EXHIBIT 4.22
Draft of 4/4/94
PREFERRED LOAN AGREEMENT
PREFERRED LOAN AGREEMENT, dated as of April __, 1994, between ENSERCH
Corporation, a Texas corporation ("ENSERCH"), and Enserch Preferred Capital,
Inc., a Delaware corporation ("Enserch Preferred").
WHEREAS, Enserch Capital L.L.C., a Delaware limited liability company
("Capital"), intends to issue its common limited liability company interests
(the "Common Securities") to ENSERCH and Enserch Preferred, and receive related
capital contributions, in an aggregate amount of $________ (the "Common Security
Payments") and to issue and sell ________ preferred limited liability company
interests of a series designated the ___% Cumulative Monthly Income Preferred
Securities, Series A (the "Preferred Securities"), with a liquidation preference
equal to $25 per Preferred Security (the "Liquidation Preference");
WHEREAS, ENSERCH is guaranteeing the payment of dividends on the Preferred
Securities if and when declared to the extent that there are sufficient funds
legally available therefor, the Redemption Price (as defined in the Guarantee
Agreement) and the Liquidation Distribution (as defined in the Guarantee
Agreement) on the Preferred Securities all to the extent set forth in the
Preferred Securities Payment and Guarantee Agreement, dated as of the date of
hereof (the "Guarantee Agreement");
WHEREAS, simultaneously with the execution of this Agreement, Enserch
Preferred is entering into a loan agreement (the "Company Loan Agreement") with
Capital pursuant to which Capital will make a loan to Enserch Preferred in an
aggregate principal amount equal to the sum of the Common Security Payments and
the aggregate Liquidation Preference of the Preferred Securities issued and sold
by Capital (the "Company Loan");
WHEREAS, ENSERCH is guaranteeing the payment of principal and interest on
the Company Loan to the extent set forth in the Loan Payment and Guarantee
Agreement, dated as of the date hereof (the "Loan Guarantee Agreement");
WHEREAS, ENSERCH has asked Enserch Preferred to make a loan of the proceeds
of the Company Loan to ENSERCH; and
WHEREAS, Enserch Preferred is willing to make the aforementioned loans to
ENSERCH, on the terms and conditions hereinafter stated.
NOW THEREFORE, ENSERCH and Enserch Preferred hereby agree as follows:
ARTICLE I.
THE LOANS
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Section 1.01. The Loans. Subject to the terms and conditions herein,
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Enserch Preferred agrees to make loans to ENSERCH on the date hereof in an
aggregate principal amount of $____________ in next day funds. Such loans shall
be referred to herein as the "Loans".
Section 1.02. Term of the Loans; Mandatory Prepayment. (a) If
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Capital redeems Preferred Securities in accordance with the terms thereof, the
Loans shall become due and payable in a principal amount equal to the aggregate
stated Liquidation Preference of the Preferred Securities so redeemed, together
with any and all accrued interest thereon. Any payment pursuant to this Section
1.02(a) shall be made in next day funds prior to 12:00 noon, New York time, on
the date fixed for such redemption or at such other time on such earlier date as
Enserch Preferred and ENSERCH shall agree.
(b) The entire principal amount of the Loans shall become due and
payable, together with any accrued and unpaid interest thereon, including
Additional Interest (as defined below), if any, on the earliest of (i) April 30,
2024 or (ii) the date upon which ENSERCH or Enserch Preferred is dissolved,
wound-up or liquidated or the date upon which Capital is dissolved, wound-up or
terminated.
Section 1.03. Optional Prepayment. ENSERCH shall have the
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right to prepay the Loans, without premium or penalty:
(i) in whole or in part (together with any accrued but unpaid
interest, including Additional Interest, if any, on the portion being
prepaid) at any time on or after April 30, 1999; and
(ii) in whole (together with all accrued and unpaid interest,
including Additional Interest thereon) at any time if Enserch Preferred is
or would be required to pay any Additional Company Interest (as defined
herein) in respect of the Company Loan or in part (together with all
accrued and unpaid interest, including Additional Interest on the portion
being prepaid) at any time if Enserch Preferred is or would be required to
pay Additional Company Interest with respect to only a portion of the
Company Loan, provided that if a partial prepayment would, through the
corresponding partial repayment of the Company Loan and partial redemption
required under the terms of the Preferred Securities, result in a delisting
of the Preferred Securities, ENSERCH may only prepay the Loans in whole.
