EXHIBIT 4(b)(3)
GUARANTEE AGREEMENT
Between
Southwestern Electric Power Company
(as Guarantor)
and
The Bank of New York
(as Trustee)
dated as of
September 1, 2003
(SWEPCo Capital Trust I)
CROSS-REFERENCE TABLE 1
Section of Trust Indenture Act Section of
of 1939, as amended Guarantee Agreement
- ------------------------------------ -------------------
310(a).................................................................4.01(a)
310(b)...........................................................4.01(c), 2.08
310(c)............................................................Inapplicable
311(a).................................................................2.02(b)
311(b).................................................................2.02(b)
311(c)............................................................Inapplicable
312(a).................................................................2.02(a)
312(b).................................................................2.02(b)
313.......................................................................2.03
314(a)....................................................................2.04
314(b)............................................................Inapplicable
314(c)....................................................................2.05
314(d)............................................................Inapplicable
314(e)........................................................1.01, 2.05, 3.02
314(f)..............................................................2.01, 3.02
315(a).................................................................3.01(d)
315(b)....................................................................2.07
315(c)....................................................................3.01
315(d).................................................................3.01(d)
315(e)............................................................Inapplicable
316(a)...........................................................5.04(i), 2.06
316(b)....................................................................5.03
316(c)....................................................................2.02
317(a) ...........................................................Inapplicable
317(b)............................................................Inapplicable
318(a).................................................................2.01(b)
318(b)....................................................................2.01
318(c).................................................................2.01(a)
- --------------
1 This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of September 1,
2003, between SOUTHWESTERN ELECTRIC POWER COMPANY, a Delaware corporation (the
"Guarantor"), and THE BANK OF NEW YORK, a New York banking corporation, as
trustee (the "Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of SWEPCO CAPITAL
TRUST I, a Delaware statutory trust (the Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of September 1, 2003, among the Trustee, the other
Trustees named therein, Southwestern Electric Power Company, as Depositor, and
the holders of undivided beneficial interests in the assets of the Trust, the
Trust is issuing as of October 1, 2003, $110,000,000 aggregate liquidation
amount of its Flexible Trust Preferred Securities (the "Preferred Securities")
representing preferred undivided beneficial interests in the assets of the Trust
and having the terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Trust and the
proceeds thereof will be used to purchase the Junior Subordinated Debentures (as
defined in the Trust Agreement) of the Guarantor, which will be held by the
Trust as trust assets; and
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires to irrevocably and unconditionally agree, to
the extent set forth herein, to pay to the Holders the Guarantee Payments (as
defined herein) and to make certain other payments on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the payment for Preferred Securities
by each Holder (as defined herein) thereof, which payment the Guarantor hereby
agrees shall benefit the Guarantor, the Guarantor executes and delivers this
Guarantee Agreement for the benefit of the Holders from time to time of the
Common Securities (as defined herein) and the Preferred Securities.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Guarantee Agreement, the terms
set forth below shall, unless the context otherwise requires, have the following
meanings. Capitalized or otherwise defined terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Trust Agreement as
in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Trust.
"Event of Default" means a failure by the Guarantor to perform any of its
payment obligations under this Guarantee Agreement or to perform any other
obligations if such default remains unremedied for 30 days.
"Guarantee Payments" shall mean the following payments or distributions,
without duplication, with respect to the Common Securities and the Preferred
Securities, to the extent not paid or made by or on behalf of the Trust: (i) any
accrued and unpaid distributions that are required to be paid on such Common
Securities and Preferred Securities to the extent the Trust has funds on hand
available therefor to make such payment; (ii) the redemption price, including
all accrued and unpaid distributions to the date of redemption (the "Redemption
Price"), with respect to the Common Securities and Preferred Securities called
for redemption by the Trust to the extent that the Trust has funds on hand
available therefor sufficient to make such payment; and (iii) upon a voluntary
or involuntary dissolution, winding-up or liquidation of the Trust (other than
in connection with the distribution of Junior Subordinated Debentures to the
holders of Trust Securities or the redemption of all of the Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accumulated and unpaid distributions on the Common Securities and the Preferred
Securities to the date of payment, to the extent the Trust has funds on hand
available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to Holders in liquidation of the Trust (in either
case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records of
the Trust, of any Common Securities and Preferred Securities; provided, however,
that in determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indenture" means the Subordinated Indenture dated as of September 1,
2003, between the Guarantor, as Junior Subordinated Debenture Issuer, and The
Bank of New York, as trustee, as the same may be modified, amended or
supplemented in accordance with the applicable provisions thereof, including by
the First Supplemental Indenture dated as of October 1, 2003, by and between the
Guarantor and The Bank of New York, as trustee.
