As filed with the Securities and Exchange Commission on July 2, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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ARIZONA PUBLIC SERVICE COMPANY
(Exact name of Registrant as specified in its charter)
ARIZONA 86-0011170
(State of incorporation) (I.R.S. Employer
Identification Number)
400 North Fifth Street
Phoenix, Arizona 85004
(602) 250-1000
(Address, including zip code and telephone number, including area code,
of registrant's principal executive offices)
----------------
MATTHEW P. FEENEY
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85073
(602) 382-6239
(Name, address, including zip code and telephone number,
including area code, of agent for service)
----------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement, as determined
by market conditions and other factors.
----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act Registration Statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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C A L C U L A T I O N O F R E G I S T R A T I O N F E E
<TABLE>
<CAPTION>
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Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Each Class of to be Price Offering Registration
Securities to be Registered Registered Per Unit Price Fee
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Mortgage Bonds ........... (1)(3) (2) (1)(2)(3) N/A
- --------------------------------------------------------------------------------------------------
Senior Notes ................... (1)(4) (2) (1)(2)(4) N/A
- --------------------------------------------------------------------------------------------------
Debt Securities ................ (1)(5) (2) (1)(2)(5) N/A
- --------------------------------------------------------------------------------------------------
Total ......................... $350,000,000 (2) $350,000,000 $ 103,250 (6)
==================================================================================================
</TABLE>
(1) In no event will the aggregate initial offering price of all securities
issued from time to time pursuant to this Registration Statement exceed
$350,000,000. If any such securities are issued at an original issue
discount, then the aggregate initial offering price as so discounted shall
not exceed $350,000,000, notwithstanding that the stated principal amount
of such securities may exceed such amount.
(2) The proposed maximum initial offering price per unit will be determined,
from time to time, by the Registrant in connection with the issuance by
the Registrant of the securities registered hereunder.
(3) Subject to Footnote (1), there are being registered hereunder an
indeterminate principal amount of First Mortgage Bonds as may be sold,
from time to time, by the Registrant.
(4) Subject to Footnote (1), there are being registered hereunder an
indeterminate amount of Senior Notes as may be sold, from time to time, by
the Registrant.
(5) Subject to Footnote (1), there are being registered hereunder an
indeterminate principal amount of Debt Securities as may be sold, from
time to time, by the Registrant.
(6) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933.
Pursuant to Rule 429 of the rules and regulations under the Securities Act of
1933, this Registration Statement contains a combined prospectus relating to
the $350,000,000 principal amount of securities registered hereby and
$50,000,000 principal amount of securities registered on August 12, 1997
pursuant to Registration No. 333-27551. The previously-paid filing fees
associated with the referenced securities registered under Registration No.
333-27551 totalled $15,152.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 2, 1998
Arizona Public Service Company
First Mortgage Bonds
Senior Notes
Debt Securities
----------------
Arizona Public Service Company (the "Company") intends from time to time
to issue up to $400,000,000 aggregate principal amount of its first mortgage
bonds (the "New Bonds"), senior notes (the "Senior Notes"), or unsecured debt
securities ("Debt Securities") (collectively, the "Securities"), in one or more
series at prices and on terms to be determined at the time of sale.
Until the Release Date (see "Description of Senior Notes--Release Date"),
the Senior Notes will be secured by one or more series of New Bonds. As a
result, when the Company issues Senior Notes, the Company will issue a like
amount of New Bonds to the Senior Note Trustee (as defined herein) to secure
the newly-issued Senior Notes. See "Description of Senior Notes--Security". The
Company may also issue New Bonds directly to purchasers or through agents
designated from time to time by the Company (see "Description of New Bonds").
As of March 31, 1998 (i) the Senior Note Trustee held $150 million of first
mortgage bonds as collateral for $150 million of outstanding senior notes and
(ii) approximately $1.1 billion of additional first mortgage bonds (i.e., first
mortgage bonds that do not secure Senior Notes) were outstanding. Until the
Release Date, the Company's senior notes (including the Senior Notes issued
pursuant to this Prospectus) will effectively rank pari passu with the
Company's outstanding first mortgage bonds.
For each issue of Securities for which this Prospectus is being delivered
(the "Offered Bonds," the "Offered Senior Notes," or the "Offered Debt
Securities" and, collectively, the "Offered Securities"), there will be an
accompanying Prospectus Supplement (the "Prospectus Supplement") that sets
forth, without limitation and to the extent applicable, the specific
designation, aggregate principal amount, denomination, maturity, premium, if
any, rate of interest (which may be fixed or variable) or method of calculation
thereof, time of payment of interest, any terms for redemption, any sinking
fund provisions, any subordination provisions, the initial public offering
price, the names of any underwriters or agents, the principal amounts, if any,
to be purchased by the underwriters, the compensation of such underwriters or
agents, and any other special terms of the Offered Securities. The Prospectus
Supplement relating to any series of Offered Securities will also contain
information concerning certain United States federal income tax considerations,
if applicable to the Offered Securities.
The Company may sell Securities directly to purchasers or through agents
designated from time to time by the Company or to or through underwriters or a
group of underwriters which may be managed by one or more underwriters. If any
agents of the Company or any underwriters are involved in the sale of
Securities in respect of which this Prospectus is being delivered, the names of
such agents or underwriters and any applicable commission or discount will be
set forth in the applicable Prospectus Supplement. The net proceeds to the
Company from the sale of Securities will be the public offering price of such
Securities less such discount, in the case of an offering through an
underwriter, or the purchase price of such Securities less such commission, in
the case of an offering through an agent, and less, in each case, other
expenses of the Company associated with the issuance and distribution of such
Securities.
----------------
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 _______, 1998
<PAGE>
AVAILABLE INFORMATION
Arizona Public Service Company (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and in accordance therewith files reports, proxy statements,
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, and other information can be
obtained at prescribed rates from the Public Reference Section of the
Commission or may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at certain of its regional offices located at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300,
New York, New York 10048. In addition, such material may be accessed
electronically by means of the Commission's Web Site on the Internet at
http://www.sec.gov. Certain securities of the Company are listed on the New
York Stock Exchange. Reports, proxy materials, and other information concerning
the Company can be inspected at the office of this exchange at 20 Broad Street,
7th Floor, New York, New York 10005.
------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the
Company (File No. 1-4473) are incorporated by reference in this Prospectus:
1. The Company's Form 10-K Report for the fiscal year ended December 31,
1997 (the "1997 10-K Report");
2. The Company's Form 10-Q Report for the fiscal quarter ended March 31,
1998;
3. The Company's Form 8-K Report dated January 13, 1998; and
4. The Company's Form 8-K Report dated May 19, 1998 (the "May 8-K
Report").
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the 1934 Act after the filing date of the May 8-K Report and prior
to the termination of the offering of the securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which is also incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the oral
or written request of such person, a copy of any or all of the documents
referred to above which have been or may be incorporated in this Prospectus by
reference, other than exhibits to such documents. Request for such copies
should be directed to Arizona Public Service Company, Office of the Secretary,
Station 9068, P.O. Box 53999, Phoenix, Arizona 85072-3999, (602) 250-3252.
2
<PAGE>
SELECTED INFORMATION
The following material is qualified in its entirety by reference to the
detailed information and financial statements incorporated by reference in this
Prospectus.
<TABLE>
The Offering
<S> <C>
Securities Offered ................... Up to $400,000,000 of any combination of First Mortgage
Bonds, Senior Notes, and Debt Securities.
Application of Proceeds .............. Except as otherwise described in the Prospectus Supple-
ment, the net proceeds of the Offered Securities will be ap-
plied primarily to the redemption, repurchase, repayment, or
retirement of outstanding indebtedness and preferred stock,
and temporary investment pending such application.
The Company
Business ............................. Electric utility servicing approximately 767,000 customers in
an area that includes the entire state of Arizona with the
exception of Tucson and about one-half of the Phoenix area.
Generating Fuel Mix (estimated for the
twelve months ended March 31,
1998) ............................... Coal -- 36.9%; Nuclear -- 29.4%; Purchases -- 30.3%;
Gas and Other -- 3.4%.
</TABLE>
Financial Data (thousands of dollars):
<TABLE>
<CAPTION>
Twelve Months Ended
-----------------------------------------------------------------
December 31,
March 31, -----------------------------------------------
1998(1) 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Electric Operating Revenues ................ $ 1,879,955 $ 1,878,553 $ 1,718,272 $ 1,614,952
=========== =========== =========== ===========
Net Income ................................. $ 254,784 $ 251,493 $ 243,471 $ 239,570
=========== =========== =========== ===========
Ratio of Earnings to Fixed Charges ......... 3.11 3.07 2.84 2.77
</TABLE>
Capitalization Data (thousands of dollars):
<TABLE>
<CAPTION>
As Adjusted(2)
As of ---------------------------
March 31, 1998(1) Amount Percentage
----------------- ---------- ----------
<S> <C> <C> <C>
Total Debt (including current maturities) ......... $2,104,316 $2,125,316 52.4%
Preferred Stock ................................... 160,427 139,427 3.4
Common Stock Equity ............................... 1,793,514 1,793,514 44.2
---------- ---------- -----
Total Capitalization ........................... $4,058,257 $4,058,257 100.0%
========== ========== =====
</TABLE>
- ------------
(1) Financial information as of and for the twelve months ended March 31, 1998
is unaudited but, in the judgment of the Company's management, contains
all necessary adjustments for a fair presentation of the financial
position of the Company on such date and the results of operations for
such period.
(2) For the (i) redemption, repayment, repurchase or retirement of $21 million
of the Company's cumulative preferred stock; and (ii) incurring $21
million of debt. It is assumed that the net proceeds from the issuance of
the Offered Securities will be used for the refinancing of a similar
amount of outstanding long-term debt.
3
<PAGE>
THE COMPANY
The Company was incorporated in 1920 under the laws of Arizona and is
principally engaged in providing electricity in the State of Arizona. The
principal executive offices of the Company are located at 400 North Fifth
Street, Phoenix, Arizona 85004 and its telephone number is (602) 250-1000.
APPLICATION OF PROCEEDS
Except as otherwise described in the Prospectus Supplement, the net
proceeds of the Offered Securities will be applied primarily to the redemption,
repurchase, repayment, or retirement of outstanding indebtedness and preferred
stock. Any proceeds not immediately so applied when received may be invested
temporarily, pending such application, in United States government or agency
obligations, commercial paper, bank certificates of deposit, or repurchase
agreements collateralized by United States government or agency obligations, or
will be deposited with banks.
EARNINGS RATIOS
The following table sets forth the Company's historical ratio of earnings
to fixed charges for each of the indicated periods:
Twelve months ended
- ---------------------------------------------------------------------
December 31,
March 31, ----------------------------------------------------
1998 1997 1996 1995 1994 1993
--------- ---- ---- ---- ---- ----
3.11 3.07 2.84 2.77 2.96 2.99
For the purposes of these computations, "earnings" are defined as the sum
of pre-tax income plus fixed charges of the Company and its subsidiaries;
"fixed charges" consist of interest on debt, amortization of debt discount,
premium, and expense and an estimated interest factor in rentals.
SECURITIES
The Securities may be issued in one or more series as (i) first mortgage
bonds ("New Bonds"), (ii) notes secured until the Release Date by New Bonds
and, thereafter (see "Description of Senior Notes -- Release Date"), being
unsecured notes (such notes are herein referred to as "Senior Notes"), or (iii)
unsecured debt securities ("Debt Securities"). From and after the "Release
Date" (as defined below), any outstanding Senior Notes secured by New Bonds
when issued will cease to be secured and will become unsecured obligations of
the Company. The New Bonds are described below under the caption "Description
of New Bonds," the Senior Notes are described below under the caption
"Description of Senior Notes," and the Debt Securities are described below
under the caption "Description of Debt Securities."
DESCRIPTION OF NEW BONDS
General
The New Bonds may be issued in one or more new series under the Mortgage
and Deed of Trust dated as of July 1, 1946 between the Company and The Bank of
New York, as successor Trustee ("Bond Trustee"), which as heretofore amended
and supplemented is herein referred to as the "Mortgage," and which is to be
further amended and supplemented by appropriate Supplemental Indentures ("Bond
Supplemental Indentures"). The following summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Mortgage, the New Bonds, and the Bond
Supplemental Indentures, the forms of which are filed, or will be filed, as
exhibits to the registration statement of which this Prospectus forms a part.
Whenever particular provisions or defined terms in such documents are referred
to herein or in a Prospectus Supplement, such provisions or defined terms are
incorporated by reference herein or therein, as the case may be.
4
<PAGE>
Reference is made to the Prospectus Supplement relating to any particular
issue of Offered Bonds for the following terms: (1) the aggregate principal
amount of the Offered Bonds; (2) the date on which such Offered Bonds mature;
(3) the rate per annum at which such Offered Bonds will bear interest; (4) the
times at which such interest will be payable; (5) the date, if any, after which
such Offered Bonds may be redeemed at the option of the Company and the
redemption price; (6) whether any of such Offered Bonds will be issuable in
whole or in part in the form of one or more Global Securities and, if so, the
Depositaries for such Global Securities, the form of any legend or legends to
be borne by any such Global Security, and any circumstances under which any
such Global Security may be exchanged in whole or in part for Offered Bonds,
registered in the names of persons other than the Depositary for such Global
Security or its nominee; and (7) any other special terms. Interest will be paid
to the person in whose name the Offered Bonds are registered at the close of
business on the record date, as established in the Bond Supplemental Indenture
relating thereto, preceding the interest payment date in respect thereof. The
New Bonds will be issued as fully registered bonds, without coupons, in
denominations of $1,000 and multiples thereof. The New Bonds will be
transferable at any time without any service or other charge, except transfer
taxes and other governmental charges, if any.
Except as otherwise described under the heading "Description of New Bonds
- -- Issuance of Additional Bonds" or in the Prospectus Supplement, the covenants
contained in the Mortgage and the New Bonds would not afford holders of the New
Bonds protection in the event of a highly-leveraged transaction involving the
Company.
Redemption
The Offered Bonds are redeemable as set forth in the Prospectus Supplement
relating thereto and, subject to any qualifications or variations set forth in
any such Prospectus Supplement, are also subject to redemption, in each case at
the principal amount of the Offered Bonds to be redeemed together with accrued
interest to the date fixed for redemption, (i) in whole or in part with the
proceeds from mortgaged property of the Company taken under eminent domain by,
or otherwise sold to, a governmental body or agency; (ii) in whole or in part
with the Proceeds of Released Property, including proceeds from the sale or
other disposition (including a sale and leaseback) of property released from
the lien of the Mortgage as specified in section (b) of the second to the last
paragraph under the heading "Description of New Bonds -- Security" below; and
(iii) in whole, together with all other first mortgage bonds of the Company
then outstanding, within twelve months of certain mergers or other transactions
involving the transfer of substantially all of the property subject to the lien
of the Mortgage, as then amended. In addition, after the date and at the price
set forth in the Prospectus Supplement, Offered Bonds may be redeemed in whole
or in part with cash deposited in the replacement fund discussed below.
Security
The New Bonds will rank pari passu, except as to any sinking fund or
similar fund provided for a particular series, with all bonds at any time
outstanding under the Mortgage. The Mortgage constitutes a first mortgage lien
on substantially all the fixed property owned by the Company (which does not
include a combined cycle plant or certain interests in Unit 2 of the Palo Verde
Nuclear Generating Station being leased), other than property specifically
excepted by the Mortgage. Such lien and the Company's title to certain of its
properties are subject to Excepted Encumbrances, to minor leases, defects,
irregularities, and deficiencies, and to the considerations discussed below
with respect to the Four Corners and Navajo Plant locations. The lien of the
Mortgage will also extend to all after-acquired property (other than the
excepted classes) located in the jurisdictions in which the necessary
recordations or filings have been accomplished, subject to Excepted
Encumbrances and to liens existing or placed on such property at the time of
its acquisition by the Company.
Both the Four Corners and the Navajo Plants are located on property held
by the plant participants under leases from the Navajo Tribe and easements from
the Secretary of the Interior. The leases extend from their respective
effective dates in 1966 and 1969 for terms of 50 years with rights of renewal
for up to 25 additional years. The easements are for 50-year terms from the
same effective dates. While the Company owns the rights conferred upon it by
the leases from the Navajo Tribe, the Company does not
5
<PAGE>
make any representation with respect to the Tribe's interest in the lands
leased (but is not aware of any assertion of a contesting claim to such lands)
or with respect to the enforceability of the leases against the Tribe.
The Mortgage requires the Company to keep the property encumbered thereby
as an operating system or systems in good repair and working order, but permits
the permanent discontinuance or reduction in capacity of any such properties
which, in the judgment of the Board of Directors of the Company, is desirable
in the conduct of its business or which is ordered by a regulatory authority or
which properties are to be sold or disposed of by the Company.
When not in default under the Mortgage, the Company may obtain the release
from the lien thereof of (a) property that has become unserviceable, obsolete,
or unnecessary for use in the Company's operations, provided that it replaces
such property with, or substitutes for the same, an equal value of other
property, and (b) other property that has been sold or otherwise disposed of,
provided that the Company deposits with the Bond Trustee cash in an amount,
waives the right to issue additional bonds on the basis of retired bonds
previously issued in an amount, or utilizes as a credit net Property Additions
acquired by the Company within the preceding five years and having a fair value
(not more than Cost), equal to the fair value of the property to be released.
The Bond Trustee may, and upon request of the Company shall, cancel and
discharge the lien of the Mortgage and all indentures supplemental thereto
whenever all indebtedness secured by the Mortgage has been paid.
Issuance of Additional Bonds
Additional bonds may be issued under the Mortgage in a principal amount
equal to (a) 60% of net Property Additions, (b) the principal amount of certain
redeemed or retired bonds previously issued, and/or (c) deposited cash,
provided that the Company's Adjusted Net Earnings over a twelve-month period
are at least two times the annual interest on all bonds to be outstanding under
the Mortgage after the issuance and on indebtedness secured by prior liens.
Exceptions to this earnings coverage requirement apply to bonds issued on the
basis of redeemed or retired bonds where the redeemed or retired bonds bore a
higher rate of interest and where certain other conditions are satisfied. In
addition, the Company's articles of incorporation allow the Company to issue
additional preferred stock when certain earnings coverage requirements are met.
Exceptions to this earnings coverage requirement apply to preferred stock
issued for the purpose of redeeming or retiring other preferred stock.
As of March 31, 1998, the Company estimates that the Mortgage and the
articles of incorporation would have allowed the Company to issue up to
approximately $2.04 billion and $1.46 billion of additional first mortgage
bonds and preferred stock, respectively.
In addition to the Mortgage restrictions on the Company's issuance of
additional bonds, the Company must obtain ACC approval before issuing equity
securities or incurring long-term debt. Existing ACC orders allow the Company
to have approximately $501 million in aggregate par value of preferred stock
and approximately $2.6 billion in principal amount of long-term debt
outstanding at any one time. The Company does not expect these provisions or
authorizations to limit the Company's ability to meet its capital requirements.
Property Additions, and in many instances redeemed or retired bonds, as
well as deposited cash, may be used for certain alternative purposes under the
Mortgage, including the release of property from the lien thereof or the
satisfaction of sinking or replacement fund requirements. The Mortgage contains
restrictions on the issuance of bonds, withdrawal of cash, or release of
property on the basis of property subject to prior liens. Property located on
leaseholds or easements (as, for example, the Four Corners and Navajo Plants)
will constitute fundable Property Additions if the leasehold or easement has an
unexpired term of, or the term is extendable at the Company's option for, at
least 30 years after the time of funding, or if the property may be removed by
the Company without compensation.
Replacement Fund
So long as any of the New Bonds are outstanding, the Company is required
for each calendar year to deposit with the Bond Trustee cash in a formularized
amount related to net additions to the Company's
6
<PAGE>
mortgaged utility plant; however, the Company may satisfy all or any part of
the requirement by utilizing redeemed or retired bonds, net Property Additions,
or property retirements. For 1997, such requirement amounted to approximately
$134 million. Any cash that may be deposited by the Company pursuant to the
requirement may, upon request by the Company, be applied to the redemption or
purchase of bonds and, if not withdrawn against Property Additions or retired
bonds within five years, must be so applied, subject in each case to any
restrictions on any such redemption or purchase as set forth in the Prospectus
Supplement relating to the issue of bonds to be redeemed or purchased.
Events of Default
The following are defaults under the Mortgage: (a) failure to pay the
principal of any bond outstanding under the Mortgage when due and payable; (b)
failure to pay interest on any bond outstanding under the Mortgage within 60
days after the same is due and payable; (c) failure to pay any installment of
any fund required to be applied to the purchase or redemption of bonds
outstanding under the Mortgage within 60 days after the same is due and
payable; (d) certain events in bankruptcy, insolvency, or reorganization; and
(e) failure to perform any other covenant of the Mortgage continuing for 90
days after notice by the Bond Trustee or holders of 15% in principal amount of
Eligible bonds. The Mortgage allows the Bond Trustee to withhold notice of
certain defaults, not including any default in the payment of principal of, or
interest on, any bond outstanding, or in the payment of any sinking,
improvement, replacement, or purchase fund installment, if it in good faith
determines that the withholding of such notice is in the interests of the
bondholders.
The holders of not less than a majority in principal amount of Eligible
bonds may direct the time, method, and place of conducting any proceeding for
any remedy available to the Bond Trustee under the Mortgage; provided, however,
that the Trustee may decline to follow any such direction under certain
circumstances, including a determination made in good faith by the Bond Trustee
that it will not be sufficiently indemnified for any expenditures, including
its own charges, in any action or proceeding so directed. The Company is
required to file with the Bond Trustee, on or before July 1 of each year, a
certificate to the effect that, except as otherwise stated therein, the Company
has complied with all of the provisions of the Mortgage and is not then in
default thereunder.
Modification of the Mortgage
The Mortgage and the rights of bondholders may be modified with the
consent of the Company, and of the Bond Trustee if deemed affected, and the
vote or assent of the holders of not less than 70% in principal amount of the
Eligible bonds, and of not less than 70% in principal amount of the Eligible
bonds of any one or more series (less than all) affected by any such
modification; except that the bondholders, without the consent of the holder of
each bond affected, have no power to (a) reduce the principal thereof, or the
premium, if any, or rate of interest thereon or otherwise modify the terms of
payment of principal, premium, or interest, or extend the maturity of any
bonds, (b) permit the creation of any lien ranking prior to or on a parity with
the lien of the Mortgage with respect to any of the mortgaged property, (c)
deprive any nonassenting bondholder of a lien upon the mortgaged property for
the security of his or her bonds, or (d) reduce the percentage of bondholders
authorized to effect any such modification.
Global Securities
Some or all of the New Bonds 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 New Bonds represented thereby. Each
Global Security will be registered in the name of a depositary or a nominee
thereof identified in the applicable Prospectus Supplement, will be deposited
with such depositary or nominee or a custodian therefor and will bear a legend
regarding the restrictions on exchanges and registration of transfer thereof
referred to below and any such other matters as may be provided for pursuant to
the applicable Bond Supplemental Indenture.
Notwithstanding any provision of the Mortgage or any New Bond described
herein, no Global Security may be exchanged in whole or in part for New Bonds
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
7
<PAGE>
such Global Security or any nominee of such depositary unless (i) 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 Mortgage, (ii) there shall have occurred and be
continuing a default with respect to the New Bonds represented by such Global
Security, or (iii) there shall exist such circumstances, if any, in addition to
or in lieu of those described above as may be described in the applicable Bond
Supplemental Indenture and Prospectus Supplement. All securities issued in
exchange for a Global Security or any portion thereof will be registered in
such names as the depositary may direct.
As long as the depositary, or its nominee, is the registered holder of a
Global Security, the depositary or such nominee, as the case may be, will be
considered the sole owner and holder of such Global Security and the New Bonds
represented thereby for all purposes under the New Bonds and the Mortgage.
Except in the limited circumstances referred to above, owners of beneficial
interests in a Global Security will not be entitled to have such Global
Security or any New Bonds represented thereby registered in their names, will
not receive or be entitled to receive physical delivery of certificated New
Bonds in exchange therefor and will not be considered to be the owners or
holders of such Global Security or any New Bonds represented thereby for any
purpose under the New Bonds or the Mortgage. All payments of principal of and
any premium and interest on a Global Security will be made to the depositary or
its nominee, as the case may be, as the holder thereof. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. These laws may impair the
ability to transfer beneficial interests in a Global Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of New Bonds represented by the Global Security to
the accounts of its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by the depositary (with
respect to participants' interests) or any such participant (with respect to
interests of persons held by such participants on their behalf). Payments,
transfers, exchanges, and other matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by
the depositary from time to time. None of the Company, the Bond Trustee or any
agent of the Company or the Bond Trustee will have any responsibility or
liability for any aspect of the depositary's or any participant's records
relating to, or for payments made on account of, beneficial interests in a
Global Security, or for maintaining, supervising, or reviewing any records
relating to such beneficial interests.
Other
The Mortgage restricts the payment of dividends on common stock of the
Company under certain conditions which have not existed in the past and do not
currently exist.
The Bond Trustee, security registrar, and paying agent under the Mortgage
is The Bank of New York. The Company maintains normal banking arrangements with
The Bank of New York, which include (i) one commitment in the aggregate
principal amount of approximately $15.7 million by The Bank of New York
pursuant to a reimbursement agreement related to a letter of credit issued on
behalf of the Company in connection with an issuance of pollution control bonds,
the proceeds of which were made available to the Company, and (ii) a $25
million commitment by The Bank of New York pursuant to a revolving credit
agreement, approximately $7.8 million of which was outstanding at March 31,
1998. The Bank of New York also serves as (i) trustee for the holders of
several issues of pollution control bonds issued on behalf of the Company, (ii)
trustee under the Indenture relating to the subordinated Debt Securities (see
"Description of Debt Securities" below), (iii) trustee under the Senior Note
Indenture (as defined below), (iv) investment manager for the Company's
nonunion post-retirement medical fund, and (v) custodian of international
fixed-income assets for the Company's pension plan.
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DESCRIPTION OF SENIOR NOTES
General
The Senior Notes may be issued in one or more new series under an
Indenture (the "Senior Note Indenture") between the Company and The Bank of New
York, or any other trustee to be named, as Trustee (the "Senior Note Trustee").
The following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the Senior Note Indenture pursuant to which the Senior Notes are to be
issued and to the Senior Notes, the forms of which are filed, or will be filed,
as exhibits to the registration statement of which this Prospectus forms a
part. Whenever particular provisions or defined terms in the Senior Note
Indenture are referred to herein or in a Prospectus Supplement, such provisions
or terms are incorporated by reference herein or therein, as the case may be.
