++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND +
+ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 2, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 10, 1997)
$300,000,000
NORAM ENERGY CORP.
% DEBENTURES DUE , 2008
-----------
Interest on the % Debentures due , 2008 (the "Debentures") is payable
semi-annually on and of each year, commencing , 1998. The Debentures
will be general unsecured obligations of NorAm Energy Corp. ("NorAm" or the
"Company") and will rank on a parity with the Company's existing and future
unsecured and unsubordinated indebtedness. The Debentures are not redeemable
prior to maturity and will not be subject to any sinking fund.
The Debentures will initially be represented by one or more global securities
registered in the name of the nominee of The Depository Trust Company, as
depository ("DTC"). Except under the limited circumstances described herein,
beneficial interests in the Debentures will be shown on, and transfers thereof
will be effected only through, records maintained by DTC and its participants.
Except under such circumstances, Debentures in definitive form will not be
issued. See "Description of Debentures--Book-Entry System."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- ------------------------------------------------------------------------
Per Debenture.................... % % %
- ------------------------------------------------------------------------
Total............................ $ $ $
- ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting estimated expenses of $ payable by the Company.
-----------
The Debentures are being offered by the several Underwriters, subject to
prior sale, when, as and if issued by the Company, delivered to and accepted by
the Underwriters, subject to approval of certain legal matters by counsel for
the Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer, and to reject orders in whole
or in part. It is expected that delivery of the Debentures will be made through
the facilities of DTC on or about , 1998 against payment therefor in
immediately available funds.
-----------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
-----------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1998.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES, INCLUDING
OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS
AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
THE COMPANY
The Company principally conducts operations in the natural gas industry,
including gathering, transmission, marketing, storage and distribution which,
collectively, account for in excess of 90% of NorAm's total revenues, income or
loss and identifiable assets. NorAm also makes sales of electricity, makes non-
energy sales and provides certain non-energy services, principally to certain of
its retail gas distribution customers. NorAm is currently organized into three
operating segments: (a) natural gas distribution; (b) interstate pipelines; and
(c) wholesale energy marketing, retail energy marketing and natural gas
gathering. For additional information regarding NorAm and its August 6, 1997
acquisition by, and merger into a subsidiary of, Houston Industries Incorporated
(the "Merger"), see the description set forth in the accompanying Prospectus
under the heading "The Company."
RECENT DEVELOPMENTS
In December 1997, NorAm completed a cash tender offer (the "Tender
Offer") for its 10% Debentures due 2019 (the "10% Debentures"), pursuant to
which it acquired $101 million in aggregate principal amount of the 10%
Debentures for an aggregate purchase price (including accrued interest) of
$114.3 million. The 10% Debentures were originally issued by Arkla, Inc., a
predecessor of NorAm. The Tender Offer was principally financed with short-term
indebtedness generally bearing interest at less than the prime rate.
NorAm expects to report earnings available for common stock for the year
ended December 31, 1997 of $67 million compared with earnings available for
common stock of $87 million for the year ended December 31, 1996. If the Merger
had occurred at the beginning of the years ended December 31, 1997 and 1996, pro
forma earnings available for common stock would have been $68.3 million and
$76.9 million, respectively.
NorAm's earnings for 1997 were adversely affected by, among other
things, the recording of trading losses of $17.4 million (pre-tax) in the first
quarter of 1997 prior to the Merger. Earnings for 1996 were adversely affected
by, among other things, early retirement and severance costs of $22.3 million
(pre-tax). The pro forma earnings available for common stock adjust for certain
Merger-related costs but do not adjust for the trading losses and the early
retirement and severance costs discussed above. Pro forma results are based upon
assumptions deemed appropriate by NorAm's management, are provided herein for
informational purposes only, and are not necessarily indicative of the results
that would have occurred had the Merger occurred at the beginning of the periods
indicated.
The Merger created a new basis of accounting for NorAm, resulting in new
carrying values for certain of NorAm's assets, liabilities and equity earnings
commencing upon the date of the Merger. NorAm's financial statements for
periods subsequent to the Merger are not comparable to prior periods because of
certain purchase accounting adjustments that reflect (i) the impact of the
amortization (over 40 years) of newly-recognized goodwill, partially offset by
the elimination of the amortization of NorAm's historical goodwill, (ii) the
incremental depreciation associated with the net increase in property, plant and
equipment, (iii) the amortization (to interest expense) of the revaluation of
long-term debt, (iv) the removal of the amortization previously associated with
certain pension and post-retirement obligations and (v) the deferred income tax
expense associated with these adjustments. These adjustments resulted in $8.8
million (after tax) in non-cash charges in the five-month period in 1997
following the Merger. Interest expense on Houston Industries' debt used to fund
the cash portion of the Merger was not allocated to NorAm.
USE OF PROCEEDS
The proceeds to the Company from the sale of the Debentures will be used
to repay short-term indebtedness of the Company, including indebtedness incurred
in connection with the Tender Offer and the repayment of $53 million aggregate
principal amount of NorAm debt that matured in December 1997 and January 1998.
The short-term indebtedness to be repaid with the proceeds of the Debentures
offered hereby had an average interest rate of approximately % (excluding
facility fees) as of , 1998.
S-3
SUMMARY FINANCIAL INFORMATION OF THE COMPANY
The following table presents summary financial data derived from the
financial statements of the Company. This summary is qualified in its entirety
by the detailed information and financial statements of the Company included in
the documents incorporated herein by reference. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus.
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1997 (1) 1996 1996 1995 1994 1993 1992
--------- -------- -------- -------- -------- -------- ---------
(Amounts in Millions, except ratios)
INCOME STATEMENT DATA
Operating Revenues...................... $4,086.5 $3,208.3 $4,788.5 $2,964.7 $2,857.9 $2,988.3 $2,782.2
Net Income (Loss)....................... $ 39.5 $ 51.1 $ 90.9 $ 65.5 $ 48.1 $ 36.1 $ (228.5)
Ratio of Earnings to Fixed Charges (2).. 1.66 1.85 2.12 1.69 1.47 1.47 1.10
AS OF SEPTEMBER 30, 1997
------------------------------------------
(Amounts in Millions, except percentages)
As
Actual Adjusted (3)
------------- -------------------------
CAPITALIZATION
Short-Term Debt....................................................................... $ 475.0 $ 342.3 8.0%
Long-Term Debt:
Senior Long-Term Debt (including current maturities)................................. 1,213.0 1,343.7 31.3
Convertible Subordinated Debentures.................................................. 107.1 107.1 2.5
-------- -------- ------
Total Debt....................................................................... 1,795.1 1,793.1 41.8
NorAm-Obligated Mandatorily
Redeemable Convertible Preferred Securities of Subsidiary Trust Holding Solely
Subordinated Debentures of NorAm................................................... 39.1 39.1 0.9
Common Stock Equity................................................................... 2,457.4 2,457.4 57.3
-------- -------- ------
Total Capitalization............................................................. $4,291.6 $4,289.6 100.0 %
======== ======== ======
___________________
(1) Actual results for the nine months ended September 30, 1997 combine
NorAm's pre-Merger results for the seven months ended July 31, 1997 with
NorAm's post-Merger results for the two months ended September 30, 1997,
including purchase accounting adjustments reflecting a new basis for
accounting. For additional information regarding such purchase
accounting adjustments, see Note B of the Notes to Consolidated
Financial Statements in NorAm's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
(2) The Company believes that the ratios for the nine-month periods are not
necessarily indicative of the ratios for the twelve-month periods due to
the seasonal nature of the Company's business, the recording of a $13.4
million after-tax charge associated with early retirement and severance
costs to 1996 first quarter earnings and the adjustments to the
Company's financial statements resulting from the Merger as described in
the Company's Quarterly Report on Form 10-Q for its quarterly period
ended September 30, 1997.
(3) Adjustments have been made to reflect: (i) the fourth quarter 1997
purchase of $101.4 million aggregate principal amount of 10% Debentures
for an aggregate purchase price of $114.3 million, including accrued
interest, which were carried on the September 30, 1997 financial
statements at $113.5 million and the related increase in short-term
indebtedness, (ii) the December 1997 and January 1998 repayment of $53.0
million aggregate principal amount of long-term debt which was carried
on the September 30, 1997 financial statements at $55.8 million and the
related increase in short-term indebtedness and (iii) the issuance of
$300.0 million principal amount of Debentures pursuant to this
Prospectus Supplement and the related repayment of short-term
indebtedness with the proceeds therefrom. Adjustments have not been
made to reflect any offerings of new securities or any calls for
redemption or purchases of securities or any premiums which may be paid
in connection therewith, which have not yet been initiated by the
Company.
S-4
DESCRIPTION OF DEBENTURES
The following description of the particular terms of the Debentures
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
accompanying Prospectus, to which description reference is hereby made.