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ARTICLE II.
INTEREST
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Section 2.01. Interest on the Loans. The Loans shall bear interest
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(including Additional Interest, if any) at an annual rate equal to __% from the
date they are made until maturity. Such interest shall be payable on the last
day of each calendar month of each year, commencing April 30, 1994. Interest
shall be computed on the basis of twelve 30-day months and a 360-day year and,
for any period shorter than a full month, shall be computed on the basis of the
actual number of days elapsed in such period. In the event that any date on
which interest is payable on the Loans is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. A
"Business Day" shall mean any day other than a day on which banking institutions
in The City of New York are authorized or required by law to close.
Section 2.02. Additional Interest. If at any time Enserch Preferred
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shall be required to pay any Additional Interest (as defined in the Company Loan
Agreement, but herein referred to as the "Additional Company Interest") in
respect of the Company Loan pursuant to the terms thereof, then ENSERCH will pay
as interest ("Additional Interest") an amount equal to such Additional Company
Interest.
Section 2.03. Extension of Interest Payment Period. Notwithstanding
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the provisions of Section 2.01, ENSERCH, acting jointly with Enserch Preferred
under the Company Loan Agreement, shall have the right at any time during the
term of the Loans, so long as ENSERCH is not in default in the payment of
interest on the Loans, to extend the interest payment period to up to 60 months
to the same extent that Enserch Preferred extends such interest payment period
under the Company Loan Agreement, at the end of which period ENSERCH shall pay
all interest then accrued and unpaid (together with interest thereon at the rate
specified for the Loans to the extent permitted by applicable law); and
provided, that, during any such extended interest payment period, neither
ENSERCH, nor any majority owned subsidiary of ENSERCH, shall declare or pay any
dividend on, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payments with respect
to the foregoing (other than (i) payments under the Guarantee Agreement or the
Loan Guarantee Agreement, or (ii) dividends or guarantee payments to ENSERCH or
a wholly owned subsidiary). Prior to the termination of any such extended
interest payment period, ENSERCH, acting jointly with Enserch Preferred, may
further extend the interest payment period,
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provided that such extended interest payment period together with all such
further extensions thereof may not exceed 60 months. ENSERCH shall give Enserch
Preferred and Capital notice of its selection of such extended interest payment
period one Business Day prior to the earlier of (i) the date Capital declares
the related dividend or (ii) the date Capital is required to give notice of the
record or payment date of such related dividend to the New York Stock Exchange
or other applicable self-regulatory organization or to holders of the Preferred
Securities, but in any event not less than two Business Days prior to such
record date. ENSERCH shall cause Capital to give such notice of ENSERCH's
selection of such extended interest payment period to the holders of the
Preferred Securities.
ARTICLE III.
PAYMENTS
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Section 3.01. Method and Date of Payment. Each payment by ENSERCH of
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principal and interest (including Additional Interest, if any) on the Loans
shall be made to Enserch Preferred in lawful money of the United States, in next
day funds for principal payments and in same day funds for interest payments, at
such place and to such account as may be designated by Enserch Preferred.
Section 3.02. Set-off. Notwithstanding anything to the contrary
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herein, ENSERCH shall have the right to set-off any payment it is otherwise
required to make hereunder with and to the extent ENSERCH has theretofore made,
or is concurrently on the date of such payment making, a payment under the
Guarantee Agreement or the Loan Guarantee Agreement.
ARTICLE IV.