Until the Release Date (as defined below), the Senior Notes will be
secured by one or more series of New Bonds ("Senior Note Mortgage Bonds")
issued and delivered by the Company to the Senior Note Trustee. See
"Description of Senior Notes -- Security" and "Description of Senior Notes --
Release Date." On the Release Date, the Senior Notes will cease to be secured
by Senior Note Mortgage Bonds, will become unsecured obligations of the
Company, and will rank on a parity with other unsecured senior indebtedness of
the Company, including senior Debt Securities. The Senior Note Indenture
provides that, in addition to the Senior Notes offered hereby, additional
senior notes may be issued thereunder, without limitation as to aggregate
principal amount, provided that, prior to the Release Date, the amount of
senior notes that may be issued cannot exceed the amount of first mortgage
bonds that the Company is able to issue under its Mortgage. See "Description of
New Bonds -- Issuance of Additional Bonds."
Reference is made to the Prospectus Supplement relating to any particular
issue of Offered Senior Notes for the following terms: (1) the title of such
Senior Notes; (2) any limit on the aggregate principal amount of such Senior
Notes or the series of which they are a part; (3) the date or dates on which
the principal of any of such Senior Notes will be payable; (4) the rate or
rates at which any of such Senior Notes will bear interest, if any, the date or
dates from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable and the Regular Record Date for any
such interest payable on any Interest Payment Date; (5) the place or places
where the principal of and any premium and interest on any of such Senior Notes
will be payable, if other than as described under "Description of Senior Notes
- -- Payment and Paying Agents"; (6) the period or periods within which, the
price or prices at which and the terms and conditions on which any of such
Senior Notes may be redeemed, in whole or in part, at the option of the
Company; (7) the obligation, if any, of the Company to redeem or purchase any
of such Senior Notes pursuant to any sinking fund or analogous provision or at
the option of the Holder thereof, and the period or periods within which, the
price or prices at which and the terms and conditions on which any of such
Senior Notes will be redeemed or purchased, in whole or in part, pursuant to
any such obligation; (8) the denominations in which any of such Senior Notes
will be issuable, if other than denominations of $1,000 and any integral
multiple thereof; (9) if the amount of principal of or any premium or interest
on any of such Senior Notes may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts will be determined;
(10) if other than the currency of the United States of America, the currency,
currencies, or currency units in which the principal of or any premium or
interest on any of such Senior Notes will be payable and the manner of
determining the equivalent thereof in the currency of the United States of
America for any purpose, including for purposes of determining the principal
amount deemed to be Outstanding at any time; (11) if the principal of or any
premium or interest on any of such Senior Notes 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 Senior Notes 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 periods
within 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); (12) if other than the entire principal amount thereof, the
portion of the principal amount of any of such Senior Notes which will be
payable upon declaration of acceleration of the Maturity thereof; (13) if the
principal amount payable at the Stated Maturity of any of such Senior Notes
will not be determinable as of any one or more dates prior to the
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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);
(14) if applicable, that such Senior Notes, in whole or any specified part, are
defeasible pursuant to the provisions of the Senior Note Indenture described
under "Description of Senior Notes -- Defeasance and Covenant Defeasance"; (15)
whether any of such Senior Notes 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 in addition to or in lieu of the legend referred to
under "Description of Senior Notes -- Global Securities" and, if different from
those described under such caption, any circumstances under which any such
Global Security may be exchanged in whole or in part for Senior Notes
registered, and 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; (16) if any of such Senior Notes are to be issued
prior to the Release Date, the designation of the series of Senior Note
Mortgage Bonds to be delivered to the Senior Note Trustee as security for such
Senior Notes; (17) any addition to or change in the Events of Default
applicable to any of such Senior Notes and any change in the right of the
Trustee or the Holders to declare the principal amount of any of such Senior
Notes due and payable; (18) any addition to or change in the covenants in the
Senior Note Indenture; and (19) any other terms of such Senior Notes not
inconsistent with the provisions of the Senior Note Indenture. (Section 301).
Senior Notes, including Original Issue Discount Notes, may be sold at a
substantial discount below their principal amount. Certain special United
States federal income tax considerations (if any) applicable to Senior Notes
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 Senior Notes
which are denominated in a currency or currency unit other than United States
dollars may be described in the applicable Prospectus Supplement.
Except as otherwise described in the Prospectus Supplement, the covenants
contained in the Senior Note Indenture would not afford holders of Senior Notes
protection in the event of a highly-leveraged transaction involving the
Company.
Form, Exchange, and Transfer
The Senior Notes of each series will be issuable only in fully registered
form without coupons and, unless otherwise specified in the applicable
Prospectus Supplement, in denominations of $1,000 and any integral multiple
thereof. (Section 302).
At the option of the Holder, subject to the terms of the Senior Note
Indenture and the limitations applicable to Global Securities, Senior Notes of
any series will be exchangeable for other Senior Notes of the same series, of
any authorized denomination and of like tenor and aggregate principal amount.
(Section 305).
Subject to the terms of the Senior Note Indenture and the limitations
applicable to Global Securities, Senior Notes 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 Note 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 Senior Notes, 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 Note 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 Senior Note Trustee as Note Registrar. Any transfer agent (in
addition to the Note Registrar) initially designated by the Company for any
Senior Notes 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 Senior Notes of
each series. (Section 1102).
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If the Senior Notes of any series (or of any series and specified tenor)
are to be redeemed, the Company will not be required to (i) issue, register the
transfer of, or exchange any Senior Note of that series (or of that 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 Senior Note that may be selected for redemption and ending at the close of
business on the day of such mailing or (ii) register the transfer of or
exchange any Senior Note so selected for redemption, in whole or in part,
except the unredeemed portion of any such Senior Note being redeemed in part.
(Section 305).
Global Notes
Some or all of the Senior Notes of any series may be represented, in whole
or in part, by one or more Global Notes which will have an aggregate principal
amount equal to that of the Senior Notes represented thereby. Each Global Note
will be registered in the name of a Depositary or a nominee thereof identified
in the applicable Prospectus Supplement, will be deposited with such Depositary
or nominee or a custodian therefor and will bear a legend regarding the
restrictions on exchanges and registration of transfer thereof referred to
below and any such other matters as may be provided for pursuant to the Senior
Note Indenture.
Notwithstanding any provision of the Senior Note Indenture or any Senior
Note described herein, no Global Note may be exchanged in whole or in part for
Senior Notes registered, and no transfer of a Global Note in whole or in part
may be registered, in the name of any Person other than the Depositary for such
Global Note or any nominee of such Depositary unless (i) the Depositary has
notified the Company that it is unwilling or unable to continue as Depositary
for such Global Note or has ceased to be qualified to act as such as required
by the Senior Note Indenture, (ii) there shall have occurred and be continuing
an Event of Default with respect to the Senior Notes represented by such Global
Note, or (iii) 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 securities issued in exchange for a Global Note or
any portion thereof will be registered in such names as the Depositary may
direct. (Sections 204 and 305).
As long as the Depositary, or its nominee, is the registered Holder of a
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Note and the Senior Notes
represented thereby for all purposes under the Senior Notes and the Senior Note
Indenture. Except in the limited circumstances referred to above, owners of
beneficial interests in a Global Note will not be entitled to have such Global
Note or any Senior Notes represented thereby registered in their names, will
not receive or be entitled to receive physical delivery of certificated Senior
Notes in exchange therefor and will not be considered to be the owners or
Holders of such Global Note or any Senior Notes represented thereby for any
purpose under the Senior Notes or the Senior Note Indenture. All payments of
principal of and any premium and interest on a Global Note will be made to the
Depositary or its nominee, as the case may be, as the Holder thereof. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. These laws may impair
the ability to transfer beneficial interests in a Global Note.
Ownership of beneficial interests in a Global Note will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Note, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Senior Notes represented by the Global Note to
the accounts of its participants. Ownership of beneficial interests in a Global
Note will be shown only on, and the transfer of those ownership interests will
be effected only through, records maintained by the Depositary (with respect to
participants' interests) or any such participant (with respect to interests of
persons held by such participants on their behalf). Payments, transfers,
exchanges, and others matters relating to beneficial interests in a Global Note
may be subject to various policies and procedures adopted by the Depositary
from time to time. None of the Company, the Senior Note Trustee or any agent of
the Company or the Senior Note Trustee will have any responsibility or
liability for any aspect of the Depositary's or any participant's records
relating to, or for payments made on account of, beneficial interests in a
Global Note, or for maintaining, supervising, or reviewing any records relating
to such beneficial interests.
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Payment and Paying Agents
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of interest on a Senior Note on any Interest Payment Date will be made
to the Person in whose name such Senior Note (or one or more Predecessor Senior
Notes) is registered at the close of business on the Regular Record Date for
such interest. (Section 307).
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Senior Notes 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 by check mailed
to the address of the Person entitled thereto as such address appears in the
Note Register. Unless otherwise indicated in the applicable Prospectus
Supplement, the corporate trust office of the Senior Note Trustee in The City
of New York will be designated as the Company's sole Paying Agent for payments
with respect to Senior Notes of each series. Any other Paying Agents initially
designated by the Company for the Senior Notes 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 or approve a change in the office through which any Paying Agent acts,
except that the Company will be required to maintain a Paying Agent in each
Place of Payment for the Senior Notes of a particular series. (Section 1102).
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Senior Notes which remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to the Company, and the Holder of such
Senior Notes thereafter may look only to the Company for payment thereof.
(Section 1103).
Consolidation, Merger, and Sale of Assets
The Company may not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets "substantially as an
entirety" to any Person, and may not permit any Person to consolidate with or
merge into the Company 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 (i) assumes
the Company's obligations on the Senior Notes and under the Senior Note
Indenture, and (ii) if such consolidation, merger, conveyance, transfer, or
lease occurs prior to the Release Date, assumes the Company's obligations under
the Senior Note Mortgage Bonds and under the Mortgage; (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 (iii) certain other conditions are met. The
term "substantially as an entirety" means 50% or more of the total assets of
the Company as shown on the Company's consolidated balance sheet as of the end
of the calendar year immediately preceding the day of the year in which such
determination is made. (Section 901).
Security
Until the Release Date (see "Release Date" below), the Senior Notes will
be secured by one or more series of New Bonds ("Senior Note Mortgage Bonds")
issued and delivered by the Company to the Senior Note Trustee (see
"Description of New Bonds"). Upon the issuance of a series of Senior Notes
prior to the Release Date, the Company will simultaneously issue and deliver to
the Senior Note Trustee, as security for such series of Senior Notes, a series
of Senior Note Mortgage Bonds that will have the same stated rate or rates of
interest (or interest calculated in the same manner), Interest Payment Dates,
Stated Maturity and redemption provisions, and will be in the same aggregate
principal amount as the series of the Senior Notes being issued. (Sections
401-403). Payments by the Company to the Senior Note Trustee of principal of,
premium and interest on, a series of Senior Notes will satisfy the Company's
obligations with respect to principal of, premium and interest on, the related
series of Senior Note Mortgage Bonds.
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Each series of Senior Note Mortgage Bonds will be a series of New Bonds,
all of which are secured by a lien on certain property owned by the Company.
See "Description of New Bonds -- Security." In certain circumstances prior to
the Release Date, the Company is permitted to reduce the aggregate principal
amount of a series of Senior Note Mortgage Bonds held by the Senior Note
Trustee, but in no event to an amount lower than the aggregate outstanding
principal amount of the series of Senior Notes initially issued
contemporaneously with such Senior Note Mortgage Bonds. (Section 409).
Following the Release Date, the Company will cause the Mortgage to be closed
and the Company will not issue any additional first mortgage bonds under the
Mortgage. (Section 403).
Release Date
ON THE RELEASE DATE, THE SENIOR NOTE MORTGAGE BONDS WILL NO LONGER SECURE
THE SENIOR NOTES, AND THE SENIOR NOTES WILL BECOME UNSECURED GENERAL
OBLIGATIONS OF THE COMPANY. (Section 407). The "Release Date" means the date
that the Company has repaid all of its first mortgage bonds, other than the
first mortgage bonds securing the senior notes.The Senior Note Trustee will
give the Senior Note Holders notice of the occurrence of the Release Date. See
"Description of Senior Notes -- Defeasance and Covenant Defeasance --
Defeasance and Discharge" for a discussion of another situation in which
outstanding Senior Notes would not be secured by Senior Note Mortgage Bonds.
Unless otherwise specified in the applicable Prospectus Supplement, from
and after the Release Date and so long as Senior Notes of a particular series
are outstanding, the Company may not issue, assume or guarantee any debt
evidenced by notes, debentures, bonds or other securities for money borrowed
that is secured by any mortgage, security interest, pledge or lien of or upon
any operating property of the Company, and will not permit to exist any such
debt secured by any such lien created on or prior to the Release Date, without
effectively securing such Senior Notes equally and ratably therewith, subject
to certain exceptions as described below. See "Limitations on Liens and Sale
and Lease-back Transactions." The intention of these provisions is that before
the Release Date the Senior Notes will have the benefit of being secured by
Senior Note Mortgage Bonds, and after the Release Date the Senior Notes will
have the benefit of the same security as other secured debt of the Company, if
any, subject to specified exceptions.
Limitations on Liens and Sale and Lease-Back Transactions
Limitations on Liens. Unless otherwise specified in the applicable
Prospectus Supplement, from and after the Release Date and so long as Senior
Notes of a particular series are outstanding, the Company may not issue,
assume, or guarantee any debt evidenced by notes, debentures, bonds, or other
securities for money borrowed ("Debt") that is secured by any mortgage,
security interest, pledge, or lien ("lien") of or upon any Operating Property
of the Company, and will not permit to exist any such Debt secured by any such
mortgage created on or prior to the Release Date, without effectively securing
such Senior Notes equally and ratably with such Debt. This restriction does not
apply to (1) liens on any property existing at the time of its acquisition; (2)
liens on property of a corporation existing at the time the corporation is
merged into or consolidated with, or disposes of substantially all of its
properties (or those of a division) to, the Company; (3) subject to certain
conditions, liens securing Debt incurred to acquire, construct, develop, or
substantially repair, alter, or improve property or to reimburse the Company
for funds spent for any such purpose; (4) liens in favor of the United States
of America or any State thereof, or for the benefit of holders of securities
issued by any such entity, or any department, agency, or instrumentality or
political subdivision of the United States of America or any State thereof, to
secure any Debt incurred for the purpose of financing all or any part of the
purchase price or the cost of constructing, developing or substantially
repairing, altering, or improving the property subject to such liens; or (5)
any extension, renewal, or replacement, in whole or in part, of any lien
referred to in clauses (1) through (4). However, the foregoing restriction does
not apply to the issuance, assumption, or guarantee by the Company of Debt
secured by a lien which would otherwise be subject to the foregoing
restrictions up to an aggregate amount which, together with all other secured
Debt of the Company (not including secured Debt permitted under the foregoing
exceptions) and the Value (as defined below) of
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all Sale and Lease-Back Transactions (as defined below) existing at such time
(other than Sale and Lease-Back Transaction proceeds which have been applied to
the retirement or certain indebtedness, Sale and Lease-Back Transactions in
which the property involved would have been permitted to be mortgaged under the
foregoing exceptions and Sale and Lease-Back Transactions that are permitted by
the first sentence of "-- Limitations on Sale and Lease-Back Transactions"
below), does not exceed the greater of 10% of Net Tangible Assets (as defined
below) or 10% of Capitalization (as defined below).
Limitations on Sale and Lease-Back Transactions. Unless otherwise
specified in the applicable Prospectus Supplement, after the Release Date, so
long as any Senior Notes are outstanding, the Company may not enter into any
Sale and Lease-Back Transaction with respect to any Operating Property and will
not permit to remain in effect any Sale and Lease-Back transaction with respect
to any Operating Property entered into on or prior to the Release Date (except
in each case, for transactions involving leases for a term, including any
renewal thereof, of not more than 48 months), if the purchaser's commitment is
or was obtained more than 18 months after the later of the completion of the
acquisition, construction or development or the placing in operation of such
Operating Property or of such Operating Property as constructed, being
developed or substantially repaired, altered or improved. This restriction will
not apply if (a) the Company would be entitled pursuant to the provisions
described in the second sentence under "-- Limitations on Liens" above to
issue, assume or guarantee Debt secured by a lien on such Operating Property
without equally and ratably securing such Senior Notes, (b) after giving effect
to such Sale and Lease-Back Transaction, the Company could incur pursuant to
the provisions described in the third sentence under "-- Limitation on Liens,"
additional debt secured by liens, or (c) the Company applies within 180 days an
amount equal to, in the case of a sale or transfer for cash, the net proceeds
(not exceeding the net book value), and, otherwise, an amount equal to the fair
value (as determined by its Board of Directors) of the Operating Property so
leased to the retirement of Senior Notes or other Debt of the Company ranking
senior to, or equally with, the Senior Notes, subject to reduction as set forth
in the Supplemental Indenture in respect of Senior Notes and such Debt retired
during such 180-day period otherwise than pursuant to mandatory sinking fund or
prepayment provisions and payments at Stated Maturity.
Definitions. The term "Capitalization" shall mean the total of all the
following items appearing on, or included in, the balance sheet of the Company:
(i) liabilities for indebtedness maturing more than 12 months from the date of
determination; and (ii) common stock, preferred stock, premium on capital
stock, capital surplus, capital in excess of par value, and retained earnings,
less, to the extent not otherwise deducted, the cost of shares of capital stock
of the Company held in its treasury.
The term "Net Tangible Assets" shall mean the amount shown as total assets
on the consolidated balance sheet of the Company, less the following: (i)
intangible assets including, but without limitation, such items as goodwill,
trademarks, tradenames, patents and unamortized debt discount and expense and
other regulatory assets carried as an asset on said balance sheet; and (ii)
appropriate adjustments, if any, on account of minority interests.
The term "Operating Property" shall mean (i) any interest in real property
owned by the Company and (ii) any asset owned by the Company that is
depreciable in accordance with generally accepted accounting principles.
The term "Sale and Lease-Back Transaction" shall mean any arrangement with
any person providing for the leasing to the Company of any Operating Property
(except for leases for a term, including any renewal thereof, of not more than
48 months), which Operating Property has been or is to be sold or transferred
by the Company to such person.
The term "Value" shall mean, with respect to a Sale and Lease-Back
Transaction, as of any particular time, the amount equal to the greater of (i)
the net proceeds to the Company from the sale or transfer of the property
leased pursuant to such Sale and Lease-Back Transaction or (ii) the net book
value of such property, as determined in accordance with generally accepted
accounting principles by the Company at the time of entering into such Sale and
Lease-Back Transaction, in each case multiplied by a fraction, the numerator of
which shall be equal to the number of full years of the term of the lease that
is part of such Sale and Lease-Back Transaction remaining at the time of
determination and the
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denominator of which shall be equal to the number of full years of such term,
without regard, in any case, to any renewal or extension options contained in
such lease.
Events of Default
Each of the following will constitute an Event of Default under the Senior
Note Indenture with respect to Senior Notes of any series: (a) failure to pay
principal of or any premium on any Senior Note of that series when due,
continued for five days; (b) failure to pay any interest on any Senior Notes of
that series when due, continued for sixty days; (c) failure to deposit any
sinking fund payment, when due, in respect of any Senior Note of that series;
(d) failure to perform any other covenant of the Company in the Senior Note
Indenture (other than a covenant included in the Senior Note Indenture solely
for the benefit of a series other than that series), continued for 90 days
after written notice has been given by the Senior Note Trustee, or the Holders
of a majority in principal amount of the Outstanding Senior Notes of that
series, as provided in the Senior Note Indenture; (e) prior to the Release
Date, the occurrence of a Default under the Mortgage (see "Description of the
Bonds -- Events of Default"), of which the Trustee under the Mortgage, the
Company or the Holders of at least 25% in aggregate principal amount of the
outstanding senior notes have given written notice thereof to the Senior Note
Trustee; and (f) certain events in bankruptcy, insolvency or reorganization.
(Section 601).
If an Event of Default (other than an Event of Default described in clause
(f) above) with respect to the Senior Notes of any series at the time
Outstanding shall occur and be continuing, either the Senior Note Trustee or
the Holders of a majority in principal amount of the Outstanding Senior Notes
of that series by notice as provided in the Senior Note Indenture may declare
the principal amount of the Senior Notes of that series (or, in the case of any
Senior Note that is an Original Issue Discount Note or the principal amount of
which is not then determinable, such portion of the principal amount of such
Senior Note, or such other amount in lieu of such principal amount, as may be
specified in the terms of such Senior Note) to be due and payable immediately.
If an Event of Default described in clause (f) above with respect to the Senior
Notes of any series at the time Outstanding shall occur, the principal amount
of all the Senior Notes of that series (or, in the case of any such Original
Issue Discount Note or other Senior Note, such specified amount) will
automatically, and without any action by the Senior Note Trustee or any Holder,
become immediately due and payable. After any such acceleration, but before (i)
a judgment or decree based on acceleration or (ii) the Senior Note Trustee's
receipt from the Trustee under the Mortgage of a notice of acceleration of
Senior Note First Mortgage Bonds, such acceleration will be automatically
waived and rescinded 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 602). For information as to waiver of
defaults, see "Modification and Waiver."
Subject to the provisions of the Senior Note Indenture relating to the
duties of the Senior Note Trustee in case an Event of Default shall occur and
be continuing, the Senior Note Trustee will be under no obligation to exercise
any of its rights or powers under the Senior Note Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Senior Note Trustee reasonable indemnity. (Section 703). Subject to such
provisions for the indemnification of the Senior Note Trustee, the Holders of a
majority in principal amount of the Outstanding Senior Notes of any series will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Note Trustee, or exercising
any trust or power conferred on the Senior Note Trustee, with respect to the
Senior Notes of that series. (Section 612).
No Holder of a Senior Note of any series will have any right to institute
any proceeding with respect to the Senior Note Indenture, or for the
appointment of a receiver or a trustee, or for any other remedy thereunder,
unless (i) such Holder has previously given to the Senior Note Trustee written
notice of a continuing Event of Default with respect to the Senior Notes of
that series, (ii) the Holders of at least 25% in aggregate principal amount of
the Outstanding Senior Notes of that series have made written request, and such
Holder or Holders have offered reasonable indemnity, to the Senior Note Trustee
to institute such proceeding as trustee, and (iii) the Senior Note Trustee has
failed to institute such proceeding, and has not received from the Holders of a
majority in aggregate principal amount of the Outstanding Senior Notes of that
series a direction inconsistent with such request, within 60 days after such
notice, request
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and offer. (Section 607). However, such limitations do not apply to a suit
instituted by a Holder of a Senior Note for the enforcement of payment of the
principal of or any premium or interest on such Senior Note on or after the
applicable due date specified in such Senior Note. (Section 608).
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 and conditions of the Indenture and, if so, specifying all such
known defaults. (Section 1104).
Modification and Waiver
Modifications and amendments of the Senior Note Indenture may be made by
the Company and the Senior Note Trustee with the consent of the Holders of a
majority in principal amount of the Outstanding Senior Notes of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Senior Note affected thereby, (a) change the Stated Maturity of the
principal of, or any instalment of principal of or interest on, any Senior
Note, (b) reduce the principal amount of, or any premium or interest on, any
Senior Note, (c) reduce the amount of principal of an Original Issue Discount
Note or any other Senior Note 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 Senior Note, (e) impair the right to institute suit
for the enforcement of any payment on or with respect to any Senior Note, (f)
prior to the Release Date, (i) impair the interest of the Senior Note Trustee
in the Senior Note Mortgage Bonds, (ii) reduce the principal amount of any
series of Senior Note Mortgage Bonds to an amount less than the principal
amount of the related Series of Notes, or (iii) alter the payment provisions of
the Senior Note Mortgage Bonds in a manner adverse to the Holders of the Notes,
or (g) reduce the percentage in principal amount of Outstanding Senior Notes of
any series, the consent of whose Holders is required for modification or
amendment of the Senior Note Indenture, reduce the percentage in principal
amount of Outstanding Senior Notes of any series necessary for waiver of
compliance with certain provisions of the Senior Note Indenture or for waiver
of certain defaults or modify such provisions with respect to modification and
waiver. (Section 1002).
The Holders of a majority in principal amount of the Outstanding Senior
Notes of any series may waive compliance by the Company with certain
restrictive provisions of the Senior Note Indenture. (Section 1108). The
Holders of a majority in principal amount of the Outstanding Senior Notes of
any series may waive any past default under the Senior Note Indenture, except a
default in the payment of principal, premium, or interest and certain covenants
and provisions of the Senior Note Indenture which cannot be amended without the
consent of the Holder of each Outstanding Senior Note of such series affected.
(Section 613).
The Senior Note Indenture provides that in determining whether the Holders
of the requisite principal amount of the Outstanding Senior Notes have given or
taken any direction, notice, consent, waiver, or other action under the Senior
Note Indenture as of any date, (i) the principal amount of an Original Issue
Discount Note 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, (ii) if, as of such date,
the principal amount payable at the Stated Maturity of a Senior Note is not
determinable (for example, because it is based on an index), the principal
amount of such Senior Note deemed to be Outstanding as of such date will be an
amount determined in the manner prescribed for such Senior Note and (iii) the
principal amount of a Senior Note 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 Senior
Note, of the principal amount of such Senior Note (or, in the case of a Senior
Note described in clause (i) or (ii) above, of the amount described in such
clause). Certain Senior Notes, 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 Senior Notes of any series entitled to give or
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take any direction, notice, consent, waiver, or other action under the Senior
Note Indenture, in the manner and subject to the limitations provided in the
Senior Note Indenture. In certain limited circumstances, the Senior Note
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
Senior Notes of that series on the record date. To be effective, such action
must be taken by Holders of the requisite principal amount of such Senior Notes
within a specified period following the record date. For any particular record
date, this period will be 180 days or such other shorter period as may be
specified by the Company (or the Senior Note 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
If and to the extent indicated in the applicable Prospectus Supplement,
the Company may elect, at its option at any time, to have the provisions of
Section 1402, relating to defeasance and discharge of indebtedness, or Section
1403, relating to defeasance of certain restrictive covenants in the Senior
Note Indenture, applied to the Senior Notes of any series, or to any specified
part of a series. (Section 1401).
