON
Alvin L. Alexanderson
Senior Vice President,
General Counsel and Secretary
Portland, Oregon
May , 1997
YOUR VOTE IS IMPORTANT
Your vote is important, regardless of the number of shares you own, and is
necessary to ensure a quorum for the meeting. Therefore, whether you expect to
attend the meeting in person or not, please mark, date, sign, and return your
proxy card promptly in the enclosed postage-paid envelope. This will also help
expedite the counting of votes. If you attend the meeting and prefer to vote in
person, you may revoke your proxy.
ONE WORLD TRADE CENTER
121 S.W. SALMON STREET, PORTLAND, OR 97204, (503) 464-8820
<PAGE> 7
ENRON CORP.
PORTLAND GENERAL CORPORATION
PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus relates to the Amended and Restated
Agreement and Plan of Merger dated as of July 20, 1996 and amended and restated
as of September 24, 1996, as amended by the First Amendment thereto dated as of
April 14, 1997 (as so amended, the "Amended Merger Agreement") among Enron
Corp., a Delaware corporation ("Enron"), Enron Oregon Corp., an Oregon
corporation and wholly-owned subsidiary of Enron ("New Enron" or the "Company"),
and Portland General Corporation, an Oregon corporation ("PGC"). Under the
Amended Merger Agreement, and subject to the terms and conditions thereof, (i)
Enron will be reincorporated as an Oregon corporation by merging with and into
New Enron (the "Reincorporation Merger") and (ii) immediately thereafter, PGC
will merge with and into New Enron, with New Enron being the surviving
corporation (the "PGC Merger" and, together with the Reincorporation Merger, the
"Mergers").
In the PGC Merger, each share of common stock, par value $3.75 per share,
of PGC ("PGC Common Stock") issued and outstanding at the effective time of the
PGC Merger (other than shares owned by PGC, Enron, New Enron or any of their
respective subsidiaries, which will be cancelled) will be converted into 0.9825
shares of common stock, without par value, of New Enron ("New Enron Common
Stock") (subject to adjustment in certain circumstances). In the Reincorporation
Merger, each issued and outstanding share of the common stock, par value $.10
per share, of Enron ("Enron Common Stock") will be converted into one share of
New Enron Common Stock and each issued and outstanding share of any class or
series of preferred stock, second preferred stock or preference stock of Enron
outstanding at the effective time of the Reincorporation Merger (together, the
"Enron Preferred Stock") will be converted into one share of a series of New
Enron preferred stock ("New Enron Preferred Stock") having the same rights,
preferences and limitations as the corresponding class or series of Enron
Preferred Stock.
This Proxy Statement/Prospectus is being furnished to holders of PGC Common
Stock in connection with the solicitation of proxies by the Board of Directors
of PGC for use at the Annual Meeting of Shareholders of PGC (the "Annual
Meeting") to be held on June 24, 1997 to approve the Amended Merger Agreement
and certain other matters. This Proxy Statement/Prospectus and the accompanying
form of proxy are first being mailed to shareholders of PGC on or about May ,
1997.
This Proxy Statement/Prospectus also constitutes a prospectus of New Enron
(or, if the Reincorporation Merger is not effected as described herein, Enron)
with respect to the shares of New Enron Common Stock (or Enron Common Stock) to
be issued in the Mergers in exchange for shares of PGC Common Stock outstanding
at the effective time of the Mergers.
There is currently no established trading market for New Enron Common
Stock, although an application will be made to have the New Enron Common Stock
listed for trading on the New York Stock Exchange ("NYSE") following the
Mergers.
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 PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is May , 1997.
<PAGE> 8
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY ENRON, NEW ENRON OR PGC. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES OFFERED HEREBY SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ENRON, NEW ENRON OR PGC SINCE
THE DATE HEREOF OR THAT THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
CONCERNING ENRON, NEW ENRON AND PGC THAT ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. ENRON, NEW ENRON AND PGC EACH UNDERTAKES TO PROVIDE COPIES OF SUCH
DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE), WITHOUT CHARGE, TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST, IN THE CASE OF ENRON AND NEW ENRON, TO
ENRON CORP., 1400 SMITH STREET, HOUSTON, TEXAS 77002, ATTENTION: PEGGY B.
MENCHACA, CORPORATE SECRETARY, (713) 853-6161, AND, IN THE CASE OF PGC, TO
PORTLAND GENERAL CORPORATION, ONE WORLD TRADE CENTER, 121 S.W. SALMON STREET,
PORTLAND, OREGON 97204, ATTENTION: ALVIN L. ALEXANDERSON, CORPORATE SECRETARY,
(503) 464-8820. IN ORDER TO ENSURE DELIVERY OF DOCUMENTS PRIOR TO THE ANNUAL
MEETING, REQUESTS SHOULD BE RECEIVED BY JUNE 16, 1997.
This Proxy Statement/Prospectus does not cover any resale of the securities
to be received by shareholders upon consummation of the Mergers, and no person
is authorized to make any use of this Proxy Statement/Prospectus in connection
with any such resale.
AVAILABLE INFORMATION
Enron, New Enron and PGC are subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by Enron, New Enron and PGC 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 Commission's Regional Offices at Seven
World Trade Center, Suite 1300, New York, New York 10048 and CitiCorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can be obtained by mail from the Public Reference Section of the
Commission at 450 West Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, reports, proxy statements and other information concerning
Enron or PGC may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, or the Pacific Stock Exchange, Inc., 301 Pine Street, San
Francisco, California 94104 on which exchanges the securities of Enron and PGC
are listed, and such material and other information concerning Enron can also be
inspected at the Chicago Stock Exchange, Inc., 440 South LaSalle Street,
Chicago, Illinois 60605, on which exchange the Enron Common Stock is listed.
Certain of such reports, proxy statements and other information filed by Enron,
New Enron or PGC are also available on the Internet at the Commission's World
Wide Web site at http://www.sec.gov.
New Enron and Enron have filed with the Commission a Registration Statement
on Form S-4 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the New Enron Common Stock (or Enron Common
Stock) and New Enron Convertible Preferred Stock to be issued in the Mergers.
The information contained herein with respect to Enron and its affiliates,
including New Enron, has been provided by Enron, and the information contained
herein with respect to PGC and its affiliates has been provided by PGC. This
Proxy Statement/Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement, copies of
which may be obtained
2
<PAGE> 9
from the Commission as set forth above. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
New Enron intends to furnish its shareholders with annual reports
containing audited financial statements certified by independent accountants
following the end of each fiscal year and, upon request, will furnish copies of
quarterly reports containing unaudited financial statements for the first three
fiscal quarters of each fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Enron with the Commission pursuant to the
Exchange Act are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996;
(b) Current Report on Form 8-K dated March 18, 1997;
(c) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; and
(d) Proxy Statement relating to the May 6, 1997 Enron Annual Meeting
of Stockholders.
In lieu of incorporating the description of Enron's capital stock set
forth in the Exchange Act registration statement relating to such
securities, a description of the New Enron capital stock is included herein
under the heading "Description of New Enron Capital Stock." Except as
otherwise noted herein, the New Enron capital stock will be substantially
similar to the Enron capital stock.
The following documents filed by New Enron with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996; and
(b) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
The following documents filed by PGC with the Commission pursuant to the
Exchange Act are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996, as amended by Form 10-K/A Amendment No. 1;
(b) Current Reports on Form 8-K dated January 16, 1997, January 24,
1997, February 14, 1997, March 12, 1997 and April 11, 1997;
(c) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; and
(d) The description of PGC Common Stock set forth in PGC's
Registration Statement on Form 8-B dated April 7, 1986.
All documents filed by Enron, New Enron or PGC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the date of the Annual Meeting shall be deemed
to be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
3
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION............................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..... 3
SUMMARY............................................. 7
The Companies..................................... 7
The Amended Agreement............................. 7
The Annual Meeting................................ 7
The Mergers and the Amended Merger Agreement...... 8
Comparative Rights of New Enron, Enron and PGC
Shareholders.................................... 13
Market Price Data................................. 14
Selected Historical Financial Information of
Enron........................................... 15
Selected Historical Financial Information of
PGC............................................. 16
Summary Unaudited Pro Forma Combined Financial
Information..................................... 17
Comparative Per Share Data........................ 18
Forward Looking Statements........................ 18
THE COMPANIES....................................... 19
Enron............................................. 19
New Enron......................................... 20
PGC............................................... 20
THE ANNUAL MEETING.................................. 22
Purpose of the Annual Meeting..................... 22
Date, Place and Time; Record Date................. 22
Voting Rights..................................... 22
Proxies........................................... 23
THE MERGERS......................................... 24
General Description of the Mergers................ 24
Background of the Mergers......................... 24
Background of the First Amendment................. 27
Reasons for the Mergers; Recommendations of the
PGC Board of Directors.......................... 32
Opinion of PGC Financial Advisor.................. 34
Interests of Certain Persons in the Mergers....... 40
Federal Income Tax Consequences................... 45
Governmental and Regulatory Approvals............. 46
Restrictions on Resales by PGC Affiliates......... 48
Stock Exchange Listing............................ 49
Accounting Treatment.............................. 49
No Appraisal Rights............................... 49
THE AMENDED MERGER AGREEMENT........................ 50
First Amendment to Original Merger Agreement...... 50
Closing; Effective Times of the Mergers........... 50
Manner and Basis of Converting Shares............. 50
Treatment of Fractional Interests................. 52
Conditions to the Mergers......................... 52
Representations and Warranties.................... 53
Certain Covenants; Conduct of Business Prior to
the Effective Time.............................. 54
No Solicitation................................... 54
Employee Benefit Matters.......................... 55
Stock Options and Incentive Plans................. 56
Certain Post-Merger Matters....................... 56
Amendment......................................... 57
Termination of the Amended Merger Agreement....... 57
Expenses and Termination Fees..................... 58
Indemnification................................... 60
MARKET PRICES AND DIVIDEND INFORMATION.............. 61
UNAUDITED PRO FORMA FINANCIAL INFORMATION........... 62
PRINCIPAL SHAREHOLDERS OF ENRON AND PGC............. 68
</TABLE>
<TABLE>
<CAPTION>
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<S> <C>
Enron............................................. 68
PGC............................................... 69
DESCRIPTION OF NEW ENRON CAPITAL STOCK.............. 70
General........................................... 70
Common Stock...................................... 70
Preferred Stock................................... 70
New Enron Convertible Preferred Stock............. 71
9.142% Preferred Stock............................ 72
Certain Provisions of the New Enron Charter and
Bylaws.......................................... 73
Certain Anti-Takeover Provisions of Oregon Law.... 74
Transfer Agent and Registrar...................... 75
MANAGEMENT AND OTHER INFORMATION.................... 76
COMPARATIVE RIGHTS OF NEW ENRON, ENRON AND PGC
SHAREHOLDERS...................................... 76
Authorized Capital Stock.......................... 76
Board of Directors................................ 77
Removal of Directors.............................. 77
Annual Meeting of Shareholders; Shareholder Action
Without Meeting................................. 77
Shareholder Proposals and Nominations............. 78
Dissenters' Rights................................ 78
Shareholder Approval Not Required for Certain
Mergers......................................... 79
Charter Amendments................................ 79
Dividends and Stock Repurchases................... 79
Fair Price Charter Provisions..................... 80
Business Combination Statutes..................... 80
Control Share Statute............................. 81
Proper Factors for Consideration in Evaluating
Business Combinations........................... 81
Form of Consideration for Capital Stock........... 81
Limitation of Director Liability.................. 81
Indemnification................................... 82
ELECTION OF DIRECTORS............................... 83
Share Ownership of Directors and Executive
Officers........................................ 85
Outside Directors' Compensation................... 86
Human Resources Committee and Committee under the
Long-Term Incentive Plan Report of Executive
Compensation.................................... 87
Compensation Committee Interlocks and Insider
Participation................................... 90
Executive Compensation............................ 90
Five-year Shareholder Return...................... 92
Cumulative Total Shareholder Return............... 92
Executive Annual Retirement Benefit............... 93
Compliance with Section 16(a) of the Exchange
Act............................................. 93
Relationship with Independent Public
Accountants..................................... 94
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS....................................... 95
LEGAL MATTERS....................................... 95
EXPERTS............................................. 95
SHAREHOLDER PROPOSALS............................... 96
ANNEXES:
A -- Amended and Restated Agreement and Plan of
Merger, as amended............................ A-1
B -- Goldman, Sachs & Co. Fairness Opinion......... B-1
C -- Employment Agreement of Ken L. Harrison....... C-1
D -- Employment Agreement of Joseph M. Hirko........ D-1
E -- New Enron Restated Articles of
Incorporation................................. E-1
F -- Form of Series Designation for New Enron
Convertible Preferred Stock................... F-1
G -- Form of Series Designation for New Enron 9.142%
Preferred Stock................................ G-1
</TABLE>
4
<PAGE> 11
PROXY STATEMENT/PROSPECTUS INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
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----
<S> <C>
1935 Act.................................... 24
Accrued Benefits............................ 56
Affiliate Agreements........................ 49
Affiliate Shares............................ 49
Amended Merger Agreement.................... 1
Annual Meeting.............................. 1
Business Transaction........................ 73
Change in Control........................... 94
Change of Control Event..................... 58
Closing..................................... 10
Closing Date................................ 10
Closing Price............................... 52
Code........................................ 12
Combined Estimates.......................... 37
Commission.................................. 2
Company..................................... 1
Continuing Director......................... 73
Converted Shares............................ 51
Core Business............................... 42
Current Agreement........................... 89
Current Participants........................ 55
DGCL........................................ 13
Directors' Insurance Plan................... 44
DDCP........................................ 45
DRP......................................... 23
ECT......................................... 19
EEI......................................... 92
EES......................................... 19
Effective Time.............................. 10
Engagement Letter........................... 39
Enron....................................... 1
Enron 9.142% Preferred Stock................ 70
Enron Business Combination.................. 59
Enron Bylaws................................ 13
Enron Charter............................... 13
Enron Common Stock.......................... 1
Enron Competing Transaction................. 55
Enron Convertible Preferred Stock........... 70
Enron Preferred Stock....................... 1
Enron QF's.................................. 47
EOG......................................... 20
EPMI........................................ 47
EPP......................................... 20
EPS......................................... 36
ESOP........................................ 69
ESPP........................................ 23
Exchange Act................................ 2
Extraordinary Distribution.................. 51
Extraordinary Distribution Value............ 51
FERC........................................ 19
First Amendment............................. 7
First Effective Time........................ 24
Five Year Grant............................. 86
Florida Gas................................. 19
Foundation.................................. 12
FTC......................................... 48
Fully Diluted Management Estimates.......... 37
Gas Composite............................... 38
Gas Transactions............................ 36
Goldman Sachs............................... 9
Goldman Selected Transactions............... 36
HR Committee................................ 84
HSR Act..................................... 48
</TABLE>
<TABLE>
<CAPTION>
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<S> <C>
IBES........................................ 36
Initial Term................................ 41
Involuntary Termination..................... 41
IRS......................................... 45
LTIP........................................ 40
LTIP Committee.............................. 89
Management Primary Estimates................ 37
MDCP........................................ 45
Mergers..................................... 1
Named Officers.............................. 85
New Enron................................... 1
New Enron Bylaws............................ 13
New Enron Charter........................... 13
New Enron Common Stock...................... 1
New Enron Convertible Preferred Stock....... 70
New Enron 9.142% Preferred Stock............ 70
New Enron Preferred Stock................... 1
Nominating Committee........................ 85
Nonqualified Plans.......................... 55
Northern.................................... 19
NQSO........................................ 89
NRC......................................... 48
NRC Order................................... 48
NYSE........................................ 1
OBCA........................................ 8
OEFSC....................................... 47
Officers' Insurance Plan.................... 44
OPUC........................................ 7
OPUC Regulatory Condition................... 53
Original Merger Agreement................... 7
Original Regulatory Condition............... 28
Original Regulatory Plan.................... 28
P/E......................................... 56
PGC......................................... 1
PGC Business Combination.................... 59
PGC Bylaws.................................. 13
PGC Certificate............................. 51
PGC Charter................................. 13
PGC Common Stock............................ 1
PGC Competing Transaction................... 55
PGC Conversion Ratio........................ 8
PGC Employees............................... 55
PGC Merger.................................. 1
PGC Stock Option............................ 56
PGC Stock Plan.............................. 56
PGE......................................... 7
POL......................................... 48
PSDAR....................................... 48
PURPA....................................... 47
QF.......................................... 47
Record Date................................. 8
Registration Statement...................... 2
Reincorporation Merger...................... 1
Related Person.............................. 72
Revised Enron Share Value................... 51
RSP......................................... 23
Second Effective Time....................... 50
Securities Act.............................. 2
Selected Gas Companies...................... 36
Selected Utility Companies.................. 35
SERP........................................ 41
Smith Barney................................ 25
</TABLE>
5
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Stipulation................................. 32
Stock Plan.................................. 40
Strategic Review Committee.................. 25
Success Fee................................. 39
Tax Penalties............................... 42
Termination Date............................ 57
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination for Cause....................... 41
Three Year Grants........................... 86
Transition Year............................. 56
Transwestern................................ 19
Utility Composite........................... 38
Window Periods.............................. 41
</TABLE>
6
<PAGE> 13
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in or
incorporated by reference in this Proxy Statement/Prospectus, including the
Amended Merger Agreement and other documents included as Annexes hereto.
Shareholders are urged to read carefully this Proxy Statement/Prospectus and the
Annexes hereto in their entirety.
THE COMPANIES
Enron and New Enron. Enron, a Delaware corporation organized in 1930, is an
integrated natural gas and electricity 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 36,000 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 electricity and other energy related commitments. New Enron is an
Oregon corporation incorporated in July 1996 for the purpose of succeeding to
the business of Enron pursuant to the Reincorporation Merger. The principal
executive offices of Enron and New Enron are located at 1400 Smith Street,
Houston, Texas 77002, and their telephone number at such offices is (713)
853-6161.
Portland General Corporation. PGC is a public utility holding company whose
principal subsidiary is Portland General Electric Company ("PGE"), an electric
utility located in Portland, Oregon. The principal executive offices of PGC, an
Oregon corporation, are located at One World Trade Center, 121 S.W. Salmon
Street, Portland, Oregon 97204, and PGC's telephone number at such office is
(503) 464-8820.
THE AMENDED MERGER AGREEMENT
The Agreement and Plan of Merger relating to the Mergers was originally
executed as of July 20, 1996 and amended and restated as of September 24, 1996
(in such form, the "Original Merger Agreement"). The Original Merger Agreement
was approved by the shareholders of both Enron and PGC at meetings held November
12, 1996. After such approval, for the reasons discussed under "The
Mergers -- Background of the Mergers," the Original Merger Agreement was amended
by the First Amendment to Amended and Restated Agreement and Plan of Merger (the
"First Amendment"), entered into by the parties as of April 14, 1997. As
described more fully below under "The Amended Merger Agreement -- First
Amendment to Original Merger Agreement," the principal effects of the First
Amendment are (i) to reduce the PGC Conversion Ratio (as hereinafter defined) to
0.9825 shares of New Enron Common Stock for each share of PGC Common Stock (as
compared to one share of New Enron Common Stock for each share of PGC Common
Stock under the Original Merger Agreement) and (ii) to increase the merger
related benefits to be offered to PGE's customers in order to enhance the
likelihood of obtaining approval by the Oregon Public Utility Commission
("OPUC") of the transactions contemplated by the Amended Merger Agreement. See
"The Amended Merger Agreement -- Conditions to the Mergers." Approval of the
Amended Merger Agreement by PGC shareholders (but not Enron shareholders) is
required as a result of the First Amendment.
THE ANNUAL MEETING
GENERAL
The Annual Meeting will be held on Tuesday, June 24, 1997, at Portland
General Electric Company, Western Region Center, 14655 SW Old Scholls Ferry
Road, Beaverton, Oregon, commencing at 1:30 p.m. local time. The purpose of the
Annual Meeting is to consider and vote upon (i) a proposal to approve the
Amended Merger Agreement, (ii) the election of three Class II members of the
Board of Directors of PGC, (iii) the ratification of the appointment of Arthur
Andersen LLP as PGC's independent public accountants
7
<PAGE> 14
for the year ending December 31, 1997, and (iv) such other matters as may
properly be brought before the Annual Meeting. Only holders of record of shares
of PGC Common Stock at the close of business on May 9, 1997 (the "Record Date")
are entitled to notice of, and to vote at, the Annual Meeting. On the Record
Date, there were 51,406,352 shares of PGC Common Stock outstanding. Each share
of PGC Common Stock will be entitled to one vote on each matter to be acted upon
at the Annual Meeting.
QUORUM; VOTE REQUIRED
The presence, in person or by proxy, at the Annual Meeting of the holders
of a majority of the shares of PGC Common Stock outstanding and entitled to vote
is necessary to constitute a quorum at the meeting. The affirmative vote of the
holders of a majority of the shares of PGC Common Stock outstanding and entitled
to vote thereon at the Annual Meeting is required under the Oregon Business
Corporation Act (the "OBCA") to approve the Amended Merger Agreement. Under
Oregon law, a favorable vote by a plurality of shares of PGC Common Stock voting
on the directors is required to elect the directors, and a favorable vote by a
majority of shares of PGC Common Stock voting is required to ratify the
appointment of the independent public accountants.
SECURITY OWNERSHIP OF MANAGEMENT
As of the Record Date, the directors and executive officers of PGC and
their affiliates owned approximately 0.8% of the outstanding shares of PGC
Common Stock entitled to vote at the Annual Meeting. The affirmative vote of the
holders of a majority of the shares of PGC Common Stock outstanding and entitled
to vote thereon at the Annual Meeting is required under the OBCA to approve the
Amended Merger Agreement. Each of the directors and executive officers of PGC
has advised PGC that he or she plans to vote or to direct the vote of all such
shares of PGC Common Stock entitled to vote thereon in favor of approval of the
Amended Merger Agreement.
THE MERGERS AND THE AMENDED MERGER AGREEMENT
GENERAL
The PGC Merger. Immediately following the Reincorporation Merger described
below, the parties will consummate the PGC Merger, in which PGC will merge with
and into New Enron with New Enron continuing in existence as the surviving
corporation. In the PGC Merger, each share of PGC Common Stock issued and
outstanding at the effective time of the PGC Merger (other than shares owned by
PGC, Enron, New Enron or any of their respective subsidiaries, which will be
cancelled) will be converted into 0.9825 shares of New Enron Common Stock,
subject to adjustment in certain circumstances (the "PGC Conversion Ratio"). See
"The Amended Merger Agreement -- Manner and Basis of Converting Shares."
The Reincorporation Merger. In the Reincorporation Merger, Enron will merge
with and into New Enron, with New Enron continuing in existence as the surviving
corporation. In connection with the Reincorporation Merger, the name of New
Enron will be changed to "Enron Corp." Each share of Enron Common Stock issued
and outstanding at the effective time of the Reincorporation Merger will be
converted into one share of New Enron Common Stock and each share of any class
or series of Enron Preferred Stock issued and outstanding at the effective time
of the Reincorporation Merger will be converted into one share of a series of
New Enron Preferred Stock having the same rights, preferences and limitations as
the corresponding class or series of Enron Preferred Stock.
Alternative Transaction Structure in the Event of Regulatory Reform. The
Merger Agreement provides that if, prior to the Effective Time, certain
regulatory reforms are enacted, the parties will revise the structure of the
transactions contemplated by the Amended Merger Agreement so that the
Reincorporation Merger will not occur and PGC will merge directly into Enron.
See "The Mergers -- General Description of the Mergers -- Alternative
Transaction Structure in the Event of Regulatory Reform."
8
<PAGE> 15
BACKGROUND
For a description of the background of the Mergers, including the
circumstances leading up to the execution of the First Amendment, see "The
Mergers -- Background of the Mergers."
REASONS FOR THE MERGERS
Enron and PGC believe that the combined company and its shareholders can
benefit significantly in long-term earnings and cash flow as a result of the
expected strategic benefits resulting from the Mergers, including the following:
- At the wholesale marketing, trading and supply level, the combined entity
will be well positioned to be the provider of choice in energy products,
principally natural gas and electricity. By combining Enron's marketing
and risk management expertise with PGC's physical delivery capabilities
and asset operation experience, the combined entity will have a strong
presence in the wholesale and retail energy markets, both domestically
and internationally.
- At the domestic retail level, the combined entity will strive to be the
leading national brand-name total energy provider. By combining the
companies' respective retail marketing expertise in natural gas,
electricity and energy management, the combined entity will be able to
provide a full range of energy products and specialty services to
commercial, industrial and residential customers. By building on PGC's
experience in automated metering, billing, auditing and other end-user
customer service functions, the combined entity will be able to offer
reliable, low-cost energy and energy management services to customers
nationwide. In addition, PGC has several non-regulated service and
infrastructure investments that both companies believe have significant
growth potential.
- The combined entity will also aim to be the most innovative and efficient
manager of electric generation, transmission and distribution assets in
the rapidly changing worldwide marketplace for power. By leveraging the
operating and engineering expertise of PGC with Enron's worldwide asset
base and experience, the combined entity will be able to expand domestic
and international activities across multiple energy sources, including
natural gas, oil, coal and hydro power.
- For more than a decade, Enron has participated in the fully competitive
market for natural gas. More recently, Enron has participated in the
increasingly competitive market for electricity. Enron's competitive
experience will help the combined entity successfully compete in the
electricity marketplace.
As more fully described in "The Mergers -- Reasons for the Mergers;
Recommendation of the PGC Board of Directors," Enron and PGC also believe that
the Mergers will benefit their respective customers and employees.
OPINION OF PGC FINANCIAL ADVISOR
Goldman, Sachs & Co. ("Goldman Sachs") has delivered its written opinion as
of April 14, 1997, which opinion has been confirmed in writing as of the date
hereof, that as of such dates and based upon the factors and assumptions
described in such opinion, the PGC Conversion Ratio pursuant to the Amended
Merger Agreement is fair to the holders of PGC Common Stock (other than Enron or
any of its subsidiaries). For information regarding the opinion of Goldman
Sachs, including the assumptions made, matters considered and limits of such
opinion, see "The Mergers -- Opinion of PGC Financial Advisor" and the full text
of the opinion dated the date hereof, which is included as Annex B hereto.
RECOMMENDATION OF THE PGC BOARD OF DIRECTORS
The Board of Directors of PGC has determined that the transactions
contemplated by the Amended Merger Agreement are fair to, and in the best
interests of, PGC and its shareholders and recommends that the holders of PGC
Common Stock vote FOR approval of the Amended Merger Agreement at the Annual
Meeting. See "The Mergers -- Background of the Mergers" and "-- Reasons for the
Mergers; Recommenda-
9
<PAGE> 16
tion of the PGC Board of Directors." In considering the recommendation of the
PGC Board with respect to the Amended Merger Agreement, PGC shareholders should
be aware that certain officers and directors of PGC have certain interests
respecting the Mergers, apart from their interests as shareholders of PGC. See
"The Mergers -- Interests of Certain Persons in the Mergers."
REGULATORY APPROVALS
Upon completion of the PGC Merger, New Enron will be the owner of the
common stock of PGE, the electric utility subsidiary of PGC. PGE is subject to
the jurisdiction of the OPUC with respect to its electric utility operations.
The approval of the OPUC is required for any transaction in which a person
acquires the power to exercise any substantial influence over the policies and
actions of a public utility subject to its jurisdiction. On August 30, 1996,
Enron filed an application with the OPUC seeking approval of the PGC Merger.
As part of the OPUC approval process, the OPUC staff, intervenors and
public interest groups have raised a number of issues that they proposed to
address by making the OPUC's merger approval subject to certain conditions. The
First Amendment includes a revised regulatory plan that outlines the terms that
Enron and PGC agreed would be offered in connection with Enron's application for
OPUC approval, including guaranteed merger-related benefits to PGE's customers
of $141 million. These terms are intended to address the issues that have been
identified through the merger approval process and provide benefits sufficient
to meet the applicable merger approval standard. Following the execution of the
First Amendment, the OPUC staff and intervenors requested changes and additions
to the conditions included in the First Amendment. As a result of the
negotiation of these matters, the OPUC Staff, Enron, PGC and certain intervenors
reached agreement on a revised set of conditions and signed a stipulation
setting forth the parties' agreement to recommend that the OPUC adopt the
stipulation (and the conditions contained therein) and approve the PGC Merger.
The final decision of the OPUC with respect to Enron's merger application is
currently scheduled for June 4, 1997.
All regulatory approvals required for consummation of the Mergers have been
obtained, except for approval by the OPUC. See "The Mergers -- Governmental and
Regulatory Approvals" for a more complete description of these and other
regulatory matters.
CLOSING; EFFECTIVE TIME OF THE MERGERS
The closing of the transactions contemplated by the Amended Merger
Agreement (the "Closing") and the effectiveness of the Mergers will occur as
soon as practicable after satisfaction of the various conditions to the Mergers
(the date of such closing being referred to herein as the "Closing Date"). The
Mergers will become effective upon the filing of required merger documents with
the Secretaries of State of Delaware and Oregon, or at such time as may be
agreed by the parties and specified in such filings. The Reincorporation Merger
will become effective prior to the PGC Merger. The time at which the PGC Merger
becomes effective is referred to herein as the "Effective Time."
In addition to being subject to PGC shareholder approval of the Amended
Merger Agreement, the Mergers are subject to approval by the OPUC consistent
with the proposed regulatory plan. As described above, the final decision of the
OPUC with respect to Enron's merger application is currently scheduled for June
4, 1997. All other regulatory approvals and the requisite approval of the
shareholders of Enron have already been obtained. If a favorable OPUC order is
issued prior to the Annual Meeting, the parties anticipate that the Mergers
would be consummated promptly after PGC shareholder approval at the Annual
Meeting. There can be no assurance that the OPUC will issue a favorable order or
that any order will be issued prior to the Annual Meeting. Either Enron or PGC
may terminate the Amended Merger Agreement if the required regulatory approvals
are not received and finalized on or before July 20, 1997, subject to a
six-month extension by either party if that party believes there is a reasonable
probability that the regulatory approvals will be obtained on or prior to the
end of such six-month extension and certain other conditions are met. See "The
Amended Merger Agreement -- Conditions to the Mergers" and "-- Termination of
the Amended Merger Agreement."
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<PAGE> 17
NO SOLICITATION
Until the Effective Time, PGC and Enron have agreed not to, and to cause
their affiliates and representatives not to, solicit proposals from or provide
information to or engage in discussions with third parties with respect to
specified business combinations or similar transactions (which, in the case of
Enron, include only transactions that by their terms would prevent the
consummation of the transactions contemplated by the Amended Merger Agreement or
be conditioned on termination of the Amended Merger Agreement). The foregoing
limitations are subject to exceptions that, prior to the Annual Meeting only,
would permit PGC to engage in discussions with third parties regarding competing
transactions if necessary to comply with the fiduciary duties of its Board of
Directors. See "The Amended Merger Agreement -- No Solicitation."
CONDITIONS TO THE CONSUMMATION OF THE MERGERS
The respective obligations of Enron, New Enron and PGC to consummate the
Mergers are subject to the satisfaction of certain conditions, including
approval of the Amended Merger Agreement by the shareholders of PGC at the
Annual Meeting, the absence of judgments or injunctions prohibiting the Mergers,
the listing of the New Enron Common Stock on the NYSE and the receipt of certain
required regulatory approvals. See "The Mergers -- Governmental and Regulatory
Approvals."
In addition, the obligations of Enron and New Enron to consummate the
Mergers remain subject to the satisfaction of certain conditions, including the
performance by PGC of its obligations under the Amended Merger Agreement and the
representations and warranties of PGC being true at the Closing Date (in each
case subject to certain materiality exceptions), the receipt by PGC of certain
required third party consents to the Mergers and the satisfactory approval (as
specified in the Amended Merger Agreement) of regulatory plans filed with the
OPUC in connection with the Mergers and certain other matters. See "The Amended
Merger Agreement -- Conditions to the Mergers" and "The Mergers -- Governmental
and Regulatory Approvals."
The obligation of PGC to consummate the PGC Merger remains subject to the
satisfaction of certain conditions, including the performance by Enron of its
obligations under the Amended Merger Agreement and the representations and
warranties of Enron being true at the Closing Date (in each case subject to
certain materiality exceptions), the receipt by Enron of certain required third
party consents to the Mergers and consummation of the Reincorporation Merger.
See "The Amended Merger Agreement -- Conditions to the Mergers."
TERMINATION OF THE AMENDED MERGER AGREEMENT
Under specified circumstances, the Amended Merger Agreement may be
terminated prior to the Closing Date, before or after approval of the Amended
Merger Agreement by the shareholders of PGC at the Annual Meeting. See "The
Amended Merger Agreement -- Termination of the Amended Merger Agreement."
TERMINATION FEES
If the Amended Merger Agreement is terminated for specified reasons
involving a competing business transaction relating to PGC, PGC would be
required to pay Enron a termination fee of $60 million, and if the Amended
Merger Agreement is terminated for specified reasons involving a change of
control of Enron or a competing business transaction relating to Enron, Enron
would be required to pay PGC a termination fee of $150 million. See "The Amended
Merger Agreement -- Expenses and Termination Fees."
EMPLOYEE BENEFIT MATTERS; STOCK INCENTIVE PLANS
Subject to certain limitations, the Amended Merger Agreement provides that,
for two years following the Effective Time, New Enron will provide PGC Employees
(as defined in the Amended Merger Agreement), other than employees represented
by labor unions, with benefits that are not materially less favorable in the
aggregate than those provided to such individuals under the PGC benefit plans
prior to the Effective Time and
11
<PAGE> 18
will also cause certain benefit and severance plans of PGC to be maintained. See
"The Amended Merger Agreement -- Employee Benefit Matters" and "-- Stock Options
and Incentive Plans" for a description of certain other agreements contained in
the Amended Merger Agreement with respect to employee benefit matters.
BOARD OF DIRECTORS AND MANAGEMENT OF NEW ENRON FOLLOWING THE MERGERS
The parties have agreed that the Board of Directors of New Enron after the
Mergers will be comprised of no more than 17 members, of whom three will be
designated by PGC. One of the three PGC designees will be Ken L. Harrison,
currently the Chairman of the Board, Chief Executive Officer and President of
PGC. Enron intends that the remaining members of the New Enron Board of
Directors will be comprised of members of the Enron Board of Directors at the
Effective Time.
The current management of Enron will comprise the management of New Enron
after the Mergers, except that, pursuant to the Amended Merger Agreement, Mr.
Harrison will serve as Vice Chairman of the Board of Directors of New Enron and
Chairman of the Board and Chief Executive Officer of PGE, and Joseph M. Hirko,
currently Senior Vice President and Chief Financial Officer of PGC, will hold
the position of Senior Vice President of New Enron. Pursuant to the Amended
Merger Agreement, Enron has entered into employment agreements with each of
Messrs. Harrison and Hirko, which will become effective upon consummation of the
Mergers and which are included as Annexes C and D hereto, respectively. See "The
Mergers -- Interests of Certain Persons in the Mergers."
CERTAIN POST-MERGER OPERATIONS
After the Mergers, New Enron will continue to be based in Houston, Texas.
Pursuant to the Amended Merger Agreement, PGE will maintain its principal
corporate offices in Portland, Oregon. The Amended Merger Agreement also
provides that the current officers of PGE will be entitled to maintain their
current titles and responsibilities as officers of PGE unless and until
otherwise determined by the Board of Directors of New Enron. Following the
Effective Time, New Enron will designate a number of directors of PGE consisting
of directors of Enron and/or employees of Enron or any subsidiary thereof,
including Ken L. Harrison and Joseph M. Hirko. In addition, PGC will have the
right to designate no more than seven non-voting advisory directors to the PGE
Board. The Amended Merger Agreement provides that immediately prior to the
Effective Time, each of Enron and PGC will cause contributions of $10 million to
be made to the assets of the PGE Foundation (the "Foundation"), and the assets
of the Foundation will be used for charitable purposes in accordance with the
constituent documents of the Foundation in the service area of PGE. The current
directors of the Foundation, or persons nominated by a majority of such
directors or nominated by their successors in accordance with this provision,
will be the directors of the Foundation. See "The Amended Merger
Agreement -- Certain Post-Merger Matters."
FEDERAL INCOME TAX CONSEQUENCES
The Mergers are intended to qualify as reorganizations under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"). Assuming the
Mergers so qualify, no gain or loss will be recognized for federal income tax
purposes by Enron, New Enron or PGC as a result of the Mergers, and holders of
PGC Common Stock will not recognize any gain or loss as a result of the exchange
of such shares for New Enron Common Stock pursuant to the Mergers (except to the
extent of cash received, if any, in lieu of fractional shares). For a discussion
of these and other federal income tax considerations in connection with the
Mergers, see "The Mergers -- Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The PGC Merger will be accounted for as a "purchase" of PGC for financial
reporting purposes. See "The Mergers -- Accounting Treatment."
NO APPRAISAL RIGHTS
No holder of PGC Common Stock will be entitled to any dissenters' or
appraisal rights in connection with the transactions contemplated by the Amended
Merger Agreement.
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<PAGE> 19
EXCHANGE OF STOCK CERTIFICATES
Promptly after consummation of the Mergers, a letter of transmittal will be
sent to each holder of record of PGC Common Stock immediately before the
Effective Time for use in exchanging certificates formerly representing shares
of PGC Common Stock for certificates representing shares of New Enron Common
Stock. Certificates should not be surrendered by the holders of PGC Common Stock
until they have received the letter of transmittal from New Enron. See "The
Amended Merger Agreement -- Manner and Basis of Converting Shares."
NO FRACTIONAL SHARES
No fractional shares of New Enron Common Stock will be issued to any holder
of PGC Common Stock in connection with the PGC Merger. Instead, holders of PGC
Common Stock who would otherwise be entitled to a fractional share of New Enron
Common Stock in the PGC Merger will be entitled to receive a cash payment in
lieu of such fraction, determined in accordance with the Amended Merger
Agreement. See "The Amended Merger Agreement -- Treatment of Fractional
Interests."
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Certain members of PGC's Board of Directors and management have personal
interests with respect to the PGC Merger separate from their interests as
holders of PGC Common Stock, including the following:
Directorships. The Amended Merger Agreement provides that PGC will
designate, prior to the Effective Time, three persons to the New Enron Board of
Directors. One of these three designees will be Ken L. Harrison, current
Chairman, Chief Executive Officer and President of PGC and PGE.
Employment Agreements. Mr. Harrison, Mr. Hirko and several senior
executives of PGC and PGE have entered into employment agreements with PGE and
Enron which will become effective and supersede their existing employment
agreements with PGC or PGE at the Effective Time. As a result of PGC shareholder
approval of the Original Merger Agreement, pursuant to the terms of their
existing employment agreements these executives will be entitled to certain
benefits if the Mergers are not consummated and their superseding employment
agreements do not become effective.
Vesting of Certain Benefits for PGC Directors and Executive Officers. Upon
PGC shareholder approval of the Original Merger Agreement, the shares of
restricted PGC Common Stock and options to purchase shares of PGC Common Stock
held by certain directors and executive officers vested pursuant to the terms of
the plans under which they were granted.
See "The Mergers -- Interests of Certain Persons in the Mergers."
COMPARATIVE RIGHTS OF NEW ENRON AND PGC SHAREHOLDERS
Rights of shareholders of PGC are currently governed by the OBCA, the
Articles of Incorporation, as amended, of PGC (the "PGC Charter") and PGC's
Bylaws, as amended (the "PGC Bylaws"). Upon consummation of the PGC Merger, PGC
shareholders will become shareholders of New Enron and their rights as
shareholders of New Enron will be governed by the Articles of Incorporation of
New Enron (the "New Enron Charter") and New Enron's Bylaws (the "New Enron
Bylaws"). There will be a number of differences between the rights of PGC
shareholders and the rights of New Enron shareholders.
If the structure of the transaction contemplated by the Amended Merger
Agreement is altered to eliminate the Reincorporation Merger as described under
"The Mergers -- General Description of the Mergers -- Alternative Transaction
Structure in the Event of Regulatory Reform," and PGC merges directly into
Enron, then the rights of PGC shareholders would be governed by the Delaware
General Corporation Law ("DGCL"), Enron's Restated Certificate of Incorporation
(the "Enron Charter") and Enron's Bylaws (the "Enron Bylaws"). The rights of
Enron and PGC shareholders differ in a number of respects. See "Comparative
Rights of New Enron, Enron and PGC Shareholders" and "Description of New Enron
Capital Stock."
13
<PAGE> 20
MARKET PRICE DATA
Enron Common Stock is traded on the NYSE and on the Chicago, Pacific,
London and Frankfurt exchanges under the symbol "ENE," and the PGC Common Stock
is traded on the NYSE and the Pacific Stock Exchange under the symbol "PGN." The
following table sets forth the closing sales prices per share of PGC Common
Stock and Enron Common Stock as reported on the NYSE on July 19, 1996, the last
business day prior to announcement by the parties of the Amended Merger
Agreement, on April 11, 1997, the last business day prior to announcement of the
First Amendment, and on May 15, 1997, the last trading day for which prices were
available prior to the date of this Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
MARKET PRICE PER SHARE
-------------------------------
PGC ENRON
DATE COMMON STOCK COMMON STOCK
---- ------------ ---------------
<S> <C> <C>
July 19, 1996............................................... $28.125 $41.750
April 11, 1997.............................................. $32.000 $35.875
May 15, 1997................................................ $39.000 $40.500
</TABLE>
An application will be made to have the New Enron Common Stock listed for
trading on the NYSE and the Chicago, Pacific, London and Frankfurt exchanges
after the Mergers.
14
<PAGE> 21
SELECTED 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 reflect
all adjustments that, in the opinion of management of Enron, are necessary to
present fairly such information for the interim periods. The results of
operations for the three-month periods are not necessarily indicative of the
results expected for a full year or any other interim period.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues..................................... $ 6,415 $ 7,985 $ 8,984 $ 9,189 $13,289 $ 3,054 $5,344
Costs and expenses
Cost of gas and other products sold........ 4,222 5,567 6,517 6,733 10,478 2,341 4,632
Operating expenses......................... 1,037 1,146 1,124 1,218 1,421 297 273
Oil and gas exploration expenses........... 59 76 84 79 89 19 22
Depreciation, depletion and amortization... 376 458 441 432 474 120 124
Taxes, other than income taxes............. 101 108 102 109 137 37 36
------- ------- ------- ------- ------- ------- ------
5,795 7,355 8,268 8,571 12,599 2,814 5,087
------- ------- ------- ------- ------- ------- ------
Operating income............................. 620 630 716 618 690 240 257
Other income and deductions
Equity in earnings of unconsolidated
subsidiaries............................. 56 73 112 86 215 31 41
Other, net................................. 91 95 116 461 333 144 131
------- ------- ------- ------- ------- ------- ------
Income before interest, minority interests
and income taxes........................... 767 798 944 1,165 1,238 415 429
Interest and related charges, net............ 330 300 273 284 274 69 70
Dividends on preferred stock of
subsidiaries............................... -- 2 20 32 34 8 15
Minority interests........................... 18 28 31 44 75 15 19
Income taxes................................. 90 135 167 285 271 110 103
------- ------- ------- ------- ------- ------- ------
Income before extraordinary items............ 329 333 453 520 584 213 222
Extraordinary items.......................... (23)(1) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------
Net income................................... 306 333(2) 453 520 584 213 222
Preferred stock dividends.................... 22 17 15 16 16 4 4
------- ------- ------- ------- ------- ------- ------
Earnings on common stock..................... $ 284 $ 316 $ 438 $ 504 $ 568 $ 209 $ 218
======= ======= ======= ======= ======= ======= ======
Primary earnings per common share............ $ 1.29 $ 1.32 $ 1.80 $ 2.07 $ 2.31 $ 0.86 $ 0.88
======= ======= ======= ======= ======= ======= ======
Fully diluted earnings per common share...... $ 1.21 $ 1.25 $ 1.70 $ 1.94 $ 2.16 $ 0.80 $ 0.81
======= ======= ======= ======= ======= ======= ======
Cash dividends per common share.............. $ 0.66 $ 0.71 $ 0.76 $ 0.81 $ 0.86 $0.2125 $0.225
======= ======= ======= ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets........................................ $10,312 $11,504 $11,966 $13,239 $16,137 $15,148
Long-term debt (including amounts reclassified from
short-term debt).................................. 2,459 2,661 2,805 3,065 3,349 3,564
Company-obligated preferred stock of subsidiaries... -- 214 377 377 592 764
Minority interests.................................. 179 196 290 549 755 754
Shareholders' equity................................ 2,518 2,623 2,880 3,165 3,723 3,914
Book value per common share......................... 9.61 10.01 10.94 12.01 13.81 14.48
</TABLE>
- ---------------
(1) Relates to an early extinguishment of debt.
(2) 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.
15
<PAGE> 22
SELECTED HISTORICAL FINANCIAL INFORMATION OF PGC
The financial information set forth below has been derived from the audited
and unaudited consolidated financial statements of PGC. The information should
be read in connection with, and is qualified in its entirety by reference to,
PGC's financial statements and notes thereto incorporated by reference herein.
See "Incorporation of Certain Documents by Reference." The interim data reflect
all adjustments that, in the opinion of management of PGC, are necessary to
present fairly such information for the interim periods. The results of
operations for the three-month periods are not necessarily indicative of the
results expected for a full year or any other interim period.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
----- ----- ----- ----- ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues...................... $ 883 $ 947 $ 959 $ 984 $1,112 $ 301 $ 368
Operating expenses
Purchased power and fuel.............. 222 312 347 294 317 80 157
Production and distribution........... 94 74 62 64 82 22 20
Maintenance and repairs............... 70 55 47 48 55 13 8
Administrative and other.............. 112 100 101 108 116 28 25
Depreciation and amortization......... 99 122 124 134 155 38 39
Taxes, other than income taxes........ 55 56 52 51 52 15 15
----- ----- ----- ----- ------ ----- -----
652 719 733 699 777 196 264
----- ----- ----- ----- ------ ----- -----
Operating income before income taxes.... 231 228 226 285 335 105 104
Income taxes............................ 67 70 72 89 110 37 40
----- ----- ----- ----- ------ ----- -----
Net operating income.................... 164 158 154 196 225 68 64
Other income (deductions)
Regulatory disallowance -- net of
income taxes of $25................ -- -- -- (50) -- -- --
Interest expense...................... (74) (71) (71) (79) (79) (20) (19)
Allowance for funds used during
construction....................... 3 1 4 11 2 -- --
Preferred dividend
requirement -- PGE................. (13) (12) (11) (10) (3) (1) (1)
Other -- net of income taxes.......... 10 13 17 13 (15) 2 15
----- ----- ----- ----- ------ ----- -----
Income from continuing operations....... 90 89 93 81 130 49 59
Discontinued operations................. -- -- 7(1) -- -- -- --
----- ----- ----- ----- ------ ----- -----
Net income.............................. $ 90 $ 89 $ 100 $ 81 $ 130 $ 49 $ 59
===== ===== ===== ===== ====== ===== =====
Primary earnings per common share from
continuing operations................. $1.93 $1.88 $1.86 $1.60 $ 2.53 $0.97 $1.16
Primary earnings per common share from
discontinued operations............... -- -- 0.13 -- -- -- --
----- ----- ----- ----- ------ ----- -----
Primary earnings per common share....... $1.93 $1.88 $1.99 $1.60 $ 2.53 $0.97 $1.16
===== ===== ===== ===== ====== ===== =====
Cash dividends per common share......... $1.20 $1.20 $1.20 $1.20 $ 1.28 $0.32 $0.32
===== ===== ===== ===== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------ MARCH 31,
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................. $3,141 $3,449 $3,559 $3,448 $3,583 $3,621
Short-term debt.......................... 141 159 149 170 92 73
Long-term debt and preferred stock of
subsidiary due within one year......... 48 52 82 105 93 69
Long-term debt........................... 856 843 836 891 933 931
Company-obligated preferred stock of
subsidiary............................. 152 140 120 40 30 30
Shareholders' equity..................... 713 760 858 893 971 1,017
Book value per common share.............. 15.65 16.35 17.27 17.67 18.99 19.83
</TABLE>
- ---------------
(1) Gain on disposal of real estate operations.
16
<PAGE> 23
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma selected combined financial information
presents the combined financial data of Enron and PGC for the year ended
December 31, 1996 and as of and for the three months ended March 31, 1997. The
unaudited pro forma combined income statement data give effect to the Mergers as
if they had occurred on January 1, 1996 and the unaudited pro forma combined
balance sheet data give effect to the Mergers as if they had occurred on March
31, 1997. Enron will account for the Mergers as a purchase. The unaudited pro
forma selected combined financial data have been derived from the unaudited pro
forma combined financial statements included herein and should be read in
conjunction with those statements, the related notes thereto and with the
separate historical financial statements of Enron and PGC incorporated herein by
reference. See "Incorporation of Certain Documents by Reference." The pro forma
data are not necessarily indicative of the actual or future results of
operations or financial condition that would have been reported had the Mergers
occurred on the dates assumed.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................... $14,401 $5,712
------- -------
Costs and expenses
Cost of gas and other products............................ 10,795 4,789
Operating expenses........................................ 1,674 326
Oil and gas exploration expenses.......................... 89 22
Depreciation, depletion and amortization.................. 654 170
Taxes, other than income taxes............................ 189 51
------- -------
13,401 5,358
------- -------
Operating income............................................ 1,000 354
Other income and deductions, net............................ 550 198
------- -------
Income before interest, minority interests and income
taxes..................................................... 1,550 552
Interest and related charges, net........................... 360 91
Dividends on preferred stock of subsidiaries................ 37 16
Minority interests.......................................... 75 19
Income taxes................................................ 381 152
------- -------
Net income.................................................. 697 274
Preferred stock dividends................................... 16 4
------- -------
Earnings on common stock.................................... $ 681 $ 270
======= =======
Earnings per share of common stock
Primary................................................... $ 2.30 $ 0.91
======= =======
Fully diluted............................................. $ 2.17 $ 0.85
======= =======
Cash dividends per share of common stock(1)................. $ 0.86 $0.225
======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
<S> <C>
BALANCE SHEET DATA:
Total assets................................................ $19,714
Short-term debt............................................. 73
Long-term debt due within one year.......................... 69
Long-term debt (including amounts reclassified from
short-term debt).......................................... 4,515
Company-obligated preferred stock of subsidiaries........... 795
Minority interests.......................................... 754
Shareholders' equity........................................ 5,777
Book value per common share................................. 18.01
</TABLE>
- ---------------
(1) Pro forma cash dividends per common share reflect quarterly cash dividends
of Enron of $.2125 per share ($.85 per share annually), which were increased
to $.225 per share ($.90 per share annually) beginning in the fourth quarter
of 1996.
17
<PAGE> 24
COMPARATIVE PER SHARE DATA
The following table sets forth for the Enron Common Stock and PGC Common
Stock selected historical per share data and the corresponding unaudited pro
forma per share amounts as of and for the periods indicated, giving effect to
the Mergers. The data presented are based upon the consolidated financial
statements and related notes of each of Enron and PGC incorporated by reference
into this Proxy Statement/Prospectus and the unaudited pro forma combined
balance sheet and income statements, including the notes thereto, appearing
elsewhere herein. This information should be read in conjunction with, and is
qualified in its entirety by, the historical and unaudited pro forma combined
financial statements and related notes thereto. The assumptions used in the
preparation of this table appear under "Unaudited Pro Forma Financial
Information." The comparative per share data are not necessarily indicative of
the results of the future operations of the combined organization or the actual
results that would have occurred if the Mergers had been consummated at the
beginning of the periods indicated.
<TABLE>
<CAPTION>
ENRON/PGC PGC EQUIVALENT
ENRON PGC PRO FORMA PRO FORMA
HISTORICAL HISTORICAL COMBINED(1) COMBINED(2)
---------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Book value per common share:
December 31, 1996....................... $ 13.81 $18.99 $ -- $ --
March 31, 1997.......................... 14.48 19.83 18.01 17.69
Cash dividends per common share:
December 31, 1996....................... 0.86 1.28 0.86(3) 0.84
March 31, 1997.......................... 0.225 0.32 0.225(3) 0.22
Net income:
Primary:
Year ended December 31, 1996......... 2.31 2.53 2.30 2.26
Three months ended March 31, 1997.... 0.88 1.16 0.91 0.89
Fully diluted:
Year ended December 31, 1996......... 2.16 2.53 2.17 2.13
Three months ended March 31, 1997.... 0.81 1.16 0.85 0.84
</TABLE>
- ---------------
(1) See "Unaudited Pro Forma Financial Information."
(2) Represents the product of the amounts set forth under "Enron/PGC Pro Forma
Combined" multiplied by the PGC Conversion Ratio of 0.9825.
(3) Pro forma cash dividends per common share reflect quarterly cash dividends
of Enron of $.2125 per share ($.85 per share annually), which were increased
to $.225 per share ($.90 per share annually) beginning in the fourth quarter
of 1996.
FORWARD LOOKING STATEMENTS
This Proxy Statement/Prospectus includes forward looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical facts included or
incorporated by reference in this Proxy Statement/Prospectus, including, without
limitation, statements regarding PGC's, Enron's, New Enron's or the surviving
company's future financial position, business strategy, budgets, reserve
estimates, projected costs and plans and objectives of management for future
operations, are forward looking statements. Although Enron and PGC believe their
expectations reflected in such forward looking statements are based on
reasonable assumptions, no assurance can be given that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the expectations reflected in the forward looking
statements herein include political developments in foreign countries, the pace
of deregulation of retail natural gas and electricity markets in the United
States (including impacts on PGE), other actions taken by regulatory
authorities, the timing and extent of changes in commodity prices for crude oil,
natural gas, electricity and interest rates, the extent of success in acquiring
oil and gas properties and in discovering, developing and producing reserves,
the timing and success of efforts to develop international power, pipeline and
other infrastructure projects, conditions of the capital markets and equity
markets and the ability of Enron and PGC to achieve the goals described in "The
Mergers -- Reasons for the Mergers; Recommendation of the PGC Board of
Directors" during the periods covered by the forward looking statements. All
subsequent written or oral forward looking statements attributable to PGC, Enron
or New Enron, or persons acting on their behalf, are expressly qualified in
their entirety by the foregoing cautionary statements.
18
<PAGE> 25
THE COMPANIES
ENRON
Enron is an integrated natural gas and electricity 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 36,000
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 electricity and other energy
related commitments.
Transportation and Operation. Enron's operations include interstate
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 ("FERC"). 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 Transwestern's 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.
Domestic Gas and Power Services. Through its wholly owned subsidiary Enron
Capital & Trade Resources Corp. and its affiliated companies ("ECT"), Enron
purchases natural gas, natural gas liquids, electricity and other energy
products 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, natural 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.
ECT recently established Enron Energy Services ("EES") to pursue the
significant growth opportunities in anticipation of a fully competitive retail
natural gas and electricity market. As states begin to deregulate their natural
gas and electricity markets, and as these markets continue to converge, EES's
goal is to provide end-users with a broad range of energy choices at more
competitive prices. EES has participated in selected natural gas and electric
retail marketing pilot programs, including a state-wide electricity pilot in New
Hampshire, where individual customers are free to select the power provider of
their choice. EES will endeavor to continue to participate in such programs.
International Operations and Development. Enron's international activities
principally involve the independent (non-utility) development, acquisition,
financing, promotion and operation of natural gas and power projects in emerging
markets, and the marketing of natural gas liquids and other liquid fuels.
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
19
<PAGE> 26
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 liquefied natural gas projects in varying stages of
development in China, India, Puerto Rico, Italy, Turkey, Qatar, Vietnam, Israel,
Jordan, Bolivia, Brazil, Indonesia and elsewhere.
Enron Global Power & Pipelines L.L.C., a Delaware limited liability company
("EPP"), was formed by Enron to acquire, own and manage operating power plants
and natural gas pipelines around the world. EPP's assets consist of interests 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 4,104 mile natural gas pipeline system in Argentina, a
357 mile natural gas pipeline in Colombia and a 185 megawatt oil-fired, barge
mounted power plant in the Dominican Republic. Enron formed EPP in 1994 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. Enron owns
approximately 52% of the common shares of EPP. On May 14, 1997, Enron submitted
a formal merger proposal to the Oversight Committee of the Board of Directors of
EPP. Under Enron's proposal, EPP would merge into Enron in a transaction in
which each EPP stockholder would receive $32 per share in Enron Common Stock. In
response to Enron's proposal, EPP indicated that its Oversight Committee will
appoint independent financial and legal advisors to assist in evaluating Enron's
proposal. The Oversight Committee is comprised of EPP's three outside directors.
It is expected that it will be several weeks before the Oversight Committee
completes its evaluation. Based upon recent market prices for Enron Common
Stock, it is estimated that approximately 9.8 million shares of Enron Common
Stock (or New Enron Common Stock following the Effective Time) would be issued
in the proposed transaction.
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, in selected other international areas. At
December 31, 1996, EOG had estimated net proved natural gas reserves of 3,675
billion cubic feet, including 1,180 billion cubic feet of proved undeveloped
methane reserves in the Big Piney, Wyoming deep Paleozoic formations, and
estimated net proved crude oil, condensate and natural gas liquids reserves of
55 million barrels, and at such date, approximately 74% of EOG's reserves (on a
natural gas equivalent basis) were located in the United States, 9% in Canada,
10% in Trinidad and 7% in India. Enron currently owns approximately 53% of the
outstanding shares of common stock of EOG.
Sale of Liquids Assets. During the first quarter of 1997, Enron completed
the sale of (i) the stock of Enron Liquids Pipeline Company, a wholly owned
subsidiary and the general partner and 15% owner and operator of Enron Liquids
Pipeline, L.P., (ii) the stock of Enron Louisiana Energy Company, a natural gas
processor and natural gas liquids producer and fractionator, which owns or holds
majority interests in five processing plants, two liquids pipelines and a salt
dome storage facility in Louisiana, (iii) its wholesale propane business, (iv)
the stock of Enron Gas Processing Company, which owns leasehold and fee
interests in the Bushton gas processing and natural gas liquids storage complex
in Kansas, and (v) the general and limited partner interests in Enron Gathering
Limited Partnership, which owns and operates an extensive natural gas gathering
system in the Hugoton basin of Kansas and Oklahoma. The sale of these
non-strategic North American liquids assets is consistent with Enron's
previously announced strategy of focusing on core businesses, and is not
material to Enron's operations.
Additional information concerning Enron and its subsidiaries is included in
the Enron documents filed with the Commission and incorporated herein by
reference. See "Incorporation of Certain Documents by Reference."
20
<PAGE> 27
NEW ENRON
New Enron is a wholly-owned subsidiary of Enron incorporated in Oregon in
July 1996 solely for the purpose of succeeding to the business of Enron pursuant
to the Reincorporation Merger. New Enron currently conducts no business and has
no material assets or liabilities.
PGC
PGC is an electric utility holding company headquartered in Portland,
Oregon. Its principal subsidiary is PGE, an electric utility incorporated in
Oregon in 1930. PGC also has certain non-utility subsidiaries. PGE is engaged in
the generation, purchase, transmission, distribution and sale of electricity
primarily in the State of Oregon. PGE also purchases and sells energy to
wholesale customers throughout the Western United States to balance its supply
of power to meet the needs of its retail customers, manage risk and to
administer PGE's current long-term wholesale contracts. PGE's Oregon service
area is 3,170 square miles, including 54 incorporated cities of which Portland
and Salem are the largest, within a state-approved service area allocation of
4,070 square miles. PGE estimates that at the end of 1996, its service-area
population was approximately 1.4 million, constituting approximately 44% of the
state's population. At December 31, 1996 PGE served approximately 670,000
customers. PGE owns hydroelectric and natural gas-fired generating plants in
Oregon and is a part owner and operator of a coal plant in Oregon, and is a part
owner of coal plants in Washington and Montana. PGC's non-utility subsidiaries
are engaged in leveraged leasing and accounting and title-tracking
administrative services to facilitate the trading of electricity in the
deregulating electric power market, telecommunications and non-regulated energy
services. Additional information concerning PGC and its subsidiaries is included
in the PGC documents filed with the Commission which are incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
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THE ANNUAL MEETING
PURPOSE OF THE ANNUAL MEETING
The purpose of the Annual Meeting is to consider and vote upon (i) a
proposal to approve the Amended Merger Agreement, (ii) the election of three
Class II members of the Board of Directors of PGC to hold office until the
Annual Meeting in 2000 or until their successors are elected and qualified,
(iii) the ratification of the appointment of Arthur Andersen LLP as PGC's
independent public accountants for the year ending December 31, 1997, and (iv)
such other matters as may properly be brought before the Annual Meeting. The PGC
Board is not aware, as of the date of mailing of this Proxy
Statement/Prospectus, of any other matters that may properly come before the
Annual Meeting. If any such other matters properly come before the Annual
Meeting, or any adjournment thereof, it is the intention of the persons named in
the PGC proxy to vote such proxies in accordance with their best judgment on
such matters.
THE PGC BOARD, BY A UNANIMOUS VOTE OF THE DIRECTORS PRESENT, HAS ADOPTED
THE AMENDED MERGER AGREEMENT, AUTHORIZED THE EXECUTION AND DELIVERY OF THE
AMENDED MERGER AGREEMENT, AND UNANIMOUSLY RECOMMENDS THAT PGC SHAREHOLDERS VOTE
FOR APPROVAL OF THE AMENDED MERGER AGREEMENT.
In considering the recommendation of the PGC Board with respect to the
Amended Merger Agreement, shareholders should be aware that certain members of
PGC's management and the PGC Board have certain interests in the Mergers that
are in addition to the interests of shareholders of PGC generally and that could
potentially represent conflicts of interest. The PGC Board was aware of these
interests and considered them, among other matters, in adopting the Amended
Merger Agreement. See "The Mergers -- Interests of Certain Persons in the
Mergers."
DATE, PLACE AND TIME; RECORD DATE
The Annual Meeting is scheduled to be held on Tuesday, June 24, 1997, at
1:30 p.m., local time, at Portland General Electric Company, Western Region
Center, 14655 SW Old Scholls Ferry Road, Beaverton, Oregon. Holders of record of
PGC Common Stock at the close of business on May 9, 1997, the Record Date, will
be entitled to notice of and to vote at the Annual Meeting. As of the Record
Date, 51,406,352 shares of PGC Common Stock were issued and outstanding.
A complete list of shareholders entitled to notice of the Annual Meeting
will be available for inspection at the offices of PGC in Portland, Oregon
during normal business hours upon written demand by any PGC shareholder or such
shareholder's agent or attorney beginning two business days after the date of
PGC's notice of meeting for the Annual Meeting and continuing through the Annual
Meeting. Any shareholder or such shareholder's agent or attorney may, upon
written demand and, subject to Section 60.774(3) of the OBCA, copy the
shareholder list during regular business hours during the inspection period at
such shareholder's expense.
The Annual Meeting may be adjourned to another date and/or place for proper
purposes (including, without limitation, for the purpose of soliciting
additional proxies).
VOTING RIGHTS
Each shareholder of record on the Record Date is entitled to one vote for
each share of PGC Common Stock held on each matter submitted to a vote at the
Annual Meeting. A majority of the outstanding shares of PGC Common Stock
entitled to vote on a matter, represented in person or by proxy, constitutes a
quorum for consideration of such matter at the Annual Meeting.
The affirmative vote of the holders of at least a majority of the
outstanding shares of PGC Common Stock will be sufficient to approve the Amended
Merger Agreement. Abstentions and broker non-votes will have the same effect as
votes cast against approval of the Amended Merger Agreement. Failure to return a
PGC proxy or vote in person at the Annual Meeting will have the effect of a vote
against approval of the Amended Merger Agreement.
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A favorable vote by a plurality of shares of PGC Common Stock voting on the
directors is required to elect the directors, and a favorable vote by a majority
of shares of PGC Common Stock voting is required to ratify the appointment of
the independent public accountants. For election of directors, votes that are
withheld will be excluded from the vote and will have no effect. Absentions and
broker non-votes are counted in determining if a quorum exists, but are not
counted in determining the outcome of the vote for the ratification of the
appointment of independent public accountants.
PROXIES
Any holder of PGC Common Stock may vote such shareholder's shares either in
person or by duly authorized proxy. The giving of a proxy by a PGC shareholder
will not affect such shareholder's right to vote such shares if the shareholder
attends the Annual Meeting and desires to vote in person. Prior to the voting of
a PGC proxy, such proxy may be revoked by the shareholder by delivering written
notice of revocation to the Secretary of PGC, by executing a subsequently dated
proxy or by voting in person at the Annual Meeting. All shares represented by
effective proxies on the enclosed form of PGC proxy received by PGC will be
voted at the Annual Meeting in accordance with the terms of such proxies. If no
instructions are given, the PGC proxies will be voted FOR the approval of the
Amended Merger Agreement, FOR the election of the directors named in such proxy
card and FOR ratification of Arthur Andersen LLP as independent auditors for
1997.
PGC will bear the cost of the solicitation of proxies for the Annual
Meeting, except that PGC and Enron will share equally expenses incurred in
connection with the printing and filing of this Proxy Statement/Prospectus.
Certain officers, directors, employees and agents of PGC may solicit PGC proxies
by correspondence, telephone, telegraph, telecopy or other electronic means, or
in person, but without extra compensation. PGC will pay to banks, brokers,
nominees and other fiduciaries their reasonable charges and expenses incurred in
forwarding the proxy soliciting material to their principals. In addition, PGC
has retained D. F. King & Co., Inc. to assist PGC in the solicitation of proxies
for a fee of $10,000 plus reasonable out-of-pocket expenses. Such solicitation
may be made by mail, telecommunication or in person.
VOTING PROCEDURES FOR PARTICIPANTS IN PGC'S DIVIDEND REINVESTMENT AND OPTIONAL
CASH PAYMENT PLAN AND EMPLOYEE BENEFIT PLANS
The enclosed proxy includes power to vote the number of shares of PGC
Common Stock registered in a holder's name, according to the books of PGC's
transfer agent, and the number of shares of PGC Common Stock beneficially owned
by a holder in PGC's Dividend Reinvestment and Optional Cash Payment Plan
("DRP"). In addition, for participants in PGC's Retirement Savings Plan ("RSP")
or the PGC Employee Stock Purchase Plan ("ESPP"), the proxy also serves as
voting instructions to the Trustee and Plan Administrator of those plans to vote
the shares of PGC Common Stock beneficially owned by the participant in those
plans.
PGC will mail this Proxy Statement/Prospectus and a proxy to all persons
who, according to the books of PGC's Transfer Agent and the books of the Trustee
and Plan Administrator of the RSP and ESPP, beneficially own shares of PGC
Common Stock in the DRP, RSP or ESPP.
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THE MERGERS
(PROPOSAL 1)
GENERAL DESCRIPTION OF THE MERGERS
PGC Merger. Immediately following the Reincorporation Merger described
below, the parties will consummate the PGC Merger, in which PGC will merge with
and into New Enron, with New Enron continuing in existence as the surviving
corporation. In the PGC Merger, each share of PGC Common Stock issued and
outstanding at the Effective Time (other than shares owned by PGC, Enron, New
Enron or any of their respective subsidiaries, which will be cancelled) will be
converted into 0.9825 shares of New Enron Common Stock (the "PGC Conversion
Ratio"). If, prior to the Effective Time, Enron effects certain changes in the
Enron Common Stock or makes certain distributions on the Enron Common Stock, the
PGC Conversion Ratio will be adjusted. See "The Amended Merger
Agreement -- Manner and Basis of Converting Shares -- Adjustments to PGC
Conversion Ratio."
Reincorporation Merger. At the effective time of the Reincorporation Merger
(the "First Effective Time"), Enron will merge with and into New Enron, with New
Enron continuing in existence as the surviving corporation. In connection with
the Reincorporation Merger, the name of New Enron will be changed to "Enron
Corp." In the Reincorporation Merger, each outstanding share of Enron Common
Stock issued and outstanding at the First Effective Time will be converted into
one share of New Enron Common Stock, and each share of any class or series of
Enron Preferred Stock issued and outstanding at the First Effective Time will be
converted into one share of a series of New Enron Preferred Stock having the
same rights, preferences and limitations as the corresponding class or series of
Enron Preferred Stock.
Alternative Transaction Structure in the Event of Regulatory Reform. The
Reincorporation Merger is intended solely to enable New Enron to qualify after
the PGC Merger as an intrastate holding company exempt from registration under
the Public Utility Holding Company Act of 1935, as amended (the "1935 Act"). If,
prior to the Effective Time, the 1935 Act is repealed or amended such that it
would be possible to merge PGC into Enron without subjecting the surviving
entity to 1935 Act registration, the Amended Merger Agreement provides that the
parties will revise the structure of the transactions contemplated by the
Amended Merger Agreement so that the Reincorporation Merger will not occur and
PGC will merge directly into Enron. In such event, PGC shareholders will receive
Enron Common Stock in the PGC Merger instead of New Enron Common Stock, and the
obligations of New Enron under the Amended Merger Agreement will be obligations
of Enron. See Exhibit B to the Amended Merger Agreement included herewith for a
complete description of the alternative transaction structure. Approval of the
Amended Merger Agreement by the shareholders of PGC at the Annual Meeting will
be deemed to constitute approval of a revised transaction structure effected
pursuant to these provisions. See "Comparative Rights of New Enron, Enron and
PGC Shareholders."
BACKGROUND OF THE MERGERS
The Original Merger Agreement. In response to the accelerating pace of
regulatory change within the electric industry, Enron concluded by mid-1993 that
it would benefit from the addition of retail electricity expertise and physical
assets that would complement Enron's existing natural gas and electricity
marketing, financial services and risk management expertise. Accordingly, at
that time Enron began analyzing various alternatives for a strategic joint
venture or acquisition in the electric power industry. Enron's objective was to
add both strategic assets and unique skill sets that would complement Enron's
existing wholesale power marketing business and enhance Enron's shareholder
value. As a result of this analysis, Enron ultimately determined that a
strategic transaction with a utility having PGE's operating characteristics
would be beneficial to Enron and its stockholders.
In February 1994, the PGC Board directed its management to present
information and analyses to the PGC Board on the changes occurring in the
electric industry and related energy markets, the potential effects of those
changes on PGC's businesses and prospects and the potential strategic
alternatives available to PGC in the context of those developments.
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In June 1994, Jeffrey Skilling, President and Chief Operating Officer of
Enron, and Kenneth Rice, Chairman and Chief Executive Officer of ECT -- North
America, met in Portland with Joseph Hirko, Senior Vice President and Chief
Financial Officer of PGC. Mr. Skilling stated that the purpose for arranging the
meeting was to lay the groundwork for exploring possible future business
opportunities between the companies.
In November 1994, at the invitation of Mr. Skilling, Messrs. Harrison,
Hirko and Richard Dyer, Senior Vice President of PGE, visited Enron's corporate
headquarters in Houston. During this visit, Messrs. Skilling and Rice and J.
Clifford Baxter, Senior Vice President of Enron, indicated that Enron wished to
enter into a relationship with a utility having PGE's operating characteristics.
PGC's management responded that PGC was not interested at that time in pursuing
a strategic relationship with Enron. There were no further discussions regarding
a strategic business relationship between Enron and PGC until January 1996.
Enron and PGC began to engage in minimal trading activities with each other
in the ordinary course of business for buying and selling electric power in late
November 1994.
On September 12, 1995, the PGC Board formed a Strategic Review Committee
(the "Strategic Review Committee"), consisting of Ms. Booth and Messrs. Brix,
Harrison, McCain, Meyer and Willison, to supervise and direct management's
exploration of possible strategic alternatives. Beginning in September 1995, the
Strategic Review Committee and the PGC Board received periodic reports from
management and representatives of Goldman Sachs regarding the analysis of
strategic alternatives and covering general industry developments with respect
to regulatory reforms, updates on merger activities within the electric utility
industry, and comparative ratio analyses of PGC's performance relative to that
of other electric utility industry participants.
In October 1995, Enron and ECT retained Smith Barney Inc. ("Smith Barney")
to assist in the investigation and analysis of possible strategic combinations
and/or acquisitions within the electric utility industry.
On January 17, 1996, at Enron's request, Messrs. Rice and Baxter met in
Portland with Messrs. Harrison, Hirko, Dyer and Mr. Alvin Alexanderson, Senior
Vice President and General Counsel of PGC. Mr. Rice articulated Enron's vision
of the future of the energy industry and the opportunities and challenges facing
companies such as Enron and PGC in an increasingly competitive environment.
Messrs. Rice and Baxter suggested that the parties enter into discussions
concerning possible joint ventures. The PGC and Enron executives agreed to
explore various possible business relationships and transactions between the two
companies.
On February 6, 1996, at a meeting of the PGC Board, PGC senior management
reported on the status of the discussions between PGC and Enron as well as other
strategic alternatives.
During the months since the January 17, 1996 meeting, up through the
completion of the merger negotiations, the Enron Board and its Executive
Committee were apprised from time to time by Enron management of the ongoing
discussions and negotiations between PGC and Enron.
On February 7 and 8, 1996, senior executives from Enron and PGC met to
conduct further discussions on the possible sale of certain assets to Enron.
Following these meetings, Enron and PGC established working teams that began to
meet periodically to explore the proposed disposition.
On March 4, 1996, the Executive Committee of the PGC Board received a
detailed report from PGC senior executives on the exploration of strategic
alternatives, including the discussions with Enron. The strategic alternatives
reviewed by the Executive Committee at this meeting, as well as at the earlier
Board of Directors meeting held on February 6, were among those ultimately
evaluated by the Board at its May 14, 1996 meeting.
On March 11, 1996, the companies entered into a confidentiality and
standstill agreement, pursuant to which the parties agreed to exchange
proprietary information, and Enron agreed generally, for a two-year period of
time, not to, among other things, (i) acquire, agree to acquire or make any
proposal to acquire any securities of PGC or its material subsidiaries, (ii)
seek or propose any merger or consolidation with (or tender
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offer or exchange offer for the securities of) PGC or any material subsidiary,
(iii) make any "solicitation" of proxies or consents within the meaning of Rule
14a-1 under the Exchange Act with respect to any securities of PGC or any
material subsidiary, (iv) form, join or in any way participate in a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any
securities of PGC or any material subsidiary, (v) seek to control or direct the
management or Board of Directors of PGC or (vi) publicly announce the pursuit or
intent to pursue any of the foregoing.
At a March 21, 1996 meeting of senior executives of Enron and PGC and a
representative of Goldman Sachs, Enron suggested that a merger of Enron and PGC
would create significantly greater long-term benefits to the companies than the
other alternatives that the companies had discussed. Following the March 21
meeting, the Enron and PGC teams began to develop a document detailing a joint
strategic vision for presentation to their respective Boards of Directors.
On April 1, 1996, at a meeting of the Executive Committee of the PGC Board,
PGC management and representatives of Goldman Sachs provided a detailed update
on the ongoing preliminary discussions with Enron, which presentation was again
delivered at a PGC Board meeting held the following day.
Senior management representatives from Enron and PGC and their respective
financial and legal advisors met in Denver on April 23 and 24, 1996. At this
meeting, Enron's representatives presented a detailed analysis of Enron's
various business units. The presentations included an articulation of Enron's
strategic vision and an overview of the major exploration, development and
trading initiatives being pursued in Enron's primary businesses. The working
group teams met again on May 1 and 2 in Phoenix where discussions focused on a
strategy for gaining regulatory approval for a business combination transaction
between the two companies if the companies decided to effect a transaction.
On May 7, 1996, PGC held its annual meeting of shareholders. At the PGC
Board meeting held in conjunction with that meeting, PGC's senior executives
presented the strategic vision outlining the opportunities for a combined
Enron/PGC enterprise in each line of business and the actions required to
successfully execute such a vision. At this meeting, PGC management also
presented to the PGC Board the company's five-year strategic and operating plan.
On May 7, 1996, Enron also held its annual meeting of shareholders. At the
accompanying Enron Board meeting, Enron's senior executives gave a presentation
to the Enron Board regarding the status of the discussions that had been held
between the two companies regarding a possible transaction.
During meetings between the two companies' representatives held on May 9
and 10, 1996 in Phoenix, Enron conducted due diligence of PGC. PGC senior
executives presented a review of PGC's regulated business and answered questions
from Enron regarding PGC's regulatory assets and its investment in and
decommissioning of the Trojan nuclear facility. PGC management made
presentations of certain of PGC's financial projections and forecasts, its
leasing business and PGC's regulatory initiatives and strategy. At this meeting,
the respective working groups established a preliminary timetable for continuing
due diligence, creating a communications plan and developing a strategy for
gaining regulatory approvals in connection with a proposed transaction if the
parties decided to proceed.
On May 14, 1996, a meeting of the PGC Board was held to review developments
in the electric industry and to evaluate strategic opportunities and
alternatives. Mr. Hirko reported that PGC's management had considered four
categories of potential business combinations: a regional merger of equals, a
merger with a regional local distribution company, a regional merger and a
merger to pursue a national energy market strategy. Mr. Hirko identified senior
management's view of the best candidate within each category, and presented
management's evaluation of the group of "best" candidates relative to various
evaluation criteria including the resultant strategic positioning of the
combined entity and the anticipated effects on the company's shareholder,
employee, and customer constituencies as well as the Oregon community generally.