"Majority in liquidation amount of Preferred Securities" means a vote by
Holder(s) of Preferred Securities, voting separately as a class, of more than
50% of the liquidation amount of all Preferred Securities outstanding at the
time of determination.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Guarantor, and
delivered to the Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the
Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Responsible Officer" means, with respect to the Trustee, any vice
president, any assistant vice president, the secretary, any assistant secretary,
the treasurer, any assistant treasurer, any senior trust officer, trust officer
or assistant trust officer or any other officer of the Corporate Trust
Department of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Successor Trustee" means a successor Trustee possessing the
qualifications to act as Trustee under Section 4.01.
"The Bank of New York" means The Bank of New York, a New York banking
corporation.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trustee" means The Bank of New York until a Successor Trustee has been
appointed and has accepted such appointment pursuant to the terms of this
Guarantee Agreement and thereafter means each such Successor Trustee.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions; and
(b) If and to the extent that any provision of this Guarantee Agreement limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.02. Lists of Holders of Securities.
(a) The Guarantor shall furnish or cause to be furnished to the Trustee (a)
semiannually, not later than April 1 and October 1 in each year, a list, in
such form as the Trustee may reasonably require, of the names and addresses
of the Holders ("List of Holders") as of a date not more than 15 days prior
to the time such list is furnished, and (b) at such other times as the
Trustee may request in writing, within 30 days after the receipt by the
Guarantor of any such request, a List of Holders as of a date not more than
15 days prior to the time such list is furnished; provided that, the
Guarantor shall not be obligated to provide such List of Holders at any
time the List of Holders does not differ from the most recent List of
Holders given to the Trustee by the Guarantor or at any time the Trustee is
the Securities Registrar under the Trust Agreement. The Trustee may destroy
any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Trustee shall comply with its obligations under Sections 311(a), 311(b)
and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Trustee. Within 60 days after May 15 of each
year commencing May 15, 2004, the Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by Section 313(a) of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Trustee shall also comply with the other
requirements of Section 313 of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Trustee. The Guarantor shall provide to
the Trustee such documents, reports and information as required by Section 314
of the Trust Indenture Act (if any) in the form, in the manner and at the times
required by Section 314 of the Trust Indenture Act, and shall provide, within
120 days after the end of each of its fiscal years, the compliance certificate
required by Section 314(a)(4) of the Trust Indenture Act in the form and in the
manner required by such Section. Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such reports, information and documents shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein.
SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Guarantee Agreement,
including an Officers' Certificate and an opinion of counsel that relate to any
of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.06. Events of Default; Waiver. The Holders of a Majority in
liquidation amount of Preferred Securities may, by vote, on behalf of all of the
Holders, waive any past Event of Default and its consequences. Upon such waiver,
any such Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.07. Event of Default; Notice.
(a) The Trustee shall, within 90 days after the occurrence of an Event of
Default, transmit by mail, first class postage prepaid, to the Holders,
notices of all Events of Default actually known to the Trustee, unless such
defaults have been cured before the giving of such notice, provided that
the Trustee shall be protected in withholding such notice if and so long as
the board of directors, the executive committee, or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Trustee shall not be deemed to have knowledge of any Event of Default
unless the Trustee shall have received written notice, or a Responsible
Officer charged with the administration of the Trust Agreement shall have
obtained written notice, of such Event of Default.
SECTION 2.08. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF TRUSTEE
SECTION 3.01. Powers and Duties of the Trustee.
(a) This Guarantee Agreement shall be held by the Trustee for the benefit of
the Holders, and the Trustee shall not transfer this Guarantee Agreement to
any Person except the Trustee shall assign rights hereunder to a Holder to
the extent such assignment is necessary to exercise such Holder's rights
pursuant to Section 5.04 or to a Successor Trustee upon acceptance by such
Successor Trustee of its appointment to act as Successor Trustee. The
right, title and interest of the Trustee shall automatically vest in any
Successor Trustee, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Trustee.
(b) If an Event of Default has occurred and is continuing, the Trustee shall
enforce this Guarantee Agreement for the benefit of the Holders.
(c) The Trustee, before the occurrence of any Event of Default and after the
curing or waiving of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06), the
Trustee shall exercise such of the rights and powers vested in it by this
Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Guarantee Agreement, and
the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Guarantee Agreement; and
(B) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming
to the requirements of this Guarantee Agreement; but in the case
of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Guarantee
Agreement;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made;
(iii)the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the
direction of the Holders of a Majority in liquidation amount of the
Preferred Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee under this
Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if the Trustee shall have reasonable
grounds for believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Guarantee
Agreement or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.02. Certain Rights of Trustee.