Defeasance and Discharge. The Senior Note Indenture provides that, upon
the Company's exercise of its option (if any) to have Section 1402 applied to
any Senior Notes, the Company will be discharged from all its obligations with
respect to such Senior Notes (except for certain obligations to exchange or
register the transfer of Senior Notes, to replace stolen, lost or mutilated
Senior Notes, 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 Senior
Notes 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 Senior Notes on the respective Stated
Maturities in accordance with the terms of the Senior Note Indenture and such
Senior Notes. Upon such defeasance and discharge, the Senior Note Trustee will
deliver to the Company for cancellation all Senior Note Mortgage Bonds securing
such Senior Notes, after which time such Senior Notes will no longer be secured
by Senior Note Mortgage Bonds. Such defeasance and discharge may occur only if,
among other things, the Company has delivered to the Senior Note 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 Senior Notes 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. The Senior Note Indenture provides that,
upon the Com-pany's exercise of its option (if any) to have Section 1403
applied to any Senior Notes, the Company may omit to comply with certain
restrictive covenants that may be described in the applicable Prospectus
Supplement, and the occurrence of certain Events of Default, which are
described above in clause (d) (with respect to such restrictive covenants)
under "Description of Senior Notes -- 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 will cease to be effective, in each case with
respect to such Senior Notes. The Company, in order to exercise such option,
will be required to deposit, in trust for the benefit of the Holders of such
Senior Notes, 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 Senior Notes on the respective Stated
Maturities in accordance with the terms of the Senior Note Indenture and such
Senior Notes. 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 Senior
Notes 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
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the case if such deposit and defeasance were not to occur. In the event the
Company exercised this option with respect to any Senior Notes and such Senior
Notes 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 Senior Notes at the time
of their respective Stated Maturities but may not be sufficient to pay amounts
due on such Senior Notes 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 Senior Notes will be given by mail to the addresses
of such Holders as they may appear in the Note Register. (Sections 101 and
106).
Title
The Company, the Senior Note Trustee, and any agent of the Company or the
Senior Note Trustee may treat the Person in whose name a Senior Note is
registered as the absolute owner thereof (whether or not such Senior Note may
be overdue) for the purpose of making payment and for all other purposes.
(Section 308).
Governing Law
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the law of the State of New York. (Section 112).
Regarding the Senior Note Trustee
The Senior Note Trustee is The Bank of New York. The Company maintains
normal banking arrangements with The Bank of New York, which include (i) one
commitment in the aggregate principal amount of approximately $15.7 million by
The Bank of New York pursuant to a reimbursement agreement related to a letter
of credit issued on behalf of the Company in connection with an issuance of
pollution control bonds, the proceeds of which were made available to the
Company, and (ii) a $25 million commitment by The Bank of New York pursuant to
a revolving credit agreement, approximately $7.8 million of which was
outstanding at March 31, 1998. The Bank of New York also serves as (i) trustee
under the Mortgage, (ii) trustee for the holders of several issues of pollution
control bonds issued on behalf of the Company, (iii) trustee under the
Company's Indenture relating to subordinated Debt Securities (see below), (iv)
investment manager for the Company's nonunion post-retirement medical fund, and
(v) custodian of international fixed-income assets for the Company's pension
plan.
DESCRIPTION OF DEBT SECURITIES
General
The Debt Securities may be issued in one or more new series under an
Indenture between the Company and (i) The Bank of New York, in the case of
subordinated Debt Securities, and (ii) The Chase Manhattan Bank, in the case of
senior Debt Securities, or any other trustees to be named, as Trustee (each, a
"Trustee"). The following summary does not purport to be complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Indentures pursuant to which the subordinated and senior
Debt Securities are to be issued and to the Debt Securities, the forms of which
are filed, or will be filed, as exhibits to the registration statement of which
this Prospectus forms a part. Whenever particular provisions or defined terms
in such documents are referred to herein or in a Prospectus Supplement, such
provisions or terms are incorporated by reference herein or therein, as the
case may be. The term "Debt Securities" does not include Senior Notes, which
are issued under the Senior Note Indenture. See "Description of Senior Notes."
The Debt Securities will be unsecured obligations of the Company. Separate
Indentures will be used for senior Debt Securities and subordinated Debt
Securities, respectively, although the description of the Indenture herein,
except as specifically stated otherwise, applies to both Indentures.
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Reference is made to the Prospectus Supplement relating to any particular
issue of Offered Debt Securities for the following terms: (1) the title of such
Debt Securities; (2) any limit on the aggregate principal amount of such Debt
Securities or the series of which they are a part; (3) the date or dates on
which the principal of any of such Debt Securities will be payable; (4) the
rate or rates at which any of such Debt Securities will bear interest, if any,
the date or dates from which any such interest will accrue, the Interest
Payment Dates on which any such interest will be payable and the Regular Record
Date for any such interest payable on any Interest Payment Date; (5) the place
or places where the principal of and any premium and interest on any of such
Debt Securities will be payable, if other than as described under "Description
of Debt Securities -- Payment and Paying Agents"; (6) the period or periods
within which, the price or prices at which and the terms and conditions on
which any of such Debt Securities may be redeemed, in whole or in part, at the
option of the Company; (7) the obligation, if any, of the Company to redeem or
purchase any of such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of the Holder thereof, and the period or periods
within which, the price or prices at which and the 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; (8) the denominations in which any of
such Debt Securities will be issuable, if other than denominations of $1,000
and any integral multiple thereof; (9) if the amount of principal of or any
premium or 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; (10) if other than the currency of the United
States of America, the currency, currencies, or currency units in which the
principal of or any premium or interest on any of such Debt Securities will be
payable and the manner of determining the equivalent thereof in the currency of
the United States of America for any purpose, including for purposes of
determining the principal amount deemed to be Outstanding at any time; (11) 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 periods within 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); (12) 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;
(13) 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);
(14) if applicable, that such Debt Securities, in whole or any specified part,
are defeasible pursuant to the provisions of the Indenture described under
"Description of Debt Securities -- Defeasance and Covenant Defeasance --
Defeasance and Discharge" or "Description of Debt Securities -- Defeasance and
Covenant Defeasance -- Covenant Defeasance," or under both such captions; (15)
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 in addition to or in lieu of the legend referred to
under "Description of Debt Securities -- Global Securities" and, if different
from those described under such caption, any circumstances under which any such
Global Security may be exchanged in whole or in part for Debt Securities
registered, and 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; (16) 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 to declare the principal amount of any of such
Debt Securities due and payable; (17) any addition to or change in the
covenants in the Indenture; and (18) 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 federal income tax considerations (if any)
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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.
Except as otherwise described in the Prospectus Supplement, the covenants
contained in the Indenture would not afford holders of Debt Securities
protection in the event of a highly-leveraged transaction involving the
Company.
Subordination
The Indenture relating to the subordinated Debt Securities provides that,
unless otherwise provided in a supplemental indenture or a Board Resolution,
the Debt Securities will be subordinate and subject in right of payment to the
prior payment in full of all Senior Debt of the Company, whether outstanding as
of the date of the Indenture or thereafter incurred. (Section 1401). The
balance of the information under this "Subordination" heading assumes that the
relevant supplemental indenture or Board Resolution results in the
corresponding series of Debt Securities being subordinated obligations of the
Company.
No payment of principal of (including redemption and sinking fund
payments), premium, if any, or interest on, the subordinated Debt Securities
may be made if any Senior Debt is not paid when due, any applicable grace
period with respect to such default has ended and such default has not been
cured or waived, or if the maturity of any Senior Debt has been accelerated
because of a default. (Section 1402). Upon any distribution of assets of the
Company to creditors upon any dissolution, winding-up, liquidation or
reorganization, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due on, all Senior Debt must be paid in full before
the holders of the subordinated Debt Securities are entitled to receive or
retain any payment. (Section 1403). The rights of the holders of the
subordinated Debt Securities will be subordinated to the rights of the holders
of Senior Debt to receive payments or distributions applicable to Senior Debt
until all amounts owing on the Debt Securities are paid in full. (Section
1404).
The term "Senior Debt" shall mean the principal of, premium, if any,
interest on and any other payment due pursuant to any of the following, whether
outstanding at the date of execution of the Indenture or thereafter incurred,
created or assumed:
(a) all indebtedness of the Company evidenced by notes, debentures,
bonds, or other securities sold by the Company for money, including all
first mortgage bonds of the Company outstanding from time to time;
(b) all indebtedness of others of the kinds described in the preceding
clause (a) assumed by or guaranteed in any manner by the Company; and
(c) all renewals, extensions, or refundings of indebtedness of the kinds
described in any of the preceding clauses (a) and (b);
unless, in the case of any particular indebtedness, renewal, extension or
refunding, the instrument creating or evidencing the same or the assumption or
guarantee of the same expressly provides that such indebtedness, renewal,
extension or refunding is not superior in right of payment to or is pari passu
with the Debt Securities. (Section 101).
The Indenture does not limit the aggregate amount of Senior Debt that the
Company may issue. As of March 31, 1998, outstanding Senior Debt and
subordinated debt of the Company aggregated approximately $1.9 billion and $75
million, respectively. Any Senior Notes issued by the Company would constitute
Senior Debt, whether before or after the Release Date. See "Description of
Senior Notes -- Release Date."
Form, Exchange, and Transfer
The Debt Securities of each series will be issuable only in fully
registered form without coupons and, unless otherwise specified in the
applicable Prospectus Supplement, in denominations of $1,000 and any integral
multiple thereof. (Section 302).
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At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Debt Securities of any series will
be exchangeable for other Debt Securities of the same series, of any authorized
denomination and of like tenor and aggregate principal amount. (Section 305).
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. (Section 1002).
If the Debt Securities of any series (or of any series and specified
tenor) are to be redeemed, the Company will not be required to (i) issue,
register the transfer of, or exchange any Debt Security of that series (or of
that 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 (ii) register the
transfer of or exchange any Debt Security so selected for redemption, in whole
or in part, except the unredeemed portion of any such Debt Security being
redeemed in part. (Section 305).
Global Securities
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. Each
Global Security will be registered in the name of a Depositary or a nominee
thereof identified in the applicable Prospectus Supplement, will be deposited
with such Depositary or nominee or a custodian therefor and will bear a legend
regarding the restrictions on exchanges and registration of transfer thereof
referred to below and any such other matters as may be provided for pursuant to
the Indenture.
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 (i) 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, (ii) there shall have occurred and be
continuing an Event of Default with respect to the Debt Securities represented
by such Global Security or (iii) 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 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).
As long as the Depositary, or its nominee, is the registered Holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Security and the Debt
Securities represented thereby for all purposes under the Debt Securities and
the Indenture. Except in the limited circumstances referred to above, owners of
beneficial interests in a Global Security will not be entitled to have such
Global Security or any Debt Securities represented thereby registered in their
names, will not receive or be entitled to receive physical delivery of
certificated
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Debt Securities in exchange therefor and will not be considered to be the
owners or Holders of such Global Security or any Debt Securities represented
thereby for any purpose under the Debt Securities or the Indenture. All
payments of principal of and any premium and interest on a Global Security will
be made to the Depositary or its nominee, as the case may be, as the Holder
thereof. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability to transfer beneficial interests in a Global
Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Debt Securities represented by the Global
Security to the accounts of its participants. Ownership of beneficial interests
in a Global Security will be shown only on, and the transfer of those ownership
interests will be effected only through, records maintained by the Depositary
(with respect to participants' interests) or any such participant (with respect
to interests of persons held by such participants on their behalf). Payments,
transfers, exchanges, and others matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by
the Depositary from time to time. None of the Company, the Trustee or any agent
of the Company or the Trustee will have any responsibility or liability for any
aspect of the Depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in a Global Security, or for
maintaining, supervising, or reviewing any records relating to such beneficial
interests.
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
Debt Securities) is registered at the close of business on the Regular Record
Date for such interest. (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 by check
mailed to the address of the Person entitled thereto as such address appears in
the Security Register. Unless otherwise indicated in the applicable Prospectus
Supplement, the corporate trust office of the Trustee in The City of New York
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 or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of
Payment for the Debt Securities of a particular series. (Section 1002).
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest has
become due and payable will be repaid to the Company, and the Holder of such
Debt Security thereafter may look only to the Company for payment thereof.
(Section 1003).
Consolidation, Merger, and Sale of Assets
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, and may not permit any Person to consolidate with or merge into the
Company or convey, transfer, or lease its properties and assets substantially
as an entirety to the Company, unless (i) 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, (ii) immediately
after giving effect to the
22
<PAGE>
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 (iii) certain other conditions are met. (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 any
other covenant of the Company in the Indenture (other than a covenant 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 by the Trustee, or
the Holders of at least 25% in principal amount of the Outstanding Debt
Securities of that series, as provided in the Indenture; and (e) certain events
in bankruptcy, insolvency or reorganization. (Section 501).
If an Event of Default (other than an Event of Default described 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 or the principal amount of
which is not then determinable, such portion of the principal amount of such
Debt Security, or such other amount in lieu of such principal amount, as may be
specified in the terms of such Debt Security) to be due and payable
immediately. If an Event of Default described in clause (e) above with respect
to the Debt Securities of any series at the time Outstanding shall occur, the
principal amount of all the Debt Securities of that series (or, in the case of
any such Original Issue Discount Security or other Debt Security, such
specified amount) will automatically, and without any action by the Trustee or
any Holder, become immediately due and payable. After any such acceleration,
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."
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 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. (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 or a trustee, or for any other remedy thereunder, unless (i) 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, (ii) the Holders
of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series have made written request, and such Holder or Holders
have offered reasonable indemnity, to the Trustee to institute such proceeding
as trustee and (iii) 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 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).
23
<PAGE>
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 and conditions of the Indenture and, if so, specifying all such
known defaults. (Section 1004).
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than 66 2/3% in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of
the principal of, or any instalment 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, 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 or modify such provisions with respect to modification and waiver.
(Section 902).
The Holders of not less than 66 2/3% in aggregate principal amount of the
Outstanding Debt Securities of any series may waive compliance by the Company
with certain restrictive provisions of the Indenture. (Section 1008). The
Holders of a majority in principal amount of the Outstanding Debt Securities of
any series may waive any past default under the Indenture, except a default in
the payment of 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. (Section
513).
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, (i) 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, (ii) 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 and (iii)
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 (i) or (ii) above, of the amount
described in such clause). 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 1302, 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 other shorter period as may be
24
<PAGE>
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
If and to the extent indicated in the applicable Prospectus Supplement,
the Company may elect, at its option at any time, to have the provisions of
Section 1302, relating to defeasance and discharge of indebtedness, or Section
1303, relating to defeasance of certain restrictive covenants in the Indenture,
applied to the Debt Securities of any series, or to any specified part of a
series. (Section 1301).
Defeasance and Discharge. The Indenture provides that, upon the Company's
exercise of its option (if any) to have Section 1302 applied to any Debt
Securities, 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
1302 and 1304).
Defeasance of Certain Covenants. The Indenture provides that, upon the
Company's exercise of its option (if any) to have Section 1303 applied to any
Debt Securities, the Company may omit to comply with certain restrictive
covenants that may be described in the applicable Prospectus Supplement, and
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 and the provisions of
Article Fourteen relating to subordination (included in the Indenture relating
to subordinated Debt Securities) will cease to be effective, 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 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 may 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 1303 and 1304).
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).
25
<PAGE>
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 as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the
purpose of making payment and for all other purposes. (Section 308).
Governing Law
The Indenture and the Debt Securities will be governed by, and construed
in accordance with, the law of the State of New York. (Section 112).
Regarding the Trustees
The Trustee under the Indenture relating to the subordinated Debt
Securities is The Bank of New York. The Company maintains normal banking
arrangements with The Bank of New York, which include (i) one commitment in the
aggregate principal amount of approximately $15.7 million by The Bank of New
York pursuant to a reimbursement agreement related to a letter of credit issued
on behalf of the Company in connection with an issuance of pollution control
bonds, the proceeds of which were made available to the Company, and (ii) a $25
million commitment by The Bank of New York pursuant to a revolving credit
agreement, approximately $7.8 million of which was outstanding at March 31,
1998. The Bank of New York also serves as (i) trustee under the Mortgage (see
"Description of New Bonds"), (ii) trustee for the holders of several issues of
pollution control bonds issued on behalf of the Company, (iii) trustee under
the Senior Note Indenture (see "Description of Senior Notes"), (iv) investment
manager for the Company's nonunion post-retirement medical fund and (v)
custodian of international fixed-income assets for the Company's pension plan.
The Trustee under the Indenture relating to the senior Debt Securities is The
Chase Manhattan Bank. The Company maintains normal banking arrangements with
The Chase Manhattan Bank. The Chase Manhattan Bank also (i) serves as trustee
for the holders of several series of bonds secured by, among other things, the
Company's payments under its Palo Verde Nuclear Generating Station leases
(these bonds were issued by a party unaffiliated with the Company), (ii) serves
as an issuing and paying agent with respect to the Company's commercial paper
program, and (iii) has a commitment to lend the Company up to $55 million under
a revolving credit agreement, approximately $17.2 million of which was
outstanding as of March 31, 1998. In addition, an affiliate of The Chase
Manhattan Bank is the lessor with respect to a lease with the Company relating
to the sale and leaseback of a portion of Unit 2 of the Palo Verde Nuclear
Generating Station.
PLAN OF DISTRIBUTION
The Company intends to sell up to $400 million in aggregate principal
amount of the Offered Securities to or through underwriters or dealers, and may
also sell the Offered Securities directly to other purchasers or through
agents, as described in the Prospectus Supplement relating to an issue of
Offered Securities.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, or at negotiated prices.
In connection with the sale of the Offered Securities, underwriters may
receive compensation from the Company or from purchasers of Offered Securities
for whom they may act as agents in the form of discounts, concessions, or
commissions. Underwriters may sell Offered 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. Underwriters, dealers, and agents
that participate in the distribution of Offered Securities may be deemed to be
underwriters, and any discounts or commissions received by them from the
Company and any profit on the resale of Offered Securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act of
1933 (the "1933 Act"). Any such person who may be deemed to be an underwriter
will be identified, and any such compensation received from the Company will be
described, in the Prospectus Supplement.
26
<PAGE>
Under agreements which may be entered into by the Company, underwriters,
dealers, and agents who participate in the distribution of the Offered
Securities may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the 1933 Act.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Company's 1997 Annual Report on Form 10-K have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon for the
Company by Snell & Wilmer L.L.P., One Arizona Center, Phoenix, Arizona 85004,
and, it is currently anticipated, for any underwriters of Securities by
Sullivan & Cromwell, 444 South Flower Street, Los Angeles, California 90071. In
giving their opinions, Sullivan & Cromwell and Snell & Wilmer L.L.P. may rely
as to matters of New Mexico law upon the opinion of Keleher & McLeod, P.A.,
1200 Public Service Building, Albuquerque, New Mexico 87102, Sullivan &
Cromwell may rely as to all matters of Arizona law upon the opinion of Snell &
Wilmer L.L.P., and Snell & Wilmer L.L.P. may rely as to all matters of New York
law upon the opinion of Sullivan & Cromwell.
27
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date.
---------------------------------
TABLE OF CONTENTS
Page
-----
Available Information ................... 2
Incorporation of Certain Documents by
Reference ............................ 2
Selected Information .................... 3
The Company ............................. 4
Application of Proceeds ................. 4
Earnings Ratios ......................... 4
Securities .............................. 4
Description of New Bonds ................ 4
Description of Senior Notes ............. 9
Description of Debt Securities .......... 18
Plan of Distribution .................... 26
Experts ................................. 27
Legal Opinions .......................... 27
$400,000,000
Arizona Public Service
Company
First Mortgage Bonds
Senior Notes
Debt Securities
-----
APS
-----
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission registration fee ......... $103,250
Printing, engraving, and postage expenses ................... 60,000
Legal fees .................................................. 250,000
Accounting fees ............................................. 40,000
Rating Agency fees .......................................... 192,750
Trustee's fees and expenses ................................. 30,000
Blue Sky fees and expenses .................................. 30,000
Miscellaneous ............................................... 4,000
--------
Total .................................................... $710,000
========
- ------------
*Estimated.
Item 15. Indemnification of Directors and Officers.
The law of Arizona permits extensive indemnification of present and former
directors, officers, employees or agents of an Arizona corporation, whether or
not authority for such indemnification is contained in the indemnifying
corporation's articles of incorporation or bylaws. Specific authority for
indemnification of present and former directors and officers, under certain
circumstances, is contained in Article Fifth of the Company's Articles of
Incorporation. In addition, Section 7.01 of the Company's bylaws provides that
the Company will indemnify present and former directors and officers to the
fullest extent permitted by Arizona law. Under Arizona law, in order for a
corporation to provide indemnification, a disinterested majority of the
corporation's board of directors, independent legal counsel, a court or the
shareholders must find that the director, officer, employee or agent acted, or
failed to act, in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reason to believe his conduct was
unlawful. Statutory indemnification is permissive, except in the event of a
successful defense, when a director, officer, employee or agent must be
indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection therewith. Indemnification is
permitted with respect to expenses, judgments, fines, and amounts paid in
settlement by such persons.
On January 1, 1996, the new Arizona Business Corporation Act (the "ABCA")
became effective. The ABCA permits extensive indemnification of present and
former directors, officers, employees, or agents of an Arizona corporation,
whether or not authority for such indemnification is contained in the
indemnifying corporation's articles of incorporation or bylaws. Under the ABCA,
in order for a corporation to provide indemnification, a majority of the
corporation's disinterested directors, independent legal counsel, or the
shareholders must find that the conduct of the individual to be indemnified was
in good faith and that the individual reasonably believed that the conduct was
in the corporation's best interests (in the case of conduct in an "official
capacity" with the corporation) or that the conduct was at least not opposed to
the corporation's best interests (in all other cases). In the case of any
criminal proceeding, the finding must be to the effect that the individual had
no reasonable cause to believe the conduct was unlawful. Indemnification is
permitted with respect to expenses, judgements, fines, and amounts paid in
settlement by such individuals.
Indemnification under the ABCA is permissive, except in the event of a
successful defense, in which case a director, officer, employee, or agent must
be indemnified against reasonable expenses, including attorneys' fees, incurred
in connection with the proceeding. In addition, the ABCA requires Arizona
corporations to indemnify any "outside director" (a director who is not an
officer, employee, or holder of five percent or more of any class of the
corporation's stock) against liability unless (i) the corporation's articles of
incorporation limit such indemnification, (ii) the outside director is adjudged
liable in a proceeding by or in the right of the corporation or in any other
proceeding charging improper personal
II-1
<PAGE>
benefit to the director, or (iii) a court determines, before payment to the
outside director, that the director failed to meet the standards of conduct
described in the preceding paragraph. A court may also order that an individual
be indemnified if the court finds that the individual is fairly and reasonably
entitled to indemnification in light of all of the relevant circumstances,
whether or not the individual has met the standards of conduct in this and the
preceding paragraph.
In connection with the offering made by the prospectus which is a part of
this registration statement, as it may be amended or supplemented, the
underwriters of the Offered Securities, pursuant to the relevant underwriting
agreement, will severally agree to indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed this registration
statement, and each person, if any, who controls the Company within the meaning
of the Securities Act of 1933, as amended (the "Act"), against certain losses,
claims, damages or liabilities, including liabilities under the Act, that arise
out of or are based upon written information furnished by such underwriters to
the Company for use in this registration statement or in such prospectus.
Insurance is maintained on a regular basis (and not specifically in
connection with this offering) against liabilities arising on the part of
directors and officers out of their performance in such capacities or arising
on the part of the Company out of its foregoing indemnification provisions,
subject to certain exclusions and to the policy limits.
Item 16. List of Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement for New Bonds.
1.2 Form of Underwriting Agreement for Debt Securities.
1.3 Form of Distribution Agreement for Senior Notes.
4.1 Form(s) of Supplemental Indenture relating to New Bonds (to be filed as Exhibit(s) by
means of Form 8-K).
4.2 Specimen(s) of New Bonds (to be filed as Exhibit(s) by means of Form 8-K).
4.3 Form(s) of Supplemental Indenture relating to Offered Debt Securities (to be filed as
Exhibit(s) by means of Form 8-K).
4.4 Specimen(s) of Offered Debt Securities (to be filed as Exhibit (s) by means of Form 8-K).
4.5 Form(s) of Supplemental Indenture relating to Offered Senior Notes (to be filed as
Exhibit(s) by means of Form 8-K).
4.6 Specimen(s) of Offered Senior Notes (to be filed as Exhibit(s) to Form 8-K).
5.1 Opinion of Snell & Wilmer L.L.P.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Snell & Wilmer L.L.P. (included in Opinion filed as Exhibit No. 5.1).
24.1 Power of Attorney (see II-6).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of
New York, as Bond Trustee under the Mortgage.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of
New York, as Trustee under the Indenture relating to the subordinated Debt
Securities.
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Chase
Manhattan Bank, as Trustee under the Indenture relating to the senior Debt
Securities.
25.4 Form T-1 Statement of Eligibility under Trust Indenture Act of 1939 of The Bank of New
York, as Trustee under the Indenture relating to the Senior Notes.
</TABLE>
II-2
<PAGE>
In addition to those Exhibits shown above, the Company hereby incorporates
the following Exhibits pursuant to Rule 411 of Regulation C promulgated under
the Securities Act of 1933 by reference to the filings set forth below:
<TABLE>
<CAPTION>
Exhibit Previously Filed Date
No. Description as Exhibit: File No. Effective
--- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
4.7 Mortgage and Deed of Trust 4.1 to September 1992 Form 1-4473 11-9-92
relating to Company's First 10-Q Report
Mortgage Bonds, together with
forty-eight indentures
supplemental thereto.
Forty-ninth Supplemental 4.1 to 1992 Form 10-K Report 1-4473 3-30-93
Indenture.
Fiftieth Supplemental Indenture. 4.2 to 1993 Form 10-K Report 1-4473 3-30-94
Fifty-first Supplemental 4.1 to August 1, 1993 Form 8-K 1-4473 9-27-93
Indenture. Report
Fifty-second Supplemental 4.1 to September 30, 1993 Form 1-4473 11-15-93
Indenture. 10-Q Report
Fifty-third Supplemental 4.5 to Registration Statement No. 1-4473 3-1-94
Indenture. 33-61228 by means of Febru-
ary 23, 1994 Form 8-K Report
Fifty-fourth Supplemental 4.1 to Registration Statements 1-4473 11-22-96
Indenture. Nos. 33-61228, 33-55473,
33-64455 and 333-15379 by
means of November 19, 1996
Form 8-K Report
Fifty-fifth Supplemental 4.8 to Registration Statements 1-4473 4-9-97
Indenture. Nos. 33-55473, 33-64455 and
333-15379 by means of April
7, 1997 Form 8-K Report
4.8 Agreement of Resignation, 4.1 to September 29, 1995 Form 1-4473 10-24-95
Appointment, Acceptance, 8-K Report
and Assignment dated as of
August 18, 1995 among the
Company, Bank of America
National Trust and Savings
Association and The Bank of
New York.
4.9 Indenture dated as of January 1, 4.6 to January 1, 1995 Form 8-K 1-4473 1-11-95
1995 among the Company and Report
The Bank of New York, as
Trustee, relating to subordi-
nated Debt Securities.
4.10 First Supplemental Indenture 4.4 to January 1, 1995 Form 8-K 1-4473 1-11-95
dated as of January 1, 1995, Report
relating to the issuance of
$75,000,000 of 10% Junior
Subordinated Deferrable
Interest Debentures, Series A,
Due 2025.