In the judgment of PGC management, a business combination with Enron seemed to
be the most beneficial transaction, in the aggregate, from the perspective of
the various constituencies considered, and seemed to provide, in the aggregate,
the most favorable prospects for the combined entity relative to the other
alternatives it had considered. It was the sense of the meeting that management
should continue to pursue
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discussions with Enron. PGC did not engage in negotiations with any third party
other than Enron with respect to any strategic alternatives and did not take any
significant steps to develop any other potential strategic opportunity or
alternative. During the period subsequent to the May 14, 1996 PGC Board meeting,
the various working groups continued to meet.
On June 5, 1996, the PGC Board met to review the status of the merger
discussions with Enron. Following a review of PGC's financial performance and
opportunities for growth as a stand-alone entity, Mr. Hirko made a presentation
to the PGC Board on Enron's individual businesses and Enron's historical and
financial performance, and presented a vision of the combined companies. Mr.
Harrison explained that, because cost efficiencies were not the motivating force
of the transaction, continued long-term opportunities for PGC employees would
exist within the combined company, and a transaction between Enron and PGC would
seem to assure a long-term role for the local community. Representatives of
Goldman Sachs presented their analysis of Enron's performance and prospects
relative to its competitors. Following a comprehensive discussion, the Board
unanimously directed PGC management to proceed with negotiations with Enron.
On June 12, 1996, the working groups from each company met in San Francisco
to discuss the initial draft merger agreement that had been circulated by Enron
on June 7, discussed the regulatory plan and outlined a timetable for the
proposed merger.
At the invitation of the PGC Board, Kenneth L. Lay, Chairman and Chief
Executive Officer of Enron, and Mr. Skilling attended a special meeting of the
PGC Board of Directors on June 18. Messrs. Lay and Skilling made presentations
on Enron's businesses, Enron's financial performance and historical returns to
shareholders and its strategic and financial outlook for the future. Mr. Lay
discussed the role PGC's management would likely play in the combined business
and the continued presence of the combined company in the Oregon community
following the proposed merger. After Messrs. Lay and Skilling left the meeting,
the PGC Board received a financial presentation from Goldman Sachs on each of
Enron's and PGC's businesses and the prospects for the proposed combined entity.
Following the June 18, 1996 PGC Board meeting, representatives of Enron and
PGC held a series of meetings to conduct further due diligence and discuss the
proposed merger agreement, regulatory and communications issues, and the roles
that various individuals would assume in a combined organization. During this
period, Enron representatives indicated to representatives of PGC that Enron's
willingness to proceed with a transaction was conditioned on PGC senior
management's willingness to remain with the combined entity following the
transaction.
The PGC Board met on July 2, 1996 and received updates from management,
Goldman Sachs and PGC's legal advisors on the status of PGC's due diligence
review of Enron, the regulatory plan for the proposed merger and ongoing
discussions with regulators regarding the company's rate plans, the status of
negotiations on, and key terms and conditions of, the merger agreement, and
Enron's desire to retain PGC management following the proposed merger. Goldman
Sachs reviewed the nature of the analysis they would perform to arrive at a
conclusion as to the fairness of the consideration that would be offered to PGC
shareholders in the proposed transaction.
On July 8, 1996, there was a meeting of the Executive Committee of the
Enron Board, at which Richard D. Kinder, then President and Chief Operating
Officer of Enron, updated the Executive Committee as to the status of the
negotiations with PGC.
During the week of July 8, 1996, the terms of the employment agreements for
Messrs. Harrison and Hirko were discussed, and substantial agreement on Mr.
Harrison's and Mr. Hirko's employment agreements was reached during the weekend
of July 13 and 14.
On July 16, 1996, representatives of Enron and PGC senior management and
their respective financial and legal advisors met in Phoenix to continue
negotiations on the merger agreement and the pricing terms. During these
negotiations, the respective working groups received reports indicating there
might be awareness of the merger discussions outside the working groups. As a
result, the respective working groups determined to accelerate the timetable for
completing the merger negotiations and due diligence efforts that had been
scheduled to be completed and presented to the Enron and PGC Boards on July 26.
On July 17, negotiations
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broke down as a result of the parties' failure to agree on pricing terms. On
July 18, Mr. Harrison contacted Mr. Kinder and they agreed to resume
negotiations. Pricing terms were agreed to late in the afternoon of Friday, July
19, subject to approval by the respective boards of directors.
On July 20, 1996, the PGC Board met and received presentations from Goldman
Sachs and legal counsel. All members of the PGC Board other than Mr. Meyer were
present at the meeting. Goldman Sachs reviewed various financial and other
information and rendered to the PGC Board its oral opinion to the effect that,
as of July 20, 1996 and based upon and subject to certain assumptions, the
proposed exchange ratio of one share of Enron Common Stock per share of PGC
Common Stock was fair to the holders of PGC Common Stock. Legal counsel reviewed
the form of Original Merger Agreement and the employment agreements between
Enron and Messrs. Harrison and Hirko with the Board. The Board discussed the
advice they had received at the various PGC Board meetings and the significant
potential benefit to shareholders, customers, and employees of PGC which would
result from a merger of Enron and PGC. Following such discussions, the PGC
Board, by a unanimous vote of those present, adopted the Original Merger
Agreement, authorized the execution thereof, and determined to submit the
Original Merger Agreement to the PGC shareholders with the PGC Board's
recommendation for approval.
On July 20, 1996, contemporaneously with the PGC Board meeting, the Enron
Board met and received presentations from Enron's senior management, Smith
Barney and legal counsel. All members of the Enron Board other than Mr. Blake
were present at the meeting. Mr. Skilling described for the Enron Board the
proposed terms of the Mergers, provided an overview of PGC's operations, assets
and financial performance, and discussed management's expectation as to the
impact on the market price of Enron Common Stock and other financial
information. Legal counsel reviewed the form of the Original Merger Agreement
and the effect of reincorporating Enron as an Oregon corporation as part of the
proposed transaction. Smith Barney reviewed various financial and other
information and advised the Enron Board with respect to the consideration to be
issued to PGC's shareholders in the PGC Merger. The members of the Enron Board
discussed the advice they had received and the substantial benefits to Enron and
its shareholders that would result from the Mergers. Following such discussions,
the Enron Board members in attendance at the meeting unanimously approved the
Original Merger Agreement and the transactions contemplated thereby.
Following the meetings of the PGC and Enron Boards of Directors, the
Original Merger Agreement was executed.
On November 12, 1996, the Original Merger Agreement was approved at special
meetings of the Enron shareholders and the PGC shareholders.
The Amended Merger Agreement. Under the terms of the Original Merger
Agreement, Enron's obligation to close the Mergers was subject to a number of
conditions, including obtaining all requisite regulatory approvals. The parties
attached to the Original Merger Agreement a schedule that included the material
terms of the OPUC regulatory plan (the "Original Regulatory Plan"). The Original
Regulatory Plan provided for, among other things, (i) $70 million of PGE rate
reductions not related to the Mergers, (ii) the OPUC's approval of Enron's
merger application and (iii) the OPUC's agreement to separate for regulatory
purposes the costs, revenues, assets, liabilities, risks and rewards of PGC's
nonutility businesses from its utility businesses.
The Original Merger Agreement provided that Enron would not be required to
consummate the Mergers unless the OPUC approved the Original Regulatory Plan
without imposing certain specified conditions (the "Original Regulatory
Condition"). Specifically, the OPUC's approval could not impose any condition or
qualification on the separation of PGC's nonutility and utility businesses
described above that would adversely affect Enron's and its subsidiaries'
ability to compete in the markets for their products and services. Furthermore,
the OPUC's approval could not impose, or threaten to impose, changes to the
Original Regulatory Plan that would have or could reasonably be expected to have
a PGC Material Adverse Effect (as defined in the Original Merger Agreement).
Obtaining the regulatory approval in a manner consistent with the Original
Regulatory Condition was an important consideration to Enron in determining to
proceed with the Mergers and agreeing to the conversion ratio of PGC shares to
Enron shares contemplated by the Original Merger Agreement.
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Enron filed an application with the OPUC on August 30, 1996 seeking
approval of the Mergers, the content of which was consistent with the Original
Regulatory Plan. As part of the merger approval process, the OPUC staff and
intervenors raised a number of issues that they proposed to address by making
the OPUC's merger approval subject to certain conditions. These issues included
the following: potential for higher rates within PGE's service territory;
potential for harm to emerging competitive markets; potential for declining
service quality and reliability; potential for cross-subsidization between PGE
and its non-regulated affiliates; and potential for abuse between PGE and its
non-regulated affiliates.
As described above, an additional element of the Original Regulatory Plan
consisted of PGE rate reductions not related to the Mergers. In November 1996,
PGE reached agreement with the OPUC staff, which was subsequently approved by
the OPUC, to reduce its rates. The rate reductions stem primarily from lower
natural gas and power purchase prices. The agreement calls for $55 million in
annual rate reductions that began December 1, 1996 (in addition to $15 million
in rate reductions previously approved by the OPUC). The settlement will result
in an after-tax decrease in earnings of approximately $32 million for 1997 ($41
million including the after-tax effect of the previously approved $15 million in
rate reductions).
In its application seeking merger approval and related documentation, Enron
and PGC proposed conditions to the merger approval order intended to directly
address each identified concern, and to meet the requirement that the Mergers
serve the customers of PGE in the "public interest." Much of the merger approval
process has focused on the amount of compensation and benefits that is required
to be provided to PGE's customers in order to meet the "public interest"
standard.
Enron initially committed that it would pass on to customers its
merger-related cost savings, subject to a minimum annual benefit of at least $3
million. The OPUC staff and a number of intervenors argued that this proposal
was insufficient to meet the "public interest" standard. On January 16, 1997,
the OPUC staff issued its preliminary report in which it stated it would
recommend approval of the Mergers, but only if Enron agreed to 23 conditions,
including merger-related benefits for PGE's customers totaling $189.6 million
over four years reflecting, among other things, merger-related cost savings and
compensation to PGE's customers for the use of PGE's name, business contacts and
reputation within the Western Systems Coordinating Council. These proposed
customer benefits were in addition to the $70 million in rate reductions
previously implemented by PGE.
Beginning on January 22, 1997, three days of settlement conferences were
held in an attempt to negotiate a settlement regarding an appropriate level of
compensation and benefits to PGE's customers in connection with granting OPUC
approval for the Mergers. During these settlement discussions, Enron and PGC
agreed to guarantee a minimum of $3 million per year for four years for a total
of $12 million in merger-related benefits for PGE's customers. Enron also
indicated that it could agree to many of the conditions proposed by the OPUC
staff, but that Enron would not agree to any condition that would permit the
OPUC to impute to PGE any revenue from Enron's activities in unregulated
businesses, and thereby compel PGE to provide further rate concessions. The OPUC
staff broke off settlement discussions, stating that the parties were too far
apart to warrant continued negotiations.
In discussions with Mr. Harrison at the end of January, Mr. Skilling raised
the possibility of amending the Original Merger Agreement to change the
consideration to be received by PGC shareholders in order to be able to provide
additional merger-related benefits. Mr. Harrison stated that he did not believe
such an amendment was acceptable or appropriate. The parties subsequently agreed
that they would focus their efforts on trying to reach an agreement with the
OPUC and its staff within the context of the Original Merger Agreement, rather
than on a restructuring of the Mergers.
On February 14, 1997, Mr. Lay, Mr. Harrison and Mr. Skilling appeared at a
special public meeting of the OPUC. During the meeting, the OPUC stated to
Enron's representatives that it would be required to offer additional benefits
to PGE's customers in order obtain the OPUC's approval of the Mergers.
Enron and PGC made a new settlement proposal on February 21, 1997. Under
the new proposal, Enron guaranteed $41 million merger-related benefits in rate
reductions to PGE's customers over four years, with possible additional benefits
of up to $9 million. Settlement meetings reconvened on February 25, 1997 but
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again failed to achieve any resolution. On February 27, 1997, Enron and PGC
submitted a new offer to the OPUC staff. The offer included financial benefits
totaling $51.5 million over four years.
From December to March, Enron and PGC had numerous discussions about
various alternative strategies for obtaining OPUC regulatory approval. During
early March, the parties agreed that if they were unsuccessful in obtaining
support from the OPUC staff based upon the level of merger-related benefits
discussed between them, they would either terminate the Original Merger
Agreement or agree to a restructuring under which any additional merger-related
benefits would be reflected in a change to the consideration to be received by
PGC shareholders.
On March 11, the OPUC staff responded with a counteroffer to Enron's $51.5
million proposal. Under the counteroffer, the OPUC staff sought $141 million in
compensation and benefits to PGE's customers over four years as a condition to
approving the Mergers. The parties met again beginning March 12, 1997 to discuss
the $51.5 million offer. Although Enron, PGC and the OPUC staff had reached
agreement with respect to most of the issues, the OPUC staff said that the $51.5
million offer was inadequate. Enron then raised the offer to $61 million, which
was also rejected as insufficient. Mr. Rice approached the OPUC staff on March
12 with an informal and confidential offer of $106 million if the OPUC staff
would agree to resolve the proceeding that day. After a brief discussion, this
offer was also rejected. The OPUC staff later reiterated its offer to settle for
$141 million.
On March 19, Mr. Baxter and Mr. Hirko met to discuss the status of the
transaction. Mr. Baxter advised Mr. Hirko that Enron was unwilling to re-submit
the informal $106 million proposal made to the OPUC staff on March 13, because
the proposal had been made to the OPUC staff solely for the purpose of resolving
the proceeding quickly. Furthermore, because the OPUC staff continued to
reiterate its offer to settle for $141 million of merger-related benefits, Mr.
Baxter stated that Enron did not believe that re-submitting the $106 million
offer would be beneficial. Mr. Baxter also indicated to Mr. Hirko that Enron
believed that a combination of the $70 million non-merger related rate reduction
and a proposal reflecting $106 million of merger-related benefits (if
incorporated in a final order by the OPUC) would have a PGC Material Adverse
Effect resulting in a failure of the Original Regulatory Condition. He further
suggested that the parties should consider a new approach in order to receive
OPUC approval of the Mergers. Specifically, Mr. Baxter suggested a revision to
the Original Merger Agreement pursuant to which the amount of merger-related
benefits would be increased and PGC's shareholders would receive a portion of
the merger consideration in the form of a security whose value would be tied to
the performance of PGE after the Mergers or to the result of certain regulatory
actions. Mr. Baxter's statements were confirmed in writing in a letter to Mr.
Hirko dated March 19, 1997.
On March 19, following the meeting between Mr. Baxter and Mr. Hirko, Enron
and PGC were advised by the OPUC staff that it intended to recommend disapproval
of the Mergers, but that the staff's offer of $141 million of merger-related
customer benefits remained open. In its public announcement of the staff's
position, Enron stated publicly that the staff's offer was not acceptable. On
March 20, a spokesman for Enron stated publicly that Enron was willing to accept
a termination of the Original Merger Agreement if a suitable agreement on
merger-related benefits could not be reached.
On April 1, Mr. Harrison and Mr. Hirko met with Mr. Lay, Mr. Skilling, Mr.
Rice, Mr. Baxter and Mr. Geoff Roberts, Managing Director of ECT--North America.
Enron said that it believed that the best way to enhance the likelihood of
consummating the transaction was to increase the amount of merger-related
benefits and reduce the consideration payable to PGC shareholders. PGC stated
that it believed Enron was obligated to increase the amount of merger-related
benefits without reducing such consideration. PGC indicated that it might be
willing to cause a quarterly dividend to the PGC shareholders to be foregone as
a means of providing additional value for merger-related benefits. Enron said it
did not believe such an approach would be successful. Enron reiterated that it
believed that if the OPUC approved the Mergers but imposed a requirement to
provide $106 million of merger-related benefits, Enron would be permitted to
terminate the Original Merger Agreement because such a regulatory action, when
taken together with the $70 million of non-merger related rate reductions, would
result in a failure of the Original Regulatory Condition. The meeting ended
without a resolution.
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On April 3, the Executive Committee of the PGC Board met to review the
situation and PGC's options. It considered the possibility of insisting that
Enron increase the amount of merger-related benefits, as well as Enron's
position that $106 million of merger-related benefits would result in a PGC
Material Adverse Effect. The Executive Committee also considered the
uncertainties associated with potential litigation relating to that issue. The
Executive Committee considered the suggestion of a security based on the
performance of PGE, and concluded that such a security would be difficult to
value and would likely create the possibility of significant conflicts between
the interests of the holders of such securities and the holders of common stock
of the combined entity.
After considerable discussion, the Executive Committee authorized
management to explore the possibility of initiating a discussion with Enron
about a small decrease in the original PGC Conversion Ratio as a means of
providing additional merger-related benefits to enhance the likelihood of OPUC
approval. Mr. Hirko advised Mr. Baxter of the Executive Committee's decision.
After discussion with other members of Enron management, Mr. Baxter advised Mr.
Hirko that Enron was interested in pursuing discussions along those lines.
On April 7, the PGC Board met and was briefed with respect to developments
with Enron. The PGC Board also received an updated report from management on
PGC's stand-alone business prospects. The PGC Board authorized management to
continue discussions with Enron.
On April 7 and 8, members of PGC management and PGC's financial advisors
and legal counsel met in Phoenix with members of Enron management and Enron's
legal counsel. The parties negotiated the terms of the First Amendment, and
reached tentative agreement on many of its terms. However, a number of
significant issues remained unresolved, including the exact formulation of the
revised regulatory plan, as well as the operation of the termination provision
relating to a failure to obtain the OPUC's approval of an acceptable regulatory
plan. Furthermore, the parties agreed that they would delay any final decision
with respect to an amendment of the Original Merger Agreement until they had an
opportunity to review and analyze the OPUC staff's final report, which was
anticipated to be published on April 11.
On April 11, the staff of the OPUC issued its final report recommending the
Mergers not be approved because of the staff's position that Enron had not
offered sufficient benefits and compensation to PGE's customers. However, the
staff included in its report a list of conditions that it would find acceptable
to address its concerns, and also indicated that $141 million in merger-related
benefits for PGE's customers would be necessary in order to obtain merger
approval. After reviewing the final report, Enron and PGC agreed to finalize the
First Amendment with a view to presenting such amendment to each company's Board
of Directors. In response to the OPUC staff's recommendation that $141 million
of merger-related benefits must be provided to PGE's customers, Enron advised
PGC that it would not pay for more than $106 million of such benefits without a
reduction in the PGC Conversion Ratio, but that it would be willing to provide
$141 million in merger-related benefits if PGC would agree to a reduction in the
PGC Conversion Ratio. The $35 million difference between $106 million and $141
million is roughly equivalent to the value of the reduction in the number of
shares of New Enron Common Stock that PGC shareholders would receive as a result
of the reduction in the PGC Conversion Ratio.
From April 11 through April 14, Enron and PGC continued to negotiate the
exact formulation of the revised regulatory plan, as well as the termination
right relating to a failure to obtain the OPUC's approval of an acceptable
regulatory plan. Specifically, a new regulatory condition was drafted to replace
the Original Regulatory Condition. Under the terms of the new condition, Enron
would not be required to consummate the Mergers if the regulatory plan attached
to the First Amendment was not adopted by the OPUC in substantially the form
attached, and without any imposition or threatened imposition of any obligations
to provide in excess of $141 million of merger-related benefits to PGE's
customers. As a result of this new regulatory condition, it is no longer
relevant under the Amended Merger Agreement whether changes to the regulatory
plan would cause a PGC Material Adverse Effect.
During the period from April 9 to April 11, PGC representatives updated
their due diligence with respect to Enron.
On April 13, the Enron Board of Directors met and received presentations
from Mr. Skilling and Mr. Baxter relating to the events that had led to a
consideration of the First Amendment, including actions
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taken by the OPUC staff. Mr. Baxter described the proposed reduction of the PGC
Conversion Ratio, the revised regulatory condition and other terms of the
proposed amendment to the Original Merger Agreement. Enron's legal counsel then
reviewed the form of the First Amendment with the Board. The Board discussed the
First Amendment and, following that discussion, adopted the Amended Merger
Agreement and authorized the execution of the First Amendment.
On April 14, the PGC Board met and received presentations from Goldman
Sachs and legal counsel. All members of the PGC Board other than Richard Geary
were present for at least a portion of the meeting. The PGC Board received
updated due diligence reports on Enron and an updated review of PGC's business
prospects. Goldman Sachs reviewed various financial and other information and
rendered to the PGC Board its oral opinion to the effect that, as of April 14,
1997 and based upon and subject to certain assumptions, the proposed PGC
Conversion Ratio of 0.9825 shares of New Enron Common Stock per share of PGC
Common Stock pursuant to the Amended Merger Agreement was fair to the holders of
PGC Common Stock (other than Enron or any of its subsidiaries). Legal counsel
reviewed the form of the First Amendment. The Board discussed the First
Amendment and the alternatives available to PGC. Following such discussion the
PGC Board, by a unanimous vote of those present, adopted the Amended Merger
Agreement, authorized the execution of the First Amendment, and determined to
submit the Amended Merger Agreement to the PGC shareholders with the PGC Board's
recommendation for approval.
Following the meeting of the PGC Board of Directors, the First Amendment
was executed.
Shortly thereafter, Enron and PGC advised the OPUC staff and other parties
of the First Amendment. Settlement discussions with the OPUC staff and
intervenors ensued and formal settlement conferences were held on April 24 and
April 29. During the settlement negotiations, the OPUC staff and intervenors
requested changes and additions to the conditions included in the First
Amendment. At the end of the April 29 conference, the OPUC Staff, Enron, PGC and
certain intervenors reached agreement on a revised set of conditions and signed
a stipulation (the "Stipulation") setting forth the parties' agreement to
recommend that the OPUC adopt the Stipulation (and the conditions contained
therein) and approve the PGC Merger.
A number of additional intervenors signed the Stipulation shortly after the
April 29 settlement conference. On May 6, the OPUC entertained oral arguments by
interested parties regarding the Stipulation and the proposed conditions. One
intervenor argued for the imposition of an additional condition designed to
constrain PGE or any affiliate from making a combined sale of electricity and
gas to any of PGE's customers prior to implementation of a direct customer
access program for these customers. Enron and PGC have not agreed to this
proposed condition. The OPUC is considering the Stipulation, the written
comments and the issues raised during the oral arguments and is scheduled to
issue an order regarding Enron's request for merger approval on June 4, 1997.
REASONS FOR THE MERGERS; RECOMMENDATION OF THE PGC BOARD OF DIRECTORS
Enron and PGC believe that the combined company and its shareholders can
benefit significantly in long-term earnings and cash flow as a result of the
expected strategic benefits resulting from the Mergers, including the following:
- At the wholesale marketing, trading and supply level, the combined entity
will be well positioned to be the provider of choice in energy products,
principally natural gas and electricity. By combining Enron's marketing
and risk management expertise with PGC's physical delivery capabilities
and asset operation experience, the combined entity will have a strong
presence in the wholesale and retail energy markets, both domestically and
internationally.
- At the domestic retail level, the combined entity will strive to be the
leading national brand-name total energy provider. By combining the
companies' respective retail marketing expertise in natural gas,
electricity and energy management, the combined entity will be able to
provide a full range of energy products and specialty services to
commercial, industrial and residential customers. By building on PGC's
experience in automated metering, billing, auditing and other end-user
customer service functions, the combined entity will be able to offer
reliable, low-cost energy and energy management services to customers
nationwide. In addition, PGC has several non-regulated service and
infrastructure investments which both companies believe have significant
growth potential.
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- The combined entity will also aim to be the most innovative and efficient
manager of electric generation, transmission and distribution assets in
the rapidly changing worldwide marketplace for power. By leveraging the
operating and engineering expertise of PGC with Enron's worldwide asset
base and experience, the combined entity will be able to expand domestic
and international activities across multiple energy sources, including
natural gas, oil, coal and hydro power.
- For more than a decade, Enron has participated in the fully competitive
market for natural gas. More recently, Enron has participated in the
increasingly competitive market for electricity. Enron's competitive
experience will help the combined entity successfully compete in the
electricity marketplace.
Recommendation of the PGC Board. The PGC Board believes that the terms of
the Mergers are fair to, and in the best interests of, PGC and its shareholders.
Accordingly, the PGC Board, by a unanimous vote of those present, has adopted
the Amended Merger Agreement and unanimously recommends its approval by PGC's
shareholders. The PGC Board believes that the Mergers represent a significant
strategic opportunity for PGC and should offer PGC and its shareholders better
prospects for the future than would be available to PGC as a stand-alone entity.
Of particular significance to the PGC Board was the fact that the transaction
contemplates a significant premium to the market price of PGC Common Stock--48
percent based on the closing price of the companies' shares on the trading day
immediately preceding public announcement of the Original Merger Agreement and
25 percent based on the closing price of the Enron Common Stock on the trading
day immediately prior to public announcement of the First Amendment compared to
the closing price of the PGC Common Stock on the trading day immediately
preceding public announcement of the Original Merger Agreement.
In reaching its decision to approve the First Amendment and the Amended
Merger Agreement, the PGC Board considered the alternatives available to PGC,
including: (i) refusing to renegotiate the PGC Conversion Ratio and taking the
position that Enron should offer additional merger-related benefits in order to
obtain OPUC approval; (ii) restructuring the transaction in a way that would
provide the PGC shareholders with a portion of the merger consideration in the
form of a security whose value would be tied to the performance of PGE after the
Mergers, or (iii) seeking to terminate the Original Merger Agreement.
In evaluating the alternative of refusing to renegotiate, the PGC Board
took into account Enron's position that it would be unwilling and was not
required under the Original Merger Agreement to resubmit its March 13 informal
proposal of merger-related benefits of $106 million, and the difficulties and
uncertainties associated with seeking to compel Enron to offer merger-related
benefits in an amount sufficient to satisfy the requirements of the OPUC.
In evaluating the possibility of some other type of restructuring involving
a security whose value would be tied to the performance of PGE, the PGC Board
concluded, as had the Executive Committee, that such a security would be
difficult to value and would likely create the possibility of significant
conflicts between the interests of the holders of such securities and the
holders of common stock of the combined entity.
In evaluating the possibility of terminating the Original Merger Agreement,
the PGC Board considered the risk and difficulty of achieving the value for PGC
shareholders contemplated by the proposed Amended Merger Agreement by any other
means.
In reaching its decision to approve the Amended Merger Agreement, the PGC
Board considered that: (i) the reduction in the PGC Exchange Ratio was modest
(1.75%); (ii) it was the opinion of PGC management that the increased
merger-related benefits proposed to be offered to the OPUC greatly enhanced the
likelihood of the consummation of the Mergers; (iii) PGC shareholders would have
the opportunity to vote on the Amended Merger Agreement; and (iv) the Amended
Merger Agreement contained the same provisions as the Original Merger Agreement
allowing the PGC Board to terminate upon the payment of a termination fee if a
better transaction for the shareholders emerged prior to the Annual Meeting.
The PGC Board also considered the decrease in the price of Enron Common
Stock from a closing price of $40.75 per share on July 19, 1996, the last
trading day prior to the joint announcement by Enron and PGC
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that they had executed the Original Merger Agreement, to a closing price of
$35.875 per share on April 11, 1997, the last trading day prior to that PGC
Board meeting.
In addition to the factors described above, the PGC Board considered the
following factors that it had also considered in connection with the Original
Merger Agreement: (i) the current and historical market prices of the PGC Common
Stock and Enron Common Stock (as set forth under "Market Prices and Dividend
Information"); (ii) information concerning the financial performance, condition,
business operations and prospects of each of PGC and Enron; (iii) the effects of
the Mergers on PGC's existing shareholders, including the opportunity to share
in the anticipated benefits of ownership of the combined enterprise; (iv) the
expected federal income tax treatment of the Mergers as a tax-free
reorganization to shareholders (as described under "-- Federal Income Tax
Consequences"); (v) the regulatory treatment to be requested in connection with
the Mergers (as discussed under "-- Governmental and Regulatory Approvals") and
the belief that customers will benefit from a broader range of innovative
products and services; (vi) the terms of the Amended Merger Agreement, which
provide for balanced representations and warranties, conditions to closing and
rights to termination, protection for employees of PGC and the communities it
serves; (vii) the fact that the transaction is not driven by a desire to cut
costs through the elimination of duplicative functions, and thus it is
anticipated that the combination will result in greater career opportunities for
PGC employees both in North America and internationally; (viii) the provision in
the Amended Merger Agreement that requires each of Enron and PGC immediately
prior to the Effective Time to cause contributions of $10 million to be made to
the assets of the Foundation to be used for charitable purposes in accordance
with the constituent documents of the Foundation in the PGE service area, and
that further specifies that the Foundation will continue to be administered by
the current directors of the Foundation and their designated successors; and
(ix) the opinion of PGC's financial advisor, Goldman Sachs, that, as of the date
hereof and based upon the factors and assumptions described in such opinion, the
PGC Conversion Ratio pursuant to the Amended Merger Agreement is fair to the
holders of shares of PGC Common Stock (other than Enron or any of its
subsidiaries). In determining that the Mergers are fair to PGC's shareholders,
the PGC Board considered the above factors as a whole and did not assign
specific or relative weights to them. In the view of the PGC Board, each of the
factors listed above reinforced its belief that the combined entity would have
excellent business prospects going forward. Because PGC's shareholders
collectively would own approximately a 16% interest in the combined entity, the
prospects of such entity were an important factor to the PGC Board in
determining whether to approve the transaction.
THE PGC BOARD, BY A UNANIMOUS VOTE OF THE DIRECTORS PRESENT, HAS ADOPTED
THE AMENDED MERGER AGREEMENT, BELIEVES THAT THE TERMS OF THE MERGERS ARE FAIR TO
PGC'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF PGC VOTE
FOR APPROVAL OF THE AMENDED MERGER AGREEMENT.
In considering the recommendation of the PGC Board with respect to the
Amended Merger Agreement, shareholders should be aware that certain members of
PGC's management and the PGC Board have certain interests in the Mergers that
are in addition to the interests of shareholders of PGC generally and that could
potentially represent conflicts of interest. The PGC Board was aware of these
interests and considered them, among other matters, in adopting the Amended
Merger Agreement and the transactions contemplated thereby. See "-- Interests of
Certain Persons in the Mergers."
OPINION OF PGC FINANCIAL ADVISOR
On April 14, 1997, Goldman Sachs delivered its oral opinion (subsequently
confirmed by delivery of a written opinion) to the PGC Board of Directors that
as of the date of such opinion the PGC Conversion Ratio pursuant to the Amended
Merger Agreement was fair to the holders of PGC Common Stock (other than Enron
or any of its subsidiaries). Goldman Sachs subsequently confirmed its earlier
opinion by delivery of its written opinion, dated the date hereof, that, based
upon the factors and assumptions described in such opinion, as of the date
hereof the PGC Conversion Ratio pursuant to the Amended Merger Agreement is fair
to the holders of PGC Common Stock (other than Enron or any of its
subsidiaries).
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The full text of the written opinion of Goldman Sachs dated as of the date
hereof, which sets forth assumptions made, matters considered and limits of the
review undertaken in connection with the opinion, is attached hereto as Annex B
and is incorporated herein by reference. Holders of shares of PGC Common Stock
are urged to, and should, read such opinion in its entirety. Goldman Sachs'
written opinion is addressed to the PGC Board of Directors and does not
constitute a recommendation to any PGC shareholder as to how such shareholder
should vote at the Annual Meeting, and should not be relied upon by any
shareholder as such. The summary of the written opinion of Goldman Sachs set
forth in this Proxy Statement/Prospectus is qualified in its entirety by
reference to the full text of such opinion.
In connection with its opinion, Goldman Sachs reviewed, among other things,
the Amended Merger Agreement; the Registration Statement, including this Proxy
Statement/Prospectus; Annual Reports to Shareholders and Annual Reports on Form
10-K of PGC and Enron for the five years ended December 31, 1996; certain
interim reports to shareholders and Quarterly Reports on Form 10-Q of PGC and
Enron; certain FERC Forms 1 of PGC and FERC Forms 2 of Enron; certain other
communications from PGC and Enron to their respective shareholders; and certain
internal financial analyses and forecasts for PGC and Enron prepared by their
respective managements. Goldman Sachs also has held discussions with members of
the senior managements of PGC and Enron regarding the past and current business
operations, financial condition and future prospects of their respective
companies and the future prospects of New Enron. In addition, Goldman Sachs
reviewed the reported price and trading activity for the PGC Common Stock and
for the Enron Common Stock, compared certain financial and stock market
information for PGC and Enron with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the electric utility industry
specifically and in other industries generally, and performed such other studies
and analyses as Goldman Sachs considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
the purposes of its opinion, as well as upon assessments by each of PGC and
Enron of their respective contingent obligations. With respect to financial
forecasts and projections provided by the respective managements of PGC and
Enron, Goldman Sachs assumed, with the consent of the PGC Board of Directors,
that such financial forecasts and projections were reasonably prepared on bases
reflecting the best available estimates and judgments as to the future financial
and other performance of PGC and Enron, as applicable. Goldman Sachs further
assumed, with the consent of the PGC Board of Directors, that obtaining any
necessary regulatory or third-party approvals for the transactions contemplated
by the Amended Merger Agreement will not have an adverse effect on PGC or Enron,
as applicable. Goldman Sachs has not made an independent evaluation or appraisal
of the assets and liabilities of PGC or Enron or any of their respective
subsidiaries and Goldman Sachs has not been furnished with any such evaluation
or appraisal.
The following is a summary of the financial analyses used by Goldman Sachs
believed by it to be material in connection with providing its oral opinion
(subsequently confirmed in writing) to the PGC Board of Directors as of April
14, 1997. Goldman Sachs utilized substantially the same type of financial
analyses in connection with providing the written opinion attached hereto as
Annex B.
(i) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain actual and estimated financial information relating to PGC to
corresponding financial information, ratios and public market multiples for
16 publicly-traded utility companies: Central Louisiana Electric Company,
Inc., DPL, Inc., Florida Progress Corporation, Idaho Power Company, IPALCO
Enterprises, Inc., KU Energy Corporation, The Montana Power Company, Nevada
Power Company, Oklahoma Gas and Electric Company, PacifiCorp, Public
Service Company of Colorado, Puget Sound Energy, Inc., Sierra Pacific
Resources, UtiliCorp United Inc., The Washington Water Power Company and
Western Resources, Inc. (collectively, the "Selected Utility Companies").
The Selected Utility Companies were chosen because they are publicly-traded
companies with operations that for purposes of analysis may be considered
similar to PGC. Goldman Sachs calculated and compared various financial
multiples and ratios. The multiples and ratios of PGC and the Selected
Utility Companies were calculated using a price of $33.50 per share of PGC
Common Stock, the closing price on the NYSE on April 9, 1997, and on
closing market prices on April 9, 1997 for each of the Selected Utility
Companies, publicly reported financial
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results and publicly available information from a number of public sources
as well as Goldman Sachs Investment Research Estimates. Unless otherwise
indicated PGC estimates were provided by PGC, and other publicly available
estimates were considered. Goldman Sachs considered for the Selected
Utility Companies estimated 1997 price/earnings ("P/E") ratios, which
ranged from 10.7x to 14.1x, compared to 13.6x for PGC based on PGC
estimates and 12.9x for PGC based on International Brokers Estimate System
("IBES") estimates; estimated 1998 P/E ratios, which ranged from 10.3x to
13.0x, compared to 13.7x for PGC based on PGC estimates and 12.4x for PGC
based on IBES estimates; dividend yield, which ranged from 3.2% to 8.2%,
compared to 3.8% for PGC based on PGC estimates and 3.8% for PGC based on
IBES estimates; 1996 payout ratios, which ranged from 45% to 103%, compared
to 51% for PGC; five-year projected earnings per share ("EPS") and dividend
per share growth rates, which ranged from 1.0% to 4.0% and from 0.0% to
4.0%, respectively, compared to 3.3% based on PGC estimates (3.5% based on
IBES estimates) and 3.0% based on PGC estimates for PGC; and latest twelve
months return on equity, which ranged from 9.4% to 21.7%, compared to 13.9%
for PGC. Goldman Sachs also considered market values as a multiple of book
value and latest twelve months cash flow as of December 31, 1996 (which
were computed by adding net income available for common stock,
depreciation, and deferred taxes minus allowance for funds used during
construction, deferred fuel expenses and accrued revenues). Goldman Sachs'
analyses of the Selected Utility Companies indicated multiples of book
value ranging from 1.18x to 3.12x, compared to a PGC multiple of 1.77x, and
multiples of cash flows ranging from 4.1x to 8.6x compared to a multiple of
6.3x for PGC.
Goldman Sachs also reviewed and compared certain actual and estimated
financial information relating to Enron to corresponding financial
information, ratios and public market multiples for eight publicly-traded
gas companies: The Columbia Gas System, Inc., Consolidated Natural Gas
Company, El Paso Natural Gas Company, Equitable Resources, Inc., NGC
Corporation, PanEnergy Corp., Sonat Inc. and The Williams Companies, Inc.
(collectively, the "Selected Gas Companies"). The Selected Gas Companies
were chosen because they are publicly-traded companies with operations that
for purposes of analysis may be considered similar to Enron. Goldman Sachs
calculated and compared various financial multiples and ratios. The
multiples and ratios of Enron and the Selected Gas Companies were
calculated using a price of $37.13 per share of Enron Common Stock, the
closing price on the NYSE on April 9, 1997, and on closing market prices on
April 9, 1997 for each of the Selected Gas Companies, publicly reported
financial results and publicly available information from a number of
public sources as well as Goldman Sachs Investment Research Estimates.
Enron estimates were provided by Enron, and other publicly available
estimates were considered. Goldman Sachs considered for the Selected Gas
Companies estimated 1997 P/E ratios, which ranged from 12.4x to 20.2x,
compared to 14.2x for Enron based on Enron estimates and 14.2x for Enron
based on IBES estimates; estimated 1998 P/E ratios, which ranged from 11.5x
to 18.1x, compared to 11.7x for Enron based on Enron estimates and 12.4x
for Enron based on IBES estimates; dividend yield, which ranged from 1.0%
to 10.6%, compared to 2.4% for Enron; leveraged capitalization to latest
twelve months earnings before interest, taxes, depreciation and
amortization (as of December 31, 1996) multiples, which ranged from 7.5x to
16.4x, compared to 7.4x for Enron; leveraged capitalization to latest
twelve months earnings before income taxes (as of December 31, 1996)
multiples, which ranged from 11.0x to 22.5x, compared to 10.2x for Enron;
and debt to total capitalization (as of December 31, 1996), which ranged
from 18.9% to 46.3%, compared to 24.6% for Enron. Goldman Sachs also
considered market values as a multiple of book value as of December 31,
1996 and estimated 1997 and 1998 cash flows (which were computed by adding
estimated amounts for net income available for common stock, depreciation,
deferred taxes, oil and gas exploration expenses and other non-cash
charges). Goldman Sachs' analyses of the Selected Gas Companies indicated
multiples of book value ranging from 1.4x to 2.9x, compared to a multiple
of 2.6x for Enron, and multiples of estimated 1997 and estimated 1998 cash
flows ranging from 5.2x to 9.3x and from 5.9x to 8.3x, respectively,
compared to multiples of 6.9x and 6.6x for Enron.
(ii) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected transactions in the electric utility
industry since 1987 (the "Goldman Selected Transactions"). Such analysis
indicated, among other things, that for the Goldman Selected Transactions
the premium over market value ranged from 0.0% to 65.0%, with a median of
21.2% (20.3% including transactions in
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which utilities purchased gas companies ("Gas Transactions")), compared to
a 29.7% premium over the market value of the PGC Common Stock in the PGC
Merger (based on the July 19, 1996 closing prices); premium over five year
high market value ranged from (61.9)% to 41.8%, with a median of (5.8)%
((2.3)% including the Gas Transactions), compared to a 16.3% premium over
the five year high market value of the PGC Common Stock in the PGC Merger;
multiple of price (based on closing prices one day prior to announcement)
to next year estimated earnings per share ranged from 7.3x to 22.0x, with a
median of 13.3x (14.5x including the Gas Transactions) compared to 14.0x
(based on 1997 estimated earnings) for the PGC Common Stock (based on the
April 9, 1997 closing prices); percentage increase in dividends to target
shareholders (based on dividends paid prior to announcement) ranged from
(34.1)% to 52.0% ((34.1)% to 535.7% including the Gas Transactions), with a
median of 0.0% (2.8% including the Gas Transactions but excluding the
particular Gas Transaction with a 535.7% increase in dividends to target
shareholders), compared to (30.9)% for the PGC Common Stock in the PGC
Merger; multiple of price (based on closing prices one day prior to
announcement) to latest twelve months cash flow (calculated as net income
from operations plus depreciation, amortization, deferred taxes and other
non-cash charges and before extraordinary items) ranged from 3.2x to 11.6x,
with a median of 6.6x (6.8x including the Gas Transactions), compared to
6.8x for the PGC Common Stock in the PGC Merger (based on the April 9, 1997
closing prices); and multiple of price (based on closing prices one day
prior to announcement) to book value ranged from 0.6x to 2.5x (0.6x to 3.2x
including the Gas Transactions), with a median of 1.7x (both including and
excluding the Gas Transactions), compared to 1.9x for the PGC Common Stock
in the PGC Merger (based on the April 9, 1997 closing prices).
(iii) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma
analyses of the financial impact of the Mergers on the holders of shares of
PGC Common Stock using the following three sets of EPS estimates for the
years 1997, 1998, 1999 and 2000: (i) primary EPS estimates for PGC and
Enron prepared by their respective managements (the "Management Primary
Estimates"), (ii) primary EPS estimates for PGC prepared by its management
and for Enron based on IBES estimates (the "Combined Estimates"), and (iii)
fully diluted EPS estimates for PGC and Enron prepared by their respective
managements (the "Fully Diluted Management Estimates"). Using such
estimates, Goldman Sachs, among other things, compared the estimated
primary or fully diluted EPS, as applicable, of PGC Common Stock, on a
stand-alone basis, to the estimated primary or fully diluted EPS, as
applicable, of the combined company's common stock on a pro forma basis.
Goldman Sachs performed this analysis based on certain assumptions and
financial forecasts (as provided by PGC and Enron management). Based on
such analysis and a closing Enron Common Stock price of $37.13 on April 9,
1997, the proposed Mergers would be accretive (dilutive) to PGC's
shareholders on a primary or fully diluted EPS basis, as applicable, in the
years 1997, 1998, 1999, and 2000 at levels of, in the case of the
Management Primary Estimates, 0.4%, 19.6%, 26.4% and 36.4%, respectively,
in the case of the Combined Estimates, 0.1%, 13.4%, 20.1% and 25.2%,
respectively, and in the case of the Fully Diluted Management Estimates,
(5.3)%, 12.9%, 19.4% and 28.9%, respectively.
(iv) Contribution Analysis. Goldman Sachs reviewed certain historical
and estimated future operating and financial information (including, among
other things, market capitalization, net income, cash flow and book value)
for PGC, Enron and the combined company resulting from the Mergers based on
PGC and Enron managements' respective financial forecasts for each of PGC
and Enron. Based on April 9, 1997 market values and December 31, 1996
financial information, the analysis indicated that on a pro forma basis PGC
would contribute 15% of the market capitalization, 21% of the book value
and 18% of the assets of the consolidated entity. Goldman Sachs also
analyzed the relative income statement contributions of PGC and Enron to
the consolidated entity on a pro forma basis based on actual 1996 and
estimated years 1997 and 1998, financial data provided to Goldman Sachs by
PGC and Enron managements. This analysis indicated that on a pro forma
basis in 1996 PGC would have contributed 19% of the net income of the
consolidated entity and on a pro forma basis in 1997 and 1998 PGC would
contribute 16% and 14%, respectively, of the net income of the consolidated
entity. In addition, this analysis indicated that on a pro forma basis in
1996 PGC would have contributed 24% of the cash flows of the consolidated
entity and on a pro forma basis in 1997 and 1998 PGC would contribute 26%
and 25%,
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respectively, of the cash flows of the consolidated entity. This analysis
also indicated that on a pro forma basis PGC would have contributed 8% of
1996 revenues of the consolidated entity.
(v) Historical Exchange Ratio. Goldman Sachs reviewed certain
historical trading prices for the shares of PGC Common Stock and the shares
of Enron Common Stock over various periods within the latest five years.
Such analysis demonstrated a range of exchange ratios (calculated by
dividing the price per share of PGC Common Stock by the price per share of
Enron Common Stock) from 0.66x to 0.77x and an exchange ratio of 0.90x as
of April 9, 1997 (based on the closing per share prices of $33.50 per share
of PGC Common Stock and $37.13 per share of Enron Common Stock on April 9,
1997). The historical exchange ratio analysis indicated that the market has
valued PGC Common Stock within a range of 0.66x to 0.77x relative to Enron
Common Stock, and that on the trading day immediately prior to the date of
execution of the Original Merger Agreement, PGC Common Stock traded within
that range at 0.69x relative to Enron Common Stock. During the period from
July 19, 1996 to April 9, 1997 the average exchange ratio was 0.94x.
(vi) Discounted Cash Flow Analysis. Goldman Sachs performed discounted
cash flow analyses to value the PGC Common Stock using PGC's management
projections. Goldman Sachs calculated a net present value of free cash
flows for PGC for the years 1997 through 2001 using discount rates ranging
from 8% to 14%. Goldman Sachs calculated PGC's terminal values in the year
2001 based on a terminal multiple of the year 2001 earnings which were
assumed to increase 3.6% from 2001 levels. The terminal values were based
on a multiple of 10x to 14x estimated earnings in 2001 and discounted to
present value using discount rates ranging from 8% to 14%. This valuation
resulted in implied per share values ranging from $27.23 to $44.02 for the
PGC Common Stock.
(vii) Dividend Discount Valuation Analysis. Goldman Sachs performed a
dividend discount valuation analysis for PGC. Using the actual 1996
dividend of $1.28 per share for PGC, which represented a 51% payout ratio,
estimated dividend growth rates ranging from 1% to 5% and estimated
required return on equity rates ranging from 8% to 14%, the implied per
share values of PGC Common Stock ranged from $9.85 to $42.67. In varying
PGC's payout ratio from 60% to 90%, implied per share values of PGC Common
Stock ranged from $11.68 to $75.90.
(viii) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the PGC Common Stock and the
relationship between movements of the PGC Common Stock price and movements
in a composite index (the "Utility Composite") of the Selected Utility
Companies and in the S&P 500. This analysis indicated that, for the period
from July 17, 1996 to April 4, 1997 the PGC Common Stock outperformed both
the Utility Composite and the S&P 500, for the period from April 3, 1996 to
April 3, 1997, the PGC Common Stock outperformed the Utility Composite and
slightly underperformed the S&P 500 and for the period between March 31,
1992 and March 31, 1997 the PGC Common Stock outperformed the Utility
Composite and the S&P 500. Goldman Sachs also reviewed the historical
trading prices and volumes for the Enron Common Stock and the relationship
between movements of the Enron Common Stock price and movements in a
composite index (the "Gas Composite") of the Selected Gas Companies and in
the S&P 500. This analysis indicated that for the period from July 17, 1996
to April 4, 1997 the Enron Common Stock underperformed the Gas Composite
and outperformed the S&P 500, for the period from April 3, 1996 to April 3,
1997 the Enron Common Stock underperformed the Gas Composite and the S&P
500, and for the period between March 31, 1992 and March 31, 1997 the Enron
Common Stock underperformed the Gas Composite and outperformed the S&P 500.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses, taken as a whole.
Furthermore, in arriving at its fairness opinion, Goldman Sachs did not
attribute any particular weight to any analysis or factor considered by it;
rather, Goldman Sachs made its determination as to fairness on the basis of
qualitative judgments as to the significance and relevance of the financial and
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comparative analyses and factors described above, taken as a whole. No company
or transaction used in the above analyses as a comparison is identical to PGC or
Enron or the contemplated transaction. The analyses were prepared solely for
purposes of Goldman Sachs in providing its opinion to the PGC Board of Directors
as to the fairness of the PGC Conversion Ratio to the holders of shares of PGC
Common Stock and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of PGC, Enron, Goldman Sachs or any other person
assumes responsibility if future results are materially different from those
forecast.
As described above, Goldman Sachs' opinion to the PGC Board of Directors
was one of many factors taken into consideration by the PGC Board of Directors
in making its determination to adopt the Amended Merger Agreement. Although
Goldman Sachs evaluated the fairness of the PGC Conversion Ratio to the holders
of shares of PGC Common Stock, the specific PGC Conversion Ratio was determined
by Enron and PGC through arm's-length negotiation. The foregoing summary does
not purport to be a complete description of the analyses performed by Goldman
Sachs and is qualified by reference to the written opinion of Goldman Sachs set
forth in Annex B hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. PGC selected Goldman
Sachs as its financial advisor because it is a nationally recognized investment
banking firm that has substantial experience in transactions similar to the
Mergers. Goldman Sachs is familiar with PGC having provided certain investment
banking services to PGC and certain of its subsidiaries from time to time,
including having acted as managing underwriter of public offerings of $37
million of PGC Common Stock in February 1994 and $75 million principal amount of
8 1/4% Quarterly Income Debt Securities of PGC due 2035 in October 1995, and
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Original Merger
Agreement and the Amended Merger Agreement. Goldman Sachs also has provided
certain investment banking services to Enron and certain of its subsidiaries
from time to time, including having acted as managing underwriter of public
offerings by Enron of $675 million of common stock of EOG in December 1995 and
$228 million principal amount of 6 1/4% Exchangeable Notes due 1998 in December
1995. Goldman Sachs may provide investment banking services to Enron, the
combined company or their respective subsidiaries in the future.
In the ordinary course of the trading activities of Goldman Sachs, Goldman
Sachs actively trades the debt and equity securities of PGC and Enron for its
own account and for the accounts of customers of Goldman Sachs and may,
therefore, at any time, hold a long or short position in such securities.
Pursuant to a letter agreement dated April 26, 1996 (the "Engagement
Letter"), as supplemented by a letter dated August 22, 1996, PGC engaged Goldman
Sachs to act as its financial advisor in connection with a potential merger,
business combination or other strategic combination. Pursuant to the terms of
the Engagement Letter, PGC has paid Goldman Sachs retainer fees of $100,000,
which amount will be credited against the Success Fee (as defined below). In
addition, in connection with the Mergers, PGC has agreed to pay Goldman Sachs a
success fee of 0.44% of the aggregate consideration paid for the PGC Common
Stock (including amounts paid to holders of options, warrants and convertible
securities) (the "Success Fee"). For the purposes of calculating the Success
Fee, the value of the Enron Common Stock proposed to be received as
consideration in the Mergers will be the average of the last sales price for the
Enron Common Stock on the five trading days ending five days prior to the
consummation of the Mergers. The Success Fee is payable in three installments,
25% upon the execution of the Original Merger Agreement, 25% upon the approval
of the Original Merger Agreement by PGC shareholders and 50% upon the
consummation of the Mergers. Upon execution of the Original Merger Agreement,
Goldman Sachs received $2,266,066.48 in respect of the first installment of the
Success Fee and upon approval of the Original Merger Agreement by PGC
shareholders on November 12, 1996 Goldman Sachs received $2,568,598.91 in
respect of the second installment of the
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Success Fee. The first installment was calculated based on the Enron Common
Stock closing price on July 19, 1996, the business day prior to the announcement
of the execution of the Original Merger Agreement, and the second installment
was based on the average closing price of the Enron Common Stock for the five
trading days ending one trading day prior to the meeting of PGC shareholders at
which the Original Merger Agreement was approved. The final installment will
consist of the actual Success Fee less the first two installments previously
paid. The retainer fees were credited against the first installment of the
Success Fee. PGC has also agreed to reimburse Goldman Sachs quarterly for its
reasonable out-of-pocket expenses, including attorneys' fees and disbursements
of up to $25,000 (which amount may be increased with the consent of PGC, which
consent may not be unreasonably withheld), and to indemnify Goldman Sachs
against certain liabilities, including certain liabilities under the federal
securities laws.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
In considering the recommendation of the PGC Board with respect to the PGC
Merger, shareholders should be aware that certain members of PGC's management
and Board of Directors have certain interests in the PGC Merger that are in
addition to the interests of shareholders of PGC generally and that could
potentially represent conflicts of interest. The PGC Board was aware of these
interests and considered them, among other things, in adopting the PGC Merger.
Board of Directors. As agreed by Enron and PGC, at the Effective Time, it
is intended that the Enron Board will consist of not more than seventeen
persons, of whom three will be designated by PGC and be reasonably acceptable to
Enron. Of these three, one will be Mr. Harrison. PGC has not yet determined who
the other two PGC designees will be.
Vesting of Certain Benefits for PGC Directors and Executive Officers.
Several of the employee benefit plans pertaining to PGC directors and executive
officers contain change of control provisions pursuant to which benefits
conferred by such plans vest immediately upon a change of control of PGC. On
September 10, 1996, the PGC Board approved an amendment to PGC's Amended and
Restated Outside Directors Stock Compensation Plan ("Stock Plan") to provide
that shares of restricted PGC Common Stock held by certain of PGC's outside
directors will vest at the Effective Time. The number of shares that will so
vest is as follows: Ms. Booth: 2,376 shares; Mr. Brix: 2,376 shares; Ms.
Chambers: 1,318 shares; Mr. Creighton: 2,748 shares; Mr. Geary: 1,610 shares;
Mr. Hudson: 2,376 shares; Mr. Meyer: 1,318 shares; Mr. Miller: 2,376 shares; and
Mr. Willison: 2,376 shares. Similarly, pursuant to certain provisions of the
Portland General Corporation Long-Term Incentive Master Plan ("LTIP"), certain
PGC employees hold restricted PGC Common Stock, and certain employees hold
options to purchase shares of PGC Common Stock, that vested upon the date that
shareholders approved the Original Merger Agreement. Pursuant to such
provisions, the following numbers of shares of PGC Common Stock vested for the
following officers upon approval of the Original Merger Agreement by the PGC
shareholders: Mr. Alexanderson: 13,000 shares; Mr. Carboneau: 10,000 shares; Mr.
Dyer: 17,000 shares; Ms. Fowler: 15,000 shares; Mr. Harrison: 44,000 shares; Mr.
Hirko: 20,000 shares; Mr. Kielblock: 11,000 shares; and Mr. Miller: 10,000
shares. Pursuant to such provisions, options to purchase the following numbers
of shares of PGC Common Stock vested for the following officers upon approval of
the Original Merger Agreement by the PGC shareholders: Mr. Alexanderson: 7,500
shares; Mr. Carboneau: 7,500 shares; Mr. Dyer: 7,500 shares; Ms. Fowler: 7,500
shares; Mr. Hirko: 10,000 shares; Mr. Kielblock: 7,500 shares; and Mr. Miller:
15,000 shares.
Employment Agreements. In February 1996, the PGC Board of Directors
approved employment agreements between PGC and certain executive officers of PGC
pursuant to which such officers obtain certain benefits upon a Change in Control
(as defined in such agreements) of PGC. Messrs. Harrison, Hirko, Dyer,
Alexanderson, Ms. Fowler, Messrs. Carboneau, Kielblock, and Miller have such
employment agreements with PGC. The approval of the Original Merger Agreement by
the PGC shareholders constituted a Change in Control within the meaning of these
executives' employment agreements. Accordingly, the affected executive officers
obtained the benefits described below upon shareholder approval of the Original
Merger Agreement. Each of the above-mentioned officers has entered into an
employment agreement with Enron that becomes effective at the Effective Time and
at such time will replace and supersede the Officer's existing employment
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agreements with PGC or PGE. Officers who have entered into such employment
agreements with Enron will receive benefits according to the terms of these
superseding agreements if the Mergers are consummated.
As described above, Messrs. Harrison and Hirko have entered into employment
agreements with Enron that will become effective at the Effective Time, at which
time New Enron will assume the obligations thereunder. Copies of these
agreements are included as Annexes C and D hereto, respectively, and the
following descriptions of these agreements are each qualified in their entirety
by reference to the respective agreements annexed hereto.
Pursuant to Mr. Harrison's employment agreement, Mr. Harrison will serve as
Vice Chairman of Enron and Chairman, President, and Chief Executive Officer of
PGE for a period of five years (the "Initial Term"), subject to certain
termination provisions described below, and thereafter as Mr. Harrison and Enron
may agree. Mr. Harrison will receive an annual base salary of not less than
$525,000 and will be entitled to participate in Enron's Executive Compensation
Program on the same basis as other senior executives of Enron (except as
otherwise provided in Mr. Harrison's agreement). Mr. Harrison will be entitled
to participate in other Enron benefit programs, such as health, life and
disability insurance, on the same basis generally as other employees of Enron.
In addition, Mr. Harrison will receive on the Effective Date (as defined in the
agreement) a grant under the Enron Corp. 1991 Stock Plan of an option to
purchase 120,000 shares of Enron Common Stock with an exercise price per share
equal to the fair market value of such stock at the Effective Time; this option
will have a ten- year term and will vest 20% on the date of grant and 20% on
each succeeding anniversary of the Effective Date, except in the case of Mr.
Harrison's Involuntary Termination (as defined below, but not including a
voluntary termination during an annual Window Period (as defined below)) or a
Change in Control (as defined in the agreement) of Enron or PGE, in which case
the option will vest immediately. At the Effective Time Mr. Harrison will also
receive shares of Enron restricted stock having a fair market value equal to his
annual base salary, such shares vesting in 20% increments on each of the first
five anniversaries of the date of grant and being subject to forfeiture upon
termination of Mr. Harrison's employment. Mr. Harrison will receive an annual
bonus of not less than $525,000, of which 20% will be paid in immediately vested
options to purchase Enron Common Stock and 80% will be paid in cash, except
that, until such time as Mr. Harrison beneficially owns Enron Common Stock with
a fair market value equal to twice his base salary, one-third of the cash amount
which would be paid to Mr. Harrison under the bonus plan will be paid in
unrestricted Enron Common Stock. Following termination of Mr. Harrison's
employment for any reason, he or his surviving spouse will be entitled to a
Supplemental Retirement Benefit (as defined in the agreement) to ensure that the
aggregate pension benefits he or his spouse receives, taking account of all
pension benefits from PGC and Enron, are at least equal to the aggregate pension
benefits he or his spouse would have received under PGC's Pension Plan and
Supplemental Executive Retirement Plan (the "SERP") had he retired on the
Effective Date having attained the Unreduced Benefit Date (as defined in the
SERP) and 25 years of service, and had his Final Average Earnings (as defined in
the SERP) equaled his Earnings (as defined in the SERP) for calendar year 1996.
Enron may terminate the employment agreement with Mr. Harrison for cause if
Mr. Harrison is convicted of a felony, willfully refuses to perform his duties
and responsibilities without proper legal cause and after notice by Enron of
such refusal or failure, or if he willfully engages in conduct which he knows or
should have reason to know may be materially injurious to Enron ("Termination
for Cause"). Mr. Harrison may terminate the agreement and will be treated as
involuntarily terminated in connection with or based on an assignment to him of
duties and responsibilities inappropriate for a senior officer of Enron or PGE;
a reduction in his annual base salary, incentive compensation, or relative
participation in benefit plans; a required relocation from Portland, Oregon; or
a Change in Control (as defined in the agreement) of PGE or Enron. "Involuntary
Termination" is defined in the employment agreement as termination (i) by Enron
other than (a) pursuant to a Termination for Cause or (b) upon death or
permanent disability, or (ii) by Mr. Harrison (a) in connection with any of the
circumstances described in the previous sentence or (b) during one of the
thirty-day periods beginning on the second, third, or fourth anniversaries of
the Effective Date ("Window Periods").
If, prior to the expiration of the initial five-year term, Mr. Harrison's
employment is terminated pursuant to an Involuntary Termination other than a
voluntary termination during a Window Period, he will be entitled
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to (1) all payments of his annual base salary and bonus at such time and in such
manner as if his employment had continued for a two-year period following the
Involuntary Termination, and if the initial five-year term of the agreement
would have continued beyond this two-year period, a lump sum amount equal to the
amount that he would have been paid during the balance of the five year term;
and (2) coverage essentially equivalent to that under certain of Enron's
insurance plans for active employees. If Mr. Harrison terminates his employment
voluntarily during a Window Period, he will be entitled to the insurance
coverage described in (2) and to all payments of his annual base salary and
bonus at such time and in such manner as if his employment had continued for the
balance of the Initial Term, provided that, if the Initial Term would have
continued beyond the second anniversary of the termination date, then Enron will
pay Mr. Harrison a lump sum amount on such second anniversary date equal to the
amount which would have been paid to Mr. Harrison during the balance of the
Initial Term if his employment had continued during such period. In the event
that the severance or other payments payable under the agreement constitute
"excess parachute payments" within the meaning of Section 280G of the Code, and
Mr. Harrison becomes liable for any excise tax or penalties or interest thereon
(the "Tax Penalties"), Enron will pay in cash to Mr. Harrison an amount equal to
such Tax Penalties and any incremental income tax liability arising from such
payments, grossing up Mr. Harrison on such gross ups until the amount of the
last gross up is less than one hundred dollars.
In addition, under Mr. Harrison's employment agreement, he may not
disclose, without authorization, any of Enron's confidential business
information or trade secrets, or make use of the same, during or after his
employment, except on behalf of Enron and for Enron's benefit. The agreement
further provides that, upon termination of Mr. Harrison's employment for any
reason, until the earlier of the fifth anniversary of the Effective Date and the
second anniversary of the date of termination, Mr. Harrison will not, directly
or indirectly, in any state of the United States or in any foreign country where
Enron or any of its affiliates is then conducting business (or has conducted
business during the previous twelve months), (1) engage in any business similar
or related to or competitive with the business conducted by PGC or any affiliate
of PGC immediately before the Effective Time, or in any other area of the
business of Enron or any affiliate with which Mr. Harrison has material
involvement during the two-year period immediately before the termination of his
employment (the "Core Business"); (2) render advice or services to, or otherwise
assist, any other person or entity who is engaged, directly or indirectly, in
any business similar or related to, or competitive with, the Core Business
conducted by Enron or any affiliate; (3) transact any business in any manner
pertaining to suppliers or customers of Enron or any affiliate which, in any
manner, would have, or is likely to have, an adverse effect upon Enron or any
affiliate; or (4) induce any employee of Enron or any affiliate to terminate his
or her employment with Enron or such affiliate.
Mr. Hirko's employment agreement is similar in structure to Mr. Harrison's
agreement. Under his agreement, Mr. Hirko will serve as a Senior Vice President
of Enron and as a senior executive officer of PGE for a period of five years,
subject to certain termination provisions similar to those in Mr. Harrison's
agreement, and thereafter as Mr. Hirko and Enron may agree. Mr. Hirko will
receive an annual base salary of not less than $250,000 and will be entitled to
participate in Enron's Executive Compensation Program on the same basis as other
senior executives of Enron (except as otherwise provided in Mr. Hirko's
agreement). Mr. Hirko will also be entitled to participate in other Enron
benefit programs, such as health, life and disability insurance, on the same
basis generally as other employees of Enron. On the Effective Date, Mr. Hirko
will receive a grant under the Enron Corp. 1991 Stock Plan of an option to
purchase 50,000 shares of Enron Common Stock with an exercise price per share
equal to the fair market value of such stock as of the Effective Date; this
option will have a ten-year term and will vest 20% on the date of grant and 20%
on each succeeding anniversary of the Effective Date, except in the case of Mr.
Hirko's Involuntary Termination (as defined in the agreement, but not including
a voluntary termination during a Window Period or a Change in Control (as
defined in the agreement) of Enron or PGE, in which case the option will vest
immediately. On the Effective Date Mr. Hirko will also receive shares of Enron
Restricted Stock having a fair market value equal to his annual base salary,
such shares vesting in 20% increments on each of the first five anniversaries of
the date of grant and being subject to forfeiture upon termination of Mr.
Hirko's employment. Mr. Hirko will receive an annual bonus of not less than
$250,000, of which 20% will be paid in immediately vested options to purchase
Enron Common Stock and 80% will be paid in cash, except that, until such time as
Mr. Hirko beneficially owns Enron Common Stock with a fair market value equal to
twice his base salary, one-third of the cash
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amount which would be paid to Mr. Hirko under the bonus plan will be paid in
unrestricted Enron Common Stock. Following termination of Mr. Hirko's employment
for any reason, he or his surviving spouse will be entitled to a Supplemental
Retirement Benefit (as defined in the agreement) to ensure that the aggregate
pension benefits he or his spouse receives, taking account of all pension
benefits from PGC and Enron, are at least equal to the aggregate pension
benefits he or his spouse would have received under PGC's Pension Plan and the
SERP had he continued to participate in such pension plan and the SERP through
the date of termination of employment. Mr. Hirko's Supplemental Retirement
Benefit thus differs from Mr. Harrison's Supplemental Retirement Benefit
described above.
The other terms of Mr. Hirko's employment agreement are substantially
similar to those of Mr. Harrison's, except that, in the event of an Involuntary
Termination prior to the expiration of the Initial Term, Mr. Hirko will be
entitled to receive a cash amount equal to the single sum actuarial equivalent
of the incremental amount that would be paid as the Supplemental Retirement
Benefit if that amount were computed assuming that Mr. Hirko had attained an
additional three years of age and an additional three years of service under the
SERP.
In connection with the Amended Merger Agreement, PGE and Enron have entered
into new employment agreements with Ms. Fowler, Mr. Alexanderson and Mr. Dyer
which will become effective as of the Effective Time. The employment agreements
generally provide as follows: (i) each agreement will have a term of three years
from the Effective Time; (ii) each agreement provides for severance pay in the
event of involuntary termination by PGE based on the greater of two years or the
remainder of the term; (iii) Mr. Dyer's agreement provides that he will be
treated as having been involuntarily terminated and entitled to receive three
years severance pay if he terminates his employment for any reason during a
thirty-day period beginning on the first anniversary of the Effective Time; (iv)
the aggregate minimum base salaries per year under such agreements equals
$660,000 per year and the aggregate minimum guaranteed annual cash incentives
per year under such agreements equals $437,500; (v) each agreement provides for
the grant of 30,000 options to purchase shares of Enron Common Stock; (vi) each
agreement provides for the grant of a number of restricted shares of Enron
Common Stock having a market value equal to such employee's annual base salary
which will vest over a five-year period and, in the case of Mr. Alexanderson,
additional shares having a fair market value equal to 50 percent of his annual
base salary which will vest on the last day of Mr. Alexanderson's initial
three-year employment term; (vii) Mr. Dyer's agreement provides that the failure
of PGE and Mr. Dyer to extend or enter into a new agreement in either case for
one year will be treated as involuntary termination, while Ms. Fowler's and Mr.
Alexanderson's agreements provide that the failure of PGE and the employee to
extend or enter into a new agreement in either case for two years will be
treated as involuntary termination; (viii) each agreement provides for a
supplemental retirement benefit; (ix) each agreement provides that in the event
that the severance or other payments payable under the agreement for involuntary
termination (except for an involuntary termination of the type described in
clause (vii) above) constitute "excess parachute payments" within the meaning of
Section 280G of the Code and the employee becomes liable for any Tax Penalties,
PGE will pay in cash to the employee an amount equal to such Tax Penalties and
any incremental income tax liability arising from such payments, grossing up
such employee on such gross ups until the amount of the last gross up is less
than one hundred dollars; and (x) each agreement includes a noncompetition
covenant.
Also in connection with the Amended Merger Agreement, PGE and Enron have
entered into new employment agreements with Messrs. Kielblock, Carboneau and
Miller to become effective as of the Effective Time. The employment agreements
generally provide as follows: (i) each agreement has a term of three years from
the Effective Time, other than the agreement of Mr. Kielblock, which has a term
of one year; (ii) each agreement provides for severance pay in the event of
involuntary termination by PGE based on the greater of two years or the
remainder of the term, other than the agreement of Mr. Kielblock which provides
for three years plus the remainder of the term; (iii) the aggregate minimum base
salaries per year under such agreements equals $495,000 per year and the
aggregate minimum guaranteed annual cash incentives per year under such
agreements equals $148,500; (iv) the grant to each of Messrs. Carboneau and
Miller of 25,000 (and to Mr. Kielblock of 10,000) options to purchase shares of
New Enron Common Stock; (v) Messrs. Carboneau and Miller's agreements provide
that the failure of PGE and the employee to extend or enter into a
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new agreement in either case for two years will be treated as involuntary
termination, while Mr. Kielblock's agreement will provide that termination of
the agreement at the end of its term will be treated as involuntary termination;
(vi) each agreement will provide for a supplemental retirement benefit; (vii)
each agreement will provide that in the event that the severance or other
payments payable under the agreement for involuntary termination (except for an
involuntary termination of the type described in clause (v) above)) constitute
"excess parachute payments" within the meaning of Section 280G of the Code and
the employee becomes liable for any Tax Penalties, the employer will pay in cash
to the employee an amount equal to such Tax Penalties and any incremental income
tax liability arising from such payments, grossing up such employee on such
gross ups until the amount of the last gross up is less than one hundred
dollars; and (viii) each agreement includes a noncompetition covenant.
As discussed above, Messrs. Harrison, Hirko, Dyer, Alexanderson, Ms.
Fowler, and Messrs. Carboneau, Kielblock, and Miller, have existing employment
agreements with PGC or PGE which contain Change in Control provisions (as
defined in the respective agreements) pursuant to the terms of which the
executives will receive certain benefits as a result of PGC shareholder approval
of the Original Merger Agreement if the Mergers are not consummated and the
superseding employment agreements with PGE and Enron do not become effective.
PGC shareholder approval of the Original Merger Agreement constituted a
change of control under the terms of the Employee's employment agreement,
thereby extending the term of the employment agreement to the date three years
following the date of such approval PGC, and the agreement became no longer
terminable by the Employer except for Cause (as such terms are defined in the
agreement). After this three-year period, the employment agreement expires.
During the three-year term, the Employer may not reduce, modify, or add to the
Employee's duties as such duties were defined at the time of the Change in
Control; nor may the Employer reduce the Employee's base salary. In addition,
the Employee will be entitled to short- and long-term incentives and benefits
under the Employer's incentive and benefit programs that are at least as
favorable, in the aggregate, as the most favorable of those benefits provided to
the Employee under such programs prior to the Change in Control. Any breach of
these provisions, including a transfer of the Employee's job to a site different
from that prior to the Change in Control, may be deemed a material breach of the
contract and will entitle the Employee to terminate the agreement and receive
damages, in one lump sum, consisting of (1) $30,000 plus three times the sum of
(A) the amount of the Employee's base salary immediately prior to termination of
employment, and (B) the aggregate of the amounts of the Employee's target Annual
Cash Incentive (as defined in the agreement) award for the year in which the
Employee's employment terminates under all of the Employer's plans or programs
in which the Employee participates; (2) the single sum actuarial equivalent of
the incremental value of adding three years of age and three years of service to
the Employee's vested accrued benefits under the SERP; and, (3) upon the
Employee's election, the single sum actuarial equivalent of the Employee's
vested accrued benefits under the SERP reduced by six percent, such election
resulting in a waiver of all further benefits under the SERP. In addition, the
Employee is entitled to receive, to the extent that such Employee or any of the
Employee's dependents may be covered under the terms of any medical or dental
plans of the Employer for active employees immediately prior to the termination,
equivalent coverage for a period not to exceed thirty-six months after
termination, subject to the Employee's obligation to make contributions equal to
those required from time to time from employees for equivalent coverage under
medical or dental plans. If shareholders do not approve the Amended Merger
Agreement and the Mergers are not consummated, PGC estimates that, based on
current compensation levels and valuation factors, the aggregate after-tax cost
of the severance benefits under these employment agreements would be
approximately $7.7 million.
Director and Executive Single Life Premium Insurance Policies. The Board of
Directors of PGC has approved the amendment of its Outside Directors' Life
Insurance Benefit Plan ("Directors' Insurance Plan") and Senior Officers' Life
Insurance Benefit Plan ("Officers' Insurance Plan") to provide that neither
shareholder approval of the Mergers nor the consummation of the Mergers will
constitute a "change of control" under those plans. However, a participant whose
Board service terminates involuntarily within one year after the Effective Time,
or whose employment terminates involuntarily within two years after the
Effective Time, as applicable, will be entitled to receive a cash payment from
PGC equal to the remaining premiums necessary to cause his or her policy to be
fully paid-up. In addition, a participant whose Board
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service terminates more than one year after the Effective Time or whose
employment terminates more than two years after the Effective Time, as
applicable, will be permitted to be treated as retiring under the Plan, with the
result that he or she will be permitted to elect to purchase the policy insuring
his or her life from the Company or continue as a participant in the Plan.
Changes to Deferred Compensation Plans. As permitted by the Original Merger
Agreement, the PGC Board of Directors approved a change to the Outside Directors
Deferred Compensation Plan ("DDCP") and the Management Deferred Compensation
Plan ("MDCP") to provide that (1) no amendment to the plan may reduce the amount
accrued in the account of any participant as of the date that notice of the
amendment is given; (2) no amendment may reduce the rate of interest credited,
after the date of amendment, to the amount accrued in the account of any
participant as of the date of the amendment; and (3) if the plan is terminated,
account balances of participants shall be paid in the form designated by such
participants.
Indemnification. Pursuant to the Amended Merger Agreement, to the extent,
if any, not provided by an existing right of indemnification or other agreement
or policy, from and after the Effective Time, New Enron will, to the fullest
extent not prohibited by applicable law, indemnify, defend and hold harmless the
present and former directors, officers and management employees of the parties
to the Mergers and their respective subsidiaries against (i) all losses,
expenses (including reasonable attorneys' fees and expenses), claims, damages,
costs, liabilities, judgments or, subject to certain restrictions, amounts paid
in settlement of or in connection with any claim, action, suit, proceeding or
investigation based on or arising out of the fact that such person is or was a
director, officer, or management employee of such party or any subsidiary
thereof, whether pertaining to any matter existing or occurring at or prior to
the Effective Time and whether asserted or claimed prior to, at, or after the
Effective Time, and (ii) all liabilities based on, arising from, or pertaining
to the Amended Merger Agreement or the transactions contemplated thereby.
In addition, the Amended Merger Agreement provides that, for a period of
six years after the Effective Time, New Enron will cause to be maintained in
effect the policies of directors' and officers' liability insurance maintained
by Enron and PGC (subject to certain limitations). See "The Amended Merger
Agreement -- Indemnification."
FEDERAL INCOME TAX CONSEQUENCES
The following discussion includes the opinion of Wachtell, Lipton, Rosen &
Katz, counsel to PGC, as to the material federal income tax consequences of the
Mergers to the holders of capital stock of PGC. The discussion is based upon
current provisions of the Code, existing regulations thereunder, current
administrative rulings of the Internal Revenue Service (the "IRS") and court
decisions, all of which are subject to change. The discussion does not address
all federal income tax consequences of the Mergers that may be relevant to
particular PGC shareholders in light of their particular circumstances,
including holders that are subject to special tax rules such as dealers in
securities, foreign persons, mutual funds, insurance companies, tax-exempt
entities and holders who do not hold their shares as capital assets. Holders of
PGC Common Stock are advised and expected to consult their own tax advisers
regarding the federal income tax consequences of the Mergers in light of their
personal circumstances and the consequences under state, local and foreign tax
laws.
PGC has received from its counsel, Wachtell, Lipton, Rosen & Katz, an
opinion to the effect that for federal income tax purposes the Mergers will
constitute reorganizations within the meaning of section 368(a) of the Code,
that Enron and New Enron will each be a party to the Reincorporation Merger and
that New Enron and PGC will each be a party to the PGC Merger, that PGC will not
recognize any gain or loss as a result of the PGC Merger and that the
shareholders of PGC will not recognize any gain or loss upon the receipt of New
Enron Common Stock in exchange for their PGC Common Stock, except with respect
to cash received, if any, in lieu of fractional shares of New Enron Common
Stock. Such opinions are based on certain representations of Enron, New Enron
and PGC as to the continuation by New Enron of the business of Enron and PGC and
as to the absence of any knowledge as to any plan or intention by the
shareholders of Enron and PGC to dispose of a substantial portion of New Enron
stock following the Mergers. Shareholders of PGC should be aware that such
opinions are not binding on the IRS and no assurance can be given that the IRS
will not adopt a contrary position or that a contrary IRS position would not be
sustained by a court.