Whenever a defined term is referred to and not herein defined, the definition
thereof is contained in the accompanying Prospectus or in the Indenture referred
to herein.
GENERAL
The Debentures will be issued under an Indenture, dated as of
February 1, 1998 (as the same may be amended from time to time, the
"Indenture"), between the Company and Chase Bank of Texas, National Association
(formerly known as Texas Commerce Bank National Association), as Trustee (the
"Trustee"), which Indenture is more fully described under the heading
"Description of Debt Securities" in the accompanying Prospectus. The Debentures
will be unsecured obligations of the Company and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company. The aggregate
principal amount of the Debentures will be limited to $300,000,000. Under the
Indenture, the Board of Directors of the Company may, by resolution,
subsequently increase such aggregate principal amount.
The Debentures will bear interest at % per annum and will mature on
, 2008.
The Debentures will bear interest from , 1998 or from the
most recent interest payment date to which interest has been paid or provided
for, payable semi-annually in arrears on and
of each year, commencing , 1998 to the persons in whose
names the Debentures are registered at the close of business on the immediately
preceding and , respectively,
whether or not such day is a Business Day.
The Debentures will not be redeemable by the Company prior to their
stated maturity and will not be entitled to the benefit of any sinking fund.
RESTRICTIVE COVENANTS
The Indenture contains the covenants summarized below (the "Restrictive
Covenants"), which are applicable to the Debentures; provided, however, that the
Restrictive Covenants will terminate and will no longer be applicable to the
Debentures (the "Termination Provision") on and after the date (the "Termination
Date") on which there remains outstanding, in the aggregate, no more than $200
million in principal amount of the Company's (a) Medium-Term Notes, Series A and
B (due through 2001), (b) 8.875% Notes due 1999, (c) 7 1/2% Notes due 2000, (d)
8.90% Debentures due 2006, (e) 10% Debentures due 2019, (f) Term Loan (due
November 1998) under that certain $150,000,000 Term Loan Agreement (the "Term
Loan") dated May 15, 1997, as amended, among the Company, Citibank, N.A., as
Agent, and various lenders party thereto and (g) any long-term indebtedness (but
excluding for this purpose any long-term indebtedness, if any, incurred pursuant
to any revolving credit facility, letter of credit facility or other similar
bank credit facility) of the Company issued subsequent to the Debentures and
prior to the Termination Date containing covenants substantially similar to the
Restrictive Covenants but not containing the Termination Provision
(collectively, the "NorAm Long-Term Indebtedness"). Each issue of NorAm Long-
Term Indebtedness (other than the Term Loan) has covenants similar to the
Restrictive Covenants summarized below. The Term Loan and various agreements
governing certain short-term indebtedness of NorAm, including NorAm's revolving
credit facility, contain provisions limiting the Company's ability to encumber
its property or the property of its subsidiaries and to effect sale and
leaseback transactions that differ from the Restrictive Covenants. As of
January 31, 1998, approximately $978 million aggregate principal amount of NorAm
Long-Term Indebtedness was outstanding.
Limitations on Liens. The Company will not, and will not permit any
Restricted Subsidiary (as defined below) to, pledge, mortgage or hypothecate, or
permit to exist, except in favor of the Company or any Restricted Subsidiary,
any mortgage, pledge, lien or other encumbrance (collectively, a "lien" or
"liens") upon, any Principal Property (as defined
S-5
below) at any time owned by it or a Restricted Subsidiary, to secure any
indebtedness (as defined below), unless effective provision is made whereby
outstanding Debentures will be secured equally and ratably therewith (or prior
thereto), and with any other indebtedness similarly entitled to be equally and
ratably secured. This restriction will not apply to: (a) liens on any property
held or used by the Company or a Restricted Subsidiary in connection with the
exploration for, development of or production of, oil, gas, natural gas
(including liquefied gas and storage gas), other hydrocarbons, helium, coal,
metals, minerals, steam, timber, geothermal or other natural resources or
synthetic fuels, such properties to include, but not be limited to, the
Company's or a Restricted Subsidiary's interest in any mineral fee interests,
oil, gas or other mineral leases, royalty, overriding royalty or net profits
interests, production payments and other similar interests, wellhead production
equipment, tanks, field gathering lines, leasehold or field separation and
processing facilities, compression facilities and other similar personal
property and fixtures; (b) liens on oil, gas, natural gas, other hydrocarbons,
helium, coal, metals, minerals, steam, timber, geothermal or other natural
resources or synthetic fuels produced or recovered from any property, an
interest in which is owned or leased by the Company or a Restricted Subsidiary;
(c) liens (or certain extensions, renewals or refundings thereof) upon any
property acquired before or after the date of the Indenture, created at the time
of acquisition or within one year thereafter to secure all or a portion of the
purchase price thereof or the cost of construction or improvement, or existing
thereon at the date of acquisition, provided that every such mortgage, pledge,
lien or encumbrance applies only to the property so acquired or constructed and
fixed improvements thereon; (d) liens upon any property acquired by any
corporation that is or becomes a Restricted Subsidiary after the date of the
Indenture (each, an "Acquired Entity"), provided that every such mortgage,
pledge, lien or encumbrance (1) shall either (i) exist prior to the time the
Acquired Entity becomes a Restricted Subsidiary or (ii) be created at the time
the Acquired Entity becomes a Restricted Subsidiary or within one year
thereafter to secure payment of the acquisition price thereof and (2) shall only
apply to those properties owned by the Acquired Entity at the time it becomes a
Restricted Subsidiary or thereafter acquired by it from sources other than the
Company or any other Restricted Subsidiary; (e) pledges of current assets, in
the ordinary course of business, to secure current liabilities; (f) deposits to
secure public or statutory obligations; (g) liens upon any office, data
processing or transportation equipment; (h) liens created or assumed in
connection with the issuance of debt securities, the interest on which is
excludable from gross income of the holder of such security pursuant to the
Internal Revenue Code, for the purpose of financing the acquisition or
construction of property to be used by the Company or a Restricted Subsidiary;
(i) pledges or assignments of accounts receivable or conditional sales contracts
or chattel mortgages and evidence of indebtedness secured thereby, received in
connection with the sale of goods or merchandise to customers; (j) certain liens
for taxes, judgments and attachments; or (k) certain other liens.
Notwithstanding the foregoing, the Company or a Restricted Subsidiary
may issue, assume or guarantee indebtedness secured by a mortgage which would
otherwise be subject to the foregoing restrictions in an aggregate amount which,
together with all other indebtedness of the Company or a Restricted Subsidiary
secured by a mortgage which (if originally issued, assumed or guaranteed at such
time) would otherwise be subject to the foregoing restrictions (not including
secured indebtedness permitted under the foregoing exceptions) and the value of
all Sale and Leaseback Transactions (as defined below) existing at such time
(other than Sale and Leaseback Transactions in which the property involved would
have been permitted to be mortgaged under (c) or (d) above), does not at the
time such indebtedness is incurred exceed 5% of Consolidated Net Tangible Assets
(as defined below), as shown on the Company's most recent audited consolidated
balance sheet preceding the date of determination.
Limitation on Sale and Leaseback Transactions. Sale and Leaseback
Transactions by the Company or any Restricted Subsidiary of any Principal
Property are generally prohibited unless the net proceeds of such sale are at
least equal to the fair value of such Principal Property (as determined by the
Board of Directors of the Company) and either (a) the Company or such Restricted
Subsidiary would be entitled under the Indenture to incur indebtedness secured
by a lien on the Principal Property to be leased without equally and ratably
securing the Debentures pursuant to the exceptions provided in subclauses (c)
and (d) of the second sentence of "Limitation on Liens" above or (b) the Company
applies an amount not less than the fair value of such property (i) to the
retirement of certain long-term indebtedness of the Company or a Restricted
Subsidiary or (ii) to the purchase at not more than the fair value of Principal
Property (other than that involved in such Sale and Leaseback Transaction).
S-6
CERTAIN DEFINITIONS
"Consolidated Net Tangible Assets" means the total amount of assets of
the Company and its Subsidiaries less, without duplication: (a) total current
liabilities (excluding indebtedness due within 12 months); (b) all reserves for
depreciation and other asset valuation reserves, but excluding reserves for
deferred federal income taxes; (c) all intangible assets such as goodwill,
trademarks, trade names, patents and unamortized debt discount and expense
carried as an asset; and (d) all appropriate adjustments on account of minority
interests of other persons holding common stock of any Subsidiary, all as
reflected in the Company's most recent audited consolidated balance sheet
preceding the date of such determination.