4.11 Indenture dated as of November 4.5 to Registration Statements 1-4473 11-22-96
15, 1996 among the Company Nos. 33-61228, 33-55473,
and The Bank of New York, as 33-64455 and 333-15379 by
Trustee, relating to Senior means of November 19, 1996
Notes. Form 8-K Report
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit Previously Filed Date
No. Description as Exhibit: File No. Effective
--- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
4.12 First Supplemental Indenture, 4.6 to Registration Statements 1-4473 11-22-96
dated as of November 15, Nos. 33-61228, 33-55473,
1996, relating to the issuance 33-64455 and 333-15379 by
of $100,000,000 of 6 3/4% Senior means of November 19, 1996
Notes Due 2006. Form 8-K Report
4.13 Second Supplemental Indenture, 4.10 to Registration Statements 1-4473 4-9-97
dated as of April 1, 1997, Nos. 33-55473, 33-64455 and
relating to the issuance of 333-15379 by means of April
$50,000,000 of 6.72% Senior 7, 1997 Form 8-K Report
Notes due 1999.
4.14 Indenture dated as of January 4.10 to Registration Statement 1-4473 1-16-98
15, 1998 among the Company Nos. 333-15379 and 333-
and The Chase Manhattan 27551 by means of January
Bank, as Trustee, relating to 13, 1998 Form 8-K Report
Senior Debt Securities.
4.15 First Supplemental Indenture 4.3 to Registration Statement 1-4473 1-16-98
dated as of January 15, 1998, Nos. 333-15379 and 333-
relating to the issuance of 27551 by means of January
$100,000,000 of 6 1/4% Notes 13, 1998 Form 8-K Report
Due 2005.
</TABLE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in
the registration
II-4
<PAGE>
statement shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(5) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the provisions referred to
in Item 15 of this Registration Statement, or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer, or controlling person of
the registrant in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer, or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(6) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(7) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on the 2nd day of July,
1998.
ARIZONA PUBLIC SERVICE COMPANY
By WILLIAM J. POST
----------------------------------------
(William J. Post, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby authorizes William J. Post, George A. Schreiber, Jr., Chris N.
Froggatt, and Michael V. Palmeri and each of them, as attorneys-in-fact, to
sign in his or her name and behalf, individually and in each capacity
designated below, and to file any amendments, including post-effective
amendments, to this registration statement, and any related Rule 462(b)
registration statement or amendment thereto.
Signature Title Date
--------- ----- ----
WILLIAM J. POST Principal Executive Officer July 2, 1998
- --------------------------- and Director
(William J. Post, President
and Chief Executive Officer)
GEORGE A. SCHREIBER, JR. Principal Accounting and July 2, 1998
- --------------------------- Financial Officer
(George A. Schreiber, Jr., and Director
Executive Vice President and
Chief Financial Officer)
O. MARK DEMICHELE Director July 2, 1998
- ---------------------------
(O. Mark DeMichele)
MICHAEL L. GALLAGHER Director July 2, 1998
- ---------------------------
(Michael L. Gallagher)
MARTHA O. HESSE Director July 2, 1998
- ---------------------------
(Martha O. Hesse)
ROBERT E. KEEVER Director July 2, 1998
- ---------------------------
(Robert E. Keever)
MARIANNE M. JENNINGS Director July 2, 1998
- ---------------------------
(Marianne M. Jennings)
ROBERT G. MATLOCK Director July 2, 1998
- ---------------------------
(Robert G. Matlock)
BRUCE J. NORDSTROM Director July 2, 1998
- ---------------------------
(Bruce J. Nordstrom)
JOHN R. NORTON III Director July 2, 1998
- ---------------------------
(John R. Norton III)
DONALD M. RILEY Director July 2, 1998
- ---------------------------
(Donald M. Riley)
II-6
<PAGE>
Signature Title Date
--------- ----- ----
QUENTIN P. SMITH, JR. Director July 2, 1998
- -----------------------
(Quentin P. Smith, Jr.)
RICHARD SNELL Director July 2, 1998
- -----------------------
(Richard Snell)
DIANNE C. WALKER Director July 2, 1998
- -----------------------
(Dianne C. Walker)
BEN F. WILLIAMS, JR. Director July 2, 1998
- -----------------------
(Ben F. Williams, Jr.)
II-7
<PAGE>
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
Arizona Public Service Company
(Exact name of registrant as specified in its charter)
================================================================================
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement for New Bonds.
1.2 Form of Underwriting Agreement for Debt Securities.
1.3 Form of Distribution Agreement for Senior Notes.
4.1 Form(s) of Supplemental Indenture relating to New Bonds (to be filed as Exhibit(s) by
means of Form 8-K).
4.2 Specimen(s) of New Bonds (to be filed as Exhibit(s) by means of Form 8-K).
4.3 Form(s) of Supplemental Indenture relating to Offered Debt Securites (to be filed as
Exhibit(s) by means of Form 8-K).
4.4 Specimen(s) of Offered Debt Securities (to be filed as Exhibit(s) by means of Form 8-K).
4.5 Form(s) of Supplemental Indenture relating to Offered Senior Notes (to be filed as
Exhibit(s) by means of Form 8-K).
4.6 Specimen(s) of Offered Senior Notes (to be filed as Exhibit(s) to Form 8-K).
5.1 Opinion of Snell & Wilmer L.L.P.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Deloitte & Touche L.L.P.
23.2 Consent of Snell & Wilmer L.L.P. (included in Opinion filed as Exhibit No. 5.1).
24.1 Power of Attorney (see II-6).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New
York, as Bond Trustee under the Mortgage.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New
York, as Trustee under the Indenture relating to the subordinated Debt Securities.
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Chase
Manhattan Bank, as Trustee under the Indenture relating to the senior Debt Securities.
25.4 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New
York, as Trustee under the Indenture relating to the Senior Notes.
</TABLE>
For a description of the Exhibits incorporated in this filing by reference
see page II-3.
Exhibit 1.1
ARIZONA PUBLIC SERVICE COMPANY
First Mortgage Bonds
UNDERWRITING AGREEMENT
----------------------
------------------
Dear Sir or Madam:
1. Introduction. Arizona Public Service Company, an Arizona corporation
(the "Company"), proposes to issue and sell from time to time up to $400,000,000
in aggregate principal amount of its First Mortgage Bonds (the "Bonds")
registered under the registration statements referred to in Section 2(a). The
Bonds will be issued under its Mortgage and Deed of Trust dated as of July 1,
1946, to The Bank of New York, as successor Trustee, as amended and supplemented
by fifty-five indentures supplemental thereto (the "Mortgage"), and as further
amended and supplemented by one or more additional Supplemental Indentures
relating to the Bonds (the "Supplemental Indentures") (the Mortgage as amended
and supplemented by such Supplemental Indentures being sometimes hereinafter
referred to as the "Indenture"). The Bonds will be issued in one or more series,
which series may vary as to interest rates, maturities, redemption provisions,
selling prices, and other terms, with all such terms for any particular issue of
the Bonds being determined at the time of sale. Particular issues of the Bonds
may be sold from time to time to one or more of the firms to whom this Agreement
is addressed, and to such other purchasers as the Company shall designate and as
shall agree in writing to comply with the terms and conditions of this
Agreement, for resale in accordance with the terms of offering determined at the
time of sale. The Bonds involved in any such offering are hereinafter referred
to as the "Purchased Bonds," the parties that agree to purchase the same are
hereinafter referred to as the "Underwriters" of such Purchased Bonds, and the
representative or representatives of the Underwriters, if any, specified in a
Terms Agreement referred to in Section 3 are hereinafter referred to as the
"Representatives."
2. Representations and Warranties of the Company. In connection with
each offering of the Purchased Bonds, the Company
<PAGE>
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-27551) relating to
$50,000,000 of the Bonds, unsecured debentures, notes, or other
evidences of indebtedness (the "Securities"), or the Company's senior
notes (the "Senior Notes") and a registration statement (No. 333-____)
relating to $350,000,000 of the Bonds, Securities or Senior Notes
(including a combined prospectus relating to up to $400,000,000 of the
Bonds, Securities or Senior Notes) were filed with the Securities and
Exchange Commission (the "Commission") and have become effective. Such
registration statements, as each is amended at the time of the Terms
Agreement referred to in Section 3 relating to the Purchased Bonds, are
hereinafter referred to as the "First Registration Statement" and the
"Second Registration Statement," respectively, and, together with any
related Rule 462(b) registration statement or amendment thereto, are
hereinafter referred to collectively as the "Registration Statements,"
and such prospectus, as supplemented as contemplated by Section 3 to
reflect the terms of the Purchased Bonds and terms of offering thereof,
including all material incorporated by reference therein, is
hereinafter referred to as the "Prospectus."
(b) Each part of the Registration Statements relating to the
Bonds, when such part became effective, conformed in all material
respects to the requirements of the Securities Act of 1933 (the "Act"),
the Trust Indenture Act of 1939 (the "Trust Indenture Act") and the
rules and regulations (the "Rules and Regulations") of the Commission
and did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and on the date of each
Prospectus Supplement referred to in Section 3, the Registration
Statements and the Prospectus will conform in all material respects to
the requirements of the Act, the Trust Indenture Act and the Rules and
Regulations, and at such date none of such documents will include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing does not
apply to (a) statements in or omissions from any such documents based
upon written information furnished to the Company by any Underwriter
specifically for use therein or (b) that part of the Registration
Statements that consists of the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939 of The
Bank of New York, as successor Trustee under the Mortgage.
(c) An order of the Arizona Corporation Commission shall have
been granted authorizing the execution and delivery of the Supplemental
Indenture relating to the Purchased Bonds and the issuance and sale of
the Purchased Bonds on the terms and
2
<PAGE>
conditions herein and in the Prospectus and the Terms Agreement
referred to in Section 3 relating to the Purchased Bonds, and the
approval or consent of no other public body or authority is necessary
to the execution and delivery of such Supplemental Indenture or the
validity of the issuance and sale of the Purchased Bonds, except as may
be required under state securities or blue sky laws.
(d) Except for property specifically excepted from the lien of
the Indenture or released therefrom in accordance with the terms
thereof, the Company has good and marketable title in fee simple,
except for items described in (A), (B), and (C) below, to all of the
real property purported in the Indenture to be so held, good and valid
leasehold interests in all properties purported in the Indenture to be
held under lease, and good and valid title to all other properties
described in the Indenture as subject to the lien thereof (which
property excludes (i) the combined cycle plant referred to in Note 9 of
Notes to Financial Statements in the Company's Form 10-K Report for the
fiscal year ended December 31, 1997 (the "1997 Form 10-K Report")
incorporated by reference in the Registration Statements but includes
the Company's leasehold and related interests in that plant and (ii)
certain leased interests in Unit 2 of the Palo Verde Nuclear Generating
Station referred to in Note 9 of Notes to Financial Statements in the
1997 Form 10-K Report), except that the transmission and distribution
lines of the Company, other than those located on land owned in fee by
the Company, and the property described in Section 15 of Article IV of
the Forty-first Supplemental Indenture, have been installed in public
streets or alleys and in highways under ordinances and permits granted
by the various governmental bodies having jurisdiction, or have been
constructed on leaseholds, easements or rights-of-way granted, with
minor exceptions, by the apparent owners of record of the land and such
leases, easements, or rights-of-way are subject to any defects in or
encumbrances on the title of the respective lessors of such leases or
grantors of such easements or rights-of-way; title to the aforesaid
properties is subject only to: (A) the lien of the Mortgage, (B)
Excepted Encumbrances as defined in the Mortgage, and (C) other liens,
encumbrances or defects, none of which, individually or in the
aggregate, materially interfere with the business or operations of the
Company (with respect to leasehold interests on the Navajo Reservation,
this representation is intended and shall be understood to mean only
that the Company is the owner of the rights conferred upon it by the
leases from the Navajo Tribe relating to the sites on which the Navajo
Plant and the Four Corners Plant are located, and that while the
Company is not aware of the assertion of any claim contesting the
interest of the Navajo Tribe in the lands leased, the Company does not
give any representation with respect to the interest of the Navajo
Tribe in the lands leased or with respect to the enforceability of such
leases against the Navajo Tribe); the
3
<PAGE>
Mortgage, subject only as above set forth in this clause, now
constitutes, and the Mortgage and the Supplemental Indentures
theretofore executed, subject only as above set forth in this clause,
when the latter shall have been duly recorded and filed, will
constitute, together and as a single instrument, a direct and valid
first mortgage lien upon said properties, which include all of the
properties of the Company (other than the classes or items of property
expressly excepted in the Mortgage); and all properties (other than the
classes or items of property expressly excepted in the Mortgage or
expressly released from the lien thereof) acquired by the Company after
the date of the Supplemental Indenture relating to the Purchased Bonds
in each county in the States of Arizona and New Mexico in which the
Mortgage and the Supplemental Indenture shall have been duly recorded
and filed (and, as to which properties, with respect to priority only,
any necessary recordation and/or filing has been accomplished,
including therein any necessary descriptions of after-acquired real
property and real property upon which after-acquired fixtures are
affixed) will, upon such acquisition, become subject to the first
mortgage lien thereof, subject, however, to Excepted Encumbrances and
to liens, if any, existing or placed thereon at the time of the
acquisition thereof by the Company and, with respect to priority only,
to liens, if any, existing prior to the time of any necessary
recordation and/or filing by the Company.
(e) The Company holds such valid franchises, certificates of
convenience and necessity, licenses, and permits as are necessary with
respect to the maintenance and operation of its property and business
as now conducted, except that (A) the Company from time to time makes
minor extensions of its system prior to the time a related franchise,
certificate, license, or permit is procured, (B) from time to time
communities already being served by the Company become incorporated and
considerable time may elapse before a franchise is procured, (C)
certain franchises may have expired prior to the renegotiation thereof,
(D) the Company may not have obtained certain permits or variances
relating to the environmental requirements described in any of its Form
10-K Report, its Form 10-Q Reports, and/or its Form 8-K Reports
incorporated by reference in the Registration Statements, (E) certain
minor defects and exceptions may exist which, individually and in the
aggregate, are not deemed material, and (F) the Company does not make
any representation regarding the geographical scope of any franchise,
certificate, license, or permit that is not specific as to its
geographical scope.
3. Purchase and Offering. The obligation of the Underwriters to
purchase, and the obligation of the Company to sell, the Purchased Bonds will be
evidenced by an exchange of facsimile transmission or other written
communications (the "Terms Agreement") at the time the Company determines to
sell the
4
<PAGE>
Purchased Bonds. The Terms Agreement shall specify (by incorporation by
reference or otherwise) the parties that will be Underwriters, the principal
amount to be purchased by each, the purchase price to be paid by the
Underwriters, any compensation or commissions to be paid to Underwriters, the
offering price, and the terms of the Purchased Bonds not already specified in
the Indenture, including, but not limited to, interest rates, maturity,
redemption provisions, and sinking fund requirements, if any. The Terms
Agreement shall also specify (by incorporation by reference or otherwise) the
time and date of delivery and payment (the "Closing Date"), the place of
delivery and payment, and any details of the terms of offering that should be
reflected in the prospectus supplement relating to the offering of the Purchased
Bonds (the "Prospectus Supplement"). It is understood that the Underwriters will
offer the Purchased Bonds for sale as set forth in the Prospectus. The
obligations of the Underwriters to purchase the Purchased Bonds shall be several
and not joint. Except as may otherwise be set forth in the Terms Agreement, the
Purchased Bonds will be in definitive form and in such denominations and
registered in such names as the Underwriters may request.
4. Covenants of the Company. In connection with each offering of
Purchased Bonds, the Company covenants and agrees with the several Underwriters
that:
(a) The Company will advise the Underwriters or the
Representatives promptly of any proposed amendment or supplementation
of the First Registration Statement, the Second Registration Statement,
or the Prospectus. The Company will also advise the Underwriters or the
Representatives of the institution by the Commission of any stop order
proceedings in respect of the First Registration Statement, the Second
Registration Statement, or of any part thereof, and will use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible its lifting, if issued.
(b) If, at any time when a prospectus relating to the
Purchased Bonds is required to be delivered under the Act, any event
occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact, or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend or
supplement the First Registration Statement, the Second Registration
Statement, or the Prospectus to comply with the Act, the Company
promptly will prepare and file with the Commission an amendment or
supplement that will correct such statement or omission or an amendment
that will effect such compliance.
(c) As soon as practicable, but not later than 18 months,
after the date of the Terms Agreement relating to the Purchased Bonds,
the Company will make generally available to
5
<PAGE>
its securityholders an earning statement or statements (which need not
be audited) covering a period of at least 12 months beginning after the
effective date of the Second Registration Statement (as defined in Rule
158(c) under the Act), which will satisfy the provisions of Section
ll(a) of the Act and the rules and regulations thereunder.
(d) The Company will furnish to the Underwriters or the
Representatives such copies of the Registration Statements (including
one copy of the Second Registration Statement for each Representative,
or for each Underwriter if there are no Representatives, and for the
counsel for the Underwriters, which is signed and includes all
exhibits), any related preliminary prospectus supplements and the
Prospectus, including all amendments or supplements to such documents,
as may be reasonably requested.
(e) The Company will arrange or cooperate in arrangements for
the qualification of the Purchased Bonds for sale and the determination
of their eligibility for investment under the laws of such
jurisdictions as the Underwriters or the Representatives designate and
will continue such qualifications in effect so long as required for the
distribution of the Purchased Bonds, provided that the Company shall
not be required to qualify as a foreign corporation in any State, to
consent to service of process in any State other than with respect to
claims arising out of the offering or sale of the Purchased Bonds, or
to meet other requirements deemed by it to be unduly burdensome.
(f) During the period of five years after the date of the
Terms Agreement relating to the Purchased Bonds, the Company will
furnish to the Underwriters or the Representatives thereunder, and,
upon request, each of the other Underwriters, (i) as soon as
practicable after the end of each fiscal year, a balance sheet and
statements of income and retained earnings of the Company as at the end
of and for such year, all in reasonable detail and certified by
independent public accountants, and (ii) (A) as soon as practicable
after the end of each quarterly fiscal period (except for the last
quarterly fiscal period of each fiscal year), a balance sheet and
statement of income of the Company as at the end of and for such
period, all in reasonable detail and certified by a principal financial
or accounting officer of the Company, (B) as soon as available, a copy
of each report of the Company mailed by the Company to stockholders or
filed with the Commission, and (C) from time to time, such other
information concerning the Company as may reasonably be requested. So
long as the Company has active subsidiaries, such financial statements
will be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated.
6
<PAGE>
(g) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, and will reimburse
the Underwriters for any reasonable expenses (including reasonable fees
and disbursements of counsel) incurred by them in connection with the
qualification of the Purchased Bonds with respect to which the Terms
Agreement relating to the Purchased Bonds has been entered for sale,
and the determination of their eligibility for investment, under the
laws of such jurisdictions as the Representatives or, if there are no
Representatives, the Underwriters designate, and the printing of
memoranda relating thereto, and for any fees charged by investment
rating agencies for the rating of the Purchased Bonds.
(h) The Company will not offer or sell any of its First
Mortgage Bonds for a period beginning at the time of execution of the
Terms Agreement relating to the Purchased Bonds and ending on the
Closing Date relating thereto without prior consent of the Underwriters
or the Representatives.
5. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Purchased Bonds will be
subject to the accuracy of the representations and warranties on the part of the
Company herein, to the accuracy of the statements of Company officers made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the following additional conditions precedent:
(a) The Underwriters or the Representatives shall have
received a letter from DELOITTE & TOUCHE LLP, dated the date of the
Terms Agreement, confirming that they are independent certified public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder, and stating in effect that (i) in
their opinion the financial statements and schedules of the Company
examined by them and incorporated by reference in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Securities Exchange Act of
1934 (the "1934 Act") and the published Rules and Regulations
thereunder and (ii) on the basis of a reading of the latest available
interim financial statements of the Company, inquiries of officials of
the Company responsible for financial and accounting matters, and other
specified procedures, nothing came to their attention that caused them
to believe that (A) the unaudited financial statements incorporated by
reference, if any, in the Registration Statements do not comply as to
form in all material respects with the applicable accounting
requirements of the 1934 Act and the published Rules and Regulations
thereunder or are not stated on a basis substantially consistent with
that of the audited financial statements incorporated by reference in
the Registration Statements, (B) at the date of the most recent
available unaudited financial statements and at a specified
7
<PAGE>
date not more than five days prior to the date of this Agreement, there
was any increase in the amounts of common stock, redeemable preferred
stock, or non-redeemable preferred stock of the Company or any
increase, exceeding $10,000,000, in long-term debt of the Company or,
at the date of the most recent available unaudited financial statements
there was any decrease in net assets as compared with amounts shown in
the most recent financial statements incorporated by reference in the
Registration Statements, or (C) for the twelve-month period ended at
the date of the most recent available unaudited financial statements
there were any decreases, exceeding 3%, as compared with the
twelve-month period ended at the date of the most recent financial
statements incorporated by reference in the Registration Statements, in
the amounts of total revenues or net income, except in all cases for
increases or decreases which result from the declaration or payment of
dividends, or which the Registration Statements (including any material
incorporated by reference therein) disclose have occurred or may occur,
or which are described in such letter.
(b) No stop order suspending the effectiveness of the First
Registration Statement, the Second Registration Statement, or any part
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or, to the knowledge of the Company or the
Underwriters, shall be contemplated by the Commission.
(c) Subsequent to the execution of the Terms Agreement
relating to the Purchased Bonds, (i) there shall not have occurred any
change, or any development involving a prospective change, in or
affecting particularly the business or properties of the Company or its
subsidiaries which, in the judgment of a majority in interest of the
Underwriters under such Terms Agreement, including any Representatives,
materially impairs the investment quality of the Purchased Bonds, (ii)
there shall not have occurred a suspension or material limitation in
trading in securities generally on the New York Stock Exchange, (iii)
there shall not have occurred a general moratorium on commercial
banking activities in New York declared by either Federal or New York
State authorities, (iv) no rating of any of the Company's debt
securities shall have been lowered and there shall have been no public
announcement that any such debt securities have been placed on
CreditWatch, Watchlist, or under any similar surveillance or review, in
each case with negative implications, by any recognized rating agency,
and (v) there shall not have occurred any outbreak or escalation of
major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of a majority
in interest of the Underwriters under such Terms Agreement, including
any Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes
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<PAGE>
it impractical or inadvisable to proceed with completion of the sale of
and payment for the Purchased Bonds.
(d) The Underwriters or the Representatives shall have
received an opinion of Snell & Wilmer L.L.P., counsel for the Company,
dated the relevant Closing Date, to the effect that:
(i) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Arizona and has full corporate power and authority to
carry on its business as presently conducted; and the Company
is duly qualified as a foreign corporation to do business and
is in good standing in the States of New Mexico, California,
Oregon, Washington, Montana and Wyoming, the only other
jurisdictions in which it owns or leases substantial
properties or in which the conduct of its business requires
such qualification;
(ii) The Purchased Bonds have been duly authorized,
executed, authenticated, issued, and delivered, constitute
valid and legally binding obligations of the Company entitled
to the benefits and security provided by the Indenture (except
as the same may be limited by (a) general principles of equity
or by bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other laws or equitable principles relating to
or affecting the enforcement of creditors' rights generally or
the enforcement of the security provided by the Indenture, (b)
the necessity for compliance with the statutory procedural
requirements governing the exercise of remedies by a secured
creditor, and (c) the qualification that certain waivers,
procedures, remedies, and other provisions of the Purchased
Bonds and the Indenture may be unenforceable under or limited
by the law of the State of Arizona; however, such law does not
in such counsel's opinion substantially prevent the practical
realization of the benefits intended by such documents) and
conform to the description thereof in the Prospectus;
(iii) The Indenture has been duly authorized,
executed, and delivered, has been duly qualified under the
Trust Indenture Act, and constitutes a valid and binding
instrument enforceable in accordance with its terms except as
the same may be limited by (a) general principles of equity or
by bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other laws or equitable principles relating to
or affecting the enforcement of creditors' rights generally or
the enforcement of the security provided by the Indenture, (b)
the necessity for compliance with the statutory procedural
requirements governing the exercise of remedies by a secured
creditor, and (c) the qualification that certain waivers,
procedures,
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<PAGE>
remedies, and other provisions of the Purchased Bonds and the
Indenture may be unenforceable under or limited by the law of
the State of Arizona; however, such law does not in such
counsel's opinion substantially prevent the practical
realization of the benefits intended by such documents;
(iv) Except for property specifically excepted from
the lien of the Indenture or released therefrom in accordance
with the terms thereof, the Company has good and marketable
title in fee simple, except for items described in (A), (B),
and (C) below, to all of the real property and fixtures
thereon purported in the Indenture to be so held and that are
both located in the State of Arizona and described in those
title reports covering at least the Saguaro, Yucca, Cholla,
Ocotillo, West Phoenix, and Palo Verde plant sites that are
listed on an exhibit to such opinion (the "Title Documents")
(in giving such opinion, such counsel may rely solely upon the
Title Documents and may assume the accuracy thereof and of the
real property descriptions contained therein and may state
that no other investigation or inquiry has been made with
respect thereto), and in giving the opinions described below
with respect to any liens, defects, and encumbrances on such
title to such personal property, such counsel may assume that
the Company has good and valid title to all of the personal
property located in the State of Arizona and described in the
Indenture as subject to the lien thereof (which property shall
not include fixtures), and such counsel may rely solely upon,
and assume the accuracy of, a search of the Uniform Commercial
Code Financing Statements filed in the records of the Arizona
Secretary of State and may assume that there are no liens or
other encumbrances on personal property (as used in the
Arizona Uniform Commercial Code) of the Company located in the
State of Arizona other than liens or other encumbrances that
have been perfected by filing with the Arizona Secretary of
State under Arizona Revised Statutes ("A.R.S.") Section
47-9401.A; such title is subject only to: (A) the lien of the
Mortgage, (B) Excepted Encumbrances as defined in the
Mortgage, and (C) other liens, encumbrances, or defects, none
of which, individually or in the aggregate, in the opinion of
such counsel, materially interfere with the business or
operations of the Company (in determining whether any such
other liens, encumbrances, or defects materially interfere
with the business or operations of the Company, such counsel
may rely solely upon a certificate of an officer or engineer
of the Company which shall be attached to such opinion and
such opinion may state that no other investigation or inquiry
with respect thereto has been made); the Mortgage, subject
only as above set forth in this clause, now constitutes, and
the Mortgage and the
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<PAGE>
Supplemental Indentures theretofore executed, subject only as
above set forth in this clause, when the latter shall have
been duly recorded and filed, will constitute, together and as
a single instrument, a direct and valid first mortgage lien
upon said property; and all properties (other than the classes
or items of property expressly excepted in the Mortgage or
expressly released from the lien thereof) acquired by the
Company after the date of the Supplemental Indenture relating
to the Purchased Bonds in each county in the State of Arizona
in which the Mortgage and the Supplemental Indenture shall
have been duly recorded and filed and, with respect to
priority only, any necessary recordation and/or filing has
been accomplished (including therein any necessary
descriptions of after-acquired real property and real property
upon which after-acquired fixtures are affixed) will, upon
such acquisition, become subject to the first mortgage lien
thereof, subject, however, to Excepted Encumbrances and to
liens, if any, existing or placed thereon at the time of the
acquisition thereof by the Company and, with respect to
priority only, to liens, if any, existing prior to the time of
any necessary recordation and/or filing by the Company;
(v) The Company is the owner of the rights conferred
upon it by the leases from the Navajo Tribe relating to the
site on which the Navajo Plant is located and while such
counsel is not aware of the assertion of any claim contesting
the title of the Navajo Tribe to the lands leased, such
counsel shall not be required to express any opinion with
respect to the interest of the Navajo Tribe in the lands
leased or with respect to the enforceability of such leases
against the Navajo Tribe;
(vi) With certain exceptions, a public service
corporation is required to obtain certificates of convenience
and necessity from the Arizona Corporation Commission under
A.R.S. Section 40-281.A for construction of its lines, plant,
services, or systems, or any extensions thereof, within the
State of Arizona, and to obtain franchises or similar consents
or permits from counties and incorporated municipalities under
A.R.S. Section 40-283.A for the construction, operation, and
maintenance of transmission lines within the State of Arizona;
to the best of such counsel's knowledge after due inquiry, the
Company holds such valid franchises, certificates of
convenience and necessity, consents, and permits pursuant to
such statutory provisions as are necessary with respect to the
maintenance and operation of its property and business as now
conducted, except that (A) the Company from time to time makes
minor extensions of its system prior to
11
<PAGE>
the time a related franchise, certificate, license, or permit
is procured, (B) from time to time communities already being
served by the Company become incorporated and considerable
time may elapse before a franchise is procured, (C) certain
franchises may have expired prior to the renegotiation
thereof, (D) certain minor defects and exceptions may exist
which, individually and in the aggregate, are not deemed
material, and (E) such counsel need not be required to express
any opinion regarding the geographical scope of any franchise,
certificate, license, or permit that is not specific as to its
geographical scope;
(vii) The issuance and sale of the Purchased Bonds on
the terms and conditions set forth or contemplated herein and
in the Prospectus and the Terms Agreement relating to the
Purchased Bonds and the execution and delivery of the
Supplemental Indenture relating to the Purchased Bonds have
been duly authorized by the Arizona Corporation Commission,
said Commission had jurisdiction in the premises, and no
further approval, authorization, or consent of any other
public board or body is necessary to the validity of such
issuance and sale of such Purchased Bonds or the execution and
delivery of such Supplemental Indenture, except as may be
required under state securities or blue sky laws, as to which
laws such counsel shall not be required to express an opinion;
(viii) The First Registration Statement and the
Second Registration Statement have become effective under the
Act, and, to the best of the knowledge of such counsel, no
stop order suspending the effectiveness of the First
Registration Statement or the Second Registration Statement
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act, and
each part of the Registration Statements relating to the
Bonds, when such part became effective, and the Prospectus, as
of the date of the Prospectus Supplement, and each amendment
or supplement thereto, as of their respective effective or
issue dates, complied as to form in all material respects with
the requirements of the Act, the Trust Indenture Act, and the
published Rules and Regulations; such counsel has no reason to
believe that any part of the Registration Statements, when
such part became effective, or the Prospectus, as of the date
of the Prospectus Supplement, or as of the Closing Date, or
any amendment or supplement thereto, as of their respective
effective or issue dates, or as of the Closing Date, contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
to make the statements therein not misleading; the
descriptions in
12
<PAGE>
the Registration Statements and Prospectus of statutes, legal
and governmental proceedings and contracts, and other
documents are accurate and fairly present the information
required to be shown; and to the actual knowledge of those
persons in the lawyer group described in such opinion, there
are no legal or governmental proceedings required to be
described in the Prospectus that are not described as
required, nor any contracts or documents of a character
required to be described in the Registration Statements or
Prospectus or to be filed as exhibits to the Registration
Statements that are not described and filed as required (it
being understood that such counsel need express no opinion as
to the financial statements or other financial data contained
in the Registration Statements or the Prospectus); and
(ix) This Agreement and the Terms Agreement have been
duly authorized, executed, and delivered by the Company.