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Assuming the Mergers qualify as reorganizations under section 368(a) of the
Code, the following federal income tax consequences will occur:
(a) no gain or loss will be recognized by Enron, New Enron or PGC by
reason of the Mergers;
(b) no gain or loss will be recognized by a holder of PGC Common Stock
upon the exchange of such shares solely for New Enron Common Stock in the
PGC Merger;
(c) the aggregate basis of the shares of New Enron Common Stock
received by a holder of PGC Common Stock in the PGC Merger (including any
fractional share deemed received) will be the same as the aggregate basis
of the shares surrendered in exchange therefor;
(d) the holding period of the shares of New Enron Common Stock
received by a holder of PGC Common Stock in the PGC Merger (including any
fractional share deemed received) will include the holding period of the
shares surrendered in exchange therefor, provided that such shares are held
as capital assets at the Effective Time; and
(e) a holder of PGC Common Stock who receives cash in lieu of a
fractional share of New Enron Common Stock will recognize gain or loss
equal to the difference, if any, between such shareholder's basis in the
fractional share (as described in paragraph (c) above) and the amount of
cash received. Such gain or loss will be eligible for long-term capital
gain or loss treatment if the PGC Common Stock is held by such shareholder
as a capital asset at the Effective Time and the holding period for the
fractional share (as described in paragraph (d) above) is more than one
year.
HOLDERS OF PGC COMMON STOCK ARE URGED TO CONSULT WITH THEIR OWN TAX
ADVISERS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGERS TO SUCH
HOLDERS, INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE,
MUNICIPAL, FOREIGN OR OTHER TAXING JURISDICTION.
GOVERNMENTAL AND REGULATORY APPROVALS
All regulatory approvals required for the consummation of the Mergers have
been obtained, except for approval of the OPUC.
Oregon Public Utility Commission. Upon completion of the PGC Merger, New
Enron will be the owner of the common stock of PGE, the electric utility
subsidiary of PGC. PGE is subject to the jurisdiction of the OPUC with respect
to its electric utility operations. The approval of the OPUC is required for any
transaction in which a person acquires the power to exercise any substantial
influence over the policies and actions of a public utility subject to its
jurisdiction. On August 30, 1996, Enron filed an application with the OPUC
seeking approval of the PGC Merger.
As part of the OPUC approval process, the OPUC staff, intervenors and
public interest groups have raised a number of issues that they proposed to
address by making the OPUC's approval subject to certain conditions. The First
Amendment includes a revised regulatory plan that outlines the terms that Enron
and PGC agreed would be offered in connection with its application for OPUC
approval, including guaranteed merger-related benefits to PGE's customers of
$141 million. These conditions are intended to address the issues that have been
identified through the approval process and provide benefits sufficient to meet
the applicable merger approval standard. Following the execution of the First
Amendment, the OPUC staff and intervenors requested changes and additions to the
conditions included in the First Amendment. As a result of the negotiation of
these matters, the OPUC Staff, Enron, PGC and certain intervenors reached
agreement on a revised set of conditions and signed the Stipulation setting
forth the parties' agreement to recommend that the OPUC adopt the Stipulation
(and the conditions contained therein) and approve the PGC Merger. The final
decision of the OPUC with respect to Enron's merger application is currently
scheduled for June 4, 1997. See "The Mergers -- Background of the Mergers -- The
Amended Merger Agreement" for a more detailed description of the OPUC approval
process to date.
In November 1996, PGE reached agreement with the OPUC staff, which was
subsequently approved by the OPUC, to reduce its rates. The rate reductions stem
primarily from lower natural gas and power purchase prices. The agreement calls
for $55 million in annual rate reductions that began December 1, 1996 (in
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addition to $15 million in rate reductions previously approved by the OPUC). The
settlement will result in an after-tax decrease in earnings of approximately $32
million for 1997 ($41 million including the previously approved $15 million in
rate reductions).
1935 Act. Enron is not a holding company (as defined in the 1935 Act) and
therefore is not subject to the provisions of the 1935 Act. PGC is a holding
company exempt from all provisions of the 1935 Act except Section 9(a)(2)
thereof under Section 3(a)(1) pursuant to Rule 2 of the 1935 Act. Following
consummation of the Mergers, Enron will be a holding company entitled to claim
an exemption from all provisions of the 1935 Act except Section 9(a)(2) thereof
under Section 3(a)(1) pursuant to Rule 2 of the 1935 Act.
PURPA. Enron owns indirect interests in six cogeneration facilities, each
of which constitutes a "qualifying facility" ("QF") under the Public Utility
Regulatory Policies Act of 1978 ("PURPA") (the "Enron QF's"). Substantial
interests in certain of the facilities are also held by affiliates of other
entities which are classified as "electric utilities" under PURPA. Following
consummation of the PGC Merger, New Enron will become a holding company under
the 1935 Act that will qualify for the intrastate exemption under Section
3(a)(1) thereof but, barring a change in law, will not be exempt from
classification as an "electric utility holding company" under PURPA. Therefore,
in order to avoid the loss of QF status for the Enron QF's and registration of
Enron as a "holding company" under the 1935 Act, Enron must cause its ownership
in the Enron QF's (aggregated with ownership by all other entities constituting
"electric utilities") to be not more than 50% prior to consummation of the PGC
Merger. An Enron subsidiary has entered into a definitive agreement providing
for the sale of its interests in three of the Enron QFs to Calpine Finance
Company. Subject to the satisfaction of certain closing conditions, the
transactions are scheduled to close on or before May 30, 1997. With respect to
the disposition of the remaining three Enron QFs, affiliates of Enron are
currently negotiating definitive agreements with a closing date anticipated by
June 15, 1997. The disposition of the remaining Enron QFs will require the
receipt of certain third party consents, which Enron expects to obtain in
advance of the scheduled closing date. Enron's management does not believe that
resolution of the foregoing matters will have a material adverse effect on its
consolidated financial position or its consolidated results of operations.
Federal Power Act. Section 203 of the Federal Power Act provides that no
public utility shall sell or otherwise dispose of its jurisdictional facilities
or, directly or indirectly, merge or consolidate such facilities with those of
any other person or acquire any security of any other public utility without
first having obtained authorization from the FERC. The approval of the FERC is
required in order to consummate the Mergers. Under Section 203 of the Federal
Power Act, the FERC is required to approve a merger if it finds such merger
"consistent with the public interest."
The 1993 FERC order authorizing Enron Power Marketing, Inc. ("EPMI") to
sell electric power at market-based rates was predicated on its finding that
EPMI and its affiliates lacked market power over wholesale power buyers. The
order requires EPMI to inform the FERC of any changes in EPMI's status or
activities that relate to the basis for the FERC's original authorization of
EPMI's market-based rates, including acquisitions of generation or transmission
facilities and affiliation with franchised utilities. Pursuant to this
requirement, on July 24, 1996, EPMI filed a "Notification of Change in Status"
with the FERC in which EPMI advised the FERC of the Original Merger Agreement
and requested FERC to confirm that the Mergers will not affect EPMI's
authorization to sell power at market-based rates. On September 20, 1996, EPMI
filed proposed changes to its FERC Electric Rate Schedule No. 1 under Section
205 of the Federal Power Act to become effective upon consummation of the PGC
Merger, as necessary for EPMI to continue to engage in wholesale power
transactions at market-based rates.
On February 26, 1997, the FERC approved the PGC Merger under Section 203 of
the Federal Power Act. As part of FERC's order, FERC also permitted EPMI's
proposed changes to its FERC Electric Rate Schedule No. 1 to become effective
under Section 205 of the Federal Power Act and held that the PGC Merger did not
affect EPMI's authority to sell electric power at market-based rates. The time
allowed for petitions for rehearing of the FERC order expired March 28, 1997,
and no petitions for rehearing were filed.
Oregon Energy Facility Siting Council. The Oregon Energy Facility Siting
Council ("OEFSC") has regulatory authority over the siting of energy facilities,
including electric generating plants, in the State of
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Oregon. Under its rules, OEFSC consent is required for certain direct or
indirect transfers of site certificates or facilities covered by a site
certificate. As a result of the Mergers, New Enron will become the owner of the
common stock of PGE. On September 4, 1996, PGE requested a declaratory ruling
from the OEFSC that the change in ownership of PGE common stock in connection
with the PGC Merger will not result in a transfer of site certificates that
requires OEFSC consent. On November 4, 1996, the OEFSC issued a Declaratory
Ruling confirming that the PGC Merger will not be a transfer of the site
certificates requiring OEFSC consent. No petitions for judicial review of the
OEFSC Declaratory Ruling were filed by any party within the statutory period.
Atomic Energy Act. PGE holds a majority interest in the Nuclear Regulatory
Commission ("NRC") license for the Trojan nuclear facility, which ceased
operations in 1993. Shortly thereafter, the facility operating license was
converted to a possession-only license ("POL") pursuant to a license amendment
accepted by the NRC. The Atomic Energy Act requires that NRC licenses (including
POLs) may not be amended or transferred or in any manner disposed of, directly
or indirectly, to any person through transfer of control unless the NRC finds
that such transfer is in accordance with the Atomic Energy Act and gives prior
consent to the transfer. On August 20, 1996, PGE filed an application seeking
approval from the NRC under the Atomic Energy Act of New Enron's controlling
interest in PGE after the Mergers. On March 6, 1997, the NRC issued an order
(the "NRC Order") approving the PGC Merger, subject to (i) PGE continuing to
fund its decommissioning trust funds in accordance with the schedule stated in
PGE's Post-Shutdown Decommissioning Activities Report ("PSDAR") and (ii) PGE
providing the Director of the NRC with at least 60 days' prior notice of a
transfer (excluding grants of security interests or liens) from PGE to its
parent or to any other affiliated company, of facilities for the production,
transmission or distribution of electric energy having a depreciated book value
exceeding 10% of PGE's consolidated net utility plant, as recorded on PGE's
books of account. The NRC also ordered that the condition specified in clause
(ii) above would not apply once (a) PGE had completed all major decommissioning
activities and (b) PGE's external decommissioning trust fund had been funded in
an amount sufficient to pay PGE's share of site radiological decommissioning
costs as estimated in the PSDAR. The NRC Order will become null and void if the
PGC Merger is not consummated by December 31, 1997, but can be extended for good
cause. No requests for a hearing with respect to issuance of the NRC Order were
filed within the required time period.
HSR Act. Transactions such as the Mergers are reviewed by the Department of
Justice and the Federal Trade Commission (the "FTC") to determine whether they
comply with applicable antitrust laws. Under the provisions of the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended (the "HSR
Act"), the Mergers may not be consummated until such time as the specified
waiting period requirements of the HSR Act have been satisfied. Enron and PGC
filed notification reports, together with requests for early termination of the
waiting period, with the Department of Justice and the FTC under the HSR Act.
Effective November 4, 1996, Enron and PGC received notice of early termination
of the waiting period and are authorized to consummate the Mergers within one
year following such date without the requirement of additional HSR Act filings.
Enron and PGC intend to make supplemental filings with the OPUC, the FERC,
the OEFSC and the NRC as necessary to reflect the execution by Enron, New Enron
and PGC of the First Amendment. Other than the foregoing, Enron and PGC are
aware of no other governmental or regulatory approvals required for consummation
of the Mergers, other than compliance with applicable securities laws.
RESTRICTIONS ON RESALES BY PGC AFFILIATES
The shares of New Enron Common Stock (or Enron Common Stock) and New Enron
Convertible Preferred Stock to be received by shareholders of PGC and Enron in
connection with the Mergers have been registered under the Securities Act and,
except as set forth in this paragraph, may be traded without restriction. The
securities to be issued in connection with the Mergers and received by persons
who are "affiliates" (as that term is defined in Rule 144 under the Securities
Act) of Enron or PGC prior to the Mergers may be resold by them only in
transactions permitted by the resale provisions of Rule 145 under the Securities
Act (or, in the case of such persons who become affiliates of Enron, Rule 144
under the Securities Act) or as otherwise permitted under the Securities Act.
Pursuant to the Amended Merger Agreement, PGC
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has agreed to use its reasonable efforts to cause its "affiliates" (as that term
is used in Rule 145 under the Securities Act) to deliver a written agreement to
Enron with respect to the shares (the "Affiliate Shares") to be received by such
affiliate pursuant to the PGC Merger (the "Affiliate Agreements"). It is
intended that, pursuant to the Affiliate Agreements, each affiliate will agree
(i) not to make any offer to sell or any sale or other disposition of all or any
part of the Affiliate Shares in violation of the Securities Act and to hold the
Affiliate Shares subject to applicable provisions of the Securities Act, (ii)
that he has been advised that any public reoffering or resale of the Affiliate
Shares by the affiliate requires compliance with certain registration
requirements under the Securities Act, and (iii) that he understands that New
Enron will be under no obligation to register the Affiliate Shares under the
Securities Act or take certain other actions that may be necessary in connection
with dispositions by the affiliate.
STOCK EXCHANGE LISTING
An application will be made to have the New Enron Common Stock listed for
trading on the NYSE, as well as the Chicago, Pacific, London and Frankfurt
exchanges.
ACCOUNTING TREATMENT
The PGC Merger will be accounted for as a purchase for financial reporting
purposes. Under the purchase method of accounting, the assets and liabilities of
PGC will be recorded at their fair values at the Effective Time, with the
difference between such fair value and the value of the consideration paid in
the PGC Merger allocated to goodwill.
NO APPRAISAL RIGHTS
Under the DGCL and the OBCA, no holder of PGC Common Stock will be entitled
to any dissenters' or appraisal rights in connection with the transactions
contemplated by the Amended Merger Agreement.
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THE AMENDED MERGER AGREEMENT
FIRST AMENDMENT TO ORIGINAL MERGER AGREEMENT
On April 14, 1997, Enron, New Enron and PGC entered into the First
Amendment. Under the terms of the First Amendment, the PGC Conversion Ratio was
reduced to 0.9825 shares of New Enron Common Stock for each share of PGC Common
Stock. The Original Merger Agreement had provided for a PGC Conversion Ratio of
one share of New Enron Common Stock for each share of PGC Common Stock. Under
the new PGC Conversion Ratio, based on the number of shares of PGC Common Stock
and Enron Common Stock issued as of the Record Date, an aggregate of 50,506,741
shares of New Enron Common Stock (approximately 16.5% of the outstanding shares
on a fully diluted basis) will be issued in the PGC Merger, compared to
51,406,352 shares of New Enron Common Stock (approximately 16.8% of the
outstanding shares on a fully diluted basis) that would have been issued under
the Original Merger Agreement.
As described below, the First Amendment also (i) modified the regulatory
closing condition in an attempt to accommodate concerns that caused the staff of
the OPUC to recommend disapproval of the PGC Merger, (ii) required PGC to
solicit the approval of the Amended Merger Agreement by its shareholders
(subject to certain fiduciary exceptions) and (iii) extended certain fiduciary
exceptions to its obligations not to solicit competing transactions until PGC
shareholder approval is obtained at the Annual Meeting. Under the terms of the
Original Merger Agreement, these fiduciary exceptions had terminated upon the
approval of the holders of the PGC Common Stock at the special meeting of PGC
shareholders held on November 12, 1996.
The following is a summary of the material terms of the Amended Merger
Agreement, giving effect to the amendments contained in the First Amendment.
This summary is qualified in its entirety by reference to the Amended Merger
Agreement. A copy of the Amended Merger Agreement (which incorporates the
amendments contained in the First Amendment) is attached as Annex A to this
Proxy Statement/Prospectus and is incorporated herein by reference.
CLOSING; EFFECTIVE TIMES OF THE MERGERS
The Closing of the transactions contemplated by the Amended Merger
Agreement will occur on the second business day immediately following the date
on which the last of the conditions to the Mergers is satisfied or are capable
of being satisfied, or at such other time and date as PGC and Enron agree.
In addition to being subject to PGC shareholder approval of the Amended
Merger Agreement, the Mergers are subject to approval by the OPUC consistent
with the proposed regulatory plan. The final decision of the OPUC with respect
to Enron's merger application is currently scheduled for June 4, 1997. All other
regulatory approvals and the requisite approval of the shareholders of Enron
have already been obtained. If a favorable OPUC order is issued prior to the
Annual Meeting, the parties anticipate that the Mergers would be consummated
promptly after PGC shareholder approval at the Annual Meeting. There can be no
assurance that the OPUC will issue a favorable order or that any order will be
issued prior to the Annual Meeting.
The Reincorporation Merger will become effective upon the later of the
filing of articles of merger with the Oregon Department of State or the filing
of a certificate of merger with the Secretary of State of Delaware, or at such
later time as may be mutually agreed to by the parties and specified in such
articles of merger or certificate of merger. The PGC Merger will become
effective upon the filing of articles of merger with the Oregon Department of
State or at such later time as may be mutually agreed to by the parties and
specified in such articles of merger (the "Second Effective Time"), provided
that the Second Effective Time will be after the First Effective Time. As used
herein, the term "Effective Time" refers to the Second Effective Time.
MANNER AND BASIS OF CONVERTING SHARES
Conversion of Enron Common Stock and Enron Preferred Stock Pursuant to the
Reincorporation Merger. At the First Effective Time, by virtue of the
Reincorporation Merger and without any action on the part of any holder of
capital stock of Enron, each share of Enron Common Stock issued and outstanding
immediately prior to the First Effective Time will be converted into and become
one share of New Enron Common Stock.
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Each share of any series of Enron Preferred Stock issued and outstanding
immediately prior to the First Effective Time will be converted into and become
one share of a series of New Enron Preferred Stock having the same rights,
preferences and limitations as the corresponding class or series of Enron
Preferred Stock. Each share of the common stock of New Enron issued and
outstanding immediately prior to the First Effective Time will be canceled
without consideration therefor.
Conversion of PGC Common Stock Pursuant to the PGC Merger. At the Second
Effective Time, by virtue of the PGC Merger and without any action on the part
of any holder of capital stock of PGC or New Enron, each share of PGC Common
Stock issued and outstanding immediately prior to the Second Effective Time
(other than shares of PGC Common Stock owned by PGC or any of its subsidiaries
or by Enron, New Enron or any of their respective subsidiaries, which will be
canceled without consideration therefor) will be converted into 0.9825 shares of
New Enron Common Stock, subject to certain adjustments described below (the "PGC
Conversion Ratio").
Adjustments to PGC Conversion Ratio. If, prior to the Effective Time, there
is a change in the number of shares of Enron Common Stock issued and outstanding
as a result of a reclassification, stock split (including a reverse stock
split), stock dividend or similar transaction, the PGC Conversion Ratio will be
equitably adjusted to eliminate the effects of such an event. If, prior to the
Effective Time, Enron effects a distribution to all holders of Enron Common
Stock of shares of any class or series of capital stock (other than any
distribution described in the preceding sentence and any dividends paid
exclusively in cash) (an "Extraordinary Distribution"), the PGC Conversion Ratio
in effect immediately prior to such Extraordinary Distribution will be adjusted
to equal $40.25 (or, if applicable, the Revised Enron Share Value (as defined
below) determined in connection with any previous adjustment in the PGC
Conversion Ratio) divided by the Revised Enron Share Value. The PGC Conversion
Ratio will be so adjusted successively whenever an Extraordinary Distribution
occurs prior to the Effective Time. Any securities distributed by Enron in an
Extraordinary Distribution will be listed on the NYSE from and after the time
such distribution is made. For purposes of the foregoing, "Extraordinary
Distribution Value" means the aggregate number of securities distributed to each
holder of Enron Common Stock pursuant to such Extraordinary Distribution
multiplied by the average of the daily closing prices per share of such security
for the 20 consecutive Trading Days (as defined in the Amended Merger Agreement)
immediately following the date of such Extraordinary Distribution, and the
"Revised Enron Share Value" means $40.25 (or, if applicable, the Revised Enron
Share Value determined in connection with any previous adjustment in the PGC
Conversion Ratio) less the Extraordinary Distribution Value. If, prior to the
Effective Time, there is consummated a transaction other than a transaction of
the type described above pursuant to which shares of Enron Common Stock become
converted into the right to receive cash, securities or other property or any
combination thereof, Enron will make appropriate provision so that the
corporation surviving such transaction is substituted for Enron as a party to
the Amended Merger Agreement, and appropriate adjustment is made so that, upon
consummation of the Mergers, each share of PGC Common Stock will be converted
into such amount of cash, securities or other property or combination thereof as
each such share would have been converted had the Mergers occurred prior to such
transaction.
Exchange of PGC Certificates. Promptly after consummation of the Mergers,
New Enron will designate an exchange agent acceptable to PGC to distribute
shares of New Enron Common Stock exchanged for PGC Common Stock in the PGC
Merger. The Exchange Agent will send a letter of transmittal to each holder of
record of PGC Common Stock immediately before the Effective Time for use in
exchanging certificates formerly representing shares of PGC Common Stock (a "PGC
Certificate") that were converted ("Converted Shares") into New Enron Common
Stock for certificates representing shares of New Enron Common Stock. PGC
Certificates should not be surrendered by the holders of PGC Common Stock until
they have received the letter of transmittal from the Exchange Agent. Upon
delivery of a PGC Certificate to the Exchange Agent for exchange, together with
a duly executed letter of transmittal and such other documents as the Exchange
Agent shall require, the holder of such PGC Certificate will be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of New Enron Common Stock and the amount of cash in lieu of fractional
share interests (if any) which such holder has the right to receive pursuant to
the Amended Merger Agreement. In the event of a transfer of ownership of
Converted Shares which is not registered in the transfer records of PGC, a
certificate representing the proper number of shares of New Enron Common Stock
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may be issued to a transferee if the PGC Certificate representing such Converted
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence satisfactory to the
Exchange Agent that any applicable stock transfer taxes have been paid. Until
delivered and exchanged for New Enron Common Stock as provided in the Amended
Merger Agreement, each PGC Certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such delivery the
certificate representing shares of New Enron Common Stock and cash in lieu of
any fractional shares (and any distributions described below). Unless and until
the certificate or certificates representing Converted Shares have been
surrendered for exchange to the Exchange Agent, no dividends or other
distributions payable to holders of New Enron Common Stock as of a record date
at or after the Effective Time will be paid to any holder of a certificate
representing such unexchanged Converted Shares. Subject to the effect of
unclaimed property, escheat and other applicable laws, following delivery of any
such certificate, there will be paid to the record holder (or transferee) of the
certificates representing whole shares of New Enron Common Stock issued in
exchange therefor, without interest, (i) the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of New Enron Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date at or after the Effective Time but prior to delivery and a payment
date subsequent to delivery payable with respect to such whole shares of New
Enron Common Stock, as the case may be.
TREATMENT OF FRACTIONAL INTERESTS
No certificates for fractional shares of New Enron Common Stock will be
issued in the PGC Merger, and fractional share interests will not entitle the
owner thereof to vote or to any rights of a shareholder of New Enron. All
holders of fractional shares of New Enron Common Stock will be entitled to
receive, in lieu thereof, an amount in cash (rounded to the nearest cent)
determined by multiplying the fraction of a share of New Enron Common Stock to
which such holder would otherwise have been entitled by the average of the
Closing Price (as hereinafter defined) of a share of New Enron Common Stock for
each of the ten trading days ending on and including the trading day prior to
the Closing Date. The "Closing Price" for each day shall be the last reported
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the NYSE.
CONDITIONS TO THE MERGERS
Condition to Each Party's Obligation to Effect the Mergers. The Amended
Merger Agreement contains certain closing conditions, many of which have already
been satisfied. As of the date of this Proxy Statement/Prospectus, the
respective obligations of each party to effect the Mergers remain subject to
satisfaction prior to the Closing Date of the following conditions, except to
the extent such conditions are waived by the parties in writing: (a) the
required approval of the shareholders of PGC shall have been obtained at the
Annual Meeting; (b) no temporary restraining order or preliminary or permanent
injunction or other judgment, decree, ruling or order by any court of competent
jurisdiction preventing consummation of either of the Mergers shall have been
issued and be continuing in effect, and the Mergers and the other transactions
contemplated by the Amended Merger Agreement shall not have been prohibited
under any applicable federal or state law or regulation; (c) no stop order
suspending the effectiveness of the Registration Statement under the Securities
Act shall have been issued and remain in effect; (d) the shares of New Enron
Common Stock issuable in the Mergers shall have been approved for listing on the
NYSE upon official notice of issuance; (e) the required statutory approvals of
the transactions contemplated by the Amended Merger Agreement (as specified in
the Amended Merger Agreement) shall have been obtained at or prior to the
Effective Time, such approvals shall have become Final Orders (as defined in the
Amended Merger Agreement) and no Final Order shall impose terms or conditions
that would have, or would be reasonably likely to have, an Enron Material
Adverse Effect or a PGC Material Adverse Effect (each as defined in the Amended
Merger Agreement).
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Conditions to the Obligations of Enron and New Enron to Effect the Mergers.
In addition to certain conditions that have been satisfied prior to the date of
this Proxy Statement/Prospectus, the obligation of Enron and New Enron to effect
the Reincorporation Merger and of New Enron to effect the PGC Merger remain
subject to the satisfaction, on or prior to the Closing Date, of certain
conditions, including the following, except as may be waived by Enron in
writing: (a) PGC shall have performed in all material respects its agreements
and covenants contained in or contemplated by the Amended Merger Agreement
required to be performed by it at or prior to the Effective Time (subject to
certain materiality exceptions); (b) subject to certain materiality and other
exceptions, the representations and warranties of PGC shall be true and correct
as of the date of the Original Merger Agreement and as of the Closing Date; (c)
Enron shall have received an opinion of counsel from Vinson & Elkins L.L.P., in
form and substance satisfactory to Enron, dated the Closing Date, to the effect
that the Mergers will be treated as reorganizations within the meaning of
Section 368(a) of the Code and that no gain or loss will be recognized to Enron
or the holders of capital stock of Enron as a result thereof; (d) the PGC
Required Consents (as defined in the Amended Merger Agreement) shall have been
obtained, except as would not have a PGC Material Adverse Effect; (e) the
regulatory approval process for obtaining the OPUC Approval shall have resulted
in a Final Order that (i) does not impose or threaten to impose any direct or
indirect change in the $141 million of merger-related benefits to PGC's
customers agreed to by Enron and PGC, (ii) adopts the regulatory conditions
contained in an appendix to the First Amendment, substantially in the form set
forth in that appendix, and (iii) does not include the imposition or threatened
imposition of any other conditions that are substantive (the "OPUC Regulatory
Condition"); and (f) EPMI shall not have been subjected to a loss, in whole or
in significant part, of its FERC authority to sell power (other than sales to
Enron's affiliates (including PGE)) at market-based rates as a consequence of
the execution of the Amended Merger Agreement, the performance of the
transactions contemplated thereby or affiliation with PGC or PGE.
Conditions to the Obligation of PGC to Effect the PGC Merger. In addition
to certain conditions that have been satisfied prior to the date of this Proxy
Statement/Prospectus, the obligation of PGC to effect the PGC Merger remains
subject to the satisfaction, on or prior to the Closing Date, of certain
conditions, including the following, except as may be waived by PGC in writing:
(a) Enron shall have performed in all material respects its agreements and
covenants contained in or contemplated by the Amended Merger Agreement required
to be performed by it at or prior to the Effective Time (subject to certain
materiality exceptions); (b) with certain exceptions, the representations and
warranties of Enron set forth in the Amended Merger Agreement shall be true and
correct as of the date of the Original Merger Agreement and as of the Closing
Date (subject to certain materiality exceptions); (c) PGC shall have received an
opinion of counsel from Wachtell, Lipton, Rosen & Katz, in form and substance
satisfactory to PGC, dated the Closing Date, to the effect that the Mergers will
be treated as reorganizations within the meaning of Section 368(a) of the Code
and that no gain or loss will be recognized to PGC or the holders of PGC Common
Stock except with respect to cash received in lieu of fractional share
interests; (d) the Enron Required Consents (as defined in the Amended Merger
Agreement) shall have been obtained (subject to certain materiality exceptions);
and (e) the Reincorporation Merger shall have become effective.
REPRESENTATIONS AND WARRANTIES
The Amended Merger Agreement contains various representations and
warranties of PGC and Enron relating to, among other things, (i) organization
and similar corporate matters, (ii) their respective capitalization, (iii)
authorization, execution, delivery, performance and enforceability of the
Amended Merger Agreement and the First Amendment and related matters, and the
absence of conflicts, violations and defaults under their respective charters
and bylaws and certain other agreements and documents, (iv) documents and
reports filed by them with the Commission and the accuracy of the information
contained therein, (v) the absence of certain changes and events, (vi)
litigation, (vii) employee benefit matters, (viii) taxes and matters relating to
a tax-free reorganization, (ix) certain regulatory matters and (x) certain other
matters. The representations and warranties expire at the Effective Time.
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CERTAIN COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
PGC. The Amended Merger Agreement provides that, prior to the Effective
Time, PGC will, and will cause its subsidiaries to, carry on their respective
businesses in all material respects in the usual, regular and ordinary course,
consistent with past practice, and will cause its subsidiaries to, use all
reasonable efforts to (i) preserve intact their present business organizations
and goodwill, preserve the goodwill and relationships with customers, suppliers
and others having business dealings with them, (ii) subject to prudent
management of workforce needs and ongoing or planned programs relating to
downsizing, re-engineering and similar matters, keep available the services of
their present officers and employees as a group, (iii) maintain and keep its
material properties and assets in as good repair and condition as at present,
subject to ordinary wear and tear, and maintain supplies and inventories in
quantities consistent with past practice and (iv) with respect to wholesale
power and energy trading and transactions, comply with prudent policies,
practices and procedures with respect to risk management and trading
limitations, all to the end that their goodwill and ongoing businesses will not
be impaired in any material respect at the Effective Time.
In addition to the foregoing limitations, PGC has also agreed (as to itself
and its subsidiaries) to certain limitations on its ability to (a) declare or
pay dividends on or repurchase or redeem its securities; (b) issue securities;
(c) amend its charter documents; (d) make acquisitions of businesses or assets
or dispose of assets outside the ordinary course of business; (e) incur
indebtedness; (f) make capital expenditures; (g) make changes in its
compensation and benefit plans; (h) take action that would jeopardize the
qualification of the Mergers as tax-free reorganizations; (i) discharge
liabilities outside the ordinary course of business; and (j) take certain other
actions. With respect to nuclear operations, PGC has agreed not to take certain
actions with respect to nuclear materials and not to incur decommissioning
expenses in excess of a specified budget. PGC has also agreed to keep Enron
informed of matters relating to the Trojan decommissioning plan and to give
specified Enron representatives access to the Trojan facilities (subject to
applicable legal requirements). Also, Enron and PGC have established a Nuclear
Oversight Committee, which has advisory powers only, to consult with PGC
management with respect to the progress of the Trojan decommissioning.
Enron. Prior to the Effective Time, Enron has agreed (as to itself and its
subsidiaries) to certain limitations on its ability to (a) redeem or repurchase
shares of capital stock of Enron or its subsidiaries; (b) pay dividends on the
Enron Common Stock; (c) amend its charter documents; (d) take actions that would
jeopardize the qualification of the Mergers as tax-free reorganizations; and (e)
take certain other actions. In addition, Enron has agreed to conduct its
business, and to cause its subsidiaries to conduct their businesses, so that the
character of the business of Enron and its subsidiaries taken as a whole is not
fundamentally altered.
NO SOLICITATION
PGC. The Amended Merger Agreement provides that until the Effective Time or
until the Amended Merger Agreement is terminated in accordance with its terms,
PGC will not initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably be
expected to lead to, any PGC Competing Transaction (as defined below), or enter
into discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a PGC Competing Transaction, or agree to or endorse any
PGC Competing Transaction, or authorize or permit any of the officers, directors
or employees of PGC or any of its subsidiaries or any investment banker,
financial advisor, attorney, accountant or other representative retained by PGC
or any of PGC's subsidiaries to take any such action; provided, however, that,
prior to receipt of the PGC shareholders' approval at the Annual Meeting,
nothing contained in the foregoing will prohibit the Board of Directors of PGC
from (i) furnishing information to, or entering into discussions or negotiations
with, any person or entity in connection with an unsolicited bona fide offer in
writing by such person or entity to acquire PGC pursuant to a merger,
consolidation, share exchange, business combination or other similar transaction
or to acquire a substantial portion of the assets of PGC or any of its
subsidiaries, to the extent and only to the extent that (A) the Board of
Directors of PGC, after consultation with and based upon the written advice of
independent legal counsel, determines in good faith that such action is
necessary for such Board of Directors to comply with its fiduciary duties to its
shareholders under applicable law and (B) prior to furnishing such
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information to, or entering into discussions or negotiations with, such person
or entity, PGC (x) provides written notice to Enron to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity and (y) enters into a confidentiality agreement with such
person or entity reasonably calculated under the circumstances, in the
reasonable judgment of PGC, to protect the confidentiality of PGC's proprietary
data; or (ii) complying with Rule 14e-2 promulgated under the Exchange Act with
regard to a "PGC Competing Transaction." For purposes of the foregoing, a "PGC
Competing Transaction" means any of the following (other than the transactions
contemplated by the Amended Merger Agreement) involving PGC or any of its
subsidiaries: (i) any merger, consolidation, share exchange, business
combination or similar transaction; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 20% or more of the assets of PGC and
its subsidiaries, taken as a whole, (iii) any tender offer or exchange offer for
20% or more of the outstanding shares of capital stock of PGC; (iv) any person
acquiring beneficial ownership of, or any group (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) being formed which beneficially owns or has the right to acquire
beneficial ownership of, 20% or more of the outstanding shares of capital stock
of PGC; or (v) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
Enron. Enron is subject to similar restrictions (but without the fiduciary
exceptions described above because the requisite Enron shareholder approval has
already been obtained) with respect to its ability to solicit, discuss or
provide information with respect to an "Enron Competing Transaction", which is
defined to mean any of the following (other than the transactions contemplated
by the Amended Merger Agreement) involving Enron or any of its subsidiaries: (i)
any merger, consolidation, share exchange, business combination or similar
transaction pursuant to which holders of Enron Common Stock prior to such
transaction would own in the aggregate less than 50% of the voting power of the
entity surviving or resulting from such transaction (or the ultimate parent
entity thereof); (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 50% or more of the assets of Enron and its subsidiaries,
taken as a whole, (iii) any tender offer or exchange offer for 30% or more of
the outstanding shares of capital stock of Enron; (iv) any person acquiring
beneficial ownership of, or any group (as such term is defined under Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
being formed which beneficially owns or has the right to acquire beneficial
ownership of, 30% or more of the outstanding shares of capital stock of Enron;
or (v) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing; except that none
of the foregoing will be deemed an Enron Competing Transaction unless such
transaction by its terms would prevent the consummation of the transactions
contemplated by the Amended Merger Agreement or be conditioned upon the
termination of the Amended Merger Agreement.
EMPLOYEE BENEFIT MATTERS
The Amended Merger Agreement provides that New Enron or its subsidiaries
will provide PGC Employees (as defined below) (other than represented
employees), for a period of not less than two years following the Effective
Time, with benefits that are not materially less favorable in the aggregate than
those provided to such individuals under the PGC Benefit Plans (as defined in
the Amended Merger Agreement); provided, that the foregoing will not require New
Enron to maintain or prevent New Enron from amending, terminating, or merging
any particular PGC Benefit Plan. "PGC Employees" means (i) individuals who are,
as of the Effective Time, employees of PGC and its subsidiaries, except that
such an individual will cease to be considered a "PGC Employee" and will
thereafter be considered a "Transferred Employee" if and when he or she
transfers to the employment of Enron or an affiliate of Enron other than PGC and
its subsidiaries; and (ii) individuals who are, as of the Effective Time, former
employees of PGC and its subsidiaries entitled to benefits according to the
provisions of any PGC Benefit Plan as of the Effective Time. Also, for two years
following the Effective Time: (i) the Portland General Corporation Supplemental
Executive Retirement Plan and the Portland General Corporation Management
Deferred Compensation Plan (the "Nonqualified Plans") will continue in effect
without any amendment that could adversely affect PGC Employees who are
participants in such plans as of the Effective Time ("Current Participants")
(including without any limitation an amendment that reduces the rate at which
benefits are accrued); (ii) the Portland General Electric Company Umbrella Trust
for Management will continue in existence with assets sufficient to provide for
all
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benefits of Current Participants that have accrued through the Effective Time
(the "Accrued Benefits"), and such assets will not be used for any purposes
other than the payment of the Accrued Benefits or to pay creditors of PGC and
its affiliates in the event of insolvency, until such time as all Accrued
Benefits have been paid; and (iii) PGC Employees and Transferred Employees
(other than represented employees) will be entitled to severance benefits in
amounts and upon terms and conditions no less favorable than those in effect
under the Portland General Corporation Involuntary Severance and Outplacement
Plan, as in effect as of the Effective Time. New Enron and its subsidiaries will
(i) for all purposes under all compensation and benefit plans and policies
applicable to employees of New Enron and its subsidiaries, treat all service by
PGC Employees and Transferred Employees with PGC or any of its affiliates before
the Effective Time as service with New Enron and its subsidiaries, except to the
extent such treatment would result in a duplication of benefits, (ii) for
purposes of any welfare or other employee benefit plan maintained by them for
the benefit of PGC Employees and/or Transferred Employees or in which any PGC
Employees and/or Transferred Employees participate after the Effective Time,
waive any waiting periods and limitations regarding pre-existing conditions,
and, if any PGC Employee or Transferred Employee transfers from one such plan to
another such plan during a plan year, cause the second plan to recognize any
out-of-pocket expenses incurred by such PGC Employee or Transferred Employee and
his or her eligible dependents during the portion of the plan year before such
transfer for purposes of determining their deductibles and out-of-pocket
maximums.
STOCK OPTIONS AND INCENTIVE PLANS
As of the Effective Time, each outstanding option to purchase shares of PGC
Common Stock (each, a "PGC Stock Option") pursuant to the 1990 Portland General
Corporation Long-Term Incentive Master Plan (the "PGC Stock Plan") will be
amended to constitute an option to acquire shares of New Enron Common Stock, on
the same terms and conditions as were applicable under such PGC Stock Option,
based on the same number of shares of New Enron Common Stock as the holder of
such PGC Stock Option would have been entitled to receive pursuant to the
Mergers had such holder exercised such option in full immediately prior to the
Effective Time; provided, that the option price of such option will be adjusted
as necessary to preserve both (A) the aggregate gain (or loss) on the PGC Stock
Option immediately prior to the Effective Time and (B) the ratio of the exercise
price per share subject to the PGC Stock Option to the fair market value
(determined immediately prior to the Effective Time) per share subject to such
option.
Following the Effective Time until December 31, 2000, PGC Employees will be
entitled to receive either (i) a company matching contribution to a profit
sharing plan, in the form of New Enron Common Stock, on terms and conditions no
less favorable than those in effect under the Portland General Corporation
Retirement Savings Plan immediately before the Effective Time, or (ii) stock
options under the Enron All-Employee Stock Option Program on terms and
conditions no less favorable than similarly situated employees of Enron and its
subsidiaries, but prorated to reflect the time remaining between the time PGC
Employees begin to participate in such plan until December 31, 2000. For the
year in which the Effective Time occurs (the "Transition Year"), the Portland
General Corporation Annual Incentive Master Plan will remain in effect and will
be administered by the individuals who constitute the Compensation Committee of
the PGC Board immediately before the Effective Time, with only such amendments
as such individuals and Enron will jointly determine to be appropriate. For the
two years following the Transition Year, the employees of PGC will participate
in an annual incentive plan administered by the Chief Executive Officer of PGC
or his designees; provided, however, that the funding levels for such plan will
be determined by the Compensation Committee of the New Enron Board following the
Effective Time.
CERTAIN POST-MERGER MATTERS
Board of Directors and Management of New Enron Following the Mergers. The
parties have agreed that the Board of Directors of New Enron after the Mergers
will be comprised of no more than 17 members, of whom three will be designated
by PGC (one of whom will be Ken L. Harrison, currently the Chairman of the
Board, Chief Executive Officer and President of PGC). Enron intends that the
remaining members of the New Enron Board of Directors will be comprised of
members of the Enron Board of Directors at the Effective Time. Although the
Amended Merger Agreement provides that PGC would designate three of 16
directors,
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Enron and PGC have executed a waiver letter that permits the size of the Enron
Board of Directors immediately following the Effective Time to be no more than
17 directors.
The current management of Enron will comprise the management of New Enron
after the Mergers, except that, pursuant to the Amended Merger Agreement, Mr.
Harrison will serve as Vice Chairman of the Board of Directors of New Enron and
Chairman of the Board and Chief Executive Officer of PGE, and Mr. Joseph M.
Hirko, currently Senior Vice President and Chief Financial Officer of PGC, will
hold the position of Senior Vice President of New Enron. Pursuant to the Amended
Merger Agreement, Enron has entered into employment agreements with each of
Messrs. Harrison and Hirko, which will become effective upon consummation of the
Mergers. See "The Mergers -- Interests of Certain Persons in the Mergers."
Post-Merger Operations. After the Mergers, New Enron will continue to be
based in Houston, Texas. Pursuant to the Amended Merger Agreement, PGE will
maintain its principal corporate offices in Portland, Oregon. The Amended Merger
Agreement also provides that the current officers of PGE will be entitled to
maintain their current titles and responsibilities as officers of PGE unless and
until otherwise determined by the Board of Directors of New Enron. Following the
Effective Time, New Enron will designate a number of directors of PGE consisting
of directors of Enron and/or employees of Enron or any subsidiary thereof,
including Messrs. Harrison and Hirko. In addition, PGC shall have the right to
designate no more than seven non-voting advisory directors to the PGE Board. The
Amended Merger Agreement provides that immediately prior to the Effective Time,
each of Enron and PGC shall cause contributions of $10 million to be made to the
assets of the Foundation, and the assets of the Foundation will be used for
charitable purposes in accordance with the constituent documents of the
Foundation in the service area of PGE. The current directors of the Foundation,
or persons nominated by a majority of such directors or nominated by their
successors in accordance with this provision, will be the directors of the
Foundation.
AMENDMENT
The Amended Merger Agreement may be further amended by the parties pursuant
to action of the respective Boards of Directors of each of Enron and PGC, at any
time before or after approval of the Amended Merger Agreement by the
shareholders of Enron and PGC and prior to the Effective Time, but after such
approvals, no such amendment shall (a) alter or change the amount or kind of
shares, rights or any of the proceedings of the exchange and/or conversion of
securities under the Amended Merger Agreement, (b) alter or change any of the
terms and conditions of the Amended Merger Agreement if any of the alterations
or changes, alone or in the aggregate, would materially and adversely affect the
rights of holders of Enron Common Stock or PGC Common Stock or (c) alter or
change any term of the articles of incorporation of New Enron, except for
alterations or changes that could otherwise be adopted by the Board of Directors
of New Enron, without the further approval of such shareholders, as applicable.
The Amended Merger Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties thereto.
TERMINATION OF THE AMENDED MERGER AGREEMENT
In addition to certain termination rights that are no longer applicable as
of the date of this Proxy Statement/Prospectus, the Amended Merger Agreement may
be terminated at any time prior to the Closing Date, whether before or after
approval thereof by the shareholders of PGC or Enron, in the following
circumstances: (a) by the mutual written consent of Enron and PGC, duly
authorized by their respective Boards of Directors; (b) subject to certain
limitations, by Enron or PGC, if the Effective Time shall not have occurred on
or before July 20, 1997 (the "Termination Date") (which date may be extended for
an additional six months by either party (or three months if the requisite OPUC
approval has been obtained but the condition that PGC shareholder approval of
the Amended Merger Agreement has not been obtained) if the non-regulatory
conditions have been satisfied or are then capable of being satisfied by July
20, 1997, and such party believes there is a reasonable probability that the
regulatory approvals will be obtained on or prior to the end of the six-month
extension and certain other conditions are met); (c) by Enron or PGC, if the
required approval of the Amended Merger Agreement by the shareholders of PGC is
not obtained at the Annual Meeting; (d) by Enron or PGC in the event of certain
regulatory or judicial actions that would prohibit the
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Mergers or have certain adverse effects on the parties; (e) by Enron, if the
Board of Directors of PGC fails to make or withdraws, modifies or changes its
recommendation of the Amended Merger Agreement or the PGC Merger (other than in
circumstances in which an Enron Material Adverse Effect has occurred) or takes
certain actions in favor of a PGC Competing Transaction or fails to recommend
against certain competing tender offers; (f) prior to receipt of the PGC
shareholders' approval at the Annual Meeting, by PGC, if as a result of a bona
fide written offer or proposal (including a tender offer) by a third party
relating to a PGC Competing Transaction, the Board of Directors of PGC, after
consultation with and based upon the written advice of independent legal
counsel, determines in good faith that its fiduciary duties to its shareholders
under applicable law require that such other written offer or proposal be
accepted (provided that, prior to any such termination, PGC must use reasonable
efforts to negotiate in good faith with Enron to make such adjustments in the
terms and conditions of the Amended Merger Agreement as would enable PGC to
proceed with the transactions contemplated by the Amended Merger Agreement); (g)
by PGC, if the Board of Directors of Enron fails to make or withdraws, modifies
or changes its recommendation of the Amended Merger Agreement or the
Reincorporation Merger (other than in circumstances in which a PGC Material
Adverse Effect has occurred) or takes certain actions in favor of an Enron
Competing Transaction or fails to recommend against certain competing tender
offers; (h) by Enron, if there shall exist a breach of any representation,
warranty, covenant or agreement on the part of PGC set forth in the Amended
Merger Agreement, which breach is not cured within 20 business days of notice
thereof (subject to certain materiality exceptions); (i) by PGC, if there shall
exist a breach of any representation, warranty, covenant or agreement on the
part of Enron set forth in the Amended Merger Agreement, which breach is not
cured within 20 business days of notice thereof (subject to certain materiality
exceptions); (j) by PGC, if Enron adopts a plan of complete or partial
liquidation or dissolution or if Enron enters into an agreement for, or there is
consummated, (1) a merger, consolidation, share exchange, business combination
or similar transaction pursuant to which the holders of Enron capital stock
prior to such transaction would own less than 50% of the voting power
attributable to the capital stock of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), (2) a sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 50% or more of the
assets of Enron and its subsidiaries, taken as a whole, or (3) a transaction
pursuant to which a person or "group" (within the meaning of Rule 13d-1 under
the Exchange Act) acquires or would acquire "beneficial ownership" (within the
meaning of Rule 13d-3 under the Exchange Act) of at least 30% of the Enron
Common Stock (a "Change of Control Event"); and (k) by Enron, if the OPUC issues
an order (regardless of whether such order has become a Final Order) that
disapproves the Mergers or that approves the Mergers in a manner that does not
satisfy the OPUC Regulatory Condition described in paragraph (d) under the
heading "-- Conditions to the Mergers -- Conditions to the Obligations of Enron
and New Enron to Effect the Mergers."
EXPENSES AND TERMINATION FEES
Except for the termination fees described below, the Amended Merger
Agreement provides that all costs and expenses incurred in connection with the
Amended Merger Agreement and the transactions contemplated thereby will be paid
by the party incurring such expenses, except that expenses incurred in
connection with printing this Proxy Statement/Prospectus and the joint proxy
statement/prospectus relating to the shareholder meetings to approve the
Original Merger Agreement, as well as the filing fee relating thereto, will be
shared equally by Enron, on the one hand, and PGC, on the other hand.
In the event of termination of the Amended Merger Agreement by either Enron
or PGC pursuant to the provisions described above, generally there will be no
liability on the part of either Enron or PGC or their respective officers or
directors under the Amended Merger Agreement except for any liability for breach
of the covenants, agreements, representations or warranties set forth in the
Amended Merger Agreement and except for the termination fees described below.
PGC. The Amended Merger Agreement provides that PGC will pay Enron $60
million in cash if the Amended Merger Agreement is terminated pursuant to the
termination provisions of the Amended Merger Agreement under one of the
following circumstances: (a) if (i) the Amended Merger Agreement is terminated
as a result of the Termination Date occurring, (ii) the Amended Merger Agreement
is terminated
58
<PAGE> 65
as a result of the failure to obtain the required approval of the Amended Merger
Agreement by the shareholders of PGC at the Annual Meeting, or (iii) the Amended
Merger Agreement is terminated by Enron as a result of a wilful breach of any
representation, warranty, covenant or agreement of PGC set forth in the Amended
Merger Agreement, and at the time of the event giving rise to any termination
described in clauses (i), (ii) or (iii), there shall exist a proposal or offer
from a third party relating to a PGC Competing Transaction and within twelve
months after the date of termination of the Amended Merger Agreement a PGC
Business Combination (as defined below) shall have occurred or PGC shall have
entered into a definitive agreement providing for a PGC Business Combination in
either case involving the party (or an affiliate thereof) proposing the PGC
Competing Transaction; (b) if the Amended Merger Agreement is terminated by
Enron as a result of the Board of Directors of PGC failing to make or
withdrawing, modifying or changing its recommendation of the Amended Merger
Agreement or the PGC Merger (other than in situations in which there has been an
Enron Material Adverse Effect, as defined in the Amended Merger Agreement) or
taking certain actions in favor of a PGC Competing Transaction or failing to
recommend against certain competing tender offers; or (c) if the Amended Merger
Agreement is terminated by PGC as a result of a third party proposal relating to
a PGC Competing Transaction that the Board of Directors of PGC determines (in
the manner set forth in the Amended Merger Agreement) its fiduciary duties
require it to accept. "PGC Business Combination" means (i) a merger,
consolidation, share exchange, business combination or similar transaction
involving PGC, (ii) a sale, lease, exchange, transfer or other disposition of
20% or more of the assets of PGC and its subsidiaries, taken as a whole, in a
single transaction or a series of transactions, or (iii) the acquisition, by a
person (other than Enron or any affiliate thereof) or group (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act) of 20% or more of the PGC Common Stock whether by tender or exchange offer
or otherwise.
Enron. The Amended Merger Agreement provides that Enron will pay PGC $150
million in cash if the Amended Merger Agreement is terminated pursuant to the
termination provisions of the Amended Merger Agreement under one of the
following circumstances: (a) if (i) the Amended Merger Agreement is terminated
as a result of the Termination Date occurring, or (ii) the Amended Merger
Agreement is terminated by PGC as a result of a wilful breach of any
representation, warranty, covenant or agreement of Enron set forth in the
Amended Merger Agreement, and at the time of the event giving rise to any
termination described in clauses (i) or (ii), there shall exist a proposal or
offer from a third party relating to an Enron Competing Transaction and within
twelve months after the date of termination of the Amended Merger Agreement an
Enron Business Combination (as defined below) shall have occurred or Enron shall
have entered into a definitive agreement providing for an Enron Business
Combination, in either case, involving the party (or an affiliate thereof)
proposing the Enron Competing Transaction; (b) if the Amended Merger Agreement
is terminated by PGC as a result of the Board of Directors of Enron failing to
make or withdrawing, modifying or changing its recommendation of the Amended
Merger Agreement or the Reincorporation Merger (other than in situations in
which there has been a PGC Material Adverse Effect, as defined in the Amended
Merger Agreement) or taking certain actions in favor of an Enron Competing
Transaction or failing to recommend against a competing tender offer that would
constitute an Enron Competing Transaction; or (c) the Amended Merger Agreement
is terminated by PGC as a result of a Change of Control Event with respect to
Enron. "Enron Business Combination" means (i) a merger, consolidation, share
exchange, business combination or similar transaction involving Enron as a
result of which the shareholders of Enron prior to such transaction in the
aggregate cease to own at least a majority of the voting securities of the
entity surviving or resulting from such transaction (or the ultimate parent
entity thereof), (ii) a sale, lease, exchange, transfer or other disposition of
more than 50% of the assets of Enron and its subsidiaries, taken as a whole, in
a single transaction or a series of transactions, or (iii) the acquisition, by a
person (other than PGC or any affiliate thereof) or group (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act) of more than 30% of the Enron Common Stock whether by tender or exchange
offer or otherwise.
59
<PAGE> 66
INDEMNIFICATION
The Amended Merger Agreement provides that (subject to certain terms and
conditions) New Enron will, to the fullest extent not prohibited by applicable
law, indemnify, defend and hold harmless the present and former directors,
officers and management employees of the parties to the Amended Merger Agreement
and their respective subsidiaries against certain losses and expenses incurred
in connection with claims, actions, suits, proceedings or investigations arising
out of the fact that such person is or was a director, officer or management
employee of such party or any subsidiary thereof and liabilities relating to the
Amended Merger Agreement or the transactions contemplated thereby.
In addition, the Amended Merger Agreement provides that, for a period of
six years after the Effective Time, New Enron will cause to be maintained in
effect the policies of directors' and officers' liability insurance maintained
by Enron and PGC; provided that New Enron may substitute therefor policies of at
least the same coverage containing terms that are no less advantageous with
respect to matters occurring at or prior to the Effective Time to the extent
such liability insurance can be maintained annually at a cost to New Enron not
greater than 200 percent of the annual premiums for the policies maintained by
Enron and PGC as of July 20, 1996 for their directors' and officers' liability
insurance.
60
<PAGE> 67
MARKET PRICES AND DIVIDEND INFORMATION
Enron Common Stock is traded on the NYSE and the Pacific, Chicago, London
and Frankfurt exchanges under the symbol "ENE" and the PGC Common Stock is
traded on the NYSE and the Pacific Stock Exchange under the symbol "PGN." The
following table sets forth, for the periods indicated, the range of high and low
per share sales prices for Enron Common Stock and PGC Common Stock as reported
on the NYSE Composite Tape, as well as information concerning quarterly
dividends declared on such shares.
<TABLE>
<CAPTION>
ENRON COMMON STOCK PGC COMMON STOCK
----------------------------------- -----------------------------------
DIVIDENDS DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
First Quarter..................................... $34 $28 $ .20 $20 7/8 $18 7/8 $ .30
Second Quarter.................................... 36 7/8 32 1/2 .20 23 1/4 20 1/4 .30
Third Quarter..................................... 36 3/8 31 5/8 .20 25 3/4 21 5/8 .30
Fourth Quarter.................................... 39 3/8 33 .2125 29 1/4 25 1/4 .30
Year ended December 31, 1996:
First Quarter..................................... $40 $34 5/8 $.2125 $31 1/2 $28 1/2 $ .32
Second Quarter.................................... 42 3/8 36 3/8 .2125 30 7/8 27 3/4 .32
Third Quarter..................................... 43 39 1/8 .2125 38 5/8 28 .32
Fourth Quarter.................................... 47 1/2 40 1/4 .225 44 3/4 37 5/8 .32
Year ending December 31, 1997:
First Quarter..................................... $45 1/8 $37 7/8 $ .225 $43 3/8 $34 7/8 $ .32
Second Quarter (through May 15, 1997)............. 41 5/8 35 5/8 .225 40 3/8 32 --
</TABLE>
On July 19, 1996, the last trading day prior to the joint announcement by
Enron and PGC that they had executed the Original Merger Agreement, the closing
per share sales prices of Enron Common Stock and PGC Common Stock, as reported
on the NYSE Composite Tape, were $41.75 and $28.125 respectively. On April 11,
1997, the last trading day prior to the announcement of the First Amendment, the
closing per share sales prices of Enron Common Stock and PGC Common Stock, as
reported on the NYSE Composite Tape, were $35.875 and $32.00 respectively.
An application will be made to have the New Enron Common Stock listed on
the NYSE and the Chicago, Pacific, London and Frankfurt exchanges.
Enron has paid quarterly cash dividends on the Enron Common Stock for more
than 50 consecutive years. New Enron intends to continue Enron's policy of
paying regular quarterly cash dividends on its common stock, although future
dividend payments on the New Enron Common Stock will depend on New Enron's
results of operations, cash flow, anticipated capital requirements and such
other factors as the Board of Directors of New Enron deems relevant. Enron is
prohibited from paying dividends on the Enron Common Stock in the event of
default of certain guaranteed obligations under the terms of the Enron Capital
LLC 8% Cumulative Guaranteed Monthly Income Preferred Shares, Enron Capital
Resources, L.P. 9% Cumulative Preferred Securities, Series A, the 8.30% Trust
Originated Preferred Securities of Enron Capital Trust I and the 8 1/8% Trust
Originated Preferred Securities of Enron Capital Trust II. Enron does not
believe such provisions will materially restrict the ability of Enron or New
Enron to pay dividends in the future.
61
<PAGE> 68
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet as of March 31,
1997 and the unaudited pro forma combined statements of income for the three
months ended March 31, 1997 and the year ended December 31, 1996, give effect to
the Mergers based on the historical consolidated financial statements of Enron
and PGC under the assumptions and adjustments set forth in the accompanying
notes to the pro forma financial statements.
The unaudited pro forma combined balance sheet assumes the Mergers were
consummated on March 31, 1997. The unaudited pro forma combined statements of
income assume that the Mergers were consummated on January 1, 1996. Enron will
account for the transaction as a purchase for financial reporting purposes.
These unaudited pro forma combined financial statements should be read in
conjunction with the notes thereto and with the historical consolidated
financial statements and related notes thereto of Enron and PGC which have been
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference." The unaudited pro forma combined financial statements have been
prepared based upon assumptions deemed appropriate by the management of Enron
and PGC. These unaudited pro forma combined financial statements have been
prepared for informational purposes only and are not necessarily indicative of
the actual or future results of operations or financial condition that would
have been achieved had the Mergers occurred at the dates assumed.
62
<PAGE> 69
ENRON CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
-----------------------
ENRON PGC* ADJUSTMENTS COMBINED
------- ------ ----------- --------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents....................... $ 255 $ 66 $ (19)(A) $ 294
(8)(B)
Trade and other receivables..................... 1,802 183 1,985
Assets from price risk management activities.... 657 -- 657
Other........................................... 559 62 621
------- ------ ------- -------
Total Current Assets.................... 3,273 311 (27) 3,557
------- ------ ------- -------
Investments and Other Assets
Investments in and advances to unconsolidated
subsidiaries................................. 1,685 -- 1,685
Assets from price risk management activities.... 1,266 -- 1,266
Unamortized regulatory assets................... 55 877 932
Other........................................... 1,790 648 (11)(A) 2,427
------- ------ ------- -------
Total Investments and Other Assets...... 4,796 1,525 (11) 6,310
------- ------ ------- -------
Property, Plant and Equipment, net................ 7,079 1,785 8,864
Goodwill.......................................... -- -- 983 (C) 983
------- ------ ------- -------
Total Assets...................................... $15,148 $3,621 $ 945 $19,714
======= ====== ======= =======
Current Liabilities
Accounts payable and accrued liabilities........ $ 1,608 $ 143 $ $ 1,751
Liabilities from price risk management
activities................................... 699 -- 699
Other........................................... 475 259 17 (D) 751
------- ------ ------- -------
Total Current Liabilities............... 2,782 402 17 3,201
------- ------ ------- -------
Long-Term Debt.................................... 3,564 931 20 (E) 4,515
------- ------ ------- -------
Deferred Credits and Other Liabilities
Deferred income taxes........................... 2,359 610 (70)(F) 2,899
Liabilities from price risk management
activities................................... 531 -- 531
Trojan decommissioning and transition
obligation................................... -- 355 355
Other........................................... 480 276 131 (D) 887
------- ------ ------- -------
Total Deferred Credits and Other
Liabilities........................... 3,370 1,241 61 4,672
------- ------ ------- -------
Minority Interests................................ 754 -- 754
------- ------ ------- -------
Company-Obligated Preferred Stock of
Subsidiaries.................................... 764 30 1 (E) 795
------- ------ ------- -------
Shareholders' Equity
Convertible preferred stock..................... 137 -- 137
Common stock.................................... 26 193 1,670 (G) 3,768
1,879 (H)
Additional paid in capital...................... 1,879 586 (586)(G) --
(1,879)(H)
Retained earnings............................... 2,172 240 (232)(G) 2,172
(8)(B)
Other........................................... (300) (2) 2 (G) (300)
------- ------ ------- -------
3,914 1,017 846 5,777
------- ------ ------- -------
Total Liabilities and Shareholders' Equity........ $15,148 $3,621 $ 945 $19,714
======= ====== ======= =======
Common Stock outstanding as of March 31, 1997..... 256 51 306
======= ====== =======
</TABLE>
- ---------------
* Certain amounts have been reclassified to conform to Enron's presentation.
63
<PAGE> 70
ENRON CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
A. To reflect approximately $30 million for transaction costs related to the
PGC Merger incurred by Enron, of which $11 million has been paid and
deferred, including Enron's required contribution to the Foundation of $10
million.
B. To reflect approximately $8 million for PGC transaction costs related to the
Mergers expected to be incurred subsequent to March 31, 1997.
C. To reflect the recognition of the purchase price allocation to goodwill. The
significant adjustments comprising the purchase price allocated to goodwill
are as follows (in millions):
<TABLE>
<S> <C>
Consideration paid in excess of PGC's net book value........ $854
Increase in long-term debt and preferred stock.............. 21
Guaranteed obligation to PGE customers...................... 148
Decrease in deferred income tax liability................... (70)
Transaction costs........................................... 30
----
$983
====
</TABLE>
For purposes of these Pro Forma Combined Financial Statements, the assets
and liabilities acquired reflect their current net book value, except as
reflected above. The allocation of the purchase price is preliminary
because valuations and other studies related to PGC's regulated and
unregulated businesses have not been finalized.
Additionally, as a condition to the OPUC's approval of the Mergers, Enron
will file a disaggregation plan to separate PGC's generating assets from
its transmission and distribution assets within 60 days after completion of
the Mergers. As a result, certain of PGC's operations may no longer be
regulated and therefore will not be subject to the provisions of Statement
of Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation." Enron has not prepared its disaggregation plan or
estimated the impact of such plan on the recorded assets and liabilities of
PGC. As of March 31, 1997, PGC's net regulatory assets were $742 million.
As a result of the above matters, the fair values of the assets and
liabilities of PGC's regulated and unregulated businesses may vary
significantly from the historical basis of the assets and liabilities
recorded by PGC. Therefore, Enron is unable to estimate the fair value of
PGC's assets and liabilities and the ultimate impact on its purchase price
allocation to goodwill.
D. To reflect Enron's obligation to provide guaranteed merger-related benefits
to PGE's customers. The total undiscounted guaranteed obligation of $141
million (which will accrue interest at above-market rates) has been
reflected at Enron's incremental current borrowing rate.
E. To increase long-term debt and preferred stock of subsidiary, PGE, by $20
million and $1 million, respectively, to reflect fair value based on the
quoted market prices for the same or similar issues or on the current rates
offered to PGC for debt of similar remaining maturities.
F. To reduce deferred income tax liabilities for the tax effect of the basis
differences between the fair value of certain liabilities and PGC's
corresponding historical net book values. It is assumed there will be no
change in the tax basis of PGC's assets and liabilities. For purposes of the
pro forma calculations, a statutory income tax rate of 41% has been
utilized.
G. To reflect the issuance of 50,505,724 shares of New Enron Common Stock,
without par value, for the PGC Common Stock issued and outstanding as of
March 31, 1997 (based upon the PGC Conversion Ratio of 0.9825 shares of New
Enron Common Stock for each share of PGC Common Stock) at $36.88 per share
(reflecting the average share price of Enron Common Stock for two trading
days before and after the announcement of the First Amendment) and to
eliminate PGC common shareholders' equity of $1,017 million.
H. To reflect the reclassification of Enron's additional paid in capital to
common stock due to the New Enron Common Stock being without a par value.
64
<PAGE> 71
ENRON CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
----------------------
ENRON PGC* ADJUSTMENTS COMBINED
------ ----- ----------- --------
<S> <C> <C> <C> <C>
Revenues............................................. $5,344 $ 368 $ $5,712
------ ----- ---- ------
Costs and Expenses
Costs of gas and other products.................... 4,632 157 4,789
Operating expenses................................. 273 53 326
Oil and gas exploration expenses................... 22 -- 22
Depreciation, depletion and amortization........... 124 39 7(A) 170
Taxes, other than income taxes..................... 36 15 51
------ ----- ---- ------
5,087 264 7 5,358
------ ----- ---- ------
Operating Income..................................... 257 104 (7) 354
Other Income and Deductions, net..................... 172 25 1(B) 198
------ ----- ---- ------
Income before Interest, Minority Interests and
Income Taxes....................................... 429 129 (6) 552
Interest and Related Charges, net.................... 70 19 2(C) 91
Dividends on Preferred Stock of Subsidiaries......... 15 1 16
Minority Interests................................... 19 -- 19
Income Taxes......................................... 103 50 (1)(D) 152
------ ----- ---- ------
Net Income........................................... 222 59 (7) 274
Preferred Stock Dividends............................ 4 -- 4
------ ----- ---- ------
Earnings on Common Stock............................. $ 218 $ 59 $ (7) $ 270
====== ===== ==== ======
Earnings Per Share of Common Stock
Primary............................................ $ 0.88 $1.16 $ 0.91
====== ===== ======
Fully diluted...................................... $ 0.81 $1.16 $ 0.85
====== ===== ======
Average Number of Common Shares Used in Primary
Computation........................................ 248 51 298(E)
====== ===== ======
</TABLE>
- ---------------
* Certain amounts have been reclassified to conform to Enron's presentation.
65
<PAGE> 72
ENRON CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
------------------------
ENRON PGC* ADJUSTMENTS COMBINED
------- ------ ------------- --------
<S> <C> <C> <C> <C>
Revenues............................................ $13,289 $1,112 $ $14,401
------- ------ ---- -------
Costs and Expenses
Costs of gas and other products................... 10,478 317 10,795
Operating expenses................................ 1,421 253 1,674
Oil and gas exploration expenses.................. 89 -- 89
Depreciation, depletion and amortization.......... 474 155 25(A) 654
Taxes, other than income taxes.................... 137 52 189
------- ------ ---- -------
12,599 777 25 13,401
------- ------ ---- -------
Operating Income.................................... 690 335 (25) 1,000
Other Income and Deductions, net.................... 548 (21) 23(B) 550
------- ------ ---- -------
Income before Interest, Minority Interests and
Income Taxes...................................... 1,238 314 (2) 1,550
Interest and Related Charges, net................... 274 78 8(C) 360
Dividends on Preferred Stock of Subsidiaries........ 34 3 37
Minority Interests.................................. 75 -- 75
Income Taxes........................................ 271 103 7(D) 381
------- ------ ---- -------
Net Income.......................................... 584 130 (17) 697
Preferred Stock Dividends........................... 16 -- 16
------- ------ ---- -------
Earnings on Common Stock............................ $ 568 $ 130 $(17) $ 681
======= ====== ==== =======
Earnings Per Share of Common Stock
Primary........................................... $ 2.31 $ 2.53 $ 2.30
======= ====== =======
Fully diluted..................................... $ 2.16 $ 2.53 $ 2.17
======= ====== =======
Average Number of Common Shares Used in Primary
Computation....................................... 246 51 296(E)
======= ====== =======
</TABLE>
- ---------------
* Certain amounts have been reclassified to conform to Enron's presentation.
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<PAGE> 73
ENRON CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
The adjustments to the Unaudited Pro Forma Condensed Combined Statements of
Income does not give effect to any nonrecurring costs directly associated with
the Mergers that might be incurred within the next twelve months. The pro forma
financial data also do not give effect to any potential cost savings and
synergies that could result from the Mergers.
A. To reflect a 40-year amortization of the purchase price allocated to
goodwill.
B. To remove the effect of PGC's recognition of expenses related to the Mergers
in the three months ended March 31, 1997 and the year ended December 31,
1996.
C. To reflect amortization of the excess of fair value over book value from
revaluation of PGC's long-term debt and preferred stock and interest expense
related to Enron's obligation to provide guaranteed merger-related benefits
to PGE's customers.
D. To reflect income tax expense for the effects of the above items except for
item A. For purposes of the pro forma calculations, a statutory income tax
rate of 41% has been utilized.
E. The average number of common shares used in primary computation have been
determined using the PGC Conversion Ratio of 0.9825 shares of New Enron
Common Stock for each share of PGC Common Stock.
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<PAGE> 74
PRINCIPAL SHAREHOLDERS OF ENRON AND PGC
ENRON
As of February 15, 1997, Enron knows of no one who beneficially owns in
excess of five percent of a class of the Enron Common Stock or Enron Convertible
Preferred Stock, except as set forth in the table below:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------------------
SOLE SHARED SOLE VOTING
VOTING VOTING AND LIMITED
TITLE OF AND AND OR NO PERCENT
NAME AND ADDRESS CLASS INVESTMENT INVESTMENT INVESTMENT OF
OF BENEFICIAL OWNER OF STOCK POWER POWER POWER OTHER CLASS
- ------------------------ ---------- ---------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Belfer Common 5,723,172(1)(13) 464,898(2) 12,235(12)(14) -- 2.4
767 Fifth Avenue Convertible
New York, NY 10153 Preferred 323,673(3) 6,352(4) -- -- 24.1
Mr. & Mrs. Lawrence Ruben Common 4,923,813(5) 945,949(6) -- -- 2.3
600 Madison Avenue Convertible
New York, NY 10022 Preferred 289,387(7) 16,275(8) -- -- 22.3
Jack Saltz Common 1,457,074(9) 817,103(10) -- -- *
767 Fifth Avenue Convertible
New York, NY 10153 Preferred 73,585 58,900(11) -- -- 9.8
Enron Employee Stock Common -- -- -- 15,296,249(15) 6.0
Ownership Plan Convertible
1400 Smith Street Preferred -- -- -- --
Houston, TX 77002
Enron Savings Plan Common -- -- -- 8,474,659(16) 3.3
1400 Smith Street Convertible
Houston, TX 77002 Preferred -- -- -- 70,000(16) 5.1
</TABLE>
- ---------------
* Less than 1 percent
(1) Includes 15,726 shares held by trusts of which Mr. Belfer is trustee, in
all of which shares Mr. Belfer disclaims beneficial ownership. Also
includes 4,418,784 shares that would be acquired upon the conversion of the
Enron Convertible Preferred Stock shown in the table as being beneficially
owned by Mr. Belfer with sole voting and investment power.
(2) Includes 372,000 shares held by a trust of which Mr. Belfer's wife is
co-trustee and 6,180 shares held by Mr. Belfer's wife. Also includes 86,718
shares that would be issued upon the conversion of the Enron Convertible
Preferred Stock shown in the table as being beneficially owned by Mr.
Belfer with shared voting and investment power.
(3) Includes 61,870 shares held by trusts of which Mr. Belfer is trustee, in
all of which shares Mr. Belfer disclaims beneficial ownership.
(4) Includes 5,300 shares held by a trust of which Mr. Belfer's wife is
co-trustee, 625 shares held by Mr. Belfer's wife and 427 shares held by
trusts of which Mr. Belfer is a trustee, in all of which shares Mr. Belfer
disclaims beneficial ownership.
(5) Includes 9,513 shares held as trustee or co-trustees for their children and
61,200 shares held by Mrs. Ruben as trustee for a charitable trust. Also
includes 3,950,711 shares that would be acquired upon the conversion of the
Enron Convertible Preferred Stock.
(6) Includes 120,696 shares held by Mrs. Ruben as co-trustee for her children;
226,787 shares held by Mr. Ruben as co-trustee for his children; 332,280
shares held by Mr. Ruben as co-trustee for his nieces and nephews; and
44,000 shares held by the Selma and Lawrence Ruben Foundation in which
shares Mr. and Mrs. Ruben have no pecuniary interest. Also includes 222,186
shares that would be issued upon the conversion of the Enron Convertible
Preferred Stock.
(7) Includes 960 shares held as co-trustee for their children, 53,330 shares
held by Mrs. Ruben as trustee for her children and 3,600 shares held by
Mrs. Ruben as trustee for a charitable trust.
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<PAGE> 75
(8) Includes 5,224 shares held by Mrs. Ruben as co-trustee for her children and
11,051 shares held by Mr. Ruben as co-trustee for his nieces and nephews,
in which shares Mr. Ruben has no pecuniary interest.
(9) Includes 1,004,582 shares that would be issued upon the conversion of the
Enron Convertible Preferred Stock.
(10) Includes 804,103 shares that would be issued upon the conversion of the
Enron Convertible Preferred Stock.
(11) Held by Mr. Saltz's wife as trustee for their children.
(12) Includes restricted shares of Enron Common Stock held under Enron's 1991
Stock Plan. Participants in the plan have sole voting power and no
investment power for restricted shares awarded under the plan until such
shares vest in accordance with plan provisions. After vesting, the
participant has sole investment and voting powers.
(13) 19,416 shares of Enron Common Stock are subject to stock options
exercisable within 60 days after February 15, 1997, which number is
included in the number of shares shown as beneficially owned as of such
date.
(14) Includes shares held under Enron's Savings Plan. Participants in the
Savings Plan have sole voting power and limited investment power with
respect to shares in the Plan.
(15) Pursuant to the terms of Enron's Employee Stock Ownership Plan ("ESOP"),
shares allocated to employee accounts are voted by the respective
employees. The ESOP administrative committee has the power to vote Enron
Common Stock that has not been allocated to any employee accounts. If the
ESOP trustee receives no voting directions from the ESOP administrative
committee as to unallocated shares or from the respective employees as to
allocated shares, then all such shares are to be voted by the trustee in
the same proportion as the allocated shares that are voted by employees.
(16) Pursuant to the terms of Enron's Savings Plan, shares allocated to employee
accounts are voted by the respective employees. If the trustee receives no
voting directions from the respective employees, then all such shares are
to be voted by the trustee in the same proportion as the allocated shares
that are voted by employees. Includes 955,640 shares that would be acquired
upon the conversion of the Enron Convertible Preferred Stock.
PGC
As of the Record Date, PGC does not know of any person or entity that would
be deemed to own beneficially more than 5% of the PGC Common Stock.
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DESCRIPTION OF NEW ENRON CAPITAL STOCK
GENERAL
The following descriptions of certain of the provisions of the New Enron
Charter and the New Enron Bylaws are summaries and do not purport to be
complete, and are qualified in their entirety by reference to the New Enron
Charter and the New Enron Bylaws. A copy of the New Enron Charter is included as
Annex E to this Proxy Statement/Prospectus, and the proposed form of New Enron
Bylaws is included as an exhibit to the Registration Statement of which this
Proxy Statement/Prospectus is a part. Generally, the terms of the New Enron
Charter and the New Enron Bylaws are substantially similar to those of the Enron
Charter and Enron Bylaws, respectively, except for changes necessary to comply
with Oregon law. See "Comparative Rights of New Enron, Enron and PGC
Shareholders" for a description of certain differences in the Enron Charter and
Bylaws and the New Enron Charter and Bylaws.
COMMON STOCK
New Enron is authorized to issue up to 600,000,000 shares of New Enron
Common Stock. As of the date of this Proxy Statement/Prospectus, there were
1,000 shares of New Enron Common Stock issued and outstanding, all of which were
owned by Enron. Based on the number of shares of Enron Common Stock and PGC
Common Stock outstanding on the Record Date, there will be an aggregate of
305,728,792 shares of New Enron Common Stock issued in the Mergers. The holders
of New Enron Common Stock are entitled to one vote for each share on all matters
submitted to a vote of shareholders and do not have cumulative voting rights in
the election of directors. The holders of New Enron Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors of New Enron out of legally available funds subject to the rights of
any preferred stock. In the event of liquidation, dissolution or winding up of
New Enron, the holders of New Enron Common Stock are entitled to share ratably
in all assets of New Enron remaining after provision for payment of liabilities
and satisfaction of the liquidation preference of any shares of New Enron
Preferred Stock that may be outstanding. The holders of New Enron Common Stock
have no preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of New Enron Common Stock may become
subject to those of holders of New Enron Preferred Stock, including any series
of New Enron Preferred Stock issued in the future.
PREFERRED STOCK
New Enron is authorized to issue up to 16,500,000 shares of New Enron
Preferred Stock, of which no shares are outstanding as of the date of this Proxy
Statement/Prospectus. Based on the number of shares of Enron Convertible
Preferred Stock issued and outstanding as of the Record Date, an aggregate of
1,367,671 shares of New Enron Preferred Stock will be designated the New Enron
Cumulative Second Preferred Convertible Stock ("New Enron Convertible Preferred
Stock") for issuance in the Reincorporation Merger in exchange for the shares of
Enron's Cumulative Second Preferred Convertible Stock ("Enron Convertible
Preferred Stock") issued and outstanding as of the Effective Time. Based on the
number of shares of Enron's 9.142% Perpetual Second Preferred Stock ("Enron
9.142% Preferred Stock") issued and outstanding as of the Record Date, an
aggregate of 35.568509 shares of New Enron Preferred Stock will be designated
the New Enron 9.142% Perpetual Second Preferred Stock ("New Enron 9.142%
Preferred Stock") for issuance in the Reincorporation Merger in exchange for the
shares of Enron 9.142% Preferred Stock issued and outstanding as of the
Effective Time.
In addition to the New Enron Convertible Preferred Stock and the New Enron
9.142% Preferred Stock, the New Enron Board of Directors have authority, without
shareholder approval (except to the extent that holders of any series of New
Enron Preferred Stock are entitled by their terms to class voting rights), to
issue shares of New Enron Preferred Stock in one or more series and to determine
the number of shares, designations, dividend rights, conversion rights, voting
power, redemption rights, liquidation preferences and other terms of any such
series. The issuance of New Enron Preferred Stock, while providing desired
flexibility in connection with possible acquisitions and other corporate
purposes, could adversely affect the voting power of holders of New Enron Common
Stock and the likelihood that such holders will receive dividend payments
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and payments upon liquidation and could have the effect of delaying, deferring
or preventing a change in control of New Enron.