SUBORDINATION
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Section 4.01. Subordination. ENSERCH and Enserch Preferred covenant
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and agree, Capital agrees and the holders of the Preferred Securities (and any
trustee appointed by such holders) by their acceptance of such Preferred
Securities likewise agree, that the Loans are subordinate and junior in right of
payment to all Senior Indebtedness as provided herein. The term "Senior
Indebtedness" shall mean the principal, premium, if any, and interest on (i) all
indebtedness of ENSERCH, whether outstanding on the date hereof or hereafter
created, incurred or assumed, which is for money borrowed, or evidenced by a
note or similar instrument given in connection with the acquisition of any
business, properties or assets, including securities, (ii) any indebtedness of
others of the kinds described in the preceding clause (i) for the payment of
which ENSERCH is responsible or liable (directly or
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indirectly, contingently or non-contingently) as guarantor or otherwise, (iii)
any indebtedness secured by a lien upon property owned by ENSERCH and upon which
indebtedness ENSERCH customarily pays interest, even though ENSERCH has not
assumed or become liable for the payment of such indebtedness and (iv)
amendments, renewals, extensions and refundings of any such indebtedness, unless
in any instrument or instruments evidencing or securing such indebtedness or
pursuant to which the same is outstanding, or in any such amendment, renewal,
extension or refunding, it is expressly provided that such indebtedness is not
superior in right of payment to the Loans. Senior Indebtedness shall continue
to be Senior Indebtedness and entitled to the benefits of these subordination
provisions irrespective of (i) any amendment, modification or waiver of any term
of the Senior Indebtedness extension or renewal of the Senior Indebtedness, (ii)
any exchange or release of, or non-perfection of any lien on or security
interest in, any collateral, or any release from, amendment or waiver of or
consent to departure from any guaranty, for all or any of the Senior
Indebtedness, (iii) any other circumstance which might otherwise constitute a
defense available to or discharge of Enserch Preferred to Capital or of Capital
to the holders of the Preferred Securities (or any trustee appointed by such
holders) in respect of the provisions of this Section 4.01, or (iv) any act or
failure to act on the part of ENSERCH or by any act or failure to act, in good
faith, by any holder of Senior Indebtedness, or by any noncompliance by ENSERCH
with the terms of this Agreement, regardless of any knowledge thereof which any
person may have or be otherwise charged with.
Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration (unless waived) or otherwise (including all installments of
principal and interest), all Senior Indebtedness then due and owing shall first
be paid in full, or such payment duly provided for in cash (or in securities or
other property satisfactory to all of the holders of such Senior Indebtedness),
before any payment is made on account of the Loans.
In the event that (i) ENSERCH shall default in the payment of any
principal, or premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise or (ii) an event of default occurs with
respect to any Senior Indebtedness, then unless and until such default in
payment or event of default shall have been cured or waived or shall have ceased
to exist, no direct or indirect payment (in cash, property, securities, by set-
off or otherwise) shall be made or agreed to be made on account of the Loans or
interest thereon or in respect of any repayment, redemption, retirement,
purchase or other acquisition of the Loans. ENSERCH will give prompt written
notice to Enserch Preferred and Capital of any default in the payment of any
Senior Indebtedness and of any dissolution, winding up or reorganization of
ENSERCH.
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In the event of (i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, composition or other similar proceeding relating to
ENSERCH or its property or for the benefit of its creditors, (ii) any proceeding
for the liquidation, dissolution or other winding up of ENSERCH, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by ENSERCH for the benefit of creditors, or (iv) any other
marshalling of the assets of ENSERCH, all Senior Indebtedness (including,
without limitation, interest accruing after the commencement of any such
proceeding, assignment or marshalling of assets) shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property, shall be made on the Loans. Any payment or distribution, whether in
cash, securities or other property, which would otherwise (but for these
subordination provisions) be payable or deliverable in respect of the Loans
(including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of ENSERCH being subordinated
to the payment of the Loans) shall be paid or delivered directly to the holders
of Senior Indebtedness or to their representative, or to the trustee under the
indenture or agreement (if any) pursuant to which such Senior Indebtedness may
have been issued, in accordance with the priorities then existing among such
holders until all Senior Indebtedness shall have been paid in full. No present
or future holder of any Senior Indebtedness shall be prejudiced in the right to
enforce subordination of the indebtedness constituting the Loans by any act or
failure to act on the part of ENSERCH.
Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash (or securities or other
property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, Enserch Preferred shall be subrogated to all the rights of any
holders of Senior Indebtedness to receive any further payments or distributions
applicable to the Senior Indebtedness until the Loans shall have been paid in
full, and such payments or distributions of cash, securities or other property
received by Enserch Preferred, by reason of such subrogation, which otherwise
would be paid or distributed to the holders of Senior Indebtedness, shall, as
between ENSERCH and its creditors other than the holders of Senior Indebtedness,
on the one hand, and Enserch Preferred, on the other, be deemed to be a payment
by ENSERCH on account of Senior Indebtedness, and not on account of the Loans.