In giving such opinion, (a) Snell & Wilmer L.L.P. may rely
solely upon certificates of the Company as to any factual matters upon which any
such opinions are based and may rely upon the opinion of Keleher & McLeod, P.A.,
referred to below, as to all matters governed by the laws of the State of New
Mexico, but the opinion of Snell & Wilmer L.L.P. shall state that, though they
are members of the Arizona Bar and do not hold themselves out as experts on the
laws of the State of New Mexico, they have made a study of the laws of such
State insofar as such laws are involved in the conclusions stated in their
opinion, other than such laws as relate to matters of title, and from such study
it is their opinion that such laws support such conclusions and that, in their
opinion, the Underwriters and they are justified to such extent in relying upon
the opinion of Keleher & McLeod, P.A.; and (b) the lawyer group referred to in
such opinion will mean those lawyers in the offices of Snell & Wilmer L.L.P. who
(i) have billed any time on the particular transaction to which such opinion
relates or (ii) have billed more than ten hours to any Company matter in the
twelve-month period preceding the date on which the list of such lawyers was
compiled for purposes of inquiry pursuant to such opinion.
(e) The Underwriters or the Representatives shall have
received an opinion of Keleher & McLeod, P.A., New Mexico counsel for
the Company, dated the Closing Date, to the effect that:
(i) The Company is duly qualified as a foreign
corporation to do business and is in good standing in the
State of New Mexico and has full corporate power and authority
to engage in the State of New Mexico in the business now
conducted by it therein;
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<PAGE>
(ii) The activities of the Company in the State of
New Mexico to date do not constitute it a "public utility" as
that term is defined in the relevant laws of the State of New
Mexico, and accordingly, no public utility franchises or
certificates of convenience and necessity are necessary under
New Mexico law with respect to the maintenance and operation
of the Company's property and business as now conducted in the
State of New Mexico and no approval, authorization, or consent
of the New Mexico Public Utility Commission or any other
public board or body of the State of New Mexico is required
for the issuance and sale of the Purchased Bonds on the terms
and conditions herein and in the Prospectus set forth or
contemplated or for the execution of the Supplemental
Indenture relating to the Purchased Bonds, except as may be
required under New Mexico state securities or blue sky laws,
as to which laws such counsel shall not be required to express
an opinion;
(iii) Assuming that the Company has good and valid
title to all of the personal property located in the State of
New Mexico and described in the Indenture as subject to the
lien thereof (which property shall not include fixtures)
("Personal Property"), in giving the opinions described below
with respect to any liens, defects and encumbrances on such
title to such Personal Property, such counsel may rely solely
upon, and assume the accuracy of, a search of the Uniform
Commercial Code Financing Statements filed in the records of
the New Mexico Secretary of State and may assume that there
are no liens or other encumbrances on personal property (as
used in the New Mexico Uniform Commercial Code) of the Company
located in the State of New Mexico other than liens or other
encumbrances that have been perfected by filing with the New
Mexico Secretary of State under Section 55-9-401, New Mexico
Statutes Annotated 1978; such title to such Personal Property
is subject only to: (A) the lien of the Mortgage, (B) Excepted
Encumbrances as defined in the Mortgage, and (C) other liens,
encumbrances, or defects, none of which, individually or in
the aggregate, in the opinion of such counsel, materially
interfere with the business or operations of the Company (in
determining whether any such other liens, encumbrances, or
defects materially interfere with the business or operations
of the Company, such counsel may rely solely upon a
certificate of an officer or engineer of the Company which
shall be attached to such opinion and such opinion may state
that no other investigation or inquiry with respect thereto
has been made); the Mortgage, subject only as above set forth
in this clause, now constitutes, and the Mortgage and the
Supplemental Indentures theretofore executed, subject only as
above set forth in this clause, when the
14
<PAGE>
latter shall have been duly recorded and filed, will
constitute, together and as a single instrument, a direct and
valid first mortgage lien upon such Personal Property; and all
properties (other than the classes or items of property
expressly excepted in the Mortgage or expressly released from
the lien thereof) acquired by the Company after the date of
the Supplemental Indenture relating to the Purchased Bonds in
each county in the State of New Mexico in which the Mortgage
and the Supplemental Indenture shall have been duly recorded
and filed and, with respect to priority only, any necessary
recordation and/or filing has been accomplished (including
therein any necessary descriptions of after-acquired real
property and real property upon which after-acquired fixtures
are affixed) will, upon such acquisition, become subject to
the first mortgage lien thereof, subject, however, to Excepted
Encumbrances and to liens, if any, existing or placed thereon
at the time of the acquisition thereof by the Company and,
with respect to priority only, to liens, if any, existing
prior to the time of any necessary recordation and/or filing
by the Company; and
(iv) The Company is the owner of the rights conferred
upon it by the leases from the Navajo Tribe relating to the
site on which the Four Corners plant is located and while such
counsel is not aware of the assertion of any claim contesting
the interest of the Navajo Tribe in the lands leased, such
counsel shall not be required to express any opinion with
respect to the interest of the Navajo Tribe in the lands
leased or with respect to the enforceability of such leases
against the Navajo Tribe.
In giving such opinion, Keleher & McLeod, P.A. may rely solely upon certificates
of the Company as to any factual matters upon which any such opinions are based.
(f) The Underwriters or the Representatives shall have
received from counsel for the Underwriters such opinion or opinions,
dated the Closing Date, with respect to the incorporation of the
Company, the validity of the Purchased Bonds, the Registration
Statements, the Prospectus, and other related matters as may reasonably
be required, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters. In rendering such opinion, such counsel may rely as to
the incorporation of the Company and all other matters governed by the
laws of the States of Arizona and New Mexico upon the opinions of Snell
& Wilmer L.L.P. and Keleher & McLeod, P.A., referred to above.
(g) The Underwriters or the Representatives shall have
received a certificate of the President or any Vice President
15
<PAGE>
and a principal financial or accounting officer of the Company, dated
the Closing Date, in which such officers, to the best of their
knowledge after reasonable investigation, shall state that the
representations and warranties of the Company in this Agreement are
true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to the Closing Date, that no stop order suspending the
effectiveness of the First Registration Statement or the Second
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission, and
that, subsequent to the date of the most recent financial statements in
the Prospectus, there has been no material adverse change in the
financial position or results of operations of the Company and its
subsidiaries except as set forth or contemplated in the Prospectus or
as described in such certificate.
(h) The Underwriters or the Representatives shall have
received a letter of DELOITTE & TOUCHE LLP, dated the Closing Date,
which meets the requirements of subsection (a) of this Section, except
that the specified date referred to in such subsection will be a date
not more than five days prior to the Closing Date for the purposes of
this subsection.
The Company will furnish the Underwriters or the Representatives with
such conformed copies of such opinions, certificates, letters, and documents as
may be reasonably requested.
6. Indemnification. (a) The Company will indemnify and hold harmless
each Underwriter and each person, if any, who controls such Underwriter within
the meaning of the Act against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter or such controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any part of the Registration Statements relating to the Bonds, when such part
became effective, any preliminary prospectus or preliminary prospectus
supplement, the Prospectus, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any of such documents in reliance upon and in conformity with written
16
<PAGE>
information furnished to the Company by any Underwriter specifically for use
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statements, and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages, or
liabilities to which the Company or any such director, officer, or controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any part of the Registration Statements relating to the Bonds,
when such part became effective, any preliminary prospectus or preliminary
prospectus supplement, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter specifically for use
therein; and will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, or controlling person in connection
with investigating or defending any such loss, claim, damage, liability, or
action. This indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, without the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. An indemnifying party shall not be liable for any
settlement of a claim or action effected without its written consent, which
shall not be unreasonably withheld.
17
<PAGE>
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party for any loss, claim,
damage, liability, or action described in subsection (a) or (b) above, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) or (b) above on the following basis: (l) if such
loss, claim, damage, liability, or action arises under subsection (a) above,
then (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Bonds or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations; and (2) if such loss, claim, damage, liability, or action arises
under subsection (b) above, then in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. For the purposes of clause (1) above, the relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters. For the
purposes of clauses (1) and (2) above, the relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). No person guilty of fraudulent
misrepresentation (within the meaning of Section ll(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
7. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Purchased Bonds pursuant to this Agreement and
the Terms Agreement and the
18
<PAGE>
principal amount of Purchased Bonds that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent (10%) or less of the
principal amount of Purchased Bonds to which such Terms Agreement relates, the
Underwriters or the Representatives may make arrangements satisfactory to the
Company for the purchase of such Purchased Bonds by other persons, including any
of the Underwriters, but if no such arrangements are made by the Closing Date
the nondefaulting Underwriters shall be obligated severally, in proportion to
their respective commitments hereunder and under such Terms Agreement, to
purchase the Purchased Bonds that such defaulting Underwriter or Underwriters
agreed but failed to purchase. If any Underwriter or Underwriters so default and
the aggregate principal amount of Purchased Bonds with respect to which such
default or defaults occur is more than the above-described amount and
arrangements satisfactory to the remaining Underwriters and the Company for the
purchase of such Purchased Bonds by other persons are not made within thirty-six
hours after such default, the Terms Agreement will terminate without liability
on the part of any non-defaulting Underwriter or the Company, except as provided
in Section 8. As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties, and other statements of
the Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter or the Company or any of its officers or directors or any
controlling person, and will survive delivery of and payment for the Purchased
Bonds. If any Terms Agreement is terminated pursuant to Section 7, or if for any
reason a purchase pursuant to any Terms Agreement is not consummated, the
Company shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 4 and the respective obligations of the Company and the
Underwriters pursuant to Section 6 shall remain in effect.
9. Notices. All communications hereunder relating to any offering of
Purchased Bonds will be in writing, and, if sent to the Underwriters, may be
mailed, delivered, or telecopied and confirmed to the Representative first named
in the Terms Agreement relating to such Purchased Bonds or the Underwriters at
their addresses furnished to the Company in writing for the purpose of
communications; provided, however, that any notice to an Underwriter pursuant to
Section 6 will be mailed, delivered, or telecopied and confirmed to each such
Underwriter at its own address. All communications hereunder to the Company
shall be mailed to the Company, Attention: Treasurer, at P.O. Box 53999,
Phoenix, Arizona 85072-3999, or delivered, or telecopied and confirmed to the
Company at 400 North Fifth Street, Phoenix, Arizona 85004.
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10. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and such Underwriters as are named in Terms
Agreements and their respective successors and the officers and directors and
controlling persons referred to in Section 6, and no other person will have any
right or obligation hereunder.
11. Representation of Underwriters. The Representatives, if any, may
act for the several Underwriters in connection with any offering to which a
Terms Agreement may relate, and any action under this Agreement or such Terms
Agreement taken by the Representatives jointly or the Representative first named
in such Terms Agreement in such capacity will be binding upon all the
Underwriters of Purchased Bonds to which such Terms Agreement relates.
12. Execution in Counterpart. This Agreement and any Terms Agreement
may be executed in one or more counterparts, each of which shall be deemed to be
an original, but all such respective counterparts shall together constitute a
single instrument.
20
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicate hereof, whereupon
it will become a binding agreement between the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY
By ___________________________
Treasurer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
By__________________________________
21
Exhibit 1.2
ARIZONA PUBLIC SERVICE COMPANY
Securities
UNDERWRITING AGREEMENT
----------------------
---------------------
Dear Sir or Madam:
1. Introduction. Arizona Public Service Company, an Arizona corporation
(the "Company"), proposes to issue and sell from time to time up to $400,000,000
in aggregate principal amount of its unsecured debentures, notes or other
evidences of indebtedness (the "Securities") registered under the registration
statements referred to in Section 2(a). The Securities will be issued under the
Indenture, dated as of January 15, 1998, between the Company and The Chase
Manhattan Bank, as Trustee, (the "Indenture"), as amended and supplemented by
one or more Supplemental Indentures between the Company and the Trustee (each, a
"Supplemental Indenture") (the Indenture as amended and supplemented by such
Supplemental Indentures being sometimes hereinafter referred to as the
"Indenture"). The Securities will be issued in one or more series, which series
may vary as to interest rates, maturities, redemption provisions, selling
prices, and other terms, with all such terms for any particular issue of the
Securities being determined at the time of sale. Particular issues of the
Securities may be sold from time to time to one or more of the firms to whom
this Agreement is addressed, and to such other purchasers as the Company shall
designate and as shall agree in writing to comply with the terms and conditions
of this Agreement, for resale in accordance with the terms of offering
determined at the time of sale. The Securities involved in any such offering are
hereinafter referred to as the "Purchased Securities," the party or parties that
agree to purchase the same are hereinafter referred to as the "Underwriters" of
such Purchased Securities, and the representative or representatives of the
Underwriters, if any, specified in a Terms Agreement referred to in Section 3
are hereinafter referred to as the "Representatives."
2. Representations and Warranties of the Company. In connection with
each offering of the Purchased Securities, the Company represents and warrants
to, and agrees with, the Underwriters that:
<PAGE>
(a) A registration statement (No. 333-27551) relating to
$50,000,000 of the Securities, the Company's first mortgage bonds (the
"Bonds"), or the Company's senior notes (the "Senior Notes") and a
registration statement (No. 333-____) relating to $350,000,000 of the
Securities, the Bonds or the Senior Notes (including a combined
prospectus relating to up to $400,000,000 of the Securities, Bonds or
Senior Notes) were filed with the Securities and Exchange Commission
(the "Commission") and have become effective. Such registration
statements, as each is amended at the time of the Terms Agreement
referred to in Section 3 relating to the Purchased Securities, are
hereinafter referred to as the "First Registration Statement" and the
"Second Registration Statement," respectively, and, together with any
related 462(b) registration statement or amendment thereto, are
hereinafter referred to collectively as the "Registration Statements"
and such prospectus, as supplemented as contemplated by Section 3 to
reflect the terms of the Purchased Securities and terms of offering
thereof, including all material incorporated by reference therein, is
hereinafter referred to as the "Prospectus."
(b) Each part of the Registration Statements relating to the
Securities, when such part became effective, conformed in all material
respects to the requirements of the Securities Act of 1933 (the "Act"),
the Trust Indenture Act of 1939 (the "Trust Indenture Act") and the
rules and regulations (the "Rules and Regulations") of the Commission
and did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and on the date of each
Prospectus Supplement referred to in Section 3, the Registration
Statements and the Prospectus will conform in all material respects to
the requirements of the Act, the Trust Indenture Act and the Rules and
Regulations, and at such date none of such documents will include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing does not
apply to (a) statements in or omissions from any such documents based
upon written information furnished to the Company by any Underwriter
specifically for use therein or (b) that part of the Registration
Statements that consists of the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of 1939 of The
Chase Manhattan Bank, as Trustee under the Indenture.
(c) An order of the Arizona Corporation Commission shall have
been granted authorizing the execution and delivery of the Supplemental
Indenture relating to the Purchased Securities and the issuance and
sale of the Purchased Securities on the terms and conditions herein and
in the Prospectus and the Terms Agreement referred to in Section 3
relating to the Purchased Securities, and the approval or
2
<PAGE>
consent of no other public body or authority is necessary to the
execution and delivery of such Supplemental Indenture or the validity
of the issuance and sale of the Purchased Securities, except as may be
required under state securities or blue sky laws.
(d) The Company holds such valid franchises, certificates of
convenience and necessity, licenses, and permits as are necessary with
respect to the maintenance and operation of its property and business
as now conducted, except that (A) the Company from time to time makes
minor extensions of its system prior to the time a related franchise,
certificate, license, or permit is procured, (B) from time to time
communities already being served by the Company become incorporated and
considerable time may elapse before a franchise is procured, (C)
certain franchises may have expired prior to the renegotiation thereof,
(D) the Company may not have obtained certain permits or variances
relating to the environmental requirements described in any of its Form
10-K Report, its Form 10-Q Reports, and/or its Form 8-K Reports
incorporated by reference in the Registration Statements, (E) certain
minor defects and exceptions may exist which, individually and in the
aggregate, are not deemed material, and (F) the Company does not make
any representation regarding the geographical scope of any franchise,
certificate, license, or permit that is not specific as to its
geographical scope.
3. Purchase and Offering. The obligation of the Underwriters to
purchase, and the obligation of the Company to sell, the Purchased Securities
will be evidenced by an exchange of facsimile transmission or other written
communications (the "Terms Agreement") at the time the Company determines to
sell the Purchased Securities. The Terms Agreement shall specify (by
incorporation by reference or otherwise) the party or parties that will be
Underwriters, the principal amount to be purchased by each, the purchase price
to be paid by the Underwriters, any compensation or commissions to be paid to
Underwriters, the offering price, and the terms of the Purchased Securities not
already specified in the Indenture, including, but not limited to, interest
rates, maturity, redemption provisions, and sinking fund requirements, if any.
The Terms Agreement shall also specify (by incorporation by reference or
otherwise) the time and date of delivery and payment (the "Closing Date"), the
place of delivery and payment, and any details of the terms of offering that
should be reflected in the prospectus supplement relating to the offering of the
Purchased Securities (the "Prospectus Supplement"). It is understood that the
Underwriters will offer the Purchased Securities for sale as set forth in the
Prospectus. The obligations of the Underwriters to purchase the Purchased
Securities shall be several and not joint. Except as may otherwise be set forth
in the Terms Agreement, the Purchased Securities will be in definitive form and
in such denominations and registered in such names as the Underwriters may
request.
3
<PAGE>
4. Covenants of the Company. In connection with each offering of
Purchased Securities, the Company covenants and agrees with the several
Underwriters that:
(a) The Company will advise the Underwriters or the
Representatives promptly of any proposed amendment or supplementation
of the First Registration Statement, the Second Registration Statement,
or the Prospectus. The Company will also advise the Underwriters or the
Representatives of the institution by the Commission of any stop order
proceedings in respect of the First Registration Statement, the Second
Registration Statement, or of any part thereof, and will use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible its lifting, if issued.
(b) If, at any time when a prospectus relating to the
Purchased Securities is required to be delivered under the Act, any
event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact, or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend or
supplement the First Registration Statement, the Second Registration
Statement, or the Prospectus to comply with the Act, the Company
promptly will prepare and file with the Commission an amendment or
supplement that will correct such statement or omission or an amendment
that will effect such compliance.
(c) As soon as practicable, but not later than 18 months,
after the date of the Terms Agreement relating to the Purchased
Securities, the Company will make generally available to its security
holders an earning statement or statements (which need not be audited)
covering a period of at least 12 months beginning after the effective
date of the Second Registration Statement (as defined in Rule 158(c)
under the Act), which will satisfy the provisions of Section 11(a) of
the Act and the rules and regulations thereunder.
(d) The Company will furnish to the Underwriters or the
Representatives such copies of the Registration Statements (including
one copy of the Second Registration Statement for each Representative,
or for each Underwriter if there are no Representatives, and for the
counsel for the Underwriters, which is signed and includes all
exhibits), any related preliminary prospectus supplements and the
Prospectus, including all amendments or supplements to such documents,
as may be reasonably requested.
(e) The Company will arrange or cooperate in arrangements for
the qualification of the Purchased Securities for sale and the
determination of their eligibility for
4
<PAGE>
investment under the laws of such jurisdictions as the Underwriters or
the Representatives designate and will continue such qualifications in
effect so long as required for the distribution of the Purchased
Securities, provided that the Company shall not be required to qualify
as a foreign corporation in any State, to consent to service of process
in any State other than with respect to claims arising out of the
offering or sale of the Purchased Securities, or to meet other
requirements deemed by it to be unduly burdensome.
(f) During the period of five years after the date of the
Terms Agreement relating to the Purchased Securities, the Company will
furnish to the Underwriters or the Representatives thereunder, and,
upon request, each of the other Underwriters, (i) as soon as
practicable after the end of each fiscal year, a balance sheet and
statements of income and retained earnings of the Company as at the end
of and for such year, all in reasonable detail and certified by
independent public accountants, and (ii) (A) as soon as practicable
after the end of each quarterly fiscal period (except for the last
quarterly fiscal period of each fiscal year), a balance sheet and
statement of income of the Company as at the end of and for such
period, all in reasonable detail and certified by a principal financial
or accounting officer of the Company, (B) as soon as available, a copy
of each report of the Company mailed by the Company to stockholders or
filed with the Commission, and (C) from time to time, such other
information concerning the Company as may reasonably be requested. So
long as the Company has active subsidiaries, such financial statements
will be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated.
(g) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, and will reimburse
the Underwriters for any reasonable expenses (including reasonable fees
and disbursements of counsel) incurred by them in connection with the
qualification of the Purchased Securities with respect to which the
Terms Agreement relating to the Purchased Securities has been entered
for sale, and the determination of their eligibility for investment,
under the laws of such jurisdictions as the Representatives or, if
there are no Representatives, the Underwriters designate, and the
printing of memoranda relating thereto, and for any fees charged by
investment rating agencies for the rating of the Purchased Securities.
(h) The Company will not offer or sell any other of its
Securities for a period beginning at the time of execution of the Terms
Agreement relating to the Purchased Securities and ending on the
Closing Date relating thereto without prior consent of the Underwriter
or the Representatives.
5
<PAGE>
5. Conditions of the Obligations of the Underwriters. The obligations
of the Underwriters to purchase and pay for the Purchased Securities will be
subject to the accuracy of the representations and warranties on the part of the
Company herein, to the accuracy of the statements of Company officers made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the following additional conditions precedent:
(a) The Underwriters or the Representatives shall have
received a letter from DELOITTE & TOUCHE LLP, dated the date of the
Terms Agreement, confirming that they are independent certified public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder, and stating in effect that (i) in
their opinion the financial statements and schedules of the Company
audited by them and incorporated by reference in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Securities Exchange Act of
1934 (the "1934 Act") and the published Rules and Regulations
thereunder and (ii) on the basis of a reading of the latest available
interim financial statements of the Company, inquiries of officials of
the Company responsible for financial and accounting matters, and other
specified procedures, nothing came to their attention that caused them
to believe that (A) the unaudited financial statements incorporated by
reference, if any, in the Registration Statements do not comply as to
form in all material respects with the applicable accounting
requirements of the 1934 Act and the published Rules and Regulations
thereunder or are not stated on a basis substantially consistent with
that of the audited financial statements incorporated by reference in
the Registration Statements, (B) at the date of the most recent
available unaudited financial statements and at a specified date not
more than five days prior to the date of this Agreement, there was any
increase in the amounts of common stock, redeemable preferred stock, or
non-redeemable preferred stock of the Company or any increase,
exceeding $10,000,000, in long-term debt of the Company or, at the date
of the most recent available unaudited financial statements there was
any decrease in net assets as compared with amounts shown in the most
recent financial statements incorporated by reference in the
Registration Statements, or (C) for the twelve-month period ended at
the date of the most recent available unaudited financial statements
there were any decreases, exceeding 3%, as compared with the
twelve-month period ended at the date of the most recent financial
statements incorporated by reference in the Registration Statements, in
the amounts of total revenues or net income, except in all cases for
increases or decreases which result from the declaration or payment of
dividends, or which the Registration Statements (including any material
incorporated by reference therein) disclose have occurred or may occur,
or which are described in such letter.