NEW ENRON CONVERTIBLE PREFERRED STOCK
The following summary of the terms of the New Enron Convertible Preferred
Stock is qualified in its entirety by reference to the form of series
designation for the New Enron Convertible Preferred Stock included as Annex F to
this Proxy Statement/Prospectus.
The annual rate of dividends payable on shares of the New Enron Convertible
Preferred Stock will be the greater of $10.50 per share or the dividend amount
payable on the number of shares of New Enron Common Stock into which one share
of New Enron Convertible Preferred Stock will be convertible (currently 13.652
shares, subject to adjustment). Such dividends will be payable quarterly on the
first days of January, April, July and October. These dividend rights are
superior to the dividend rights of the New Enron Common Stock and will rank
equally with the dividend rights on the New Enron 9.142% Preferred Stock.
The amount payable on shares of the New Enron Convertible Preferred Stock
in the event of any involuntary or voluntary liquidation, dissolution or winding
up of the affairs of New Enron will be $100 per share, together with accrued
dividends to the date of distribution or payment. The liquidation rights of the
New Enron Convertible Preferred Stock will be superior to the New Enron Common
Stock and will rank equally with the liquidation rights of the New Enron 9.142%
Preferred Stock
The New Enron Convertible Preferred Stock will be redeemable at the option
of New Enron at any time, in whole or in part, at a redemption price of $100 per
share, together with accrued dividends to the date of distribution or payment.
If the Effective Time were to occur on the date hereof, each share of New Enron
Convertible Preferred Stock would be convertible initially into 13.652 shares of
New Enron Common Stock at any time at the option of the holder (which conversion
rate is and will be subject to certain adjustments).
Holders of New Enron Convertible Preferred Stock will be entitled to vote
together with the New Enron Common Stock on all matters submitted to a vote of
New Enron shareholders, with each share of New Enron Convertible Preferred Stock
having a number of votes equal to the number of shares of New Common Stock into
which one share of New Enron Convertible Preferred Stock is convertible. In
addition, holders of New Enron Convertible Preferred Stock will be entitled to
certain class voting rights, including (unless provision is made for redemption
of such shares) (a) the requirement for approval by the holders of at least
two-thirds of the New Enron Convertible Preferred Stock (voting together with
all other shares of parity stock similarly affected) to effect (i) an amendment
to the New Enron Charter or Bylaws that would affect adversely the voting
powers, rights or preferences of the holders of the New Enron Convertible
Preferred Stock or reduces the time for any notice to which the holders of the
New Enron Convertible Preferred Stock may be entitled, (ii) the authorization,
creation or issuance of, or the increase in the authorized amount of, any stock
of any class or series or any security convertible into stock of any class or
series ranking prior to the New Enron Convertible Preferred Stock, (iii) the
voluntary dissolution, liquidation or winding up of the affairs of New Enron, or
the sale, lease or conveyance by New Enron of all or substantially all of its
property or assets, or (iv) the purchase or redemption (for sinking fund
purposes or otherwise) of less than all of the New Enron Convertible Preferred
Stock and other parity stock at the time outstanding unless the full dividends
on all shares of New Enron Convertible Preferred Stock then outstanding shall
have been paid or declared and a sum sufficient for payment thereof set apart,
and (b) the requirement for approval by the holders of at least a majority of
the New Enron Convertible Preferred Stock (voting together with all other shares
of parity stock similarly affected), to effect (i) the authorization, creation
or issuance of, or the increase in the authorized amount of, any stock of any
class or series or any security convertible into stock of any class or series,
ranking on a parity with the New Enron Convertible Preferred Stock, provided
that no such consent shall be required for the authorization, creation or
issuance by New Enron of a number of shares of one or more series of Preferred
Stock ranking on parity with the New Enron Convertible Preferred Stock that,
together with number of shares of New Enron Convertible Preferred Stock and
other Preferred Stock ranking on parity with the New Enron Convertible Preferred
Stock then outstanding, would equal 5,000,000, or (ii) the merger or
consolidation of New Enron with or into any other corporation, unless the
corporation resulting from such
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merger or consolidation will have after such merger or consolidation no class of
stock and no other securities either authorized or outstanding ranking prior to
or on a parity with the New Enron Convertible Preferred Stock, except the same
number of shares of stock and the same amount of other securities with the same
rights and preferences as the stock and securities of New Enron respectively
authorized and outstanding immediately preceding such merger or consolidation,
and each holder of New Enron Convertible Preferred Stock immediately preceding
such merger or consolidation shall receive the same number of shares, with the
same rights and preferences, of the resulting corporation. In addition, if
dividend payments on the New Enron Convertible Preferred Stock are in default in
an amount equivalent to six quarterly dividends on such shares, then the holders
of the New Enron Convertible Preferred Stock shall have certain voting rights
(together with any parity stock similarly affected) to elect two directors to
New Enron's Board of Directors until such dividends have been paid or funds
sufficient therefor deposited in trust.
9.142% PREFERRED STOCK
The following summary of the terms of the New Enron 9.142% Preferred Stock
is qualified in its entirety by reference to the form of series designation for
the New Enron 9.142% Preferred Stock included as Annex G to this Proxy
Statement/Prospectus.
The annual rate of dividends payable on shares of the New Enron 9.142%
Preferred Stock will be $91,420 per share. Such dividends will be payable
quarterly on the first days of January, April, July and October. These dividend
rights will be superior to the dividend rights of the New Enron Common Stock and
will rank equally with the dividend rights on the New Enron Convertible
Preferred Stock.
The amount payable on shares of the New Enron 9.142% Preferred Stock in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of New Enron will be $1,000,000 per share, together with accrued
dividends. The liquidation rights of the New Enron 9.142% Preferred Stock will
be superior to the New Enron Common Stock and will rank equally with the
liquidation rights of the New Enron Convertible Preferred Stock.
The New Enron 9.142% Preferred Stock will not be redeemable at the option
of New Enron. Pursuant to an agreement between New Enron and its subsidiary,
however, such subsidiary will have the rights, exercisable at any time, in whole
or in part, for a 180-day period commencing January 31, 2004, to cause New Enron
to redeem 18 shares for $1,000,000 per share, together with accrued dividends.
The holders of New Enron 9.142% Preferred Stock will generally have no
voting rights but will be entitled to certain class voting rights, including
(unless provision is made for redemption of such shares) (a) the requirement for
approval by the holders of at least two-thirds of the New Enron 9.142% Preferred
Stock (voting together with all other shares of parity stock similarly
affected), to effect (i) an amendment to the New Enron Charter or Bylaws that
would affect adversely the voting powers, rights or preferences of the holders
of the New Enron 9.142% Preferred Stock or reduces the time for any notice to
which the holders of the New Enron 9.142% Preferred Stock may be entitled, (ii)
the authorization, creation or issuance of, or the increase in the authorized
amount of, any stock of any class or series or any security convertible into
stock of any class or series ranking prior to the New Enron 9.142% Preferred
Stock, (iii) the voluntary dissolution, liquidation or winding up of the affairs
of New Enron, or the sale, lease or conveyance by New Enron of all or
substantially all of its property or assets, or (iv) the purchase or redemption
(for sinking fund purposes or otherwise) of less than all of the New Enron
9.142% Preferred Stock and other parity stock at the time outstanding unless the
full dividends on all shares of New Enron 9.142% Preferred Stock then
outstanding shall have been paid or declared and a sum sufficient for payment
thereof set apart, and (b) the requirement for approval by the holders of at
least a majority of the New Enron 9.142% Preferred Stock (voting together with
all other shares of parity stock similarly affected), to effect (i) the
authorization, creation or issuance of, or the increase in the authorized amount
of, any stock of any class or series or any security convertible into stock of
any class or series, ranking on a parity with the New Enron 9.142% Preferred
Stock, provided that no such consent shall be required for the authorization,
creation or issuance by New Enron of a number of shares of one or more series of
Preferred Stock ranking on parity with the New Enron 9.142% Preferred Stock
that, together with number of shares of New Enron 9.142% Preferred Stock and
other Preferred Stock ranking on
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parity with the New Enron 9.142% Preferred Stock then outstanding, would equal
5,000,000, or (ii) the merger or consolidation of New Enron with or into any
other corporation, unless the corporation resulting from such merger or
consolidation will have after such merger or consolidation no class of stock and
no other securities either authorized or outstanding ranking prior to or on a
parity with the New Enron 9.142% Preferred Stock, except the same number of
shares of stock and the same amount of other securities with the same rights and
preferences as the stock and securities of New Enron respectively authorized and
outstanding immediately preceding such merger or consolidation, and each holder
of New Enron 9.142% Preferred Stock immediately preceding such merger or
consolidation shall receive the same number of shares, with the same rights and
preferences, of the resulting corporation. In addition, if dividend payments on
the New Enron 9.142% Preferred Stock are in default in an amount equivalent to
six quarterly dividends on such shares, then the holders of the New Enron 9.142%
Preferred Stock shall have certain voting rights (together with any other parity
stock similarly affected) to elect two directors to New Enron's Board of
Directors until such dividends have been paid or funds sufficient therefor
deposited in trust.
CERTAIN PROVISIONS OF THE NEW ENRON CHARTER AND BYLAWS
Fair Price Provision. The New Enron Charter contains a "fair price"
provision which generally requires that certain mergers, business combinations
and similar transactions with a "Related Person" (generally the beneficial owner
of at least 10 percent of New Enron's voting stock) be approved by the holders
of at least 80 percent of New Enron's voting stock, unless (a) the transaction
is approved by at least 80 percent of the "Continuing Directors" of New Enron,
who constitute a majority of the entire board, (b) the transaction occurs more
than five years after the last acquisition of New Enron voting stock by the
Related Person or (c) certain "fair price" and procedural requirements are
satisfied. The New Enron Charter defines "Business Transaction" as (a) any
merger or consolidation involving New Enron or a subsidiary of New Enron, (b)
any sale, lease, exchange, transfer or other disposition (in one transaction or
a series of transactions), including without limitation a mortgage or any other
security device, of all or any substantial part of the assets either of New
Enron or of a subsidiary of New Enron, (c) any sale, lease, exchange, transfer
or other disposition of all or any substantial part of the assets of an entity
to New Enron or a subsidiary of New Enron, (d) the issuance, sale, exchange,
transfer or other disposition by New Enron or a subsidiary of New Enron of any
securities of New Enron or any subsidiary of New Enron, (e) any recapitalization
or reclassification of New Enron's securities (including without limitation, any
reverse stock split) or other transaction that would have the effect of
increasing the voting power of a Related Person, (f) any liquidation, spinoff,
splitoff, splitup or dissolution of New Enron, and (g) any agreement, contract
or other arrangement providing for any of the transactions described in this
definition of Business Transaction. "Continuing Director" is defined to mean a
director who either was a member of the Board of Directors of New Enron prior to
the time such Related Person became a Related Person or who subsequently became
a director of New Enron and whose election, or nomination for election by New
Enron's shareholders, was approved by a vote of at least 80 percent of the
Continuing Directors then on the Board, either by a specific vote or by approval
of the proxy statement issued by New Enron on behalf of the Board of Directors
in which such person is named as nominee for director, without an objection to
such nomination; provided, however, that in no event shall a director be
considered a "Continuing Director" if such director is a Related Person and the
Business Transaction to be voted upon is with such Related Person or is one in
which such Related Person otherwise has an interest (except proportionately as a
shareholder of New Enron).
Advance Notice Requirements for Shareholder Proposals and Nominations. The
New Enron Bylaws provide that for business to be properly brought before an
annual meeting of shareholders, it must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise brought before the meeting by or at the direction of
the Board of Directors or (c) otherwise properly brought before the meeting by a
shareholder of New Enron who is a shareholder of record at the time of giving of
notice hereinafter provided for, who shall be entitled to vote at such meeting
and who complies with the following notice procedures. In addition to any other
applicable requirements, for business to be brought before an annual meeting by
a shareholder of New Enron, the shareholder must have given timely notice in
writing of the business to be brought before an annual meeting of shareholders
to the Secretary of New Enron. To be timely, a shareholder's notice must be
delivered to or mailed and received at
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New Enron's principal executive offices not less than 120 days prior to the
anniversary date of the proxy statement for the previous year's annual meeting
of the shareholders of New Enron (or Enron, with respect to the first such
meeting after the Effective Time). A shareholder's notice to the Secretary must
set forth as to each matter the shareholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on New Enron's books, of the
shareholder proposing such business, (iii) the acquisition date, the class and
the number of shares of voting stock of New Enron which are owned beneficially
by the shareholder, (iv) any material interest of the shareholder in such
business and (v) a representation that the shareholder intends to appear in
person or by proxy at the meeting to bring the proposed business before the
meeting. No business shall be conducted at an annual meeting except in
accordance with the procedures outlined above.
The New Enron Bylaws provide that only persons who are nominated for
election as a director of New Enron in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for election
to New Enron's Board of Directors may be made at a meeting of shareholders (a)
by or at the direction of the Board of Directors or (b) by any shareholder of
New Enron who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote for the election of
directors at the meeting and who complies with the following notice procedures.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of New Enron. To be timely, a shareholder's notice must be delivered to or
mailed and received at New Enron's principal executive offices, (i) with respect
to an election to be held at an annual meeting of shareholders of New Enron, not
less than 120 days prior to the anniversary date of the proxy statement for the
previous year's annual meeting of the shareholders of New Enron (or Enron, with
respect to the first such meeting after the Effective Time), and (ii) with
respect to an election to be held at a special meeting of shareholders of New
Enron for the election of directors, not later than the close of business on the
10th day following the date on which notice of the date of the meeting was
mailed or public disclosure of the date of the meeting was made, whichever first
occurs. Such shareholder's notice to the Secretary shall set forth (a) as to
each person whom the shareholder proposes to nominate for election or
re-election as a director, all information relating to the person that is
required to be disclosed in solicitations for proxies for election of directors,
or is otherwise required, pursuant to Regulation 14A under the Exchange Act
(including the written consent of such person to be named in the proxy statement
as a nominee and to serve as a director if elected); and (b) as to the
shareholder giving the notice, (i) the name and address, as they appear on New
Enron's books, of such shareholder, and (ii) the class and number of shares of
capital stock of New Enron which are beneficially owned by the shareholder.
CERTAIN ANTI-TAKEOVER PROVISIONS OF OREGON LAW
Business Combinations with Interested Shareholders. New Enron will be
subject to the provisions of Sections 60.825-60.845 of the OBCA, which generally
provide that any person who acquires 15% or more of a corporation's voting stock
(thereby becoming an "interested shareholder") may not engage in certain
"business combinations" with the corporation for a period of three years
following the date the person became an interested stockholder, unless (i) the
board of directors has approved, prior to the date the person became an
interested shareholder, either the business combination or the transaction that
resulted in the person becoming an interested shareholder, (ii) upon
consummation of the transaction that resulted in the person becoming an
interested shareholder, that person owns at least 85% of the corporation's
voting stock outstanding at the time the transaction is commenced (excluding
shares owned by person who are both directors and officers and shares owned by
employee stock plans in which participants do not have the right to determine
whether shares will be tendered in a tender or exchange offer), or (iii) on or
subsequent to the date the person became an interested shareholder, the business
combination is approved by the board of directors and authorized by the
affirmative vote of at least 66 2/3% of the outstanding voting stock not owned
by the interested shareholder.
Control Share Statute. As is permitted by the OBCA, the New Enron Charter
provides that New Enron will not be subject to the Oregon Control Share Act. The
Oregon Control Share Act restricts the ability of a
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shareholder of certain Oregon-based corporations to vote shares of stock
acquired in a transaction that causes the acquiring person to control at least
one-fifth, one-third or one-half of the votes entitled to be cast in the
election of directors, except as authorized by a vote of the corporation's
disinterested shareholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the New Enron Common Stock and New
Enron Convertible Preferred Stock will be The First Chicago Trust Company of New
York.
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MANAGEMENT AND OTHER INFORMATION
Certain information relating to the management, executive compensation,
voting securities, certain relationships and related transactions and other
related matters pertaining to Enron and PGC is set forth in or incorporated by
reference in their respective Annual Reports on Form 10-K for the year ended
December 31, 1996. Such Annual Reports are incorporated in this Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference."
COMPARATIVE RIGHTS OF NEW ENRON, ENRON AND PGC SHAREHOLDERS
Rights of shareholders of Enron are currently governed by the DGCL, the
Enron Charter and the Enron Bylaws. Rights of shareholders of PGC are currently
governed by the OBCA, the PGC Charter and the PGC Bylaws. Upon consummation of
the Mergers, Enron and PGC shareholders will become shareholders of New Enron
and their rights as shareholders of New Enron will be governed by the New Enron
Charter, the New Enron Bylaws and the OBCA. There are a number of differences
between the rights of Enron and PGC shareholders and the rights of New Enron
shareholders. The following is a brief summary of certain differences between
the rights of New Enron shareholders and the rights of Enron or PGC
shareholders, and is qualified in its entirety by reference to the relevant
provisions of the OBCA, the DGCL, the Enron Charter and Bylaws, the PGC Charter
and Bylaws and the New Enron Charter and Bylaws.
IF THE STRUCTURE OF THE TRANSACTION CONTEMPLATED BY THE AMENDED MERGER
AGREEMENT IS ALTERED TO ELIMINATE THE REINCORPORATION MERGER AS DESCRIBED UNDER
"THE MERGERS -- GENERAL DESCRIPTION OF THE MERGERS -- ALTERNATIVE TRANSACTION
STRUCTURE IN THE EVENT OF REGULATORY REFORM," AND PGC IS MERGED DIRECTLY INTO
ENRON, THEN THE RIGHTS OF ENRON SHAREHOLDERS WOULD NOT BE AFFECTED, AND THE
RIGHTS OF PGC SHAREHOLDERS WOULD BE GOVERNED BY THE DGCL AND THE ENRON CHARTER
AND BYLAWS.
AUTHORIZED CAPITAL STOCK
Enron. The authorized capital stock of Enron consists of 600,000,000 shares
of Enron Common Stock, 1,500,000 shares of Preferred Stock, par value $100 per
share, 5,000,000 shares of Second Preferred Stock, par value $1.00 per share,
and 10,000,000 shares of Preference Stock, par value $1.00 per share. With
respect to the Preferred Stock, Second Preferred Stock or Preference Stock, the
Enron Board is authorized, without stockholder approval (subject to any class
voting rights of any existing holders of preferred stock), to designate series
of each such class and to determine the relative rights, preferences and
limitations of such series. As of the date hereof, there have been designated an
aggregate of 2,400,000 shares of Enron Convertible Preferred Stock (of which
1,367,671 shares were issued and outstanding as of the Record Date) and
35.568509 shares of Enron 9.142% Preferred Stock (of which 35.568509 shares are
issued and outstanding), each of which is a series of Second Preferred Stock.
PGC. The authorized capital stock of PGC consists of 100,000,000 shares of
PGC Common Stock and 30,000,000 shares of preferred stock, with respect to which
the PGC Board of Directors is empowered to establish series and to determine the
relative rights, preferences and limitations of any such series.
New Enron. The authorized capital stock of New Enron consists of
600,000,000 shares of New Enron Common Stock and 16,500,000 shares of New Enron
Preferred Stock, of which, based on the number of shares outstanding on the
Record Date, 1,367,671 shares will be designated the New Enron Convertible
Preferred Stock and 35.568509 shares will be designated the New Enron 9.142%
Preferred Stock for issuance to holders of Enron Convertible Preferred Stock and
Enron 9.142% Preferred Stock in the Reincorporation Merger. The Board of
Directors of New Enron is authorized, without shareholder approval (subject to
any class voting rights of any existing holders of preferred stock), to
designate series of New Enron Preferred Stock and to determine the relative
rights, preferences and limitations of any such series. See "Description of New
Enron Capital Stock."
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BOARDS OF DIRECTORS
Enron. The Board of Directors of Enron currently consists of 14 members,
with the number of directors constituting the Board of Directors to be
determined from time to time by resolution of the Board, except that no decrease
in the number of directors passed by the Board of Directors may shorten the term
of any incumbent director. The Enron Board is not divided into staggered
classes, and cumulative voting in the election of directors is not permitted.
PGC. The Board of Directors of PGC currently consists of 11 members (one
seat is currently vacant), which are divided into three staggered classes
serving three-year terms. The PGC Charter provides that the number of directors
must be not less than 11 nor more than 15 persons, the exact number to be
determined from time to time by a majority of the Board, except that no decrease
in the number of directors may shorten the term of any incumbent director.
Cumulative voting is not permitted in the election of directors.
New Enron. At the Effective Time, the Board of Directors of New Enron will
consist of 17 members. Following the Effective Time, the number of directors may
be changed from time to time by a majority of the Board except that no reduction
in the number of directors passed by the Board of Directors may have the effect
of shortening the term of any incumbent director. The Board of Directors of New
Enron is not divided into classes, although, under the OBCA, the Board of
Directors would be empowered to establish a classified board of directors
without shareholder approval by amending the New Enron Bylaws, an act which
would require shareholder approval under the DGCL. Cumulative voting in the
election of directors of New Enron will not be permitted.
REMOVAL OF DIRECTORS
Enron. The Enron Bylaws provide that any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the shares entitled to vote at an election of directors (except that any
director elected by a particular class or series of stock may be removed only by
such class).
PGC. Under the PGC Charter, a director may be removed for cause only with
the approval of 80 percent of the voting power of the outstanding voting stock
and may be removed without cause only with the approval of 100 percent of the
voting power of the outstanding voting stock.
New Enron. The New Enron Bylaws contain provisions similar to those in the
Enron Bylaws with respect to the removal of directors.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION WITHOUT MEETING
Enron. Under the DGCL, special meetings of stockholders may be called by
the board of directors or by such persons as may be authorized by the charter or
by the bylaws. The Enron Bylaws provide that special meetings of stockholders
may be called by the Chairman of the Board, President, any Vice Chairman of the
Board or by a majority of the Board or Executive Committee thereof. Stockholders
do not have the right to call a special meeting of stockholders. The Enron
Charter provides that stockholders do not have the power to act by written
consent (i.e., without a meeting).
PGC. Under the OBCA and the PGC Bylaws, special meetings of shareholders
may be called by the Board of Directors, the Chairman of the Board of Directors,
the President or the holders of at least 10 percent of all votes entitled to be
cast on any issue proposed to be considered at the meeting. The OBCA provides
that shareholders may take action by written consent only if such consent is
unanimous.
New Enron. The New Enron Bylaws contain a similar provision to the Enron
Bylaws as described above with respect to special shareholders meetings. In
addition, as required by the OBCA, the holders of at least 10 percent of all
votes entitled to be cast on any issue proposed to be considered at the meeting
will also be entitled to call a special shareholders' meeting. Under the OBCA,
New Enron shareholders will be entitled to act by written consent only if such
consent is unanimous.
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SHAREHOLDER PROPOSALS AND NOMINATIONS
Enron. The Enron Bylaws provide that for business to be properly brought
before an annual meeting of stockholders by a stockholder, the stockholder must
have given timely notice in writing of the business to be brought before the
meeting to the Secretary of Enron. To be timely, a stockholder's notice must be
delivered to or mailed and received at Enron's principal executive offices not
less than 120 days prior to the anniversary date of the proxy statement for the
previous year's annual meeting of the stockholders. The stockholder's notice to
the Secretary must set forth certain specified information as to each matter the
stockholder proposes to bring before the annual meeting. With respect to
director nominations, the Enron Bylaws provide that persons nominated by a
stockholder and not by or at the direction of the Board of Directors, shall be
eligible for election as a director only if such nomination is delivered to or
mailed and received at Enron's principal executive offices, (i) with respect to
an election to be held at an annual meeting of stockholders of Enron, not less
than 120 days prior to the anniversary date of the proxy statement for the
previous year's annual meeting of stockholders, and (ii) with respect to an
election to be held at a special meeting of stockholders of Enron for the
election of directors, not later than the close of business on the 10th day
following the date on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever first occurs.
Such stockholder's notice must set forth certain specified information with
respect to the nominee and the nominating stockholder.
PGC. PGC's Bylaws provide that for business to be properly brought before
an annual meeting of shareholders by a shareholder, the shareholder must have
given timely notice in writing of the business to be brought before the meeting
to PGC. To be timely, a shareholder's notice must be delivered to or mailed and
received by the Secretary of PGC at PGC's principal executive offices not more
than 70 days or less than 35 days prior to the meeting (subject to certain
exceptions in the event that less than 50 days' notice is given of the meeting).
The shareholder's notice must set forth certain specified information as to each
matter the shareholder proposes to bring before the annual meeting. With respect
to director nominations, PGC's Bylaws provide that persons nominated by a
shareholder shall be eligible for election as a director only if such nomination
is delivered to or mailed and received by the Secretary of PGC at PGC's
principal executive offices, (i) with respect to an election to be held at the
annual meeting of shareholders of PGC, not less than 90 days prior to the
anniversary date of the previous year's annual meeting of shareholders, and (ii)
with respect to an election to be held at a special meeting of shareholders of
PGC for the election of directors, not later than the close of business on the
10th day following the date on which notice of the date of the meeting was first
given to shareholders. Such shareholder's notice must set forth certain
specified information with respect to the nominee and the nominating
shareholder.
New Enron. The New Enron Bylaws contain provisions similar to those in the
Enron Bylaws with respect to shareholder nominations and proposals. See
"Description of New Enron Capital Stock -- Certain Provisions of the New Enron
Charter and Bylaws."
DISSENTERS' RIGHTS
Enron. Under the DGCL, dissenting stockholders are generally entitled to
appraisal rights only with respect to mergers or consolidations. Under the DGCL,
no appraisal rights exist if the stocks of the merging corporation are listed on
a national securities exchange or quoted on Nasdaq, or, if not listed, are held
of record by more than 2,000 stockholders, unless the holders are required to
accept cash or anything other than stocks of the survivor or stocks of another
corporation which are listed on a national stock exchange or quoted on Nasdaq.
PGC. Under the OBCA, a shareholder is entitled to dissent from, and obtain
payment of the fair value of the shareholder's shares in the event of (only to
the extent the shareholder is entitled to vote thereon) a merger, stock
exchange, sale or exchange of all or substantially all of the property of the
corporation other than in the usual and regular course of business (with certain
exceptions), or certain specified charter amendments. Under the OBCA, unless the
articles of incorporation provide otherwise (which the PGC Charter does not),
dissenters' rights do not apply to the holders of stocks of any class or series
if the stocks of the class or series
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were registered on a national securities exchange or quoted on the Nasdaq
National Market on the record date for the meeting of shareholders at which the
corporate action giving rise to dissenters' rights is to be approved.
New Enron. New Enron is governed by the OBCA with respect to dissenters'
rights.
SHAREHOLDER APPROVAL NOT REQUIRED FOR CERTAIN MERGERS
Enron. Under the DGCL, the stockholders of a Delaware corporation surviving
a merger are not required to vote on the merger if the agreement of merger does
not otherwise amend the certificate of incorporation, the outstanding shares of
the surviving corporation are not modified in the merger and the number of
shares of common stock issued by the surviving corporation, after giving effect
to conversions of securities issued in the merger, does not exceed 20% of the
common stock outstanding immediately before the effective date of the merger.
PGC. Under the OBCA, action by shareholders of a surviving corporation on a
plan of merger is not required if (i) the articles of incorporation of the
survivor will not differ from its articles before the merger (with certain
limited exceptions), (ii) each shareholder of the survivor will hold the same
number of shares with identical preferences and other rights as existed before
the merger, (iii) the number of voting shares outstanding after the merger, plus
the number of voting shares issuable as a result of conversions or the exercise
of warrants issued pursuant to the merger, will not exceed by more than 20% the
total number of voting shares of the survivor outstanding before the merger, and
(iv) the number of participating shares (shares entitling their holders to
participate without limitations in distributions) outstanding after the merger,
plus the number of participating shares issued upon conversion or exercise of
securities or rights issued pursuant to the merger, will not exceed by more than
20% the total number of participating shares outstanding before the merger.
New Enron. New Enron is governed by the OBCA with respect to approval of
mergers.
CHARTER AMENDMENTS
Enron. Under the DGCL and the Enron Charter, an amendment to the Enron
Charter must be approved by the holders of a majority of the outstanding stock
entitled to vote thereon and a majority of the outstanding stock of each class
entitled to vote thereon. Generally, the DGCL requires a separate class vote on
a charter amendment if the amendment would increase or decrease the aggregate
number of authorized shares of such class, increase or decrease the par value of
the shares of such class, or alter or change the powers, preferences or special
rights of shares of such class so as to affect them adversely.
PGC. Under the OBCA and the PGC Charter, an amendment to the PGC Charter
generally may be approved if the votes cast by a voting group entitled to vote
favoring the amendment exceed the votes cast by the voting group opposing the
action (except that a charter amendment that would result in a voting group
having dissenters' rights requires the affirmative vote of a majority of the
shares of such voting group). In addition to the instances in which an amendment
of a charter requires a class vote under Delaware law, the Oregon statute
requires, among other things, a class vote if the charter is amended to create a
new class of shares having rights or preferences prior to or on a parity with
the shares of the class or to increase the rights or preferences of another
authorized class so that such other class becomes prior to or on a parity with
the shares of a class. The OBCA provides that directors may make certain
amendments to the articles of incorporation without shareholder approval,
including making certain changes to the corporation's name or extending the
duration of the corporation.
New Enron. New Enron is governed by the OBCA with respect to charter
amendments.
DIVIDENDS AND STOCK REPURCHASES
Enron. The DGCL provides that a corporation may pay dividends from its
surplus or from its net profits during the current or immediately preceding
year, unless capital is less than the liquidation preferences of outstanding
preferred shares. The statute permits surplus to be determined by valuing the
corporation's net assets at fair market value rather than historical book value.
A Delaware corporation may not purchase or
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<PAGE> 86
redeem its shares when the capital of the corporation is impaired or such
purchase or redemption would cause any impairment of its capital (except that
the corporation may redeem preferred stock and then reduce the capital of the
corporation in the manner permitted by the statute) and may not purchase shares
that are subject to redemption at the option of the corporation at a price
greater than the applicable redemption price.
PGC. The OBCA provides that, subject to any restrictions contained in the
articles of incorporation, a corporation may make a distribution to its
shareholders unless, after giving effect to the distribution (which is defined
to include a repurchase of shares), (i) the corporation would not be able to pay
its debts as they become due in the usual course of business or (ii) the
corporation's total assets would be less than the sum of its total liabilities
plus the amount that would be needed, if the corporation were to be dissolved,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The board
of directors may base a decision that a distribution is not prohibited on (a)
financial statements prepared on the basis of accounting practices that are
reasonable in the circumstances, (b) a fair valuation, or (c) any other method
that is reasonable in the circumstances.
New Enron. New Enron is governed by the OBCA with respect to the payment of
dividends and stock repurchases.
FAIR PRICE CHARTER PROVISIONS
Enron. The Enron Charter contains a "fair price" provision which generally
requires that certain mergers, business combinations and similar transactions
with a "Related Person" (generally the beneficial owner of at least 10 percent
of Enron's voting stock) be approved by the holders of at least 80 percent of
Enron's voting stock, unless (i) the transaction is approved by at least 80
percent of the "Continuing Directors" (as defined) of Enron, who constitute a
majority of the entire board, (ii) the transaction occurs more than five years
after the last acquisition of Enron voting stock by the related person or (iii)
certain "fair price" and procedural requirements are satisfied.
PGC. The PGC Charter contains a fair price provision under which certain
mergers, business combinations and similar transactions with an "Interested
Shareholder" (generally the beneficial owner of at least 10 percent of PGC's
voting stock) must be approved by the holders of at least 80 percent of PGC's
voting stock, unless (i) the transaction is approved by a majority of the
"disinterested directors" (as defined) or (ii) certain "fair price" and
procedural requirements are satisfied.
New Enron. The New Enron Charter contains a provision substantially similar
to the fair price provision in the Enron Charter. See "Description of New Enron
Capital Stock -- Certain Provisions of the New Enron Charter and Bylaws."
BUSINESS COMBINATION STATUTES
Enron. Enron is subject to Section 203 of the DGCL, which provides that any
person who acquires 15% or more of a corporation's voting stock (thereby
becoming an "interested shareholder") may not engage in certain "business
combinations" with the corporation for a period of three years following the
date the person became an interested shareholder, unless (i) the board of
directors has approved, prior to that acquisition date, either the business
combination or the transaction that resulted in the person becoming an
interested shareholder, (ii) upon consummation of the transaction that resulted
in the person becoming an interested shareholder, that person owns at least 85%
of the corporation's voting stock outstanding at the time the transaction is
commenced (excluding shares owned by persons who are both directors and officers
and shares owned by employee stock plans in which participants do not have the
right to determine whether shares will be tendered in a tender or exchange
offer), or (iii) the business combination is approved by the board of directors
and authorized by the affirmative vote of at least 66% of the outstanding voting
stock not owned by the interested shareholder.
PGC. PGC is subject to the provisions of the Oregon Business Combination
Act, which is substantially similar to Section 203 of the DGCL as described
above.
New Enron. New Enron is subject to the provisions of the Oregon Business
Combination Act.
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CONTROL SHARE STATUTE
Enron. Under the DGCL Enron is not subject to a "control share" statute.
PGC. PGC is subject to the Oregon Control Share Act, which regulates the
process by which a person may acquire control of certain Oregon-based
corporations (as defined in the statute) without the consent and cooperation of
the board of directors. The law restricts a shareholder's ability to vote shares
of stock acquired in any transaction not approved by the board of directors that
causes the acquiring person's control of the corporation's stock to exceed
one-fifth, one-third or one-half of the votes entitled to be cast in the
election of directors. Shares acquired in a control share acquisition have no
voting rights except as authorized by a vote of the shareholders.
New Enron. As is permitted by the OBCA, the New Enron Charter contains a
provision "opting out" of the application of the Oregon Control Share Act, so
New Enron is not subject to the provisions of such Act.
PROPER FACTORS FOR CONSIDERATION IN EVALUATING BUSINESS COMBINATIONS
Enron. The DGCL does not contain a statutory provision outlining proper
factors for consideration in evaluating a business combination or transaction.
PGC. The OBCA provides that, when evaluating a tender offer, merger,
consolidation or sale of assets, the directors may, in determining what they
believe to be in the best interests of the corporation, give consideration to
the social, legal and economic effects on employees, customers and suppliers of
the corporation and on the communities and geographical areas in which the
corporation operates, the economy of the state and nation, the long-term as well
as short-term interests of the corporation and its shareholders, including the
possibility that these interests may be best served by the continued
independence of the corporation, and other relevant factors.
New Enron. New Enron is governed by the OBCA with respect to evaluating
business combinations and related transactions.
FORM OF CONSIDERATION FOR CAPITAL STOCK
Enron. The DGCL provides that the consideration for which capital stock is
issued must consist of cash, services rendered, personal property, real
property, leases of real property or a combination thereof.
PGC. Under the OBCA, shares may be issued for a consideration consisting of
any tangible or intangible property or benefit to the corporation, including
cash, promissory notes, services performed, contracts for services to be
performed or other securities of the corporation.
New Enron. New Enron is governed by the OBCA with respect to share
issuances.
LIMITATION OF DIRECTOR LIABILITY
Enron. The Enron Charter contains a provision, permitted by the DGCL, that
eliminates the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duties as a director,
except for liability of a director (i) for breach of the duty of loyalty, (ii)
for actions or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for the payment of improper
dividends or redemptions, or (iv) for any transaction from which the director
derived an improper personal benefit.
PGC. The PGC Charter does not contain a provision limiting the liability of
directors.
New Enron. As is permitted by the OBCA, the New Enron Charter contains
essentially the same provision as is contained in the Enron Charter with respect
to limiting director liability, except that, as permitted under the OBCA,
damages are limited for monetary damages "for conduct as a director," which
differs from the DGCL provision, which permits limits on monetary damages "for
breach of fiduciary duty as a director."
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INDEMNIFICATION
Enron. The Enron Charter contains provisions under which Enron will
indemnify, to the fullest extent permitted by law, persons who are made a party
to an action or proceeding by virtue of the fact that the person is or was a
director, officer, or, in certain circumstances, an employee or agent, of Enron
or another corporation at Enron's request. The DGCL generally permits such
indemnification to the extent that the person acted in good faith and in a
manner which he reasonably believed to be in the best interest of or not opposed
to the corporation or, with respect to criminal matters, if the individual had
no reasonable cause to believe his or her conduct was unlawful.
PGC. The PGC Bylaws contain a provision under which PGC will indemnify, to
the fullest extent permitted by law, persons who are made a party to an action
or proceeding by virtue of the fact that the person is or was a director or
officer of PGC or another corporation at PGC's request. The OBCA generally
permits such indemnification to the extent that the person acted in good faith
and in a manner which he reasonably believed to be in, or not opposed to, the
best interest of the corporation or, with respect to criminal matters, if the
individual had no reasonable cause to believe his or her conduct was unlawful.
New Enron. The New Enron Charter contains provisions substantially similar
to the indemnification provisions in the Enron Charter, subject to any
limitations in the OBCA.
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ELECTION OF DIRECTORS
(PROPOSAL 2)
The three Class II Directors elected at the Annual Meeting will serve a
three-year term ending at the time of the Annual Meeting in 2000 or until their
successors are elected and qualified.
It is anticipated that if the requisite approval of the OPUC is obtained
prior to the Annual Meeting and the Amended Merger Agreement receives the
approval of the PGC shareholders, then the PGC Merger will be consummated
promptly after the Annual Meeting, and it will not be necessary for the three
Class II members of the Board of Directors to assume office.
In the absence of contrary instruction, it is the intention of the persons
named in the enclosed proxy to vote the proxy FOR the persons listed, all of
whom are presently members of the Board of Directors. Should any nominee be
unable to serve, the persons named in the proxy will have discretionary
authority to nominate and vote for a suitable substitute or substitutes.
Except as specifically noted, each director and nominee has been employed
for more than five years in the capacity indicated. No family relationships
exist among the directors, nominees, or PGC's officers.
NAME, AGE, PRINCIPAL OCCUPATION
AND OTHER DIRECTORSHIPS(1)
- --------------------------------------------------------------------------------
CLASS II
(NOMINEES FOR ELECTION FOR A TERM OF THREE YEARS EXPIRING IN 2000)
CAROLYN S. CHAMBERS, age 65. Director since 1993
Ms. Chambers is Chairman and Chief Executive Officer, Chambers
Communication Corporation, a cable television and broadcasting company
located in Eugene, Oregon. Ms. Chambers is also a director of U.S. Bancorp;
Chambers Construction Company; Peacehealth; McKenzie River Motors;
University of Oregon Foundation; and C-Span.
KEN L. HARRISON, age 54. Director since 1987
Mr. Harrison is Chairman of the Board, Chief Executive Officer, and
President, PGC and PGE.
JEROME J. MEYER, age 59. Director since 1993
Mr. Meyer is Chairman and Chief Executive Officer and a director,
Tektronix, Inc., an electronics manufacturer located in Wilsonville,
Oregon. Mr. Meyer is also a director of Esterline Technologies Corporation
and AMP, Incorporated.
CLASS III
(TERM EXPIRING IN 1998)
GWYNETH GAMBLE BOOTH, age 60. Director since 1981(2)
Ms. Booth is a television producer/reporter, media consultant, and
community activist. She is a facilitator at the Dougy Center for grieving
children and Vice President of the Portland Art Museum. She is also a
member of the Board of Trustees of the University of Washington Foundation,
Neighborhood Partnership Fund of Oregon Community Foundation and the Dant
Foundation of the Oregon Heart Association.(3)
PETER J. BRIX, age 60. Director since 1983(2)
Mr. Brix is President, Hayden Investment Corporation, a marine
transportation and petroleum sales and investment company located in
Portland, Oregon. He was Chairman of the Board and Chief Executive Officer,
Brix Maritime Company until September 1993. Mr. Brix is also a director of
Idaho Forest Industries Inc.; Totem Resources Corporation; Regent Assisted
Living, Inc.; and Centennial Bank.
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JOHN W. CREIGHTON, JR., age 64. Director since 1990
Mr. Creighton is President, Chief Executive Officer and a director,
Weyerhaeuser Company, a forest products company located in Tacoma,
Washington. Mr. Creighton is also a director of Quality Food Centers, Inc.;
NHP, Incorporated; and Unocal Corporation.
RANDOLPH L. MILLER, age 49. Director since 1987
Mr. Miller is President, The Moore Company, a wholesale distributor of
consumer electronics, computer and telecommunications products, and
appliances located in Portland, Oregon. Mr. Miller is also a director of
the Automobile Association of America, Oregon and Chairman of the National
Computing Technology Industry Association, Distributor Section.
CLASS I
(TERM EXPIRING IN 1999)
RICHARD GEARY, age 62. Director since 1996
Mr. Geary is President, Kiewit Pacific Company, a highway and heavy
construction company located in Vancouver, Washington, a division of Peter
Kiewit Sons', Inc., Omaha, Nebraska. Mr. Geary is also a director of Peter
Kiewit Sons,' Inc.; Standard Insurance; Portland Opera; and Oregon Health
Sciences University Foundation.
JERRY E. HUDSON, age 59. Director since 1984(2)
Dr. Hudson is President, Willamette University, Salem, Oregon.
BRUCE G. WILLISON, age 48. Director since 1989
Mr. Willison is President, Chief Operating Officer and a director of H. F.
Ahmanson Company and its principal subsidiary, Home Savings of America,
FSB. He served as Chairman, President, and CEO of First Interstate Bank of
California and as Vice Chairman of First Interstate Bancorp until April
1996.
- ---------------
(1) All directors of PGC are also directors of PGE.
(2) Includes time served on the Board of Directors of PGE prior to the formation
of PGC in 1985.
(3) During 1996, PGC and its subsidiaries retained the legal services of Tonkon,
Torp, Galen, Marmaduke & Booth. Ms. Booth's husband is a partner in that
firm. PGC and its subsidiaries have retained that firm for services to be
rendered in 1997 and may retain the firm in the future.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
During 1996, the Board of Directors of PGC held 10 meetings. All directors
attended 75 percent or more of the aggregate of the meetings of the Board and
the committees on which they serve.
Board Committees. The Board of Directors has established standing audit,
compensation, and nominating committees. The names of these committees, their
current membership, and a brief statement of their principal responsibilities
are presented below.
The Audit Committee members are Bruce G. Willison, Chair; John W.
Creighton, Jr.; Richard Geary; Jerome J. Meyer; and Randolph L. Miller. The
Audit Committee is responsible to ensure adequate, appropriate, and responsive
auditing services; recommend independent auditors; review financial statements;
review the effectiveness of existing systems of control; review reports issued
by the Internal Audit Department; review policies concerning business practices;
and undertake other responsibilities deemed appropriate by the Board of
Directors of PGC. The Audit Committee held three meetings during 1996.
The Human Resources Committee (the "HR Committee") members are John W.
Creighton, Jr., Chair; Gwyneth Gamble Booth; Jerome J. Meyer; and Randolph L.
Miller. The HR Committee advises the Board of Directors of PGC on executive and
employee compensation and benefit plans, establishes investment policy for
certain employee benefit trusts, and addresses other human resources related
matters. The HR Committee held four meetings during 1996.
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The Board Nominating and Governance Committee (the "Nominating Committee")
members are Jerry E. Hudson, Chair; Peter J. Brix; Ken Harrison; and Randolph L.
Miller. The Nominating Committee plans for, identifies, evaluates and recommends
candidates for vacancies on the PGC Board of Directors. The Nominating Committee
held no meetings during 1996.
Under the PGC Bylaws, to nominate a director at the Annual Meeting a
shareholder must give written notice of intent to make the nomination either by
personal delivery or by mail, to the Corporate Secretary, not later than 90 days
prior to the anniversary date of the immediately preceding Annual Meeting. Each
notice must include: (a) the name and address of the shareholder making the
nomination and the nominee; (b) a representation that the shareholder is a
holder of record of PGC Common Stock and intends to appear in person or by proxy
at the meeting to make the nomination; (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other persons
(naming them) pursuant to which the nomination is to be made; (d) such other
information regarding each nominee as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Commission; and (e) the
consent of each nominee to serve as a director if elected. Unless this procedure
has been followed, the presiding officer of the meeting may refuse to
acknowledge the nomination. There is no formal procedure if a shareholder merely
wants to submit a recommendation to PGC for consideration.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The shares of PGC Common Stock beneficially owned by each director, the
executive officers named in the Summary Compensation Table below (the "Named
Officers"), and all directors and executive officers of PGC as a group as of
January 31, 1997 are given in the following table. The directors and executive
officers individually and as a group own less than 1 percent of the outstanding
shares of PGC Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP
------------------------ -----------------
<S> <C>
Gwyneth Gamble Booth........................................ 9,239(1)(2)
Peter J. Brix............................................... 11,876(1)
Carolyn S. Chambers......................................... 3,061(1)
John W. Creighton, Jr. ..................................... 9,276(1)
Richard Geary............................................... 1,659(1)
Ken L. Harrison............................................. 160,338(3)(4)
Jerry E. Hudson............................................. 7,649(1)
Jerome J. Meyer............................................. 3,061(1)
Randolph L. Miller.......................................... 4,164(1)
Bruce G. Willison........................................... 7,728(1)
Alvin Alexanderson.......................................... 37,461(3)(4)(5)
Richard E. Dyer............................................. 16,254(3)(4)
Joseph M. Hirko............................................. 42,802(3)(4)(5)
Peggy Fowler................................................ 13,785(3)(4)
All executive officers and directors as a group (18
persons).................................................. 406,115(6)
</TABLE>
- ---------------
(1) Includes shares under the PGC Outside Directors' Stock Compensation Plan.
(2) Does not include 500 shares of PGC Common Stock held by spouse for which
beneficial interest is disclaimed.
(3) Includes shares held in the RSP as of December 31, 1996.
(4) Includes shares held under the Restricted Stock Program of the LTIP.
(5) Includes shares which the Named Officer has the right to acquire during the
next six months.
(6) Including shares held in the RSP and under the Restricted Stock Program of
the LTIP as of December 31, 1996 and shares that the executive officers have
the right to acquire during the next six months.
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OUTSIDE DIRECTORS' COMPENSATION
In February 1996, the PGC Board of Directors modified the compensation and
benefits for nonemployee directors. As described more fully below, the annual
retainer has been replaced with per meeting fees, the amount of compensation in
the form of PGC Common Stock has been increased, and the retirement plan has
been suspended with no further accrual of benefits.
Commencing April 1, 1996, the annual cash retainer was eliminated. In its
place, nonemployee directors receive $1,600 per PGC Board meeting attended and
$1,000 per PGC Board Committee meeting attended. In addition, the Chair of a
standing Board Committee receives an annual fee of $3,000 which is paid at
year-end and is prorated if the director did not serve as the Chair for the
entire year.
Nonemployee directors participate in the Stock Plan. Prior to amendment as
discussed below, every five years each nonemployee director was granted $50,000
of PGC Common Stock, one-fifth of which vests each year over the succeeding
five-year period ("Five Year Grant"). Unvested shares under a Five Year Grant
are forfeited if the recipient ceases to be a nonemployee director for any
reason except death, in which case the shares scheduled to vest on the next
anniversary date vest immediately.
The Stock Plan was amended in February 1996 to provide that nonemployee
directors who at the time of the amendment had unvested shares under a Five Year
Grant received a one-time additional grant of PGC Common Stock worth $6,500
times the number of years remaining before all of the shares under their Five
Year Grant vest. Each year that a portion of the shares under the Five Year
Grant vests, a one-year portion of the shares under the additional grant also
vests. There will be no future Five Year Grants under the Stock Plan, as
amended.
Nonemployee directors first appointed or elected to the PGC Board after
January 1, 1996, and all other nonemployee directors, once their Five Year
Grants fully vest, will be granted PGC Common Stock worth $16,500 per year,
based on the market value of the PGC Common Stock on the date of purchase, times
the number of years remaining in the three-year term of the Class of directors
in which the director serves ("Three Year Grants"). Three Year Grants will be
made upon election or appointment of each nonemployee director and thereafter on
the date of the annual meeting of shareholders at which the Class in which the
director serves is elected. Appointment for a partial year of more than six
months will be treated as a full year unless the director is appointed to fill a
vacancy in a class that will be elected at the next annual meeting of
shareholders. In that case, if appointment is six months or more before the next
annual meeting of shareholders, the director will be granted $16,500 worth of
PGC Common Stock which will vest at the date of the next annual meeting of
shareholders. Thereafter, PGC Common Stock will be granted in three-year amounts
coinciding with the three-year term of the Class in which the director serves.
If the appointment is less than six months before the next annual meeting of
shareholders, the director will be granted three years' worth of PGC Common
Stock, none of which will vest until three years later on the date of the annual
meeting of shareholders at which the Class in which the director serves is again
elected. If a director ceases to be a director for any reason, except death,
before the date on which the shares are scheduled to vest, all of the shares are
forfeited. In the event of death, all of the shares will immediately vest.
Dividends paid on unvested shares under both Five Year Grants and Three Year
Grants are reinvested under the PGC Dividend Reinvestment and Optional Cash
Payment Plan and are fully vested upon payment. On September 10, 1996, the Stock
Plan was amended further to provide for the 100 percent vesting of all
outstanding unvested shares on consummation of the Mergers. There will be no
Three Year Grants with respect to the Annual Meeting. The Stock Plan has been
amended further as described above under "The Mergers -- Interests of Certain
Persons in the Mergers."
Under the DDCP, nonemployee directors may elect to defer up to 100 percent
of their cash fees paid during the year. Interest is credited at a rate equal to
a three calendar month average of Moody's Average Corporate Bond Yield Index
plus 3 percent. The withdrawal of deferred amounts while serving as a director
results in forfeiture of 10% of the amount withdrawn, unless the withdrawal is
for limited cases of hardship. Payments will be made in a lump sum, or in a
series of monthly payments over a period of up to 15 years, after service as a
director or in the event of death. Upon written request, amounts may be
withdrawn with a 6 percent forfeiture of the amount paid to the participant in
the event of a Change in Control (as defined
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below). During 1996, interest was credited as follows: $31,497 for Mr. Brix,
$7,667 for Mr. Creighton, $32,267 for Mr. Hudson, $5,279 for Mr. Meyer, and
$3,754 for Mr. Willison. The DDCP has been amended as described above under "The
Mergers -- Interests of Certain Persons in the Mergers."
The Directors' Insurance Plan has been eliminated for nonemployee directors
first appointed or elected to the PGC Board after January 1, 1996. Those
appointed before that date are provided life insurance benefits of $200,000. PGC
and the director share the cost of the premium. However, PGC advances to the
director his/her share of the premium and treats it as compensation. Upon
surrender or cancellation of the policy, the director is entitled to the balance
of the cash value of the policy after PGC has recovered its share of the
premiums paid. In the event of a Change in Control (as defined below), PGC will
release its collateral interest in the policies and pay the director the amount
required to maintain the level of death benefit provided under the policies. The
amounts paid by PGC for the directors' share of the premiums in 1996 were $450
for Mr. Brix and Ms. Booth; $636 for Ms. Chambers; $610 for Mr. Creighton; $432
for Mr. Hudson; $432 for Mr. Meyer; $238 for Mr. Miller; and $214 for Mr.
Willison. No director first appointed or elected after January 1, 1996 will
participate in this program. The Directors' Insurance Plan has been amended as
described above under "The Mergers -- Interests of Certain Persons in the
Mergers."
The Retirement Plan for Outside Directors has been suspended. Effective
January 1, 1996, all accruals ceased and all accrued benefits were fully vested
to each nonemployee director in office on that date. Benefit payout will not
begin until a director ceases to be a member of the Board of PGC, any affiliate
of PGC (including after consummation of the Mergers, Enron) and any advisory
board of PGE. Interest will not accrue on the benefit amount. There will not be
a retirement plan for nonemployee directors first appointed or elected to the
PGC Board after January 1, 1996.
HUMAN RESOURCES COMMITTEE AND COMMITTEE UNDER THE LONG-TERM INCENTIVE PLAN
REPORT ON EXECUTIVE COMPENSATION
The objective of PGC's executive compensation program is to provide
competitive compensation which will attract, retain, and reward executives who
are capable of providing the management and leadership necessary to achieve the
business objectives of PGC and PGE. Compensation is both market based and
performance driven. Total direct executive compensation consists of three
components: base pay, annual incentives and long-term incentives. These
executive pay programs are strongly linked to company performance.
Base Pay. Annually, the HR Committee reviews executive base pay for the
Chairman and Chief Executive Officer (CEO), Executive Vice President, Senior
Vice Presidents, and anyone more highly paid than these individuals. Current
market compensation for similar positions, company performance and individual
performance are reviewed by the HR Committee before setting executive
compensation. The HR Committee uses market data from two different
sources -- the utility industry and general industry -- to assure that the
compensation decisions are competitive and fair. The utility industry market
data is based on an HR Committee-selected group of 14 national electric
utilities and utility holding companies. These utilities, whose selection is
annually affirmed by the HR Committee, are a subset of the Edison Electric
Institute 100 Index of utilities utilized in the performance graph set forth
below. These utilities were chosen based on their comparability, including
historical performance records, to PGC and PGE. Due to the changing nature of
the electric utility industry the Committee also reviews general industry market
data. General industry data is derived from the Towers Perrin Executive
Compensation database. Actual base compensation varies above or below
middle-of-the-market compensation depending upon company performance and the
individual executive's long-term contributions to PGC's and PCE's business. The
Chief Executive Officer of PGC (the "CEO") sets the compensation for any
officers other than the Executive Vice President and the Senior Vice Presidents.
In making the compensation decision, factors of market data for each position,
executive responsibilities, individual performance, and internal comparability
are reviewed by the CEO.
As a result of the HR Committee's review of PGC's 1995 earnings performance
and the market compensation for a CEO of a company of comparable size to PGC,
the HR Committee adjusted the CEO's
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base pay upward to the 50th percentile effective January 1, 1996. For 1996,
compensation for officers other than the CEO was also influenced by the expected
strategic impact of the position in the coming year, 1995 performance and
internal equity. Further adjustments were made in the latter half of the year to
the salary levels of three officers due to promotions.
Annual Incentive Compensation. Annual incentive compensation is totally
dependent upon performance under PGC's Annual Incentive Master Plan. The
objectives of the plan are to provide competitive management compensation and
stimulate and reinforce outstanding performance by participants to contribute
substantially to the achievement of annual financial and strategic objectives of
PGC and PGE. Superior performance is encouraged by setting the annual incentive
pay opportunity at approximately the 75th percentile of compensation of the
Edison Electric Institute's survey of over 100 utilities. In general, an award
of annual incentive compensation is based on achieving company financial goals
and key corporate, strategic and individual goals. Any annual incentive
compensation awards made are based on individual participant and company
achievement as measured against the established targets. The award is paid in
cash.
The 1996 annual incentive compensation awards were designed to pay for good
earnings performance. The 1996 award target range for the earnings goal was from
one-half of the annual incentive pay opportunity when earnings per share are 90
percent of targeted earnings per share and up to two times the annual incentive
pay opportunity for earnings per share at 120 percent of the targeted earnings
per share. Both the Annual Incentive Plan and PGC's broad-based employee
incentive program incorporate a provision whereby no performance awards will be
paid through these programs, regardless of individual goal achievement, unless
PGC's earnings per share are at least equal to its common stock dividend. The
PGC Board has the discretion to modify performance objectives during the course
of the year if it determines they are no longer suitable due to extraordinary
financial events, a change in PGC's business operations, corporate structure, or
capital structure, or other material conditions. Accordingly, the PGC Board of
Directors revised the 1996 annual cash incentive target range to exclude costs
related to the Mergers.
In 1996, the annual incentive compensation award for the CEO was entirely
dependent upon achieving targeted earnings per share. For the other Named
Officers, 70 percent of annual incentive compensation was based on achieving the
earnings per share goal and 30 percent was based on individual achievement of
strategic goals. The strategic goals were:
- Senior Vice President and Chief Financial Officer -- Organization
efficiency, regulated and nonregulated business strategies; merger
transition issues; competitive, strategically aligned finance and
accounting services.
- Senior Vice President, Power Supply -- Hydro and thermal competitiveness;
wholesale power marketing sales goals; achievement of targets for
generating plant performance; Trojan decommissioning goals; Leadership
for Excellence Program.
- Senior Vice President, General Counsel & Secretary -- Provide legal
support and assist negotiations of strategic options; complete unbundling
negotiations; prepare and file a direct access rate for industrial
customers; represent investor-owned utilities on the Northwest Regional
Review; negotiate a general rate reduction for PGE; support the
refinancing of PGE's demand-side management investments.
- PGE Executive Vice President and Chief Operating Officer -- Safety,
employee relations, service strategies, system reliability,
profitability, positioning for the future.
Goals were not weighted. Incentive compensation awards for achieving
strategic goals for all other executive officers ranged from zero to one and
one-half times the target strategic incentive compensation award.
In 1996, earnings-per-share performance, excluding costs related to the
proposed merger, exceeded the targeted earnings per share, resulting in the CEO
receiving an award at two times the target award.
Long-Term Incentive Compensation. The LTIP is designed to ensure executive
focus on long-term shareholder value and PGC Common Stock performance. The
objective of the LTIP is to motivate executives
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to make decisions that will enhance the long-term financial performance of the
business, thereby positively affecting the long-term total return to
shareholders. The LTIP, approved by shareholders in 1991, permits the granting
by the Committee under the LTIP ("LTIP Committee") of several different types of
stock-based awards. Although the LTIP Committee is a separate committee from the
HR Committee, members are presently the same as the HR Committee. To date, three
types of awards -- Nonqualified Stock Options ("NQSO"), Performance Accelerated
Restricted Stock and Restricted Stock -- have been granted to executive
officers.
The NQSO program provides rewards only when the price of PGC Common Stock
increases above the price at which the executive has an option to buy the stock.
The option price was set at fair market value at the date of the grant. None of
the Named Officers has received NQSO grants since 1991.
All outstanding Performance Accelerated Restricted Stock grants for 1993,
1994, and 1995 vested on November 12, 1996 upon shareholder approval of the
Original Merger Agreement.
In order to retain key senior management during the period of transition
with respect to the Mergers, executive officers, including the Named Officers,
were granted Restricted Stock on September 10, 1996. The Restricted Stock vests
100 percent in five years and will be converted at the PGC Conversion Ratio to
New Enron Common Stock upon the consummation of the Mergers.
Summary. The goal of PGC's executive compensation program is to strengthen
management focus on creating shareholder value by targeting base pay at the
middle of the market and targeting annual and long-term compensation incentives
above the middle of the market. Annual incentive targets for the CEO and the
other executive officers are set at approximately the 75th percentile of
compensation of the Edison Electric Institute's survey of over 100 utilities.
Long-term incentives for the CEO and other executive officers are set at the
discretion of the HR Committee. Goals for incentive plans are established
annually and are not tied to the One-Year Total Return graph below. Base pay,
annual incentives and long-term incentives all fluctuate depending upon PGC's
performance. The CEO's annual incentive compensation and long-term incentive
compensation represented 75 percent and 76 percent, respectively, of the CEO's
base compensation in 1996.
Philosophy on Qualifying Compensation for Deductibility under IRC Section
162(m). Qualifying compensation for deductibility under IRC Section 162(m) is
one of many factors the HR Committee considers in determining executive
compensation arrangements. Deductibility will be maintained when it does not
conflict with overall compensation objectives. Present arrangements include the
ability for executives to defer base salary and bonuses and the incorporation of
a provision in restricted stock agreements to ensure the corporate tax
deductibility of the Restricted Stock grants.
Officer Loans. In March 1997, the HR Committee approved unsecured loans to
the officers of PGC and PGE to provide temporary liquidity to meet tax payments
associated with stock awards and other compensation in conjunction with the
desirability of deferring any transactions in equity securities as a result of
the pendency of the Mergers.
A loan has been made to Ken L. Harrison, Chairman of the Board and Chief
Executive Officer of PGC, in the amount of $645,000, and to Alvin Alexanderson,
Senior Vice President, General Counsel and Secretary of PGC in the amount of
$190,000, in each case evidenced by a promissory note from the executive and
subject to 7% interest payable upon repayment of the loan. The term of each loan
is the earliest of (a) 90 days subsequent to consummation of the Mergers, (b) 90
days subsequent to termination of the Mergers, or (c) one year from the date of
the loan.
Employment Agreements. Each of the Named Officers has entered into an
employment agreement ("Current Agreement") with PGC or PGE and which governs the
terms of his or her current employment, including provisions in the event of
Change in Control (as defined below). In addition, each of the Named Officers
has entered into an employment agreement with Enron and/or PGE that will
supersede and replace his or her Current Agreement as of the effective time of
the Mergers. For a description of these agreements, see "The
Mergers -- Interests of Certain Persons in the Mergers."
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It is the HR Committee's belief that, upon a termination of employment, a
minimum amount of disruption takes place when the terms and conditions of
payments and benefits upon termination have been incorporated into an agreement.
In addition, agreements also serve to enhance continuity of management in the
event of Change in Control.
Human Resources Committee and Long-Term Incentive Plan Committee:
<TABLE>
<C> <C>
John W. Creighton, Jr.,
Chairman Jerome J. Meyer
Gwyneth Gamble Booth Randolph L. Miller
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Human Resources Committee are: Gwyneth Gamble Booth,
John W. Creighton, Jr., Jerome J. Meyer, and Randolph L. Miller.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation earned for each year
ended December 31, 1996, 1995, and 1994 by the Chief Executive Officer and the
four most highly compensated executive officers of PGC and PGE.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ---------------- ALL OTHER
SALARY($) BONUS($) RESTRICTED STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR (1) (1) AWARDS($)(2) ($)(3)
--------------------------- ---- --------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Ken L. Harrison....................... 1996 $544,478 $410,336 $413,875 $65,864
Chairman of the Board and 1995 491,664 371,167 305,250 69,507
Chief Executive Officer 1994 465,228 198,096 202,500 57,500
Joseph M. Hirko....................... 1996 245,517 155,400 188,125 30,064
Senior Vice President, Chief 1995 215,963 114,389 138,750 22,626
Financial Officer, Chief 1994 183,027 63,363 67,500 20,063
Accounting Officer, and Treasurer
Richard E. Dyer....................... 1996 209,196 111,002 150,500 23,428
Senior Vice President, Power 1995 198,297 104,655 111,000 11,979
Supply, PGE 1994 180,833 52,061 50,625 12,386
Peggy Y. Fowler....................... 1996 202,504 106,379 150,500 24,045
Executive Vice President and 1995 165,213 78,836 111,000 18,185
Chief Executive Officer, PGE 1994 140,000 41,231 50,625 17,374
Alvin Alexanderson.................... 1996 195,000 108,225 112,875 41,408
Senior Vice President, General 1995 179,732 77,779 83,250 32,224
Counsel, and Secretary 1994 169,180 48,266 50,625 27,789
</TABLE>
- ---------------
(1) Amounts shown include cash compensation earned and received by the executive
officer, as well as amounts earned but deferred at the election of the
officer.
(2) Restricted stock awards are valued at the closing price of $37.625 per share
for the September 10, 1996 grant, $27.75 per share for the November 6, 1995
grant; and at $16.875 per share for the October 4, 1994 grant. The number
and value of the aggregate Restricted Stock holdings for the officers listed
in the Summary Compensation Table are outlined in the table on the following
page. Dividends on the restricted stock are paid to the officer as declared.
(All Restricted Stock granted prior to 1996 vested November 12, 1996 upon
PGC shareholder approval of the Original Merger Agreement.) Aggregate
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Restricted Stock holdings listed below are valued at $42.00 per share, the
closing price of the PGC Common Stock on December 31, 1996.
AGGREGATE RESTRICTED STOCK HOLDINGS
<TABLE>
<CAPTION>
AGGREGATE SHARES (#) VALUE ($)
-------------------- ---------
<S> <C> <C>
Ken L. Harrison........................ 11,000 $462,000
Joseph M. Hirko........................ 5,000 210,000
Richard E. Dyer........................ 4,000 168,000
Peggy Y. Fowler........................ 4,000 168,000
Alvin Alexanderson..................... 3,000 126,000
</TABLE>
(3) Other compensation includes: (i) company-paid split dollar insurance
premiums; (ii) the dollar value of life insurance benefits as determined
under the Commission's methodology for valuing such benefits; (iii) company
contributions to the RSP and the MDCP; and (iv) earnings on amounts in the
MDCP which are greater than 120 percent of the federal long-term rate which
was in effect at the time the rate was set. The following table lists the
amount for 1996:
<TABLE>
<CAPTION>
SPLIT
DOLLAR DOLLAR VALUE CONTRIBUTIONS ABOVE MARKET
INSURANCE OF LIFE TO 401(K) INTEREST ON
PREMIUM INSURANCE AND MDCP MDCP TOTAL
------------ ------------ ------------- ------------ -------
<S> <C> <C> <C> <C> <C>
Ken L. Harrison........ $1,580 $ 3,874 $21,310 $39,100 $65,864
Joseph M. Hirko........ 587 10,613 13,032 5,832 30,064
Richard E. Dyer........ 1,452 10,663 9,480 1,833 23,428
Peggy Y. Fowler........ 776 13,158 7,887 2,224 24,045
Alvin Alexanderson..... 892 8,721 11,700 20,095 41,408
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END (FY) OPTION VALUES
The table below displays the number and value of options for the Named
Officers.
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNEXERCISED OPTIONS(1) VALUE OF
ACQUIRED ------------------------- IN-THE-MONEY OPTIONS(2)
ON VALUE NOT NOT
NAME EXERCISE REALIZED EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
---- -------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ken L. Harrison................... 0 0 120,000 0 $3,150,000 0
Joseph M. Hirko................... 0 0 30,000 0 797,500 0
Richard E. Dyer................... 32,500 $888,850 0 0 0 0
Peggy Y. Fowler................... 22,500 $643,125 0 0 0 0
Alvin Alexanderson................ 12,000 $165,000 20,500 0 524,500 0
</TABLE>
- ---------------
(1) Options were granted in 1990 and 1991 under the LTIP. No options have been
granted to the Named Officers since 1991. The options were granted at fair
market value. The 1990 grants vested in 1995 and the 1991 grants vested
November 12, 1996 upon PGC shareholder approval of the Original Merger
Agreement and are thus currently exercisable.
(2) Value of unexercised in-the-money options is based on the difference between
the PGC Common Stock price of $42.00 on December 31, 1996 and the exercise
option price.
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FIVE-YEAR SHAREHOLDER RETURN
The following graphs compare the cumulative five-year and the one-year
total shareholder return of PGC Common Stock on an indexed basis with the S&P
500 Stock Index and the EEI 100 Index of Investor-Owned Electrics, an index of
100 electric utilities prepared by Edison Electric Institute ("EEI"). The
five-year line graph assumes an investment of $100 was made at the close of
business on December 31, 1991 in PGC Common Stock and in each index. Total
return assumes reinvestment of dividends and is determined as of December 31 of
each year.
CUMULATIVE TOTAL SHAREHOLDER RETURN
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) PGC S&P 500 EEI 100 ELECTRIC
<S> <C> <C> <C>
1991 100 100 100
1992 125 108 108
1993 147 119 120
1994 148 121 106
1995 233 166 139
1996 346 204 140
PGC S&P 500 EEI 100 ELECTRIC
1996 148 123 140
</TABLE>
A list of the electric utilities included in the EEI Index will be provided
upon request to the PGC Shareholder Services Department, 121 SW Salmon Street,
Portland, Oregon 97204.
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<PAGE> 99
EXECUTIVE ANNUAL RETIREMENT BENEFIT
Estimated annual retirement benefits payable upon normal retirement at age
65 for the Named Officers are shown in the table below. Amounts in the table
reflect payments from the Portland General Pension Plan and SERP combined.
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFIT
STRAIGHT-LIFE ANNUITY, AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE -----------------------------
EARNINGS OF: 15 20 25+
- ------------- ------- ------- -------
<S> <C> <C> <C>
$175,000.......................................... 78,750 91,875 105,000
200,000.......................................... 90,000 105,000 120,000
250,000.......................................... 112,500 131,250 150,000
300,000.......................................... 135,000 157,500 180,000
400,000.......................................... 180,000 210,000 240,000
450,000.......................................... 202,500 236,250 270,000
500,000.......................................... 225,000 262,500 300,000
600,000.......................................... 270,000 315,000 360,000
700,000.......................................... 315,000 367,500 420,000
800,000.......................................... 360,000 424,000 480,000
900,000.......................................... 405,000 477,000 540,000
</TABLE>
Compensation used to calculate benefits under the combined Pension Plan and
SERP is based on a three-year average of base salary and bonus amounts earned
(the highest 36 consecutive months within the last 10 years), as reported in the
Summary Compensation Table. SERP participants may retire without age-based
reductions in benefits when their age plus years of service equals 85. Surviving
spouses receive one half the participant's retirement benefit from the SERP plus
the joint and survivor benefit, if any, from the Pension Plan. In addition to
the aforementioned annual retirement benefit, an additional temporary Social
Security Supplement is paid until the participant is eligible for Social
Security retirement benefits. Retirement benefits are not subject to any
deduction for Social Security.
The Named Officers have had the following number of service years with PGC:
Ken L. Harrison, 21; Richard E. Dyer, 29; Peggy Y. Fowler, 22; Joseph M. Hirko,
16; and Alvin Alexanderson, 17. Under PGC's SERP, the Named Officers are
eligible to retire without a reduction in benefits upon attainment of the
following ages: Ken L. Harrison, 59; Richard E. Dyer, 55; Peggy Y. Fowler, 55;
Joseph M. Hirko, 55; and Alvin Alexanderson, 57.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16 of the Securities Exchange Act of 1934 requires PGC's directors
and executive officers and persons who own more than 10 percent of a registered
class of PGC's equity securities to file various reports with the Commission and
the NYSE concerning their holdings of, and transactions in, securities of PGC.
Copies of those filings must be furnished to PGC.
PGC offers assistance to its directors and executive officers in meeting
their obligations under Section 16 with regard to information concerning the
applicable law and the completion and filing of the required reports.
Based on a review of the copies of the reports received by PGC and written
representations from certain reporting persons that they have complied with the
relevant filing requirements, PGC believes that all filing requirements
applicable to its directors and executive officers were complied with as of
December 31, 1996, except for minor mathematical errors for Mr. Peter Brix and
Ms. Peggy Fowler, which have been amended, and one late filing for Richard
Reiten, a former director and officer.
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<PAGE> 100
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP has served in the capacity of independent
public accountants for PGC and its subsidiaries for many years. Services
rendered during 1996 in connection with their audit function included the
examination of annual financial statements, review of unaudited quarterly
financial information, and consultation in connection with filing certain
reports with the Commission and other governmental and regulatory agencies.
DEFINITION OF CHANGE IN CONTROL
Certain of the benefit plans discussed above contain change of control
provisions, some of which have been amended as described above under "The
Mergers -- Interests of Certain Persons in the Mergers."
For the Stock Plan and RSP a change in control means:
(a) any person or group becomes the beneficial owner of more than 30
percent of the then outstanding voting stock of PGC, otherwise than through
a transaction arranged by, or consummated with the prior approval of, the
board of directors, or (b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the board of
directors (and any new director whose election by the board or whose
nomination for election by the stockholders was approved by a vote of at
least two-thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute
a majority thereof.
For the Directors' Insurance Plan, Officers' Insurance Plan, DDCP, MDCP,
Retirement Plan for Outside Directors, SERP and Current Agreements, the
definition of change in control is as follows:
(a) any person or group becomes the beneficial owner of more than 30
percent of the then outstanding voting stock of PGC, (b) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the board of directors (and any new director whose nomination
for election by the stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors
at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority thereof, (c) the stockholders of PGC or PGE approve a merger or
consolidation of PGC or PGE with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of PGC
or PGE outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80 percent of the combined
voting power of the voting securities of PGC or PGE or any surviving entity
outstanding immediately after such merger or consolidation, or (ii) a
merger or consolidation effected to implement a recapitalization of PGC or
PGE (or similar transaction) in which no person acquired more than 30
percent of the combined voting power of PGC's or PGE's then outstanding
securities or (d) the stockholders of PGC or PGE approve a plan of complete
liquidation of PGC or PGE or an agreement for the sale or disposition by
PGC or PGE of 60 percent of PGC's or PGE's assets.
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<PAGE> 101
RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL 3)
Upon the recommendation of the Audit Committee, the PGC Board of Directors
has appointed the firm of Arthur Andersen LLP as independent public accountants
for the year 1997. Such appointment is proposed for ratification by the
shareholders. In the absence of contrary instructions, it is the intention of
the persons named in the proxy to vote such proxy FOR ratification. If the
reappointment is not ratified, the Audit Committee and the Board of Directors
will consider such vote in subsequent appointments.
A representative of Arthur Andersen LLP plans to attend the Annual Meeting.
The representative will have an opportunity to make a statement if so desired
and will be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of the
appointment.
LEGAL MATTERS
The validity of the securities to be issued in the Mergers has been passed
upon for New Enron and Enron by James V. Derrick, Jr., Senior Vice President and
General Counsel of Enron. Certain tax consequences of the Mergers have been
passed upon for New Enron and Enron by Vinson & Elkins L.L.P., Houston, Texas,
and for PGC by Wachtell, Lipton, Rosen & Katz, New York, New York.
EXPERTS
The consolidated financial statements included in Enron's Current Report on
Form 8-K dated March 17, 1997 and consolidated financial statements and schedule
included in Enron's Annual Report on Form 10-K for the year ended December 31,
1996, incorporated by reference herein and in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
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, 1996, 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.
The consolidated financial statements included in PGC's Annual Report on
Form 10-K for the year ended December 31, 1996, incorporated by reference herein
and in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
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<PAGE> 102
SHAREHOLDER PROPOSALS
If for any reason the Mergers are not consummated and there is a 1998
annual meeting of shareholders of PGC, then to be considered for inclusion in
the proxy statement for such meeting, a proposal by a shareholder must be
received by the Corporate Secretary of PGC at One World Trade Center, 121 SW
Salmon Street, Portland, Oregon 97204, not later than the close of business on
January 16, 1997. Proposals received by that date will be included in the 1998
Proxy Statement if the proposals are proper for consideration at an annual
meeting of shareholders and are required for inclusion in the proxy statement
by, and conform to, the rules of the Commission.
Under the PGC Bylaws, for business to be properly brought before an annual
meeting by a shareholder, written notice to the Corporate Secretary of PGC must
be delivered or mailed and received at the above address no more than 70 days
nor less than 35 days prior to the annual meeting. However, if notice or public
disclosure of the date of the annual meeting is made less than 50 days in
advance, the notice to the Secretary must be received no later than 15 days
after the announcement. If the annual meeting date is announced less than 15
days before the meeting, the notice must be received no later than the day
before the annual meeting. Under the PGC Bylaws, the notice must (a) briefly
describe the business to be presented and the reason for presenting it at the
annual meeting, (b) state the name and record address of the shareholder
proposing the business, state the class and number of shares of stock
beneficially owned by the shareholder and (c) describe any material interests
the shareholder has in the business to be presented.
96
<PAGE> 103
ANNEX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF
MERGER
BY AND AMONG
ENRON CORP.,
PORTLAND GENERAL CORPORATION
AND
ENRON OREGON CORP.