The term "indebtedness," as applied to the Company or any Subsidiary,
means bonds, debentures, notes and other instruments representing obligations
created or assumed by any such corporation (i) for money borrowed (other than
unamortized debt discount or premium); (ii) evidenced by a note or similar
instrument given in connection with the acquisition of any business, properties
or assets of any kind; (iii) as lessee under leases required to be capitalized
on the balance sheet of the lessee under generally accepted accounting
principles; and (iv) any amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligation listed in clause (i), (ii) or
(iii) above. All indebtedness secured by a lien upon property owned by the
Company or any Subsidiary and upon which indebtedness any such corporation
customarily pays interest, although any such corporation has not assumed or
become liable for the payment of such indebtedness, is also deemed to be
indebtedness of any such corporation. All indebtedness for borrowed money
incurred by other persons which is directly guaranteed as to payment of
principal by the Company or any Subsidiary shall for all purposes of the
Indenture be deemed to be indebtedness of any such corporation, but no other
contingent obligation of any such corporation in respect of indebtedness
incurred by other persons shall for any purpose be deemed indebtedness of such
corporation. Indebtedness of the Company or any Subsidiary does not include (i)
amounts which are payable only out of all or a portion of the oil, gas, natural
gas, helium, coal, metals, minerals, steam, timber, hydrocarbons, or geothermal
or other natural resources produced, derived or extracted from properties owned
or developed by such corporation; (ii) any indebtedness incurred to finance oil,
gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons,
or geothermal or other natural resources or synthetic fuel exploration or
development, payable, with respect to principal and interest, solely out of the
proceeds of oil, gas, natural gas, helium, coal, metals, minerals, steam,
timber, hydrocarbons, or geothermal or other natural resources or synthetic fuel
to be produced, sold, and/or delivered by the Company or any Subsidiary; (iii)
indirect guarantees or other contingent obligations in connection with the
indebtedness of others, including agreements, contingent or otherwise, with such
other persons or with third persons with respect to, or to permit or insure the
payment of, obligations of such other persons, including, without limitation,
agreements to advance or supply funds to or to invest in such other persons, or
agreements to pay for property, products or services of such other persons
(whether or not conferred, delivered or rendered), and any demand charge,
throughput, take-or-pay, keep-well, make-whole, cash deficiency, maintenance of
working capital or earnings or similar agreements; and (iv) any guarantees with
respect to lease or other similar periodic payments to be made by other persons.
"Principal Property" means any natural gas distribution property,
natural gas pipeline or gas processing plant located in the United States,
except any such property that in the opinion of the Board of Directors of the
Company is not of material importance to the total business conducted by the
Company and its consolidated Subsidiaries. "Principal Property" shall not
include any oil or gas property or the production or proceeds of production from
an oil or gas producing property or the production or any proceeds of production
of gas processing plants or oil or gas or petroleum products in any pipeline or
storage field.
"Restricted Subsidiary" means any Subsidiary which owns a Principal
Property. "Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
S-7
"Sale and Leaseback Transaction" means any arrangement with any person
providing for the leasing to the Company or any Restricted Subsidiary of any
Principal Property (except for temporary leases for a term, including any
renewal thereof, of not more than three years and except for leases between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries), which
Principal Property has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such person.
BOOK-ENTRY SYSTEM
Upon issuance, the Debentures will each be represented by one or more
global securities (the "Global Securities") deposited with, or on behalf of, The
Depository Trust Company, New York, New York, which will act as Depositary with
respect to the Debentures. The Global Securities representing the Debentures
will be registered in the name of a nominee of the Depositary. Except under the
circumstances described in the accompanying Prospectus under the heading
"Description of Debt Securities--Global Securities," the Debentures will not be
issuable in definitive form.
A further description of the Depositary's procedures with respect to
Global Securities is set forth in the accompanying Prospectus under the heading
"Description of Debt Securities--Global Securities."
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below (the "Underwriters"), and each of the Underwriters has severally agreed to
purchase, the principal amount of the Debentures set forth opposite its name
below:
Principal
Amount of
Underwriters Debentures
- ------------ ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................... $
Credit Suisse First Boston Corporation...............
NationsBanc Montgomery Securities LLC................
Salomon Brothers Inc.................................
------------
Total................................................ $300,000,000
============
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Debentures, if any are
taken.
The Underwriters propose to offer the Debentures in part directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of each Debenture.
The Underwriters may allow, and such dealers may reallow, a concession not to
exceed % of the principal amount of each Debenture to certain
brokers and dealers. After the Debentures are released for sale to the public,
the offering price and such other selling terms may from time to time be varied
by the Underwriters.
In connection with the offering of the Debentures, the Underwriters may
engage in overallotment, stabilizing transactions and syndicate covering
transactions in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended. Overallotment involves sales in excess of the offering
size, which creates a short position for the Underwriters. Stabilizing
transactions involve bids to purchase the Debentures in the open market for the
purpose of pegging, fixing or maintaining the price of the Debentures. Syndicate
covering transactions involve purchases of the Debentures in the open market
after the distribution has been completed in order to cover short positions. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the
S-8
Debentures sold in the offering may be reclaimed by the Underwriters if such
Debentures are repurchased by the Underwriters in stabilizing or covering
transactions. These activities may cause the price of the Debentures to be
higher than it would otherwise be in the absence of such transactions. Such
activities, if commenced, may be discontinued at any time.
The Debentures are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that the Underwriters
intend to make a market in the Debentures but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Debentures.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, and to contribute to payments the Underwriters may be required to make
in respect thereof.
Certain of the Underwriters or their affiliates have provided from time
to time, and expect to provide in the future, investment or commercial banking
services to the Company and its affiliates for which such Underwriters or their
affiliates have received or will receive customary fees and commissions. Certain
of the net proceeds from the sale of the Debentures offered hereby may be used
to repay short-term indebtedness owed by the Company under a revolving credit
facility to which NationsBank of Texas, N.A., an affiliate of NationsBanc
Montgomery Securities LLC, is a party.
S-9
PROSPECTUS
NORAM ENERGY CORP.
$500,000,000
DEBT SECURITIES
------------
NorAm Energy Corp. ("NorAm" or the "Company") may from time to time
offer debt securities consisting of bonds, debentures, notes (including notes
commonly known as medium-term notes), or other evidences of indebtedness in one
or more series at an aggregate initial offering price not to exceed $500,000,000
or its equivalent in any other currency or composite currency (the "Debt
Securities"). The Debt Securities may be offered as separate series in amounts,
at prices and on terms to be determined at the time of sale. The accompanying
Prospectus Supplement sets forth with regard to the series of Debt Securities in
respect of which this Prospectus is being delivered the title, aggregate
principal amount, denominations (which may be in United States dollars, in any
other currency or in a composite currency), maturity, rate, if any (which may be
fixed or variable), and time of payment of any interest, any terms for
redemption at the option of the Company or the holder, any terms for sinking
fund payments, any listing on a securities exchange, and the initial public
offering price and any other terms in connection with the offering and sale of
such Debt Securities.
The Company may sell Debt Securities to or through one or more
underwriters or dealers, and also may sell Debt Securities directly to other
purchasers or through agents. The accompanying Prospectus Supplement sets forth
the names of any underwriters or agents involved in the sale of the Debt
Securities in respect of which this Prospectus is being delivered, the principal
amounts, if any, to be purchased by underwriters and the compensation, if any,
of such underwriters or agents. See "Plan of Distribution" for possible
indemnification arrangements for underwriters, agents and their controlling
persons.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF DEBT SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------
The date of this Prospectus is December 10, 1997.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBT SECURITIES OR ANY
SECURITIES THE PRICES OF WHICH MAY BE USED TO DETERMINE PAYMENTS ON THE DEBT
SECURITIES INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THIS
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION" IN
THIS PROSPECTUS AND "PLAN OF DISTRIBUTION" OR "UNDERWRITING" IN THE RELEVANT
PROSPECTUS SUPPLEMENT.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, any accompanying
Prospectus Supplement or the documents incorporated or deemed incorporated by
reference herein or therein, and any information or representations not
contained herein or therein must not be relied upon as having been authorized by
NorAm or by any agent, dealer or underwriter. This Prospectus and any
accompanying Prospectus Supplement do not constitute an offer to sell or a
solicitation of an offer to buy the Debt Securities in any circumstances in
which such offer or solicitation is unlawful. The delivery of this Prospectus
or any Prospectus Supplement at any time does not imply that the information
herein or therein is correct as of any time subsequent to the date of such
information.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other information
can be inspected and copied at the public reference facilities of the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. The Company's 6% Convertible
Subordinated Debentures due 2012 and NorAm Financing I's 6 1/4% Convertible
Trust Originated Preferred Securities(sm) are listed on the New York Stock
Exchange (the "NYSE"). Reports and other information concerning the Company can
be inspected and copied at the offices of the NYSE at 20 Broad Street, New York,
New York 10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Debt Securities offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations of
the Commission. For further information with respect to the Company and the
Debt Securities offered hereby, reference is made to the Registration Statement
and the exhibits and the financial statements, notes and schedules filed as a
part thereof or incorporated by reference therein, which may be inspected at the
public reference facilities of the Commission at the addresses set forth above
or through the Commission's home page on the Internet. Statements made in this
Prospectus concerning the contents of any documents referred to herein are not
necessarily complete, and in each instance are qualified in all respects by
reference to the copy of such document filed as an exhibit to the Registration
Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 1-13265) or by
its predecessor ("Old NorAm") (File No. 1-3751) with the Commission are
incorporated herein by reference:
(a) Old NorAm's Annual Report on Form 10-K for its fiscal year ended
December 31, 1996;
(b) Old NorAm's Quarterly Report on Form 10-Q for its quarterly period
ended March 31, 1997;
(c) the Company's Quarterly Reports on Form 10-Q for its quarterly
periods ended June 30, 1997 and September 30, 1997; and
-2-
(d) the Company's and Old NorAm's Combined Current Report on Form 8-K
dated August 6, 1997, as amended by Form 8-K/A dated August 18, 1997.