6
<PAGE>
(b) No stop order suspending the effectiveness of the First
Registration Statement, the Second Registration Statement, or any part
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or, to the knowledge of the Company or the
Underwriters, shall be contemplated by the Commission.
(c) Subsequent to the execution of the Terms Agreement
relating to the Purchased Securities, (i) there shall not have occurred
any change, or any development involving a prospective change, in or
affecting particularly the business or properties of the Company or its
subsidiaries which, in the judgment of a majority in interest of the
Underwriters under such Terms Agreement, including any Representatives,
materially impairs the investment quality of the Purchased Securities,
(ii) there shall not have occurred a suspension or material limitation
in trading in securities generally on the New York Stock Exchange,
(iii) there shall not have occurred a general moratorium on commercial
banking activities in New York declared by either Federal or New York
State authorities, (iv) no rating of any of the Company's debt
securities shall have been lowered and there shall have been no public
announcement that any such debt securities have been placed on
CreditWatch, Watchlist, or under any similar surveillance or review, in
each case with negative implications, by any recognized rating agency,
and (v) there shall not have occurred any outbreak or escalation of
major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of a majority
in interest of the Underwriters under such Terms Agreement, including
any Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable
to proceed with completion of the sale of and payment for the Purchased
Securities.
(d) The Underwriters or the Representatives shall have
received an opinion of Snell & Wilmer L.L.P., counsel for the Company,
dated the relevant Closing Date, to the effect that:
(i) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Arizona and has full corporate power and authority to
carry on its business as presently conducted; and the Company
is duly qualified as a foreign corporation to do business and
is in good standing in the States of New Mexico, California,
Oregon, Washington, Montana and Wyoming, the only other
jurisdictions in which it owns or leases substantial
properties or in which the conduct of its business requires
such qualification;
7
<PAGE>
(ii) The Purchased Securities have been duly
authorized, executed, authenticated, issued, and delivered,
constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture
(except as the same may be limited by (a) general principles
of equity or by bankruptcy, insolvency, reorganization,
arrangement, moratorium, or other laws or equitable principles
relating to or affecting the enforcement of creditors' rights
generally and (b) the qualification that certain waivers,
procedures, remedies, and other provisions of the Purchased
Securities and the Indenture may be unenforceable under or
limited by the law of the State of Arizona; however, such law
does not in such counsel's opinion substantially prevent the
practical realization of the benefits intended by such
documents) and conform to the description thereof in the
Prospectus;
(iii) The Indenture has been duly authorized,
executed, and delivered, has been duly qualified under the
Trust Indenture Act, and constitutes a valid and binding
instrument enforceable in accordance with its terms except as
the same may be limited by (a) general principles of equity or
by bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other laws or equitable principles relating to
or affecting the enforcement of creditors' rights generally
and (b) the qualification that certain waivers, procedures,
remedies, and other provisions of the Purchased Securities and
the Indenture may be unenforceable under or limited by the law
of the State of Arizona; however, such law does not in such
counsel's opinion substantially prevent the practical
realization of the benefits intended by such documents;
(iv) With certain exceptions, a public service
corporation is required to obtain certificates of convenience
and necessity from the Arizona Corporation Commission under
A.R.S. Section 40-281.A for construction of its lines, plant,
services, or systems, or any extensions thereof, within the
State of Arizona, and to obtain franchises or similar consents
or permits from counties and incorporated municipalities under
A.R.S. Section 40-283.A for the construction, operation, and
maintenance of transmission lines within the State of Arizona;
to the best of such counsel's knowledge after due inquiry, the
Company holds such valid franchises, certificates of
convenience and necessity, consents, and permits
8
<PAGE>
pursuant to such statutory provisions as are necessary with
respect to the maintenance and operation of its property and
business as now conducted, except that (A) the Company from
time to time makes minor extensions of its system prior to the
time a related franchise, certificate, license, or permit is
procured, (B) from time to time communities already being
served by the Company become incorporated and considerable
time may elapse before a franchise is procured, (C) certain
franchises may have expired prior to the renegotiation
thereof, (D) certain minor defects and exceptions may exist
which, individually and in the aggregate, are not deemed
material, and (E) such counsel need not be required to express
any opinion regarding the geographical scope of any franchise,
certificate, license, or permit that is not specific as to its
geographical scope;
(v) The issuance and sale of the Purchased Securities
on the terms and conditions set forth or contemplated herein
and in the Prospectus and the Terms Agreement relating to the
Purchased Securities and the execution and delivery of the
Supplemental Indenture relating to the Purchased Securities
have been duly authorized by the Arizona Corporation
Commission, said Commission had jurisdiction in the premises,
and no further approval, authorization, or consent of any
other public board or body is necessary to the validity of
such issuance and sale of such Purchased Securities or the
execution and delivery of such Supplemental Indenture, except
as may be required under state securities or blue sky laws, as
to which laws such counsel shall not be required to express an
opinion;
(vi) The First Registration Statement and the Second
Registration Statement have become effective under the Act,
and, to the best of the knowledge of such counsel, no stop
order suspending the effectiveness of the First Registration
Statement or the Second Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated under the Act, and each part of
the Registration Statements relating to the Securities, when
such part became effective, and the Prospectus, as of the date
of the Prospectus Supplement, and each amendment or supplement
thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the
requirements of the Act, the Trust Indenture Act, and the
published Rules and Regulations; such counsel has
9
<PAGE>
no reason to believe that any part of the Registration
Statements, when such part became effective, or the
Prospectus, as of the date of the Prospectus Supplement, or as
of the Closing Date, or any amendment or supplement thereto,
as of their respective effective or issue dates, or as of the
Closing Date, contained any untrue statement of a material
fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading; the descriptions in the Registration Statements
and Prospectus of statutes, legal and governmental proceedings
and contracts, and other documents are accurate and fairly
present the information required to be shown; and to the
actual knowledge of those persons in the lawyer group
described in such opinion, there are no legal or governmental
proceedings required to be described in the Prospectus that
are not described as required, nor any contracts or documents
of a character required to be described in the Registration
Statements or Prospectus or to be filed as exhibits to the
Registration Statements that are not described and filed as
required (it being understood that such counsel need express
no opinion as to the financial statements or other financial
data contained in the Registration Statements or the
Prospectus); and
(vii) This Agreement and the Terms Agreement have
been duly authorized, executed, and delivered by the Company.
In giving such opinion, (a) Snell & Wilmer L.L.P. may rely
solely upon certificates of the Company as to any factual matters upon
which any such opinions are based and may rely upon the opinion of
Keleher & McLeod, P.A., referred to below, as to all matters governed
by the laws of the State of New Mexico, but the opinion of Snell &
Wilmer L.L.P. shall state that, though they are members of the Arizona
Bar and do not hold themselves out as experts on the laws of the State
of New Mexico, they have made a study of the laws of such State insofar
as such laws are involved in the conclusions stated in their opinion,
and from such study it is their opinion that such laws support such
conclusions and that, in their opinion, the Underwriters and they are
justified to such extent in relying upon the opinion of Keleher &
McLeod, P.A.; and (b) the lawyer group referred to in such opinion will
mean those lawyers in the offices of Snell & Wilmer L.L.P. who (i) have
billed any time on the particular transaction to which such opinion
relates or (ii) have billed more than ten hours to any Company matter
in the twelve-month period preceding the date on which the list of such
lawyers was compiled for purposes of inquiry pursuant to such opinion.
10
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(e) The Underwriters or the Representatives shall have
received an opinion of Keleher & McLeod, P.A., New Mexico counsel for
the Company, dated the Closing Date, to the effect that:
(i) The Company is duly qualified as a foreign
corporation to do business and is in good standing in the
State of New Mexico and has full corporate power and authority
to engage in the State of New Mexico in the business now
conducted by it therein; and
(ii) The activities of the Company in the State of
New Mexico to date do not constitute it a "public utility" as
that term is defined in the relevant laws of the State of New
Mexico, and accordingly, no public utility franchises or
certificates of convenience and necessity are necessary under
New Mexico law with respect to the maintenance and operation
of the Company's property and business as now conducted in the
State of New Mexico and no approval, authorization, or consent
of the New Mexico Public Utility Commission or any other
public board or body of the State of New Mexico is required
for the issuance and sale of the Purchased Securities on the
terms and conditions herein and in the Prospectus set forth or
contemplated or for the execution of the Supplemental
Indenture relating to the Purchased Securities, except as may
be required under New Mexico state securities or blue sky
laws, as to which laws such counsel shall not be required to
express an opinion.
In giving such opinion, Keleher & McLeod, P.A. may rely solely upon
certificates of the Company as to any factual matters upon which any
such opinions are based.
(f) The Underwriters or the Representatives shall have
received from counsel for the Underwriters such opinion or opinions,
dated the Closing Date, with respect to the incorporation of the
Company, the validity of the Purchased Securities, the Registration
Statements, the Prospectus, and other related matters as may reasonably
be required, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters. In rendering such opinion, such counsel may rely as to
the incorporation of the Company and all other matters governed by the
laws of the States of Arizona and New Mexico upon the opinions of Snell
& Wilmer L.L.P. and Keleher & McLeod, P.A., referred to above.
(g) The Underwriters or the Representatives shall have
received a certificate of the President or any Vice President
11
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and a principal financial or accounting officer of the Company, dated
the Closing Date, in which such officers, to the best of their
knowledge after reasonable investigation, shall state that the
representations and warranties of the Company in this Agreement are
true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to the Closing Date, that no stop order suspending the
effectiveness of the First Registration Statement or the Second
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission, and
that, subsequent to the date of the most recent financial statements in
the Prospectus, there has been no material adverse change in the
financial position or results of operations of the Company and its
subsidiaries except as set forth or contemplated in the Prospectus or
as described in such certificate.
(h) The Underwriters or the Representatives shall have
received a letter of DELOITTE & TOUCHE LLP, dated the Closing Date,
which meets the requirements of subsection (a) of this Section, except
that the specified date referred to in such subsection will be a date
not more than five days prior to the Closing Date for the purposes of
this subsection.
The Company will furnish the Underwriters or the Representatives with
such conformed copies of such opinions, certificates, letters, and documents as
may be reasonably requested.
6. Indemnification.
(a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any part of
the Registration Statements relating to the Securities, when such part
became effective, any preliminary prospectus or preliminary prospectus
supplement, the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will
reimburse each Underwriter and each such controlling person for any
legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that
the Company will not be liable in any such case to the extent that any
such
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loss, claim, damage, or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in any of such documents in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter specifically for use therein. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold
harmless the Company, each of its directors, each of its officers who
have signed the Registration Statements, and each person, if any, who
controls the Company within the meaning of the Act, against any losses,
claims, damages, or liabilities to which the Company or any such
director, officer, or controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in any part of the Registration Statements relating to
the Securities, when such part became effective, any preliminary
prospectus or preliminary prospectus supplement, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter specifically for use therein; and will reimburse any legal
or other expenses reasonably incurred by the Company or any such
director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or
action. This indemnity agreement will be in addition to any liability
which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability that it may
have to any indemnified party otherwise than under this Section. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, without the
consent of the indemnified party, be counsel to the
13
<PAGE>
indemnifying party), and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. An indemnifying
party shall not be liable for any settlement of a claim or action
effected without its written consent, which shall not be unreasonably
withheld.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party for
any loss, claim, damage, liability, or action described in subsection
(a) or (b) above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or
(b) above on the following basis: (1) if such loss, claim, damage,
liability, or action arises under subsection (a) above, then (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant
equitable considerations; and (2) if such loss, claim, damage,
liability, or action arises under subsection (b) above, then in such
proportion as is appropriate to reflect the relative fault of the
Company on the one hand and the Underwriter on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities as well as any other relevant equitable
considerations. For the purposes of clause (1) above, the relative
benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by
the Company bear to the total underwriting discounts and commissions
received by the Underwriters. For the purposes of clauses (1) and (2)
above, the relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of
this
14
<PAGE>
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of
this subsection (d). No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d)
to contribute are several in proportion to their respective
underwriting obligations and not joint.
7. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Purchased Securities pursuant to this Agreement
and the Terms Agreement and the principal amount of Purchased Securities that
such defaulting Underwriter or Underwriters agreed but failed to purchase is ten
percent (10%) or less of the principal amount of Purchased Securities to which
such Terms Agreement relates, the Underwriters or the Representatives may make
arrangements satisfactory to the Company for the purchase of such Purchased
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by the Closing Date the nondefaulting Underwriters shall
be obligated severally, in proportion to their respective commitments hereunder
and under such Terms Agreement, to purchase the Purchased Securities that such
defaulting Underwriter or Underwriters agreed but failed to purchase. If any
Underwriter or Underwriters so default and the aggregate principal amount of
Purchased Securities with respect to which such default or defaults occur is
more than the above-described amount and arrangements satisfactory to the
remaining Underwriters and the Company for the purchase of such Purchased
Securities by other persons are not made within thirty-six hours after such
default, the Terms Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company, except as provided in Section 8. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties, and other statements of
the Company or its officers and of the Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of the Underwriters or the Company or any of its officers or directors or any
controlling person, and will survive delivery of and payment for the Purchased
Securities. If any Terms Agreement is terminated pursuant to Section 7, or if
for any reason a purchase pursuant to any Terms Agreement is not consummated,
the Company shall remain responsible for the expenses to be paid or reimbursed
by it pursuant to Section 4 and the respective obligations of the Company and
the Underwriters pursuant to Section 6 shall remain in effect.
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<PAGE>
9. Notices. All communications hereunder relating to any offering of
Purchased Securities will be in writing, and, if sent to the Underwriters, may
be mailed, delivered, or telecopied and confirmed to the Representative first
named in the Terms Agreement relating to such Purchased Securities or the
Underwriters at their addresses furnished to the Company in writing for the
purpose of communications; provided, however, that any notice to an Underwriter
pursuant to Section 6 will be mailed, delivered, or telecopied and confirmed to
each such Underwriter at its own address. All communications hereunder to the
Company shall be mailed to the Company, Attention: Treasurer, at P.O. Box 53999,
Phoenix, Arizona 85O72-3999, or delivered, or telecopied and confirmed to the
Company at 400 North Fifth Street, Phoenix, Arizona 85004.
10. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and the Underwriter or Underwriters as are named
in any Terms Agreement and their respective successors and the officers and
directors and controlling persons referred to in Section 6, and no other person
will have any right or obligation hereunder.
11. Representation of Underwriters. The Representatives, if any, may
act for the Underwriters in connection with any offering to which a Terms
Agreement may relate, and any action under this Agreement or such Terms
Agreement taken by the Representatives jointly or the Representative first named
in such Terms Agreement in such capacity will be binding upon the Underwriters
of Purchased Securities to which such Terms Agreement relates.
12. Execution in Counterpart. This Agreement and any Terms Agreement
may be executed in one or more counterparts, each of which shall be deemed to be
an original, but all such respective counterparts shall together constitute a
single instrument.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicate hereof, whereupon
it will become a binding agreement between the Company and the Underwriters in
accordance with its terms.
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY
By____________________________
Treasurer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
By__________________________________
17
$400,000,000
ARIZONA PUBLIC SERVICE COMPANY
Medium-Term Notes
-----------------
DISTRIBUTION AGREEMENT
----------------------
(For Senior Notes)
---------------
Ladies and Gentlemen:
1. Introduction. Arizona Public Service Company, an Arizona
corporation (the "Company"), confirms its agreement with each of you
(individually, a "Distributor" and collectively, the "Distributors") with
respect to the issue and sale from time to time by the Company of its
medium-term notes registered under the registration statements referred to in
Section 2(a) and described in the combined prospectus relating to such
registration statements as "Senior Notes" (any such medium-term notes being
hereinafter referred to as the "Securities," which expression shall, if the
context so admits, include any permanent global Security). Securities may be
offered and sold pursuant to Section 3 of this Agreement in an aggregate amount
not to exceed the amount of Registered Securities (as defined in Section 2(a)
hereof) registered pursuant to such registration statements reduced by the
aggregate amount of any other Registered Securities sold otherwise than pursuant
to Section 3 of this Agreement. The Securities will be issued under an
Indenture, dated as of November 15, 1996, between the Company and The Bank of
New York, as trustee (the "Trustee"), as amended and supplemented by two
indentures supplemental thereto (the "Basic Indenture"), and as further amended
and supplemented by one or more additional Supplemental Indentures relating
thereto (each a "Supplemental Indenture," and collectively, the "Supplemental
Indentures") (the Basic Indenture, as amended and supplemented by such
Supplemental Indentures, is hereinafter referred to as the "Indenture"). Subject
to Article 14 of the Basic Indenture, prior to the Release Date (as defined in
the Basic Indenture), the Securities will be secured by the Company's first
mortgage bonds (the "Senior Note Mortgage Bonds") issued pursuant to the
Mortgage and Deed of Trust dated as of July 1, 1946,
<PAGE>
to The Bank of New York, as successor Trustee, as amended and supplemented by
fifty-five indentures supplemental thereto (the "Basic Mortgage"), and as
further amended and supplemented by one or more additional supplemental
indentures relating thereto (each a "Mortgage Supplemental Indenture" and
collectively, the "Mortgage Supplemental Indentures") (the Basic Mortgage as
amended and supplemented by such Mortgage Supplemental Indentures, is
hereinafter referred to as the "Mortgage").
The Securities shall have the terms described in the
Prospectus referred to in Section 2(a) as it may be amended or supplemented from
time to time, including any supplement to the Prospectus that sets forth only
the terms of a particular issue of the Securities (a "Pricing Supplement").
Securities will be issued, and the terms thereof established, from time to time
by the Company in accordance with the Indenture and the Procedures (as defined
in Section 3(d) hereof).
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each Distributor as follows:
(a) A registration statement (No. 333-27551) relating to
$50,000,000 of the Company's first mortgage bonds (the "Bonds"), or
unsecured debentures, notes or other evidences of indebtedness (the
"Unsecured Securities"), or Securities and a registration statement
(No. 333-________) relating to $350,000,000 of Bonds, Unsecured
Securities or Securities (together, the "Registered Securities")
(including a combined prospectus relating to up to $400,000,000 of
Bonds, Unsecured Securities or Securities), were filed with the
Securities and Exchange Commission (the "Commission") and have become
effective. Such registration statements, as each is amended as of the
Closing Date (as defined in Section 3(e) hereof), are hereinafter
referred to as the "First Registration Statement" and the "Second
Registration Statement," respectively, and, together with any related
Rule 462(b) registration statement or amendment thereto, are
hereinafter referred to collectively as the "Registration Statements,"
and such prospectus, as amended or as supplemented as of the Closing
Date, including all material incorporated by reference therein, is
hereinafter referred to as the "Prospectus." Any reference in this
Agreement to amending or supplementing the Prospectus shall be deemed
to include the filing of materials incorporated by reference in the
Prospectus after the Closing Date and any reference in this Agreement
to any amendment or supplement to the Prospectus shall be deemed to
include any such materials incorporated by reference in the Prospectus
after the Closing Date.
(b) Each part of the Registration Statements, when such part
became effective, conformed in all material respects to the
requirements of the Securities Act of 1933 (the "Act"), the Trust
Indenture Act of 1939 (the "Trust Indenture Act"), and the rules and
regulations (the "Rules and Regulations") of the Commission and did not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and on the Closing Date and at each
of the times of acceptance and of delivery referred to in Section 6(a)
hereof and at each of the times of amendment or supplementing referred
to in Section 6(b) hereof (the Closing Date and each such time being
herein sometimes referred to as a "Representation Date"), the
2
<PAGE>
Registration Statements and the Prospectus will conform in all material
respects to the requirements of the Act, the Trust Indenture Act, and
the Rules and Regulations, and at such date none of such documents will
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
foregoing does not apply to (a) statements in or omissions from any
such documents based upon written information furnished to the Company
by any Distributor specifically for use therein or (b) that part of the
Second Registration Statement that consists of the Statement of
Eligibility and Qualification (Form T-1) under the Trust Indenture Act
of 1939 of The Bank of New York, as Trustee under the Basic Indenture.
(c) An order of the Arizona Corporation Commission shall have
been granted authorizing (i) the execution and delivery of the
Supplemental Indenture relating to any series of Securities issued and
sold by the Company hereunder, (ii) the execution and delivery of the
Mortgage Supplemental Indenture, pursuant to which the Senior Note
Mortgage Bonds securing such Securities will be issued, and (iii) the
issuance and sale of such Securities on the terms and conditions herein
and in the Prospectus or in any Terms Agreement (as defined in Section
3(b)) relating to such Securities, and the approval or consent of no
other public body or authority is necessary to the execution and
delivery of such Supplemental Indenture or Mortgage Supplemental
Indenture or the validity of the issuance and sale of such Securities,
except as may be required under state securities or blue sky laws.
(d) The Company holds such valid franchises, certificates of
convenience and necessity, licenses, and permits as are necessary with
respect to the maintenance and operation of its property and business
as now conducted, except that (A) the Company from time to time makes
minor extensions of its system prior to the time a related franchise,
certificate, license, or permit is procured, (B) from time to time
communities already being served by the Company become incorporated and
considerable time may elapse before a franchise is procured, (C)
certain franchises may have expired prior to the renegotiation thereof,
(D) the Company may not have obtained certain permits or variances
relating to the environmental requirements described in any of its Form
10-K Report, its Form 10-Q Reports, and/or its Form 8-K Reports
incorporated by reference in the Registration Statements, (E) certain
minor defects and exceptions may exist which, individually and in the
aggregate, are not deemed material, and (F) the Company does not make
any representation regarding the geographical scope of any franchise,
certificate, license, or permit that is not specific as to its
geographical scope.
(e) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Arizona,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
(f) Except for property specifically excepted from the lien of
the Mortgage or released therefrom in accordance with the terms
thereof, the Company has good and marketable title in fee simple,
except for items described in (A), (B), and (C) below, to all of
3
<PAGE>
the real property purported in the Mortgage to be so held, good and
valid leasehold interests in all properties purported in the Mortgage
to be held under lease, and good and valid title to all other
properties described in the Mortgage as subject to the lien thereof
(which property excludes (i) the combined cycle plant referred to in
Note 9 of Notes to Financial Statements in the Company's Form 10-K
Report for the fiscal year ended December 31, 1997 (the "1997 Form 10-K
Report") incorporated by reference in the Registration Statements but
includes the Company's leasehold and related interests in that plant
and (ii) certain leased interests in Unit 2 of the Palo Verde Nuclear
Generating Station referred to in Note 9 of Notes to Financial
Statements in the 1997 Form 10-K Report), except that the transmission
and distribution lines of the Company, other than those located on land
owned in fee by the Company, and the property described in Section 15
of Article IV of the Forty-first Mortgage Supplemental Indenture, have
been installed in public streets or alleys and in highways under
ordinances and permits granted by the various governmental bodies
having jurisdiction, or have been constructed on leaseholds, easements
or rights-of-way granted, with minor exceptions, by the apparent owners
of record of the land and such leases, easements, or rights-of-way are
subject to any defects in or encumbrances on the title of the
respective lessors of such leases or grantors of such easements or
rights-of-way; title to the aforesaid properties is subject only to:
(A) the lien of the Mortgage, (B) Excepted Encumbrances as defined in
the Mortgage, and (C) other liens, encumbrances or defects, none of
which, individually or in the aggregate, materially interfere with the
business or operations of the Company (with respect to leasehold
interests on the Navajo Reservation, this representation is intended
and shall be understood to mean only that the Company is the owner of
the rights conferred upon it by the leases from the Navajo Tribe
relating to the sites on which the Navajo Plant and the Four Corners
Plant are located, and that while the Company is not aware of the
assertion of any claim contesting the interest of the Navajo Tribe in
the lands leased, the Company does not give any representation with
respect to the interest of the Navajo Tribe in the lands leased or with
respect to the enforceability of such leases against the Navajo Tribe);
the Mortgage, subject only as above set forth in this clause, now
constitutes, and the Mortgage and the Mortgage Supplemental Indentures
theretofore executed, subject only as above set forth in this clause,
when the latter shall have been duly recorded and filed, will
constitute, together and as a single instrument, a direct and valid
first mortgage lien upon said properties, which include all of the
properties of the Company (other than the classes or items of property
expressly excepted in the Mortgage); and all properties (other than the
classes or items of property expressly excepted in the Mortgage or
expressly released from the lien thereof) acquired by the Company after
the date hereof in each county in the States of Arizona and New Mexico
in which the Mortgage and the Mortgage Supplemental Indentures shall
have been duly recorded and filed (and, as to which properties, with
respect to priority only, any necessary recordation and/or filing has
been accomplished, including therein any necessary descriptions of
after-acquired real property and real property upon which
after-acquired fixtures are affixed) will, upon such acquisition,
become subject to the first mortgage lien thereof, subject, however, to
Excepted Encumbrances and to liens, if any, existing or placed thereon
at the time of the acquisition thereof by the Company and, with respect
to priority only, to liens, if any, existing prior to the time of any
necessary recordation and/or filing by the Company.
4
<PAGE>
3. Appointment as Distributors; Agreement of Distributors;
Solicitations.
(a) Subject to the terms and conditions stated herein, the
Company hereby appoints each of the Distributors as an agent of the
Company for the purpose of soliciting or receiving offers to purchase
the Securities from the Company by others during any Marketing Time.
For purposes of this Agreement, "Marketing Time" shall mean any time
when no suspension of solicitation of offers to purchase Securities
pursuant to Section 3(b) or Section 4(b) shall be in effect and any
time when either any Distributor shall own any Securities with the
intention of reselling them or the Company has accepted an offer to
purchase Securities but the related settlement has not occurred.
So long as this Agreement shall remain in effect with respect
to any Distributor, the Company shall not, without the consent of any
such Distributor, solicit or accept offers to purchase newly-issued
Securities from the Company otherwise than through one of the
Distributors; provided, however, that, subject to all of the terms and
conditions of this Agreement, the foregoing shall not be construed to
prevent the Company from selling at any time any Securities in a firm
commitment underwriting pursuant to an underwriting agreement that does
not provide for a continuous offering of such Securities; and provided,
further, that the Company reserves the right from time to time (i) to
purchase or sell Securities directly from or to an investor, and (ii)
to accept a specific offer to purchase newly-issued Securities from the
Company solicited by a dealer other than the Distributors (each an
"Other Dealer"), without obtaining the prior consent of any of
Distributors, provided that any Other Dealer shall agree to be bound by
and subject to the terms and conditions of this Agreement binding on
the Distributors (including the commission schedule set forth on
Exhibit B). Each Distributor is authorized to engage the services of
any other broker or dealer in connection with the offer or sale of
Securities purchased by such Distributor as principal for resale to
others and may reallow a portion of the commission, but such
Distributor is not authorized to appoint sub-agents.