DATED AS OF JULY 20, 1996
AND
AMENDED AND RESTATED
AS OF
SEPTEMBER 24, 1996
AND AS
FURTHER AMENDED
BY THE FIRST AMENDMENT
DATED
AS OF APRIL 14, 1997
<PAGE> 104
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGERS
Section 1.1 The Reincorporation Merger.................................. A-1
Section 1.2 The PGC Merger.............................................. A-2
Section 1.3 Effective Times of the Mergers.............................. A-2
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Reincorporation Merger on Capital Stock....... A-3
Section 2.2 Effect of the PGC Merger on Capital Stock................... A-3
Section 2.3 No Exchange of Enron Stock Certificates..................... A-3
Section 2.4 Exchange of PGC Common Stock Certificates................... A-4
Section 2.5 Adjustments to PGC Conversion Ratio......................... A-5
ARTICLE III
THE CLOSING
Section 3.1 Closing..................................................... A-6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ENRON
Section 4.1 Organization and Qualification.............................. A-6
Section 4.2 Subsidiaries................................................ A-6
Section 4.3 Capitalization.............................................. A-7
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.................................................. A-7
Section 4.5 Reports and Financial Statements............................ A-8
Section 4.6 Absence of Certain Changes or Events........................ A-9
Section 4.7 Litigation.................................................. A-9
Section 4.8 Registration Statement and Proxy Statement.................. A-9
Section 4.9 Tax Matters................................................. A-9
Section 4.10 Employee Matters; ERISA..................................... A-10
Section 4.11 Environmental Protection.................................... A-11
Section 4.12 Regulation as a Utility..................................... A-12
Section 4.13 Vote Required............................................... A-12
Section 4.14 Opinion of Financial Advisor................................ A-13
Section 4.15 Insurance................................................... A-13
Section 4.16 Applicability of Certain Delaware Law Provisions............ A-13
Section 4.17 Operations of the Company................................... A-13
Section 4.18 Authority, Non-Contravention and Statutory Approvals
relating to the Agreement As Amended by the First
Amendment................................................... A-13
Section 4.19 Vote Required for First Amendment........................... A-14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PGC
Section 5.1 Organization and Qualification.............................. A-14
Section 5.2 Subsidiaries................................................ A-14
Section 5.3 Capitalization.............................................. A-14
Section 5.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.................................................. A-15
Section 5.5 Reports and Financial Statements............................ A-16
</TABLE>
A-i
<PAGE> 105
Section 5.6 Absence of Certain Changes or Events........................ A-16
Section 5.7 Litigation.................................................. A-16
Section 5.8 Registration Statement and Proxy Statement.................. A-16
Section 5.9 Tax Matters................................................. A-17
Section 5.10 Employee Matters; ERISA..................................... A-18
Section 5.11 Environmental Protection.................................... A-20
Section 5.12 Regulation as a Utility..................................... A-21
Section 5.13 Vote Required............................................... A-21
Section 5.14 Opinion of Financial Advisor................................ A-21
Section 5.15 Insurance................................................... A-21
Section 5.16 Applicability of Certain Oregon Law Provision............... A-21
Section 5.17 Status of PGC Nuclear Facility.............................. A-22
Section 5.18 Authority, Non-Contravention and Statutory Approvals
relating to the Agreement As Amended by the First
Amendment................................................... A-22
Section 5.19 Vote Required for First Amendment........................... A-23
Section 5.20 Supplemental Opinion of Financial Advisor................... A-23
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Ordinary Course of Business................................. A-23
Section 6.2 Dividends and Repurchases................................... A-23
Section 6.3 Issuance of Securities...................................... A-24
Section 6.4 Charter Documents........................................... A-24
Section 6.5 Acquisitions................................................ A-24
Section 6.6 No Dispositions............................................. A-24
Section 6.7 Indebtedness................................................ A-24
Section 6.8 Capital Expenditures........................................ A-25
Section 6.9 Compensation, Benefits...................................... A-25
Section 6.10 Tax-Free Status............................................. A-25
Section 6.11 Discharge of Liabilities.................................... A-25
Section 6.12 Cooperation, Notification................................... A-25
Section 6.13 Conduct of Business by Enron................................ A-25
Section 6.14 Third-Party Consents........................................ A-25
Section 6.15 No Breach, Etc. ............................................ A-26
Section 6.16 Insurance................................................... A-26
Section 6.17 Permits..................................................... A-26
Section 6.18 Nuclear Operations.......................................... A-26
Section 6.19 Operations of Company....................................... A-26
Section 6.20 Agreements.................................................. A-27
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information....................................... A-27
Section 7.2 Joint Proxy Statement and Registration Statement............ A-27
Section 7.3 Regulatory Matters.......................................... A-28
Section 7.4 Shareholder Approvals....................................... A-29
Section 7.5 Directors' and Officers' Indemnification.................... A-29
Section 7.6 Disclosure Schedules........................................ A-30
Section 7.7 Public Announcements........................................ A-31
Section 7.8 Rule 145 Affiliates......................................... A-31
Section 7.9 Employee Agreements......................................... A-31
Section 7.10 Employee Benefit Plans...................................... A-31
A-ii
<PAGE> 106
Section 7.11 Incentive, Stock and Other Plans............................ A-32
Section 7.12 No Solicitations............................................ A-33
Section 7.13 Company Board of Directors.................................. A-34
Section 7.14 Company Officers............................................ A-35
Section 7.15 Employment Contracts........................................ A-35
Section 7.16 Post-Merger Operations...................................... A-35
Section 7.17 NYSE Listing................................................ A-35
Section 7.18 Expenses.................................................... A-35
Section 7.19 Further Assurances.......................................... A-35
Section 7.20 PGC Supplemental Proxy Statement and Registration
Statement................................................... A-36
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the
Mergers..................................................... A-37
Section 8.2 Conditions to Obligation of Enron and the Company to Effect
the Mergers................................................. A-38
Section 8.3 Conditions to Obligation of PGC to Effect the PGC Merger.... A-39
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination................................................. A-40
Section 9.2 Effect of Termination....................................... A-41
Section 9.3 Termination Fees............................................ A-42
Section 9.4 Amendment................................................... A-43
Section 9.5 Waiver...................................................... A-43
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties, Covenants and
Agreements.................................................. A-43
Section 10.2 Brokers..................................................... A-43
Section 10.3 Notices..................................................... A-43
Section 10.4 Miscellaneous............................................... A-44
Section 10.5 Interpretation.............................................. A-44
Section 10.6 Counterparts; Effect........................................ A-44
Section 10.7 Parties in Interest......................................... A-45
Section 10.8 Specific Performance........................................ A-45
Section 10.9 Waiver of Jury Trial........................................ A-45
A-iii
<PAGE> 107
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
1935 Act.................................................... A-6
Accrued Benefits............................................ A-31
Act......................................................... A-47
Affiliate Agreement......................................... A-31
Agreement................................................... A-1
Atomic Energy Act........................................... A-16
Ceiling Price............................................... A-41
Change in Control........................................... A-25
Closing..................................................... A-6
Closing Date................................................ A-6
Closing Price............................................... A-4
Code........................................................ A-1
Committee................................................... A-26
Company..................................................... A-1, A-47
Company Common Stock........................................ A-3, A-47
Company Preferred Stock..................................... A-3
Confidentiality Agreement................................... A-27
Converted Shares............................................ A-4
Current Participants........................................ A-31
Decommissioning Plan........................................ A-22
DGCL........................................................ A-1
Disclosure Schedules........................................ A-30
Effective Time.............................................. A-2
Enron....................................................... A-1, A-43
Enron Benefit Plans......................................... A-10
Enron Business Combination.................................. A-42
Enron Common Stock.......................................... A-3
Enron Competing Transaction................................. A-34
Enron Convertible Preferred Stock........................... A-3
Enron Disclosure Schedule................................... A-30
Enron Employee Arrangements................................. A-10
Enron Financial Statements.................................. A-8
Enron Material Adverse Effect............................... A-6
Enron Preferred Stock....................................... A-3
Enron Required Consents..................................... A-8
Enron Required Statutory Approvals.......................... A-8
Enron SEC Reports........................................... A-8
Enron Shareholders' Approval................................ A-12
Enron Special Meeting....................................... A-29
Enron Transaction Price..................................... A-41
Enron Violation............................................. A-7
Environmental Claim......................................... A-12
Environmental Laws.......................................... A-12
Environmental Permits....................................... A-11
ERISA....................................................... A-10
Exchange Act................................................ A-8
Exchange Agent.............................................. A-4
Extraordinary Distribution.................................. A-5
Extraordinary Distribution Value............................ A-5
Final Order................................................. A-38
</TABLE>
A-iv
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<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
First Effective Time........................................ A-2
Floor Price................................................. A-41
Foundation.................................................. A-35
GAAP........................................................ A-8
Governmental Authority...................................... A-8
Hazardous Materials......................................... A-12
HSR Act..................................................... A-28
Indemnified Parties......................................... A-29
Indemnified Party........................................... A-29
Joint Proxy Statement....................................... A-9
Joint Proxy/Registration Statement.......................... A-27
Mergers..................................................... A-2
Nonqualified Plans.......................................... A-31
NRC......................................................... A-16
NYSE........................................................ A-5
OBCA........................................................ A-1
ODOE........................................................ A-27
OPUC Approval............................................... A-28
Oregon Department of State.................................. A-2
Permits..................................................... A-8
PGC......................................................... A-1
PGC Benefit Plans........................................... A-18
PGC Business Combination.................................... A-42
PGC Certificates............................................ A-4
PGC Common Stock............................................ A-3
PGC Competing Transaction................................... A-33
PGC Conversion Ratio........................................ A-3
PGC Disclosure Schedule..................................... A-30
PGC Employees............................................... A-31
Post-Effective Amendment.................................... A-36
PGC ERISA Affiliate......................................... A-18
PGC Financial Statements.................................... A-16
PGC Group................................................... A-17
PGC Material Adverse Effect................................. A-14
PGC Merger.................................................. A-2
PGC Required Consents....................................... A-15
PGC Required Statutory Approvals............................ A-15
PGC SEC Reports............................................. A-16
PGC Shareholders' Approval.................................. A-21
PGC Special Meeting......................................... A-29
PGC Stock Option............................................ A-29
PGC Stock Plan.............................................. A-32
PGC Violation............................................... A-15
PGE......................................................... A-21
Power Act................................................... A-16
Registration Statement...................................... A-9
Regulatory Plans............................................ A-28
Reincorporation Merger...................................... A-1
Release..................................................... A-12
Representatives............................................. A-27
Revised Enron Share Value................................... A-6
</TABLE>
A-v
<PAGE> 109
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Revised OPUC Plan........................................... A-28
SEC......................................................... A-8
Second Effective Time....................................... A-2
Securities Act.............................................. A-8
Shares...................................................... A-47
Stock Plans................................................. A-32
Surviving Corporation....................................... A-1
Supplemental PGC Shareholders' Approval..................... A-23
Supplemental PGC Shareholders' Meeting...................... A-37
Supplemental Proxy Statement................................ A-28
Tax Return.................................................. A-9
Taxes....................................................... A-9
Termination Date............................................ A-40
Trading Day................................................. A-5
Transferred Employee........................................ A-31
Transition Year............................................. A-32
</TABLE>
A-vi
<PAGE> 110
AMENDED AND RESTATED
AGREEMENT AND PLAN
OF MERGER
(INCLUDING FIRST AMENDMENT THERETO)
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of July
20, 1996 and amended and restated as of September 24, 1996, and as further
amended by the First Amendment hereto dated as of April 14, 1997 (this
"Agreement"), is by and among Enron Corp., a Delaware corporation ("Enron"),
Portland General Corporation, an Oregon corporation ("PGC"), and Enron Oregon
Corp. (formerly New Falcon Corp.), an Oregon corporation and wholly owned
subsidiary of Enron (the "Company").
WHEREAS, the boards of directors of Enron and PGC have approved and deemed
it advisable and in the best interests of their respective shareholders to
consummate the transactions contemplated herein under which the businesses of
Enron and PGC would be combined by means of (i) the reincorporation of Enron as
an Oregon corporation through the merger of Enron with and into the Company, as
a result of which shareholders of Enron will become shareholders of the Company,
and (ii) the subsequent merger of PGC with and into the Company, as a result of
which the shareholders of PGC will become shareholders of the Company, all on
the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the
transactions contemplated hereby will qualify as reorganizations under the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended,
and rules and regulations promulgated thereunder (the "Code");
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGERS
Section 1.1 The Reincorporation Merger. Upon the terms and subject to the
conditions of this Agreement, at the First Effective Time (as defined in Section
1.3(a)):
(a) Effect. Enron shall be merged with and into the Company (the
"Reincorporation Merger") in accordance with the applicable provisions of
the laws of the States of Delaware and Oregon, as a result of which the
separate corporate existence of Enron shall cease, and the Company shall be
the surviving corporation (sometimes referred to herein as the "Surviving
Corporation") and shall continue its corporate existence under the laws of
the State of Oregon. The effects and consequences of the Reincorporation
Merger shall be as set forth in Section 252 of the Delaware General
Corporation Law ("DGCL") and Section 60.497 of the Oregon Business
Corporation Act (the "OBCA").
(b) Articles of Incorporation. At the First Effective Time, the
articles of incorporation of the Company, which shall be substantially
similar to the certificate of incorporation of Enron in effect on the date
hereof, with such changes as are necessary to comply with the OBCA or as
may be agreed upon by Enron and PGC prior to the PGC Special Meeting (as
defined herein), shall be the articles of incorporation of the Surviving
Corporation and thereafter shall continue to be its articles of
incorporation until amended as provided therein and pursuant to the
applicable provisions of the OBCA, except that Article 1 of such articles
of incorporation shall be amended to read in its entirety as follows:
"The name of the corporation is Enron Corp."
(c) Bylaws. The bylaws of the Company, which shall be substantially
similar to the bylaws of Enron in effect on the date hereof, with such
changes as are necessary to comply with the OBCA or as may be agreed upon
by Enron and PGC prior to the PGC Special Meeting, shall be the bylaws of
the Surviving Corporation and thereafter shall continue to be its bylaws
until amended as provided therein and pursuant to the applicable provisions
of the OBCA.
A-1
<PAGE> 111
(d) Officers and Directors. The directors of Enron immediately prior
to the First Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation, and the officers of
Enron immediately prior to the First Effective Time shall be the officers
of the Surviving Corporation, each to hold office in accordance with the
bylaws of the Surviving Corporation.
Section 1.2 The PGC Merger. Upon the terms and subject to the conditions
of this Agreement, at the Second Effective Time (as defined in Section 1.3(b)):
(a) Effect. PGC shall be merged with and into the Company (the "PGC
Merger" and, together with the Reincorporation Merger, the "Mergers") in
accordance with the applicable provisions of the OBCA, as a result of which
the separate corporate existence of PGC shall cease, and the Company shall
be the Surviving Corporation and shall continue its corporate existence
under the laws of the State of Oregon. The effects and consequences of the
PGC Merger shall be as set forth in Section 60.497 of the OBCA.
(b) Articles of Incorporation. At the Second Effective Time, the
articles of incorporation of the Company, as in effect immediately prior to
the Second Effective Time, shall be the articles of incorporation of the
Surviving Corporation and thereafter shall continue to be its articles of
incorporation until amended as provided therein and pursuant to the
applicable provisions of the OBCA.
(c) Bylaws. The bylaws of the Company, as in effect immediately prior
to the Second Effective Time, shall be the bylaws of the Surviving
Corporation and thereafter shall continue to be its bylaws until amended as
provided therein and pursuant to the applicable provisions of the OBCA.
(d) Officers and Directors. Subject to Section 7.13, the directors of
the Company immediately prior to the Second Effective Time shall be the
directors of the Surviving Corporation, each to hold office in accordance
with the articles of incorporation and bylaws of the Surviving Corporation
and, subject to Section 7.14, the officers of the Company immediately prior
to the Second Effective Time shall be the officers of the Surviving
Corporation, each to hold office in accordance with the bylaws of the
Surviving Corporation.
Section 1.3 Effective Times of the Mergers.
(a) First Effective Time. On the Closing Date (as defined in Section 3.1),
articles of merger in proper form under Section 60.494 of the OBCA, and a
certificate of merger in proper form under Section 252 the DGCL, each relating
to the Reincorporation Merger, will be duly executed and filed by the parties to
the Reincorporation Merger with the Office of the Department of State of the
State of Oregon (the "Oregon Department of State") and the Office of the
Secretary of State of the State of Delaware in accordance with the applicable
provisions of the OBCA and the DGCL, respectively. The Reincorporation Merger
shall become effective upon the later of the filing of such articles of merger
with the Oregon Department of State or the filing of such certificate of
incorporation with the Secretary of State of Delaware, or at such later time as
may be mutually agreed to by the parties hereto and specified in such articles
of merger or certificate of merger (the time the Reincorporation Merger becomes
effective being herein called the "First Effective Time").
(b) Second Effective Time. On the Closing Date articles of merger in proper
form under Section 60.494 of the OBCA relating to the PGC Merger will be duly
executed and filed by the parties to the PGC Merger with the Oregon Department
of State in accordance with the applicable provisions of the OBCA. The PGC
Merger shall become effective upon the filing of such articles of merger with
the Oregon Department of State or at such later time as may be mutually agreed
to by the parties hereto and specified in such articles of merger (the time the
PGC Merger becomes effective being herein called the "Second Effective Time");
provided, however, that the Second Effective Time shall in any event be later
than the First Effective Time. As used herein, the term "Effective Time" refers
to the Second Effective Time.
A-2
<PAGE> 112
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Reincorporation Merger on Capital Stock. At the
First Effective Time, by virtue of the Reincorporation Merger and without any
action on the part of any holder of any capital stock of Enron or the Company:
(a) Conversion of Enron Common Stock. Each share of Enron common
stock, par value $.10 per share ("Enron Common Stock"), issued immediately
prior to the First Effective Time shall be converted into and become one
share of the common stock, no par value, of the Company ("Company Common
Stock").
(b) Conversion of Enron Preferred Stock. Each share of Cumulative
Second Preferred Convertible Stock, par value $1.00 per share ("Enron
Convertible Preferred Stock") issued and outstanding immediately prior to
the First Effective Time, each share of 9.142% Perpetual Second Preferred
Stock, par value $1.00 per share, issued and outstanding immediately prior
to the First Effective Time, and each share of any series of Preferred
Stock, Second Preferred Stock or Preference Stock of Enron issued after the
date hereof and issued and outstanding immediately prior to the First
Effective Time (together, the "Enron Preferred Stock") shall be converted
into and become one share of a class or series of preferred stock of the
Company having substantially equivalent rights, preferences and limitations
as the corresponding class or series of Enron Preferred Stock (together,
the "Company Preferred Stock").
(c) Cancellation of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the First Effective Time
shall be canceled, and no consideration shall be delivered in exchange
therefor.
Section 2.2 Effect of the PGC Merger on Capital Stock. At the Second
Effective Time, by virtue of the PGC Merger and without any action on the part
of any holder of any capital stock of PGC or the Company:
(a) Cancellation of Certain PGC Common Stock. Each share of PGC common
stock, par value $3.75 per share ("PGC Common Stock"), owned by PGC or any
of its subsidiaries or by Enron, the Company or any of their respective
subsidiaries, shall be canceled and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of PGC Common Stock. Each share of PGC Common Stock
issued and outstanding immediately prior to the Second Effective Time
(other than shares canceled pursuant to Section 2.2(a)) shall be converted
into 0.9825 shares of Company Common Stock (the "PGC Conversion Ratio").
Upon such conversion as provided for herein, each holder of a certificate
formerly representing any such shares of PGC Common Stock shall cease to
have any rights with respect thereto, except the right to receive the
shares of Company Common Stock to be issued in consideration therefor (and
cash in lieu of fractional shares as provided below in Section 2.4(d)) upon
the surrender of such in accordance with Section 2.4.
Section 2.3 No Exchange of Enron Stock Certificates. No certificates
representing Company Common Stock or Company Preferred Stock shall be issued to
holders of Enron Common Stock or Enron Preferred Stock by virtue of consummation
of the Reincorporation Merger unless requested by such holders. Instead,
following the Reincorporation Merger, certificates that prior to the First
Effective Time represented shares of Enron Common Stock or Enron Preferred Stock
shall be deemed for all purposes to represent an equal number of shares of
Company Common Stock or Company Preferred Stock, as the case may be. From and
after the First Effective Time, the stock transfer books of Enron shall be
closed and no transfer of any such shares shall thereafter be made, but when
certificates that formerly represented shares of Enron Common Stock or Enron
Preferred Stock are duly presented to the Company or its transfer agent for
exchange or transfer, the Company will cause to be issued in respect thereof
certificates representing an equal number of shares of Company Common Stock or
Company Preferred Stock, as the case may be.
A-3
<PAGE> 113
Section 2.4 Exchange of PGC Common Stock Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, the Company shall deposit with a bank, trust company or
other agent selected by the Company and acceptable to PGC ("Exchange
Agent"), pursuant to an agreement in form and substance reasonably
acceptable to the Company and PGC, certificates representing shares of
Company Common Stock required to effect the conversion of PGC Common Stock
into Company Common Stock in accordance with Section 2.2(b).
(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Company shall cause the Exchange Agent to mail to each holder of
record as of the Effective Time of a certificate or certificates that
immediately prior to the Effective Time represented issued and outstanding
shares of PGC Common Stock ("PGC Certificates") that were converted
("Converted Shares") into shares of Company Common Stock pursuant to
Section 2.2(b), a letter of transmittal and instructions for use in
submitting PGC Certificates to the Exchange Agent in exchange for
certificates representing shares of Company Common Stock in accordance with
the terms hereof. Upon delivery of a PGC Certificate to the Exchange Agent
for exchange, together with a duly executed letter of transmittal and such
other documents as the Exchange Agent shall require, the holder of such PGC
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Company Common Stock and the
amount of cash in lieu of fractional share interests which such holder has
the right to receive pursuant to the provisions of this Article II. In the
event of a transfer of ownership of Converted Shares which is not
registered in the transfer records of PGC, a certificate representing the
proper number of shares of Company Common Stock may be issued to a
transferee if the PGC Certificate representing such Converted Shares is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence satisfactory to the
Exchange Agent that any applicable stock transfer taxes have been paid.
Until delivered and exchanged for Company Common Stock as contemplated by
this Section 2.4, and except as provided in Section 2.4(c), each PGC
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such delivery the certificate
representing shares of Company Common Stock and cash in lieu of any
fractional shares as contemplated by this Section 2.4.
(c) Distributions with Respect to Unexchanged Shares. Unless and until
the certificate or certificates representing Converted Shares have been
surrendered for exchange to the Exchange Agent as contemplated in Section
2.4, no dividends or other distributions payable to holders of Company
Common Stock as of a record date at or after the Effective Time shall be
paid to any holder of a certificate representing such unexchanged Converted
Shares. Subject to the effect of unclaimed property, escheat and other
applicable laws, following delivery of any such certificate, there shall be
paid to the record holder (or transferee) of the certificates representing
whole shares of Company Common Stock issued in exchange therefor, without
interest, (i) the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
shares of Company Common Stock, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date at or
after the Effective Time but prior to delivery and a payment date
subsequent to delivery payable with respect to such whole shares of Company
Common Stock, as the case may be.
(d) No Fractional Shares. No certificates or scrip representing
fractional shares of Company Common Stock shall be issued upon the delivery
for exchange of Converted Shares, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a shareholder of
the Company. In lieu of any such fractional shares, each holder of a
certificate previously evidencing Converted Shares, upon surrender of such
certificate for exchange pursuant to this Section 2.4, shall be paid an
amount in cash, without interest, rounded to the nearest cent, determined
by multiplying (a) the average of the Closing Prices (as defined herein) of
the Enron Common Stock for the ten Trading Days ending on and including the
Trading Day prior to the Closing Date, by (b) the fractional interest to
which such holder would otherwise be entitled (after taking into account
all Converted Shares held of record by such holder at the Effective Time).
The "Closing Price" for each day shall be the last reported sale price,
regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to
A-4
<PAGE> 114
securities listed or admitted to trading on the New York Stock Exchange
("NYSE"). The term "Trading Day" shall mean a day on which the NYSE is open
for the transaction of business.
(e) Closing of Transfer Books. From and after the Effective Time, the
stock transfer books of PGC shall be closed and no transfer of any such
shares shall thereafter be made. If, after the Effective Time, PGC
Certificates are presented to the Company, they shall be canceled and
exchanged for certificates representing the appropriate number of whole
shares of Company Common Stock and cash in lieu of fractional shares of
Company Common Stock as provided in this Section 2.4.
(f) Termination of Exchange Agent Duties. Any certificates
representing shares of Company Common Stock deposited with the Exchange
Agent pursuant to Section 2.4(a) and not exchanged within six months after
the Effective Time pursuant to this Section 2.4 shall be returned by the
Exchange Agent to the Company, which shall thereafter act as Exchange
Agent.
(g) Escheat. The Company shall not be liable to any person for such
shares or funds delivered to a public official pursuant to the requirements
of any applicable abandoned property, escheat or similar law.
(h) Taxes. The Company shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any
former holder of Converted Shares such amounts as the Company (or any
affiliate thereof) is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Company,
such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the former holder of the Converted Shares in respect
of which such deduction and withholding was made by the Company.
Section 2.5 Adjustments to PGC Conversion Ratio.
(a) If, on or after the date hereof and prior to the Effective Time,
there is a change in the number of shares of Enron Common Stock issued and
outstanding as a result of reclassification, stock split (including a
reverse stock split), stock dividend or similar transaction, the PGC
Conversion Ratio, the Ceiling Price (as defined in Section 9.1(m)) and the
Floor Price (as defined Section 9.1(l)) shall be equitably adjusted to
eliminate the effects of such event.
(b) If, on or after the date hereof and prior to the Effective Time,
Enron effects a distribution to all holders of Enron Common Stock of shares
of any class or series of capital stock (but excluding any distribution
that results in an adjustment under clause (a) above and any dividends paid
exclusively in cash) (an "Extraordinary Distribution"), the PGC Conversion
Ratio in effect immediately prior to such Extraordinary Distribution shall
be adjusted to equal $40.25 (or, if applicable, the Revised Enron Share
Value determined in connection with any previous adjustment in the PGC
Conversion Ratio) divided by the Revised Enron Share Value (as hereinafter
defined). In addition, the Ceiling Price in effect immediately prior to
such Extraordinary Distribution shall be adjusted to equal 1.1317
multiplied by the Revised Enron Share Value, and the Floor Price in effect
immediately prior to such Extraordinary Distribution shall be adjusted to
equal 0.8683 multiplied by the Revised Enron Share Value. The PGC
Conversion Ratio, the Ceiling Price and Floor Price shall be so adjusted
successively whenever an Extraordinary Distribution shall occur on or after
the date hereof and prior to the Effective Time. Any securities distributed
by Enron in an Extraordinary Distribution shall be listed on the NYSE from
and after the time such distribution is made.
(c) For purposes of this Section 2.5(b), the following terms shall
have the following meanings in respect of any Extraordinary Distribution:
"Extraordinary Distribution Value" means the aggregate number of
securities distributed to each holder of Enron Common Stock pursuant to
such Extraordinary Distribution multiplied by the market price of such
security, with the "market price" being the average of the daily closing
prices (as hereinafter defined) per share of such security for the 20
consecutive Trading Days immediately following the date of such
Extraordinary Distribution.
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"Revised Enron Share Value" shall equal $40.25 (or, if applicable, the
Revised Enron Share Value determined in connection with any previous
adjustment in the PGC Conversion Ratio) less the Extraordinary Distribution
Value.
(d) If, on or after the date hereof and prior to the Effective Time,
there is consummated a transaction other than a transaction of the type
described in Sections 2.5(a) or (b) above pursuant to which shares of Enron
Common Stock become converted into the right to receive cash, securities or
other property or any combination thereof, Enron shall make appropriate
provision so that the corporation surviving such transaction is substituted
for Enron as a party hereto, and appropriate adjustment is made to Section
2.2(b) hereof so that, upon consummation of the Mergers, each share of PGC
Common Stock shall be converted into such amount of cash, securities or
other property or combination thereof as each such share would have been
converted had the Mergers occurred prior to such transaction.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at a place and time to be
mutually agreed upon by the parties hereto on the second business day
immediately following the date on which the last of the conditions set forth in
Article VIII (other than conditions that by their nature are required to be
performed on the Closing Date, but subject to satisfaction of such conditions)
is fulfilled or waived, or at such other time and date as PGC and Enron shall
mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ENRON
Enron represents and warrants to PGC as follows:
Section 4.1 Organization and Qualification. Except as disclosed in Section
4.1 of the Enron Disclosure Schedule (as defined in Section 7.6(ii)), Enron and
each of its subsidiaries (as defined below) is a corporation or other entity
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary regulatory
approvals and orders, to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and properties makes such
qualification necessary other than in such jurisdictions where the failure to be
so qualified and in good standing will not, when taken together with all other
such failures, have a material adverse effect on the business, properties,
financial condition, results of operations or prospects of Enron and its
subsidiaries and joint ventures, taken as a whole or on the consummation of this
Agreement (any such material adverse effect being hereinafter referred to as an
"Enron Material Adverse Effect"). As used in this Agreement, references to a
"subsidiary" of Enron means any corporation or other entity (including
partnerships and other business associations) in which Enron directly or
indirectly owns outstanding capital stock or other voting securities having the
power, under ordinary circumstances, to elect a majority of the directors or
similar members of the governing body of such corporation or other entity.
Section 4.2 Subsidiaries. Section 4.2 of the Enron Disclosure Schedule
contains a listing as of the date hereof of all material and certain other
subsidiaries and joint ventures of Enron, including the name of each such
entity, the state or jurisdiction of its incorporation or organization and
Enron's interest therein. Such entities are not subject to, or are exempt from,
regulation as a "public utility company", a "holding company", a "subsidiary
company" or an "affiliate" of any public utility company within the meaning of
Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act"), respectively. Except as
disclosed in Section 4.2 of the Enron Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each subsidiary of Enron are validly
issued, fully paid,
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nonassessable and free of preemptive rights and are owned directly or indirectly
by Enron. Except as disclosed in Section 4.2 of the Enron Disclosure Schedule,
such shares are owned free and clear of any liens, claims, encumbrances,
security interests, equities, charges and options of any nature whatsoever, and
there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating any
such subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating it to grant, extend
or enter into any such agreement or commitment, except for any of the foregoing
that could not reasonably be expected to have an Enron Material Adverse Effect.
As used in this Agreement, references to a "joint venture" of Enron means any
corporation or other entity (including partnerships and other business
associations and joint ventures) in which Enron and its subsidiaries in the
aggregate own an equity interest that is less than a majority of the outstanding
voting securities but at least 10% of such voting securities.
Section 4.3 Capitalization.
(a) The authorized capital stock of Enron and the number of shares of
each class or series of capital stock outstanding as of the close of
business on July 18, 1996 is set forth in Section 4.3 of the Enron
Disclosure Schedule. All of the issued and outstanding shares of the
capital stock of Enron are validly issued, fully paid, nonassessable and
free of preemptive rights. Except as disclosed in Section 4.3 of the Enron
Disclosure Schedule, as of the date hereof there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating Enron to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock or other voting securities of Enron
or obligating Enron to grant, extend or enter into any such agreement or
commitment.
(b) The authorized capital stock of the Company consists of 1,000
shares of Company Common Stock and no shares of preferred stock. As of the
date hereof, 1,000 shares of Company Common Stock and no shares of
preferred stock were issued and outstanding.
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. Enron and the Company have all requisite power and
authority to enter into this Agreement and, subject to the Enron
Shareholders' Approval (as defined in Section 4.13) and the Enron Required
Statutory Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation by Enron and the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Enron or the Company, as the case may be, subject to
obtaining the Enron Shareholders' Approval. This Agreement has been duly
and validly executed and delivered by Enron and the Company and, assuming
the due authorization, execution and delivery of this Agreement by PGC,
constitutes the legal, valid and binding obligation of Enron and the
Company, enforceable against Enron and the Company in accordance with its
terms.
(b) Non-Contravention. Except as disclosed in Section 4.4(b) of the
Enron Disclosure Schedule, the execution and delivery of this Agreement by
Enron do not, and the consummation of the transactions contemplated hereby
will not, violate, conflict with or result in a breach of any provision of,
or constitute a default (with or without notice or lapse of time or both)
under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination, cancellation or
acceleration of any obligation under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties
or assets of Enron or any of its subsidiaries or, to Enron's knowledge, any
of its joint ventures (any such violation, conflict, breach, default, right
of termination, cancellation or acceleration, loss or creation, a "Enron
Violation"), under any provisions of (i) the certificate of incorporation,
bylaws or similar charter documents of Enron or any of its subsidiaries or,
to Enron's knowledge, any of its joint ventures, (ii) subject to obtaining
the Enron Required Statutory Approvals and the receipt of the Enron
Shareholders' Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court,
governmental or regulatory body (including a stock exchange or other
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self-regulatory body) or authority, domestic or foreign (each, a
"Governmental Authority"), applicable to Enron or any of its subsidiaries
or, to Enron's knowledge, any of its joint ventures, or any of their
respective properties or assets or (iii) subject to obtaining the
third-party consents or other approvals set forth in Section 4.4(b) of the
Enron Disclosure Schedule (the "Enron Required Consents"), any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which Enron or any of its subsidiaries or, to Enron's knowledge, any of its
joint ventures, is now a party or by which any of them or any of their
respective properties or assets may be bound or affected, excluding from
the foregoing clauses (ii) and (iii) such Enron Violations as would not
have, in the aggregate, an Enron Material Adverse Effect.
(c) Statutory Approvals. Except as disclosed in Section 4.4(c) of the
Enron Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent, finding by or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by Enron and the Company or the consummation by Enron and the
Company of the transactions contemplated hereby, the failure to obtain,
make or give which would have, in the aggregate, an Enron Material Adverse
Effect (the "Enron Required Statutory Approvals"), it being understood that
references in this Agreement to "obtaining" such Enron Required Statutory
Approvals shall mean making such declarations, filings or registrations;
giving such notice; obtaining such consents or approvals; and having such
waiting periods expire as are necessary to avoid a violation of law.
(d) Compliance. Except as disclosed in Section 4.4(d) or 4.11 of the
Enron Disclosure Schedule or as disclosed in the Enron SEC Reports (as
defined in Section 4.5), neither Enron nor any of its subsidiaries nor, to
Enron's knowledge, its joint ventures, is in violation of or under
investigation with respect to, or has been given notice or been charged
with any violation of, any law, statute, order, rule, regulation, ordinance
or judgment (including, without limitation, any applicable Environmental
Laws (as defined in Section 4.11(f)) of any Governmental Authority, except
for violations that, in the aggregate, do not have, and, to the knowledge
of Enron, are not reasonably likely to have, an Enron Material Adverse
Effect. Except as disclosed in Section 4.4(d) or 4.11 of the Enron
Disclosure Schedule, Enron and its subsidiaries and, to Enron's knowledge,
its joint ventures, have all permits, licenses, franchises and other
governmental authorizations, consents and approvals necessary to conduct
their respective businesses as currently conducted (collectively,
"Permits"), except those which the failure to obtain would, in the
aggregate, not have an Enron Material Adverse Effect.
Section 4.5 Reports and Financial Statements. The filings required to be
made by Enron and its subsidiaries since January 1, 1991 under the Securities
Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), have been filed with the Securities
and Exchange Commission (the "SEC") and complied in all material respects with
all applicable requirements of the appropriate act and the rules and regulations
thereunder. Enron has made available to PGC a true and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
Enron with the SEC since January 1, 1991 and through the date hereof (as such
documents have since the time of their filing been amended, the "Enron SEC
Reports"). The Enron SEC Reports, including without limitation any financial
statements or schedules included therein, at the time filed did not, and any
forms, reports or other documents filed by Enron with the SEC after the date
hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of Enron included in the Enron SEC Reports
(collectively, the "Enron Financial Statements") that have been included in
Enron SEC Reports have been prepared, and the Enron Financial Statements to be
included in any forms, reports or other documents filed by Enron with the SEC
after the date hereof will be prepared, in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP") (except as may be
indicated therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q) and fairly present the consolidated
financial position of Enron as of the respective dates thereof or the
consolidated results of operations and cash flows for the respective periods
then ended, as the case may be, subject, in the case of the unaudited interim
financial statements, to normal, recurring audit adjustments. True, accurate and
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complete copies of the certificate or articles of incorporation and bylaws of
Enron and the Company, each as in effect on the date hereof, have been delivered
to PGC.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed in
the Enron SEC Reports filed prior to the date hereof or as disclosed in Section
4.6 or 4.7 of the Enron Disclosure Schedule, since December 31, 1995 (i) there
has not been and, no event has occurred which has had, and no fact or condition
exists that would have or, to the knowledge of Enron, is reasonably likely to
have, an Enron Material Adverse Effect, and (ii) none of Enron nor any of its
subsidiaries has taken any action that would have been prohibited by Article VI
hereof had this Agreement been in effect at the time of such action.
Section 4.7 Litigation. Except as disclosed in the Enron SEC Reports filed
prior to the date hereof or as disclosed in Section 4.7, 4.9 or 4.11 of the
Enron Disclosure Schedule, (i) there are no claims, suits, actions or
proceedings pending or, to the knowledge of Enron, threatened, nor, to the
knowledge of Enron, are there any investigations or reviews pending or
threatened against, relating to or affecting Enron or any of its subsidiaries or
any Enron Benefit Plan or Enron Employee Arrangement, (ii) there are no
judgments, decrees, injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
applicable to Enron or any of its subsidiaries, except for any of the foregoing
under clauses (i) and (ii) that individually or in the aggregate would not
reasonably be expected to have an Enron Material Adverse Effect.
Section 4.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of Enron that is included
or incorporated by reference in (i)(A) the registration statement on Form S-4 to
be filed with the SEC by the Company in connection with the issuance of shares
of Company Common Stock in the PGC Merger (the "Registration Statement") or (B)
the Post-Effective Amendment (as defined in Section 7.2(a)) will, at the time
the Registration Statement or the Post-Effective Amendment becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) the joint proxy
statement/prospectus in definitive form, relating to the meetings of the
shareholders of PGC and Enron to be held in connection with the Mergers and the
prospectus relating to the Company Common Stock to be issued in the PGC Merger
(the "Joint Proxy Statement") will, at the date such document is mailed to such
shareholders and, as the same may be amended or supplemented, at the times of
such meetings, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading and (iii) the
Supplemental Proxy Statement (as defined in Section 7.20(a)) in definitive form,
relating to the Supplemental PGC Shareholders' Meeting (as defined in Section
7.20(e)) will, at the date such document is mailed to the shareholders of PGC
and, as the same may be amended or supplemented, at the times of such meeting,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. All documents that
Enron is responsible for filing with the SEC in connection with the transactions
contemplated herein shall comply as to form in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder.
Section 4.9 Tax Matters. "Taxes", as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies, or other
assessments, including all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal property, gross
receipts, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties (civil or criminal) on or additions to any such taxes
and any expenses incurred in connection with the determination, settlement or
litigation of any tax liability. "Tax Return", as used in this Agreement, means
a report, return or other information required to be supplied to a governmental
entity with respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes Enron or any of its
subsidiaries on the one hand, or PGC or any of its subsidiaries on the other
hand.
(a) Filing of Timely Tax Returns. Except as disclosed in Section
4.9(a) of the Enron Disclosure Schedule, Enron and each of its subsidiaries
have filed all Tax Returns required to be filed by each of
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them under applicable law. All Tax Returns were (and, as to Tax Returns not
filed as of the date hereof, will be) in all material respects true,
complete and correct and filed on a timely basis.
(b) Payment of Taxes. Enron and each of its subsidiaries have, within
the time and in the manner prescribed by law, paid (and until the Closing
Date will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable except for those contested in good
faith and for which adequate reserves have been taken.
(c) Tax Liens. There are no Tax liens upon the assets of Enron or any
of its subsidiaries except liens for Taxes not yet due.
(d) Withholding Taxes. Enron and each of its subsidiaries have
complied (and until the Closing Date will comply) in all material respects
with the provisions of the Code relating to the payment and withholding of
Taxes, including, without limitation, the withholding and reporting
requirements under Code sec.sec. 1441 through 1464, 3401 through 3606, and
6041 and 6049, as well as similar provisions under any other laws, and
have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all
amounts required.
(e) Extensions of Time for Filing Tax Returns. Except as disclosed in
Section 4.9(e) of the Enron Disclosure Schedule, neither Enron nor any of
its subsidiaries has requested any extension of time within which to file
any Tax Return, which Tax Return has not since been filed.
(f) Waivers of Statute of Limitations. Except as disclosed in Section
4.9(f) of the Enron Disclosure Schedule, neither Enron nor any of its
subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(g) Availability of Tax Returns. Enron and its subsidiaries have made
available to PGC complete and accurate copies, covering all years ending on
or after December 31, 1991, of (i) all Tax Returns, and any amendments
thereto, filed by Enron or any of its subsidiaries, (ii) all audit reports
received from any taxing authority relating to any Tax Return filed by
Enron or any of its subsidiaries and (iii) any closing agreements entered
into by Enron or any of its subsidiaries with any taxing authority.
Section 4.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the Enron Disclosure Schedule
contains a true and complete list of: (i) each "employee benefit plan"
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") covering employees or former
employees of Enron (the "Enron Benefit Plans"); and (ii) each contract,
agreement or arrangement other than the Enron Benefit Plans with or
covering any employee or director pursuant to which Enron or any of its
subsidiaries could have material statutory or contractual liability (the
"Enron Employee Arrangements"). With respect to each Enron Benefit Plan,
Enron has made available to PGC a true and correct copy of, as applicable,
(i) the current plan document (including all amendments adopted since the
most recent restatement) and its most recently prepared summary plan
description and all summaries of material modifications prepared since the
most recent summary plan description, (ii) the most recently prepared
annual report (IRS Form 5500 Series) including financial statements, (iii)
each related trust agreement, insurance contract, service provider or
investment management agreement (including all amendments to each such
document), (iv) the most recent IRS determination letter with respect to
the qualified status under Code sec. 401(a) of such plan and a copy of any
application of an IRS determination letter filed since the most recent IRS
determination letter was issued, and (v) the most recent actuarial report
or valuation.
(b) Qualification; Compliance. Except as disclosed in Section 4.10(b)
of the Enron Disclosure Schedule, (i) each Enron Benefit Plan that is
intended to be "qualified" within the meaning of Code sec. 401(a) has been
determined by the IRS to be so qualified, and, to the knowledge of Enron,
no event or condition exists or has occurred that could reasonably be
expected to result in the revocation of any such determination; (ii) each
Enron Benefit Plan and each Enron Employee Arrangement is and has been
operated and administered substantially in compliance with its terms and
provisions and in
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compliance with all applicable laws, rules and regulations; (iii) no
individual or entity has engaged in any transaction with respect to any
Enron Benefit Plan as a result of which Enron or any of its subsidiaries
could reasonably expect to be subject to liability pursuant to ERISA sec.
409 or sec. 502, or subjected to Taxes; and (iv) no Enron Benefit Plan is
subject to any ongoing audit, investigation, or other administrative
proceeding of any federal, state, or local governmental entity, or is the
subject of any pending application with any federal, state or local
governmental entity for administrative or other relief.
(c) Title IV Liabilities. No event has occurred and, to the knowledge
of Enron, there exists no condition or set of circumstances, that could
subject or potentially subject Enron or any of its subsidiaries to any
liability arising under or based upon the provision of Title IV of ERISA
(whether to a governmental agency, a multiemployer plan or to any other
person or entity) which could reasonably be expected to have an Enron
Material Adverse Effect.
Section 4.11 Environmental Protection.
(a) Compliance. Except as disclosed in Section 4.11(a) of the Enron
Disclosure Schedule, or as disclosed in the Enron SEC Reports, Enron and
each of its subsidiaries is in compliance with all applicable Environmental
Laws (as hereinafter defined in Section 4.11(f)), except where the failure
to be so in compliance would not in the aggregate have an Enron Material
Adverse Effect. Except as disclosed in Section 4.11(a) of the Enron
Disclosure Schedule, neither Enron nor any of its subsidiaries has received
any written notice from any person or Governmental Authority that alleges
that Enron or any of its subsidiaries is not in compliance with applicable
Environmental Laws, except where the failure to be in such compliance would
not in the aggregate have an Enron Material Adverse Effect.
(b) Environmental Permits. Except as disclosed in Section 4.11(b) of
the Enron Disclosure Schedule, or as disclosed in the Enron SEC Reports,
Enron and each of its subsidiaries has obtained or has applied for all
environmental, health and safety permits and authorizations (collectively,
"Environmental Permits") necessary for the construction of their facilities
and the conduct of their operations, and all such Environmental Permits are
in good standing or, where applicable, a renewal application has been
timely filed and is pending agency approval, and Enron and its subsidiaries
are in compliance with all terms and conditions of all such Environmental
Permits and are not required to make any expenditures in connection with
any renewal application pending agency approval, except where the failure
to obtain or be in such compliance and the requirement to make such
expenditures would not have in the aggregate an Enron Material Adverse
Effect.
(c) Environmental Claims. Except as disclosed in Section 4.11(c) of
the Enron Disclosure Schedule, or as disclosed in the Enron SEC Reports,
there is no Environmental Claim (as hereinafter defined in Section 4.11(f))
pending, or to the knowledge of Enron, threatened (i) against Enron or any
of its subsidiaries or, to Enron's knowledge, any of its joint ventures,
(ii) against any person or entity whose liability for any Environmental
Claim Enron or any of its subsidiaries or, to Enron's knowledge, any of its
joint ventures, has or may have retained or assumed either contractually or
by operation of law or (iii) against any real or personal property or
operations that Enron or any of its subsidiaries or, to Enron's knowledge,
any of its joint ventures, owns, leases or manages, in whole or in part,
that, if adversely determined, would have in the aggregate an Enron
Material Adverse Effect.
(d) Releases. Except as disclosed in Section 4.11(c) or 4.11(d) of the
Enron Disclosure Schedule, or as disclosed in the Enron SEC Reports, to the
knowledge of Enron, there has been no Release (as hereinafter defined in
Section 4.11(f)) of any Hazardous Material (as hereinafter defined in
Section 4.11(f)) that would be reasonably likely to form the basis of any
Environmental Claim against Enron or any subsidiary or joint venture of
Enron, or against any person or entity whose liability for any
Environmental Claim Enron or any subsidiary of Enron has or may have
retained or assumed either contractually or by operation of law, except for
Releases of Hazardous Materials the liability for which would not have in
the aggregate an Enron Material Adverse Effect.
(e) Predecessors. Except as disclosed in Section 4.11(e) of the Enron
Disclosure Schedule, or as disclosed in the Enron SEC Reports, to the
knowledge of Enron, with respect to any predecessor of Enron
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or any subsidiary or joint venture of Enron, there are no Environmental
Claims pending or threatened, or any Releases of Hazardous Materials that
would be reasonably likely to form the basis of any Environmental Claims
that would have, or that Enron reasonably believes would have, in the
aggregate an Enron Material Adverse Effect.
(f) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity (including, without
limitation, any Governmental Authority) alleging potential liability
(including, without limitation, potential liability for enforcement
costs, investigatory costs, cleanup costs, response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries, fines or penalties) arising out of, based on or
resulting from (A) the presence, or Release or threatened Release of any
Hazardous Materials at any location, whether or not owned, operated,
leased or managed by Enron or any of its subsidiaries or joint ventures
(for purposes of this Section 4.11 only), or by PGC or any of its
subsidiaries (for purposes of Section 5.11 only), (B) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law or (C) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Materials.
(ii) "Environmental Laws" means all federal, state and local laws,
rules and regulations relating to pollution or protection of human
health or the environment as in effect on the date hereof (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) including, without limitation, laws and
regulations relating to Releases or threatened Releases of Hazardous
Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products or petroleum wastes (including crude oil or any fraction
thereof), radioactive materials, friable asbestos or friable
asbestos-containing material, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls, (B) any chemicals, materials or substances
which are now defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", or words of similar import, under any Environmental
Law and (C) any other chemical, material, substance or waste, exposure
to which is now prohibited, limited or regulated under any Environmental
Law in a jurisdiction in which Enron or any of its subsidiaries or joint
ventures operates (for purposes of this Section 4.11 only) or in which
PGC or any of its subsidiaries or joint ventures operates (for purposes
of Section 5.11 only).
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property (indoors or outdoors).
Section 4.12 Regulation as a Utility. Enron shall not, prior to the
Effective Time, become a "holding company" within the meaning the 1935 Act
without complying with the registration, exemption or other provisions
applicable thereto.
Section 4.13 Vote Required. The approval by the holders of a majority of
the votes entitled to be cast by holders of the Enron Common Stock and the Enron
Convertible Preferred Stock, voting together as a single class, with each share
of Enron Common Stock being entitled to one vote per share and each share of
Enron Convertible Preferred Stock being entitled to a number of votes per share
equal to the number of shares of Enron Common Stock into which such share of
Enron Preferred Stock is then convertible (the "Enron Shareholders' Approval"),
is the only vote of the holders of any class or series of the capital stock of
Enron required to approve the Reincorporation Merger, this Agreement and the
other transactions contemplated hereby. Enron, as the sole shareholder of the
Company, has duly approved the Mergers and this Agreement
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and the transactions contemplated hereby, and no other vote of the holders of
any class or series of the capital stock of the Company is required to
consummate such transactions.
Section 4.14 Opinion of Financial Advisor. Enron has received the opinion
of Smith Barney Inc., dated the date hereof, to the effect that, as of the date
hereof, the consideration to be issued to holders of PGC Common Stock in the PGC
Merger is fair from a financial point of view to the holders of Enron Common
Stock and the Enron Preferred Stock.
Section 4.15 Insurance. Except as disclosed in Section 4.15 of the Enron
Disclosure Schedule, each of Enron and each of its subsidiaries is, and has been
continuously since January 1, 1991, insured in such amounts and against such
risks and losses as are customary for companies conducting the respective
businesses conducted by Enron and its subsidiaries during such time period.
Except as disclosed in Section 4.15 of the Enron Disclosure Schedule, neither
Enron nor any of its subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy thereof. All material
insurance policies of Enron and its subsidiaries are valid and enforceable
policies.
Section 4.16 Applicability of Certain Delaware Law Provisions. Neither the
business combination provisions of Section 203 of the DGCL nor any similar
provisions of the certificate of incorporation or bylaws of Enron are applicable
to the transactions contemplated by this Agreement.
Section 4.17 Operations of the Company. The Company was formed for
purposes of the transactions contemplated by this Agreement and, except as
contemplated by this Agreement, has not conducted any business operations or
incurred any liabilities since its formation.
Section 4.18 Authority, Non-Contravention and Statutory Approvals relating
to the Agreement As Amended by the First Amendment.
(a) Authority. Enron and the Company have all requisite power and
authority to enter into the First Amendment (as defined in Section 4.19)
and, subject to obtaining the Enron Required Statutory Approvals, to
consummate the transactions contemplated by this Agreement. The execution
and delivery of the First Amendment and the consummation by Enron and the
Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Enron or the
Company, as the case may be. The First Amendment has been duly and validly
executed and delivered by Enron and the Company and, assuming the due
authorization, execution and delivery of this Agreement by PGC, the
Agreement constitutes the legal, valid and binding obligation of Enron and
the Company, enforceable against Enron and the Company in accordance with
its terms.
(b) Non-Contravention. Except as disclosed in Section 4.4(b) of the
Enron Disclosure Schedule, the execution and delivery of the First
Amendment by Enron do not, and the consummation of the transactions
contemplated by this Agreement will not, result in an Enron Violation under
any provisions of (i) the certificate of incorporation, bylaws or similar
charter documents of Enron or any of its subsidiaries or, to Enron's
knowledge, any of its joint ventures, (ii) subject to obtaining the Enron
Required Statutory Approvals, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of
any Governmental Authority, applicable to Enron or any of its subsidiaries
or, to Enron's knowledge, any of its joint ventures, or any of their
respective properties or assets or (iii) subject to obtaining the Enron
Required Consents, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Enron or any of
its subsidiaries or, to Enron's knowledge, any of its joint ventures, is
now a party or by which any of them or any of their respective properties
or assets may be bound or affected, excluding from the foregoing clauses
(ii) and (iii) such Enron Violations as would not have, in the aggregate,
an Enron Material Adverse Effect.
(c) Statutory Approvals. Except for (i) the OPUC Approval (as defined
in Section 7.3(a)), (ii) a declaration of effectiveness by the SEC of the
Post-Effective Amendment (as defined in Section 7.2), (iii) the matters set
forth in items (c) and (f) on Section 4.4(c) of the Enron Disclosure
Schedule, (iv) those declarations, filings, registrations, notices,
authorizations, consents, findings or approvals that have already been made
and (v) any supplemental filings relating to any of the foregoing required
by the
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execution of the First Amendment or the transactions contemplated thereby,
there are no Enron Required Statutory Approvals in connection with the
execution and delivery of the First Amendment by Enron and the Company or
the consummation by Enron and the Company of the transactions contemplated
by this Agreement the failure to obtain, make or give which would have, in
the aggregate, an Enron Material Adverse Effect.
Section 4.19 Vote Required for First Amendment. No additional vote by the
holders of any capital stock of Enron is required in connection with the First
Amendment to this Agreement, which amendment was executed as of April 14, 1997
(the "First Amendment").
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PGC
PGC represents and warrants to Enron and the Company as follows:
Section 5.1 Organization and Qualification. Except as disclosed in Section
5.1 of the PGC Disclosure Schedule (as defined in Section 7.6(i)), PGC and each
of its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, has all
requisite corporate power and authority, and has been duly authorized by all
necessary regulatory approvals and orders, to own, lease and operate its assets
and properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its assets and
properties makes such qualification necessary other than in such jurisdictions
where the failure to be so qualified and in good standing will not, when taken
together with all other such failures, have a material adverse effect on the
business, properties, financial condition, results of operations or prospects
(in the case of prospects, taking into account the effect of the Regulatory
Plans described below) of PGC and its subsidiaries and joint ventures, taken as
a whole or on the consummation of this Agreement (any such material adverse
effect being hereinafter referred to as a "PGC Material Adverse Effect"). As
used in this Agreement, references to a "subsidiary" of PGC means any
corporation or other entity (including partnerships and other business
associations) in which PGC directly or indirectly owns outstanding capital stock
or other voting securities having the power, under ordinary circumstances, to
elect a majority of the directors or similar members of the governing body of
such corporation or other entity, or otherwise to direct the management and
policies of such corporation or other entity.
Section 5.2 Subsidiaries. Section 5.2 of the PGC Disclosure Schedule
contains a description as of the date hereof of all subsidiaries and joint
ventures of PGC, including the name of each such entity, the state or
jurisdiction of its incorporation or organization and PGC's interest therein.
Except as disclosed in Section 5.2 of the PGC Disclosure Schedule, none of such
entities is a "public utility company", a "holding company", a "subsidiary
company" or an "affiliate" of any public utility company within the meaning of
Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the 1935 Act, respectively.
Except as disclosed in Section 5.2 of the PGC Disclosure Schedule, all of the
issued and outstanding shares of capital stock of each subsidiary of PGC are
validly issued, fully paid, nonassessable and free of preemptive rights and are
owned directly or indirectly by PGC free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
As used in this Agreement, references to a "joint venture" of PGC means any
corporation or other entity (including partnerships and other business
associations and joint ventures) in which PGC or one or more of its subsidiaries
owns an equity interest that is less than a majority of any class of the
outstanding voting securities but at least 10% of such voting securities.
Section 5.3 Capitalization. The authorized capital stock of PGC consists
of 100,000,000 shares of PGC Common Stock and 30,000,000 shares of preferred
stock. As of the close of business on June 30, 1996,
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51,116,367 shares of PGC Common Stock and no shares of preferred stock were
issued and outstanding. All of the issued and outstanding shares of the capital
stock of PGC are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as disclosed in Section 5.3 of the PGC Disclosure
Schedule, as of the date hereof there are no outstanding subscriptions, options,
calls, contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating PGC or any of its subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of the capital stock
or other voting securities of PGC or obligating PGC or any of its subsidiaries
to grant, extend or enter into any such agreement or commitment.
Section 5.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. PGC has all requisite power and authority to enter into
this Agreement and, subject to the PGC Shareholders' Approval (as defined
in Section 5.13) and the PGC Required Statutory Approvals (as defined in
Section 5.4(c)), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by PGC of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of PGC, subject to obtaining the
PGC Shareholders' Approval. This Agreement has been duly and validly
executed and delivered by PGC and, assuming the due authorization,
execution and delivery hereof by Enron and the Company, constitutes the
legal, valid and binding obligation of PGC enforceable against PGC in
accordance with its terms.
(b) Non-Contravention. Except as disclosed in Section 5.4(b) of the
PGC Disclosure Schedule, the execution and delivery of this Agreement by
PGC do not, and the consummation of the transactions contemplated hereby
will not, violate, conflict with or result in a breach of any provision of,
or constitute a default (with or without notice or lapse of time or both)
under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination, cancellation or
acceleration of any obligation under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties
or assets of PGC or any of its subsidiaries, or, to PGC's knowledge, any of
its joint ventures (any such violation, conflict, breach, default, right of
termination, cancellation or acceleration, loss or creation, a "PGC
Violation") under any provisions of (i) the articles of incorporation,
bylaws or similar governing documents of PGC or any of its subsidiaries or
joint ventures, (ii) subject to obtaining the PGC Required Statutory
Approvals and the receipt of the PGC Shareholders' Approval, any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Authority applicable to PGC or
any of its subsidiaries or joint ventures or any of their respective
properties or assets, or (iii) subject to obtaining the third-party
consents or other approvals disclosed in Section 5.4(b) of the PGC
Disclosure Schedule (the "PGC Required Consents"), any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which PGC or any of its subsidiaries or joint ventures is now a party or by
which any of them or any of their respective properties or assets may be
bound or affected, excluding from the foregoing clauses (ii) and (iii) such
PGC Violations as would not have, in the aggregate, a PGC Material Adverse
Effect.
(c) Statutory Approvals. Except as disclosed in Section 5.4(c) of the
PGC Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent, finding by or approval of, any
Governmental Authority, is necessary for the execution and delivery of this
Agreement by PGC or the consummation by PGC of the transactions
contemplated hereby, the failure to obtain, make or give which would have,
in the aggregate, a PGC Material Adverse Effect (the "PGC Required
Statutory Approvals"), it being understood that references in this
Agreement to "obtaining" such PGC Required Statutory Approvals shall mean
making such declarations, filings or registrations; giving such notice;
obtaining such consents or approvals; and having such waiting periods
expire as are necessary to avoid a violation of law.
(d) Compliance. Except as disclosed in Section 5.4(d) or 5.11 of the
PGC Disclosure Schedule or as disclosed in the PGC SEC Reports (as defined
in Section 5.5), neither PGC nor any of its subsidiaries
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nor, to the knowledge of PGC, any of its joint ventures, is in violation of
or under investigation with respect to, or has been given notice or been
charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
Environmental Laws), of any Governmental Authority, except for violations
that, in the aggregate, do not have, and, to the knowledge of PGC, are not
reasonably likely to have, a PGC Material Adverse Effect. Except as
disclosed in Section 5.4(d) or 5.11 of the PGC Disclosure Schedule, PGC,
its subsidiaries and, to the knowledge of PGC, its joint ventures have all
Permits, except those which the failure to obtain would not, in the
aggregate, have a PGC Material Adverse Effect.
Section 5.5 Reports and Financial Statements. The filings required to be
made by PGC and its subsidiaries since January 1, 1991 under the Securities Act,
the 1935 Act, the Atomic Energy Act of 1954, as amended (the "Atomic Energy
Act"), the Exchange Act, applicable Oregon laws and regulations and the Federal
Power Act ("Power Act") have been filed with the SEC, the Oregon Public Utility
Commission, the FERC, or the Nuclear Regulatory Commission ("NRC") as the case
may be, and complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder. PGC has made
available to Enron a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by PGC with the SEC
since January 1, 1991 and through the date hereof (as such documents have since
the time of their filing been amended, the "PGC SEC Reports"). The PGC SEC
Reports, including without limitation any financial statements or schedules
included therein, at the time filed did not, and any forms, reports or other
documents filed by PGC with the SEC after the date hereof will not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
PGC included in the PGC SEC Reports (collectively, the "PGC Financial
Statements") that have been included in PGC SEC Reports have been prepared, and
the PGC Financial Statements to be included in any forms, reports or other
documents filed by PGC with the SEC after the date hereof will be prepared, in
accordance with GAAP (except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements as permitted by Form 10-Q) and
fairly present the consolidated financial position of PGC as of the respective
dates thereof or the consolidated results of operations and cash flows for the
respective periods then ended, as the case may be, subject, in the case of the
unaudited interim financial statements, to normal, recurring audit adjustments.
True, accurate and complete copies of the articles of incorporation and bylaws
of PGC and each of its subsidiaries, as in effect on the date hereof, have been
delivered to Enron.
Section 5.6 Absence of Certain Changes or Events. Except as disclosed in
the PGC SEC Reports filed prior to the date hereof or as disclosed in Section
5.6 or 5.7 of the PGC Disclosure Schedule, since December 31, 1995 (i) each of
PGC and each of its subsidiaries has conducted its business only in the ordinary
course of business consistent with past practice and no event has occurred which
has had, and no fact or condition exists that would have or, to the knowledge of
PGC, is reasonably likely to have, a PGC Material Adverse Effect, and (ii) none
of PGC nor any of its subsidiaries has taken any action that would have been
prohibited by Article VI hereof had this Agreement been in effect at the time of
such action.
Section 5.7 Litigation. Except as disclosed in the PGC SEC Reports filed
prior to the date hereof or as disclosed in Sections 5.7, 5.9 or 5.11 of the PGC
Disclosure Schedule, (i) there are no claims, suits, actions or proceedings
pending or, to the knowledge of PGC, threatened, nor, to the knowledge of PGC,
are there any investigations or reviews pending or threatened against, relating
to or affecting PGC or any of its subsidiaries or any PGC Benefit Plan or PGC
Employee Arrangement, and (ii) there are no judgments, decrees, injunctions,
rules or orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to PGC or any of its
subsidiaries, except for any of the foregoing under clauses (i) and (ii) that
individually or in the aggregate would not reasonably be expected to have a PGC
Material Adverse Effect.
Section 5.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of PGC that is included
or incorporated by reference in (i)(A) the Registration Statement or (B) the
Post-Effective Amendment will, at the time the Registration Statement or the
Post-
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Effective Amendment becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
(ii) the Joint Proxy Statement will, at the date that document is mailed to the
shareholders of PGC and Enron and, as the same may be amended or supplemented,
at the times of the meetings of such shareholders to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading and (iii) the
Supplemental Proxy Statement will, at the date that document is mailed to the
shareholders of PGC and, as the same may be amended or supplemented, at the time
of the supplemental PGC Shareholders Meeting contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. All documents that PGC is responsible for filing with the SEC in
connection with the transactions contemplated herein shall comply as to form in
all material respects with the applicable requirements of the Securities Act and
the rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
Section 5.9 Tax Matters.
(a) Filing of Timely Tax Returns. Except as disclosed in Section
5.9(a) of the PGC Disclosure Schedule, PGC and each of its subsidiaries
have filed all Tax Returns required to be filed by each of them under
applicable law. All Tax Returns were (and, as to Tax Returns not filed as
of the date hereof, will be) in all material respects true, complete and
correct and filed on a timely basis.
(b) Payment of Taxes. PGC and each of its subsidiaries have, within
the time and in the manner prescribed by law, paid (and until the Closing
Date will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable except for those contested in good
faith and for which adequate reserves have been taken.
(c) Tax Liens. There are no Tax liens upon the assets of PGC or any of
its subsidiaries except liens for Taxes not yet due.
(d) Withholding Taxes. PGC and each of its subsidiaries have complied
(and until the Closing Date will comply) in all material respects with the
provisions of the Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting requirements
under Code sec.sec. 1441 through 1464, 3401 through 3606, and 6041 and
6049, as well as similar provisions under any other laws, and have, within
the time and in the manner prescribed by law, withheld from employee wages
and paid over to the proper governmental authorities all amounts required.
(e) Extensions of Time for Filing Tax Returns. Except as disclosed in
Section 5.9(e) of the PGC Disclosure Schedule, neither PGC nor any of its
subsidiaries has requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.
(f) Waivers of Statute of Limitations. Except as disclosed in Section
5.9(f) of the PGC Disclosure Schedule, neither PGC nor any of its
subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(g) Availability of Tax Returns. PGC and its subsidiaries have made
available to Enron complete and accurate copies covering all years ending
on or after December 31, 1991, of (i) all Tax Returns, and any amendments
thereto, filed by PGC or any of its subsidiaries, (ii) all audit reports
received from any taxing authority relating to any Tax Return filed by PGC
or any of its subsidiaries and (iii) any closing agreements entered into by
PGC or any of its subsidiaries with any taxing authority.
(h) Intercompany Transactions. Section 5.9(h) of the PGC Disclosure
Schedule sets forth all intercompany transactions (within the meaning of
Treas. Reg. sec. 1.1502-13) between members of the affiliated group of
corporations of which PGC is the common parent corporation (the "PGC
Group") for which any income or gain will remain unrecognized as of the
close of the last taxable year prior to the date hereof, listing for each
such transaction the selling member, the buying member, and the amount of
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such income or gain. Except as set forth on Schedule 5.9(h) of the PGC
Disclosure Schedule, there have been no material changes in amount of
income or gain attributable to intercompany transactions.
(i) Excess Loss Accounts. Section 5.9(i) of the PGC Disclosure
Schedule sets forth the amount of each excess loss account (within the
meaning of Treas. Reg. sec. 1.1502-19) of any member of the PGC Group in
the stock of any other member of the PGC Group as of the close of the last
taxable year prior to the date hereof. Except as set forth on Schedule
5.9(i) of the PGC Disclosure Schedule, there have been no material changes
in amount of such excess loss accounts.
Section 5.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 5.10(a) of the PGC Disclosure Schedule
contains a true and complete list of: (i) each employee benefit plan,
program or arrangement covering employees, former employees or directors of
PGC (or any of its subsidiaries) or any of their dependents or
beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, including, but not limited to, any "employee
benefit plan" within the meaning of ERISA sec. 3(3) (whether or not
terminated, if PGC or any of its subsidiaries could have statutory or
contractual liability with respect thereto on or after the date hereof);
(ii) each management, employment, deferred compensation, severance
(including any payment, right or benefit resulting from a change in
control), bonus, contract for personal services, arrangement or agreement
with or covering any current officer, key employee or director or any
consulting contract with any person who prior to entering into such
contract was a director or officer of PGC or any of its subsidiaries
(whether or not terminated, if PGC or any of its subsidiaries could have
statutory or contractual liability with respect thereto on or after the
date hereof); (iii) each "employee pension benefit plan" (within the
meaning of ERISA sec. 3(2)) subject to Title IV of ERISA or the minimum
funding requirements of Code sec. 412 maintained or contributed to by PGC
or any entity required to be aggregated therewith pursuant to Code
sec. 414(b) or (c) (a "PGC ERISA Affiliate") at any time during the
seven-year period immediately preceding the date hereof (the plans,
programs and arrangements described in items (i), (ii) and (iii) above
being hereinafter referred to collectively as the "PGC Benefit Plans") and
(iv) with respect to each PGC Benefit Plan that is described in item (i) or
(ii) above and that is funded other than from general assets of PGC and its
affiliates, the source or sources of benefit payments under the plan
(including, where applicable, the identity of any trust (whether or not a
grantor trust), insurance contract, custodial account, agency agreement, or
other arrangement that holds the assets of, or serves as a funding vehicle
or source of benefits for, such PGC Benefit Plan).
(b) Contributions. Except as disclosed in Section 5.10(b) of the PGC
Disclosure Schedule, all material contributions and other payments required
to have been made by PGC or any of its subsidiaries pursuant to any PGC
Benefit Plan (or to any person pursuant to the terms thereof) have been
timely made or the amount of such payment or contribution obligation has
been reflected in the PGC Financial Statements.
(c) Qualification; Compliance. Except as disclosed in Section 5.10(c)
of the PGC Disclosure Schedule, each PGC Benefit Plan that is intended to
be "qualified" within the meaning of Code sec. 401(a) has been determined
by the IRS to be so qualified, and, to the knowledge of PGC, no event or
condition exists or has occurred that could reasonably be expected to
result in the revocation of any such determination. PGC and each of its
subsidiaries are in compliance with, and each PGC Benefit Plan is and has
been operated in compliance with, all applicable laws, rules and
regulations governing such plan, including, without limitation, ERISA and
the Code, except for violations that could not reasonably be expected to
have a PGC Material Adverse Effect. To the knowledge of PGC, no individual
or entity has engaged in any transaction with respect to any PGC Benefit
Plan as a result of which PGC or any of its subsidiaries could reasonably
expect to be subject to material liability pursuant to ERISA sec. 409 or
sec. 502, or subject to an excise tax pursuant to Code sec. 4975. To the
knowledge of PGC, (i) no PGC Benefit Plan is subject to any ongoing audit,
investigation, or other administrative proceeding of the Internal Revenue
Service, the Department of Labor, or any other federal, state, or local
governmental entity, and (ii) no PGC Benefit Plan is the subject of any
pending application for administrative relief under any voluntary
compliance program of any governmental entity (including, without
limitation, the IRS's Voluntary
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Compliance Resolution Program or Walk-in Closing Agreement Program, or the
Department of Labor's Delinquent Filer Voluntary Compliance Program).
(d) Liabilities. With respect to the PGC Benefit Plans described in
item (i) of Section 5.10(a), individually and in the aggregate, no
termination or partial termination of any PGC Benefit Plan or other event
has occurred and, to the knowledge of PGC, there does not exist any
condition or set of circumstances, that could subject PGC or any of its
subsidiaries to any liability arising under the Code, ERISA or any other
applicable law (including, without limitation, any liability to or under
any such plan or to the PBGC), whether directly or pursuant to an indemnity
agreement, excluding liabilities for benefit claims and funding obligations
payable in the ordinary course and liability for PBGC insurance premiums
payable in the ordinary course, which liability could reasonably be
expected to have a PGC Material Adverse Effect.
(e) Welfare Plans. Except as disclosed in Section 5.10(e) of the PGC
Disclosure Schedule, no PGC Benefit Plan that is a "welfare plan" (within
the meaning of ERISA sec. 3(1)) provides benefits for any retired or former
employees (other than as required pursuant to ERISA sec. 601).
(f) Documents Made Available. PGC has made available to Enron a true
and correct copy of each collective bargaining agreement to which PGC is a
party or under which PGC has obligations and, with respect to each PGC
Benefit Plan that is an "employee benefit plan" within the meaning of ERISA
sec. 3(3), as applicable (i) the current plan document (including all
amendments adopted since the most recent restatement) and its most recently
prepared summary plan description and all summaries of material
modifications prepared since the most recent summary plan description, (ii)
the most recently prepared annual report (IRS Form 5500 Series) including
financial statements, (iii) each related trust agreement, insurance
contract, service provider or investment management agreement (including
all amendments to each such document), (iv) the most recent IRS
determination letter with respect to the qualified status under Code
sec. 401(a) of such plan and a copy of any application of an IRS
determination letter filed since the most recent IRS determination letter
was issued, and (v) the most recent actuarial report or valuation.
(g) Payments Resulting from Merger. Other than as set forth in Section
7.11 or disclosed in Section 5.10(g) of the PGC Disclosure Schedule, the
consummation or announcement of any transaction contemplated by this
Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in any (i) payment (whether of severance
pay or otherwise) becoming due from PGC or any of its subsidiaries under
any applicable PGC Benefit Plans to any officer, employee, former employee
or director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (ii) benefit under any PGC Benefit Plan being established
or becoming accelerated, vested or payable, except for a payment or benefit
that would have been payable under the same terms and conditions without
regard to the transactions contemplated by this Agreement.
(h) Funded Status of Plans. Except as disclosed in Section 5.10(h) of
the PGC Disclosure Schedule, each PGC Benefit Plan that is subject to
either or both of the minimum funding requirements of ERISA sec. 302 or to
Title IV of ERISA has assets that, as of the date of such plan's most
recently prepared actuarial valuation report, have a fair market value
equal to or exceeding the present value of the accrued benefit obligations
thereunder, based on the actuarial methods, tables and assumptions
theretofore utilized by such plan's actuary in preparing such report. No
PGC Benefit Plan subject to the minimum funding requirements of ERISA sec.
302 has incurred any "accumulated funding deficiency" (within the meaning
of ERISA sec. 302).
(i) Multiemployer Plans. No PGC Benefit Plan is or was a
"multiemployer plan" (within the meaning of ERISA sec. 4001(a)(3)), a
multiple employer plan described in Code sec. 413(c), or a "multiple
employer welfare arrangement" (within the meaning of ERISA sec. 3(40)); and
none of PGC, any subsidiary thereof or any PGC ERISA Affiliate has been
obligated to contribute to, or otherwise has or has had any liability with
respect to, any multiemployer plan, multiple employer plan, or multiple
employer welfare arrangement.
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(j) Reportable Events; Claims. Except as disclosed in Section 5.10(j)
of the PGC Disclosure Schedule, (i) no event constituting a "reportable
event" (within the meaning of ERISA sec. 4043(b)) for which the 30-day
notice requirement has not been waived by the PBGC has occurred with
respect to any PGC Benefit Plan and (ii) no liability, claim, action or
litigation has been made, commenced or, to the knowledge of PGC,
threatened, by or against PGC or any of its subsidiaries with respect to
any PGC Benefit Plan (other than for benefits or PBGC premiums payable in
the ordinary course) that could reasonably be expected to have a PGC
Material Adverse Effect.
(k) Labor Agreements. To the knowledge of PGC, as of the date hereof,
there is no current labor union representation issue involving employees of
PGC or any of its subsidiaries, nor does PGC or any of its subsidiaries
know of any activity or proceeding of any labor organization (or
representative thereof) or employee group (or representative thereof) to
organize any such employees. Except as disclosed in the PGC SEC Reports or
as disclosed in Section 5.10(k) of the PGC Disclosure Schedule: (i) neither
PGC nor any of its subsidiaries is a party to any collective bargaining
agreement or other labor agreement with any union or labor organization;
(ii) there is no unfair labor practice charge or grievance arising out of a
collective bargaining agreement or other grievance procedure against PGC or
any of its subsidiaries pending, or to the knowledge of PGC, threatened,
that has, or reasonably may be expected by PGC to have, a PGC Material
Adverse Effect; (iii) there is no complaint, lawsuit or proceeding in any
forum by or on behalf of any present or former employee, any applicant for
employment or classes of the foregoing alleging breach of any express or
implied contract of employment, any law or regulation governing employment
or the termination thereof or other discriminatory, wrongful or tortious
conduct in connection with the employment relationship against PGC or any
of its subsidiaries pending, or to the knowledge of PGC, threatened, that
has, or reasonably may be expected by PGC to have, a PGC Material Adverse
Effect; (iv) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or to the knowledge of PGC, threatened, against or
involving PGC or any of its subsidiaries that has or, insofar as reasonably
can be foreseen, could have, a PGC Material Adverse Effect; (v) PGC and
each of its subsidiaries are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, except
for noncompliance that, in the aggregate, does not, and insofar as
reasonably can be foreseen, will not, have a PGC Material Adverse Effect;
and (vi) there is no proceeding, claim, suit, action or governmental
investigation pending or, to the knowledge of PGC, threatened in respect to
which any director, officer, employee or agent of PGC or any of its
subsidiaries is or may be entitled to claim indemnification from PGC or any
of its subsidiaries pursuant to their respective articles of incorporation
or bylaws or as provided in the indemnification agreements listed on
Section 5.10(k) of the PGC Disclosure Schedule.
Section 5.11 Environmental Protection.
(a) Compliance. Except as disclosed in Section 5.11(a) of the PGC
Disclosure Schedule or as disclosed in the PGC SEC Reports, PGC and each of
its subsidiaries is in compliance with all applicable Environmental Laws,
except where the failure to be so in compliance would not in the aggregate
have a PGC Material Adverse Effect. Except as disclosed in Section 5.11(a)
of the PGC Disclosure Schedule, neither PGC nor any of its subsidiaries has
received any written notice from any person or Governmental Authority that
alleges that PGC or any of its subsidiaries is not in compliance with
applicable Environmental Laws, except where the failure to be so in
compliance would not in the aggregate have a PGC Material Adverse Effect.
(b) Environmental Permits. Except as disclosed in Section 5.11(b) of
the PGC Disclosure Schedule or as disclosed in the PGC SEC Reports, each of
PGC and each of its subsidiaries has obtained or has applied for all
Environmental Permits necessary for the construction of their facilities
and the conduct of their operations, and all such Environmental Permits are
in good standing or, where applicable, a renewal application has been
timely filed and is pending agency approval, and PGC and its subsidiaries
are in compliance with all terms and conditions of all such Environmental
Permits and are not required to make any expenditures in connection with
any renewal application pending agency
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approval, except where the failure to obtain or be in such compliance and
the requirement to make such expenditures would not have in the aggregate a
PGC Material Adverse Effect.
(c) Environmental Claims. Except as disclosed in Section 5.11(c) of
the PGC Disclosure Schedule or as disclosed in the PGC SEC Reports, to the
knowledge of PGC, there is no Environmental Claim (as defined in Section
4.11(f)) pending, or to the knowledge of PGC, threatened (i) against PGC or
any of its subsidiaries or joint ventures, (ii) against any person or
entity whose liability for any Environmental Claim PGC or any of its
subsidiaries or joint ventures has or may have retained or assumed either
contractually or by operation of law or (iii) against any real or personal
property or operations that PGC or any of its subsidiaries or joint
ventures owns, leases or manages, in whole or in part, that, if adversely
determined, would have in the aggregate a PGC Material Adverse Effect.
(d) Releases. Except as disclosed in Section 5.11(c) or 5.11(d) of the
PGC Disclosure Schedule or as disclosed in the PGC SEC Reports, to the
knowledge of PGC, there has been no Release of any Hazardous Material that
would be reasonably likely to form the basis of any Environmental Claim
against PGC or any subsidiary or joint venture of PGC, or against any
person or entity whose liability for any Environmental Claim PGC or any
subsidiary or joint venture of PGC has or may have retained or assumed
either contractually or by operation of law, except for Releases of
Hazardous Materials the liability for which would not have in the aggregate
a PGC Material Adverse Effect.
(e) Predecessors. Except as disclosed in Section 5.11(e) of the PGC
Disclosure Schedule or as disclosed in the PGC SEC Reports, to the
knowledge of PGC, with respect to any predecessor of PGC or any subsidiary
or joint venture of PGC, there are no Environmental Claims pending or
threatened, or any Releases of Hazardous Materials that would be reasonably
likely to form the basis of any Environmental Claims that would have, or
that PGC reasonably believes would have, in the aggregate, a PGC Material
Adverse Effect.