Each document or report filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of any offering of the Debt Securities made by this Prospectus
shall be deemed to be incorporated by reference into this Prospectus and to be a
part of this Prospectus from the date of filing of such document. Any statement
contained herein, or in any document all or a portion of which is incorporated
or deemed to be incorporated by reference herein, shall be deemed to be modified
or superseded for purposes of the Registration Statement and this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein (other
than exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: Corporate
Secretary, NorAm Energy Corp., 1111 Louisiana, Houston, Texas 77002, telephone
number (713) 207-3000.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Prospectus, including the documents that
are incorporated by reference as set forth in "Incorporation of Certain
Documents by Reference," that are not historical facts are forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management's beliefs as well as
assumptions made by and information currently available to management. Because
such statements are based on expectations as to future economic performance and
are not statements of fact, actual results may differ materially from those
projected. Important factors that could cause future results to differ include
(a) the effects of competition, (b) legislative and regulatory changes, (c)
fluctuations in the weather, (d) fluctuations in energy commodity prices, (e)
environmental liabilities, (f) changes in the economy and (g) other factors
discussed in this and other filings by NorAm with the Commission. When used in
NorAm's documents or oral presentations, the words "anticipate," "estimate,"
"expect," "objective," "projection," "forecast," "goal" or similar words are
intended to identify forward-looking statements.
THE COMPANY
NorAm principally conducts operations in the natural gas industry,
including gathering, transmission, marketing, storage and distribution which,
collectively, account for in excess of 90% of NorAm's total revenues, income or
loss and identifiable assets. NorAm also makes sales of electricity, non-energy
sales and provides certain non-energy services, principally to certain of its
retail gas distribution customers. NorAm is currently organized into five
operating units: (a) natural gas distribution; (b) interstate pipelines; (c)
wholesale energy marketing; (d) retail energy marketing; and (e) natural gas
gathering.
NATURAL GAS DISTRIBUTION. NorAm's natural gas distribution operations
are conducted through three divisions, Arkla, Entex and Minnegasco, which
collectively form the nation's third-largest gas distribution operation in terms
of customers served with over 400 billion cubic feet of annual throughput to
over 2.7 million customers. Through these divisions, NorAm engages in both the
sale to, and transportation of natural gas for, residential, commercial and a
limited number of industrial customers in six states: Arkansas; Louisiana;
Minnesota; Mississippi; Oklahoma; and Texas.
INTERSTATE PIPELINES. NorAm's interstate natural gas pipeline
operations are conducted principally through NorAm Gas Transmission Company
("NGT") and Mississippi River Transmission Corporation ("MRT"), two wholly owned
subsidiaries of NorAm, together with certain subsidiaries and affiliates. The
NGT system consists of approximately 6,200 miles of natural gas transmission
lines located in portions of Arkansas, Louisiana, Mississippi, Missouri, Kansas,
Oklahoma, Tennessee and Texas. The MRT system consists of approximately 2,000
miles of pipeline serving principally the greater St. Louis area in Missouri and
Illinois. Through these subsidiaries and affiliates, NorAm engages in the
transmission, sale and storage of natural gas.
-3-
WHOLESALE ENERGY MARKETING. NorAm's wholesale energy marketing operations
principally consist of marketing natural gas and electricity and providing risk
management services to natural gas resellers and certain large volume customers.
This business is principally conducted by NorAm Energy Services, Inc., together
with certain affiliates.
RETAIL ENERGY MARKETING. NorAm's retail energy marketing operations are
principally conducted by NorAm Energy Management, Inc. and certain affiliates
("NEM"). NEM was created in 1995 to consolidate the existing unregulated retail
marketing activities of NorAm's distribution companies into one business
segment. NEM is focusing on industrial and large commercial customers.
Services offered to these customers include natural gas supply, electric power
services, management of commodity pricing risks, total energy management, and
supply and financing of gas-burning equipment, including inside-the-fence
cogeneration.
NATURAL GAS GATHERING. NorAm's natural gas gathering activities are
principally carried out by NorAm Field Services Corp. and certain affiliates
("NFS"). NFS operates approximately 3,500 miles of gathering pipelines which
collect gas from more than 200 separate systems located in major producing
fields in Oklahoma, Louisiana, Arkansas and Texas.
The principal executive offices of NorAm are located at Houston Industries
Plaza, 1111 Louisiana Street, Houston, Texas 77002, and its telephone number is
(713) 207-3000.
ACQUISITION BY HOUSTON INDUSTRIES
On August 6, 1997, pursuant to an Agreement and Plan of Merger dated as of
August 11, 1996, as amended, Old NorAm merged with and into a wholly owned
subsidiary of Houston Industries Incorporated ("Houston Industries"), thereby
becoming a wholly owned subsidiary of Houston Industries (the "Merger").
Houston Industries is a holding company with headquarters in Houston, Texas,
whose principal pre-merger operations were conducted by Houston Lighting & Power
Company, the electric utility serving a 5,000-square-mile area of the Texas Gulf
Coast, including Houston, Texas. The aggregate consideration paid to Old NorAm
stockholders in connection with the Merger consisted of $1.4 billion in cash and
47.8 million shares of Houston Industries' common stock valued at approximately
$1 billion. The overall transaction was valued at $4.0 billion, consisting of
$2.4 billion for Old NorAm's common stock and common stock equivalents and $1.6
billion of Old NorAm debt ($1.3 billion of which was long-term debt).
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratios of earnings from
continuing operations to fixed charges for each of the periods indicated:
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- ----------------------------
1997 1996 1996 1995 1994 1993 1992
------ ----- ---- ---- ---- ---- ----
Ratio of earnings from continuing
operations to fixed charges (1) 1.66 1.85 2.12 1.69 1.47 1.47 1.10
- -------------
(1) The Company believes that the ratios for the nine-month periods are not
necessarily indicative of the ratios for the twelve-month periods due to the
seasonal nature of the Company's business, the recording of a $13.4
million after-tax charge associated with early retirement and severance
costs to 1996 first quarter earnings and the adjustments to the Company's
financial statements resulting from the Merger as described in the Company's
Quarterly Report on Form 10-Q for its quarterly period ended September 30,
1997.
-4-
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement,
the Company anticipates that any net proceeds from the sale of Debt Securities
will be used for general corporate purposes, which may include, but are not
limited to, working capital, capital expenditures, acquisitions and the
repayment or refinancing of the Company's indebtedness, including the Company's
outstanding long-term public debt securities.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of
December 1, 1997 (as the same may be amended from time to time, the
"Indenture"), between the Company and Texas Commerce Bank National Association,
as Trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Debt Securities
may be issued from time to time in one or more series. The particular terms of
each series, or of Debt Securities forming a part of a series which are offered
by a Prospectus Supplement, will be described in such Prospectus Supplement.
The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject, and are qualified in their entirety by
reference, to all the provisions of the Indenture, including the definitions
therein of certain terms, and, with respect to any particular Debt Securities,
to the description of the terms thereof included in the Prospectus Supplement
relating thereto. Wherever particular Sections or defined terms of the Indenture
are referred to herein or in a Prospectus Supplement, such Sections or defined
terms are incorporated by reference herein or therein, as the case may be.
The covenants in the Indenture would not necessarily afford the
holders of the Debt Securities protection in the event of a decline in the
Company's credit quality resulting from highly leveraged or other transactions
involving the Company.