In the event that notwithstanding the provisions of this Section 4.01
ENSERCH shall make any payment on the Loans to Enserch Preferred or Enserch
Preferred receives any payment or distribution of assets of ENSERCH (other than
securities of ENSERCH or any other corporation provided for by a plan of
reorganization, the payment of which is subordinate, at least to the extent
provided in these
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subordination provisions with respect to the indebtedness evidenced by the
Loans, to the payment of all Senior Indebtedness at the time outstanding and to
any securities issued in respect thereof under any such plan of reorganization),
at any time before all Senior Indebtedness is paid in full, then such payment
shall be held by Enserch Preferred, in trust for the benefit of, and shall be
paid forthwith over and delivered to, the holders of Senior Indebtedness or
their representative or the trustee under the indenture or other agreement (if
any) pursuant to which Senior Indebtedness may have been issued, in accordance
with the priorities then existing among such holders, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
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Section 5.01. Representations and Warranties. ENSERCH
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represents and warrants to Enserch Preferred that:
(a) Good Standing. ENSERCH is a corporation duly incorporated and
validly existing under the laws of the State of Texas, with power and
authority (corporate and other) to own its properties and conduct its
business as now being conducted.
(b) Power and Authority. ENSERCH has full power and authority to
enter into this Agreement and to incur and perform the obligations provided
for herein, all of which have been duly authorized by all proper and
necessary action.
(c) No Conflict. The execution and delivery of this Agreement and
the performance by ENSERCH of all its obligations hereunder will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which ENSERCH
is a party or by which ENSERCH is bound or subject, nor will this Agreement
result in a violation of the provisions of ENSERCH's Restated Articles of
Incorporation, as amended, or by-laws.
(d) Binding Agreement. This Agreement constitutes the valid and
legally binding obligation of ENSERCH enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
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ARTICLE VI.
COVENANTS
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Section 6.01. Covenants. (a) ENSERCH agrees (i) that neither it,
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nor any of its majority owned subsidiaries, shall declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock, or make any guarantee payments with respect to the
foregoing (other than (i) payments under the Guarantee Agreement or the Loan
Guarantee Agreement, or (ii) dividends or guarantee payments to ENSERCH or a
wholly owned subsidiary) if at such time (a) there shall have occurred any event
that, with the giving of notice or the lapse of time or both, would constitute
an Event of Default hereunder or (b) ENSERCH shall be in default with respect to
its payment or other obligations under the Guarantee Agreement or the Loan
Guarantee Agreement, (ii) to maintain direct or indirect 100% ownership of the
Common Securities, (iii) not to voluntarily dissolve, wind-up or terminate
Capital, (iv) to remain the Class A Member of Capital and to timely perform all
of its duties as Class A Member of Capital (including the duty to declare and
pay dividends on the Preferred Securities) in all material respects; provided
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that any permitted successor of ENSERCH under this Agreement may succeed to
ENSERCH's duties as Class A Member, and (v) to use its reasonable efforts to
cause Capital to remain a limited life limited liability company and otherwise
continue to be treated as a partnership for United States federal income tax
purposes.
(b) ENSERCH agrees that its obligations under this Agreement will
also be for the benefit of Capital and the holders from time to time of
Preferred Securities, and ENSERCH acknowledges and agrees that Capital or such
holders will be entitled to enforce this Agreement directly against ENSERCH;
provided, that no holder of Preferred Securities shall be entitled to institute
any proceeding, judicial or otherwise, under this Agreement unless such
proceeding has been brought by or with the consent of the holders of at least
25% of the outstanding Preferred Securities; and provided, further, that
notwithstanding the immediately preceding proviso, the holder of any Preferred
Security shall have the right to institute suit for the enforcement of any
payment of principal or interest on the Loans.