Section 5.12 Regulation as a Utility. PGC is an electric utility holding
company and is the parent of Portland General Electric Company ("PGE"), a
regulated public utility in the State of Oregon and in no other state. Except as
disclosed in Section 5.12 of the PGC Disclosure Schedule, neither PGC nor any
subsidiary company or affiliate of PGC is subject to regulation as a public
utility or public service company (or similar designation) by any other state in
the United States, by the United States or any agency or instrumentality of the
United States or by any foreign country. PGC is a holding company exempt from
all provisions of the 1935 Act except Section 9(a)(2) of the 1935 Act pursuant
to Section 3(a)(1) of the 1935 Act.
Section 5.13 Vote Required. The approval of the PGC Merger by the holders
of a majority of the shares of outstanding PGC Common Stock (the "PGC
Shareholders' Approval") is the only vote of the holders of any class or series
of the capital stock of PGC required to approve this Agreement, the PGC Merger
and the other transactions contemplated hereby.
Section 5.14 Opinion of Financial Advisor. PGC has received the opinion of
Goldman, Sachs & Co. dated the date hereof, to the effect that, as of the date
hereof, the consideration to be received by the holders of PGC Common Stock in
the PGC Merger is fair from a financial point of view to the holders of PGC
Common Stock.
Section 5.15 Insurance. Except as disclosed in Section 5.15 of the PGC
Disclosure Schedule, each of PGC and each of its subsidiaries is, and has been
continuously since January 1, 1991, insured in such amounts and against such
risks and losses as are customary for companies conducting the respective
businesses conducted by PGC and its subsidiaries during such time period. Except
as disclosed in Section 5.15 of the PGC Disclosure Schedule, neither PGC nor any
of its subsidiaries has received any notice of cancellation or termination with
respect to any material insurance policy thereof. All material insurance
policies of PGC and its subsidiaries are valid and enforceable policies.
Section 5.16 Applicability of Certain Oregon Law Provision. None of the
transactions contemplated by this Agreement is subject to the control share
acquisition provisions of Section 60.801 et seq. of the OBCA,
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the business combination provisions of Section 60.825 of the OBCA or any similar
provisions of the articles of incorporation or bylaws of PGC.
Section 5.17 Status of PGC Nuclear Facility. Except as set forth in
Section 5.17 of the PGC Disclosure Schedule, the operation of the PGC Nuclear
Facility and the operations related to decommissioning of the PGC Nuclear
Facility have at all times been conducted in compliance with applicable health,
safety, regulatory and other legal requirements, except where the failure to be
so in compliance in the aggregate does not have, and cannot reasonably be
expected to have, a PGC Material Adverse Effect. Except as set forth in such
Schedule, neither the operations of the PGC Nuclear Facility nor the operations
related to decommissioning of the PGC Nuclear Facility are the subject of any
outstanding notices of violation or requests for information from the NRC or any
other agency with jurisdiction over such facility. PGC maintains, and is in
compliance with, an emergency plan designed to protect the health and safety of
the public in the event of an unplanned release of radioactive materials from
the PGC Nuclear Facility, and the NRC has determined that such plan is in
compliance with its requirements. Liability insurance to the full extent
required by law for non-operating nuclear facilities and consistent with PGC's
view of the risks inherent in the decommissioning of the PGC Nuclear Facility
remains in full force and effect regarding such facility, and the amount of such
liability insurance has been approved by the NRC. Plans for the decommissioning
of the PGC Nuclear Facility, and for the storage of spent nuclear fuel, conform
with the requirements of applicable law, and PGC has funded such plans to the
extent required by law. The PGC Decommissioning Plan as approved by the NRC on
April 15, 1996 (the "Decommissioning Plan"), has not been amended, and remains a
true and correct copy of the decommissioning plan approved by the NRC. Except as
disclosed in Section 5.17 of the PGC Disclosure Schedule, PGE has no intention
of varying its operations from those described in the Decommissioning Plan and
has no other material commitments (whether written or oral) to Governmental
Authorities with respect to the PGC Nuclear Facility.
Section 5.18 Authority, Non-Contravention and Statutory Approvals relating
to the Agreement As Amended by the First Amendment.
(a) Authority. PGC has all requisite power and authority to enter into
the First Amendment and, subject to the Supplemental PGC Shareholders'
Approval (as defined in Section 5.19) and the PGC Required Statutory
Approvals, to consummate the transactions contemplated by this Agreement.
The execution and delivery of the First Amendment and the consummation by
PGC of the transactions contemplated by this Agreement and thereby have
been duly authorized by all necessary corporate action on the part of PGC,
subject to obtaining the Supplemental PGC Shareholders' Approval. The First
Amendment has been duly and validly executed and delivered by PGC and,
assuming the due authorization, execution and delivery hereof by Enron and
the Company, constitutes the legal, valid and binding obligation of PGC
enforceable against PGC in accordance with its terms.
(b) Non-Contravention. Except as disclosed in Section 5.4(b) of the
PGC Disclosure Schedule, the execution and delivery of the First Amendment
by PGC do not, and the consummation of the transactions contemplated by
this Agreement will not, result in a PGC Violation under any provisions of
(i) the articles of incorporation, bylaws or similar governing documents of
PGC or any of its subsidiaries or joint ventures, (ii) subject to obtaining
the PGC Required Statutory Approvals and the Supplemental PGC Shareholders'
Approval, any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any Governmental Authority
applicable to PGC or any of its subsidiaries or joint ventures or any of
their respective properties or assets, or (iii) subject to obtaining PGC
Required Consents, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which PGC or any of its
subsidiaries or joint ventures is now a party or by which any of them or
any of their respective properties or assets may be bound or affected,
excluding from the foregoing clauses (ii) and (iii) such PGC Violations as
would not have, in the aggregate, a PGC Material Adverse Effect.
(c) Statutory Approvals. Except for (i) the OPUC Approval, (ii) a
declaration of effectiveness by the SEC of the Post-Effective Amendment,
(iii) the matters set forth in items (5) and (6) on Section 5.4(c) of the
PGC Disclosure Schedule, (iv) those declarations, filings, registrations,
notices, authorizations, consents, findings or approvals that have already
been made and (v) any supplemental filings
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relating to any of the foregoing required by the execution of the First
Amendment or the transactions contemplated thereby, there are no PGC
Required Statutory Approvals in connection with the execution and delivery
of the First Amendment by PGC or the consummation by PGC of the
transactions contemplated by this Agreement, the failure to obtain, make or
give which would have, in the aggregate, a PGC Material Adverse Effect.
Section 5.19 Vote Required for First Amendment. The approval of the First
Amendment and the PGC Merger by the holders of a majority of the shares of
outstanding PGC Common Stock (the "Supplemental PGC Shareholders' Approval") is
the only vote of the holders of any class or series of the capital stock of PGC
required to approve this Agreement (as amended by the First Amendment), the PGC
Merger and the other transactions contemplated by this Agreement.
Section 5.20 Supplemental Opinion of Financial Advisor. PGC has received
the opinion of Goldman, Sachs & Co. dated the date of the First Amendment to the
effect that, as of such date, the consideration to be received by the holders of
PGC Common Stock in the PGC Merger pursuant to this Agreement (as amended by the
First Amendment) is fair from a financial point of view to the holders of PGC
Common Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, each of Enron and PGC agrees as to itself and its
subsidiaries, except as expressly contemplated or permitted in this Agreement,
or to the extent the other party shall otherwise consent in writing, which
consent shall not be unreasonably withheld, as follows:
Section 6.1 Ordinary Course of Business. PGC shall, and shall cause its
subsidiaries to, carry on their respective businesses in all material respects
in the usual, regular and ordinary course, consistent with past practice, and
shall, and shall cause its subsidiaries to, use all reasonable efforts to (i)
preserve intact their present business organizations and goodwill, preserve the
goodwill and relationships with customers, suppliers and others having business
dealings with them, (ii) subject to prudent management of workforce needs and
ongoing or planned programs relating to downsizing, re-engineering and similar
matters, keep available the services of their present officers and employees as
a group, (iii) maintain and keep its material properties and assets in as good
repair and condition as at present, subject to ordinary wear and tear, and
maintain supplies and inventories in quantities consistent with past practice
and (iv) with respect to wholesale power and energy trading and transactions,
comply with prudent policies, practices and procedures with respect to risk
management and trading limitations, all to the end that their goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time.
Section 6.2 Dividends and Repurchases.
(a) PGC shall not and shall not permit any of its subsidiaries to: (i)
declare or pay any dividends on or make other distributions in respect of
any of their capital stock other than (A) dividends by a wholly-owned
subsidiary to PGC or another wholly-owned subsidiary, (B) dividends by a
less than wholly-owned subsidiary consistent with past practice, (C) stated
dividends on PGE Preferred Stock, or (D) regular dividends on PGC Common
Stock with usual record and payment dates that, in any fiscal year, do not
exceed 106% of the dividends for the prior fiscal year; (ii) split, combine
or reclassify any of its capital stock or the capital stock of any
subsidiary or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares of its
capital stock or the capital stock of any subsidiary; or (iii) redeem,
repurchase or otherwise acquire any shares of its capital stock or the
capital stock of any subsidiary other than (A) redemptions, repurchases and
other acquisitions of shares of capital stock in connection with the
administration of employee benefit and dividend reinvestment plans as in
effect on the date hereof in the ordinary course of the operation of such
plans consistent with past practice, or (B) intercompany acquisitions of
capital stock.
(b) Except as set forth on Section 6.2(b) of the Enron Disclosure
Schedule, Enron shall not, and shall not permit any subsidiary to, redeem,
repurchase or otherwise acquire any shares of its capital stock
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or the capital stock of any subsidiary other than (i) redemptions,
repurchases and other acquisitions of shares of capital stock in connection
with the administration of employee benefit and dividend reinvestment plans
as in effect on the date hereof in the ordinary course of the operation of
such plans consistent with past practice or (ii) any market repurchase
plans consistent with Rule 10b-18 under the Exchange Act, or (iii)
intercompany acquisitions of capital stock.
(c) Enron shall not and shall not permit any of its subsidiaries to
directly or indirectly declare or pay any dividend on the Enron Common
Stock consisting of shares of capital stock of Enron Capital & Trade
Resources Corp. or effect a distribution, whether by dividend,
recapitalization, reclassification or otherwise, to the holders of Enron
Common Stock consisting of evidences of indebtedness, rights, options or
warrants to purchase securities (other than rights attached to the Enron
Common Stock).
(d) Enron shall not pay any cash dividends in any fiscal year on the
Enron Common Stock in excess of 110% of the dividends for the prior fiscal
year.
Section 6.3 Issuance of Securities. PGC shall not, nor shall it permit any
of its subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or the capital
stock of any subsidiary or any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such shares
of capital stock, other than the issuance of common stock or stock appreciation
or similar rights, as the case may be, pursuant to PGC's existing Long Term
Incentive Master Plan, Retirement Savings Plan, Employee Stock Ownership Plan or
Outside Directors Stock Compensation Plan, consistent in kind and amount with
past practice and other than issuances by wholly-owned subsidiaries of PGC of
securities to other wholly-owned subsidiaries of PGC.
Section 6.4 Charter Documents. Except as disclosed in Section 6.4 of the
Enron Disclosure Schedule or the PGC Disclosure Schedule, none of Enron, the
Company or PGC shall amend or propose to amend its certificate or articles of
incorporation or by-laws, except as contemplated herein, in any way that would
adversely affect the consummation of the transactions contemplated by this
Agreement or that would alter the terms of the securities to be issued in the
PGC Merger.
Section 6.5 Acquisitions. Except as disclosed in Section 6.5 of the PGC
Disclosure Schedule, PGC shall not, nor shall it permit any of its subsidiaries
to, acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any material amount of assets other than in the
ordinary course of business.
Section 6.6 No Dispositions. Except as disclosed in Section 6.6 of the PGC
Disclosure Schedule, and other than in the ordinary course of business
consistent with past practice, PGC shall not nor shall it permit any of its
subsidiaries to, sell, lease, license, encumber or otherwise dispose of, any of
its assets.
Section 6.7 Indebtedness. PGC shall not, nor shall it permit any of its
subsidiaries to, incur or guarantee any indebtedness (including any debt
borrowed or guaranteed or otherwise assumed, including, without limitation, the
issuance of debt securities or warrants or rights to acquire debt) other than
(a) short-term indebtedness in the ordinary course of business consistent with
past practice, (b) long-term indebtedness incurred by PGE in connection with the
refinancing of existing indebtedness either at its stated maturity or at a lower
cost of funds, (c) up to $175 million in long-term indebtedness, and up to $15
million in long-term indebtedness for pollution control bonds, in each case
incurred by PGE in the ordinary course of business consistent with past
practice, (d) up to $100 million in indebtedness having maturities not to exceed
5 years from its date of incurrence incurred by PGC or Portland General
Holdings, Inc. ("PGH"), provided that if such indebtedness has a maturity in
excess of one year from the date of its incurrence, such indebtedness shall be
incurred only after consultation with Enron, and (e) the securitization referred
to in item 2 of Section 6.6 of the PGC Disclosure Schedule. Notwithstanding the
foregoing, PGC shall not guarantee any indebtedness of PGE, but PGC and PGH
shall be permitted to guarantee obligations under commercial contracts in the
ordinary course of business that are not prohibited by this Agreement.
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Section 6.8 Capital Expenditures. Except as disclosed in Section 6.8 of
the PGC Disclosure Schedule or as required by law, PGC shall not, nor shall it
permit any of its subsidiaries to, make any capital expenditures, other than
capital expenditures to repair or replace facilities destroyed or damaged due to
casualty or accident (whether or not covered by insurance).
Section 6.9 Compensation, Benefits. Except as disclosed in Section 6.9 of
the PGC Disclosure Schedule, PGC shall not, nor shall it permit any of its
subsidiaries to, (i) enter into, adopt or amend (except as may be required by
applicable law), or increase the amount or accelerate the payment or vesting of
any benefit or amount payable under, any employee benefit plan or other
contract, agreement, commitment, arrangement, plan or policy maintained by,
contributed to or entered into by PGC or any of its subsidiaries, or increase,
or enter into any contract, agreement, commitment or arrangement to increase in
any manner, the compensation or fringe benefits, or otherwise to extend, expand
or enhance the engagement, employment or any related rights, of any director,
officer or other employee of PGC or any of its subsidiaries, except pursuant to
binding legal commitments and except for normal (including incentive) increases,
extensions, expansions, enhancements, amendments or adoptions in the ordinary
course of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to PGC and its
subsidiaries taken as a whole or (ii) enter into or amend any employment,
severance, special pay arrangement with respect to termination of employment or
other similar contract, agreement or arrangement with any director or officer of
PGC or any of its subsidiaries other than in the ordinary course of business
consistent with past practice. PGC shall take such action as shall be necessary
so that neither the execution of this Agreement nor the transactions
contemplated hereby shall constitute a "Change in Control" within the meaning of
the Portland General Corporation Retirement Savings Plan.
Section 6.10 Tax-Free Status. Neither Enron nor PGC shall, nor shall
either permit any of its subsidiaries to, take any actions that would, or would
be reasonably likely to, adversely affect the qualification of the Mergers as
reorganizations within the meaning of Section 368(a) of the Code.
Section 6.11 Discharge of Liabilities. PGC shall not pay, discharge or
satisfy any material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction, in the ordinary course of business consistent with
past practice (which includes the payment of final and nonappealable judgments
and the refinancing of existing indebtedness for borrowed money either at its
stated maturity or at a lower cost of funds) or in accordance with their terms,
of liabilities reflected or reserved against in, or contemplated by, its most
recent consolidated financial statements (or the notes thereto) included in its
reports filed with the SEC, or incurred in the ordinary course of business
consistent with past practice or as disclosed in Section 6.11 of the PGC
Disclosure Schedule.
Section 6.12 Cooperation, Notification. Each of Enron and PGC shall: (a)
confer on a regular and frequent basis with one or more representatives of the
other to discuss the general status of its ongoing operations; (b) promptly
notify the other of any significant changes in its business, properties,
financial condition or results of operations; (c) advise the other of any change
or event that has had or, insofar as reasonably can be foreseen, is reasonably
likely to result in, an Enron Material Adverse Effect or a PGC Material Adverse
Effect, as the case may be; and (d) promptly provide the other with copies of
all filings made by it or any of its subsidiaries with any state or federal
court, administrative agency, commission or other Governmental Authority in
connection with this Agreement and the transactions contemplated hereby.
Section 6.13 Conduct of Business by Enron. Prior to the Effective Time,
Enron will conduct its business, and will cause its subsidiaries to conduct
their respective businesses, so that the character of the business of Enron and
its subsidiaries taken as a whole will not be fundamentally altered.
Section 6.14 Third-Party Consents. Enron shall, and shall cause its
subsidiaries to, use all reasonable efforts to obtain all Enron Required
Consents. Enron shall promptly notify PGC of any failure or anticipated failure
to obtain any such consents and, if requested by PGC, shall provide copies of
all Enron Required Consents obtained by Enron to PGC. PGC shall, and shall cause
its subsidiaries to, use all reasonable efforts to obtain all PGC Required
Consents. PGC shall promptly notify Enron of any failure or anticipated failure
to obtain any such consents and, if requested by Enron, shall provide copies of
all PGC Required Consents obtained by PGC to Enron.
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Section 6.15 No Breach, Etc. No party shall, nor shall any party permit
any of its subsidiaries to, take any action that would or is reasonably likely
to result in a material breach of any provision of this Agreement or in any of
its representations and warranties set forth in this Agreement being untrue on
and as of the Closing Date.
Section 6.16 Insurance. Each of Enron and PGC shall, and shall cause its
subsidiaries to, maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are customary for
companies engaged in their respective businesses.
Section 6.17 Permits. Each party shall, and shall cause its subsidiaries
to, use all reasonable efforts to maintain in effect all existing Permits (as
defined in Section 4.4) pursuant to which such party or such party's
subsidiaries operate.
Section 6.18 Nuclear Operations.
(a) PGC shall not (i) repudiate or breach any existing contract or
arrangement for the disposal or storage of spent nuclear fuel or components
of the PGC Nuclear Facility; or (ii) obligate itself to the payment of
decommissioning expenses for the PGC Nuclear Facility, or propose or adopt
a budget for such decommissioning expenses, which exceeds the budget for
decommissioning expenses set forth in Section 6.18 of the PGC Disclosure
Schedule, by an amount sufficient to produce a PGC Material Adverse Effect
when measured over the life of the payment obligation or budget for such
expenses. PGC shall not engage in, or enter into the business of
undertaking to engage in, the transportation, treatment or disposal of
radioactive waste generated by third parties. To the extent not prohibited
by applicable laws, regulations, facility licenses, permits and agreements
with third parties existing as of the date of this Agreement, at all times
prior to the Closing, PGC shall make available to Enron, upon its request,
any existing information relevant to the operation or decommissioning of
the PGC Nuclear Facility, and shall inform Enron promptly of any proposed
changes to the Decommissioning Plan. If PGC is prohibited by agreement with
a third party from providing information to Enron, PGC shall use reasonable
efforts (including taking into account Enron's willingness to execute
appropriate confidentiality agreements) to obtain the consent of such third
party to the release of such information. In addition, upon reasonable
notice, PGC shall allow access by two individuals designated by Enron to
all portions of the PGC Nuclear Facility, affording those persons the same
degree of access to facilities and information to the same extent afforded
the Director of Nuclear Decommissioning & Thermal Operations. Access by the
individuals selected by Enron shall be pursuant to existing procedures for
access to the PGC Nuclear Facility, including any security clearance and
training normally required of PGC nuclear personnel.
(b) Within fifteen days following the date of execution of this
Agreement, Enron and PGC shall create a Nuclear Oversight Committee (the
"Committee") consisting of two members appointed by Enron and two members
appointed by PGC. The Committee shall have no authority to control, manage,
operate or participate in the management of the PGC Nuclear Facility or the
decommissioning of such facility, but shall be advisory only. Each member
of the Committee shall have responsibility only to the entity that
appointed that member to the Committee. To the extent not prohibited by
applicable laws, regulations and facility licenses and permits, the
Committee and each member thereof shall have access to the PGC Nuclear
Facility to the same extent granted to senior nuclear personnel employed by
PGC, and PGC employees shall cooperate with members of the Committee in
obtaining such access and in promptly responding to all inquiries
concerning the PGC Nuclear Facility. Access by the individuals selected by
Enron shall be pursuant to existing procedures for access to the PGC
Nuclear Facility, including any security clearance and training normally
required of PGC nuclear personnel. The Committee shall consult with the
management of PGC and Enron at regular intervals (but not less frequently
than monthly) concerning the progress of decommissioning of the PGC Nuclear
Facility.
Section 6.19 Operations of Company. Prior to the First Effective Time, the
Company shall not, and Enron shall not permit the Company to, conduct any
activities or hold assets except as required in connection with the transactions
contemplated hereby.
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Section 6.20 Agreements. No party or any of its subsidiaries shall agree
in writing to take any action prohibited by this Article VI.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice and during
normal business hours, each party shall, and shall cause its subsidiaries to,
afford to the officers, directors, employees, accountants, counsel, investment
bankers, financial advisors and other representatives of the other party
(collectively, "Representatives") reasonable access, during normal business
hours throughout the period prior to the Effective Time, to all of its
properties, books, contracts, commitments and records (including, but not
limited to, Tax Returns) and, during such period, each party shall, and shall
cause its subsidiaries to, furnish promptly to the other (i) a copy of each
report, schedule and other document filed or received by it or any of its
subsidiaries pursuant to the requirements of federal or state securities laws or
filed with the SEC, the FERC, the NRC, the Department of Justice, the Federal
Trade Commission, the OPUC, the Oregon Department of Energy ("ODOE") or any
other federal or state regulatory agency or commission with respect to the
transactions contemplated hereby and (ii) all information concerning themselves,
their subsidiaries, directors, officers and shareholders and such matters as may
be reasonably requested by the other party in connection with any filings,
applications or approvals required or contemplated by this Agreement. All
documents and information furnished pursuant to this Section 7.1 shall be
subject to the Confidentiality Agreement between Enron and PGC dated as of March
11, 1996 (the "Confidentiality Agreement"). The party requesting copies of any
documents from any other party hereto shall be responsible for all out-of-pocket
expenses incurred by the party to whom such request is made in complying with
such request, including any cost of reproducing and delivering any required
information.
Section 7.2 Joint Proxy Statement and Registration Statement.
(a) Preparation and Filing. As promptly as reasonably practicable
after the date hereof, the parties shall prepare and file with the SEC the
Registration Statement and the Joint Proxy Statement (together the "Joint
Proxy/Registration Statement"). The parties shall take such actions as may
be reasonably required to cause the Registration Statement to be declared
effective under the Securities Act as promptly as practicable after such
filing. The parties shall also take such action as may be reasonably
required to cause the shares of Company Common Stock and Company Preferred
Stock issuable in connection with the Mergers to be registered under or to
obtain an exemption from registration under applicable state "blue sky" or
securities laws; provided, however, that none of the Company, PGC or Enron
shall be required to register or qualify as a foreign corporation or to
take any other action that would subject it to general service of process
in any jurisdiction in which the Company will not, following the Effective
Time, be so subject. Each of the parties shall furnish all information
concerning itself that is required or customary for inclusion in the Joint
Proxy/Registration Statement. If, at any time prior to the Effective Time,
Enron discovers any event or circumstance relating to Enron or any of its
subsidiaries, or its or their respective officers or directors, that should
be set forth in an amendment to the Registration Statement or a supplement
to the Joint Proxy Statement, Enron shall promptly inform PGC. If, at any
time prior to the Effective Time, PGC discovers any event or circumstance
relating to PGC or any of its subsidiaries, or its or their respective
officers or directors that should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement, PGC
shall promptly inform Enron. No representation, covenant or agreement
contained in this Agreement is made by any party hereto with respect to
information supplied by any other party hereto for inclusion in the Joint
Proxy/Registration Statement. The Joint Proxy/Registration Statement shall
comply as to form in all material respects with the Securities Act and the
rules and regulations thereunder.
(b) Letter of Enron's Accountants. Following receipt by Arthur
Andersen LLP, Enron's independent auditors, of an appropriate request from
PGC pursuant to SAS No. 72, Enron shall use best efforts to cause to be
delivered to the Company and PGC a letter of Arthur Andersen LLP, dated a
date within two business days before the effective date of the Registration
Statement, and addressed to the Company
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and PGC, in form and substance reasonably satisfactory to the Company and
PGC and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Joint Proxy/Registration
Statement.
(c) Letter of PGC's Accountants. Following receipt by Arthur Andersen
LLP, PGC's independent auditors, of an appropriate request from Enron
pursuant to SAS No. 72, PGC shall use best efforts to cause to be delivered
to the Company and Enron a letter of Arthur Andersen LLP dated a date
within two business days before the effective date of the Registration
Statement, and addressed to the Company and Enron, in form and substance
satisfactory to the Company and Enron and customary in scope and substance
for "cold comfort" letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the
Joint Proxy/Registration Statement.
(d) Fairness Opinions. Prior to mailing the Joint Proxy Statement to
the shareholders of PGC and Enron (i) Enron shall have received an opinion
from Smith Barney Inc., dated the date of the Joint Proxy Statement, to the
effect that, as of the date thereof, the consideration to be issued to the
holders of PGC Common Stock in the PGC Merger is fair to the holders of
Enron Common Stock and Enron Convertible Preferred Stock from a financial
point of view, and (ii) PGC shall have received an opinion from Goldman,
Sachs & Co., dated the date of the Joint Proxy Statement, to the effect
that, as of the date thereof, the consideration to be received by holders
of PGC Common Stock pursuant to the PGC Merger is fair to such holders from
a financial point of view.
Section 7.3 Regulatory Matters.
(a) Regulatory Plans. Set forth on Appendix I are the terms of the
revised regulatory plan to be submitted for approval by the OPUC (the
"Revised OPUC Plan"). To the extent that the regulatory plans set forth in
Schedule 7.3(a) (the "Regulatory Plans") relate to the OPUC or the state
regulatory approval process, such regulatory plans (and Schedule 7.3(a))
are hereby amended to reflect the Revised OPUC Plan. The approval of the
OPUC contemplated by the Revised OPUC Plan is referred to herein as the
"OPUC Approval." PGC and Enron shall cooperate in good faith, consult with
each other and obtain each other's consent and agreement (which shall not
be unreasonably withheld) on all components of, significant steps toward
the achievement of the Revised OPUC Plan and obtaining the OPUC Approval
and with respect to significant filings, communications, agreements,
arrangements or consents, written or oral, formal or informal, with the
OPUC and/or any intervenor or representative thereof.
(b) Other Regulatory Approvals. Each party hereto shall cooperate and
use all reasonable efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions,
filings and other documents, and to use all reasonable efforts to obtain
all necessary permits, consents, approvals and authorizations of all
Governmental Authorities and all other persons necessary or advisable to
consummate the transactions contemplated by this Agreement, including,
without limitation, the Enron Required Statutory Approvals, and the PGC
Required Statutory Approvals. Enron and PGC shall each consult with the
other with respect to the obtaining of all such necessary or advisable
permits, consents, approvals and authorizations of Governmental
Authorities. Further, the parties hereto shall cooperate and use all
reasonable efforts to seek appropriate authority to engage in transactions
between affiliates, including OPUC approval for transactions between
affiliated interests.
(c) HSR Filings. Each party hereto shall file or cause to be filed
with the Federal Trade Commission and the Department of Justice any
notifications required to be filed by their respective "ultimate parent"
entities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such
parties will use all reasonable efforts to make such filings on a timely
basis and shall respond promptly to any requests for additional information
made by either of such agencies.
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Section 7.4 Shareholder Approvals.
(a) Approval of PGC Shareholders. PGC shall, as promptly as reasonably
practicable after the date hereof (i) take all steps reasonably necessary
to call, give notice of, convene and hold a special meeting of its
shareholders (the "PGC Special Meeting") for the purpose of securing the
PGC Shareholders' Approval, (ii) distribute to its shareholders the Joint
Proxy Statement in accordance with applicable federal and state law and
with its articles of incorporation and bylaws, which Joint Proxy Statement
shall contain the recommendation of the Board of Directors of PGC that its
shareholders approve the PGC Merger, this Agreement and the transactions
contemplated hereby, (iii) use all reasonable efforts to solicit from its
shareholders proxies in favor of the approval and adoption of the PGC
Merger, this Agreement and the transactions contemplated hereby and to
secure the PGC Shareholders' Approval, and (iv) cooperate and consult with
Enron with respect to each of the foregoing matters; provided, that nothing
contained in this Section 7.4(a) shall prohibit the PGC Board of Directors
from failing to make or from withdrawing or modifying its recommendation to
the PGC shareholders hereunder if the Board of Directors of PGC, after
consultation with and based upon the written advice of independent legal
counsel, determines in good faith that such action is necessary for such
Board of Directors to comply with its fiduciary duties to its shareholders
under applicable law.
(b) Approval of Enron Shareholders. Enron shall, as promptly as
reasonably practicable after the date hereof (i) take all steps reasonably
necessary to call, give notice of, convene and hold a special meeting of
its shareholders (the "Enron Special Meeting") for the purpose of securing
the Enron Shareholders' Approval, (ii) distribute to its shareholders the
Joint Proxy Statement in accordance with applicable federal and state law
and its articles of incorporation and bylaws, which Joint Proxy Statement
shall contain the recommendation of the Enron Board of Directors that its
shareholders approve the Reincorporation Merger, this Agreement and the
transactions contemplated hereby and (iii) use all reasonable efforts to
solicit from its shareholders proxies in favor of the approval and adoption
of the Reincorporation Merger, this Agreement and the transactions
contemplated hereby and to secure the Enron Shareholders' Approval, and
(iv) cooperate and consult with PGC with respect to each of the foregoing
matters; provided, that nothing contained in this Section 7.4(b) shall
prohibit the Enron Board of Directors from failing to make or from
withdrawing or modifying its recommendation to the Enron shareholders
hereunder if the Board of Directors of Enron, after consultation with and
based upon the written advice of independent legal counsel, determines in
good faith that such action is necessary for such Board of Directors to
comply with its fiduciary duties to its shareholders under applicable law.
(c) Meeting Date. The Enron Special Meeting and the PGC Special
Meeting shall be held on the same day unless otherwise agreed by Enron and
PGC.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and
after the Effective Time, the Company shall, to the fullest extent not
prohibited by applicable law, indemnify, defend and hold harmless the
present and former directors, officers and management employees of the
parties hereto and their respective subsidiaries (each an "Indemnified
Party" and, collectively, the "Indemnified Parties") against (i) all
losses, expenses (including reasonable attorneys' fees and expenses),
claims, damages, costs, liabilities, judgments or (subject to the proviso
of the next succeeding sentence) amounts that are paid in settlement of or
in connection with any claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact
that such person is or was a director, officer or management employee of
such party or any subsidiary thereof, whether pertaining to any matter
existing or occurring at or prior to or after the Effective Time and
whether asserted or claimed prior to, at or after the Effective Time and
(ii) all liabilities based in whole or in part on, or arising in whole or
in part out of, or pertaining to this Agreement or the transactions
contemplated hereby. In the event of any such loss, expense, claim, damage,
cost, liability, judgment or settlement (whether or not arising before the
Effective Time), (x) the Company shall pay the reasonable fees and expenses
of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Company, promptly after statements
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therefor are received, and otherwise advance to the Indemnified Parties
upon request reimbursement of documented expenses reasonably incurred, in
either case to the extent not prohibited by the laws of the State of
Oregon, (y) the Company shall cooperate in the defense of any such matter
and (z) any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards under applicable
law or as set forth in the Company's articles of incorporation or bylaws
shall be made by independent counsel mutually acceptable to the Company and
the Indemnified Party; provided, however, that the Company shall not be
liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld or delayed). The Indemnified
Parties as a group may retain only one law firm (other than local counsel)
with respect to each related matter except to the extent there is, in the
sole opinion of counsel to an Indemnified Party, under applicable standards
of professional conduct, a conflict on any significant issue between
positions of any two or more Indemnified Parties, in which case each
Indemnified Party with a conflicting position on a significant issue shall
be entitled to separate counsel. In the event any Indemnified Party is
required to bring any action to enforce rights or to collect moneys due
under this Agreement and is successful in such action, the Company shall
reimburse such Indemnified Party for all of its expenses in bringing and
pursuing such action. Each Indemnified Party shall be entitled to the
advancement of expenses to the full extent contemplated in this Section
7.5(a) in connection with any such action.
(b) Insurance. For a period of six (6) years after the Effective Time,
the Company shall cause to be maintained in effect the policies of
directors' and officers' liability insurance maintained by Enron and PGC;
provided that the Company may substitute therefor policies of at least the
same coverage containing terms that are no less advantageous with respect
to matters occurring at or prior to the Effective Time to the extent such
liability insurance can be maintained annually at a cost to the Company not
greater than 200 percent of the current annual premiums for the policies
currently maintained by Enron and PGC for their directors' and officers'
liability insurance; provided further, that if such insurance cannot be so
maintained or obtained at such cost, the Company shall maintain or obtain a
policy providing the best coverage available, as determined by the Board of
Directors of the Company, for a premium not exceeding 200 percent of the
respective current annual premiums of each of Enron and PGC for their
directors' and officers' liability insurance and other indemnity
agreements.
(c) Successors. In the event the Company or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any person, then and in either such case, proper provision shall
be made so that the successors and assigns of the Company shall assume the
obligations set forth in this Section 7.5.
(d) Survival of Indemnification. To the fullest extent not prohibited
by law, from and after the Effective Time, all rights to indemnification
now existing in favor of the employees, agents, directors or officers of
Enron, PGC and their respective subsidiaries with respect to their
activities as such prior to or at the Effective Time, as provided in their
respective articles or certificate of incorporation or bylaws or
indemnification agreements in effect on the date of such activities or
otherwise in effect on the date hereof, shall survive the Mergers and shall
continue in full force and effect for a period of not less than six years
from the Effective Time, provided that, in the event any claim or claims
are asserted or made within such six year period, all such rights to
indemnification in respect of any claim or claims shall continue until
final disposition of such claim or claims.
Section 7.6 Disclosure Schedules. On or before the date of this Agreement,
(i) PGC has delivered to Enron a schedule (the "PGC Disclosure Schedule")
accompanied by a certificate signed by the chief financial officer of PGC
stating that the Disclosure Schedule is being delivered pursuant to this Section
7.6(i) and (ii) Enron has delivered to PGC a schedule (the "Enron Disclosure
Schedule") accompanied by a certificate signed by an executive officer of Enron
stating that the Enron Disclosure Schedule is being delivered pursuant to this
Section 7.6(ii). The PGC Disclosure Schedule and the Enron Disclosure Schedule
are collectively referred to herein as the "Disclosure Schedules". The
Disclosure Schedules constitute an integral part of this Agreement and modify
the respective representations, warranties, covenants or agreements of the
parties
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hereto contained herein to the extent that such representations, warranties,
covenants or agreements expressly refer specifically to the applicable section
of the Disclosure Schedules. Any and all statements, representations, warranties
or disclosures set forth in the Disclosure Schedules shall be deemed to have
been made on and as of the date of this Agreement.
Section 7.7 Public Announcements. Enron and PGC shall cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and, subject to each party's disclosure
obligations imposed by law or any applicable national securities exchange, (a)
shall consult with each other with respect to any public announcements or
statements and (b) shall not issue any public announcement or statement with
respect to the transactions contemplated by this Agreement that is inconsistent
with any public announcement or statement previously made by either party
without the consent of the other party.
Section 7.8 Rule 145 Affiliates. PGC shall identify in a letter to Enron
all persons who are, on the date hereof, "affiliates" of PGC, as such term is
used in Rule 145 under the Securities Act. PGC shall use all reasonable efforts
to cause its respective affiliates to deliver to Enron not later than 10 days
prior to the date of the PGC Special Meeting, a written agreement substantially
in the form attached as Exhibit A (an "Affiliate Agreement"), and shall use all
reasonable efforts to cause persons who become "affiliates" after such date but
prior to the Closing Date to execute and deliver agreements at least 5 days
prior to the Closing Date.
Section 7.9 Employee Agreements. Subject to Section 7.10 and Section 7.15,
the Company and its subsidiaries shall honor, all contracts, agreements,
collective bargaining agreements and commitments of the parties that apply to
any current or former employees or current or former directors of the parties
hereto; provided, however, that this undertaking is not intended to prevent the
Company from enforcing such contracts, agreements, collective bargaining
agreements and commitments in accordance with their terms or from exercising any
right (including any right resulting from mutual consent) to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment.
Section 7.10 Employee Benefit Plans.
(a) Maintenance of Benefits. The Company or its subsidiaries shall
provide PGC Employees (as defined below) (other than represented
employees), for a period of not less than two years following the Effective
Time, with benefits that are not materially less favorable in the aggregate
than those provided to such individuals under the PGC Benefit Plans;
provided, that the foregoing shall not require the Company to maintain or
prevent the Company from amending, terminating, or merging any particular
PGC Benefit Plan. PGC Employees means (i) individuals who are, as of the
Effective Time, employees of PGC and its subsidiaries, except that such an
individual shall cease to be considered a "PGC Employee" and shall
thereafter be considered a "Transferred Employee" if and when he or she
transfers to the employment of Enron or an affiliate of Enron other than
PGC and its subsidiaries; and (ii) individuals who are, as of the Effective
Time, former employees of PGC and its subsidiaries entitled to benefits
according to the provisions of any PGC Benefit Plan as of the Effective
Time.
(b) Nonqualified Plans and Severance. In addition to, and without
limitation of the foregoing, for two years following the Effective Time:
(i) the Portland General Corporation Supplemental Executive Retirement Plan
and the Portland General Corporation Management Deferred Compensation Plan
(the "Nonqualified Plans") shall continue in effect without any amendment
that could adversely affect PGC Employees who are participants in such
plans as of the Effective Time ("Current Participants") (including without
any limitation an amendment that reduces the rate at which benefits are
accrued); (ii) the Portland General Electric Company Umbrella Trust for
Management shall continue in existence with assets sufficient to provide
for all benefits of Current Participants that have accrued through the
Effective Time (the "Accrued Benefits"), and such assets shall not be used
for any purposes other than the payment of the Accrued Benefits or to pay
creditors of PGC and its affiliates in the event of insolvency, until such
time as all Accrued Benefits have been paid; and (iii) PGC Employees and
Transferred Employees (other than represented employees) shall be entitled
to severance benefits in amounts and upon terms and conditions no less
favorable than those in effect under the Portland General Corporation
Involuntary Severance and Outplacement Plan, as in effect as of the
Effective Time.
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(c) Continuity of Benefits. The Company and its subsidiaries shall (i)
for all purposes under all compensation and benefit plans and policies
applicable to employees of the Company and its subsidiaries, treat all
service by PGC Employees and Transferred Employees with PGC or any of its
affiliates before the Effective Time as service with the Company and its
subsidiaries, except to the extent such treatment would result in a
duplication of benefits, (ii) for purposes of any welfare or other employee
benefit plan maintained by them for the benefit of PGC Employees and/or
Transferred Employees or in which any PGC Employees and/or Transferred
Employees participate after the Effective Time, waive any waiting periods
and limitations regarding pre-existing conditions, and if any PGC Employee
or Transferred Employee transfers from one such plan to another such plan
during a plan year, cause the second plan to recognize any out-of-pocket
expenses incurred by such PGC Employee or Transferred Employee and his or
her eligible dependents during the portion of the plan year before such
transfer for purposes of determining their deductibles and out-of-pocket
maximums.
Section 7.11 Incentive, Stock and Other Plans.
(a) Existing PGC Stock Options. As of the Effective Time, each
outstanding option to purchase shares of PGC Common Stock (each, a "PGC
Stock Option") pursuant to the 1990 Portland General Corporation Long-Term
Incentive Master Plan (the "PGC Stock Plan") shall be amended to constitute
an option to acquire shares of Company Common Stock, on the same terms and
conditions as were applicable under such PGC Stock Option, based on the
same number of shares of the Company Common Stock as the holder of such PGC
Stock Option would have been entitled to receive pursuant to the Mergers in
accordance with Article II had such holder exercised such option in full
immediately prior to the Effective Time; provided, that the option price of
such option shall be adjusted as necessary to preserve both (A) the
aggregate gain (or loss) on the PGC Stock Option immediately prior to the
Effective Time and (B) the ratio of the exercise price per share subject to
the PGC Stock Option to the fair market value (determined immediately prior
to the Effective Time) per share subject to such option.
(b) Other Stock Compensation. Following the Effective Time until
December 31, 2000, PGC Employees shall be entitled to receive either (i) a
company matching contribution to a profit sharing plan, in the form of
Company Common Stock, on terms and conditions no less favorable than those
in effect under the Portland General Corporation Retirement Savings Plan
immediately before the Effective Time, or (ii) stock options under the
Enron All-Employee Stock Option Program on terms and conditions no less
favorable than similarly situated employees of Enron and its subsidiaries,
but pro-rated to reflect the time remaining between the time PGC Employees
begin to participate in such plan until December 31, 2000.
(c) Annual Incentive Plan. For the year in which the Effective Time
occurs (the "Transition Year"), the Portland General Corporation Annual
Incentive Master Plan shall remain in effect and shall be administered by
the individuals who constitute the Compensation Committee of PGC
immediately before the Effective Time, with only such amendments as such
individuals and Enron shall jointly determine to be appropriate. For the
two years following the Transition Year, the employees of PGC shall
participate in an annual incentive plan administered by the Chief Executive
Officer of PGC or his designees; provided, however, that the funding levels
for such plan shall be determined by the Compensation Committee of Enron
following the Effective Time.
(d) Company Action. With respect to each PGC Benefit Plan and each
other plan referred to above under which the delivery of PGC Common Stock
or Company Common Stock is required upon payment of benefits, grant of
awards or exercise of options (the "Stock Plans"), the Company shall take
all corporate action necessary or appropriate to (i) provide for the
issuance or purchase in the open market of Company Common Stock rather than
PGC Common Stock pursuant thereto, and otherwise to amend the Stock Plans
to reflect this Agreement and the Mergers, (ii) obtain shareholder approval
with respect to such Stock Plan to the extent such approval is required for
purposes of the Code or other applicable law, or to enable such Stock Plan
to comply with Rule 16b-3 promulgated under the Exchange Act, (iii) reserve
for issuance under such plan or otherwise provide a sufficient number of
shares of Company Common Stock for delivery upon payment of benefits, grant
of awards or exercise of options
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under such Stock Plan and (iv) as soon as practicable after the Effective
Time, file registration statements on Form S-3 or Form S-8 or amendments on
such forms to the Form S-4 Registration Statement, as the case may be (or
any successor or other appropriate forms), with respect to the shares of
Company Common Stock subject to such Stock Plan to the extent such
registration statement is required under applicable law, and the Company
shall use its best efforts to maintain the current status of the
prospectuses contained therein) for so long as such benefits and grants
remain payable and such options remain outstanding. With respect to those
individuals who subsequent to the Mergers will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, the Company shall
administer the Stock Plans, where applicable, in a manner that complies
with Rule 16b-3 promulgated under the Exchange Act.
Section 7.12 No Solicitations.
(a) From the date of this Agreement until the Effective Time or until
this Agreement is terminated in accordance with Article IX hereof, PGC
shall not initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably
be expected to lead to, any PGC Competing Transaction (as defined below),
or enter into discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a PGC Competing Transaction, or
agree to or endorse any PGC Competing Transaction, or authorize or permit
any of the officers, directors or employees of PGC or any of its
subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by PGC or any of PGC's
subsidiaries to take any such action, and PGC shall promptly notify Enron
of all relevant terms (including the identities of the parties involved) of
any such inquiries and proposals received by PGC or any of its subsidiaries
or by any such officer, director, investment banker, financial advisor,
attorney, accountant or other representative relating to any of such
matters and if such inquiry or proposal is in writing, PGC shall promptly
deliver or cause to be delivered to Enron a copy of such inquiry or
proposal; provided, however, that, prior to receipt of the Supplemental PGC
Shareholders' Approval at the Supplemental PGC Shareholders' Meeting,
nothing contained in this Section 7.12 shall prohibit the Board of
Directors of PGC from (i) furnishing information to, or entering into
discussions or negotiations with, any person or entity in connection with
an unsolicited bona fide offer in writing by such person or entity to
acquire PGC pursuant to a merger, consolidation, share exchange, business
combination or other similar transaction or to acquire a substantial
portion of the assets of PGC or any of its subsidiaries, to the extent and
only to the extent that (A) the Board of Directors of PGC, after
consultation with and based upon the written advice of independent legal
counsel, determines in good faith that such action is necessary for such
Board of Directors to comply with its fiduciary duties to its shareholders
under applicable law and (B) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity PGC
(x) provides written notice to Enron to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such
person or entity and (y) enters into a confidentiality agreement with such
person or entity reasonably calculated under the circumstances, in the
reasonable judgment of PGC, to protect the confidentiality of PGC's
proprietary data; or (ii) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a PGC Competing Transaction. For purposes of
this Agreement, "PGC Competing Transaction" shall mean any of the following
(other than the transactions contemplated by this Agreement) involving PGC
or any of its subsidiaries: (i) any merger, consolidation, share exchange,
business combination or similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of
the assets of PGC and its subsidiaries, taken as a whole, (iii) any tender
offer or exchange offer for 20% or more of the outstanding shares of
capital stock of PGC; (iv) any person acquiring beneficial ownership of, or
any group (as such term is defined under Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder) being formed which
beneficially owns or has the right to acquire beneficial ownership of, 20%
or more of the outstanding shares of capital stock of PGC; or (v) any
public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
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(b) From the date of this Agreement until the Effective Time or until
this Agreement is terminated in accordance with Article IX hereof, Enron
shall not initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably
be expected to lead to, any Enron Competing Transaction (as defined below),
or enter into discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain an Enron Competing Transaction,
or agree to or endorse any Enron Competing Transaction, or authorize or
permit any of the officers, directors or employees of Enron or any of its
subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by Enron or any of Enron's
subsidiaries to take any such action, and Enron shall promptly notify PGC
of all relevant terms (including the identities of the parties involved) of
any such inquiries and proposals received by Enron or any of its
subsidiaries or by any such officer, director, investment banker, financial
advisor, attorney, accountant or other representative relating to any of
such matters and if such inquiry or proposal is in writing, Enron shall
promptly deliver or cause to be delivered to PGC a copy of such inquiry or
proposal; provided, however, that prior to receipt of the Enron
Shareholders' Approval at the Enron Special Meeting, nothing contained in
this Section 7.12(b) shall prohibit the Board of Directors of Enron from
(i) furnishing information to, or entering into discussions or negotiations
with, any person or entity in connection with an unsolicited bona fide
offer in writing by such person or entity to acquire Enron pursuant to a
merger, consolidation, share exchange, business combination or other
similar transaction or to acquire a substantial portion of the assets of
Enron or any of its subsidiaries, to the extent and only to the extent that
(A) the Board of Directors of Enron, after consultation with and based upon
the written advice of independent legal counsel, determines in good faith
that such action is necessary for such Board of Directors to comply with
its fiduciary duties to its shareholders under applicable law and (B) prior
to furnishing such information to, or entering into discussions or
negotiations with, such person or entity Enron (x) provides written notice
to PGC to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity and (y) enters into
a confidentiality agreement with such person or entity comparable to those
customarily used by Enron to protect the confidentiality of Enron's
proprietary data; or (ii) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Enron Competing Transaction. For purposes of
this Agreement, a "Enron Competing Transaction" shall mean any of the
following (other than the transactions contemplated by this Agreement)
involving Enron or any of its subsidiaries: (i) any merger, consolidation,
share exchange, business combination or similar transaction pursuant to
which holders of Enron Common Stock prior to such transaction would own in
the aggregate less than 50% of the voting power of the entity surviving or
resulting from such transaction (or the ultimate parent entity thereof);
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 50% or more of the assets of Enron and its subsidiaries,
taken as a whole, (iii) any tender offer or exchange offer for 30% or more
of the outstanding shares of capital stock of Enron; (iv) any person
acquiring beneficial ownership of, or any group (as such term is defined
under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) being formed which beneficially owns or has the
right to acquire beneficial ownership of, 30% or more of the outstanding
shares of capital stock of Enron; or (v) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing; provided, that notwithstanding anything
herein to the contrary, none of the foregoing shall be deemed an Enron
Competing Transaction unless such transaction by its terms would prevent
the consummation of the transactions contemplated by this Agreement or be
conditioned upon the termination of this Agreement.
Section 7.13 Company Board of Directors. The parties hereto will take such
action as may be necessary to cause the number of directors comprising the full
Board of Directors of the Company at the Effective Time to be not more than 16
persons, of whom three shall be designated by PGC and reasonably acceptable to
Enron and of whom one shall be Ken L. Harrison; provided, however, that if,
prior to the Effective Time, any of such designees shall decline or be unable to
serve, PGC shall designate another person to serve in such person's stead
reasonably acceptable to Enron.
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Section 7.14 Company Officers. At the Effective Time, pursuant to the
terms hereof and the employment contract referred to in Section 7.15, Ken L.
Harrison shall hold the positions of Vice Chairman of the Board of the Company
and Chairman of the Board and Chief Executive Officer of PGE and Joseph M. Hirko
shall hold the position of Senior Vice President of the Company.
Section 7.15 Employment Contracts. Concurrently with the execution and
delivery of this Agreement, the Company has entered into employment contracts
with Messrs. Harrison and Hirko, respectively. Such employment agreements shall
become effective immediately at the Effective Time in accordance with their
terms.
Section 7.16 Post-Merger Operations. Following the Effective Time, the
Company shall conduct its operations in accordance with the following:
(a) Principal Corporate Offices. PGE shall maintain its principal
corporate offices in the city of Portland in the State of Oregon.
(b) Corporate Officers of PGE. The corporate officers of PGE shall be
entitled to maintain their current titles and responsibilities as officers
of PGE, except to the extent modified by the forms of employment contracts
set forth pursuant to Section 7.15, and unless and until otherwise
determined by the Board of Directors of the Company. Following the
Effective Time, Enron shall designate a number of directors of PGE
consisting of directors of Enron and/or employees of Enron or any
subsidiary thereof, including Ken L. Harrison and Joseph M. Hirko.
Furthermore, PGC shall have the right to designate no more than seven
non-voting advisory directors for PGE.
(c) Charities. Immediately prior to the Effective Time, each of Enron
and PGC shall cause contributions of $10 million to be made to the assets
of the PGE Foundation (the "Foundation"), and the assets of the Foundation
shall be used for charitable purposes in accordance with the constituent
documents of the Foundation in the service area of PGE. The current
directors of the Foundation, or persons nominated by a majority of such
directors or nominated by their successors in accordance with this
provision, shall be the directors of the Foundation.
Section 7.17 NYSE Listing. The parties shall take such action as may be
reasonably required to cause the shares of Company Common Stock to be issued in
the Mergers and any Company Preferred Stock issued in exchange for shares of
Enron Convertible Preferred Stock to be approved for listing on the NYSE and the
exchanges on which the Enron Common Stock or Enron Convertible Preferred Stock
was listed, each subject to official notice of issuance.
Section 7.18 Expenses. Subject to Section 7.1 and Section 9.3, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, except that those expenses incurred in connection with printing the
Joint Proxy/Registration Statement, the Post-Effective Amendment and the
Supplemental Proxy Statement, as well as the filing fee relating thereto, shall
be shared equally by Enron, on the one hand, and PGC, on the other hand.
Section 7.19 Further Assurances.
(a) Each of PGC and Enron shall, and shall cause their respective
subsidiaries to, execute such further documents and instruments and take
such further actions as may reasonably be requested by the other in order
to consummate the Mergers and the transactions contemplated hereby, and to
use its reasonable efforts to take or cause to be taken all actions, and to
do or cause to be done all things, necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
Mergers and the other transactions contemplated hereby, including fully
cooperating with the other in obtaining the PGC Required Statutory
Approvals, the Enron Required Statutory Approvals and all other approvals
and authorizations of any Governmental Authorities necessary or advisable
to consummate the transactions contemplated hereby.
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(b) Enron and PGC acknowledge that the Reincorporation Merger is
intended solely to enable the Company to qualify after the PGC Merger as an
intrastate holding company that is exempt from the registration
requirements of the 1935 Act. If, prior to the Effective Time, the 1935 Act
is repealed or amended in a manner that would make it possible for PGC to
merge directly with and into Enron in the manner set forth on Exhibit B
hereto without having Enron, directly or indirectly, become subject to the
registration requirements of the 1935 Act as a result thereof, then the
form of the transactions contemplated by this Agreement will be revised to
eliminate the Reincorporation Merger in the manner set forth in Exhibit B;
provided that it shall be a condition to such revised transaction structure
that (i) the economic benefits to Enron and PGC contemplated by this
Agreement shall be preserved, and (ii) such revised transaction structure
shall not have an adverse effect on any material third party or
Governmental Authority declarations, filings, registrations, notices,
authorizations, consents or approvals previously obtained.
Section 7.20 PGC Supplemental Proxy Statement and Registration Statement.
(a) Preparation and Filing. As promptly as reasonably practicable
after the date of the First Amendment, the parties shall prepare and file
with the SEC a post-effective amendment to the Registration Statement and a
Proxy Statement (the "Supplemental Proxy Statement") in connection with the
Supplemental PGC Shareholders' Meeting. The parties shall take such actions
as may be reasonably required to cause the post-effective amendment to the
Registration Statement (the "Post-Effective Amendment") to be declared
effective under the Securities Act as promptly as practicable after such
filing. The parties shall also take such action as may be reasonably
required to cause the shares of Company Common Stock and Company Preferred
Stock issuable in connection with the Mergers to be registered under or to
obtain an exemption from registration under applicable state "blue sky" or
securities laws, and to promptly make any filings required in connection
with the First Amendment and the transactions contemplated thereby;
provided, however, that none of the Company, PGC or Enron shall be required
to register or qualify as a foreign corporation or to take any other action
that would subject it to general service of process in any jurisdiction in
which the Company will not, following the Effective Time, be so subject.
Each of the parties shall furnish all information concerning itself that is
required or customary for inclusion in the Supplemental Proxy Statement
and/or the Post-Effective Amendment. If, at any time prior to the Effective
Time, Enron discovers any event or circumstance relating to Enron or any of
its subsidiaries, or its or their respective officers or directors, that
should be set forth in an amendment to the Post-Effective Amendment or a
supplement to the Supplemental Proxy Statement, Enron shall promptly inform
PGC. If, at any time prior to the Effective Time, PGC discovers any event
or circumstance relating to PGC or any of its subsidiaries, or its or their
respective officers or directors that should be set forth in an amendment
to the Post-Effective Amendment or a supplement to the Supplemental Proxy
Statement, PGC shall promptly inform Enron. No representation, covenant or
agreement contained in this Agreement is made by any party hereto with
respect to information supplied by any other party hereto for inclusion in
the Post-Effective Amendment or the Supplemental Proxy Statement. The
Post-Effective Amendment and the Supplemental Proxy Statement shall comply
as to form in all material respects with the Securities Act and the rules
and regulations thereunder.
(b) Letter of Enron's Accountants. Following receipt by Arthur
Andersen LLP, Enron's independent auditors, of an appropriate request from
PGC pursuant to SAS No. 72, Enron shall use best efforts to cause to be
delivered to the Company and PGC a letter of Arthur Andersen LLP, dated a
date within two business days before the effective date of the
Post-Effective Amendment and addressed to the Company and PGC, in form and
substance reasonably satisfactory to the Company and PGC and customary in
scope and substance for "cold comfort" letters delivered by independent
public accountants in connection with registration statements and proxy
statements similar to the Post-Effective Amendment and the Supplemental
Proxy Statement.
(c) Letter of PGC's Accountants. Following receipt by Arthur Andersen
LLP, PGC's independent auditors, of an appropriate request from Enron
pursuant to SAS No. 72, PGC shall use best efforts to cause to be delivered
to the Company and Enron a letter of Arthur Andersen LLP dated a date
within two business days before the effective date of the Post-Effective
Amendment and addressed to the
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Company and Enron, in form and substance satisfactory to the Company and
Enron and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Post-Effective Amendment and
the Supplemental Proxy Statement.
(d) Fairness Opinion. Prior to mailing the Supplemental Proxy
Statement to the shareholders of PGC, PGC shall have received an opinion
from Goldman, Sachs & Co., dated the date of the Supplemental Proxy
Statement, to the effect that, as of the date thereof, the consideration to
be received by holders of PGC Common Stock pursuant to the PGC Merger is
fair to such holders from a financial point of view.
(e) Supplemental PGC Shareholder Approval. PGC shall, as promptly as
reasonably practicable after the date of the First Amendment (i) take all
steps reasonably necessary to call, give notice of, convene and hold a
meeting of its shareholders, which may be either a special meeting or
annual meeting (the "Supplemental PGC Shareholders' Meeting"), for the
purpose of securing the Supplemental PGC Shareholders' Approval, (ii)
distribute to its shareholders the Supplemental Proxy Statement in
accordance with applicable federal and state law and with its articles of
incorporation and bylaws, which Supplemental Proxy Statement shall contain
the recommendation of the Board of Directors of PGC that its shareholders
approve the PGC Merger, this Agreement and the transactions contemplated by
this Agreement (as amended by the First Amendment), (iii) use all
reasonable efforts to solicit from its shareholders proxies in favor of the
approval and adoption of the PGC Merger this Agreement (as amended by the
First Amendment) and the transactions contemplated by this Agreement and to
secure the Supplemental PGC Shareholders' Approval, and (iv) cooperate and
consult with Enron with respect to each of the foregoing matters; provided,
that nothing contained in this Section 7.20(a) shall prohibit the PGC Board
of Directors from failing to make or from withdrawing or modifying its
recommendation to the PGC shareholders hereunder if the Board of Directors
of PGC, after consultation with and based upon the written advice of
independent legal counsel, determines in good faith that such action is
necessary for such Board of Directors to comply with its fiduciary duties
to its shareholders under applicable law.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Mergers.
The respective obligations of each party to effect the Mergers shall be subject
to the satisfaction prior to the Closing Date of the following conditions,
except to the extent such condition is waived by the parties in writing pursuant
to Section 9.5:
(a) Shareholder Approvals. The PGC Shareholders' Approval, the
Supplemental PGC Shareholder Approval and the Enron Shareholders' Approval
shall have been obtained.
(b) No Injunction. No temporary restraining order or preliminary or
permanent injunction or other judgment, decree, ruling or order by any
court of competent jurisdiction preventing consummation of either of the
Mergers shall have been issued and continuing in effect, and the Mergers
and the other transactions contemplated hereby shall not have been
prohibited under any applicable federal or state law or regulation.
(c) Registration Statement and Post-Effective Amendment. The
Registration Statement and Post-Effective Amendment shall have become
effective in accordance with the provisions of the Securities Act, and no
stop order suspending such effectiveness shall have been issued and remain
in effect.
(d) Listing of Shares. The shares of Company Common Stock issuable in
the Mergers pursuant to Article II shall have been approved for listing on
the NYSE upon official notice of issuance.
(e) Statutory Approvals. The Enron Required Statutory Approvals and
the PGC Required Statutory Approvals shall have been obtained at or prior
to the Effective Time, such approvals shall have become Final Orders (as
hereinafter defined) and no Final Order shall impose terms or conditions
that
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would have, or would be reasonably likely to have, an Enron Material
Adverse Effect or a PGC Material Adverse Effect. A "Final Order" means
action by the relevant regulatory authority that has not been reversed,
stayed, enjoined, set aside, annulled or suspended, with respect to which
any waiting period prescribed by law before the transactions contemplated
hereby may be consummated has expired (but without the requirement for
expiration of any applicable appeal period), and as to which all conditions
to the consummation of such transactions prescribed by law, regulation or
order have been satisfied.
Section 8.2 Conditions to Obligation of Enron and the Company to Effect
the Mergers. The obligation of Enron and the Company to effect the
Reincorporation Merger and of the Company to effect the PGC Merger shall be
further subject to the satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by Enron in writing pursuant to
Section 9.5:
(a) Performance of Obligations of PGC. PGC shall have performed in all
material respects its agreements and covenants contained in or contemplated
by this Agreement required to be performed by it at or prior to the
Effective Time; provided, however, that with respect to the agreements and
covenants set forth in Sections 6.11, 6.17 and 6.18 (and Section 6.20 to
the extent related to any of the foregoing) and Article VII (other than
Sections 7.3 and 7.12), this condition shall be deemed to be satisfied if
(without giving effect for purposes of this Section 8.2(a) to the
individual materiality standards otherwise contained in such sections)
there was no failure to comply that, individually or in the aggregate,
could reasonably be expected to have a PGC Material Adverse Effect.
(b) Representations and Warranties. Except as otherwise contemplated
by this Agreement, the representations and warranties of PGC set forth in
this Agreement shall be true and correct as of the date hereof and as of
the Closing Date as if made on and as of the Closing Date, in each case
except for such failures to be so true and correct (without giving effect
for purposes of this Section 8.2(b) to the individual materiality standards
otherwise contained in Article V hereof) which would not, individually or
in the aggregate, reasonably be expected to have a PGC Material Adverse
Effect; provided, that to the extent that such representations and
warranties are made specifically as of the date hereof or as of an earlier
date, such representations and warranties must be satisfied only as of the
date hereof or such earlier date, as the case may be.
(c) Closing Certificates. Enron shall have received a certificate
signed by the Chief Executive Officer and Chief Financial Officer of PGC,
dated the Closing Date, to the effect that, to the best of each such
officer's knowledge, the conditions set forth in Section 8.2(a) and Section
8.2(b) have been satisfied.
(d) Tax Opinion. Enron shall have received an opinion of counsel from
Vinson & Elkins L.L.P., in form and substance satisfactory to Enron, dated
the Closing Date, which opinion may be based on appropriate representations
of Enron, PGC and the Company that are in form and substance reasonably
satisfactory to such counsel, to the effect that the Mergers will be
treated as reorganizations within the meaning of Section 368(a) of the Code
and that no gain or loss will be recognized to Enron or the holders of
capital stock of Enron as a result thereof.
(e) PGC Required Consents. The PGC Required Consents shall have been
obtained, except for such PGC Required Consents the failure of which to
obtain would not have a PGC Material Adverse Effect.
(f) Approval of Regulatory Plans. The OPUC shall have issued a Final
Order that approves the Revised OPUC Plan that (i) does not include the
imposition or threatened imposition of any change to the payment
obligations, direct or indirect, of PGC, Enron or any affiliate of either
of them set forth in Sections 2(19) and 2(20) of Appendix I, (ii) adopts
the conditions set forth in Appendix I (including those set forth in
Sections 2(19) and 2(20)), substantially in the form set forth in Appendix
I, and (iii) does not include the imposition or threatened imposition of
any other conditions that are substantive. For purposes of this Section
8.2(f), the term "threatened imposition" shall mean a formal or informal
expression of intent by any Governmental Authority. For purposes of this
Section 8.2(f), the term "pay" shall include, without limitation, any
imputation of revenues or reduction of revenues, and the term
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"paying" and "payment" shall have corresponding meanings. In order for
Enron to assert that the condition set forth in this Section 8.2(f) has not
been satisfied as a result of any action by a Governmental Authority
(including without limitation a Final Order of the OPUC), Enron must give
written notice to PGC to such effect no later than five business days after
the date of the receipt by Enron of notice that such Governmental Authority
has taken such action.
(g) Satisfaction of PGC Conditions. PGC shall have delivered a written
representation to Enron to the effect that no conditions to its obligations
to consummate the PGC Merger remain to be satisfied, and that upon
consummation of the Reincorporation Merger, PGC will consummate the PGC
Merger.
(h) Market-Based Rates. Enron Power Marketing, Inc. shall not have
been subjected to a loss, in whole or in significant part, of its FERC
authority to sell power (other than sales to Enron's affiliates (including
PGE)) at market-based rates as a consequence of the execution of this
Agreement, the performance of the transactions contemplated by this
Agreement or affiliation with PGC or PGE.
Section 8.3 Conditions to Obligation of PGC to Effect the PGC Merger. The
obligation of PGC to effect the PGC Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by PGC in writing pursuant to Section 9.5:
(a) Performance of Obligations of Enron. Enron shall have performed in
all material respects its agreements and covenants contained in or
contemplated by this Agreement required to be performed by it at or prior
to the Effective Time; provided, however, that with respect to the
agreements and covenants set forth in Article VII (other than Section 7.3
and 7.12), this condition shall be deemed to be satisfied if (without
giving effect for purposes of this Section 8.3(a) to the individual
materiality standards otherwise contained in such sections) there was no
failure to comply that, individually or in the aggregate, could reasonably
be expected to have an Enron Material Adverse Effect.
(b) Representations and Warranties. Except as otherwise contemplated
by this Agreement, the representations and warranties of Enron set forth in
this Agreement shall be true and correct as of the date hereof and as of
the Closing Date as if made on and as of the Closing Date, in each case
except for such failures to be so true and correct (without giving effect
for purposes of this Section 8.3(b) to the individual materiality standards
otherwise contained in Article IV hereof) which would not, individually or
in the aggregate, reasonably be expected to have an Enron Material Adverse
Effect; provided, that to the extent that such representations and
warranties are made specifically as of the date hereof or as of an earlier
date, such representations and warranties must be satisfied only as of the
date hereof or such earlier date, as the case may be.
(c) Closing Certificates. PGC shall have received a certificate signed
by the President or any Vice President and the Treasurer of Enron, dated
the Closing Date, to the effect that, to the best of each such officer's
knowledge, the conditions set forth in Section 8.3(a) and Section 8.3(b)
have been satisfied.
(d) Tax Opinion. PGC shall have received an opinion of counsel from
Wachtell, Lipton, Rosen & Katz, in form and substance satisfactory to PGC,
dated the Closing Date, which opinion may be based on appropriate
representations of Enron, PGC and the Company that are in form and
substance reasonably satisfactory to such counsel, to the effect that the
Mergers will be treated as "reorganizations" within the meaning of Section
368(a) of the Code and that no gain or loss will be recognized to PGC or
the holders of PGC Common Stock except with respect to cash received in
lieu of fractional share interests.
(e) Enron Required Consents. The Enron Required Consents shall have
been obtained, except for such Enron Required Consents the failure of which
to obtain would not have an Enron Material Adverse Effect.
(f) Consummation of the Reincorporation Merger. The Reincorporation
Merger shall have become effective, except as otherwise contemplated by
Section 7.19(b).
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the shareholders
of the respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of Enron and PGC, duly authorized by
their respective Boards of Directors;
(b) by Enron or PGC, by written notice to the other, if the Effective
Time shall not have occurred on or before the first anniversary of the date
hereof (the "Termination Date"); provided, however, that either party may
extend the Termination Date for an additional six months (or three months
if the condition set forth in Section 8.2(f) has been satisfied but the
condition set forth in Section 8.1(a) has not been satisfied) from such
anniversary if (i) all the conditions to consummation of the Mergers set
forth in Article VIII hereof have either been satisfied or are then capable
of being satisfied by such date, other than the condition set forth in
Sections 8.2(a) and/or 8.2(f) and (ii) such party believes that there is a
reasonable probability that such condition will be satisfied by or before
such extended Termination Date; and provided further, that the right to
terminate this Agreement under this Section 9.1(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before the termination date;
(c) by Enron or PGC, by written notice to the other party, if (i) the
Enron Shareholders' Approval shall not have been obtained at the Enron
Special Meeting, including any adjournments thereof, (ii) the PGC
Shareholders' Approval shall not have been obtained at the PGC Special
Meeting, including any adjournments thereof or (iii) the Supplemental PGC
Shareholders' Approval shall not have been obtained at the Supplemental PGC
Shareholders' Meeting, including any adjournments thereof;
(d) by Enron or PGC, if any state or federal law, order, rule or
regulation is adopted or issued, that has the effect, as supported by the
written, reasoned opinion of outside counsel for such party, of prohibiting
either of the Mergers or causing an Enron Material Adverse Effect or PGC
Material Adverse Effect, or by any party hereto, if any court or
administrative agency of competent jurisdiction in the United States or any
State shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting either of the Mergers or
causing an Enron Material Adverse Effect or PGC Material Adverse Effect,
and such order, judgment or decree shall have become final and
nonappealable;
(e) by Enron if (i) the Board of Directors of PGC fails to make or
withdraws, modifies or changes its recommendation of this Agreement or the
PGC Merger in a manner adverse to Enron or shall have resolved to do any of
the foregoing, in each case other than under circumstances in which an
Enron Material Adverse Effect has occurred; (ii) the Board of Directors of
PGC shall have recommended to the shareholders of PGC any PGC Competing
Transaction or entered into an agreement with respect to a PGC Competing
Transaction or shall have resolved to do so; or (iii) a tender offer or
exchange offer for 20% or more of the outstanding shares of capital stock
of PGC is commenced, and the Board of Directors of PGC does not recommend,
within the time period specified under Rule 14e-2 under the Exchange Act,
that shareholders not tender their shares into such tender or exchange
offer;
(f) prior to receipt of the Supplemental PGC Shareholders' Approval at
the Supplemental PGC Shareholders' Meeting, by PGC, upon two days' prior
notice to Enron, if, as a result of a bona fide written offer or proposal
(including a tender offer) by a party other than Enron or any of its
affiliates relating to a PGC Competing Transaction, the Board of Directors
of PGC, after consultation with and based upon the written advice of
independent legal counsel, determines in good faith that its fiduciary
duties to its shareholders under applicable law require that such other
written offer or proposal be accepted; provided, however, that prior to any
such termination, PGC shall use its reasonable efforts to, and shall use
reasonable efforts to cause its respective financial and legal advisors to,
negotiate in good faith with Enron
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to make such adjustments in the terms and conditions of this Agreement as
would enable PGC to proceed with the transactions contemplated herein;
(g) by PGC if (i) the Board of Directors of Enron fails to make or
withdraws, modifies or changes its recommendation of this Agreement or the
Reincorporation Merger in a manner adverse to PGC or shall have resolved to
do any of the foregoing, in each case other than in circumstances in which
a PGC Material Adverse Effect has occurred; (ii) the Board of Directors of
Enron shall have recommended to the shareholders of Enron any Enron
Competing Transaction or entered into an agreement with respect to an Enron
Competing Transaction or shall have resolved to do so, or (iii) a tender
offer or exchange is commenced that, if consummated, would constitute an
Enron Competing Transaction, and the Board of Directors of Enron does not
recommend, within the time period specified under Rule 14e-2 under the
Exchange Act, that shareholders not tender their shares into such tender or
exchange offer;
(h) prior to receipt of the Enron Shareholders' Approval at the Enron
Special Meeting by Enron, upon two days' prior notice to PGC, if, as a
result of a bona fide written offer or proposal (including a tender offer)
by a party other than PGC or any of its affiliates relating to an Enron
Competing Transaction, the Board of Directors of Enron, after consultation
with and based upon the written advice of independent legal counsel,
determines in good faith that its fiduciary duties to its shareholders
under applicable law require that such other written offer or proposal be
accepted;
(i) by Enron, if there shall exist a breach of any representation,
warranty, covenant or agreement on the part of PGC set forth in this
Agreement, which breach is not cured within 20 business days after receipt
by PGC of a written notice of such breach from Enron specifying the breach
and requesting that it be cured, and the effect of such breach is that the
conditions set forth in Section 8.2(a) or Section 8.2(b) would not be
satisfied;
(j) by PGC, if there shall exist a breach of any representation,
warranty, covenant or agreement on the part of Enron set forth in this
Agreement, which breach is not cured within 20 business days after receipt
by Enron of a written notice of such breach from PGC specifying the breach
and requesting that it be cured, and the effect of such breach is that the
conditions set forth in Section 8.3(a) or Section 8.3(b) would not be
satisfied;
(k) by PGC, if Enron adopts a plan of complete or partial liquidation
or dissolution or if Enron enters into an agreement for, or there is
consummated, (i) a merger, consolidation, share exchange, business
combination or similar transaction pursuant to which the holders of Enron
capital stock prior to such transaction would own less than 50% of the
voting power attributable to the capital stock of the entity surviving or
resulting from such transaction (or the ultimate parent entity thereof),
(ii) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 50% or more of the assets of Enron and its subsidiaries,
taken as a whole, or (iii) a transaction pursuant to which a person or
"group" (within the meaning of Rule 13d-1 under the Exchange Act) acquires
or would acquire "beneficial ownership" (within the meaning of Rule 13d-3
under the Exchange Act) of at least 30% of the Enron Common Stock;
(l) prior to the PGC Special Meeting, by PGC, if the Enron Transaction
Price (as defined in Section 9.1(m)) is less than $36.25 (the "Floor
Price");
(m) prior to the Enron Special Meeting, by Enron, if the Enron
Transaction Price is greater than $47.25 (the "Ceiling Price"). For the
purposes of paragraphs (l) and (m) hereof, the term "Enron Transaction
Price" shall mean the average of the Closing Prices on the 20 consecutive
Trading Day period ending five Trading Days prior to the date of the PGC
Special Meeting; and
(n) by Enron, by written notice to PGC, if the OPUC issues an order
(regardless of whether such order has become a Final Order) that
disapproves the Mergers or that approves the Mergers in a manner that does
not satisfy the condition set forth in Section 8.2(f).
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either Enron or PGC pursuant to Section 9.1, there shall be no
liability on the part of either Enron or PGC or their respective
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officers or directors hereunder, except as provided in Section 9.3 and that the
agreement contained in the second to the last sentence of Section 7.1 shall
survive any such termination, and except that nothing herein or pursuant hereto
(including the making of any payment pursuant to Section 9.3) shall relieve a
party of any liability for (i) breach of the covenants or agreements set forth
in this Agreement, or (ii) breach of any representation or warranty under this
Agreement.
Section 9.3 Termination Fees.
(a) PGC agrees that if this Agreement is terminated pursuant to:
(i) Section 9.1(b), Section 9.1(c) as a result of the failure of
PGC to receive the Supplemental PGC Shareholders' Approval at the
Supplemental PGC Shareholders' Meeting, or Section 9.1(i) as a result of
a wilful breach of any representation, warranty, covenant or agreement
of PGC contained herein, and at the time of the event giving rise to any
such termination, there shall exist a proposal or offer from a third
party relating to a PGC Competing Transaction and within twelve months
after the date of termination of this Agreement a PGC Business
Combination (as defined in Section 9.3(c)) shall have occurred or PGC
shall have entered into a definitive agreement providing for a PGC
Business Combination in either case involving the party (or an affiliate
thereof) proposing the PGC Competing Transaction referred to above; or
(ii) Section 9.1(e) or Section 9.1(f);
then PGC shall pay to Enron promptly (but not later than five business days
after receipt of notice of the amount due from Enron) an amount in cash
equal to $60 million.
(b) Enron agrees that if this Agreement is terminated pursuant to:
(i) Section 9.1(b), Section 9.1(c) as a result of the failure of
Enron to receive the Enron Shareholders Approval at the Enron Special
Meeting, Section 9.1(j) as a result of a wilful breach of any
representation, warranty, covenant or agreement of Enron contained
herein, and at the time of the event giving rise to any such
termination, there shall exist a proposal or offer from a third party
relating to Enron Competing Transaction and within twelve months after
the date of termination of this Agreement an Enron Business Combination
(as defined in Section 9.3(c)) shall have occurred or Enron shall have
entered into a definitive agreement providing for an Enron Business
Combination in either case involving the party (or an affiliate thereof)
proposing the Enron Competing Transaction referred to above; or
(ii) Section 9.1(g), Section 9.1(h) or Section 9.1(k);
then Enron shall pay to PGC promptly (but not later than five business days
after receipt of notice of the amount due from PGC) an amount in cash equal
to $150 million.
(c) For purposes of this Section 9.3, the term "PGC Business
Combination" means (i) a merger, consolidation, share exchange, business
combination or similar transaction involving PGC, (ii) a sale, lease,
exchange, transfer or other disposition of 20% or more of the assets of PGC
and its subsidiaries, taken as a whole, in a single transaction or a series
of transactions, or (iii) the acquisition, by a person (other than Enron or
any affiliate thereof) or group (as such term is defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) of
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of
20% or more of the PGC Common Stock whether by tender or exchange offer or
otherwise, and the term "Enron Business Combination" means (i) a merger,
consolidation, share exchange, business combination or similar transaction
involving Enron as a result of which the shareholders of Enron prior to
such transaction in the aggregate cease to own at least a majority of the
voting securities of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), (ii) a sale, lease,
exchange, transfer or other disposition of more than 50% of the assets of
Enron and its subsidiaries, taken as a whole, in a single transaction or a
series of transactions, or (iii) the acquisition, by a person (other than
PGC or any affiliate thereof) or group (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
of beneficial ownership (as
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defined in Rule 13d-3 under the Exchange Act) of more than 30% of the Enron
Common Stock whether by tender or exchange offer or otherwise.