GENERAL
The Indenture provides that separate series of Debt Securities may be
issued under the Indenture from time to time without limitation as to aggregate
principal amount. The Company may specify a maximum aggregate principal amount
for the Debt Securities of any series, provided, however, such specified maximum
aggregate principal amount may be increased by resolution of the Board of
Directors of the Company. (Section 301) The Debt Securities are to have such
terms and provisions which are not inconsistent with the Indenture, including as
to maturity, principal and interest, as the Company may determine. The Debt
Securities will be unsecured obligations of the Company and will rank on a
parity with all other unsecured and unsubordinated indebtedness of the Company.
The applicable Prospectus Supplement will set forth the price or
prices at which the Debt Securities to be offered will be issued and will
describe the following terms of such Debt Securities: (a) the title of such Debt
Securities; (b) any limit on the aggregate principal amount of the particular
series of Debt Securities; (c) the date or dates on which the principal of any
of such Debt Securities will be payable or the method by which such date or
dates will be determined or extended; (d) the rate or rates at which any of such
Debt Securities will bear interest, if any, or the method by which such rate or
rates shall be determined, the date or dates from which any such interest will
accrue, or the method by which such date or dates shall be determined, the
Interest Payment Dates on which any such interest will be payable and the
Regular Record Date, if any, for any such interest payable on any Interest
Payment Date, or the method by which such date or dates shall be determined, and
the basis upon which interest shall be calculated if other than that of a 360-
day year of twelve 30-day months; (e) the place or places where the principal of
and any premium and interest on any of such Debt Securities will be payable, the
place or places where such Debt Securities may be presented for registration of
transfer or exchange, and the place or places where notices and demands to or
upon the Company in respect of such Debt Securities may be made; (f) the period
or periods within which or the date or dates on which, the price or prices at
which and the terms and conditions upon which any of such Debt Securities may be
redeemed, in whole or in part, at the option of the Company and the manner in
which any election by the Company to redeem such Debt Securities shall be
evidenced (if other than by a Board Resolution); (g) the obligation or the
right, if any, of the Company to redeem or purchase any of such Debt Securities
pursuant to any sinking fund, amortization or analogous provisions or the option
of the Holder thereof to require any such redemption or purchase, and the period
or periods within which, the price or prices at which, the currency or
currencies (including currency unit or units) in which and the other terms and
conditions on which any of such Debt Securities will be redeemed or purchased,
in whole or in part, pursuant to any such obligation; (h) the denominations in
which any of such Debt Securities will be issuable, if other than denominations
of $1,000 and any integral multiple thereof; (i) if the amount of principal of
or any premium or
-5-
interest on any of such Debt Securities may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts will be
determined; (j) if other than the currency of the United States of America, the
currency, currencies or currency units, including composite currencies, in which
the principal of or any premium or interest on any of such Debt Securities will
be payable (and the manner in which the equivalent of the principal amount
thereof in the currency of the United States of America is to be determined for
any purpose, including for the purpose of determining the principal amount
deemed to be Outstanding at any time); (k) if the principal of or any premium or
interest on any of such Debt Securities is to be payable, at the election of the
Company or the Holder thereof, in one or more currencies or currency units other
than those in which such Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of any such amount as to which
such election is made will be payable, the period or periods within which or the
date or dates on which and the terms and conditions upon which such election is
to be made and the amount so payable (or the manner in which such amount is to
be determined); (l) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the entire principal amount
thereof, the portion of the principal amount of any of such Debt Securities
which will be payable upon declaration of acceleration of the Maturity thereof
or the method by which such portion shall be determined; (m) if the principal
amount payable at the Stated Maturity of any of such Debt Securities will not be
determinable as of any one or more dates prior to the Stated Maturity, the
amount which will be deemed to be such principal amount as of any such date for
any purpose, including the principal amount thereof which will be due and
payable upon any Maturity other than the Stated Maturity or which will be deemed
to be Outstanding as of any such date (or, in any such case, the manner in which
such deemed principal amount is to be determined); (n) any variation from the
application of the provisions of the Indenture described under "Defeasance and
Covenant Defeasance--Defeasance and Discharge" or "Defeasance and Covenant
Defeasance--Defeasance of Certain Covenants" or under both such captions and the
manner in which any election of the Company to defease such Debt Securities
shall be evidenced (if other than by a Board Resolution); (o) whether any of
such Debt Securities will initially be issuable in whole or in part in the form
of a temporary Global Security representing such Debt Securities and provisions
for the exchange of such temporary Global Security for definitive Debt
Securities; (p) whether any of such Debt Securities will be issuable in whole or
in part in the form of one or more Global Securities and, if so, the respective
Depositaries for such Global Securities, the form of any legend or legends to be
borne by any such Global Security, any circumstances under which any such Global
Security may be exchanged, in whole or in part, for Debt Securities registered,
and whether and under what circumstances any transfer of such Global Security,
in whole or in part, may be registered, in the names of Persons other than the
Depositary for such Global Security or its nominee; (q) whether any of such Debt
Securities will be subject to certain optional interest rate reset provisions;
(r) whether any of such Debt Securities will be subject to certain optional
extension of maturity provisions; (s) any addition to or change in the Events
of Default applicable to any of such Debt Securities and any change in the right
of the Trustee or the Holders of any of such Debt Securities to declare the
principal amount of any of such Debt Securities due and payable; (t) any
addition to or change in the covenants in the Indenture applicable to any of
such Debt Securities; (u) the additions or changes, if any, to the Indenture
with respect to such Debt Securities as shall be necessary to permit or
facilitate the issuance of such Debt Securities in bearer form, registrable or
not registrable as to principal, and with or without interest coupons; (v) the
appointment of any Paying Agent or Agents for such Debt Securities, if other
than Houston Industries; (w) the terms of any right to convert or exchange such
Debt Securities into any other securities or property of the Company, and the
additions or changes, if any, to the Indenture with respect to such Debt
Securities to permit or facilitate such conversion or exchange; (x) the terms
and conditions, if any, pursuant to which such Debt Securities are secured; (y)
any restriction or condition on the transferability of such Debt Securities; and
(z) any other terms of such Debt Securities not inconsistent with the provisions
of the Indenture. (Section 301)
Debt Securities, including Original Issue Discount Securities, may be
sold at a substantial discount below their principal amount. Certain special
United States income tax considerations (if any) applicable to Debt Securities
sold at an original issue discount may be described in the applicable Prospectus
Supplement. In addition, certain special United States federal income tax or
other considerations (if any) applicable to any Debt Securities which are
denominated in a currency or currency unit other than United States dollars may
be described in the applicable Prospectus Supplement.
FORM, EXCHANGE AND TRANSFER
The Debt Securities of each series will be issuable only in registered
form, without coupons, and, unless otherwise specified in the applicable
Prospectus Supplement, only in denominations of $1,000 and integral multiples
thereof. (Section 302)
At the option of the Holder, subject to the terms of the Indenture and
the limitations applicable to Global Securities, Debt Securities of each series
will be exchangeable for other Debt Securities of the same series, of any
authorized denomination and of a like tenor and aggregate principal amount.
(Section 305)
-6-
Subject to the terms of the Indenture and the limitations applicable
to Global Securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or with the form of
transfer endorsed thereon duly executed) at the office of the Security Registrar
or at the office of any transfer agent designated by the Company for such
purpose. No service charge will be made for any registration of transfer or
exchange of Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Such transfer or exchange will be effected upon the Security
Registrar or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The Company
has appointed the Trustee as Security Registrar. Any transfer agent (in
addition to the Security Registrar) initially designated by the Company for any
Debt Securities will be named in the applicable Prospectus Supplement. (Section
305) The Company may at any time designate additional transfer agents or rescind
the designation of any transfer agent or approve a change in the office through
which any transfer agent acts, except that the Company will be required to
maintain a transfer agent in each Place of Payment for the Debt Securities of
each series. (Sections 305 and 1002)
Neither the Trustee nor the Company will be required to (a) issue,
register the transfer of or exchange any Debt Security of any series (or of any
series and specified tenor, as the case may be) during a period beginning at the
opening of business 15 days before the day of mailing of a notice of redemption
of any such Debt Security that may be selected for redemption and ending at the
close of business on the day of such mailing, or (b) register the transfer of or
exchange any Debt Security so selected for redemption, in whole or in part,
except, in the case of any such Debt Security to be redeemed in part, any
portion not to be redeemed. (Section 305)
GLOBAL SECURITIES
Unless otherwise provided in the Prospectus Supplement, some or all of
the Debt Securities of any series may be represented, in whole or in part, by
one or more Global Securities which will have an aggregate principal amount
equal to that of the Debt Securities represented thereby. Unless otherwise
provided in the Prospectus Supplement, the Global Security representing Debt
Securities will be deposited with, or on behalf of, The Depository Trust Company
("DTC"), or other successor depository appointed by the Company (DTC or such
other depository is herein referred to as the "Depositary") and registered in
the name of the Depositary or its nominee and such Global Security will bear a
legend regarding the restrictions on exchange and registration of transfer
thereof referred to below and any such other matters as may be provided for
pursuant to the Indenture. Unless otherwise provided in the Prospectus
Supplement, Debt Securities will not be issued in definitive form.