(a) Subject to the provisions of Section 3.01:
(i) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this Guarantee
Agreement shall be sufficiently evidenced by an Officers' Certificate;
(iii)whenever, in the administration of this Guarantee Agreement, the
Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Guarantor;
(iv) the Trustee may consult with counsel or other experts of its choice,
and the written advice or opinion of such counsel or other experts
shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion; such counsel may be
counsel to the Guarantor or any of its Affiliates and may include any
of its employees; the Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement
from any court of competent jurisdiction;
(v) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Guarantee Agreement at the request or
direction of any Holder, unless such Holder shall have provided to the
Trustee such adequate security and indemnity as would satisfy a
reasonable person in the position of the Trustee against the costs,
expenses (including attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the Trustee;
provided that nothing contained in this Section 3.02(a)(v) shall be
taken to relieve the Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Guarantee Agreement;
(vi) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit;
(vii)the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents
or attorneys, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(viii) whenever in the administration of this Guarantee Agreement the
Trustee shall deem it desirable to receive instructions with respect
to enforcing any remedy or right or taking any other action hereunder,
the Trustee (i) may request instructions from the Holders, (ii) may
refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be
protected in acting in accordance with such instructions;
(ix) the Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith and reasonably believed by it
to be authorized or within the discretion or rights or powers
conferred upon it by this Guarantee Agreement; and
(x) the rights, privileges, protections, immunities and benefits given to
the Trustee, including , without limitation, its rights to be
indemnified, are extended to, and shall be enforceable by, the Trustee
in each of its respective capacities hereunder, and to each agent,
custodian and other Person employed to act hereunder.
(b) No provision of this Guarantee Agreement shall be deemed to impose any duty
or obligation on the Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform
any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Trustee shall
be construed to be a duty.
SECTION 3.03. Compensation; Fees; Indemnity.
The Guarantor agrees:
(a) to pay to the Trustee from time to time reasonable compensation for all
services rendered by the Trustee hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the Trustee
upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Guarantee Agreement (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee for, and to hold the Trustee harmless against, any
and all loss, damage, claims, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with
the acceptance or administration of this Guarantee Agreement, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder.
The provisions of this Section 3.03 shall survive the termination of this
Guarantee Agreement.
ARTICLE IV
TRUSTEE
SECTION 4.01. Trustee; Eligibility.
(a) There shall at all times be a Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of the
United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or District
of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority referred to above, then, for
the purposes of this Section 4.01(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Trustee shall cease to be eligible to so act under
Section 4.01(a), the Trustee shall immediately resign in the manner and
with the effect set out in Section 4.02(c).
(c) If the Trustee has or shall acquire any "conflicting interest" within the
meaning of Section 310(b) of the Trust Indenture Act, the Trustee and
Guarantor shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act, subject to the rights of the Trustee
under the penultimate paragraph thereof.
SECTION 4.02. Appointment, Removal and Resignation of Trustee.
(a) Subject to Section 4.02(b), the Trustee may be appointed or removed without
cause at any time by the Guarantor.
(b) The Trustee shall not be removed until a Successor Trustee has been
appointed and has accepted such appointment by written instrument executed
by such Successor Trustee and delivered to the Guarantor.
(c) The Trustee appointed to office shall hold office until a Successor Trustee
shall have been appointed or until its removal or resignation. The Trustee
may resign from office (without need for prior or subsequent accounting) by
an instrument in writing executed by the Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor
Trustee has been appointed and has accepted such appointment by instrument
in writing executed by such Successor Trustee and delivered to the
Guarantor and the resigning Trustee.
(d) If no Successor Trustee shall have been appointed and accepted appointment
as provided in this Section 4.02 within 60 days after delivery to the
Guarantor of an instrument of resignation, the resigning Trustee may
petition any court of competent jurisdiction for appointment of a Successor
Trustee. Such court may thereupon, after prescribing such notice, if any,
as it may deem proper, appoint a Successor Trustee.