Section 9.4 Amendment. This Agreement may be amended by the parties hereto
pursuant to action of the respective Boards of Directors of each of Enron and
PGC, at any time before or after approval hereof by the shareholders of Enron
and PGC and prior to the Effective Time, but after such approvals, no such
amendment shall (a) alter or change the amount or kind of shares, rights or any
of the proceedings of the exchange and/or conversion under Article II, (b) alter
or change any of the terms and conditions of this Agreement if any of the
alterations or changes, alone or in the aggregate, would materially and
adversely affect the rights of holders of Enron Common Stock or PGC Common Stock
or (c) alter or change any term of the articles of incorporation of the Company,
except for alterations or changes that could otherwise be adopted by the Board
of Directors of the Company, without the further approval of such shareholders,
as applicable. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by a duly
authorized officer of each party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties, Covenants and
Agreements. No representation, warranty, covenant or agreement in this Agreement
shall survive the Effective Time, except the covenants and agreements contained
in this Section 10.1 and in Article II (Treatment of Shares), the second to the
last sentence of Section 7.1 (Access to Information), Section 7.5 (Directors'
and Officers' Indemnification), Section 7.9 (Employee Agreements), Section 7.10
(Employee Benefit Plans), Section 7.11 (Incentive, Stock and Other Plans),
Section 7.13 (Company Board of Directors), Section 7.14 (Company Officers),
Section 7.16 (Expenses), Section 10.2 (Brokers) and Section 10.7 (Parties in
Interest), each of which shall survive in accordance with its terms.
Section 10.2 Brokers. Enron represents and warrants that, except for Smith
Barney Inc., its investment banking firm, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Enron. PGC represents and warrants that, except for
Goldman, Sachs & Co., its investment banking firm, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of PGC.
Section 10.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given (a) if delivered personally, or (b) if
sent by overnight courier service (receipt confirmed in writing), or (c) if
delivered by facsimile transmission (with receipt confirmed), or (d) three days
after being mailed by registered or certified mall (return receipt requested) to
the parties, in each case to the following addresses (or at such other address
for a party as shall be specified by like notice):
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(i) If to PGC, to:
Alvin Alexanderson
Senior Vice President, General
Counsel and Secretary
121 SW Salmon Street
Portland, Oregon 97204
Fax: (503) 464-2087
with a copy to:
Seth A. Kaplan
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Fax: (212) 403-2000
(ii) If to Enron or the Company, to:
James V. Derrick
Robert D. Eickenroht
1400 Smith Street
Houston, Texas 77002
Fax: (713) 646-3393
with a copy to:
J. Mark Metts
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Fax: (713) 758-2346
Douglas W. Hawes
Steven H. Davis
LeBoeuf, Lamb, Greene & MacRae L.L.P.
125 West 55th Street
New York, NY 10019
Fax: (212) 424-8500
Section 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement; and (b) shall not be assigned by
operation of law or otherwise. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
executed in and to be fully performed in such State, without giving effect to
its conflicts of laws statutes, rules or principles. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect. The parties hereto shall negotiate in good
faith to replace any provision of this Agreement so held invalid or
unenforceable with a valid provision that is as similar as possible in substance
to the invalid or unenforceable provision.
Section 10.5 Interpretation. When reference is made in this Agreement to
Articles, Sections or Exhibits, such reference shall be to an Article, Section
or Exhibit of this Agreement, as the case may be, unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words
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"include", "includes", or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." Whenever "or" is used
in this Agreement it shall be construed in the nonexclusive sense. Whenever
reference is made to the "knowledge" of any person or entity in this Agreement
or to information "known" to any person or entity in this Agreement, such terms
shall refer to information actually known to the person, in a case of an
individual, or in the case of a corporation or other entity, information
actually known to an executive officer of such corporation or entity, as well as
information which the individual or executive officer involved should reasonably
be expected to have obtained as a result of undertaking an investigation of such
a scope and extent as a reasonably prudent man would undertake concerning the
particular subject matter.
Section 10.6 Counterparts; Effect. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 10.7 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and, except for rights of
Indemnified Parties as set forth in Section 7.5 (Directors' and Officers'
Indemnification), nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 10.8 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
Section 10.9 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 10.9.
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IN WITNESS WHEREOF, Enron, PGC and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first above written.
ENRON CORP.
By: /s/ Edmund P. Segner III
Name: EDMUND P. SEGNER III
Title: Executive Vice President
and Chief of Staff
PORTLAND GENERAL CORPORATION
By: /s/ Ken L. Harrison
Name: KEN L. HARRISON
Title: Chairman of the Board,
Chief Executive Officer and
President
ENRON OREGON CORP.
By: /s/ Edmund P. Segner III
Name: EDMUND P. SEGNER III
Title: President
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EXHIBIT A
[Form of Affiliate Agreement]
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Gentlemen:
Reference is made to the Amended and Restated Agreement and Plan of Merger
dated as of July 20, 1996 and amended and restated as of September 24, 1996 as
amended by the First Amendment thereto dated as of April 14, 1997 (as so
amended, the "Amended Merger Agreement"), by and among Enron Corp., a Delaware
corporation ("Enron"), Portland General Corporation, an Oregon corporation, and
Enron Oregon Corp., an Oregon corporation (the "Company"), pursuant to which
both Enron and PGC will be merged with and into the Company. Pursuant to the
terms and conditions of the Amended Merger Agreement, upon consummation of the
transactions contemplated thereby, each share of Common Stock, par value $3.75
per share, of PGC owned by the undersigned as of the Effective Time (as defined
in the Amended Merger Agreement) will be converted into and exchangeable for
certain shares of the common stock, without par value, of the Company (the
"Company Common Stock").
The undersigned understands that the he may be deemed to be an "affiliate"
of PGC for purposes of Rule 145 promulgated under the Securities Act of 1933, as
amended (the "Act"). The undersigned is delivering this letter of undertaking
and commitment pursuant to Section 7.8 of the Amended Merger Agreement.
With respect to such shares of the Company Common Stock as may be received
by the undersigned pursuant to the Amended Merger Agreement (the "Shares"), the
undersigned represents to and agrees with Enron and the Company that:
A. The undersigned will not make any offer to sell or any sale or
other disposition of all or any part of the Shares in violation of the Act
or the rules and regulations thereunder, including without limitation Rule
145, and will hold all the Shares subject to all applicable provisions of
the Act and the rules and regulations thereunder.
B. The undersigned has been advised that the offering, sale and
delivery of the Shares to the undersigned pursuant to the Amended Merger
Agreement will be registered under the Act on a Registration Statement on
Form S-4. The undersigned has also been advised, however, that, since the
undersigned may be deemed an "affiliate" of PGC, any public reoffering or
resale by the undersigned of any of the Shares will, under current law,
require either (i) the further registration under the Act of the Shares to
be sold, (ii) compliance with Rule 145 promulgated under the Act
(permitting limited sales under certain circumstances) or (iii) the
availability of another exemption from registration under the Act.
C. The undersigned understands that the Company will be under no
obligation to register the offering, sale and delivery of the Shares under
the Act in connection with any sale, transfer, or other disposition by the
undersigned or on behalf of the undersigned or to take any other action
necessary in order to make compliance with an exemption from registration
under the Act available.
D. The undersigned also understands that, if the Company should deem
it necessary to comply with the requirements of the Act, stop transfer
instructions will be given to its transfer agents with respect to the
Shares and that there will be placed on the certificates for the Shares, or
any substitutions therefor, a legend stating in substance:
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"The securities represented by this certificate were
issued in a transaction under Rule 145 promulgated under the
Securities Act of 1933, as amended (the "Act"), and may be
sold, transferred or otherwise disposed of only upon receipt
by the Corporation of an opinion of counsel acceptable to it
that the securities are being sold in compliance with the
limitations of Rule 145 or that some other exemption from
registration under the Act is available, or pursuant to a
registration statement under the Act."
Very truly yours,
--------------------------------------
Signature
--------------------------------------
Name
--------------------------------------
Date
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<PAGE> 158
EXHIBIT B
ALTERNATIVE TRANSACTION STRUCTURE
If the structure of the transactions contemplated by the Agreement is
modified to eliminate the Reincorporation Merger in accordance with Section
7.19(b) thereof, then the Agreement shall be interpreted in the following
manner: (i) the Reincorporation Merger (and the actions referred to in Sections
2.1 and 2.3 of the Agreement with respect thereto) will not occur, (ii) all
references to the Reincorporation Merger will be disregarded, whether for the
purposes of any conditions to the closing of the transactions contemplated by
the Agreement or otherwise, (iii) all references to the "Mergers" shall be
deemed to refer to the PGC Merger only, (iv) all references to the "First
Effective Time" or the "Second Effective Time" shall refer to the Effective
Time, as defined in revised Section 1.2 below, (v) unless the context requires
otherwise, all references to the "Company" shall be deemed to refer to "Enron,"
(vi) unless the context requires otherwise, all references to "Company Common
Stock" shall be deemed to refer to Enron Common Stock, and (vii) Article I of
the Agreement shall be superseded in its entirety by the following:
ARTICLE I
THE MERGER
Section 1.1 The PGC Merger. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 1.2):
(a) Effect. PGC shall be merged with and into Enron (the "PGC Merger")
in accordance with the applicable provisions of the laws of the States of
Delaware and Oregon, as a result of which the separate corporate existence
of PGC shall cease, and Enron shall be the surviving corporation (sometimes
referred to herein as the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware. The effects
and consequences of the PGC Merger shall be as set forth in Section 252 of
the Delaware General Corporation Law ("DGCL") and Section 60.497 of the
Oregon Business Corporation Act (the "OBCA").
(b) Certificate of Incorporation. At the Effective Time, the
certificate of incorporation of Enron shall be the certificate of
incorporation of the Surviving Corporation and thereafter shall continue to
be its certificate of incorporation until amended as provided therein and
pursuant to the applicable provisions of the DGCL.
(c) Bylaws. The bylaws of Enron shall be the bylaws of the Surviving
Corporation and thereafter shall continue to be its bylaws until amended as
provided therein and pursuant to the applicable provisions of the DGCL.
(d) Officers and Directors. Subject to Section 7.13, the directors of
Enron immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation, and,
subject to Section 7.14, the officers of Enron immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, each to
hold office in accordance with the bylaws of the Surviving Corporation.
Section 1.2 Effective Time of the PGC Merger. On the Closing Date (as
defined in Section 3.1), articles of merger in proper form under Section 60.494
of the OBCA, and a certificate of merger in proper form under Section 252 the
DGCL, each relating to the PGC Merger, will be duly executed and filed by the
parties to the PGC Merger with the Office of the Department of State of the
State of Oregon (the "Oregon Department of State") and the Office of the
Secretary of State of the State of Delaware in accordance with the applicable
provisions of the OBCA and the DGCL, respectively. The PGC Merger shall become
effective upon the later of the filing of such articles of merger with the
Oregon Department of State or the filing of such certificate of incorporation
with the Secretary of State of Delaware, or at such later time as may be
mutually agreed to by the parties hereto and specified in such articles of
merger or certificate of merger (the time the PGC Merger becomes effective being
herein called the "Effective Time").
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- --------------------------------------------------------------------------------
Goldman, Sachs & Co. Y 85 Broad Street Y New York, New York 10004
Tel: 212-902-1000
ANNEX B
[GOLDMAN,
SACHS & CO. LOGO]
- --------------------------------------------------------------------------------
May , 1997
Board of Directors
Portland General Corporation
121 S.W. Salmon Street
World Trade Center
Portland, OR 97204
Gentlemen and Mesdames:
You have requested our opinion as to the fairness to the holders (other
than Enron Corp. ("Enron") or any of its subsidiaries) of the outstanding shares
of Common Stock, par value $3.75 per share (the "Shares"), of Portland General
Corporation ("PGC") of the exchange ratio to be used in connection with the
proposed combination of PGC and Enron pursuant to the Agreement and Plan of
Merger dated as of July 20, 1996, as amended and restated as of September 24,
1996 and as amended on April 14, 1997 (the "Merger Agreement") by and among
Enron, PGC and Enron Oregon Corp. ("New Enron"), a wholly-owned subsidiary of
Enron. Pursuant to the Merger Agreement, unless the transaction is restructured
in accordance with the terms thereof to provide for a merger of PGC directly
into Enron (in connection with which an identical Exchange Ratio (as defined
below) would be used), (i) Enron will be merged with and into New Enron (the
"Reincorporation Merger"), with New Enron as the surviving corporation, pursuant
to which each existing share of Common Stock, no par value, of New Enron ("New
Enron Common Stock") will be canceled and each share of Common Stock, par value
$.10 per share, of Enron ("Enron Common Stock") will be converted into one share
of New Enron Common Stock, and (ii) after the Reincorporation Merger, the
Company will be merged with and into New Enron (the "Merger"), with New Enron as
the surviving corporation, pursuant to which each Share (other than Shares owned
by the Company or any of its subsidiaries or by Enron, New Enron or any of their
respective subsidiaries) will be converted into .9825 of a share of New Enron
Common Stock (the "Exchange Ratio").
Goldman, Sachs & Co. ("Goldman Sachs"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with PGC having provided certain investment
banking services to PGC and certain of its subsidiaries from time to time,
including having acted as managing underwriter of public offerings of $37
million of PGC Common Stock in February 1994 and $75 million principal amount of
8 1/4% Quarterly Income Debt Securities of PGC due 2035 in October 1995 and
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Merger Agreement. We
have also provided certain investment banking services to Enron and certain of
its subsidiaries from time to time, including having acted as managing
underwriter of public offerings by Enron of $675 million of Common Stock of
Enron Oil & Gas Company in December 1995 and $228 million principal amount of
6 1/4% Exchangeable Notes due 1998 in December 1995. We may provide investment
banking services to Enron, New Enron or certain of their respective subsidiaries
in the future.
New York Y London Y Tokyo Y Boston Y Chicago Y Dallas Y Frankfurt Y Hong Kong Y
Houston Y Los Angeles
Memphis Y Miami Y Montreal Y Osaka Y Paris Y Philadelphia Y San Francisco Y
Singapore Y Sydney Y Toronto Y Zurich
B-1
<PAGE> 160
In the ordinary course of the trading activities of Goldman Sachs, the Firm
actively trades the debt and equity securities of PGC and Enron for its own
account and for the accounts of customers of Goldman Sachs and may, therefore,
at any time hold a long or short position in such securities.
In connection with our opinion, we reviewed, among other things, the Merger
Agreement; the Registration Statement on Form S-4 of Enron and New Enron,
including the Proxy Statement/Prospectus relating to the Annual Meeting of
Shareholders of PGC to be held in connection with, among other things, the
Merger Agreement; Annual Reports to Shareholders and Annual Reports on Form 10-K
of PGC and Enron for the five years ended December 31, 1996; certain interim
reports to shareholders and Quarterly Reports on Form 10-Q of PGC and Enron;
certain FERC Forms 1 of PGC and FERC Forms 2 of Enron; certain other
communications from PGC and Enron to their respective shareholders; and certain
internal financial analyses and forecasts for PGC and Enron prepared by their
respective managements. We also held discussions with members of the senior
managements of PGC and Enron regarding the past and current business operations,
financial condition and future prospects of their respective companies and the
future prospects of New Enron. In addition, we reviewed the reported price and
trading activity for the Shares and for the Enron Common Stock, compared certain
financial and stock market information for PGC and Enron with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the electric utility industry specifically and in other industries generally and
performed such other studies and analyses as we considered appropriate.
We relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of our opinion, as well as upon assessments by each of PGC and Enron of
their respective contingent obligations. With respect to financial forecasts and
projections provided by the respective managements of PGC and Enron, we assumed,
with your consent, that such financial forecasts and projections were reasonably
prepared on bases reflecting the best available estimates and judgments as to
the future financial and other performance of PGC and Enron, as applicable. We
further assumed, with your consent, that obtaining any necessary regulatory or
third-party approvals for the transactions contemplated by the Merger Agreement
will not have an adverse effect on PGC or Enron, as applicable. We did not make
an independent evaluation or appraisal of the assets and liabilities of PGC or
Enron or any of their respective subsidiaries and we were not furnished with any
such evaluation or appraisal. Our advisory services and our opinion were
provided for the information and assistance of the Board of Directors of PGC in
connection with its consideration of the Merger contemplated by the Merger
Agreement and such opinion does not constitute a recommendation as to how any
holder of the Shares should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we considered relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Merger Agreement is fair to the holders of Shares
(other than Enron or any of its subsidiaries).
Very truly yours,
- ----------------------------------------
(Goldman, Sachs & Co.)
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ANNEX C
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") entered into the 20th day of July,
1996, and to become effective upon the consummation of the Mergers (as defined
in the Agreement and Plan of Merger dated as of July 20, 1996 (the "Merger
Agreement") by and between Enron Corp. (the "Company"), Portland General
Corporation ("PGC") and New Falcon Corp. ("Surviving Co.")) by and between the
Company and Ken L. Harrison ("Employee"), an individual currently residing in
Portland, Oregon.
WITNESSETH:
WHEREAS, upon the consummation of the Mergers Company desires to employ
Employee in an executive capacity and Employee desires to enter Company's
employ:
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Company and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Company agrees to employ Employee and Employee agrees to be employed
by Company beginning as of the Effective Date of this Agreement, subject to the
terms and conditions of this Agreement. The Effective Date of this Agreement
shall be the Effective Time under the Merger Agreement. At the Effective Date,
this Agreement shall supercede, rescind and replace Employee's existing
Employment Agreement with Portland General Corporation. Upon the merger of
Company with and into Surviving Co., this Agreement shall become the obligation
of Surviving Co. If the Merger Agreement is terminated, then this Agreement
shall have no further force or effect and shall be deemed terminated.
1.2 Employee agrees to serve as Vice Chairman of Company and Chairman,
President and Chief Executive Officer of Portland General Electric Company
("PGE"), and to perform diligently and to the best of Employee's abilities, the
duties and services appertaining to such position as reasonably directed by
Company.
1.3 Employee shall, during the period of his employment by Company, devote
his entire business time, energy and best efforts to the business and affairs of
Company and not engage, directly or indirectly, in any other business or
businesses to the extent such activity would be contrary to the interests of
Company or any Affiliate of Company or would detract from Employee's ability to
perform his duties under this Agreement.
1.4 Employee shall be subject to policies and procedures adopted,
established or amended by Company from time to time which are applicable to all
employees generally.
ARTICLE 2: TERM OF EMPLOYMENT
Unless sooner terminated pursuant to other provisions hereof, Employee's
period of employment under this Agreement shall be a period of five (5) years
beginning on the Effective Date of this Agreement ("Initial Term"), and
thereafter for such period, if any, as may be agreed upon in writing by Employee
and Company.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the Initial Term, Employee's annual base salary
shall not be less than Five Hundred and Twenty Five Thousand Dollars
($525,000.00), which shall be earned and paid in equal semimonthly installments
in accordance with Company's standard payroll practice.
3.2 Incentive Compensation Programs. While Employee is actively employed
under this Agreement, Employee shall be entitled to participate in the Executive
Compensation Program maintained by Company for its senior executives on the same
basis (except as otherwise specifically provided herein) as other senior
executives of Company.
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3.3 Other Employee Benefits. While Employee is actively employed under
this Agreement, Employee shall be allowed to participate on the same basis
generally as other employees of Company, in all benefit plans and programs,
including improvements or modifications of the same, which are now, or may
hereafter be, available to such employees. Such benefits, plans and programs may
include, without limitation, health insurance or health care plan, life
insurance, disability insurance, and pension plans. Upon termination of
employment with the Company for any reason, Employee shall be entitled to
receive office space and secretarial support on the same basis as that currently
provided under the Retired Chairman's Program at PGC.
3.4 Changes Permitted. Company shall not, however, by reason of paragraphs
3.2 and 3.3 be obligated to institute, maintain, or refrain from changing,
amending or discontinuing, any such benefit plan or program, so long as such
changes are similarly applicable to covered employees generally.
3.5 Stock Option. (a) On the Effective Date, Employee shall receive a
grant of an Option (which shall not constitute an Incentive Stock Option) under
and pursuant to the terms and provisions of the Enron Corp. 1991 Stock Plan to
purchase One Hundred and Twenty Thousand (120,000) shares of common stock of
Company. Such grant shall be made in the form of a Non-Qualified Stock Option
Agreement as reflected in Exhibit A to this Agreement. The per share option
price of such Option shall be set at the fair market value of a share of Company
common stock as of the Effective Date, shall have a term of 10 years and shall
vest 20% on the date of grant and 20% on each of the four succeeding
anniversaries of the Effective Date. If Employee voluntarily terminates
employment other than during a Window Period (as hereinafter defined), Employee
may exercise vested options within one month of voluntary termination of
employment. In the event of Involuntary Termination (including voluntary
termination of employment by the Employee during a Window Period), death,
disability or retirement, Employee may exercise vested options within three
years of the date of termination.
(b) Notwithstanding any other provision in the Enron Corp. 1991 Stock Plan
or in the grant of said Option reflected in Exhibit A, the vesting provision
described in paragraph (a) above shall be the sole and exclusive method of
vesting, except said Option shall immediately and fully vest:
(i) upon a Change of Control of Company or PGE, or
(ii) in the event of Employee's Involuntary Termination (other than a
voluntary termination of employment by Employee during a Window Period).
3.6 Annual Incentive Plan. Employee's bonus under Company's Annual
Incentive Plan shall be not less than $525,000. Twenty percent (20%) of such
bonus shall be paid to Employee in the form of Options and eighty percent (80%)
shall be paid to Employee in the form of cash. For purposes of this paragraph
3.6, Options shall be valued in the same manner as options are valued for all
other participants in the Enron Executive Compensation Program by the
Compensation Committee. Options granted under this paragraph 3.6 shall vest
immediately upon grant. In the event of a termination of employment, all options
granted under this paragraph 3.6 shall be exercisable at any time within three
years of the date of termination. Until such time as Employee becomes the
Beneficial Owner of shares of Company common stock having a fair market value
equal to not less than two times Employee's base salary as set forth in
paragraph 3.1, one-third of the cash amount which would be paid to Employee as a
bonus under the Company's Annual Incentive Plan shall be paid to Employee in the
form of unrestricted Company common stock.
3.7 Restricted Stock Grant. On the Effective Date Employee will be granted
shares of Enron Restricted Stock having a fair market value equal to Employee's
base salary (as specified in paragraph 3.1). Such grant will vest in 20%
increments on each of the first five anniversaries of the date of grant.
Unvested Restricted Stock will not vest upon a termination of employment of
Employee and will be forfeited upon such termination.
3.8 Supplemental Pension Benefit. Following termination of Employee's
employment for any reason, Employee or Employee's surviving spouse shall be
provided an immediate supplemental nonqualified retirement benefit to the extent
necessary so that (A) the sum of (i) the aggregate pension benefits actually
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received by him or her from the Portland General Corporation Pension Plan (the
"Pension Plan"), the Portland General Corporation Supplemental Executive
Retirement Plan (the "SERP") and any defined benefit qualified or nonqualified
pension plans of the Company and (ii) the Supplemental Retirement Benefit are
not less than (B) the aggregate benefits he or she would have received pursuant
to the Pension Plan and the SERP, in each case as in effect on the Effective
Date of this Agreement, if Employee had retired on the Effective Date of this
Agreement having attained the "Unreduced Benefit Date" (as defined in the SERP)
and 25 years of service, and if Employee's "Final Average Earnings" (as defined
in the SERP) had equalled his "Earnings" (as defined in the SERP) for the
calendar year 1996.
ARTICLE 4: TERMINATION PRIOR TO EXPIRATION OF TERM
4.1 Effect On Compensation And Benefits. If Employee's employment
hereunder shall be terminated by Company or by Employee, upon such termination,
regardless of the reason therefor, all compensation and all benefits to Employee
under this Agreement shall terminate contemporaneously with the termination of
such employment, except that (i) Employee shall be entitled to the Supplemental
Retirement Benefit set forth in Section 3.8, and (ii) if Employee's employment
is Involuntarily Terminated (as defined herein) prior to expiration of the
Initial Term of employment established under Article 2, Employee shall be
entitled to receive the following benefits ("Severance Remuneration"):
(a) If Employee's employment is Involuntarily Terminated other than as
a result of a voluntary termination of employment by Employee during a
Window Period, all payments of the annual base salary under paragraph 3.1
(at the level set forth therein) and bonus payments under paragraph 3.6 (at
the level set forth therein) at such time and in such manner as if
Employee's employment had continued for a two year period following the
Involuntary Termination Date, and, if the Initial Term of the Agreement
would have continued beyond the second anniversary of the Involuntary
Termination Date, then Company shall pay to Executive a lump-sum amount on
such second anniversary equal to the amount which would have been paid to
Employee during the balance of the Initial Term if Employee's employment
had continued during such period. If Employee's employment is terminated as
a result of a voluntary termination of employment by Employee during a
Window Period, then Executive shall be entitled to receive all payments of
base salary under paragraph 3.1 (at the level set forth therein) and bonus
payments under paragraph 3.6 (at the level set forth therein) at such time
and in such manner as if Employee's employment had continued for the
balance of the Initial Term, provided that, if the Initial Term would have
continued beyond the second anniversary of the Involuntary Termination
Date, then Company shall pay to Executive a lump-sum amount on such second
anniversary equal to the amount which would have been paid to Employee
during the balance of the Initial Term if Employee's employment had
continued during such period.
(b) Employee shall be provided coverage essentially equivalent to that
under Company's Contributory and Non-Contributory Life Insurance, Health
and long-term disability plans for active employees (using Employee's
annual base salary pursuant to paragraph 4.1(a) as the compensation base
where relevant).
The Company reserves the right to provide the benefits and payments
referred to in paragraphs 4.1(b) and 4.1(c) by making substantially equivalent
payments to or purchasing substantially equivalent benefits for Employee under
arrangements other than the plans referred to in said paragraphs if, in
Company's sole discretion, the tax or compliance status of such plans may
otherwise be jeopardized. Such equivalent payments shall be a liability of
Company, shall be paid exclusively from the general assets of Company, and shall
be an unfunded and unsecured promise to pay money in the future, unless Company
elects to otherwise fund or secure such payments.
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4.2 Involuntary Termination. As used in this Agreement, "Involuntary
Termination" or "Involuntarily Terminated" shall mean termination of Employee's
employment with Company if such termination results from:
(a) termination by Company on any grounds whatsoever except (i)
"Termination for Cause" as defined below, or (ii) termination upon
Employee's death or Permanent Disability;
(b) termination by Employee within 60 days of and in connection with
or based upon any of the following:
(i) an assignment to Employee of duties and responsibilities
inappropriate to a senior officer of the Company or PGE;
(ii) (A) a reduction in Employee's annual base salary as
established in paragraph 3.1, (B) a reduction in Employee's incentive
compensation pursuant to paragraph 3.2 or paragraph 3.6, or (C) the
failure to continue Employee's participation in any employee benefit
plan or program (except a benefit plan or program that is substantially
comparable to an existing benefit plan or program) in which Employee is
participating or is eligible to participate prior to such reduction
(other than as a result of the expiration of such plan or program),
other than such failures which are a part of a general program to reduce
employee benefits on a proportional basis relative to other employees of
Company;
(iii) a relocation required by the Company of Employee from
Portland, Oregon; or
(iv) a Change of Control of Company or PGE.
In addition, if Employee voluntarily terminates his employment during a
Window Period, such termination shall be treated as an Involuntary Termination
for all purposes of this Agreement (except as otherwise specified herein). The
Window Periods for purposes of this Agreement shall be the thirty-day periods
beginning on the second, third and fourth anniversaries of the Effective Date.
4.3 Termination for Cause. As used in this Agreement, "Termination for
Cause" shall mean termination by action of Company's Board of Directors because
of Employee's (i) conviction of a felony (which, through lapse of time or
otherwise, is not subject to appeal); or (ii) willful refusal without proper
legal cause to perform Employee's duties and responsibilities; or (iii)
willfully engaging in conduct which Employee has or should have reason to know
may be materially injurious to Company. Such termination shall be effected by
notice thereof delivered by Company to Employee and shall be effective as of the
date of such notice; provided, however, that if (A) such termination is because
of Employee's willful refusal without proper legal cause to perform any one or
more of Employee's duties and responsibilities and (B) within seven days
following the date of such notice Employee shall cease such refusal and shall
use Employee's best efforts to perform such duties and responsibilities, then
the termination shall not be effective, and, provided further, that Company
shall consult in good faith with Employee and provide a reasonable opportunity
for Employee to be heard prior to effecting any termination under (i), (ii) or
(iii) of this paragraph.
4.4 In the Event of Excess Parachute Payments. In the event that the
Severance Remuneration payable under this Agreement, or any other payment or
distribution to or for the benefit of Employee by the Company, PGC or any of
their respective Affiliates, shall constitute "excess parachute payments" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended,
and any regulations thereunder, and Employee becomes liable for any excise tax
on "excess parachute payments" and/or interest or penalties thereon (such excise
tax, interest and penalties, collectively, the "Tax Penalties"), Company shall
make a cash payment (the "Additional Payment") to Employee in an amount equal to
the Tax Penalties. In addition, Company shall make an additional cash payment to
Employee in an amount rounded to the nearest One Hundred Dollars which is
sufficient to pay Employee an amount equal to any additional income, excise and
other taxes (using the individual tax rates applicable to Employee for the year
for which such Tax Penalties are owed) for which Employee will be liable as a
result of Employee's receipt of the Additional Payment. In addition, Employee
shall be grossed up on such gross ups until the amount of last gross up is less
than One Hundred Dollars.
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ARTICLE 5: DEFINITIONS FOR AGREEMENT
For purposes of this Agreement the following terms shall have the meanings
ascribed to them below:
(a) "Affiliate" is used to indicate a relationship to a specified
person or entity and shall mean a person or entity who directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, such specified person or entity.
Affiliate shall include Affiliates of Company.
(b) "Beneficial Owner" shall be defined by reference to Rule 13(d)-3
under the Securities Exchange Act of 1934, as in effect on July 20, 1996,
provided, however, and without limitation, any individual, corporation,
partnership, group, association or other person or entity which has the
right to acquire any Voting Stock at any time in the future, whether such
right is contingent or absolute, pursuant to any agreement, arrangement or
understanding or upon exercise of conversion rights, warrants or options,
or otherwise, shall be the Beneficial Owner of such Voting Stock.
(c) "Change of Control" of Company or PGE shall mean after the
Effective Time (i) Company or PGE merges or consolidates with any other
corporation (other than Company or one of Company's wholly owned
subsidiaries) and is not the surviving corporation (or survives only as the
subsidiary of another corporation), or (ii) Company or PGE sells all or
substantially all of its assets to any other person or entity (other than
to Company or one of Company's wholly owned subsidiaries), or (iii) Company
or PGE is dissolved, or (iv) any third person or entity (other than, in the
case of PGE, Company or any wholly owned subsidiary of Company, or in the
case of PGE or Company, the trustee or committee of any qualified employee
benefit plan of Company) together with its affiliates and associates shall
become, directly or indirectly, the Beneficial Owner of at least thirty
percent (30%) of the Voting Stock of Company or PGE or (v) the individuals
who constitute the members of Company's Board of Directors ("Incumbent
Board") cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director whose election or nomination
for election by Company stockholders was approved by a vote of at least
eighty percent (80%) of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be, for purposes of this clause (v),
considered as though such person were a member of the Incumbent Board.
(d) "Change of Control Date" shall mean the day on which a Change of
Control becomes effective.
(e) "Involuntary Termination Date" shall mean Employee's last date of
employment by reason of an Involuntary Termination.
(f) "Permanent Disability" or "Permanently Disabled" shall mean such
permanent disability that qualifies Employee for benefits beyond twenty
four months of disability under Company's Long-Term Disability Plan.
(g) "Voting Stock" shall mean all outstanding shares of capital stock
entitled to vote generally in elections for directors, considered as one
class; provided, however, that if there are shares of Voting Stock entitled
to more or less than one vote for any such share, each reference to a
proportion of shares of Voting Stock shall be deemed to refer to such
proportion of the votes entitled to be cast by such shares.
ARTICLE 6: DEATH, DISABILITY OR RETIREMENT
In the event of Employee's death or Permanent Disability following
Employee's Involuntary Termination Date, Employee or Employee's legal
representatives shall be entitled to receive the balance of any unpaid amounts
payable under Article 4.
In no event will Employee or Employee's legal representatives receive
payments under Article 4 of this Agreement if Employee dies, retires, or becomes
Permanently Disabled prior to his Involuntary Termination.
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ARTICLE 7: CONFIDENTIAL INFORMATION
7.1 Company Information. Employee acknowledges that Company's business is
highly competitive and that Company's books, records and documents, Company's
technical information concerning its products, equipment, services and
processes, procurement procedures and pricing techniques, the names of and other
information (such as credit and financial data) concerning Company's customers
and business Affiliates, all comprise confidential business information and
trade secrets of Company which are valuable, special, and unique assets of
Company, which Company uses in its business to obtain a competitive advantage
over Company's competitors which do not know or use this information. Employee
further acknowledges that protection of Company's confidential business
information and trade secrets against unauthorized disclosure and use, is of
critical importance to Company in maintaining its competitive position.
Accordingly, Employee hereby agrees that he will not, at any time during or
after his employment by Company, make any unauthorized disclosure of any
confidential business information or trade secrets of Company, or make any use
thereof, except for the benefit of, and on behalf of Company. For the purposes
of this paragraph, the term "Company" shall also include Affiliates of Company.
ARTICLE 8: MISCELLANEOUS
8.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Company to: Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Corporate Secretary
If to Employee to:or to such other address as either party may furnish
to the other in writing in accordance herewith,
except that notices of changes of address shall be
effective only upon receipt.
8.2 Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas, without giving
effect to the principles of conflict of laws.
8.3 No Duty to Seek Employment. Employee shall not be under any duty or
obligation to seek or accept other employment following termination and no
amount, payment or benefit due Employee hereunder or otherwise shall be reduced
or suspended if Employee accepts subsequent employment.
8.4 No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
8.5 Remedy for Breach of Contract. (a) The parties agree that in the event
there is any breach or asserted breach of the terms, covenants or conditions of
this Agreement, the remedy of Company shall be in law and in equity and
injunctive relief also shall lie for the enforcement of or relief from any
provisions of this Agreement.
(b) The sole and exclusive remedy of Employee shall be limited to the
enforcement of the provisions of this Agreement. Employee agrees that he will
receive sufficiently higher consideration under this Agreement than he would
otherwise receive if he did not agree to this provision. Employee understands
the effect of the provisions of this Section 8.5, he has had reasonable time to
consider the effect thereof, and he was encouraged and had an opportunity to
consult an attorney with respect thereto.
(c) If any eligible remedy or relief is sought and obtained by either party
pursuant to this Section 8.5, the other party shall, in addition to the remedy
of relief so obtained, be liable for the expenses incurred by the successful
party in obtaining such remedy or relief, including costs of court and the fees
and expenses of the successful party's counsel.
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8.6 Severability. It is a desire and intent of the parties that the terms,
provisions, covenants and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by Law. If any such term, provision,
covenant or remedy of this Agreement or the application thereof to any person or
circumstances shall to any extent, be construed to be invalid or unenforceable
in whole or in part, then such term, provision, covenant or remedy shall be
construed in a manner so as to permit its enforceability under the applicable
law to the fullest extent permitted by law. In any case, the remaining
provisions of this Agreement or the application thereof to any person or
circumstances other than those to which they have been held invalid or
unenforceable, shall remain in full force and effect.
8.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
8.8 Withholding of Taxes. Company may withhold, from any benefits payable
under this Agreement all federal, state, city or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
8.9 Headings. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
8.10 Successors and Assignment. This Agreement automatically shall be
binding upon any corporation or other entity which may hereafter acquire or
succeed to all or substantially all of the business or assets of Company by any
means whether direct or indirect, by purchase, merger, consolidation or
otherwise. As used in this paragraph 8.10, "Company" shall mean Company as
defined in the preamble to this agreement and any successor to its business or
assets by operation of law or otherwise. With respect to employee's rights and
obligations, Employee's rights and obligations hereunder are personal and
neither this Agreement, nor any right, benefit or obligation of Employee, shall
be subject to voluntary or involuntary assignment, alienation or transfer,
whether by operation of law or otherwise, without the prior written consent of
Company. This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8.11 Entire Agreement; Modification. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, supersedes
any and all prior agreements with respect to Employee's employment by Company or
an Affiliate except as provided in this Agreement, and contains all of the
covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Employee by Company. Each party to this
Agreement acknowledges that no representation, inducement, promise or agreement,
oral or written, has been made by either party, which is not embodied herein,
and that no agreement, statement, or promise relating to the employment of
Employee by Company, which is not contained in this Agreement shall be valid or
binding. Any modification of this Agreement will be effective only if it is in
writing and signed by both parties. This Agreement does not revoke or cancel any
employee benefits or compensation earned or accrued by or vested in Employee as
of the effective date of this Agreement and which are attributable to Employee's
prior employment by Company or an Affiliate.
8.12 Non-competition. As part of the consideration for the compensation to
be paid to Employee hereunder, and as an additional incentive for Company to
enter into this Agreement, Company and Employee agree to the non-competitive
provisions of this Section 8.12. Upon termination of employment for any reason,
Employee agrees that until the first to occur of (x) the date upon which the
Initial Term of this Agreement would have ended had employment of Employee not
terminated and (y) the second anniversary of the date of termination of
employment, Employee will not, directly or indirectly for himself or for others,
in any state of the United States or in any foreign country where Company or any
of its Affiliates is then conducting any business, or has, during the previous
twelve (12) months, conducted any business:
(i) engage in any business similar or related to or competitive with
the business conducted by PGC or any Affiliate of PGC immediately before
the Effective Time, or any other area of the business of Company or any
Affiliate with which Employee has material involvement during the two-year
period immediately before the termination of his employment (the "Core
Business");
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(ii) render advice or services to, or otherwise assist, any other
person or entity who is engaged, directly or indirectly, in any business
similar or related to, or competitive with, the Core Business conducted by
Company or any Affiliate;
(iii) transact any business in any manner pertaining to suppliers or
customers in Company or any Affiliate which, in any manner, would have, or
is likely to have, an adverse effect upon Company or any Affiliate; or
(iv) induce any employee of Company or any Affiliate to terminate his
or her employment with Company or such Affiliate.
Employee understands that the foregoing restrictions may limit Employee's
ability to engage in a business similar to Company's Core Business anywhere in
the world during the period provided for above, but acknowledges that Employee
will receive sufficiently higher remuneration and other benefits from Company
hereunder than he would otherwise receive, to justify such restriction. Employee
understands the effect of the provisions of this Section 8.12, he has had
reasonable time to consider the effect thereof, and he was encouraged and had an
opportunity to consult an attorney with respect thereto. Company shall be
entitled to enforce the provisions of this Section 8.12 by terminating any
payments then owing to Employee under this Agreement and by resorting to
appropriate legal and equitable action.
It is expressly understood and agreed that Company and Employee consider
the restrictions contained in this Section 8.12 to be reasonable and necessary.
Nevertheless, if any of the aforesaid restrictions are found by a court having
jurisdiction to be unreasonable, or over broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the restrictions herein set
forth to be modified by such court so as to be reasonable and enforceable and,
as so modified by the court, to be fully enforced.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
ENRON CORP.
By: /s/ EDMUND P. SEGNER III
------------------------------------
Title: Executive Vice President
and Chief of Staff
KEN L. HARRISON
/s/ KEN L. HARRISON
------------------------------------
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ANNEX D
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") entered into the 20th day of July,
1996, and to become effective upon the consummation of the Mergers (as defined
in the Agreement and Plan of Merger dated as of July 20, 1996 (the "Merger
Agreement") by and between Enron Corp. (the "Company"), Portland General
Corporation ("PGC") and New Falcon Corp. ("Surviving Co.")) by and between the
Company and Joseph M. Hirko ("Employee"), an individual currently residing in
Portland, Oregon.
WITNESSETH:
WHEREAS, upon the consummation of the Mergers Company desires to employ
Employee in an executive capacity and Employee desires to enter Company's
employ:
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
and obligations contained herein, Company and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES
1.1 Company agrees to employ Employee and Employee agrees to be employed
by Company beginning as of the Effective Date of this Agreement, subject to the
terms and conditions of this Agreement. The Effective Date of this Agreement
shall be the Effective Time under the Merger Agreement. At the Effective Date,
this Agreement shall supercede, rescind and replace Employee's existing
Employment Agreement with Portland General Corporation. Upon the merger of
Company with and into Surviving Co., this Agreement shall become the obligation
of Surviving Co. If the Merger Agreement is terminated, then this Agreement
shall have no further force or effect and shall be deemed terminated.
1.2 Employee agrees to serve as Senior Vice President of Company and as a
senior executive officer of Portland General Electric Company ("PGE"), and to
perform diligently and to the best of Employee's abilities, the duties and
services appertaining to such position as reasonably directed by Company.
1.3 Employee shall, during the period of his employment by Company, devote
his entire business time, energy and best efforts to the business and affairs of
Company and not engage, directly or indirectly, in any other business or
businesses to the extent such activity would be contrary to the interests of
Company or any Affiliate of Company or would detract from Employee's ability to
perform his duties under this Agreement.
1.4 Employee shall be subject to policies and procedures adopted,
established or amended by Company from time to time which are applicable to all
employees generally.
ARTICLE 2: TERM OF EMPLOYMENT
Unless sooner terminated pursuant to other provisions hereof, Employee's
period of employment under this Agreement shall be a period of five (5) years
beginning on the Effective Date of this Agreement ("Initial Term"), and
thereafter for such period, if any, as may be agreed upon in writing by Employee
and Company.
ARTICLE 3: COMPENSATION AND BENEFITS
3.1 Base Salary. During the Initial Term, Employee's annual base salary
shall not be less than Two Hundred and Fifty Thousand Dollars ($250,000.00),
which shall be earned and paid in equal semimonthly installments in accordance
with Company's standard payroll practice.
3.2 Incentive Compensation Programs. While Employee is actively employed
under this Agreement, Employee shall be entitled to participate in the Executive
Compensation Program maintained by Company for its senior executives on the same
basis (except as otherwise specifically provided herein) as other senior
executives of Company.
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3.3 Other Employee Benefits. While Employee is actively employed under
this Agreement, Employee shall be allowed to participate on the same basis
generally as other employees of Company, in all benefit plans and programs,
including improvements or modifications of the same, which are now, or may
hereafter be, available to such employees. Such benefits, plans and programs may
include, without limitation, health insurance or health care plan, life
insurance, disability insurance, and pension plans.
3.4 Changes Permitted. Company shall not, however, by reason of paragraphs
3.2 and 3.3 be obligated to institute, maintain, or refrain from changing,
amending or discontinuing, any such benefit plan or program, so long as such
changes are similarly applicable to covered employees generally.
3.5 Stock Option. (a) On the Effective Date, Employee shall receive a
grant of an Option (which shall not constitute an Incentive Stock Option) under
and pursuant to the terms and provisions of the Enron Corp. 1991 Stock Plan to
purchase Fifty Thousand (50,000) shares of common stock of Company. Such grant
shall be made in the form of a Non-Qualified Stock Option Agreement as reflected
in Exhibit A to this Agreement. The per share option price of such Option shall
be set at the fair market value of a share of Company common stock as of the
Effective Date, shall have a term of 10 years and shall vest 20% on the date of
grant and 20% on each of the four succeeding anniversaries of the Effective
Date. If Employee voluntarily terminates employment other than during a Window
Period (as hereinafter defined), Employee may exercise vested options within one
month of voluntary termination of employment. In the event of Involuntary
Termination (including voluntary termination of employment by the Employee
during a Window Period), death, disability or retirement, Employee may exercise
vested options within three years of the date of termination.
(b) Notwithstanding any other provision in the Enron Corp. 1991 Stock Plan
or in the grant of said Option reflected in Exhibit A, the vesting provision
described in paragraph (a) above shall be the sole and exclusive method of
vesting, except said Option shall immediately and fully vest:
(i) upon a Change of Control of Company or PGE, or
(ii) in the event of Employee's Involuntary Termination (other than a
voluntary termination of employment by Employee during a Window Period).
3.6 Annual Incentive Plan. Employee's bonus under Company's Annual
Incentive Plan shall be not less than $250,000. Twenty percent (20%) of such
bonus shall be paid to Employee in the form of Options and eighty percent (80%)
shall be paid to Employee in the form of cash. For purposes of this paragraph
3.6, Options shall be valued in the same manner as options are valued for all
other participants in the Enron Executive Compensation Program by the
Compensation Committee. Options granted under this paragraph 3.6 shall vest
immediately upon grant. In the event of a termination of employment, all options
granted under this paragraph 3.6 shall be exercisable at any time within three
years of the date of termination. Until such time as Employee becomes the
Beneficial Owner of shares of Company common stock having a fair market value
equal to not less than two times Employee's base salary as set forth in
paragraph 3.1, one-third of the cash amount which would be paid to Employee as a
bonus under the Company's Annual Incentive Plan shall be paid to Employee in the
form of unrestricted Company common stock.
3.7 Restricted Stock Grant. On the Effective Date Employee will be granted
shares of Enron Restricted Stock having a fair market value equal to Employee's
base salary (as specified in paragraph 3.1). Such grant will vest in 20%
increments on each of the first five anniversaries of the date of grant.
Unvested Restricted Stock will not vest upon a termination of employment of
Employee and will be forfeited upon such termination.
3.8 Supplemental Pension Benefit. Following termination of Employee's
employment for any reason, Employee or Employee's surviving spouse shall be
provided a supplemental nonqualified retirement benefit (the "Supplemental
Retirement Benefit") to the extent necessary so that (A) the sum of (i) the
aggregate pension benefits actually received by him or her from the Portland
General Corporation Pension Plan (the "Pension Plan"), the Portland General
Corporation Supplemental Executive Retirement Plan (the "SERP") and any defined
benefit qualified or nonqualified pension plans of the Company and (ii) the
Supplemental
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Retirement Benefit are not less than (B) the aggregate benefits he or she would
have received pursuant to the Pension Plan and the SERP, in each case as in
effect on the Effective Date of this Agreement, if Employee had continued to
participate in the Pension Plan and the SERP, in each case as in effect on the
Effective Date of this Agreement, through the date of such termination of
employment.
ARTICLE 4: TERMINATION PRIOR TO EXPIRATION OF TERM
4.1 Effect On Compensation And Benefits. If Employee's employment
hereunder shall be terminated by Company or by Employee, upon such termination,
regardless of the reason therefor, all compensation and all benefits to Employee
under this Agreement shall terminate contemporaneously with the termination of
such employment, except that (i) Employee shall be entitled to the Supplemental
Retirement Benefit set forth in Section 3.8, and (ii) if Employee's employment
is Involuntarily Terminated (as defined herein) prior to expiration of the
Initial Term of employment established under Article 2, Employee shall be
entitled to receive the following benefits ("Severance Remuneration"):
(a) If Employee's employment is Involuntarily Terminated other than as
a result of a voluntary termination of employment by Employee during a
Window Period, all payments of the annual base salary under paragraph 3.1
(at the level set forth therein) and bonus payments under paragraph 3.6 (at
the level set forth therein) at such time and in such manner as if
Employee's employment had continued for a two year period following the
Involuntary Termination Date, and, if the Initial Term of the Agreement
would have continued beyond the second anniversary of the Involuntary
Termination Date, then Company shall pay to Executive a lump-sum amount on
such second anniversary equal to the amount which would have been paid to
Employee during the balance of the Initial Term if Employee's employment
had continued during such period. If Employee's employment is terminated as
a result of a voluntary termination of employment by Employee during a
Window Period, then Executive shall be entitled to receive all payments of
base salary under paragraph 3.1 (at the level set forth therein) and bonus
payments under paragraph 3.6 (at the level set forth therein) at such time
and in such manner as if Employee's employment had continued for the
balance of the Initial Term, provided that, if the Initial Term would have
continued beyond the second anniversary of the Involuntary Termination
Date, then Company shall pay to Executive a lump-sum amount on such second
anniversary equal to the amount which would have been paid to Employee
during the balance of the Initial Term if Employee's employment had
continued during such period.
(b) Employee shall be provided coverage essentially equivalent to that
under Company's Contributory and Non-Contributory Life Insurance, Health
and long-term disability plans for active employees (using Employee's
annual base salary pursuant to paragraph 4.1(a) as the compensation base
where relevant).
(c) Employee shall be paid, within 10 days after the date of such
termination, a cash amount equal to the single sum actuarial equivalent of
the incremental amount that would be paid as the Supplemental Retirement
Benefit pursuant to Section 3.8 if the amount described in clause (B) of
Section 3.8 were computed by assuming that Employee had attained an
additional three years of age and an additional three years of service
under the SERP.
The Company reserves the right to provide the benefits and payments
referred to in paragraphs 4.1(b) and 4.1(c) by making substantially equivalent
payments to or purchasing substantially equivalent benefits for Employee under
arrangements other than the plans referred to in said paragraphs if, in
Company's sole discretion, the tax or compliance status of such plans may
otherwise be jeopardized. Such equivalent payments shall be a liability of
Company, shall be paid exclusively from the general assets of Company, and shall
be an unfunded and unsecured promise to pay money in the future, unless Company
elects to otherwise fund or secure such payments.
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4.2 Involuntary Termination. As used in this Agreement, "Involuntary
Termination" or "Involuntarily Terminated" shall mean termination of Employee's
employment with Company if such termination results from:
(a) termination by Company on any grounds whatsoever except (i)
"Termination for Cause" as defined below, or (ii) termination upon
Employee's death or Permanent Disability;
(b) termination by Employee within 60 days of and in connection with
or based upon any of the following:
(i) an assignment to Employee of duties and responsibilities
inappropriate to a senior officer of the Company or PGE;
(ii) (A) a reduction in Employee's annual base salary as
established in paragraph 3.1, (B) a reduction in Employee's incentive
compensation pursuant to paragraph 3.2 or paragraph 3.6, or (C) the
failure to continue Employee's participation in any employee benefit
plan or program (except a benefit plan or program that is substantially
comparable to an existing benefit plan or program) in which Employee is
participating or is eligible to participate prior to such reduction
(other than as a result of the expiration of such plan or program),
other than such failures which are a part of a general program to reduce
employee benefits on a proportional basis relative to other employees of
Company;
(iii) a relocation required by the Company of Employee from
Portland, Oregon; or
(iv) a Change of Control of Company or PGE.
In addition, if Employee voluntarily terminates his employment during a
Window Period, such termination shall be treated as an Involuntary Termination
for all purposes of this Agreement (except as otherwise specified herein). The
Window Periods for purposes of this Agreement shall be the thirty-day periods
beginning on the second, third and fourth anniversaries of the Effective Date.
4.3 Termination for Cause. As used in this Agreement, "Termination for
Cause" shall mean termination by action of Company's Board of Directors because
of Employee's (i) conviction of a felony (which, through lapse of time or
otherwise, is not subject to appeal); or (ii) willful refusal without proper
legal cause to perform Employee's duties and responsibilities; or (iii)
willfully engaging in conduct which Employee has or should have reason to know
may be materially injurious to Company. Such termination shall be effected by
notice thereof delivered by Company to Employee and shall be effective as of the
date of such notice; provided, however, that if (A) such termination is because
of Employee's willful refusal without proper legal cause to perform any one or
more of Employee's duties and responsibilities and (B) within seven days
following the date of such notice Employee shall cease such refusal and shall
use Employee's best efforts to perform such duties and responsibilities, then
the termination shall not be effective, and, provided further, that Company
shall consult in good faith with Employee and provide a reasonable opportunity
for Employee to be heard prior to effecting any termination under (i), (ii) or
(iii) of this paragraph.
4.4 In the Event of Excess Parachute Payments. In the event that the
Severance Remuneration payable under this Agreement, or any other payment or
distribution to or for the benefit of Employee by the Company, PGC or any of
their respective Affiliates, shall constitute "excess parachute payments" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended,
and any regulations thereunder, and Employee becomes liable for any excise tax
on "excess parachute payments" and/or interest or penalties thereon (such excise
tax, interest and penalties, collectively, the "Tax Penalties"), Company shall
make a cash payment (the "Additional Payment") to Employee in an amount equal to
the Tax Penalties. In addition, Company shall make an additional cash payment to
Employee in an amount rounded to the nearest One Hundred Dollars which is
sufficient to pay Employee an amount equal to any additional income, excise and
other taxes (using the individual tax rates applicable to Employee for the year
for which such Tax Penalties are owed) for which Employee will be liable as a
result of Employee's receipt of the Additional Payment. In addition, Employee
shall be grossed up on such gross ups until the amount of last gross up is less
than One Hundred Dollars.
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ARTICLE 5: DEFINITIONS FOR AGREEMENT
For purposes of this Agreement the following terms shall have the meanings
ascribed to them below:
(a) "Affiliate" is used to indicate a relationship to a specified
person or entity and shall mean a person or entity who directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, such specified person or entity.
Affiliate shall include Affiliates of Company.
(b) "Beneficial Owner" shall be defined by reference to Rule 13(d)-3
under the Securities Exchange Act of 1934, as in effect on July 20, 1996,
provided, however, and without limitation, any individual, corporation,
partnership, group, association or other person or entity which has the
right to acquire any Voting Stock at any time in the future, whether such
right is contingent or absolute, pursuant to any agreement, arrangement or
understanding or upon exercise of conversion rights, warrants or options,
or otherwise, shall be the Beneficial Owner of such Voting Stock.
(c) "Change of Control" of Company or PGE shall mean after the
Effective Time (i) Company or PGE merges or consolidates with any other
corporation (other than Company or one of Company's wholly owned
subsidiaries) and is not the surviving corporation (or survives only as the
subsidiary of another corporation), or (ii) Company or PGE sells all or
substantially all of its assets to any other person or entity (other than
to Company or one of Company's wholly owned subsidiaries), or (iii) Company
or PGE is dissolved, or (iv) any third person or entity (other than, in the
case of PGE, Company or any wholly owned subsidiary of Company, or in the
case of PGE or Company, the trustee or committee of any qualified employee
benefit plan of Company) together with its affiliates and associates shall
become, directly or indirectly, the Beneficial Owner of at least thirty
percent (30%) of the Voting Stock of Company or PGE or (v) the individuals
who constitute the members of Company's Board of Directors ("Incumbent
Board") cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director whose election or nomination
for election by Company stockholders was approved by a vote of at least
eighty percent (80%) of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be, for purposes of this clause (v),
considered as though such person were a member of the Incumbent Board.
(d) "Change of Control Date" shall mean the day on which a Change of
Control becomes effective.
(e) "Involuntary Termination Date" shall mean Employee's last date of
employment by reason of an Involuntary Termination.
(f) "Permanent Disability" or "Permanently Disabled" shall mean such
permanent disability that qualifies Employee for benefits beyond twenty
four months of disability under Company's Long-Term Disability Plan.
(g) "Voting Stock" shall mean all outstanding shares of capital stock
entitled to vote generally in elections for directors, considered as one
class; provided, however, that if there are shares of Voting Stock entitled
to more or less than one vote for any such share, each reference to a
proportion of shares of Voting Stock shall be deemed to refer to such
proportion of the votes entitled to be cast by such shares.
ARTICLE 6: DEATH, DISABILITY OR RETIREMENT
In the event of Employee's death or Permanent Disability following
Employee's Involuntary Termination Date, Employee or Employee's legal
representatives shall be entitled to receive the balance of any unpaid amounts
payable under Article 4.
In no event will Employee or Employee's legal representatives receive
payments under Article 4 of this Agreement if Employee dies, retires, or becomes
Permanently Disabled prior to his Involuntary Termination.
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ARTICLE 7: CONFIDENTIAL INFORMATION
7.1 Company Information. Employee acknowledges that Company's business is
highly competitive and that Company's books, records and documents, Company's
technical information concerning its products, equipment, services and
processes, procurement procedures and pricing techniques, the names of and other
information (such as credit and financial data) concerning Company's customers
and business Affiliates, all comprise confidential business information and
trade secrets of Company which are valuable, special, and unique assets of
Company, which Company uses in its business to obtain a competitive advantage
over Company's competitors which do not know or use this information. Employee
further acknowledges that protection of Company's confidential business
information and trade secrets against unauthorized disclosure and use, is of
critical importance to Company in maintaining its competitive position.
Accordingly, Employee hereby agrees that he will not, at any time during or
after his employment by Company, make any unauthorized disclosure of any
confidential business information or trade secrets of Company, or make any use
thereof, except for the benefit of, and on behalf of Company. For the purposes
of this paragraph, the term "Company" shall also include Affiliates of Company.
ARTICLE 8: MISCELLANEOUS
8.1 Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
<TABLE>
<S> <C>
If to Company to: Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Corporate Secretary
If to Employee to:
or to such other address as either party may furnish to the
other in writing in accordance herewith, except that notices
of changes of address shall be effective only upon receipt.
</TABLE>
8.2 Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas, without giving
effect to the principles of conflict of laws.
8.3 No Duty to Seek Employment. Employee shall not be under any duty or
obligation to seek or accept other employment following termination and no
amount, payment or benefit due Employee hereunder or otherwise shall be reduced
or suspended if Employee accepts subsequent employment.
8.4 No Waiver. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
8.5 Remedy for Breach of Contract. (a) The parties agree that in the event
there is any breach or asserted breach of the terms, covenants or conditions of
this Agreement, the remedy of Company shall be in law and in equity and
injunctive relief also shall lie for the enforcement of or relief from any
provisions of this Agreement.
(b) The sole and exclusive remedy of Employee shall be limited to the
enforcement of the provisions of this Agreement. Employee agrees that he will
receive sufficiently higher consideration under this Agreement than he would
otherwise receive if he did not agree to this provision. Employee understands
the effect of the provisions of this Section 8.5, he has had reasonable time to
consider the effect thereof, and he was encouraged and had an opportunity to
consult an attorney with respect thereto.
(c) If any eligible remedy or relief is sought and obtained by either party
pursuant to this Section 8.5, the other party shall, in addition to the remedy
of relief so obtained, be liable for the expenses incurred by the
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successful party in obtaining such remedy or relief, including costs of court
and the fees and expenses of the successful party's counsel.
8.6 Severability. It is a desire and intent of the parties that the terms,
provisions, covenants and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by Law. If any such term, provision,
covenant or remedy of this Agreement or the application thereof to any person or
circumstances shall to any extent, be construed to be invalid or unenforceable
in whole or in part, then such term, provision, covenant or remedy shall be
construed in a manner so as to permit its enforceability under the applicable
law to the fullest extent permitted by law. In any case, the remaining
provisions of this Agreement or the application thereof to any person or
circumstances other than those to which they have been held invalid or
unenforceable, shall remain in full force and effect.
8.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
8.8 Withholding of Taxes. Company may withhold, from any benefits payable
under this Agreement all federal, state, city or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
8.9 Headings. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.
8.10 Successors and Assignment. This Agreement automatically shall be
binding upon any corporation or other entity which may hereafter acquire or
succeed to all or substantially all of the business or assets of Company by any
means whether direct or indirect, by purchase, merger, consolidation or
otherwise. As used in this paragraph 8.10, "Company" shall mean Company as
defined in the preamble to this agreement and any successor to its business or
assets by operation of law or otherwise. With respect to employee's rights and
obligations, Employee's rights and obligations hereunder are personal and
neither this Agreement, nor any right, benefit or obligation of Employee, shall
be subject to voluntary or involuntary assignment, alienation or transfer,
whether by operation of law or otherwise, without the prior written consent of
Company. This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
8.11 Entire Agreement; Modification. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, supersedes
any and all prior agreements with respect to Employee's employment by Company or
an Affiliate except as provided in this Agreement, and contains all of the
covenants, promises, representations, warranties and agreements between the
parties with respect to employment of Employee by Company. Each party to this
Agreement acknowledges that no representation, inducement, promise or agreement,
oral or written, has been made by either party, which is not embodied herein,
and that no agreement, statement, or promise relating to the employment of
Employee by Company, which is not contained in this Agreement shall be valid or
binding. Any modification of this Agreement will be effective only if it is in
writing and signed by both parties. This Agreement does not revoke or cancel any
employee benefits or compensation earned or accrued by or vested in Employee as
of the effective date of this Agreement and which are attributable to Employee's
prior employment by Company or an Affiliate.
8.12 Non-competition. As part of the consideration for the compensation to
be paid to Employee hereunder, and as an additional incentive for Company to
enter into this Agreement, Company and Employee agree to the non-competitive
provisions of this Section 8.12. Upon termination of employment for any reason,
Employee agrees that until the first to occur of (x) the date upon which the
Initial Term of this Agreement would have ended had employment of Employee not
terminated and (y) the second anniversary of the date of termination of
employment, Employee will not, directly or indirectly for himself or for others,
in any state of the United States or in any foreign country where Company or any
of its Affiliates is then conducting any business, or has, during the previous
twelve (12) months, conducted any business:
(i) engage in any business similar or related to or competitive with
the business conducted by PGC or any Affiliate of PGC immediately before
the Effective Time, or any other area of business of Company
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or any Affiliate with which Employee has material involvement during the
two-year period immediately before the termination of his employment (the
"Core Business");
(ii) render advice or services to, or otherwise assist, any other
person or entity who is engaged, directly or indirectly, in any business
similar or related to, or competitive with, the Core Business conducted by
Company or any Affiliate;
(iii) transact any business in any manner pertaining to suppliers or
customers in Company or any Affiliate which, in any manner, would have, or
is likely to have, an adverse effect upon Company or any Affiliate; or
(iv) induce any employee of Company or any Affiliate to terminate his
or her employment with Company or such Affiliate.
Employee understands that the foregoing restrictions may limit Employee's
ability to engage in a business similar to Company's Core Business anywhere in
the world during the period provided for above, but acknowledges that Employee
will receive sufficiently higher remuneration and other benefits from Company
hereunder than he would otherwise receive, to justify such restriction. Employee
understands the effect of the provisions of this Section 8.12, he has had
reasonable time to consider the effect thereof, and he was encouraged and had an
opportunity to consult an attorney with respect thereto. Company shall be
entitled to enforce the provisions of this Section 8.12 by terminating any
payments then owing to Employee under this Agreement and by resorting to
appropriate legal and equitable action.
It is expressly understood and agreed that Company and Employee consider
the restrictions contained in this Section 8.12 to be reasonable and necessary.
Nevertheless, if any of the aforesaid restrictions are found by a court having
jurisdiction to be unreasonable, or over broad as to geographic area or time, or
otherwise unenforceable, the parties intend for the restrictions herein set
forth to be modified by such court so as to be reasonable and enforceable and,
as so modified by the court, to be fully enforced.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
ENRON CORP.
By: /s/ EDMUND P. SEGNER III
------------------------------------
Title: Executive Vice President
and Chief of Staff
JOSEPH M. HIRKO
/s/ JOSEPH M. HIRKO
--------------------------------------
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ANNEX E
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ENRON OREGON CORP.
---------------------
ARTICLE I
The name of this corporation is Enron Oregon Corp. (herein, the
"Corporation").
ARTICLE II
The address of the registered office of this Corporation in the State of
Oregon is 520 S.W. Yamhill, Suite 800, Portland, Oregon 97204, and the name of
its resident agent at such address is CT Corporation System. The mailing address
of this Corporation at which notices may be delivered pursuant to the Oregon
Business Corporation Act is c/o CT Corporation System, 520 S.W. Yamhill, Suite
800, Portland, Oregon 97204.
ARTICLE III
The nature of the business or purposes to be transacted, promoted or
carried on by this Corporation is to engage in any lawful business or activity
for which corporations may lawfully be organized under the laws of the State of
Oregon.
ARTICLE IV
The total number of shares of all classes of stock which this Corporation
shall have authority to issue is 616,500,000 shares of capital stock, of which
16,500,000 shares are Preferred Stock (the "Preferred Stock"), and 600,000,000
shares are Common Stock (the "Common Stock").
The following is a statement fixing certain of the preferences, limitations
and relative rights of the Preferred Stock and the Common Stock, and the
authority with respect thereto expressly granted to the Board of Directors of
the Corporation to fix any such provisions not fixed by these Articles of
Incorporation:
A. PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of the Corporation (or, to the extent permitted by law, a
duly authorized committee thereof) is hereby expressly vested with the
authority, without shareholder approval, to adopt from time to time an amendment
or amendments to these Articles of Incorporation to establish, in the manner
provided by and to the fullest extent now or hereafter permitted by the Oregon
Business Corporation Act, series of the Preferred Stock and to determine, in the
sole discretion of the Board of Directors, the preferences, limitations and
relative rights of each such series, including without limitation the following:
(1) The distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased
(except as otherwise provided by the Board of Directors in creating such
series) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of Directors;
(2) The dividend rate on the shares of that series, whether such
dividends, if any, shall be cumulative, and, if so, the date or dates from
which dividends payable on such shares shall accumulate, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
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(3) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(4) Whether that series shall have conversion privileges with respect
to shares of any other class or classes of stock or of any other series of
any class of stock, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate upon
occurrence of such events as the Board of Directors shall determine;
(5) Whether the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including their relative
rights of priority, if any, of redemption, the date or dates upon or after
which they shall be redeemable, provisions regarding redemption notices,
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;
(6) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
(7) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution, or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of that
series;
(8) The conditions or restrictions upon the creation of indebtedness
of the Corporation or upon the issuance of additional Preferred Stock or
other capital stock ranking on a parity therewith, or prior thereto, with
respect to dividends or distribution of assets upon liquidation;
(9) The conditions or restrictions with respect to the issuance of,
payment of dividends upon, or the making of other distributions to, or the
acquisition or redemption of, shares ranking junior to the Preferred Stock
or to any series thereof with respect to dividends or distribution of
assets upon liquidation; and
(10) Any other designations, powers, preferences, and rights,
including, without limitation, any qualifications, limitations, or
restrictions thereof.
Except as shall be determined by the Board of Directors or its committee as
permitted hereby in establishing the terms of a series of Preferred Stock, all
shares of Preferred Stock shall be of equal rank and shall be identical. All
shares of any particular series of Preferred Stock so designated by the Board of
Directors shall be alike in every particular, except that shares of any
particular series issued at different times may differ as to the dates from
which dividends thereon shall be cumulative.
B. COMMON STOCK
Subject to the terms of any Preferred Stock, the Board of Directors may, in
its discretion, out of funds legally available for the payment of dividends and
at such times and in such manner as determined by the Board of Directors,
declare and pay dividends on the Common Stock. No dividend (other than a
dividend in capital stock ranking on a parity with the Common Stock with respect
to the payment of dividends or cash in lieu of fractional shares with respect to
such stock dividend) shall be declared or paid on any share or shares of any
class of stock or series thereof ranking on a parity with the Common Stock in
respect of payment of dividends for any dividend period unless there shall have
been declared, for the same dividend period, like proportionate dividends on all
shares of Common Stock then outstanding.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation and payment or
setting aside for payment of any preferential amount due to the holders of any
other class or series of stock, the holders of the Common Stock shall be
entitled to receive ratably any or all assets remaining to be paid or
distributed.
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Subject to any special voting rights of any Preferred Stock, the holders of
the Common Stock of the Corporation shall be entitled to one vote for each share
of such stock held by them on all matters submitted to a vote or consent of the
shareholders.
C. NO PREEMPTIVE RIGHTS
No holder of shares of stock of the Corporation shall have any preemptive
or other rights to acquire the Corporation's unissued shares, except as such
rights are expressly provided by contract or in the terms of any series of
Preferred Stock established hereunder.
D. SHAREHOLDER ACTION BY WRITTEN CONSENT
If the Corporation's shareholders are permitted by law to take any action
required or permitted to be taken at a shareholders' meeting without a meeting,
such action must be evidenced by one or more written consents describing the
action taken, signed by all the shareholders entitled to vote on the action and
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records.
ARTICLE V
A. BUSINESS TRANSACTIONS WITH RELATED PERSONS
In addition to the requirements of the provisions of any series of
Preferred Stock which may be outstanding, and whether or not a vote of the
shareholders is otherwise required, the affirmative vote of the holders of not
less than eighty percent (80%) of the Voting Stock shall be required for the
approval or authorization of any Business Transaction with a Related Person, or
any Business Transaction in which a Related Person has an interest (except
proportionately as a shareholder); provided, however, that the eighty percent
(80%) voting requirement shall not be applicable if either (i) the Continuing
Directors, who at the time constitute at least a majority of the entire Board of
Directors of the Corporation, have expressly approved the Business Transaction
by at least an eighty percent (80%) vote of such Continuing Directors, (ii) the
Business Transaction occurs more than five years after the last acquisition of
Voting Stock by the Related Person, or (iii) all of the following conditions are
satisfied:
(1) The Business Transaction is a merger or consolidation or sale of
substantially all of the assets of the Corporation, and the cash or fair
market value of the property, securities or other consideration to be
received per share by holders of Common Stock of the Corporation (other
than such Related Person) in the Business Transaction is at least equal in
value to such Related Person's Highest Purchase Price; provided, however,
that if such Business Transaction is effected more than nine months after
the last date upon which such Related Person paid the Highest Purchase
Price, the consideration to be received per share by holders of Common
Stock of the Corporation (other than such Related Person) in such Business
Transaction shall be at least equal in value to such Related Person's
Adjusted Purchase Price;
(2) After such Related Person has become the Beneficial Owner of not
less than ten percent (10%) of the Voting Stock of the Corporation and
prior to the consummation of such Business Transaction, such Related Person
shall not have become the Beneficial Owner of any additional shares of
Voting Stock or securities convertible into Voting Stock, except (i) as a
part of the transaction which resulted in such Related Person becoming the
Beneficial Owner of not less than ten percent (10%) of the Voting Stock or
(ii) as a result of a pro rata stock dividend or stock split; and
(3) Prior to the consummation of such Business Transaction, such
Related Person shall not have, directly or indirectly, (i) received the
benefit (except proportionately as a shareholder) of any loans, advances,
guarantees, pledges or other financial assistance or tax credits provided
by the Corporation or any of its subsidiaries, or (ii) caused any material
change in the Corporation's business or equity capital structure,
including, without limitation, the issuance of shares of capital stock of
the Corporation.
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B. DEFINITIONS
For the purpose of this Article V:
(1) The term "Business Transaction" shall mean (a) any merger or
consolidation involving the Corporation or a subsidiary of the Corporation,
(b) any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of transactions), including without limitation a
mortgage or any other security device, of all or any Substantial Part of
the assets either of the Corporation or of a subsidiary of the Corporation,
(c) any sale, lease, exchange, transfer or other disposition of all or any
Substantial Part of the assets of an entity to the Corporation or a
subsidiary of the Corporation, (d) the issuance, sale, exchange, transfer
or other disposition by the Corporation or a subsidiary of the Corporation
of any securities of the Corporation or any subsidiary of the Corporation,
(e) any recapitalization or reclassification of the Corporation's
securities (including without limitation, any reverse stock split) or other
transaction that would have the effect of increasing the voting power of a
Related Person, (f) any liquidation, spinoff, splitoff, splitup or
dissolution of the Corporation, and (g) any agreement, contract or other
arrangement providing for any of the transactions described in this
definition of Business Transaction.
(2) The term "Related Person" shall mean and include (a) any
individual, corporation, partnership, group, association or other person or
entity which, together with its Affiliates and Associates, is the
Beneficial Owner of not less than ten percent (10%) of the Voting Stock of
the Corporation or was the Beneficial Owner of not less than ten percent
(10%) of the Voting Stock of the Corporation (i) at the time the definitive
agreement providing for the Business Transaction (including any amendment
thereof) was entered into, (ii) at the time a resolution approving the
Business Transaction was adopted by the Board of Directors of the
Corporation, or (iii) as of the record date for the determination of
shareholders entitled to notice of and to vote on, or consent to, the
Business Transaction, and (b) any Affiliate or Associate of any such
individual, corporation, partnership, group, association or other person or
entity; provided, however, and notwithstanding anything in the foregoing to
the contrary, the term "Related Person" shall not include the Corporation,
a wholly owned subsidiary of the Corporation, any employee stock ownership
or other employee benefit plan of the Corporation or any wholly owned
subsidiary of the Corporation, or any trustee of, or fiduciary with respect
to, any such plan when acting in such capacity.
(3) The term "Beneficial Owner" shall be defined by reference to Rule
13d-3 under the Securities Exchange Act of 1934, as in effect on February
1, 1984; provided, however, and without limitation, any individual,
corporation, partnership, group, association or other person or entity
which has the right to acquire any Voting Stock at any time in the future,
whether such right is contingent or absolute, pursuant to any agreement,
arrangement or understanding or upon exercise of conversion rights,
warrants or options, or otherwise, shall be the Beneficial Owner of such
Voting Stock.
(4) The term "Highest Purchase Price" shall mean the highest amount of
consideration paid by such Related Person for a share of Common Stock of
the Corporation (including any brokerage commissions, transfer taxes and
soliciting leaders' fees) in the transaction which resulted in such Related
Person becoming a Related Person or within one year prior to the date such
Related Person became a Related Person; provided, however, that the Highest
Purchase Price shall be appropriately adjusted to reflect the occurrence of
any reclassification, recapitalization, stock split, reverse stock split,
withholding of dividends or other readjustments in the number of
outstanding shares of Common Stock of the Corporation, or the declaration
of a stock dividend thereon, between the last date upon which such Related
Person paid the Highest Purchase Price to the effective date of the merger
or consolidation or the date of distribution to shareholders of the
Corporation of the proceeds from the sale of substantially all of the
assets of the Corporation referred to in Section A (1) of this Article V
during the Relevant Period.
(5) The term "Relevant Period" shall mean the period which runs from
the last date upon which such Related Person paid the Highest Purchase
Price for a share of Common Stock of the Corporation to the effective date
of the merger or consolidation or the date of distribution of shareholders
of the Corporation of the proceeds from the sale of substantially all the
assets of the Corporation referred to in Section A (1) of this Article V.
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(6) The term "Adjusted Purchase Price" shall mean that amount which
would result from increasing such Related Person's Highest Purchase Price
during the Relevant Period at an annual rate equal to one-hundred ten
percent (110%) of the arithmetic average of the weekly per annum market
discount rates for three-month U.S. Treasury bills during such Relevant
Period, as published by the Board of Governors of the Federal Reserve
System; provided, however, that in respect of any portion of the Relevant
Period during which the Corporation cannot determine the annual rate of
increase in the foregoing manner, the annual rate of increase shall be
deemed to be ten percent (10%); and provided further that the amount of the
increase in such Related Person's Highest Purchase Price which would occur
as a result of the foregoing provision shall be reduced by the aggregate of
the regular quarterly cash dividends paid per share of Common Stock during
the Relevant Period.
(7) The term "Substantial Part" shall mean more than twenty percent
(20%) of the fair market value of the total assets of the entity in
question, as reflected on the most recent consolidated balance sheet of
such entity existing at the time the shareholders of the Corporation would
be required to approve or authorize the Business Transaction involving the
assets constituting any such Substantial Part.
(8) In the event of a merger in which the Corporation is the surviving
corporation, for the purpose of Section A (1) of this Article V, the phrase
"property, securities or other consideration to be received" shall include,
without limitation, Common Stock of the Corporation retained by its
existing shareholders (other than such Related Person).
(9) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election
of directors, considered for the purpose of this Article V as one class;
provided, however, that if the Corporation has shares of Voting Stock
entitled to more or less than one vote for any such share, each reference
in this Article V to a proportion of shares of Voting Stock shall be deemed
to refer to such proportion of the votes entitled to be cast by such
shares.
(10) The term "Continuing Director" shall mean a director who either
was a member of the Board of Directors of the Corporation prior to the time
such Related Person became a Related Person or who subsequently became a
director of the Corporation and whose election, or nomination for election
by the Corporation's shareholders, was approved by a vote of at least
eighty percent (80%) of the Continuing Directors then on the Board, either
by a specific vote or by approval of the proxy statement issued by the
Corporation on behalf of the Board of Directors in which such person is
named as nominee for director, without an objection to such nomination;
provided, however, that in no event shall a director be considered a
"Continuing Director" if such director is a Related Person and the Business
Transaction to be voted upon is with such Related Person or is one in which
such Related Person otherwise has an interest (except proportionately as a
shareholder of the Corporation).
(11) The term "Affiliate," used to indicate a relationship to a
specified person, shall mean a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, such specified person.
(12) The term "Associate," used to indicate a relationship with a
specified person, shall mean (a) any corporation, partnership or other
organization of which such specified person is an officer or partner or is,
directly or indirectly, the Beneficial Owner of ten percent (10%) or more
of any class of equity securities, (b) any trust or other estate in which
such specified person has a substantial beneficial interest or as to which
such specified person serves as trustee or in a similar fiduciary capacity,
(c) any relative or spouse of such specified person, or any relative of
such spouse, who has the same home as such specified person or who is a
director or officer of the Corporation or any of its parents or
subsidiaries, and (d) any person who is a director or officer of such
specified person or any of its parents or subsidiaries (other than the
Corporation or any wholly owned subsidiary of the Corporation).