(b) On the basis of the representations and warranties
contained herein, but subject to the terms and conditions herein set
forth, each Distributor agrees, as an agent of the Company, to use
reasonable best efforts when requested by the Company to solicit offers
to purchase the Securities upon the terms and conditions set forth in
the Prospectus, as from time to time amended or supplemented. No
Distributor shall have any responsibility for maintaining records with
respect to the aggregate principal amount of Securities sold, or
otherwise monitoring the availability of Securities for sale under the
Registration Statements. In connection therewith, each Distributor will
use the Prospectus (as amended or supplemented from time to time) in
the form most recently furnished to such Distributor by the Company and
will solicit offers to purchase the Securities in accordance with the
Act, the Rules and Regulations, and the applicable securities laws or
regulations of any other applicable jurisdiction in which such
Distributor solicits offers to purchase any Securities. In placing any
Securities pursuant to an offer accepted by the Company, the
Distributor that solicited or received such offer (the "Presenting
Distributor") may act as agent or purchase such Securities from the
Company as principal for resale. Upon acceptance by the Company of an
offer by the Presenting Distributor to purchase Securities as
principal,
5
<PAGE>
the Presenting Distributor may complete a Terms Agreement substantially
in the form of Exhibit A hereto (a "Terms Agreement") and transmit the
completed Terms Agreement to the Company by hand or by facsimile or
other similar means of telecommunication. Upon acceptance by the
Company of an offer to purchase Securities, unless the Company and the
Presenting Distributor otherwise agree in writing, any such Terms
Agreement or any other written confirmation or communication
transmitted by the Presenting Distributor to the Company or, in the
absence of a Terms Agreement or other written confirmation or
communication from the Presenting Distributor, the oral agreement with
respect to the terms of the Securities and of their offer and sale
evidenced by the offer communicated by the Presenting Distributor and
accepted by the Company, in each case together with the provisions of
this Agreement, shall constitute an agreement between the Presenting
Distributor and the Company for the sale and purchase of such
Securities (whether or not any Terms Agreement or other written
confirmation or communication shall have been executed by the Company
or the Presenting Distributor).
Upon receipt of notice from the Company as contemplated by
Section 4(b) hereof, each Distributor shall suspend its solicitation of
offers to purchase Securities until such time as the Company shall have
furnished it with an amendment or supplement to the Registration
Statements or the Prospectus, as the case may be, contemplated by
Section 4(b) and shall have advised such Distributor that such
solicitation may be resumed.
The Company reserves the right, in its sole discretion, to
suspend solicitation of offers to purchase the Securities commencing at
any time for any period of time or permanently. Upon receipt of at
least one Business Day's prior notice from the Company, the
Distributors will forthwith suspend solicitation of offers to purchase
Securities from the Company until such time as the Company has advised
the Distributors that such solicitation may be resumed. For the purpose
of the foregoing sentence, "Business Day" shall mean any day that is
not a Saturday or Sunday, and that in The City of New York or Phoenix,
Arizona is not a day on which banking institutions generally are
authorized or obligated by law or executive order to close.
The Distributors are authorized to solicit offers to purchase
Securities as described in the Prospectus, as amended or supplemented,
and only in a minimum aggregate amount of $1,000 (or the equivalent
thereof in one or more currencies or currency units other than U.S.
dollars). Each Distributor shall communicate to the Company, orally or
in writing, each reasonable offer to purchase Securities received by it
as agent. The Company shall have the sole right to accept offers to
purchase the Securities and may reject any such offer, in whole or in
part. Each Distributor shall have the right, in its discretion
reasonably exercised, without notice to the Company, to reject any
offer to purchase Securities received by it, in whole or in part, and
any such rejection shall not be deemed a breach of its agreement
contained herein.
In connection with the solicitation of offers to purchase
Securities, the Distributors are not authorized to provide to any
person any written information relating to the Company other than the
Prospectus and the documents incorporated by reference therein. No
Security which
6
<PAGE>
the Company has agreed to sell pursuant to this Agreement shall be
deemed to have been purchased and paid for, or sold by the Company,
until such Security shall have been delivered to the purchaser thereof
against payment by such purchaser.
(c) At the time of delivery of, and payment for, any
Securities sold by the Company as a result of a solicitation made by,
or offer to purchase received by, a Distributor, acting on an agency
basis, the Company agrees to pay such Distributor a commission in
accordance with the schedule set forth in Exhibit B hereto. The Company
agrees that each Distributor that purchases Securities as principal for
resale shall receive such compensation, in the form of a discount or
otherwise, as shall be agreed to between such Distributor and the
Company at the time the Company accepts an offer to purchase such
Securities, or, if no such compensation is agreed to, a commission in
accordance with Exhibit B hereto. Unless otherwise specified in a Terms
Agreement, a Distributor purchasing Securities may resell such
Securities to other dealers on the terms set forth in, or determined as
described in, the Prospectus (including, if applicable, the Pricing
Supplement).
(d) Administrative procedures respecting the sale of
Securities (the "Procedures") shall be agreed upon from time to time by
the Distributors and the Company. The initial Procedures, which are set
forth in Exhibit C hereto, shall remain in effect until changed by
agreement among the Company and the Distributors. Each Distributor and
the Company agree to perform the respective duties and obligations
specifically provided to be performed by each of them herein and in the
Procedures. The Company will furnish to the Trustee a copy of the
Procedures as from time to time in effect.
(e) The documents required to be delivered by Section 5 hereof
shall be delivered at the office of the Company, 400 North Fifth
Street, Phoenix, Arizona 85004, not later than 10:00 A.M., Arizona
time, on the date of this Agreement or at such later time as may be
mutually agreed by the Company and the Distributors, which in no event
shall be later than the time at which the Distributors commence
solicitation of purchases of Securities hereunder, such time and date
being herein called the "Closing Date".
4. Covenants of the Company. In connection with each offering
of Securities, the Company covenants and agrees with the Distributors that:
(a) The Company will advise the Distributors promptly of any
proposed amendment or supplementation of the First Registration
Statement, the Second Registration Statement, or the Prospectus and
will afford the Distributors a reasonable opportunity to comment on any
such proposed amendment or supplement (other than any Pricing
Supplement that relates to Securities not purchased through or by such
Distributors). The Company will also advise the Distributors of the
institution by the Commission of any stop order proceedings in respect
of the First Registration Statement, the Second Registration Statement,
or of any part thereof, and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
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<PAGE>
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
or if it is necessary at any time to amend or supplement the First
Registration Statement, the Second Registration Statement or the
Prospectus to comply with the Act, the Company promptly will notify
each Distributor to suspend solicitation of offers to purchase the
Securities and, if the Company shall decide to amend or supplement the
Registration Statements or Prospectus, the Company will promptly advise
each Distributor by telephone (with confirmation in writing) and
promptly will prepare and file with the Commission an amendment or
supplement that will correct such statement or omission or an amendment
that will effect such compliance; provided, however, that if during the
period referred to above any Distributor shall own any Securities that
it has purchased from the Company as principal with the intention of
reselling them and the Distributor has held such Securities for fewer
than 90 days or the Company has accepted an offer to purchase
Securities but the related settlement has not occurred, the Company
promptly will prepare and file with the Commission an amendment or
supplement that will correct such statement or omission or an amendment
that will effect such compliance.
(c) As soon as practicable, but not later than 18 months,
after the date of each acceptance by the Company of an offer to
purchase Securities hereunder, the Company will make generally
available to its security holders an earning statement or statements
(which need not be audited) covering a period of at least 12 months
beginning after the effective date of the Fourth Registration Statement
(as defined in Rule 158(c) under the Act), which will satisfy the
provisions of Section 11(a) of the Act and the rules and regulations
thereunder.
(d) The Company will furnish to the Distributors such copies
of the Registration Statements (including one copy of the Second
Registration Statement for the Distributors, and for the counsel for
the Distributors, which is signed and includes all exhibits), any
related preliminary prospectus supplements and the Prospectus,
including all amendments or supplements to such documents, as may be
reasonably requested.
(e) The Company will arrange or cooperate in arrangements for
the qualification of the Securities for sale and the determination of
their eligibility for investment under the laws of such jurisdictions
as the Distributors designate and will continue such qualifications in
effect so long as required for the distribution of the Securities,
provided that the Company shall not be required to qualify as a foreign
corporation in any State, to consent to service of process in any State
other than with respect to claims arising out of the offering or sale
of the Securities, or to meet other requirements deemed by it to be
unduly burdensome.
(f) For a period expiring on the earlier of (i) five years
after the applicable Representation Date and (ii) the last date on
which any Security sold pursuant to this Agreement is outstanding, the
Company will furnish to the Distributors thereunder (i) as soon as
practicable after the end of each fiscal year, a balance sheet and
statements of income and
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retained earnings of the Company as at the end of and for such year,
all in reasonable detail and certified by independent public
accountants, and (ii) (A) as soon as practicable after the end of each
quarterly fiscal period (except for the last quarterly fiscal period of
each fiscal year), a balance sheet and statement of income of the
Company as at the end of and for such period, all in reasonable detail
and certified by a principal financial or accounting officer of the
Company, (B) as soon as available, a copy of each report of the Company
mailed by the Company to stockholders or filed with the Commission, and
(C) from time to time, such other information concerning the Company as
may reasonably be requested. So long as the Company has active
subsidiaries, such financial statements will be on a consolidated basis
to the extent the accounts of the Company and its subsidiaries are
consolidated.
(g) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, and will reimburse
the Distributors for any reasonable expenses (including reasonable fees
and disbursements of counsel) incurred by them in connection with the
qualification of the Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions as the
Distributors may designate, and for any fees charged by investment
rating agencies for the rating of the Securities.
(h) Between the date of a Terms Agreement and the date of
delivery of Securities with respect thereto, the Company will not,
without the prior written consent of each Distributor which is a party
to such Terms Agreement, offer or sell, or enter into any agreement to
sell, any of its debt securities which are substantially similar to the
Securities other than borrowings under the Company's revolving credit
agreements and lines of credit, the private placement of securities,
and the issuance of commercial paper.
5. Conditions of Obligations. The obligations of each
Distributor, as agent of the Company, under this Agreement at any time to
solicit offers to purchase the Securities and to purchase Securities from the
Company as principal is subject to the accuracy, on the date hereof and on each
Representation Date, of the representations and warranties of the Company
herein, to the accuracy, on each such date, of the statements of the Company's
officers made pursuant to the provisions hereof, to the performance, on or prior
to each such date, by the Company of its obligations hereunder, and to each of
the following additional conditions precedent:
(a) The Prospectus, as amended or supplemented as of any
Representation Date, shall have been filed with the Commission in
accordance with the Rules and Regulations and no stop order suspending
the effectiveness of the Registration Statements or of any part thereof
shall have been issued and no proceedings for that purpose shall have
been instituted or, to the knowledge of the Company or any Distributor,
shall be contemplated by the Commission.
(b) Neither the Registration Statements nor the Prospectus, as
amended or supplemented as of any Representation Date, shall contain
any untrue statement of fact which, in the opinion of any Distributor,
is material or omits to state a fact which, in the opinion of any
Distributor, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
9
<PAGE>
(c) There shall not have occurred (i) any change, or any
development involving a prospective change, in or affecting
particularly the business or properties of the Company or its
subsidiaries which, in the judgment of the Distributors materially
impairs the investment quality of the Securities, (ii) a suspension or
material limitation in trading in securities generally on the New York
Stock Exchange, (iii) a general moratorium on commercial banking
activities in New York declared by either Federal or New York State
authorities, (iv) a lowering of the rating of any of the Company's debt
securities or a public announcement that any such debt securities have
been placed on CreditWatch, Watchlist, or under any similar
surveillance or review, in each case with negative implications, by any
recognized rating agency, and (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of
war by Congress or any other substantial national or international
calamity or emergency if, in the judgment of the Distributors the
effect of any such outbreak, escalation, declaration, calamity or
emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Securities.
(d) With respect to any Security denominated in a currency
other than the U.S. dollar, more than one currency or a composite
currency or any Security the principal or interest of which is indexed
to such currency, currencies or composite currency, there shall not
have occurred a suspension or material limitation in foreign exchange
trading in such currency, currencies or composite currency by a major
international bank, a general moratorium on commercial banking
activities in the country or countries issuing such currency,
currencies of composite currency, the outbreak or escalation of
hostilities involving, the occurrence of any material adverse change in
the existing financial, political or economic conditions of, or the
declaration of war or a national emergency by, the country or countries
issuing such currency, currencies or composite currency or the
imposition or proposal of exchange controls by any governmental
authority in the country or countries issuing such currency, currencies
or composite currency;
(e) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Distributor purchasing
such Securities (the "Purchasing Distributor"), as the case may be,
shall have received an opinion, dated the Closing Date, or such date of
delivery, as the case may be, of Snell & Wilmer L.L.P., counsel for the
Company, to the effect that:
(i) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Arizona and has full corporate power and authority to
carry on its business as presently conducted; and the Company
is duly qualified as a foreign corporation to do business and
is in good standing in the States of New Mexico, California,
Wyoming, Washington, Oregon and Montana, the only other
jurisdictions in which it owns or leases substantial
properties or in which the conduct of its business requires
such qualification;
(ii) The Indenture has been duly authorized,
executed, and delivered, has been duly qualified under the
Trust Indenture Act, and
10
<PAGE>
constitutes a valid and binding instrument enforceable in
accordance with its terms except as the same may be limited by
(a) general principles of equity or by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or other laws or
equitable principles relating to or affecting the enforcement
of creditors' rights generally or the enforcement of the
security provided by the Indenture, (b) the necessity for
compliance with the statutory procedural rights governing the
exercise of remedies by a secured creditor, and (c) the
qualification that certain waivers, procedures, remedies, and
other provisions of the Securities and the Indenture may be
unenforceable under or limited by the law of the State of
Arizona; however, such law does not in such counsel's opinion
substantially prevent the practical realization of the
benefits intended by such documents;
(iii) Any series of Securities established on or
prior to the date of such opinion in conformity with the
Indenture, and, when the terms of a particular Security and of
its issuance and sale have been duly authorized and
established by all necessary corporate action in conformity
with the Indenture, and such Security has been duly completed,
authenticated, and issued in accordance with the Indenture and
delivered against payment as contemplated by this Agreement,
such Security will constitute a valid and binding obligation
of the Company entitled to the benefits provided by the
Indenture (except as the same may be limited by (a) general
principles of equity or by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or other laws or
equitable principles relating to or affecting the enforcement
of creditors' rights generally or the enforcement of the
security provided by the Indenture, (b) the necessity for
compliance with the statutory procedural rights governing the
exercise of remedies by a secured creditor, and (c) the
qualification that certain waivers, procedures, remedies, and
other provisions of such Security and the Indenture may be
unenforceable under or limited by the law of the State of
Arizona; however, such law does not in such counsel's opinion
substantially prevent the practical realization of the
benefits intended by such documents), it being understood that
such counsel may (A) assume that at the time of the issuance,
sale and delivery of each Security the authorization of such
series will not have been modified or rescinded and there will
not have occurred any change in law affecting the validity,
legally binding character or enforceability of such Security,
(B) assume that neither the issuance, sale and delivery of any
Security, nor any of the terms of such Security, nor
compliance by the Company with such terms will violate any
applicable law, any agreement or instrument then binding upon
the Company or any restriction imposed by any court or
governmental body having jurisdiction over the Company and (C)
state that as of the date of such opinion a judgment for money
in an action based on Securities denominated in foreign
currencies or currency units in a Federal or State court in
the United States ordinarily would be enforced in the United
States only in United States dollars, and that the date used
to determine the rate of conversion of the foreign currency
unit in which a particular
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<PAGE>
Security is denominated into United States dollars will depend
upon various factors, including which court renders the
judgment;
(iv) The Mortgage has been duly authorized, executed,
and delivered, has been duly qualified under the Trust
Indenture Act, and constitutes a valid and binding instrument
enforceable in accordance with its terms, except as the same
may be limited by (a) general principles of equity or by
bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other laws or equitable principles relating to
or affecting the enforcement of creditors' rights generally or
the enforcement of the security provided by the Mortgage, (b)
the necessity for compliance with the statutory procedural
rights governing the exercise of remedies by a secured
creditor, and (c) the qualification that certain waivers,
procedures, remedies, and other provisions of the Senior Note
Mortgage Bonds and the Mortgage may be unenforceable under or
limited by the law of the State of Arizona; however, such law
does not in such counsel's opinion substantially prevent the
practical realization of the benefits intended by such
document;
(v) Any series of Senior Note Mortgage Bonds
established on or prior to the date of such opinion in
conformity with the Indenture and the Mortgage, and, when the
terms of a particular Senior Note Mortgage Bond and of its
issuance and sale have been duly authorized and established by
all necessary corporate action in conformity with the
Indenture and the Mortgage, and such Senior Note Mortgage Bond
has been duly completed, authenticated, and issued in
accordance with the Mortgage and delivered to the Trustee as
security for Securities, such Senior Note Mortgage Bond will
constitute a valid and binding obligation of the Company
entitled to the benefits provided by the Mortgage (except as
the same may be limited by (a) general principles of equity or
by bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other laws or equitable principles relating to
or affecting the enforcement of creditors' rights generally or
the enforcement of the security provided by the Mortgage, (b)
the necessity for compliance with the statutory procedural
rights governing the exercise of remedies by a secured
creditor, and (c) the qualification that certain waivers,
procedures, remedies, and other provisions of such Senior Note
Mortgage Bond and the Mortgage may be unenforceable under or
limited by the law of the State of Arizona; however, such law
does not in such counsel's opinion substantially prevent the
practical realization of the benefits intended by such
documents), it being understood that such counsel may (A)
assume that at the time of the issuance, sale and delivery of
each Senior Note Mortgage Bond the authorization of such
series will not have been modified or rescinded and there will
not have occurred any change in law affecting the validity,
legally binding character or enforceability of such Senior
Note Mortgage Bond, (B) assume that neither the issuance, sale
and delivery of any Senior Note Mortgage Bond, nor any of the
terms of such Senior Note Mortgage Bond, nor compliance by the
Company with such terms will violate
12
<PAGE>
any applicable law, any agreement or instrument then binding
upon the Company or any restriction imposed by any court or
governmental body having jurisdiction over the Company and (C)
state that as of the date of such opinion a judgment for money
in an action based on Senior Note Mortgage Bonds denominated
in foreign currencies or currency units in a Federal or State
court in the United States ordinarily would be enforced in the
United States only in United States dollars, and that the date
used to determine the rate of conversion of the foreign
currency unit in which a particular Senior Note Mortgage Bond
is denominated into United States dollars will depend upon
various factors, including which court renders the judgment;
(vi) Except for property specifically excepted from
the lien of the Mortgage or released therefrom in accordance
with the terms thereof, the Company has good and marketable
title in fee simple, except for items described in (A), (B),
and (C) below, to all of the real property and fixtures
thereon purported in the Mortgage to be so held and that are
both located in the State of Arizona and described in those
title reports covering at least the Saguaro, Yucca, Cholla,
Ocotillo, West Phoenix, and Palo Verde plant sites that are
listed on an exhibit to such opinion (the "Title Documents")
(in giving such opinion, such counsel may rely solely upon the
Title Documents and may assume the accuracy thereof and of the
real property descriptions contained therein and may state
that no other investigation or inquiry has been made with
respect thereto), and in giving the opinions described below
with respect to any liens, defects, and encumbrances on such
title to such personal property, such counsel may assume that
the Company has good and valid title to all of the personal
property located in the State of Arizona and described in the
Mortgage as subject to the lien thereof (which property shall
not include fixtures), and such counsel may rely solely upon,
and assume the accuracy of, a search of the Uniform Commercial
Code Financing Statements filed in the records of the Arizona
Secretary of State and may assume that there are no liens or
other encumbrances on personal property (as used in the
Arizona Uniform Commercial Code) of the Company located in the
State of Arizona other than liens or other encumbrances that
have been perfected by filing with the Arizona Secretary of
State under Arizona Revised Statutes ("A.R.S.") Section
47-9401.A; such title is subject only to: (A) the lien of the
Mortgage, (B) Excepted Encumbrances as defined in the
Mortgage, and (C) other liens, encumbrances, or defects, none
of which, individually or in the aggregate, in the opinion of
such counsel, materially interfere with the business or
operations of the Company (in determining whether any such
other liens, encumbrances, or defects materially interfere
with the business or operations of the Company, such counsel
may rely solely upon a certificate of an officer or engineer
of the Company which shall be attached to such opinion and
such opinion may state that no other investigation or inquiry
with respect thereto has been made); the Mortgage, subject
only as above set forth in this clause, now constitutes, and
the Mortgage and the Mortgage Supplemental Indentures
theretofore
13
<PAGE>
executed, subject only as above set forth in this clause, when
the latter shall have been duly recorded and filed, will
constitute, together and as a single instrument, a direct and
valid first mortgage lien upon said property; and all
properties (other than the classes or items of property
expressly excepted in the Mortgage or expressly released from
the lien thereof) acquired by the Company after the date of
such opinion in each county in the State of Arizona in which
the Mortgage and the Mortgage Supplemental Indentures shall
have been duly recorded and filed and, with respect to
priority only, any necessary recordation and/or filing has
been accomplished (including therein any necessary
descriptions of after-acquired real property and real property
upon which after-acquired fixtures are affixed) will, upon
such acquisition, become subject to the first mortgage lien
thereof, subject, however, to Excepted Encumbrances and to
liens, if any, existing or placed thereon at the time of the
acquisition thereof by the Company and, with respect to
priority only, to liens, if any, existing prior to the time of
any necessary recordation and/or filing by the Company;
(vii) The Company is the owner of the rights
conferred upon it by the leases from the Navajo Tribe relating
to the site on which the Navajo Plant is located and while
such counsel is not aware of the assertion of any claim
contesting the title of the Navajo Tribe to the lands leased,
such counsel shall not be required to express any opinion with
respect to the interest of the Navajo Tribe in the lands
leased or with respect to the enforceability of such leases
against the Navajo Tribe;
(viii) With certain exceptions, a public service
corporation is required to obtain certificates of convenience
and necessity from the Arizona Corporation Commission under
A.R.S. Section 40-281.A for construction of its lines, plant,
services, or systems, or any extensions thereof, within the
State of Arizona, and to obtain franchises or similar consents
or permits from counties and incorporated municipalities under
A.R.S. Section 40-283.A for the construction, operation, and
maintenance of transmission lines within the State of Arizona;
to the best of such counsel's knowledge after due inquiry, the
Company holds such valid franchises, certificates of
convenience and necessity, consents, and permits pursuant to
such statutory provisions as are necessary with respect to the
maintenance and operation of its property and business as now
conducted, except that (A) the Company from time to time makes
minor extensions of its system prior to the time a related
franchise, certificate, license, or permit is procured, (B)
from time to time communities already being served by the
Company become incorporated and considerable time may elapse
before a franchise is procured, (C) certain franchises may
have expired prior to the renegotiation thereof, (D) certain
minor defects and exceptions may exist which, individually and
in the aggregate, are not deemed material, and (E) such
counsel need not be required to express any opinion regarding
the geographical
14
<PAGE>
scope of any franchise, certificate, license, or permit that
is not specific as to its geographical scope;
(ix) No consent, approval, authorization, or consent
of any public board or body is required for the consummation
of the transactions contemplated hereby or in any Terms
Agreement, including the issuance and sale of Securities and
Senior Note Mortgage Bonds and the execution and delivery of a
related Supplemental Indenture and Mortgage Supplemental
Indenture, except as may be required under state securities or
blue sky laws, as to which laws such counsel shall not be
required to express an opinion, and such other approvals
(specified in such opinion) as have been obtained;
(x) The First Registration Statement and the Second
Registration Statement have become effective under the Act,
and, to the best of the knowledge of such counsel, no stop
order suspending the effectiveness of the First Registration
Statement or the Second Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated under the Act, and each part of
the Registration Statements, when such part became effective,
and the Prospectus, as of the Closing Date, and any amendment
or supplement thereto, as of its date, complied as to form in
all material respects with the requirements of the Act, the
Trust Indenture Act, and the published Rules and Regulations;
such counsel has no reason to believe that any part of the
Registration Statements, when such part became effective, or
the Prospectus, as of the Closing Date, or any amendment or
supplement thereto, as of its date, contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading; the descriptions in the
Registration Statements and Prospectus of statutes, legal and
governmental proceedings and contracts, and other documents
are accurate and fairly present the information required to be
shown; and to the actual knowledge of those persons in the
lawyer group described in such opinion, there are no legal or
governmental proceedings required to be described in the
Prospectus that are not described as required, nor any
contracts or documents of a character required to be described
in the Registration Statements or Prospectus or to be filed as
exhibits to the Registration Statements that are not described
and filed as required (it being understood that such counsel
need express no opinion as to the financial statements or
other financial data contained in the Registration Statements
or the Prospectus); and
(xi) This Agreement has been duly authorized,
executed, and delivered by the Company.
In giving such opinion, (a) Snell & Wilmer L.L.P. may rely
solely upon certificates of the Company as to any factual matters upon
which any such opinions are based and may rely upon the opinion of
Keleher & McLeod, P.A., referred to below, as to all matters governed
by
15
<PAGE>
the laws of the State of New Mexico, but the opinion of Snell & Wilmer
L.L.P. shall state that, though they are members of the Arizona Bar and
do not hold themselves out as experts on the laws of the State of New
Mexico, they have made a study of the laws of such State insofar as
such laws are involved in the conclusions stated in their opinion, and
from such study it is their opinion that such laws support such
conclusions and that, in their opinion, the Distributors and they are
justified to such extent in relying upon the opinion of Keleher &
McLeod, P.A.; (b) Snell & Wilmer L.L.P. may rely on the opinion
delivered pursuant to Section 5(g) as to all matters governed by the
laws of the State of New York; and (c) the lawyer group referred to in
such opinion will mean those lawyers in the offices of Snell & Wilmer
L.L.P. who (i) have billed any time on the particular transaction to
which such opinion relates or (ii) have billed more than ten hours to
any Company matter in the twelve-month period preceding the date on
which the list of such lawyers was compiled for purposes of inquiry
pursuant to such opinion.