Notwithstanding any provision of the Indenture or any Debt Security
described herein, no Global Security may be exchanged, in whole or in part, for
Debt Securities registered, and no transfer of a Global Security, in whole or in
part, may be registered in the name of any Person other than the Depositary for
such Global Security or any nominee of such Depositary unless (a) the Depositary
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or has ceased to be qualified to act as such
as required by the Indenture, (b) there shall have occurred and be continuing an
Event of Default with respect to the Debt Securities represented by such Global
Security, (c) the Company in its sole discretion determines that such Global
Security will be so exchangeable or transferable, or (d) there shall exist such
circumstances, if any, in addition to or in lieu of those described above as may
be described in the applicable Prospectus Supplement. All Debt Securities
issued in exchange for a Global Security or any portion thereof will be
registered in such names as the Depositary may direct. (Sections 204 and 305)
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of
Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to DTC's book-entry system is also available to others, such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
-7-
Upon the issuance by the Company of Debt Securities represented by a
Global Security, purchases of Debt Securities under the DTC System must be made
by or through Direct Participants, which will receive a credit for the Debt
Securities on DTC's records. The ownership interest of each actual purchaser of
each Debt Security ("Beneficial Owner") is in turn to be recorded on the Direct
and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Debt Securities are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Debt Securities, except in the event that use of the book-entry
system for the Debt Securities is discontinued. The laws of some states require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may impair the ability to transfer beneficial
interests in a Global Security.
So long as the Depositary for the Global Security, or its nominee, is
the registered owner of the Global Security, the Depositary or its nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as described above, Beneficial Owners will not be entitled to
have Debt Securities represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities in definitive form and will not be considered the owners or holders
thereof under the Indenture.
To facilitate subsequent transfers, all Debt Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Debt Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Debt Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such Debt
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers. Conveyance of notices and other communications by
DTC to Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to Debt
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Debt Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Payments of principal of and interest, if any, on the Debt Securities
represented by the Global Security registered in the name of the Depositary or
its nominee will be made by the Company through the Trustee under the Indenture
or a paying agent (the "Paying Agent"), which may also be the Trustee under the
Indenture, to the Depositary or its nominee, as the case may be, as the
registered owner of the Global Security. Neither the Company, the Trustee, nor
the Paying Agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company has been advised that DTC will credit Direct Participants'
accounts on the payable date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payment on the payable date. Payments by Participants to Beneficial Owners will
be governed by standing instructions and customary practices, as in the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and not of
DTC, the Paying Agent, or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal and
interest to DTC is the responsibility of the Company or the Paying Agent,
disbursement of such payments to Direct Participants shall be the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
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PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of interest on a Debt Security on any Interest Payment Date will be made
to the Person in whose name such Debt Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest in respect of such Debt Securities, except that, unless
otherwise provided in such Debt Securities, interest payable on the Stated
Maturity of the principal of a Debt Security shall be paid to the Person to whom
principal is paid. The initial payment of interest on any Debt Security of any
series which is issued between a Regular Record Date and the related Interest
Payment Date shall be payable as provided in such Debt Security. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Debt Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Company may designate for such purpose from time to time, except that at the
option of the Company payment of any interest may be made (a) by check mailed to
the address of the Person entitled thereto as such address appears in the
Security Register, or (b) by wire transfer in immediately available funds at
such place and to such account as designated in writing by the Person entitled
thereto as specified in the Security Register. Unless otherwise indicated in the
applicable Prospectus Supplement, Houston Industries, the Company's parent
company, will be designated as the Company's sole Paying Agent for payments with
respect to Debt Securities of each series. Any other Paying Agents initially
designated by the Company for the Debt Securities of a particular series will be
named in the applicable Prospectus Supplement. The Company may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent, except that the Company at all times will be required to maintain a
Paying Agent in each Place of Payment for the Debt Securities of a particular
series. (Sections 307 and 1002)
Any money deposited by the Company with the Trustee or any Paying
Agent for the payment of the principal of or any premium or interest on any Debt
Security which remains unclaimed at the end of two years after such principal,
premium or interest has become due and payable may be repaid to the Company at
the Company's request and the Holder of such Debt Security will thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, will thereupon
cease. (Section 1003)
COVENANTS
The applicable Prospectus Supplement will set forth any restrictive
covenants applicable with respect to any series of Debt Securities.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to, any
Person ("Successor Person"), and may not permit any Person to consolidate with
or merge into, or convey, transfer or lease its properties and assets
substantially as an entirety to, the Company, unless (a) the Successor Person
(if any) is a corporation, partnership, trust or other entity organized and
validly existing under the laws of any domestic jurisdiction and assumes the
Company's obligations on the Debt Securities and under the Indenture, (b)
immediately after giving effect to the transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing and (c) the Company has delivered
to the Trustee the certificates and opinions required under the Indenture.
(Section 801)
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to Debt Securities of any series: (a) failure to pay
principal of or any premium on any Debt Security of that series when due; (b)
failure to pay any interest on any Debt Securities of that series when due,
continued for 30 days; (c) failure to deposit any sinking fund payment, when
due, in respect of any Debt Security of that series; (d) failure to perform, or
breach in any material respect of, any other covenant or warranty of the Company
in the Indenture with respect to Debt Securities of that series (other than a
covenant or warranty included in the Indenture solely for the benefit of a
series other than that series), continued for 90 days after written notice has
been given to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Outstanding Securities of that series, as provided in
the Indenture; (e) certain events involving bankruptcy, insolvency or
reorganization; and (f) any other
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Event of Default provided with respect to Debt Securities of that series;
provided, however, that no event described in clause (d), (e) or (f) above shall
constitute an Event of Default until an officer of the Trustee, assigned to and
working in the Trustee's corporate trust department has actual knowledge thereof
or until a written notice of any such event is received by the Trustee at its
Corporate Trust Office, and such notice refers to the Debt Securities generally,
the Company or the Indenture. (Section 501)
Notwithstanding the foregoing provisions, if the principal or any
premium or interest on any Debt Security is payable in a currency other than the
currency of the United States of America and such currency is not available to
the Company for making payment thereof due to the imposition of exchange
controls or other circumstances beyond the control of the Company, the Company
will be entitled to satisfy its obligations to Holders of the Debt Securities by
making such payment in the currency of the United States of America in an amount
equal to the currency of the United States of America equivalent of the amount
payable in such other currency, as determined by the Trustee by reference to the
noon buying rate in The City of New York for cable transfers for such currency
("Exchange Rate"), as such Exchange Rate is reported or otherwise made
available by the Federal Reserve Bank of New York on the date of such payment,
or, if such rate is not then available, on the basis of the most recently
available Exchange Rate. Notwithstanding the foregoing, any payment made under
such circumstances in the currency of the United States of America where the
required payment is in a currency other than the currency of the United States
of America will not constitute an Event of Default under the Indenture.
(Section 501)
If an Event of Default (other than an Event of Default described in
clause (d) above or another Event of Default specified in clause (f) above that
is applicable to all Outstanding Debt Securities, or an Event of Default
specified in clause (e) above) with respect to the Debt Securities of any series
at the time Outstanding shall occur and be continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series by notice as provided in the Indenture may declare the
principal amount of the Debt Securities of that series (or, in the case of any
Debt Security that is an Original Issue Discount Security, such portion of the
principal amount of such Debt Security, as may be specified in the terms of such
Debt Security) to be due and payable immediately, and upon any such declaration
such principal amount shall become immediately due and payable. If an Event of
Default described in clause (d) above or another Event of Default specified in
clause (f) above that is applicable to all Outstanding Debt Securities shall
occur and be continuing, or an Event of Default specified in clause (e) above
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in aggregate principal amount of all the Debt Securities then Outstanding
(treated as one class) by notice as provided in the Indenture may declare the
principal amount (or, if any Debt Securities are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms thereof) of all the Debt Securities then Outstanding to be due and payable
immediately, and upon any such declaration such principal amount shall become
immediately due and payable. After any such acceleration of a series, but before
a judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration if all
Events of Default, other than the non-payment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indenture.
(Section 502) For information as to waiver of defaults, see "Modification and
Waiver" below.
Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. (Section
603) Subject to such provisions for the indemnification of the Trustee, the
Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the Debt
Securities of that series, provided that, (a) such direction shall not be in
conflict with any rule of law or the Indenture, (b) the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction, and (c) subject to the provisions of the Indenture relating to the
duties of the Trustee, the Trustee will have the right to decline to follow such
direction if an officer of the Trustee determines, in good faith, that the
proceeding so directed would involve the Trustee in personal liability or would
otherwise be contrary to applicable law. (Section 512)
No Holder of a Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture, or for the appointment
of a receiver, assignee, trustee, liquidator or sequestrator (or other similar
official), or for any other remedy thereunder, unless (a) such Holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Debt Securities of that series, (b) the Holders of at least
25% in aggregate principal amount of the Outstanding Debt Securities of that
series have made written request to the Trustee, and such Holder or Holders have
offered reasonable indemnity, to the Trustee to institute such proceeding and
(c) the Trustee has failed to institute such proceeding, and has not received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of that series a direction inconsistent
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with such request, within 60 days after such notice, request and offer. (Section
507) However, such limitations do not apply to a suit instituted by a Holder of
a Debt Security for the enforcement of payment of the principal of or any
premium or interest on such Debt Security on or after the applicable due date
specified in such Debt Security. (Section 508)
The Company will be required to furnish to the Trustee annually a
statement by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the performance or observance of any of the terms,
provisions, covenants and conditions of the Indenture and, if so, specifying all
such known defaults. (Section 1004)
MODIFICATION AND WAIVER
The Indenture contains provisions permitting the Company and the
Trustee to enter into one or more supplemental indentures without the consent of
the holders of any of the Debt Securities in order (a) to evidence the
succession of another corporation to the Company, or successive successions and
the assumption of the covenants, agreements and obligations of the Company by a
successor to the Company; (b) to add to the covenants of the Company for the
benefit of the Holders or surrender any right or power of the Company; (c) to
add additional Events of Default with respect to any series of Debt Securities;
(d) to add or change any provisions of the Indenture to such extent as necessary
to facilitate the issuance of Debt Securities in bearer form; (e) to add to,
change or eliminate any provision of the Indenture in respect of one or more
series of Debt Securities, provided that if such action adversely affects the
interests of any Holders of Debt Securities of any series, such addition, change
or elimination will become effective with respect to such series only when no
Security of such series remains Outstanding; (f) to convey, transfer, assign,
mortgage or pledge any property to or with the Trustee or to surrender any right
or power herein conferred upon the Company; (g) to establish the form or terms
of Debt Securities; (h) to provide for uncertificated securities in addition to
certificated securities; (i) to evidence and provide for successor Trustees or
to add or change any provisions to such extent as necessary to permit or
facilitate the appointment of a separate Trustee or Trustees for specific series
of Debt Securities; (j) to cure any ambiguity, to correct any defect or
supplement any inconsistent provisions or to make any other provisions with
respect to matters or questions arising under the Indenture, provided that such
action does not adversely affect the interests of the Holders of Debt Securities
of any series; (k) to supplement any provisions of the Indenture necessary to
permit or facilitate the defeasance and discharge of any series of Debt
Securities, provided that such action does not adversely affect the interests of
the Holders of Debt Securities of such series or any other series; (l) to comply
with the rules or regulations of any securities exchange or automated quotation
system on which any of the Debt Securities may be listed or traded; or (m) to
add, change or eliminate any provisions of the Indenture as is necessary or
desirable in accordance with any amendments to the Trust Indenture Act, provided
that such action does not adversely affect the rights or interests of any Holder
of Debt Securities. (Section 901)
The Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such supplemental indenture (treated as one class), to execute
supplemental indentures adding any provisions to or changing or eliminating any
of the provisions of the Indenture or modifying the rights of the Holders of
Debt Securities of such series, except that no such supplemental indenture may,
without the consent of the Holder of each Outstanding Debt Security so affected,
(a) except to the extent permitted pursuant to the Indenture, change the Stated
Maturity of the principal of, or any installment of principal of or interest on,
any Debt Security, (b) reduce the principal amount of, or any premium or
interest on, any Debt Security, (c) reduce the amount of principal of an
Original Issue Discount Security or any other Debt Security payable upon
acceleration of the Maturity thereof, (d) change the place or currency of
payment of principal of, or any premium or interest on, any Debt Security, (e)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security, (f) reduce the percentage in principal amount of
Outstanding Debt Securities of any series, the consent of whose Holders is
required for modification or amendment of the Indenture, (g) reduce the
percentage in principal amount of Outstanding Debt Securities of any series
necessary for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults, (h) make certain modifications to such
provisions with respect to modification and waiver, (i) with respect to any
series of Debt Securities that are convertible or exchangeable into any other
securities or property of the Company, make any change that adversely affects
the right to convert or exchange any such Debt Security or decrease the
conversion or exchange rate or increase the conversion price of any such Debt
Security, or (j) with respect to any series of Debt Securities that are secured,
change the terms and conditions pursuant to which such Debt Securities are
secured in a manner adverse to the Holders of such Debt Securities. (Section
902)
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Debt Securities of any series may waive any past default or
compliance with certain restrictive provisions under the Indenture, except a
default in the payment of
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principal, premium or interest and certain covenants and provisions of the
Indenture which cannot be amended without the consent of the Holder of each
Outstanding Debt Security of such series affected. (Sections 513 and 1006)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given or
taken any direction, notice, consent, waiver or other action under the Indenture
as of any date, (a) the principal amount of an Original Issue Discount Security
that will be deemed to be Outstanding will be the amount of the principal
thereof that would be due and payable as of such date upon acceleration of the
Maturity thereof to such date, (b) if, as of such date, the principal amount
payable at the Stated Maturity of a Debt Security is not determinable (for
example, because it is based on an index), the principal amount of such Debt
Security deemed to be Outstanding as of such date will be an amount determined
in the manner prescribed for such Debt Security, (c) the principal amount of a
Debt Security denominated in one or more foreign currencies or currency units
that will be deemed to be Outstanding will be the U.S. dollar equivalent,
determined as of such date in the manner prescribed for such Debt Security, of
the principal amount of such Debt Security (or, in the case of a Debt Security
described in clause (a) or (b) above, of the amount described in such clause)
and (d) Debt Securities owned by the Company or any other obligor upon the Debt
Securities or any of their Affiliates will be disregarded and deemed not to be
Outstanding. Certain Debt Securities, including those for whose payment or
redemption money has been deposited or set aside in trust for the Holders and
those that have been fully defeased pursuant to Section 1402, will not be deemed
to be Outstanding. (Section 101)
Except in certain limited circumstances, the Company will be entitled
to set any day as a record date for the purpose of determining the Holders of
Outstanding Debt securities of any series entitled to give or take any
direction, notice, consent, waiver or other action under the Indenture, in the
manner and subject to the limitations provided in the Indenture. In certain
limited circumstances, the Trustee will be entitled to set a record date for
action by Holders. If a record date is set for any action to be taken by
Holders of a particular series, such action may be taken only by persons who are
Holders of Outstanding Debt Securities of that series on the record date. To be
effective, such action must be taken by Holders of the requisite principal
amount of such Debt Securities within a specified period following the record
date. For any particular record date, this period will be 180 days or such
shorter period as may be specified by the Company (or the Trustee, if it set the
record date) and may be shortened or lengthened (but not beyond 180 days) from
time to time. (Section 104)
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided in the applicable Prospectus Supplement, the
provisions of Section 1402, relating to defeasance and discharge of
indebtedness, or Section 1403, relating to defeasance of certain restrictive
covenants, in the Indenture, shall apply to the Debt Securities of any series or
to any specified part of a series. (Section 1401)
DEFEASANCE AND DISCHARGE. Section 1402 of the Indenture provides that
the Company will be discharged from all its obligations with respect to such
Debt Securities (except for certain obligations to exchange or register the
transfer of Debt Securities, to replace stolen, lost or mutilated Debt
Securities, to maintain paying agencies and to hold moneys for payment in trust)
upon the deposit in trust for the benefit of the Holders of such Debt Securities
of money or U.S. Government Obligations, or both, which, through the payment of
principal and interest in respect thereof in accordance with their terms, will
provide money in an amount sufficient to pay the principal of and any premium
and interest on such Debt Securities on the respective Stated Maturities in
accordance with the terms of the Indenture and such Debt Securities. Such
defeasance or discharge may occur only if, among other things, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that the Company
has received from, or there has been published by, the United States Internal
Revenue Service a ruling, or there has been a change in tax law, in either case
to the effect that Holders of such Debt Securities will not recognize gain or
loss for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge were not to occur. (Sections 1402 and 1404)
DEFEASANCE OF CERTAIN COVENANTS. Section 1403 of the Indenture
provides that, in certain circumstances, the Company may omit to comply with
certain restrictive covenants, including any that may be described in the
applicable Prospectus Supplement, and that in those circumstances the occurrence
of certain Events of Default, which are described above in clause (d) (with
respect to such restrictive covenants) under "Events of Default" and any that
may be described in the applicable Prospectus Supplement, will be deemed not to
be or result in an Event of Default, in each case with respect to such Debt
Securities. The Company, in order to exercise such option, will be required to
deposit, in trust for the benefit of the Holders of such Debt Securities, money
or U.S. Government Obligations, or both, which, through the payment of principal
and interest in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of and any premium and
interest on such Debt
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Securities on the respective Stated Maturities in accordance with the terms of
the Indenture and such Debt Securities. The Company will also be required, among
other things, to deliver to the Trustee an opinion of Counsel to the effect that
Holders of such Debt Securities will not recognize gain or loss for federal
income tax purposes as a result of such deposit and defeasance of certain
obligations and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit
and defeasance were not to occur. In the event the Company exercised this option
with respect to any Debt Securities and such Debt Securities were declared due
and payable because of the occurrence of any Event of Default, the amount of
money and U.S. Government Obligations so deposited in trust would be sufficient
to pay amounts due on such Debt Securities at the time of their respective
Stated Maturities, but might not be sufficient to pay amounts due on such Debt
Securities upon any acceleration resulting from such Event of Default. In such
case, the Company would remain liable for such payments. (Sections 1403 and
1404)
NOTICES
Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the Security Register.