C. DETERMINATION BY BOARD OF DIRECTORS
For the purpose of this Article V, if the Continuing Directors constitute
at least a majority of the entire Board of Directors, then eighty percent (80%)
of such Continuing Directors shall have the power to make a
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good faith determination, on the basis of information known to them, of: (i) the
number of shares of Voting Stock of which any person is the Beneficial Owner,
(ii) whether a person is an Affiliate or Associate of another, (iii) whether a
person has an agreement, arrangement or understanding with another as to the
matters referred to in the definition of Beneficial Owner herein, (iv) whether
the assets subject to any Business Transaction constitute a Substantial Part,
(v) whether any Business Transaction is one in which a Related Person has an
interest (except proportionately as a shareholder), (vi) whether a Related
Person has, directly or indirectly, received the benefits or caused any of the
changes referred to in Section A (3) of this Article V, and (vii) such other
matters with respect to which a determination is required under this Article V.
D. FIDUCIARY DUTIES
Nothing contained in this Article V shall be construed to relieve any
Related Person from any fiduciary obligation imposed by law.
E. AMENDMENT
Notwithstanding any other provisions of these Articles of Incorporation or
the Bylaws of the Corporation (and notwithstanding that a lesser percentage may
be specified by law, these Articles of Incorporation or the Bylaws of the
Corporation), the provisions of this Article V may not be repealed or amended in
any respect, nor may any provision be adopted inconsistent with this Article V,
unless such action is approved by the affirmative vote of the holders of not
less than eighty percent (80%) of the Voting Stock.
ARTICLE VI
The number of directors of the Corporation shall be determined as specified
in the Bylaws of the Corporation. No shareholder of the Corporation shall have
any right to cumulate votes in the election of directors.
ARTICLE VII
A. PERSONAL LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
any unlawful distribution under Oregon Revised Statutes Section 60.367, or (iv)
for any transaction from which the director derived an improper personal
benefit. Any repeal or amendment of this provision by the shareholders of the
Corporation shall be prospective only and shall not adversely affect any
limitation on the liability of a director of the Corporation existing at the
time of such repeal or amendment. In addition to the circumstances in which a
director of the Corporation is not liable as set forth in the foregoing
provisions, a director shall not be liable to the fullest extent permitted by
any provisions of the statutes of Oregon hereafter enacted that further limits
the liability of a director.
B. INDEMNIFICATION
(1) Each person who was or is made a party to, 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 which
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, partner, trustee, 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, partner, trustee, employee or agent or in any other capacity while
serving as a director, officer, partner, trustee, employee or agent, shall
be indemnified and held harmless by the Corporation to the fullest
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extent authorized by the Oregon Business Corporation Act, as the same
exists or may hereafter be amended (but, in the case of any such
amendments, 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 serve
in a capacity to which the above indemnification applies and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that, except as provided in paragraph (2) hereof, the Corporation
shall indemnify any such person seeking indemnification in connection with
a proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Section
shall be a contract right and shall include the right to be paid by the
Corporation for expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Oregon
Business Corporation Act 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 a
written affirmation of the director or officer's good faith belief that
such director has met the standard of conduct described in Oregon Revised
Statutes Section 60.391 and of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall
ultimately to 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 not covered by the foregoing with the same scope
and effect as the foregoing indemnification of directors and officers.
(2) If a claim under paragraph B (1) of this Article VII 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 Oregon Business
Corporation Act 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 shareholders) 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 Oregon Business
Corporation Act, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its shareholders)
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.
(3) 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 Articles of
Incorporation, bylaw, agreement, vote of shareholders or disinterested
directors or otherwise.
(4) 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 Oregon Business Corporation Act.
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ARTICLE VIII
The provisions of the Oregon Control Share Act (Oregon Revised Statutes
Sections 60.801-60.816) shall not be applicable to acquisitions of voting shares
of the Corporation.
ARTICLE IX
The Corporation shall have the right, subject to any express provisions or
restrictions contained in the Articles of Incorporation or Bylaws of the
Corporation, from time to time, to amend the Articles of Incorporation or any
provision thereof in any manner now or hereafter provided by law, and all rights
and powers of any kind conferred upon a shareholder of the Corporation by the
Articles of Incorporation or any amendment thereof are conferred subject to such
right.
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ANNEX F
FORM OF
STATEMENT OF RESOLUTIONS ESTABLISHING
A SERIES OF PREFERRED STOCK OF
ENRON OREGON CORP.
---------------------
CUMULATIVE SECOND PREFERRED CONVERTIBLE STOCK
---------------------
Pursuant to Oregon Revised Statutes Section 60.134 and Article IV of the
Articles of Incorporation, as amended, of Enron Oregon Corp. (the
"Corporation"), the Board of Directors of the Corporation has duly adopted the
following resolutions on , 199 , establishing a series of Preferred
Stock of the Corporation:
RESOLVED, that there is hereby established a series of the Preferred Stock
of the Corporation designated the Cumulative Second Preferred Convertible Stock
(herein referred to as the "Convertible Preferred Stock"). The designation and
number of shares of such series and the powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof (in addition to those set forth in the
Articles of Incorporation, as amended, that may be applicable to such series)
are as follows:
A. Definitions. Capitalized terms used but not defined herein shall have
the meaning ascribed thereto in the Corporation's Articles of Incorporation, as
amended. In addition, the following terms shall have the following meanings when
used herein:
(1) The term "accrued dividends" for a share shall mean an amount
computed at the annual dividend rate on such share from the date on which
dividends on such share become cumulative to and including the date to
which such dividends are to be accrued, less the aggregate amount of all
dividends theretofore paid thereon.
(2) The term "junior stock" shall mean, with respect to paragraphs C
and G, the Common Stock and any other class or series of stock of the
Corporation not entitled to receive any dividends unless all dividends
required to have been paid or declared and set apart for payment on the
Convertible Preferred Stock shall have been so paid or declared and set
apart for payment and, with respect to paragraphs D and G, any class or
series of stock of the Corporation not entitled to receive any assets upon
the liquidation, dissolution or winding up of the affairs of the
Corporation until the Convertible Preferred Stock shall have received the
entire amount to which such stock is entitled upon such liquidation,
dissolution or winding up.
(3) The term "parity stock" (and references to shares ranking "on a
parity with" the Convertible Preferred Stock) shall refer to, with respect
to paragraphs C and G, any class or series of stock of the Corporation
entitled to receive payment of dividends on a parity with the Convertible
Preferred Stock and, with respect to paragraphs D and G, any class or
series of stock of the Corporation entitled to receive assets upon the
liquidation, dissolution or winding up of the affairs of the Corporation on
a parity with the Convertible Preferred Stock. The Corporation's 9.142%
Perpetual Second Preferred Stock shall be parity stock with respect to the
Convertible Preferred Stock.
(4) The term "senior stock" (and references to shares ranking "senior
to" or "prior to" the Convertible Preferred Stock) shall refer to, with
respect to paragraph C, any class or series of stock of the Corporation
ranking senior to the Convertible Preferred Stock in respect of the right
to receive dividends and, with respect to paragraph D, any class or series
of stock of the Corporation ranking senior to the Convertible Preferred
Stock with respect to the right to receive assets upon the liquidation,
dissolution or winding up of the affairs of the Corporation.
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(5) The term "sinking fund" shall mean any fund or requirement for the
periodic retirement of shares.
B. Designation. The distinctive designation of the series shall be the
"Cumulative Second Preferred Convertible Stock." The number of shares that shall
constitute such series shall be [1,367,671](1) shares, which number shall not be
increased.
C. Dividends.
(1) The holders of the Convertible Preferred Stock, in preference to
the rights of holders of any junior stock but subject to the rights of any
senior stock, shall be entitled to receive, as and when declared by the
Board of Directors out of any funds legally available therefor, cash
dividends, at an annual rate equal to a variable amount equal to the higher
of (a) $10.50 per share and (b) the equivalent dividend that would be paid
if shares of the Convertible Preferred Stock were converted to Common
Stock, and no more, payable quarterly on the first days of January, April,
July and October, respectively, in each year, with respect to the quarterly
period ending on the day preceding each such respective payment date,
except that the first dividend after the issuance of shares of Convertible
Preferred Stock pursuant to the merger of Enron Corp., a Delaware
corporation ("Old Enron"), with and into the Corporation, shall be paid in
respect of the period from the end of the last quarterly dividend period on
shares of the Cumulative Second Preferred Convertible Stock of Old Enron
for which dividends were paid in full (the "Initial Dividend Period"). Such
dividends shall be cumulative from and shall accrue on all shares of the
Convertible Preferred Stock from the beginning of the Initial Dividend
Period.
(2) No dividend shall be paid upon, or declared or set apart for, any
share of Convertible Preferred Stock or shares ranking on parity with the
Convertible Preferred Stock for any quarterly dividend period unless at the
same time a like proportionate dividend for the same quarterly dividend
period, ratably in proportion to the respective annual dividend rates fixed
therefor, shall be paid upon, or declared and set apart for, all shares of
Convertible Preferred Stock and any Preferred Stock ranking on parity with
the Convertible Preferred Stock that are entitled to such dividends.
(3) In no event, so long as any shares of Convertible Preferred Stock
shall be outstanding, shall any dividend, whether in cash or property, be
paid or declared, nor shall any distribution be made, on any junior stock,
nor shall any shares of any junior stock be purchased, redeemed or
otherwise acquired for value by the Corporation, nor shall the Corporation
permit any distribution to be made or shares purchased, redeemed or
otherwise acquired by any subsidiary, unless all dividends on the
Convertible Preferred Stock for all past quarterly dividend periods and for
then current quarterly period shall have been paid or declared and a sum
sufficient for the payment thereof set apart. The foregoing provisions of
this subparagraph (3) shall not, however, apply to a dividend payable in
any junior stock, or to the acquisition of shares of any junior stock in
exchange for, or through application of the proceeds of the sale of, shares
of any other junior stock.
D. Liquidation Preference.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, then, before any distribution or
payments shall be made to the holders of any junior stock, but subject to the
rights of any senior stock or parity stock, the holders of the Convertible
Preferred Stock shall be entitled to be paid in full the amount of $100 per
share, together with accrued dividends to the date of such distribution or
payment, whether or not earned or declared. If such payment shall have been made
in full to the holders of the Convertible Preferred Stock (and senior and parity
stock), the remaining assets and funds of the Corporation shall be distributed
among the holders of the junior stock, according to their respective rights and
preferences and in each case according to their respective shares. If, upon any
liquidation, dissolution or winding up of the affairs of the Corporation, the
amounts so payable are not paid in full to the holders of all outstanding shares
of Convertible Preferred Stock and parity stock, the holders of the Convertible
Preferred
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1 To be revised to reflect the appropriate number of shares at the time of
filing.
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Stock, together with holders of parity stock, shall share ratably in any
distribution of assets in proportion to the full amounts to which they would
otherwise be respectively entitled. Neither the consolidation or merger of the
Corporation, nor the sale, lease or conveyance of all or a part of its assets,
shall be deemed a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of the foregoing provisions of this paragraph D
or paragraph G hereof.
E. Redemption.
(1) Subject to the provisions of subparagraph G(2)(a)(iv), the
Corporation shall have the right to redeem any and all of the Convertible
Preferred Stock at any time at the redemption price of $100 per share,
together with accrued dividends to the date of distribution or payment,
whether or not earned or declared; provided, however, that the Corporation
shall not have the right to redeem any shares of the Convertible Preferred
Stock pursuant to this paragraph E unless the current market price per
Common Share (as defined in subparagraph F(4) below) has been for at least
30 consecutive Trading Days (as defined in subparagraph F(4) below) at
least 150% of the amount calculated by dividing $100 by the number of
Common Shares into which one share of the Convertible Preferred Stock is
then convertible pursuant to the provisions of paragraph F below.
(2) If less than all the outstanding shares of Convertible Preferred
Stock are to be redeemed, the shares to be redeemed shall be determined by
lot or pro rata in such manner as the Board of Directors may prescribe.
(3) Notice of every redemption of Convertible Preferred Stock shall be
mailed, addressed to the holders of record of the shares to be redeemed at
their respective addresses as they shall appear on the stock books of the
Corporation (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the proceedings for such
redemption) and notice shall also be published at least once in one daily
newspaper printed in the English language and published and of general
circulation in the Borough of Manhattan, The City of New York, the first
publication and such mailing to be at least thirty days and not more than
sixty days prior to the date fixed for redemption.
(4) If notice of redemption shall have been duly published as may be
required herein and if, on or before the redemption date specified in the
notice, the redemption price, together with accrued dividends to the date
fixed for redemption, whether or not earned or declared, shall have been
set aside by the Corporation, separate and apart from its other funds, in
trust for the pro rata benefit of the holders of the shares so called for
redemption, so as to be and continue to be available therefor, then, from
and after the date of redemption so designated, notwithstanding that any
certificate for shares of Convertible Preferred Stock so called for
redemption shall not have been surrendered for cancellation, the shares
represented thereby shall no longer be deemed outstanding, the dividends
thereon shall cease to accumulate, and all rights with respect to the
shares of Convertible Preferred Stock so called for redemption shall
forthwith on the redemption date cease and terminate, except only the right
of the holders thereof to receive the redemption price of the shares so
redeemed, including accrued dividends to the redemption date, but without
interest.
(5) The Corporation may also, at any time prior to the redemption
date, deposit in trust, for the account of the holders of the Convertible
Preferred Stock to be redeemed, with a bank or trust company in good
standing, organized under the laws of the United States of America or of
the State of New York doing business in the Borough of Manhattan, The City
of New York having capital, surplus and undivided profits aggregating at
least Five Million Dollars ($5,000,000), designated in the notice of
redemption, the redemption price, together with accrued dividends to the
date fixed for redemption, whether or not earned or declared, and, unless
the notice of redemption herein provided for has previously been duly
mailed and published, deliver irrevocable written instructions directing
such bank or trust company, on behalf and at the expense of the
Corporation, to cause notice of redemption specifying the date of
redemption to be duly mailed and publication of the notice to be made as
herein provided promptly upon receipt of such irrevocable instructions.
Upon such deposit in trust, either after due mailing and publication of the
notice of redemption or accompanied by irrevocable instructions as provided
above, notwithstanding that any certificate for shares of Convertible
Preferred Stock so called
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for redemption shall not have been surrendered for cancellation, all shares
of Convertible Preferred Stock with respect to which the deposit shall have
been made shall no longer be deemed to be outstanding, and all rights with
respect to such shares of Convertible Preferred Stock shall forthwith cease
and terminate except only the right of the holders thereof to receive from
such bank or trust company, at any time after the time of the deposit, the
redemption price, including accrued dividends to the redemption date,
whether or not earned or declared, but without interest, of the shares so
to be redeemed, and the right to exercise, on or before the date fixed for
redemption, privileges of conversion or exchange, if any, not theretofore
expiring.
(6) Any moneys deposited by the Corporation pursuant to this paragraph
E which shall not be required for the redemption because of the exercise of
any such right of conversion or exchange subsequent to the date of the
deposit shall be repaid to the Corporation forthwith. Any other moneys
deposited by the Corporation pursuant to this paragraph E and unclaimed at
the end of six years from the date fixed for redemption shall be repaid to
the Corporation upon its request expressed in a resolution of its Board of
Directors, after which repayment the holders of the shares so called for
redemption shall look only to the Corporation for the payment thereof.
F. Conversion Rights.
(1) Each share of the Convertible Preferred Stock shall be convertible
at any time at the option of the holder thereof into fully paid and
non-assessable shares of Common Stock (the "Common Shares") of the
Corporation at the conversion rate, determined as hereinafter provided, in
effect at the time of conversion. The rate at which Common Shares shall be
delivered upon conversion of shares of the Convertible Preferred Stock
(herein called the "Conversion Rate") shall be initially [13.652](2) Common
Shares for each share of Convertible Preferred Stock. The Conversion Rate
shall be subject to adjustment as provided for below. Upon conversion no
allowance or adjustment shall be made for dividends on either class of
stock.
(2) In order to convert shares of the Convertible Preferred Stock into
Common Shares, the holder thereof shall surrender at the office of any
transfer agent for the Convertible Preferred Stock the certificate or
certificates therefor, duly endorsed to the Corporation or in blank or
accompanied by appropriate instruments of transfer to the Corporation or in
blank, and give written notice to the Corporation at said office that he
elects to convert such shares. Shares of the Convertible Preferred Stock
shall be deemed to have been converted immediately prior to the close of
business on the date of surrender of such shares for conversion in
accordance with the foregoing provisions (the "Conversion Date"), and the
person or persons entitled to receive the Common Shares issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such Common Shares at such time. As promptly as practicable
after the Conversion Date, the Corporation shall issue and deliver at said
office the certificate or certificates for the number of full Common Shares
issuable upon such conversion, together with a cash payment in lieu of any
fraction of a Common Shares, as hereinafter provided, to the person or
persons entitled to receive the same or to the nominee or nominees of such
person or persons. In case shares of the Convertible Preferred Stock are
called for redemption pursuant to paragraph E, the right to convert such
shares shall cease and terminate at the close of business on the date fixed
for redemption unless default shall be made in the payment of the
redemption price.
(3) The Conversion Rate shall be adjusted from time to time as
follows:
(a) In case the Corporation shall (i) pay a dividend on its Common
Shares in other Common Shares, (ii) subdivide its outstanding Common
Shares, (iii) combine its outstanding Common shares into a smaller
number of Common Shares, or (iv) issue by reclassification of its Common
Shares any other shares of the Corporation (including in connection with
a merger in which the Corporation is a surviving corporation), the
Conversion Rate in effect at the time of the record date for such
dividend or the effective date of such subdivision, combination or
reclassification shall be
- ---------------
2 To be updated to reflect the appropriate conversion rate at the time of
filing.
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proportionately adjusted so that the holder of each share of the
Convertible Preferred Stock converted after such time shall be entitled
to receive the aggregate number and kind of shares which, if such share
of the Convertible Preferred Stock had been converted immediately prior
to such time, the holder would have owned upon such conversion and been
entitled to receive by virtue of such dividend, subdivision, combination
or reclassification. Such adjustment shall be made successively whenever
any of the events listed above shall occur.
(b) In case the Corporation shall issue rights or warrants to the
holders of its Common Shares as such entitling them (for a period
expiring within 45 days after the record date for determination of the
shareholders entitled to receive such rights or warrants) to subscribe
for or purchase Common Shares at a price per share less than the current
market price per share (as defined in subparagraph F(4) below) on such
record date, then in each such case the Conversion Rate shall be
adjusted by multiplying the Conversion Rate in effect immediately prior
to such record date by a fraction, of which the numerator shall be the
number of Common Shares outstanding on the date of issuance of such
rights or warrants plus the number of additional Common Shares offered
for subscription or purchase, and of which the denominator shall be the
number of Common Shares outstanding on the date of issuance of such
rights or warrants plus the number of Common Shares which the aggregate
offering price of the total number of shares so offered would purchase
at such current market price. For the purposes of this clause (b), the
issuance of rights or warrants to subscribe for or purchase securities
convertible into Common Shares shall be deemed to be the issuance of
rights or warrants to purchase the Common Shares into which such
securities are convertible at an aggregate offering price equal to the
aggregate offering price of such securities plus the minimum aggregate
amount (if any) payable upon conversion of such securities into Common
Shares. Such adjustment shall be made whenever any such rights or
warrants are issued, and shall become effective retroactively with
respect to conversions made subsequent to the record date for the
determination of shareholders entitled to receive such rights or
warrants.
(c) In case the Corporation shall distribute to holders of its
Common Shares (including any such distribution made pursuant to a merger
or consolidation in which the Corporation is the surviving corporation)
any assets (excluding cash distributions after the Effective Time of the
Merger, as such terms are defined in the Agreement and Plan of Merger,
dated as of April 12, 1983 among Old Enron, I N Holdings, Inc. and Belco
Petroleum Corporation (the "Effective Time") not exceeding (i) the
aggregate net earning of the Corporation and its subsidiaries on a
consolidated basis after such date determined in accordance with sound
accounting principles less (ii) dividends paid after such date on shares
other than Common Shares), rights to subscribe or warrants (excluding
those referred to in clause (b) above), evidences of its indebtedness or
other securities of the Corporation (other than Common Shares) then in
each such case the Conversion Rate shall be adjusted by multiplying the
Conversion Rate in effect immediately prior to the record date for
determination of shareholders entitled to receive such distribution by a
fraction, of which the numerator shall be the current market price per
Common Share (as defined in subparagraph F(4) below) on such record
date, and of which the denominator shall be such current market price
per Common Share less the fair value (as determined by a resolution of
the Board of Directors of the Corporation, after consultation with its
investment bankers, filed with each transfer agent for the Convertible
Preferred Stock, which determination shall be conclusive), of the
portion of the assets, rights to subscribe or warrants, evidences of its
indebtedness or other securities so to be distributed applicable to one
Common Share. Such adjustment shall be made whenever any such
distribution is made, and shall become effective retroactively with
respect to conversions made subsequent to the record date for the
determination of shareholders entitled to receive such distribution.
(4) For the purpose of any computation under subparagraph (3) above,
the current market price per Common Share on any date shall be deemed to be
the average of the daily Closing Prices for 30 consecutive Trading Days
selected by the Corporation commencing not more than 45 Trading Days before
the date in question. The term "Closing Price" on any day shall mean the
reported last sale price per Common Share regular way on such day or, in
case no such sale takes place on such date, the average
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of the reported closing bid and asked prices regular way, in each case on
the Composite Tape, or, if the Common Shares are not listed or admitted to
trading on the New York Stock Exchange, on the American Stock Exchange, or,
if the Common Shares are not listed or admitted to trading on the American
Stock Exchange, on the principal national securities exchange on which the
Common Shares are listed or admitted to trading, or, if the Common Shares
are not listed or admitted to trading on any national securities exchange,
the average of the closing bid and asked prices in the over-the-counter
market as reported by the National Association of Securities Dealers'
Automated Quotation system, or, if not so reported, as reported by the
National Quotation Bureau, Incorporated, or any successor thereof, or, if
not so reported, the average of the closing bid and asked prices as
furnished by any member of the National Association of Securities Dealers,
Inc. selected from time to time by the Corporation for that purpose; and
the term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Shares are listed or admitted to
trading is open for the transaction of business or, if the Common Shares
are not listed or admitted to trading on any national securities exchange,
a Monday, Tuesday, Wednesday, Thursday or Friday on which banking
institutions in the Borough of Manhattan, City and State of New York are
not authorized or obligated by law or executive order to close.
(5) No adjustment in the Conversion Rate shall be required unless such
adjustment (plus any adjustments not previously made by reason of this
subparagraph (5)) would require an increase or decrease of at least 1% in
the number of Common Shares into which each share of the Convertible
Preferred Stock is then convertible; provided, however, that any
adjustments which by reason of this subparagraph (5) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph F shall be made to the
nearest one-thousandth of a share.
(6) The Board of Directors may make such adjustments in the Conversion
Rate, in addition to those required by this paragraph F, as shall be
determined by the Board, as evidenced by a Board resolution, to be
advisable in order to avoid taxation so far as practicable of any dividend
of stock or stock rights or any event treated as such for Federal income
tax purposes to the recipients. The Board shall have the power to resolve
any ambiguity or correct any error in this paragraph F and its action in so
doing, as evidenced by the Board resolution, shall be final and conclusive.
(7) In any case of any reclassification of Common Shares (other than a
reclassification of the Common Shares referred to in subparagraph 3(a)
hereof), any consolidation or merger of the Corporation with or into
another corporation or any sale or conveyance to another corporation (other
than a wholly-owned subsidiary of the Corporation) of all or substantially
all of the property of the Corporation, the holder of a share of the
Convertible Preferred Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such consolidation, merger, sale or conveyance by
a holder of the number of Common Shares into which such share of the
Convertible Preferred Stock might have been converted immediately prior to
such consolidation, merger, sale or conveyance and shall have no other
conversion rights with regard to such share of Convertible Preferred Stock.
In the event of such a reclassification, consolidation, merger, sale or
conveyance, effective provision shall be made in the certificate of
incorporation of the resulting or surviving corporation or otherwise so
that the conversion rate applicable to any stock or other securities or
property into which the shares of the Convertible Preferred Stock shall
then be convertible shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Shares contained in clauses (a) to (c) of
subparagraph (3) inclusive, above, and the other provisions of this
paragraph F with respect to the Common Shares shall apply on terms as
nearly equivalent as practicable to any such other shares of stock and
other securities and property deliverable upon conversion of shares of
Convertible Preferred Stock.
(8) In the event that any time, as a result of any adjustment made
pursuant to clause (a) of subparagraph (3) above, the holder of any shares
of the Convertible Preferred Stock thereafter surrendered for conversion
shall become entitled to receive any shares of capital stock of the
Corporation other than Common Shares, thereafter the number of such other
shares so receivable upon conversion of
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<PAGE> 191
such shares of Convertible Preferred Stock shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Shares contained
in clauses (a) to (c) of subparagraph (3) inclusive, above, and the other
provisions of this paragraph F with respect to the Common Shares shall
apply on like terms to any such other shares.
(9) Whenever any adjustments is required in the Common Shares into
which each share of Convertible Preferred Stock is convertible, the
Corporation shall forthwith (a) file with each transfer agent of the
Convertible Preferred Stock a statement describing in reasonable detail the
adjustment and the method of calculation used and (b) cause a copy of such
statement to be mailed to the holder of record of the Convertible Preferred
Stock as of the effective date of such adjustment.
(10) In Case:
(a) the Corporation shall declare a dividend (or any other
distribution) on its Common Shares other than a cash dividend or
distribution not exceeding (i) the aggregate net earnings of the
corporation and its subsidiaries on a consolidated basis after the
Effective Time determined in accordance with sound accounting principles
less (ii) dividends paid after such date on shares other than Common
Shares; or
(b) the Corporation shall authorize the granting to the holders of
its Common Shares of rights to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(c) of any reclassification of the capital stock of the Corporation
(other than a subdivision or combination of its outstanding shares of
Common Shares), or of any consolidation or merger to which the
Corporation is a party and for which approval of any shareholders of the
Corporation is required, or of the sale or transfer of all or
substantially all of the assets of the Corporation, or of the voluntary
or involuntary dissolution, liquidation or winding up of the
Corporation; or
(d) the Corporation proposes to take any other action that would
require an adjustment of the Conversion Rate;
then the Corporation shall cause to be mailed to each transfer agent for
the Convertible Preferred Stock and to the holders of record of the
outstanding shares of the Convertible Preferred Stock, at least 20 days (or
10 days in any case specified in clauses (a) or (b) above) prior to the
applicable record date hereinafter specified, a notice stating (x) the date
on which a record is to be taken for the purposes of such dividend,
distribution or rights, or, if a record is not to be taken, the date as of
which the holders of Common Shares of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the date on
which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation, winding up or other action is expected to become
effective, and the date as of which it is expected that holders of Common
Shares of record shall be entitled to exchange their shares of Common
Shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation, winding up or other action.
(11) The Corporation shall at all times reserve and keep available out
of its authorized but unissued Common Shares, for the purpose of issuance
upon conversion of the Convertible Preferred Stock, the full number of
Common Shares then issuable upon the conversion of all shares of the
Convertible Preferred Stock then outstanding.
(12) The Corporation will pay any and all taxes that may be payable in
respect of the issuance or delivery of Common Shares on conversion of
shares of the Convertible Preferred Stock pursuant hereto. The Corporation
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involving issue and delivery of Common Shares in
the name other than that in which the shares of Convertible Preferred Stock
so converted were registered and no such issue and delivery shall be made
unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(13) For the purpose of this paragraph F, the term "Common Shares"
shall include any shares of the Corporation of any class or series which
has no preference or priority in the payment of dividends or in
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the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and which is not subject to
redemption by the Corporation. However, Common Shares issuable upon
conversion of the Convertible Preferred Stock shall include only shares of
the class designated as Common Shares as of the original date of issuance
of the Convertible Preferred Stock, or shares of the Corporation of any
classes or series resulting from any reclassification or reclassifications
thereof and which have no preference or priority in the payment of
dividends or in the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation and
which are not subject to redemption by the Corporation, provided that if at
any time there shall be more than one such resulting class or series, the
shares of such class and series then so issuable shall be substantially in
the proportion which the total number of shares of such class and series
resulting from all such reclassifications bears to the total number of
shares of all such classes and series resulting from all such
reclassifications.
(14) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of the Convertible Preferred Stock. If
any such conversion would otherwise require the issuance of a fractional
share, an amount equal to such fraction multiplied by the Closing Price
(determined as provided in subparagraph F(4) above) of the Common Shares on
the date of conversion shall be paid to the holder in cash by the
Corporation. If on such date there is no Closing Price, the fair value of a
Common Share on such date, as determined by the Board of Directors, shall
be used.
(15) The certificate of any independent firm of public accountants of
recognized standing selected by the Board of Directors shall be presumptive
evidence of the correctness of any computation made under this paragraph F.
(16) All shares of the Convertible Preferred Stock purchased or
otherwise acquired by the Corporation (including shares surrendered for
conversion) shall be canceled and thereupon restored to the status of
authorized by unissued shares of Preferred Stock undesignated as to series.
G. Voting Rights. The holders of Convertible Preferred Stock shall have no
right to vote except as otherwise specifically provided herein, in the Articles
of Incorporation, as amended, of the Corporation, or by statute:
(1) In addition to the voting rights set forth below, the holders of
shares of Convertible Preferred Stock shall vote together with the holders
of the Common Shares (and of any other securities which may similarly be
entitled to vote with the holders of the Common Shares) as a single class
upon all matters upon which shareholders are entitled to vote and, when so
voting, shall be entitled to a number of votes per share equal to the
Conversion Rate in effect on the record date of the determination of
shareholders entitled to notice of, and to vote at, such meeting.
(2) So long as any shares of Convertible Preferred Stock are
outstanding, in addition to any other vote or consent of shareholders
required in the Articles of Incorporation or by law:
(a) The consent of the holders of at least two-thirds of the
Convertible Preferred Stock and all other shares of parity stock at the
time outstanding that would be affected similarly by the action
described in clauses (i)-(iv) below and that are entitled to vote on
such matter, given in person or by proxy, either in writing without a
meeting (if permitted by law) or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating:
(i) any amendment, alteration or repeal of any of the provisions
of the Articles of Incorporation or the Bylaws of the Corporation,
which affects adversely the voting powers, rights or preferences of
the holders of the Convertible Preferred Stock or reduces the time
for any notice to which the holders of the Convertible Preferred
Stock may be entitled; provided, that the amendment of the provisions
of the Articles of Incorporation so as to authorize or create, or to
increase the authorized amount of any junior stock shall not be
deemed to affect adversely the voting powers, rights or preferences
of the holders of the Convertible Preferred Stock;
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<PAGE> 193
(ii) the authorization, creation or issuance of, or the increase
in the authorized amount of, any stock of any class or series or any
security convertible into stock of any class or series, ranking prior
to the Convertible Preferred Stock;
(iii) the voluntary dissolution, liquidation or winding up of
the affairs of the Corporation, or the sale, lease or conveyance by
the Corporation of all or substantially all of its property or
assets; or
(iv) the purchase or redemption (for sinking fund purposes or
otherwise) of less than all of the Convertible Preferred Stock and
other parity stock at the time outstanding unless the full dividends
on all shares of Convertible Preferred Stock then outstanding shall
have been paid or declared and a sum sufficient for payment thereof
set apart.
(b) The consent of the holders of at least a majority of the
Convertible Preferred Stock and all other shares of parity stock at the
time outstanding that would be affected similarly by the action
described in clauses (i) or (ii) below and that are entitled to vote on
such matter, given in person or by proxy, either in writing without a
meeting (if permitted by law) or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating:
(i) the authorization, creation or issuance of, or the increase
in the authorized amount of, any stock of any class or series or any
security convertible into stock of any class or series, ranking on a
parity with the Convertible Preferred Stock; provided that no such
consent shall be required for the authorization, creation or issuance
by the Corporation of up to a number of shares of one or more series
of Preferred Stock ranking on parity with the Convertible Preferred
Stock that, when added to the number of shares of Convertible
Preferred Stock and other Preferred Stock ranking on parity with the
Convertible Preferred Stock then outstanding, equals 5,000,000; or
(ii) the merger or consolidation of the Corporation with or into
any other corporation, unless the corporation resulting from such
merger or consolidation will have after such merger or consolidation
no class of stock and no other securities either authorized or
outstanding ranking prior to or on a parity with the Convertible
Preferred Stock, except the same number of shares of stock and the
same amount of other securities with the same rights and preferences
as the stock and securities of the Corporation respectively
authorized and outstanding immediately preceding such merger or
consolidation, and each holder of Convertible Preferred Stock
immediately preceding such merger or consolidation shall receive the
same number of shares, with the same rights and preferences, of the
resulting corporation.
(c) Notwithstanding the provisions of subparagraphs (a) or (b)
above, no such consent of the holders of the Convertible Preferred Stock
shall be required if, at or prior to the time when such amendment,
alteration or repeal is to take effect or when the issuance of any such
prior or parity stock or convertible security is to be made, or when
such consolidation or merger, voluntary liquidation, dissolution or
winding up, sale, lease, conveyance, purchase or redemption is to take
effect, as the case may be, provision is to be made for the redemption
of all shares of Convertible Preferred Stock at the time outstanding.
(3) (a) If, at any time, dividends payable on the Convertible
Preferred Stock shall be in default in an amount equivalent to six full
quarterly dividends, then the holders of the Convertible Preferred Stock,
voting separately as a class together with the holders of all other parity
stock having then present right to elect one or more directors as a result
of a dividend arrearage (herein referred to as "Class Voting Stock"), shall
be entitled to elect two directors of the Corporation. When all such
dividends in default shall have been so paid or funds sufficient therefor
deposited in trust (and such dividends in default shall be so paid as soon
as lawful and reasonably practicable out of any assets of the Corporation
available therefor), the holders of the Convertible Preferred Stock shall
be divested of such voting rights, but
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subject always to the same provisions for the vesting of such voting rights
in the holders of the Convertible Preferred Stock in the case of any future
such dividend default or defaults.
(b) The foregoing right of the holders of the Convertible Preferred
Stock with respect to the election of directors of the Corporation may
be exercised at any annual meeting of shareholders or, within the
limitations hereinafter provided, at a special meeting of shareholders
held for such purpose. If the date upon which such right of the holders
of the Convertible Preferred Stock shall become vested shall be more
than ninety days preceding the date of the next ensuing annual meeting
of shareholders as fixed by the Bylaws of the Corporation, the President
of the Corporation shall, within ten days after delivery to the
Corporation at its principal office of a request to such effect signed
by the holders of at least five percent (5%) of the Convertible
Preferred Stock then outstanding, call a special meeting of shareholders
to be held within forty days after the delivery of such request for the
purpose of electing a new Board of Directors to serve until the next
annual meeting and until their successors shall be elected and shall
qualify. Notice of such meeting shall be mailed to each shareholder
entitled to vote thereat not less than ten days prior to the date of
such meeting. The term of office of all directors of the Corporation
shall terminate at the time of any such meeting held for the purpose of
electing a new Board of Directors, notwithstanding that the term for
which such directors had been elected shall not then have expired. In
the event that at any such meeting at which holders of the Convertible
Preferred Stock (and other Class Voting Stock) shall be entitled to
elect two directors, a quorum of the holders of such Class Voting Stock
shall not be present in person or by proxy, the holders of the Common
Stock, if a quorum thereof be present, may temporarily elect the
directors whom the holders of the Class Voting Stock were entitled but
failed to elect, such directors to be designated as having been so
elected and their term of office to expire at such time thereafter as
their successors shall be elected by the holders of the Class Voting
Stock as herein provided.
(c) Whenever the holders of Convertible Preferred Stock (and any
Class Voting Stock) shall be entitled to elect two directors, any holder
of such Convertible Preferred Stock shall have the right, during regular
business hours, in person or by duly authorized representative, to
examine and to make transcripts of the stock records of the Corporation
for the Convertible Preferred Stock for the purpose of communicating
with other holders of such Convertible Preferred Stock with respect to
the exercise of such right of election.
(d) Whenever the holders of Convertible Preferred Stock (and other
Class Voting Stock) shall be divested of any voting right pursuant to
this paragraph G(3), the President of the Corporation shall, within ten
days after delivery to the Corporation at its principal office of a
request to such effect signed by any holder of Common Stock, call a
special meeting of the holders of shares of stock entitled to vote at
such meeting to be held within forty days after the delivery of such
request for the purpose of electing a new Board of Directors to serve
until the next annual meeting or until their respective successors shall
be elected and shall qualify. If, at any such special meeting, any
director shall not be reelected, his term of office shall terminate upon
the election and qualification of his successor, notwithstanding that
the term for which such director was originally elected shall not then
have expired.
(e) At any annual or special meeting of shareholders held for the
purpose of electing directors when the holders of the Convertible
Preferred Stock (and Class Voting Stock) shall be entitled to elect two
directors, the presence in person or by proxy of the holders of
one-third of the outstanding shares of the Convertible Preferred Stock
and Class Voting Stock shall be required to constitute a quorum for the
election by such class of such two directors, and the presence in person
or by proxy of the holders of a majority of the outstanding shares of
the Common Stock shall be required to constitute a quorum for the
election by such class of the directors which that class is entitled to
elect or for the election temporarily by such class as herein provided
of the members of the Board of Directors whom the holders of the
Convertible Preferred Stock (and other Class Voting Stock) cannot at the
time for the want of a quorum elect; provided, however, that the
majority of the holders of either such class of stock who are present in
person or by proxy shall have power to adjourn such
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meeting for the election of directors by such class from time to time
without notice other than announcement at the meeting. No delay or
failure by the holders of any class of stock to elect the members of the
Board of Directors whom such holders are entitled to elect shall
invalidate the election of the remaining members of the Board of
Directors by the holders of any class of stock. At any such election of
directors by the holders of shares of Convertible Preferred Stock and
any other Class Voting Stock, each such holder shall have one vote for
each share of such stock standing in his name on the books of the
Corporation on any record date fixed for such purpose or, if no such
date be fixed, on the date on which the election is held.
(f) If, during any interval between annual meetings of shareholders
for the election of directors and while the holders of the Convertible
Preferred Stock (and any other Class Voting Stock) shall be entitled to
elect two directors, the numbers of directors in office who have been
elected by the holders of shares of such class of stock shall, by reason
of resignation, death or removal, be less than the total number of
directors subject to election by the holders of shares of such class,
(i) the vacancy or vacancies in the directors elected by the holders of
shares of that class shall be filled by a majority vote of the remaining
directors then in office who were elected by such class or succeeded to
directors so elected, although such majority be less than a quorum, or,
if there shall be only one such remaining director, shall be filled by
the directors then in office upon nomination of the remaining director
elected by the holders of the shares of that class or his successor and
(ii) if not so filled within forty days after the creation thereof, the
President of the Corporation shall call a special meeting of the holders
of shares of such class and such vacancy or vacancies shall be filled at
such special meeting.
(g) Any director elected by the holders of Convertible Preferred
Stock and other Class Voting Stock may be removed from office by vote of
the holders of a majority of the shares of the class of stock by which
his successor would be elected. A special meeting of the holders of
shares of such class may be called by a majority vote of the Board of
Directors for the purpose of removing a director in accordance with the
provisions of this paragraph. The President of the Corporation shall, in
any event, within ten days after delivery to the Corporation at its
principal office of a request to such effect signed by the holders of at
least five percent (5%) of the outstanding shares of such class, call a
special meeting for such purpose to be held within forty days after the
delivery of such request.
(4) Holders of Convertible Preferred Stock shall not be entitled to
receive notice of any meeting of shareholders at which they are not
entitled to vote or consent.
H. Retired Shares. All shares of Convertible Preferred Stock purchased or
otherwise acquired by the Corporation shall be canceled and thereupon restored
to the status of authorized but unissued shares of Preferred Stock, undesignated
as to series.
I. Other Rights. Shares of Convertible Preferred Stock shall not have any
relative, participating, optional or other special rights or powers other than
as set forth herein or in the Articles of Incorporation, as amended.
F-11
<PAGE> 196
ANNEX G
FORM OF
STATEMENT OF RESOLUTIONS ESTABLISHING
A SERIES OF PREFERRED STOCK OF
ENRON OREGON CORP.
---------------------
9.142% PERPETUAL SECOND PREFERRED STOCK
---------------------
Pursuant to Oregon Revised Statutes Section 60.134 and Article IV of the
Articles of Incorporation, as amended, of Enron Oregon Corp. (the
"Corporation"), the Board of Directors of the Corporation has duly adopted the
following resolutions on , 199 , establishing a series of
Preferred Stock of the Corporation:
RESOLVED, that there is hereby established a series of the Preferred Stock
of the Corporation designated the 9.142% Perpetual Second Preferred Stock
(herein referred to as the "9.142% Preferred Stock"). The designation and number
of shares of such series and the powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof (in addition to those set forth in the
Articles of Incorporation, as amended, that may be applicable to such series)
are as follows:
A. Definitions. Capitalized terms used but not defined herein shall have
the meaning ascribed thereto in the Corporation's Articles of Incorporation, as
amended. In addition, the following terms shall have the following meanings when
used herein:
(1) The term "accrued dividends" for a share shall mean an amount
computed at the annual dividend rate on such share from the date on which
dividends on such share become cumulative to and including the date to
which such dividends are to be accrued, less the aggregate amount of all
dividends theretofore paid thereon.
(2) The term "junior stock" shall mean, with respect to paragraphs C
and F, the Common Stock and any other class or series of stock of the
Corporation not entitled to receive any dividends unless all dividends
required to have been paid or declared and set apart for payment on the
9.142% Preferred Stock shall have been so paid or declared and set apart
for payment and, with respect to paragraphs D and F, any class or series of
stock of the Corporation not entitled to receive any assets upon the
liquidation, dissolution or winding up of the affairs of the Corporation
until the 9.142% Preferred Stock shall have received the entire amount to
which such stock is entitled upon such liquidation, dissolution or winding
up.
(3) The term "parity stock" (and references to shares ranking "on a
parity with" the 9.142% Preferred Stock) shall refer to, with respect to
paragraphs C and F, any class or series of stock of the Corporation
entitled to receive payment of dividends on a parity with the 9.142%
Preferred Stock and, with respect to paragraphs D and F, any class or
series of stock of the Corporation entitled to receive assets upon the
liquidation, dissolution or winding up of the affairs of the Corporation on
a parity with the 9.142% Preferred Stock. The Corporation's Cumulative
Second Preferred Convertible Stock shall be parity stock with respect to
the 9.142% Preferred Stock.
(4) The term "senior stock" (and references to shares ranking "senior
to" or "prior to" the 9.142% Preferred Stock) shall refer to, with respect
to paragraph C, any class or series of stock of the Corporation ranking
senior to the 9.142% Preferred Stock in respect of the right to receive
dividends and, with respect to paragraph D, any class or series of stock of
the Corporation ranking senior to the 9.142% Preferred Stock with respect
to the right to receive assets upon the liquidation, dissolution or winding
up of the affairs of the Corporation.
G-1
<PAGE> 197
(5) The term "sinking fund" shall mean any fund or requirement for the
periodic retirement of shares.
B. Designation. The distinctive designation of the series shall be the
"9.142% Perpetual Second Preferred Stock." The number of shares that shall
constitute such series shall be [35.568509](1) shares, which number shall not be
increased.
C. Dividends.
(1) The holders of the 9.142% Preferred Stock, in preference to the
rights of holders of any junior stock but subject to the rights of any
senior stock, shall be entitled to receive, as and when declared by the
Board of Directors out of any funds legally available therefor, cash
dividends, at an annual rate of $91,420 per share, and no more, payable
quarterly on the first days of January, April, July and October,
respectively, in each year, with respect to the quarterly period ending on
the day preceding each such respective payment date, except that the first
dividend after the issuance of shares of 9.142% Preferred Stock pursuant to
the merger of Enron Corp., a Delaware corporation ("Old Enron"), with and
into the Corporation, shall be paid in respect of the period from the end
of the last quarterly dividend period on shares of the 9.142% Perpetual
Second Preferred Stock of Old Enron for which dividends were paid in full
(the "Initial Dividend Period"). Such dividends shall be cumulative from
and shall accrue on all shares of the 9.142% Preferred Stock from the
beginning of the Initial Dividend Period.
(2) No dividend shall be paid upon, or declared or set apart for, any
share of 9.142% Preferred Stock or shares ranking on parity with the 9.142%
Preferred Stock for any quarterly dividend period unless at the same time a
like proportionate dividend for the same quarterly dividend period, ratably
in proportion to the respective annual dividend rates fixed therefor, shall
be paid upon, or declared and set apart for, all shares of 9.142% Preferred
Stock and any Preferred Stock ranking on parity with the 9.142% Preferred
Stock that are entitled to such dividends.
(3) In no event, so long as any shares of 9.142% Preferred Stock shall
be outstanding, shall any dividend, whether in cash or property, be paid or
declared, nor shall any distribution be made, on any junior stock, nor
shall any shares of any junior stock be purchased, redeemed or otherwise
acquired for value by the Corporation, nor shall the Corporation permit any
distribution to be made or shares purchased, redeemed or otherwise acquired
by any subsidiary, unless all dividends on the Convertible Preferred Stock
for all past quarterly dividend periods and for then current quarterly
period shall have been paid or declared and a sum sufficient for the
payment thereof set apart. The foregoing provisions of this subparagraph
(3) shall not, however, apply to a dividend payable in any junior stock, or
to the acquisition of shares of any junior stock in exchange for, or
through application of the proceeds of the sale of, shares of any other
junior stock.
D. Liquidation Preference.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, then, before any distribution or
payments shall be made to the holders of any junior stock, but subject to the
rights of any senior stock or parity stock, the holders of the 9.142% Preferred
Stock shall be entitled to be paid in full the amount of $1,000,000 per share,
together with accrued dividends to the date of such distribution or payment,
whether or not earned or declared. If such payment shall have been made in full
to the holders of the 9.142% Preferred Stock (and senior and parity stock), the
remaining assets and funds of the Corporation shall be distributed among the
holders of the junior stock, according to their respective rights and
preferences and in each case according to their respective shares. If, upon any
liquidation, dissolution or winding up of the affairs of the Corporation, the
amounts so payable are not paid in full to the holders of all outstanding shares
of 9.142% Preferred Stock and parity stock, the holders of the 9.142% Preferred
Stock, together with holders of parity stock, shall share ratably in any
distribution of assets in proportion to the full amounts to which they would
otherwise be respectively entitled. Neither the consolidation or merger of the
- ---------------
1 To be revised to reflect the appropriate number of shares at the time of the
filing.
G-2
<PAGE> 198
Corporation, nor the sale, lease or conveyance of all or a part of its assets,
shall be deemed a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of the foregoing provisions of this paragraph D
or paragraph F hereof.
E. Redemption.
The 9.142% Preferred Stock shall not be redeemable by the Corporation.
F. Voting Rights. The holders of 9.142% Preferred Stock shall have no right
to vote except as otherwise specifically provided herein, in the Articles of
Incorporation, as amended, of the Corporation, or by statute:
(1) So long as any shares of 9.142% Preferred Stock are outstanding,
in addition to any other vote or consent of shareholders required in the
Articles of Incorporation or by law:
(a) The consent of the holders of at least two-thirds of the 9.142%
Preferred Stock and all other shares of parity stock at the time
outstanding that would be affected similarly by the action described in
clauses (i)-(iv) below and that are entitled to vote on such matter,
given in person or by proxy, either in writing without a meeting (if
permitted by law) or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
(i) any amendment, alteration or repeal of any of the provisions
of the Articles of Incorporation or the Bylaws of the Corporation,
which affects adversely the voting powers, rights or preferences of
the holders of the 9.142% Preferred Stock or reduces the time for any
notice to which the holders of the 9.142% Preferred Stock may be
entitled; provided, that the amendment of the provisions of the
Articles of Incorporation so as to authorize or create, or to
increase the authorized amount of any junior stock shall not be
deemed to affect adversely the voting powers, rights or preferences
of the holders of the 9.142% Preferred Stock;
(ii) the authorization, creation or issuance of, or the increase
in the authorized amount of, any stock of any class or series or any
security convertible into stock of any class or series, ranking prior
to the 9.142% Preferred Stock;
(iii) the voluntary dissolution, liquidation or winding up of
the affairs of the Corporation, or the sale, lease or conveyance by
the Corporation of all or substantially all of its property or
assets; or
(iv) the purchase or redemption (for sinking fund purposes or
otherwise) of less than all of the 9.142% Preferred Stock and other
parity stock at the time outstanding unless the full dividends on all
shares of 9.142% Preferred Stock then outstanding shall have been
paid or declared and a sum sufficient for payment thereof set apart.
(b) The consent of the holders of at least a majority of the 9.142%
Preferred Stock and all other shares of parity stock at the time
outstanding that would be affected similarly by the action described in
clauses (i) or (ii) below and that are entitled to vote on such matter,
given in person or by proxy, either in writing without a meeting (if
permitted by law) or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
(i) the authorization, creation or issuance of, or the increase
in the authorized amount of, any stock of any class or series or any
security convertible into stock of any class or series, ranking on a
parity with the 9.142% Preferred Stock; provided that no such consent
shall be required for the authorization, creation or issuance by the
Corporation of up to a number of shares of one or more series of
Preferred Stock ranking on parity with the 9.142% Preferred Stock
that, when added to the number of shares of 9.142% Preferred Stock
and other Preferred Stock ranking on parity with the 9.142% Preferred
Stock then outstanding equals 5,000,000; or
(ii) the merger or consolidation of the Corporation with or into
any other corporation, unless the corporation resulting from such
merger or consolidation will have after such merger or consolidation
no class of stock and no other securities either authorized or
outstanding
G-3
<PAGE> 199
ranking prior to or on a parity with the 9.142% Preferred Stock,
except the same number of shares of stock and the same amount of
other securities with the same rights and preferences as the stock
and securities of the Corporation respectively authorized and
outstanding immediately preceding such merger or consolidation, and
each holder of 9.142% Preferred Stock immediately preceding such
merger or consolidation shall receive the same number of shares, with
the same rights and preferences, of the resulting corporation.
(c) Notwithstanding the provisions of subparagraphs (a) or (b)
above, no such consent of the holders of the 9.142% Preferred Stock
shall be required if, at or prior to the time when such amendment,
alteration or repeal is to take effect or when the issuance of any such
prior or parity stock or convertible security is to be made, or when
such consolidation or merger, voluntary liquidation, dissolution or
winding up, sale, lease, conveyance, purchase or redemption is to take
effect, as the case may be, provision is to be made for the redemption
of all shares of 9.142% Preferred Stock at the time outstanding.
(2) (a) If, at any time, dividends payable on the 9.142% Preferred
Stock shall be in default in an amount equivalent to six full quarterly
dividends, then the holders of the 9.142% Preferred Stock, voting
separately as a class together with the holders of all other parity stock
having then present right to elect one or more directors as a result of a
dividend arrearage (herein referred to as "Class Voting Stock"), shall be
entitled to elect two directors of the Corporation. When all such dividends
in default shall have been so paid or funds sufficient therefor deposited
in trust (and such dividends in default shall be so paid as soon as lawful
and reasonably practicable out of any assets of the Corporation available
therefor), the holders of the 9.142% Preferred Stock shall be divested of
such voting rights, but subject always to the same provisions for the
vesting of such voting rights in the holders of the 9.142% Preferred Stock
in the case of any future such dividend default or defaults.
(b) The foregoing right of the holders of the 9.142% Preferred
Stock with respect to the election of directors of the Corporation may
be exercised at any annual meeting of shareholders or, within the
limitations hereinafter provided, at a special meeting of shareholders
held for such purpose. If the date upon which such right of the holders
of the 9.142% Preferred Stock shall become vested shall be more than
ninety days preceding the date of the next ensuing annual meeting of
shareholders as fixed by the Bylaws of the Corporation, the President of
the Corporation shall, within ten days after delivery to the Corporation
at its principal office of a request to such effect signed by the
holders of at least five percent (5%) of the 9.142% Preferred Stock then
outstanding, call a special meeting of shareholders to be held within
forty days after the delivery of such request for the purpose of
electing a new Board of Directors to serve until the next annual meeting
and until their successors shall be elected and shall qualify. Notice of
such meeting shall be mailed to each shareholder entitled to vote
thereat not less than ten days prior to the date of such meeting. The
term of office of all directors of the Corporation shall terminate at
the time of any such meeting held for the purpose of electing a new
Board of Directors, notwithstanding that the term for which such
directors had been elected shall not then have expired. In the event
that at any such meeting at which holders of the 9.142% Preferred Stock
(and other Class Voting Stock) shall be entitled to elect two directors,
a quorum of the holders of such Class Voting Stock shall not be present
in person or by proxy, the holders of the Common Stock, if a quorum
thereof be present, may temporarily elect the directors whom the holders
of the Class Voting Stock were entitled but failed to elect, such
directors to be designated as having been so elected and their term of
office to expire at such time thereafter as their successors shall be
elected by the holders of the Class Voting Stock as herein provided.
(c) Whenever the holders of 9.142% Preferred Stock (and any Class
Voting Stock) shall be entitled to elect two directors, any holder of
such 9.142% Preferred Stock shall have the right, during regular
business hours, in person or by duly authorized representative, to
examine and to make transcripts of the stock records of the Corporation
for the 9.142% Preferred Stock for the purpose of communicating with
other holders of such 9.142% Preferred Stock with respect to the
exercise of such right of election.
G-4
<PAGE> 200
(d) Whenever the holders of 9.142% Preferred Stock (and other Class
Voting Stock) shall be divested of any voting right pursuant to this
paragraph F(2), the President of the Corporation shall, within ten days
after delivery to the Corporation at its principal office of a request
to such effect signed by any holder of Common Stock, call a special
meeting of the holders of shares of stock entitled to vote at such
meeting to be held within forty days after the delivery of such request
for the purpose of electing a new Board of Directors to serve until the
next annual meeting or until their respective successors shall be
elected and shall qualify. If, at any such special meeting, any director
shall not be reelected, his term of office shall terminate upon the
election and qualification of his successor, notwithstanding that the
term for which such director was originally elected shall not then have
expired.
(e) At any annual or special meeting of shareholders held for the
purpose of electing directors when the holders of the 9.142% Preferred
Stock (and Class Voting Stock) shall be entitled to elect two directors,
the presence in person or by proxy of the holders of one-third of the
outstanding shares of the 9.142% Preferred Stock and Class Voting Stock
shall be required to constitute a quorum for the election by such class
of such two directors, and the presence in person or by proxy of the
holders of a majority of the outstanding shares of the Common Stock
shall be required to constitute a quorum for the election by such class
of the directors which that class is entitled to elect or for the
election temporarily by such class as herein provided of the members of
the Board of Directors whom the holders of the 9.142% Preferred Stock
(and other Class Voting Stock) cannot at the time for the want of a
quorum elect; provided, however, that the majority of the holders of
either such class of stock who are present in person or by proxy shall
have power to adjourn such meeting for the election of directors by such
class from time to time without notice other than announcement at the
meeting. No delay or failure by the holders of any class of stock to
elect the members of the Board of Directors whom such holders are
entitled to elect shall invalidate the election of the remaining members
of the Board of Directors by the holders of any class of stock. At any
such election of directors by the holders of shares of 9.142% Preferred
Stock and any other Class Voting Stock, each such holder shall have one
vote for each share of such stock standing in his name on the books of
the Corporation on any record date fixed for such purpose or, if no such
date be fixed, on the date on which the election is held.
(f) If, during any interval between annual meetings of shareholders
for the election of directors and while the holders of the 9.142%
Preferred Stock (and any other Class Voting Stock) shall be entitled to
elect two directors, the numbers of directors in office who have been
elected by the holders of shares of such class of stock shall, by reason
of resignation, death or removal, be less than the total number of
directors subject to election by the holders of shares of such class,
(i) the vacancy or vacancies in the directors elected by the holders of
shares of that class shall be filled by a majority vote of the remaining
directors then in office who were elected by such class or succeeded to
directors so elected, although such majority be less than a quorum, or,
if there shall be only one such remaining director, shall be filled by
the directors then in office upon nomination of the remaining director
elected by the holders of the shares of that class or his successor and
(ii) if not so filled within forty days after the creation thereof, the
President of the Corporation shall call a special meeting of the holders
of shares of such class and such vacancy or vacancies shall be filled at
such special meeting.
(g) Any director elected by the holders of 9.142% Preferred Stock
and other Class Voting Stock may be removed from office by vote of the
holders of a majority of the shares of the class of stock by which his
successor would be elected. A special meeting of the holders of shares
of such class may be called by a majority vote of the Board of Directors
for the purpose of removing a director in accordance with the provisions
of this paragraph. The President of the Corporation shall, in any event,
within ten days after delivery to the Corporation at its principal
office of a request to such effect signed by the holders of at least
five percent (5%) of the outstanding shares of such class, call a
special meeting for such purpose to be held within forty days after the
delivery of such request.
G-5
<PAGE> 201
(3) Holders of 9.142% Preferred Stock shall not be entitled to receive
notice of any meeting of shareholders at which they are not entitled to
vote or consent.
G. Retired Shares. All shares of 9.142% Preferred Stock purchased or
otherwise acquired by the Corporation shall be canceled and thereupon restored
to the status of authorized but unissued shares of Preferred Stock, undesignated
as to series.
H. Other Rights. Shares of 9.142% Preferred Stock shall not have any
relative, participating, optional or other special rights or powers other than
as set forth herein or in the Articles of Incorporation, as amended.
G-6
<PAGE> 202
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The New Enron Charter contains provisions under which New Enron will
indemnify, to the fullest extent permitted by law, persons who are made a party
to an action or proceeding by virtue of the fact that the individual is or was a
director, officer, or, in certain circumstances, an employee or agent, of New
Enron or another corporation at New Enron's request. The OBCA generally permits
such indemnification to the extent that the individual acted in good faith and
in a manner which he reasonably believed to be in the best interest of or not
opposed to the corporation or, with respect to criminal matters, if the
individual had no reasonable cause to believe his or her conduct was unlawful.
In addition, the New Enron Charter contains a provision that eliminates the
personal liability of a director to the corporation or its shareholders for
monetary damages for conduct as a director, except for liability of a director
(i) for breach of the duty of loyalty, (ii) for actions or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for the payment of improper dividends or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Enron Charter contains provisions under which Enron will indemnify, to
the fullest extent permitted by law, persons who are made a party to an action
or proceeding by virtue of the fact that the individual is or was a director,
officer, or, in certain circumstances, an employee or agent of Enron or another
corporation at Enron's request. The DGCL generally permits such indemnification
to the extent that the individual acted in good faith and in a manner which he
reasonably believed to be in the best interest of or not opposed to the
corporation or, with respect to criminal matters, if the individual had no
reasonable cause to believe his or her conduct was unlawful. In addition, the
Enron Charter contains a provision that eliminates the personal liability of a
director to the corporation or its shareholders for monetary damages for breach
of fiduciary's duty as a director, except for liability of a director (i) for
breach of the duty of loyalty, (ii) for actions or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii) for
payment of improper dividends or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 -- 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, New Enron and PGC, as
amended by the First Amendment thereto dated April 14,
1997 (included as Annex A to the Proxy
Statement/Prospectus included herein).
3.1 -- Restated Articles of Incorporation of New Enron (included
as Annex E to the Proxy Statement/Prospectus included
herein).
3.2* -- Form of Bylaws of New Enron.
3.3 -- Form of Series Designation for the New Enron Convertible
Preferred Stock (included as Annex F to the Proxy
Statement/Prospectus included herein).
3.4 -- Form of Series Designation for the New Enron 9.142%
Preferred Stock (included as Annex G to the Proxy
Statement/Prospectus included herein).
3.5 -- Restated Certificate of Incorporation of Enron Corp., as
amended (incorporated by reference to Exhibit 3.01 to
Enron's Form 10-K for the year ended December 31, 1994).
</TABLE>
II-1
<PAGE> 203
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
3.6 -- Bylaws of Enron Corp. (incorporated by reference to
Exhibit 3.02 to Enron's Form 10-K for the year ended
December 31, 1995).
4.1 -- Indenture dated as of November 1, 1985, between Enron and
Harris Trust and Savings Bank, as supplemented and
amended by the First Supplemental Indenture dated as of
December 1, 1995 (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; Exhibit 4(b) to Enron's Form S-3
Registration Statement No. 33-64057 filed on November 8,
1995). There have not been filed as exhibits to this
registration statement other debt instruments defining
the rights of holders of long-term debt of Enron, none of
which relates to authorized indebtedness that exceeds 10%
of the consolidated assets of Enron and its subsidiaries.
Enron hereby agrees to furnish a copy of any such
instrument to the Commission upon request.
5.1* -- Opinion of James V. Derrick, Jr. as to the legality of
the securities.
8.1* -- Opinion of Vinson & Elkins L.L.P regarding tax matters.
8.2* -- Opinion of Wachtell, Lipton, Rosen & Katz regarding tax
matters.
10.1 -- Employment Agreement dated July 20, 1996 between Enron
and Ken L. Harrison (included as Annex C to the Joint
Proxy Statement/Prospectus included herein).
10.2 -- Employment Agreement dated July 20, 1996 between Enron
and Joseph M. Hirko (included as Annex D to the Joint
Proxy Statement/Prospectus included herein).
23.1* -- Consent of James V. Derrick, Jr. (included in Exhibit
5.1).
23.2* -- Consent of Vinson & Elkins L.L.P. (set forth in Exhibit
8.1).
23.3* -- Consent of Wachtell, Lipton, Rosen & Katz (set forth in
Exhibit 8.2).
23.4** -- Consent of Arthur Andersen LLP (Enron).
23.5** -- Consent of Arthur Andersen LLP (PGC).
23.6** -- Consent of DeGolyer and MacNaughton.
23.7* -- Consents of persons named as about to become directors of
New Enron.
24.1** -- Powers of attorney of certain directors and officers of
Enron.
99.1** -- Form of PGC Proxy Card.
99.2** -- Consent of Goldman, Sachs & Co.
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
Financial Statement Schedules:
Not Applicable
II-2
<PAGE> 204
ITEM 22. UNDERTAKINGS.
The undersigned Registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrants pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request;
(6) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;
(7) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
II-3
<PAGE> 205
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 20 above, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants 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, the Registrants 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-4
<PAGE> 206
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Enron Oregon
Corp. has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 15th day of May, 1997.
ENRON OREGON CORP.
By: /s/ EDMUND P. SEGNER, III
--------------------------------
Edmund P. Segner, III
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed by the following persons in the capacities indicated on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EDMUND P. SEGNER, III Director and President May 15, 1997
- ----------------------------------------------------- (Principal Executive Officer)
(Edmund P. Segner, III)
/s/ WILLIAM D. GATHMANN Vice President, Finance May 15, 1997
- ----------------------------------------------------- (Principal Financial and
(William D. Gathmann) Accounting Officer)
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, Enron Corp. has
duly caused this Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas, on the 15th
day of May, 1997.
ENRON CORP.
By: /s/ RICHARD A. CAUSEY
--------------------------------
Richard A. Causey
Senior Vice President and Chief
Accounting and Information Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed by the following persons in the capacities indicated on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ KENNETH L. LAY Chairman of the Board, Chief May 15, 1997
- ----------------------------------------------------- Executive Officer and Director
(Kenneth L. Lay) (Principal Executive Officer)
/s/ RICHARD A. CAUSEY Senior Vice President and Chief May 15, 1997
- ----------------------------------------------------- Accounting and Information
(Richard A. Causey) Officer (Principal Accounting
Officer)
/s/ ANDREW S. FASTOW Senior Vice President, Finance May 15, 1997
- ----------------------------------------------------- (Principal Financial Officer)
(Andrew S. Fastow)
/s/ ROBERT A. BELFER* Director May 15, 1997
- -----------------------------------------------------
(Robert A. Belfer)
/s/ NORMAN P. BLAKE, JR.* Director May 15, 1997
- -----------------------------------------------------
(Norman P. Blake, Jr.)
</TABLE>
II-5
<PAGE> 207
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RONNIE C. CHAN* Director May 15, 1997
- -----------------------------------------------------
(Ronnie C. Chan)
/s/ JOHN H. DUNCAN* Director May 15, 1997
- -----------------------------------------------------
(John H. Duncan)
/s/ JOE H. FOY* Director May 15, 1997
- -----------------------------------------------------
(Joe H. Foy)
/s/ WENDY L. GRAMM* Director May 15, 1997
- -----------------------------------------------------
(Wendy L. Gramm)
/s/ ROBERT K. JAEDICKE* Director May 15, 1997
- -----------------------------------------------------
(Robert K. Jaedicke)
/s/ CHARLES A. LEMAISTRE* Director May 15, 1997
- -----------------------------------------------------
(Charles A. Lemaistre)
/s/ JEFFERY K. SKILLING* Director and President and Chief May 15, 1997
- ----------------------------------------------------- Operating Officer
(Jeffery K. Skilling)
/s/ JOHN A. URQUHART* Director May 15, 1997
- -----------------------------------------------------
(John A. Urquhart)
/s/ JOHN WAKEHAM* Director May 15, 1997
- -----------------------------------------------------
(John Wakeham)
/s/ CHARLS E. WALKER* Director May 15, 1997
- -----------------------------------------------------
(Charls E. Walker)
/s/ HERBERT S. WINOKUR, JR.* Director May 15, 1997
- -----------------------------------------------------
(Herbert S. Winokur, Jr.)
*By: /s/ PEGGY B. MENCHACA May 15, 1997
------------------------------------------------
Peggy B. Menchaca
(Attorney-in-fact for persons indicated)
</TABLE>
II-6
<PAGE> 208
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 -- 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, New Enron and PGC, as
amended by the First Amendment thereto dated April 14,
1997 (included as Annex A to the Proxy
Statement/Prospectus included herein).
3.1 -- Restated Articles of Incorporation of New Enron (included
as Annex E to the Proxy Statement/Prospectus included
herein).
3.2* -- Form of Bylaws of New Enron.
3.3 -- Form of Series Designation for the New Enron Convertible
Preferred Stock (included as Annex F to the Proxy
Statement/Prospectus included herein).
3.4 -- Form of Series Designation for the New Enron 9.142%
Preferred Stock (included as Annex G to the Proxy
Statement/Prospectus included herein).
3.5 -- Restated Certificate of Incorporation of Enron Corp., as
amended (incorporated by reference to Exhibit 3.01 to
Enron's Form 10-K for the year ended December 31, 1994).
3.6 -- Bylaws of Enron Corp. (incorporated by reference to
Exhibit 3.02 to Enron's Form 10-K for the year ended
December 31, 1995).
4.1 -- Indenture dated as of November 1, 1985, between Enron and
Harris Trust and Savings Bank, as supplemented and
amended by the First Supplemental Indenture dated as of
December 1, 1995 (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; Exhibit 4(b) to Enron's Form S-3
Registration Statement No. 33-64057 filed on November 8,
1995). There have not been filed as exhibits to this
registration statement other debt instruments defining
the rights of holders of long-term debt of Enron, none of
which relates to authorized indebtedness that exceeds 10%
of the consolidated assets of Enron and its subsidiaries.
Enron hereby agrees to furnish a copy of any such
instrument to the Commission upon request.
5.1* -- Opinion of James V. Derrick, Jr. as to the legality of
the securities.
8.1* -- Opinion of Vinson & Elkins L.L.P regarding tax matters.
8.2* -- Opinion of Wachtell, Lipton, Rosen & Katz regarding tax
matters.
10.1 -- Employment Agreement dated July 20, 1996 between Enron
and Ken L. Harrison (included as Annex C to the Joint
Proxy Statement/Prospectus included herein).
10.2 -- Employment Agreement dated July 20, 1996 between Enron
and Joseph M. Hirko (included as Annex D to the Joint
Proxy Statement/Prospectus included herein).
23.1* -- Consent of James V. Derrick, Jr. (included in Exhibit
5.1).
23.2* -- Consent of Vinson & Elkins L.L.P. (set forth in Exhibit
8.1).
23.3* -- Consent of Wachtell, Lipton, Rosen & Katz (set forth in
Exhibit 8.2).
23.4** -- Consent of Arthur Andersen LLP (Enron).
23.5** -- Consent of Arthur Andersen LLP (PGC).
23.6** -- Consent of DeGolyer and MacNaughton.
23.7* -- Consents of persons named as about to become directors of
New Enron.
24.1** -- Powers of attorney of certain directors and officers of
Enron.
99.1** -- Form of PGC Proxy Card.
99.2** -- Consent of Goldman, Sachs & Co.
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated February 17,
1997, included in Enron Corp.'s Form 8-K dated March 17, 1997 and Form 10-K for
the year ended December 31, 1996, and to all references to our Firm included in
this Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
May 15, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated January 20,
1997, included in Portland General Corporation's Form 10-K for the year ended
December 31, 1996, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Portland, Oregon
May 15, 1997
<PAGE> 1
DeGOLYER AND MacNAUGHTON
ONE ENERGY SQUARE
DALLAS, TEXAS 75206
May 15, 1997
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Gentlemen:
In connection with Post-Effective Amendment No. 1 to Enron Corp.'s
Registration Statement No. 333-13791 on Form S-4 (the Registration Statement),
to be filed with the Securities and Exchange Commission on or about May 15,
1997, by Enron Corp., DeGolyer and MacNaughton (D & M) hereby consents to the
incorporation in the Registration Statement of the references to D & M and to
the opinions delivered to Enron Oil & Gas Company (the Company) regarding the
comparison of reserves estimates prepared by D & M with those furnished by the
Company. D & M's estimates of proved oil, condensate, natural gas liquids, and
natural gas reserves, as of January 1, 1995, December 31, 1995, and December
31, 1996, of selected properties owned by the Company are contained in the
letter reports dated January 13, 1995, January 22, 1996, and January 17, 1997,
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, 1996,
and in Note 19 to the consolidated financial statements included in Enron
Corp.'s Form 10-K for the year ended December 31, 1996. D & M also consents to
the incorporation by reference in the Registration Statement of the letter
report dated January 17, 1997, which is included as Exhibit 23.03 to Enron
Corp.'s Annual Report on Form 10-K for the year ended December 31, 1996. D & M
also consents to the references to D & M in the section "Experts" in the
Prospectus that is part of the Registration Statement.
Very truly yours,
/s/ DeGOLYER and MacNAUGHTON
-------------------------------------
DeGOLYER and MacNAUGHTON
<PAGE> 1
EXHIBIT 24.1
LIMITED POWER OF ATTORNEY
ENRON CORP.
KNOW ALL MEN BY THESE PRESENTS that, the undersigned director or
officer of Enron Corp., a Delaware corporation, does hereby make, constitute and
appoint KENNETH L. LAY, RICHARD A. CAUSEY, ANDREW S. FASTOW and PEGGY B.
MENCHACA, and each of them acting individually, his true and lawful attorney
with power to act without the other and with full power of substitution, to
execute, deliver and file, for and on his behalf, and in his name and in his
capacity or capacities as aforesaid, a Registration Statement on Form S-4 for
filing with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and any other documents in support thereof or supplemental
thereto, with respect to Common Stock of Enron Corp. and Enron Oregon Corp.,
necessary or appropriate to be registered in connection with the merger of
Portland General Corporation with Enron Corp. (or any wholly-owned subsidiary of
Enron Corp.) and any and all amendments thereto, hereby granting to said
attorneys and each of them full power and authority to do and perform each and
every act and thing whatsoever as said attorney or attorneys may deem necessary
or advisable to carry out fully the intent of the foregoing as the undersigned
might or could do personally or in the capacity or capacities as aforesaid,
hereby ratifying and confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
15th day of May, 1997.
/s/ JEFFERY K. SKILLING
-----------------------------
Jeffery K. Skilling
Director
<PAGE> 1
[X] Please mark your 9334
votes as in this
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 3 AND
FOR THE PERSONS LISTED IN PROPOSAL 2.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 3 AND FOR THE
PERSONS LISTED IN PROPOSAL 2.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Approval and adoption of the Amended and Restated [ ] [ ] [ ]
Agreement and Plan of Merger by and between Portland
General Corporation, Enron Corp., and Enron Oregon,
dated as of July 20, 1996, amended and restated as
of September 24, 1996 and further amended and
restated as of April 14, 1997.
FOR AGAINST WITHHOLD
2. Election of Class II Directors (terms expiring in
2000)
a. Carolyn Chambers [ ] [ ] [ ]
b. Ken L. Harrison [ ] [ ] [ ]
c. Jerome J. Meyer [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Ratification of the appointment of Arthur Andersen [ ] [ ] [ ]
LLP as public accountants for the year 1997.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
SIGNATURE(S) _______________________________________________ DATE_______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[PORTLAND GENERAL CORPORATION LOGO]
Dear Fellow Shareholder:
The Annual Meeting of Shareholders of Portland General Corporation
will be held on JUNE 24, 1997. Your vote is very important regardless
of the number of shares you own. We urge you to promptly SIGN, DATE,
AND MAIL the above proxy card in the postage paid envelope provided for
your convenience.
Thank you for your prompt cooperation and continued support.
/s/ KEN HARRISON
Chairman of the Board,
Chief Executive Officer,
and President
<PAGE> 2
- --------------------------------------------------------------------------------
PORTLAND GENERAL CORPORATION
One World Trade Center 121 S. W. Salmon Street Portland, OR 97204
COMMON STOCK PROXY
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF PORTLAND GENERAL CORPORATION
P The undersigned acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement/Prospectus distributed in connection with such Annual
R Meeting and hereby appoints Gwyneth Gamble Booth, Peter J. Brix and Ken L.
Harrison, or any of them as Proxies, each with the power to appoint a
O substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse side, all the shares of Common Stock of Portland
X General Corporation held of record by the undersigned on May [9], 1997, at
the Annual Meeting of Shareholders to be held on June 24, 1997, or any
Y adjournment(s) thereof. For participants in Portland General Corporation's
Retirement Savings Plan or the Portland General Corporation Employee Stock
Purchase Plan, the proxy also serves as voting instructions to the Trustee
and Plan Administrator of those plans to vote the shares of Portland
General Corporation Common Stock beneficially owned by the participant in
those plans.
You are encouraged to specify your choice by marking the appropriate box,
SEE REVERSE SIDE, but you need not mark any box if your wish to vote in
accordance with the Board of Directors' recommendation. The Proxies cannot
vote your shares unless you sign and return this card.
The signer hereby revokes all proxies heretofore given by the signer to
vote at said meeting or any adjournment(s) thereof.
-----------
SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL
SAVE THE EXPENSE OF ADDITIONAL MAILINGS
PORTLAND GENERAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, JUNE 24, 1997 1:30 P.M.
MEETING LOCATION
PORTLAND GENERAL ELECTRIC
WESTERN REGION CENTER
14655 SW OLD SCHOLLS FERRY RD.
BEAVERTON, OREGON
<PAGE> 1
Exhibit 99.2
PERSONAL AND CONFIDENTIAL
May 15, 1997
Board of Directors
Portland General Corporation
121 S.W. Salmon Street
World Trade Center
Portland, OR 97204
Re:Registration Statement on Form S-4 of Enron Corp. ("Enron") and Enron Oregon
Corp., a wholly-owned subsidiary of Enron ("New Enron") relating to Common
Stock being registered in connection with the proposed combination of Portland
General Corporation ("PGC") and Enron pursuant to the Agreement and Plan of
Merger dated as of July 20, 1996, as amended and restated as of September 24,
1996 and as amended on April 14, 1997.
Gentlemen and Mesdames:
Reference is made to our opinion letter to be dated the date of the Proxy
Statement/Prospectus included in the above mentioned Registration Statement,
with respect to the fairness to the holders (other than Enron or any of its
subsidiaries) of the outstanding shares of Common Stock, par value $3.75 per
share, of PGC of the exchange ratio to be used in connection with the proposed
combination of PGC and Enron pursuant to the Agreement and Plan of Merger dated
as of July 20, 1996, as amended and restated as of September 24, 1996 and as
amended on April 14, 1997 by and among Enron, PGC and New Enron.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of PGC in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that PGC has determined to include our
opinion in the above-referenced Registration Statement.
<PAGE> 2
Portland General Corporation
May 15, 1997
Page Two
In that regard, we hereby consent to the reference to the opinions of our Firm
under the captions "SUMMARY -- The Mergers and the Amended Merger Agreement --
Opinion of PGC Financial Advisor", "THE MERGERS -- Background of the Mergers",
"THE MERGERS -- Reasons for the Mergers; Recommendation of the PGC Board of
Directors" and "THE MERGERS -- Opinion of PGC Financial Advisor" in the Proxy
Statement/Prospectus included in the above mentioned Registration Statement, to
the inclusion of the foregoing opinion in such Proxy Statement/Prospectus and to
the reference to the opinion of our firm in the cover letter to PGC shareholders
accompanying such Proxy Statement/Prospectus. In providing such consent, except
as may be required by the federal securities laws, we do not intend that any
person other than the Board of Directors rely upon such opinion. In giving such
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 or the
rules and regulations of the Securities and Exchange commission thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- -----------------------------
(GOLDMAN, SACHS & CO.)