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Guarantor
may have or assert against any Person, other than the defense of payment. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of this Guarantee Agreement and of any liability to which
it applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Trust or any other Person before proceeding against
the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.03. Obligations Not Affected. The obligation of the Guarantor to
make the Guarantee Payments under this Guarantee Agreement shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or otherwise, of the performance
or observance by the Trust of any express or implied agreement, covenant,
term or condition relating to the Preferred Securities to be performed or
observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any portion of
the Distributions, Redemption Price, Liquidation Distribution or any other
sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of,
or in connection with, the Preferred Securities (other than an extension of
time for payment of Distributions, Redemption Price, Liquidation
Distribution or other sum payable that results from the extension of any
interest payment period on the Junior Subordinated Debentures permitted by
the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Trust granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust
or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or hereby
incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a legal
or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.03 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly acknowledges
that: (i) this Guarantee Agreement will be deposited with the Trustee to be held
for the benefit of the Holders; (ii) the Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee in respect of this Guarantee Agreement or exercising any trust or
power conferred upon the Trustee under this Guarantee Agreement; and (iv) any
Holder may institute a legal proceeding directly against the Guarantor to
enforce its rights under this Guarantee Agreement, without first instituting a
legal proceeding against or requesting or directing that action be taken by the
Trustee or any other Person; it being understood and intended that no one or
more of such Holders shall have any right in any manner whatsoever by virtue of,
or by availing of, any provision of this Guarantee Agreement to affect, disturb
or prejudice the rights of any other of such Holders or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Guarantee Agreement, except in the manner herein provided and
for the equal and ratable benefit of all of such Holders.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication) or upon the distribution of Junior Subordinated Debentures to the
Holders in exchange for all of the Preferred Securities.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Trust in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts of Guarantee Payments are due
and unpaid under this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges that its
obligations hereunder are independent of the obligations of the Trust with
respect to the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE VI
SUBORDINATION
SECTION 6.01. Subordination. This Guarantee Agreement will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to all other liabilities of the Guarantor, including the
Junior Subordinated Debentures, except those obligations or liabilities made
pari passu or subordinate by their terms; (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Guarantor and with
any guarantee now or hereafter entered into by the Guarantor in respect of any
preferred or preference securities of any Affiliate of the Guarantor; and (iii)
senior to all common stock of the Guarantor.
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Guarantee Agreement shall terminate and be
of no further force and effect upon: (i) full payment of the Redemption Price of
all Preferred Securities; (ii) the distribution of Junior Subordinated
Debentures to the Holders in exchange for all of the Preferred Securities; or
(iii) full payment of the amounts payable in accordance with the Trust Agreement
upon liquidation of the Trust. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must restore payment of any sums paid with respect
to Preferred Securities or under this Guarantee Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Preferred Securities then outstanding. Except in
connection with a consolidation, merger, conveyance, transfer, or lease
involving the Guarantor that is permitted under Article Eleven of the Indenture,
the Guarantor shall not assign its obligations hereunder.
SECTION 8.02. Amendments. Except with respect to any changes which do not
materially adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Guarantee Agreement may only be amended with the
prior approval of the Holders of a Majority in liquidation amount of the
Preferred Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of Holders shall apply to the giving of such approval.
SECTION 8.03. Notices. Any notice, request or other communication required
or permitted to be given hereunder shall be in writing, duly signed by the party
giving such notice, and delivered, telecopied or mailed by first class mail as
follows:
(a) if given to the Guarantor, to the address set forth below or such other
address as the Guarantor may give notice of to the Trustee and the Holders:
Southwestern Electric Power Company
1 Riverside Plaza
Columbus, Ohio 43215
Facsimile No.: (614) 716-1687
Attn: Treasurer
(b) if given to the Trust, in care of the Trustee, or to the Trustee at the
Trust's (and the Trustee's) address set forth below or such other address
as the Trustee on behalf of the Trust may give notice to the Holders:
SWEPCo Capital Trust I
c/o The Bank of New York
101 Barclay Street - 8W
New York, NY 10286
Facsimile No.: (212) 815-5707
Attn: Corporate Trust Administration
(c) if given to any Holder, at the address set forth on the books and records
of the Trust.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 8.04. Benefit. This Guarantee Agreement is solely for the benefit
of the Holders and, subject to Section 3.01(a), is not separately transferable
from the Preferred Securities.
SECTION 8.05. Interpretation. In this Guarantee Agreement, unless the
context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not defined in the
preamble hereto have the respective meanings assigned to them in Section
1.01;
(b) a term defined anywhere in this Guarantee Agreement has the same meaning
throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee Agreement"
are to this Guarantee Agreement as modified, supplemented or amended from
time to time;
(d) all references in this Guarantee Agreement to Articles and Sections are to
Articles and Sections of this Guarantee Agreement unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the same meaning when used in
this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;
(f) reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include the
masculine, feminine and neuter genders.
SECTION 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK. THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT
IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK IN ANY
ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION
WITH THIS GUARANTEE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, AND TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR HEREBY WAIVES AND AGREES
NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER, OR THAT THIS GUARANTEE AGREEMENT OR ANY DOCUMENT OR ANY INSTRUMENT
REFERRED TO HEREIN OR THE SUBJECT MATTER HEREOF MAY NOT BE LITIGATED IN OR BY
SUCH COURTS. THE GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY
CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS
GUARANTEE AGREEMENT OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW YORK.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
SOUTHWESTERN ELECTRIC POWER COMPANY
By: /s/ Wendy G. Hargus
Name: Wendy G. Hargus
Title: Assistant Treasurer
THE BANK OF NEW YORK
By: /s/ Joseph A. Lloret
Name: Joseph A. Lloret
Title:Assistant Treasurer