(c) ENSERCH agrees not to merge with or into another entity, or
permit another entity to merge with or into it, and agrees not to sell, transfer
or lease all or substantially all of its assets to another entity unless: (i) at
such time no Event of Default hereunder has occurred and is continuing, or would
occur as a result of such merger, sale, transfer or lease, and (ii) ENSERCH is
the survivor of such merger or the entity to which ENSERCH's assets are sold,
transferred or leased is an entity organized under the laws of the United States
or any state thereof, assumes all of
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ENSERCH's obligations under this Agreement and becomes the Class A Member.
ARTICLE VII.
EVENTS OF DEFAULT
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Section 7.01. Events of Default. If one or more of the following
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events (each an "Event of Default") shall occur and be continuing:
(a) default in the payment of interest on the Loans, including any
Additional Interest in respect of the Loans, when due for 10 days (whether
by virtue of the provisions described under Article IV hereof or
otherwise); provided that a valid extension of the interest payment period
by ENSERCH pursuant to Section 2.03 hereof shall not constitute a default
in the payment of interest for this purpose; or
(b) default in the payment of principal on the Loans when due; or
(c) the dissolution, winding up or termination of Capital; or
(d) the bankruptcy, insolvency or liquidation of ENSERCH or Enserch
Preferred; or
(e) breach of any covenants contained herein continued for 30 days
after notice to ENSERCH from Enserch Preferred or the holders of 25% or
more of the outstanding Preferred Securities; or
(f) an event of default shall have occurred under the Company Loan
Agreement.
then, in every such event, and at any time thereafter during the continuance of
such event, Enserch Preferred will have the right to declare the principal of
and the interest on the Loans (including any Additional Interest and any
interest subject to an extension of the interest payment period) and any other
amounts payable on the Loans to be forthwith due and payable, whereupon the same
shall become and be forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything in this Agreement to the contrary notwithstanding. ENSERCH expressly
acknowledges that under the terms of the Preferred Securities, the holders of
the outstanding Preferred Securities shall have the right to appoint a trustee,
which trustee shall be authorized to exercise Enserch Preferred's creditor
rights under this Agreement, and ENSERCH agrees to cooperate with such trustee.
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ARTICLE VIII.
MISCELLANEOUS
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Section 8.01. Notices. All notices hereunder shall be deemed given
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by a party hereto if in writing and delivered personally or by telegram or
facsimile transmission or by registered or certified mail (return receipt
requested) to the other party at the following address for such party (or at
such other address as shall be specified by like notice):
If to Enserch Preferred, to:
Enserch Preferred Capital, Inc.
c/o ENSERCH Corporation
ENSERCH Center
300 South St. Paul Street
Dallas, Texas 75201
Fax No.: (214) 573-3351
Attention: Treasurer
If to ENSERCH, to:
ENSERCH Corporation
ENSERCH Center
300 South St Paul Street
Dallas, Texas 75201
Fax No.: (214) 573-3351
Attention: Treasurer
Any notice given by mail or telegram or facsimile transmission shall
be effective when received.
Section 8.02. Binding Effect. ENSERCH shall have the right at all
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times to assign any of its rights or obligations under this Agreement to a
direct or indirect wholly-owned subsidiary of ENSERCH; provided that, in the
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event of any such assignment, ENSERCH shall remain jointly and severally liable
for all such obligations. Enserch Preferred may not assign any of its rights
hereunder without the prior written consent of ENSERCH. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
ENSERCH and Enserch Preferred and their respective successors and assigns. This
Agreement may not otherwise be assigned by ENSERCH, Enserch Preferred or
Capital.
Section 8.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
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CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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Section 8.04. Counterparts. This Agreement may be executed in
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counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
Section 8.05. Amendments. This Agreement may be amended by mutual
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consent of Capital and of the parties hereto in the manner Capital and the
parties shall agree; provided that, so long as any of the Preferred Securities
remain outstanding, no such amendment shall be made that adversely affects the
holders of Preferred Securities, and no termination of this Agreement shall
occur, and no Event of Default or compliance with any covenant under this
Agreement may be waived by Enserch Preferred, without the prior approval of
Capital and the holders of at least 66-2/3% of the outstanding Preferred
Securities, unless and until the Loans and all accrued and unpaid interest
thereon (including Additional Interest, if any) shall have been paid in full.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ENSERCH CORPORATION
By:_____________________________
Name:
Title:
ENSERCH PREFERRED CAPITAL, INC.
By:_____________________________
Name:
Title:
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