(Sections 101 and 106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name a Debt Security is registered on the
applicable record date as the owner thereof (whether or not such Debt Security
may be overdue) for the purpose of making payment and for all other purposes.
(Section 309)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York without regard
to conflicts of laws principles thereof. (Section 112)
REGARDING THE TRUSTEE
The Trustee serves as trustee for (i) Houston Industries', the
Company's parent company, first mortgage bonds aggregating $2.5 billion, (ii)
Houston Industries' collateralized medium-term notes which are secured as to
payment of principal, interest and premium, if any, by Houston Industries' first
mortgage bonds and (iii) pollution control bonds previously issued on behalf of
Houston Industries aggregating $927.9 million, a portion of which is
collateralized by Houston Industries' first mortgage bonds. Houston Industries
maintains depositary and other normal banking relationships with the Trustee.
The Chase Manhattan Bank ("Chase"), a subsidiary of the Chase
Manhattan Corporation, the sole indirect shareholder of the Trustee, is a party
to credit agreements under which Houston Industries and its affiliates have bank
lines of credit. Houston Industries and certain of its subsidiaries maintain
depository and other normal banking, investment banking and trust relationships
with Chase and certain subsidiaries of Chase. Mr. Don D. Jordan, Chairman and
Chief Executive Officer of the Company and Houston Industries, serves on the
Trustee's Advisory Board of Directors and Mr. R. Steve Letbetter, President and
Chief Operating Officer of Houston Industries, serves on the Trustee's Houston
Regional Advisory Board of Directors.
The Trustee will be renamed Chase Bank of Texas, National Association
in January 1998.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (a) through an underwriter or
underwriters, (b) through dealers, (c) through agents, (d) directly to
purchasers, including affiliates of the Company, or (e) through a combination of
any such methods of sale. The applicable Prospectus Supplement will set forth
the terms of the offerings of any Debt Securities, including the method of
distribution, the name or names of any underwriters, dealers or agents, any
managing underwriter or underwriters, the purchase price of the Debt Securities
and the proceeds to the Company from the sale, any underwriting discounts,
agency fees and other items constituting underwriters' compensation and any
discounts and concessions allowed, reallowed or paid to dealers or agents. Any
initial public offering price and any discount or concessions allowed or
reallowed to dealers may be changed from time to
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time. The expected time of delivery of the Debt Securities in respect of which
this Prospectus is delivered will be set forth in the applicable Prospectus
Supplement.
If underwriters are used in the sale of the Debt Securities, the
underwriting agreement will provide that the obligations of the underwriters are
subject to certain conditions precedent and that the underwriters with respect
to a sale of Debt Securities will be obligated to purchase all such Debt
Securities if any are purchased. In connection with the sale of Debt Securities,
underwriters may receive compensation from the Company or from purchasers of
Debt Securities for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Debt Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agents.
If a dealer is utilized in the sale of the Debt Securities in respect
of which this Prospectus is delivered, the Company will sell such Debt
Securities to the dealer as principal. The dealer may then resell such Debt
Securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter, as such
term is defined in the Securities Act, of the Debt Securities so offered and
sold. The name of the dealer and the terms of the transaction will be set forth
in the Prospectus Supplement relating thereto.
Underwriters, agents or dealers participating in the distribution of
Debt Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Debt Securities may be deemed to be underwriting discounts and commissions under
the Securities Act.
The Debt Securities may be sold in one or more transactions either at
a fixed price or prices which may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company may also offer and sell the Debt Securities in
exchange for one or more of its outstanding issues of debt or convertible debt
securities or in the satisfaction of indebtedness.
Underwriters, agents or dealers who participate in the distribution of
Debt Securities may be entitled, under agreements which may be entered into with
the Company, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution by the
Company to payments that such underwriters, dealers or agents or any of their
controlling persons may be required to make in respect thereof. Underwriters,
agents or dealers may be customers of, engage in transactions with or perform
services for the Company or affiliates of the Company in the ordinary course of
business.
Each series of Debt Securities will be a new issue with no established
trading market. The Company may elect to list any series of Debt Securities on
an exchange, but the Company shall not be obligated to do so. It is possible
that one or more underwriters may make a market in a series of Debt Securities,
but will not be obliged to do so and may discontinue any market making at any
time without notice. Therefore, no assurance can be given as to the liquidity
of the trading market for the Debt Securities.
In connection with the offering, the underwriters or agents, as the
case may be, may purchase and sell the Debt Securities in the open market.
These transactions may include over-allotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the Debt
Securities; and syndicate short positions involve the sale by the underwriters
or agents, as the case may be, of a greater number of Debt Securities than they
are required to purchase from the Company in the offering. The underwriters
also may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker dealers in respect of the Debt Securities sold in the
offering for their account may be reclaimed by the syndicate if such Debt
Securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Debt Securities, which may be higher than the price that
might otherwise prevail in the open market, and these activities, if commenced,
may be discontinued at any time. These transactions may be effected on the
NYSE, in the over-the-counter market or otherwise.
If so indicated in the Prospectus Supplement, the Company will
authorize underwriters, dealers and agents to solicit offers by certain
institutions to purchase Debt Securities from the Company pursuant to delayed
delivery contracts providing for payment and delivery on the date stated in the
Prospectus Supplement. Such contracts will be subject only to those conditions
set forth in the Prospectus Supplement. The Prospectus Supplement will also set
forth the commission payable for solicitation of such contracts.
-14-
Offers to purchase Debt Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to institutional
investors or others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto. Except
as set forth in the applicable Prospectus Supplement, no director, officer or
employee of the Company will solicit or receive a commission in connection with
direct sales by the Company of the Debt Securities, although such persons may
respond to inquiries by potential purchasers and perform ministerial and
clerical work in connection with any such direct sales.
Debt Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms"), acting as principals for their own
accounts or as agents for the Company. Any remarketing firm will be identified
and the terms of its agreement, if any, with the Company and its compensation
will be described in the Prospectus Supplement. Remarketing firms may be deemed
to be underwriters, as such term is defined in the Securities Act, in connection
with the Debt Securities remarketed thereby. Remarketing firms may be entitled
under agreements which may be entered into with the Company to indemnification
or contribution by the Company against certain civil liabilities, including
liabilities under the Securities Act, and may be customers of, engage in
transactions with or perform services for the Company in the ordinary course of
business.
EXPERTS
The consolidated balance sheet of Old NorAm as of December 31, 1996
and 1995 and the consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1996,
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement,
the validity of the Debt Securities will be passed upon for the Company by Baker
& Botts, L.L.P., Houston, Texas. Certain legal matters will be passed upon for
the Company by Hugh Rice Kelly, Esq., Executive Vice President, General Counsel
and Corporate Secretary of the Company, and for the underwriters, dealers, or
agents, if any, by Dewey Ballantine LLP, New York, New York. James A. Baker,
III, a senior partner in the law firm of Baker & Botts, L.L.P., is currently a
director of Houston Industries, the Company's sole stockholder, and beneficial
owner of 1,500 shares of Houston Industries' common stock.
-15-
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AF-
FAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
----
The Company................................................................ S-3
Use of Proceeds............................................................ S-3
Summary Financial Information of the Company............................... S-4
Description of Debentures.................................................. S-5
Underwriting............................................................... S-8
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Disclosure Regarding Forward-Looking Statements............................ 3
The Company................................................................ 3
Ratio of Earnings to Fixed Charges......................................... 4
Use of Proceeds............................................................ 5
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 13
Experts.................................................................... 15
Validity of Securities..................................................... 15
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$300,000,000
NORAM ENERGY CORP.
% DEBENTURES DUE , 2008
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
NATIONSBANC MONTGOMERY
SECURITIES LLC
SALOMON SMITH BARNEY
, 1998
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