(f) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Purchasing
Distributor, as the case may be, shall have received an opinion, dated
the Closing, or such date of delivery, as the case may be, of Keleher &
McLeod, P.A., New Mexico counsel for the Company, to the effect that:
(i) The Company is duly qualified as a foreign
corporation to do business and is in good standing in the
State of New Mexico and has full corporate power and authority
to engage in the State of New Mexico in the business now
conducted by it therein;
(ii) The activities of the Company in the State of
New Mexico to date do not constitute it a "public utility" as
that term is defined in the relevant laws of the State of New
Mexico, and accordingly, no public utility franchises or
certificates of convenience and necessity are necessary under
New Mexico law with respect to the maintenance and operation
of the Company's property and business as now conducted in the
State of New Mexico and no approval, authorization, or consent
of the New Mexico Public Utility Commission or any other
public board or body of the State of New Mexico is required
for the issuance and sale of the Securities or the Senior Note
Mortgage Bonds on the terms and conditions herein and in the
Prospectus set forth or contemplated or for the execution of
the Supplemental Indenture relating to the Securities or the
Mortgage Supplemental Indenture relating to the Senior Note
Mortgage Bonds, except as may be required under New Mexico
state securities or blue sky laws, as to which laws such
counsel shall not be required to express an opinion;
(iii) Assuming that the Company has good and valid
title to all of the personal property located in the State of
New Mexico and described in the Mortgage as subject to the
lien thereof (which property shall not include fixtures)
("Personal Property"), in giving the opinions described below
with respect to any liens, defects and encumbrances on such
title to such Personal
16
<PAGE>
Property, such counsel may rely solely upon, and assume the
accuracy of, a search of the Uniform Commercial Code Financing
Statements filed in the records of the New Mexico Secretary of
State and may assume that there are no liens or other
encumbrances on personal property (as used in the New Mexico
Uniform Commercial Code) of the Company located in the State
of New Mexico other than liens or other encumbrances that have
been perfected by filing with the New Mexico Secretary of
State under Section 55-9-401, New Mexico Statutes Annotated
1978; such title to such Personal Property is subject only to:
(A) the lien of the Mortgage, (B) Excepted Encumbrances as
defined in the Mortgage, and (C) other liens, encumbrances, or
defects, none of which, individually or in the aggregate, in
the opinion of such counsel, materially interfere with the
business or operations of the Company (in determining whether
any such other liens, encumbrances, or defects materially
interfere with the business or operations of the Company, such
counsel may rely solely upon a certificate of an officer or
engineer of the Company which shall be attached to such
opinion and such opinion may state that no other investigation
or inquiry with respect thereto has been made); the Mortgage,
subject only as above set forth in this clause, now
constitutes, and the Mortgage and the Mortgage Supplemental
Indentures theretofore executed, subject only as above set
forth in this clause, when the latter shall have been duly
recorded and filed, will constitute, together and as a single
instrument, a direct and valid first mortgage lien upon such
Personal Property; and all properties (other than the classes
or items of property expressly excepted in the Mortgage or
expressly released from the lien thereof) acquired by the
Company after the date of this opinion in each county in the
State of New Mexico in which the Mortgage and the Mortgage
Supplemental Indentures shall have been duly recorded and
filed and, with respect to priority only, any necessary
recordation and/or filing has been accomplished (including
therein any necessary descriptions of after-acquired real
property and real property upon which after-acquired fixtures
are affixed) will, upon such acquisition, become subject to
the first mortgage lien thereof, subject, however, to Excepted
Encumbrances and to liens, if any, existing or placed thereon
at the time of the acquisition thereof by the Company and,
with respect to priority only, to liens, if any, existing
prior to the time of any necessary recordation and/or filing
by the Company; and
(iv) The Company is the owner of the rights conferred
upon it by the leases from the Navajo Tribe relating to the
site on which the Four Corners plant is located and while such
counsel is not aware of the assertion of any claim contesting
the interest of the Navajo Tribe in the lands leased, such
counsel shall not be required to express any opinion with
respect to the interest of the Navajo Tribe in the lands
leased or with respect to the enforceability of such leases
against the Navajo Tribe.
17
<PAGE>
In giving such opinion, Keleher & McLeod, P.A. may rely solely upon
certificates of the Company as to any factual matters upon which any
such opinions are based.
(g) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Purchasing
Distributor, as the case may be, shall have received an opinion, dated
the Closing Date, or such date of delivery, as the case may be, from
counsel for the Distributors or the Purchasing Distributor, as the case
may be, dated the Closing Date or such date of delivery, as the case
may be, with respect to the incorporation of the Company, the validity
of the Securities, the Senior Note Mortgage Bonds, the Registration
Statements, the Prospectus, and other related matters as may reasonably
be required, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters. In rendering such opinion, such counsel may rely as to
the incorporation of the Company and all other matters governed by the
laws of the States of Arizona and New Mexico upon the opinions of Snell
& Wilmer L.L.P. and Keleher & McLeod, P.A., referred to above.
(h) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Purchasing
Distributor, as the case may be, shall have received a certificate of
the President or any Vice President and a principal financial or
accounting officer of the Company, dated the Closing Date or such date
of delivery, as the case may be, in which such officers, to the best of
their knowledge after reasonable investigation, shall state that the
representations and warranties of the Company in this Agreement are
true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to the Closing Date, that no stop order suspending the
effectiveness of the First Registration Statement or the Second
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission, and
that, subsequent to the date of the most recent financial statements in
the Prospectus, there has been no material adverse change in the
financial position or results of operations of the Company and its
subsidiaries except as set forth or contemplated in the Prospectus or
as described in such certificate.
(i) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Purchasing
Distributor, as the case may be, shall have received a letter of
Deloitte & Touche LLP, dated the Closing Date or such date of delivery,
as the case may be, confirming that they are independent certified
public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder, and stating in effect that
(i) in their opinion the financial statements and schedules of the
Company audited by them and incorporated by reference in the
Registration Statements comply as to form in all material respects with
the applicable accounting requirements of the Securities Exchange Act
of 1934 (the "1934 Act") and the published Rules and Regulations
thereunder and (ii) on the basis of a reading of the latest available
interim financial statements of the Company, inquiries of officials of
the Company responsible for financial and accounting matters, and other
specified procedures, nothing came to their attention that caused them
to believe that (A) the unaudited financial
18
<PAGE>
statements incorporated by reference, if any, in the Registration
Statements do not comply as to form in all material respects with the
applicable accounting requirements of the 1934 Act and the published
Rules and Regulations thereunder or are not stated on a basis
substantially consistent with that of the audited financial statements
incorporated by reference in the Registration Statements, (B) at the
date of the most recent available unaudited financial statements and at
a specified date not more than five days prior to the date of this
Agreement, there was any increase in the amounts of common stock,
redeemable preferred stock, or non-redeemable preferred stock of the
Company or any increase, exceeding $10,000,000, in long-term debt of
the Company or, at the date of the most recent available unaudited
financial statements there was any decrease in net assets as compared
with amounts shown in the most recent financial statements incorporated
by reference in the Registration Statements, or (C) for the
twelve-month period ended at the date of the most recent available
unaudited financial statements there were any decreases, exceeding 3%,
as compared with the twelve-month period ended at the date of the most
recent financial statements incorporated by reference in the
Registration Statements, in the amounts of total revenues or net
income, except in all cases for increases or decreases which result
from the declaration or payment of dividends, or which the Registration
Statements (including any material incorporated by reference therein)
disclose have occurred or may occur, or which are described in such
letter.
The Company will furnish the Distributors with such conformed
copies of such opinions, certificates, letters, and documents as may be
reasonably requested.
6. Additional Covenants of the Company. The Company agrees
that:
(a) Each acceptance by the Company of an offer for the
purchase of Securities shall be deemed to be an affirmation that its
representations and warranties contained in this Agreement are true and
correct at the time of such acceptance and a covenant that such
representations and warranties will be true and correct at the time of
delivery to the purchaser of the Securities as though made at and as of
each such time, it being understood that such representations and
warranties shall relate to the Registration Statements and the
Prospectus as amended or supplemented at each such time. Each such
acceptance by the Company of an offer to purchase Securities shall be
deemed to constitute an additional representation, warranty and
agreement by the Company that, as of the date of delivery of such
Securities to the purchaser thereof, after giving effect to the
issuance of such Securities, of any other Securities to be issued on or
prior to such delivery date and of any other Registered Securities to
be issued and sold by the Company on or prior to such delivery date,
the aggregate amount of Registered Securities (including any
Securities) which have been issued and sold by the Company will not
exceed the amount of Registered Securities registered pursuant to the
Registration Statements.
(b) Each time that the Registration Statements or the
Prospectus shall be amended or supplemented (other than by a Pricing
Supplement, an amendment or supplement which relates exclusively to an
offering of securities other than the Securities, or an amendment or
supplement that occurs through the filing an incorporated document
(other than a Form 10-K or Form 10-Q) with the Commission), the Company
shall, (A) concurrently
19
<PAGE>
with such amendment or supplement, if such amendment or supplement
shall occur at a Marketing Time, or (B) immediately at the next
Marketing Time if such amendment or supplement shall not occur at a
Marketing Time, furnish the Distributors with a certificate, dated the
date of delivery thereof, of the President or any Vice President and a
principal financial or accounting officer of the Company, in form
satisfactory to the Distributors, to the effect that the statements
contained in the certificate covering the matters set forth in Section
5(h) hereof which was last furnished to the Distributors pursuant to
this Section 6(b) are true and correct at the time of such amendment or
supplement, as though made at and as of such time or, in lieu of such
certificate, a certificate of the same tenor as the certificate
referred to in Section 5(h).
(c) At each Representation Date referred to in Section 6(b),
the Company shall, (A) concurrently if such Representation Date shall
occur at a Marketing Time, or (B) immediately at the next Marketing
Time if such Representation Date shall not occur at a Marketing Time,
furnish the Distributors with a written opinion or opinions, dated the
date of such Representation Date, of counsel for the Company, in form
satisfactory to the Distributors, to the effect set forth in Sections
5(e) and 5(f) hereof; provided, however, that to the extent appropriate
such opinion or opinions may reconfirm matters set forth in a prior
opinion delivered at the Closing Date or under this Section 6(c);
provided further, however, that any opinion or opinions furnished under
this Section 6(c) shall relate to the Registration Statements and the
Prospectus as amended or supplemented at such Representation Date.
(d) At each Representation Date referred to in Section 6(b) on
which the Registration Statements or the Prospectus shall be amended or
supplemented to include additional financial information, the Company
shall cause Deloitte & Touche LLP, (A) concurrently if such
Representation Date shall occur at a Marketing Time, or (B) immediately
at the next Marketing Time if such Representation Date shall not occur
at a Marketing Time, to furnish the Distributors with a letter,
addressed jointly to the Company and the Distributors and dated the
date of such Representation Date, to the effect set forth in Section
5(i) hereof; provided, however, that to the extent appropriate such
letter may reconfirm matters set forth in a prior letter delivered at
the Closing Date or pursuant to this Section 6(d); provided further,
however, that any letter furnished under this Section 6(d) shall relate
to the Registration Statements and the Prospectus as amended or
supplemented at such Representation Date, with such changes as may be
necessary to reflect changes in the financial statements and other
information derived from the accounting records of the Company.
(e) On each date for the delivery of Securities to the
purchaser thereof, the Company shall, if requested by the Distributor
that solicited or received the offer to purchase any Securities being
delivered on such settlement date, furnish such Distributor with a
written opinion or opinions, dated the date of delivery thereof, of
counsel for the Company, to the effect set forth in Sections 5(e) and
5(f) hereof; provided, however, that in lieu of each opinion, such
counsel may furnish the Distributor with a letter to the effect that
the Distributor may rely on such prior opinion to the same extent as
though it was dated such
20
<PAGE>
delivery date (except that statements in such prior opinion shall be
deemed to relate to the Registration Statements and Prospectus as
amended or supplemented to the time of delivery of such letter
authorizing reliance).
(f) The Company agrees that any obligation of a person who has
agreed to purchase Securities, to make payment for, and take delivery
of such Securities shall be subject to (i) the accuracy, on the related
settlement date fixed pursuant to the Procedures, of the Company's
representation and warranty deemed to be made to the Distributors
pursuant to the last sentence of subsection (a) of this Section 6, and
(ii) the satisfaction, on such settlement date, of each of the
conditions set forth in Sections 5(a), (b) and (c), it being understood
that under no circumstance shall any Distributor have any duty or
obligation to exercise the judgment permitted under Section 5(b) or (c)
on behalf of any such person.
7. Indemnification.
(a) The Company will indemnify and hold harmless each
Distributor and each person, if any, who controls such Distributor
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any part of
the Registration Statements relating to the Securities, when such part
became effective, any preliminary prospectus or preliminary prospectus
supplement, the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will
reimburse each Distributor and each such controlling person for any
legal or other expenses reasonably incurred by such Distributor or such
controlling person in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that
the Company will not be liable in any such case to the extent that any
such loss, claim, damage, or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in any of such documents in reliance upon and in
conformity with written information furnished to the Company by any
Distributor specifically for use therein. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Distributor will severally indemnify and hold
harmless the Company, each of its directors, each of its officers who
have signed the Registration Statements, and each person, if any, who
controls the Company within the meaning of the Act, against any losses,
claims, damages, or liabilities to which the Company or any such
director, officer, or controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in any part of the Registration Statements relating to
the Securities, when such part became effective, any preliminary
prospectus or preliminary prospectus supplement, the Prospectus, or any
21
<PAGE>
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
Distributor specifically for use therein; and will reimburse any legal
or other expenses reasonably incurred by the Company or any such
director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or
action. This indemnity agreement will be in addition to any liability
which such Distributor may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability that it may
have to any indemnified party otherwise than under this Section. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, without the
consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. An indemnifying party shall not
be liable for any settlement of a claim or action effected without its
written consent, which shall not be unreasonably withheld.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party for
any loss, claim, damage, liability, or action described in subsection
(a) or (b) above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or
(b) above on the following basis: (1) if such loss, claim, damage,
liability, or action arises under subsection (a) above, then (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Distributor[s] on the
other from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Distributors on the other in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant
equitable considerations; and (2) if such loss, claim, damage,
liability, or action arises under subsection (b) above, then in such
proportion as is appropriate to reflect the relative fault of the
Company on the one hand and the Distributors on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities as well as any other relevant equitable
considerations. For the purposes of clause (1) above, the
22
<PAGE>
relative benefits received by the Company on the one hand and the
Distributors on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Distributors. For the purposes of clauses
(1) and (2) above, the relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Distributors and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement
or omission. The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is
the subject of this subsection (d). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Distributors' obligations in
this subsection (d) to contribute are several in proportion to their
respective obligations and not joint.
8. Status of Each Distributor. In soliciting offers to
purchase the Securities from the Company pursuant to this Agreement and in
assuming its other obligations hereunder (other than any obligation to purchase
Securities pursuant to Section 3 hereof), each Distributor is acting
individually and not jointly and is acting solely as agent for the Company and
not as principal. In connection with the placement of any Securities by a
Distributor, acting as agent, (a) each Distributor will make reasonable efforts
to assist the Company in obtaining performance by each purchaser whose offer to
purchase Securities from the Company has been solicited by such Distributor and
accepted by the Company, but such Distributor shall have no liability to the
Company in the event any such purchase is not consummated for any reason; and
(b) if the Company shall default on its obligations to deliver Securities to a
purchaser whose offer it has accepted, the Company (i) shall hold the
Distributors harmless against any loss, claim or damage arising from or as a
result of such default by the Company, and (ii) in particular, shall pay to the
Distributors any commission to which they would be entitled in connection with
such sale.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company or its officers and of the Distributors set forth in
or made pursuant to this Agreement will remain in full force and effect
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of the Distributors or the Company or any of its officers or
directors or any controlling person, and will survive delivery of and payment
for the Securities. If this Agreement is terminated pursuant to Section 10 or
for any other reason or if for any reason the sale of Securities described in a
confirmation or Terms Agreement referred to Section 3 by the Company to a
Distributor is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 4(g) and the
obligations of the Company under Sections 4(c) and 4(f) and the respective
obligations of the Company and the Distributors pursuant to Section 7 shall
remain in effect. In addition, if any such termination of this Agreement shall
occur either (i) at a time when any Distributor shall own any Securities that it
has purchased from the Company as principal with the intention of reselling them
and the Distributor has held such Securities for fewer than 90 days or (ii)
after the Company has accepted
23
<PAGE>
an offer to purchase Securities but the related settlement has not occurred, the
obligations of the Company under the proviso in Section 4(b), under Sections
4(a), 4(d), 4(e) and 4(h) and, in the case of a termination occurring as
described in (ii) above, under Sections 3(c), 6(a), 6(e) and 6(f) and under the
last sentence of Section 8, shall also remain in effect.
10. Termination. This Agreement may be terminated for any
reason at any time by the Company as to any Distributor or, in the case of any
Distributor, by such Distributor insofar as this Agreement relates to such
Distributor, upon the giving of one day's written notice of such termination to
the other parties hereto; provided, however, that this Agreement may not be
terminated with respect to a Distributor by the giving of such notice following
receipt by the Company of a confirmation or Terms Agreement referred to in
Section 3 relating to the purchase of Securities by such Distributor and prior
to delivery of the Securities described in such confirmation or Terms Agreement,
unless the sale and purchase of Securities contemplated thereby is rejected by
the Company in accordance with Section 3. Any settlement with respect to
Securities placed by a Distributor on an agency basis occurring after
termination of this Agreement shall be made in accordance with the Procedures
and each Distributor agrees, if requested by the Company, to take the steps
therein provided to be taken by such Distributor in connection with such
settlement.
11. Sales of Securities Denominated in a Currency other than
U.S. Dollars or of Indexed Securities. If at any time the Company and any of the
Distributors shall determine to issue and sell Securities denominated in a
currency other than U.S. dollars, which other currency may include a currency
unit, or with respect to which an index is used to determine the amounts of
payments of principal and any premium and interest, the Company and any such
Distributor may execute and deliver a supplement to this Agreement for the
purpose of making any appropriate additions to and modifications of the terms of
this Agreement (and the Procedures) applicable to such Securities and the offer
and sale thereof. The Distributors are authorized to solicit offers to purchase
Securities with respect to which an index is used to determine the amounts of
payments of principal and any premium and interest, and the Company shall agree
to any sales of such Securities (whether offered on an agency or principal
basis), only in a minimum aggregate amount of $2,500,000. The Company will not
issue Securities denominated in Yen otherwise than in compliance with applicable
Japanese laws, regulations and policies. In particular, the Company or its
designated agent shall submit such reports or information as may be required
from time to time by applicable law, regulations and guidelines promulgated by
Japanese governmental and regulatory authorities in the case of the issue and
purchase of the Securities and the Company shall ensure that each such Security
shall have a minimum denomination of (Y)1,000,000 and a minimum maturity of one
year or such other minimum denomination and maturity as may be allowed from time
to time by Japanese governmental and regulatory authorities.
12. Notices. All communications hereunder relating to any
offering of Securities will be in writing, and, if sent to the Distributors, may
be mailed, delivered, or telecopied and confirmed at their addresses furnished
to the Company in writing for the purpose of communications. All communications
hereunder to the Company shall be mailed to the Company, Attention: Treasurer,
at
24
<PAGE>
P.O. Box 53999, Phoenix, Arizona 85072-3999, or delivered, or telecopied and
confirmed to the Company at 400 North Fifth Street, Phoenix, Arizona 85004.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and the Distributors as are named in any
Terms Agreement and their respective successors and the officers and directors
and controlling persons referred to in Section 7 and, to the extent provided in
Section 6(f), any person who has agreed to purchase Securities from the Company,
and no other person will have any right or obligation hereunder.
14. Governing Laws; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
This Agreement and any Terms Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute a single instrument.
25
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it will become a binding agreement between the Company and the
Underwriters in accordance with its terms.
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY
By:___________________________
Confirmed and Accepted, as of the
date first above written:
[NAME OF DISTRIBUTOR]
By:____________________________________
[NAME OF DISTRIBUTOR]
By:____________________________________
26
<PAGE>
Exhibit A
Arizona Public Service Company
("Company")
Medium Term Notes, Series _____
Due Nine Months or More from Date of Issue
TERMS AGREEMENT
---------------
___________, 199__
Arizona Public Service Company
400 North 5th Street
Phoenix, AZ 85004
Attention: Treasurer
Ladies and Gentlemen:
We offer to purchase, on and subject to the terms and
conditions of the Distribution Agreement filed as an exhibit to the Company's
registration statement on Form S-3 (No. 333-_____) ("Distribution Agreement"),
the following Securities ("Notes") on the following terms:
Title:
Currency or Currency Units:
Stated Maturity:
Principal Amount:
Public Offering Price: [___%, subject to change by the
undersigned -- The Distributor
proposes to reoffer the above Notes
from time to time at market prices
prevailing at the time of sale, at
prices related to such prevailing
market prices or at negotiated
prices.]
Original Issue Discount Security: Yes ____ No ____
Denominations:
Purchase Price (to be paid in immediately available funds):
___% [, plus accrued interest, if any, from the Trade Date to
the Settlement Date]
Underwriting Discount or Commission received from the Company
(%):
Proceeds to Company (If different from Public Offering Price)
(%):
<PAGE>
In the case of Fixed Rate Notes, the interest rate and, if
different from the dates set forth in the Prospectus
Supplement, the Interest Payment Date or Dates and
corresponding Regular Record Date or Dates:
In the case of Floating Rate Notes, the interest rate formula,
Initial Interest Rate, the Index Maturity, the Spread or
Spread Multiplier (if any), the maximum or minimum Interest
rate limitations (if any), the Interest Reset Dates, the
Interest Determination Dates, the Calculation Agent, the
Calculation Dates, the Interest Payment Dates and the Regular
Record Dates, in each case to the extent applicable:
Optional Redemption (option of the Company):
Redemption Date(s):
Redemption Prices(s)(%):
Notice Period:
Optional Redemption (option of the Holder):
Redemption Date(s):
Redemption Price(s)(%):
Notice Period:
Sinking Fund:
Other Terms:
Trade Date:
Settlement Date (Issue Date):
-2-
<PAGE>
* * * * *
Details for Settlement
- ----------------------
(Additional Purchase Information -- to be completed by
Distributor, if desired, to the extent available):
Exact name in which the Note or Notes are to be
registered ("registered owner"):
Exact address of registered owner and, if different,
the address for delivery of notices and payment of
principal and any premium and interest:
Taxpayer identification number of registered owner:
Principal amount of each Note in authorized
denominations to be delivered to registered owner:
Exchange rate applicable to purchase Foreign Currency
Notes to be paid for in U.S. dollars:
* * * * *
Our agreement to purchase the Notes hereunder is subject to
the conditions set forth in the Distribution Agreement, including the conditions
set forth in paragraphs (d), (e), (f), (g), (h), and (i) of Section 5 thereof.
If for any reason the purchase by the undersigned of the Notes is not
consummated other than because of a default by the undersigned or a failure to
satisfy a condition set forth in clause (ii), (iii) or (v) of Section 5(c) of
the Distribution Agreement, the Company shall reimburse the undersigned for all
out-of-pocket expenses reasonably incurred by the undersigned in connection with
the offering of the Notes and not otherwise required to be reimbursed pursuant
to Section 4 of the Distribution Agreement.
-3-
<PAGE>
Unless the undersigned has received notification from the
Company within [one Business Day (as defined in the Distribution Agreement)]
that the Company does not agree to the terms set forth herein, this Terms
Agreement shall constitute an agreement between the Company and the undersigned
for the sale and purchase of the Notes upon the terms set forth herein and in
the Distribution Agreement.
Very truly yours,
[NAME OF DISTRIBUTOR]
By ____________________________________
Accepted and agreed to
as of the date set forth above.
ARIZONA PUBLIC SERVICE COMPANY
By _________________________________
-4-
<PAGE>
EXHIBIT B
COMMISSION SCHEDULE TO FOLLOW
<PAGE>
EXHIBIT C
ADMINISTRATIVE PROCEDURES
-------------------------
The medium-term notes due nine months or more from their issue
date (the "Notes"), are to be offered on a continuing basis by Arizona Public
Service Company (the "Company"). _______________________ and
_____________________ (individually, a "Distributor" and collectively, the
"Distributors"), have each agreed to use reasonable efforts to solicit offers to
purchase the Notes. Each Distributor may, but will not be obligated to, purchase
Notes as principal for its own account. The Notes are being sold pursuant to a
Distribution Agreement, dated ______________, 19__ (the "Distribution
Agreement"), between the Company and the Distributors, and will be issued
pursuant to an Indenture, dated as of November 15, 1996, as amended from time to
time (the "Indenture"), between the Company and The Bank of New York, as trustee
(the "Trustee"). Subject to Article 14 of the Indenture, until the Release Date,
the Notes will be secured by one or more series of the Company's first mortgage
bonds issued and delivered by the Company to the Trustee for the Notes. On the
Release Date, the Notes will cease to be secured by the Company's first mortgage
bonds, will become unsecured general obligations of the Company, and will rank
on a parity with other unsecured senior indebtedness of the Company. For a
description of the terms of the Notes and the offering and sale thereof, see the
sections entitled "Description of Senior Notes", "Special Provisions Relating to
Foreign Currency Notes", "Plan of Distribution of Senior Notes" and "Glossary"
in the Prospectus Supplement relating to the Notes, dated ________, 19__,
attached hereto and hereinafter referred to as the "Prospectus Supplement", and
the sections entitled "Description of Senior Notes" and "Plan of Distribution"
in the Prospectus relating to the Notes, dated _______________, 19__, attached
hereto and hereinafter referred to as the "Prospectus." Defined terms used
herein but not defined herein shall have the meanings assigned to them in the
Distribution Agreement, the Prorospectus Supplement.
The Notes will be represented either by Global Notes delivered
to The Depository Trust Company ("DTC") or its nominee and recorded in the
book-entry system maintained by DTC or such nominee ("Book-Entry Notes") or by
certificates issued in definitive form delivered to the Holders thereof or
Persons designated by such Holders ("Certificated Notes"). Notes for which
interest is calculated on the basis of a fixed interest rate are referred to
herein as "Fixed Rate Notes". Notes for which interest is calculated at a rate
or rates determined by reference to an interest rate formula are referred to
herein as "Floating Rate Notes".
Notes may be issued as Indexed Notes, with the principal
amount payable at Maturity, the amount of interest payable on an Interest
Payment Date, or both, to be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors, as
indicated in the applicable Pricing Supplement. Holders of Indexed Notes may
receive a principal amount at Maturity that is greater than or less than the
face amount of such Notes depending upon the fluctuation of the relative value,
rate or price of the specified index. Specific information pertaining to the
method for determining the principal amount payable at
<PAGE>
Maturity, a historical comparison of the relative value, rate or price of the
specified index and the face amount of the Indexed Note and any additional tax
considerations will be described in the applicable Pricing Supplement.
Notes which are issued at a price lower than the principal
amount thereof and which provide that upon redemption or acceleration of the
Maturity thereof an amount less than the principal thereof shall become due and
payable are referred to herein as "Original Issue Discount Notes". For special
provisions relating to Original Issue Discount Notes and other Notes issued at a
discount for tax purposes, see the section entitled "United States Taxation --
Original Issue Discount" in the Prospectus Supplement.
Unless otherwise indicated in the applicable Pricing
Supplement, the Notes will be denominated in U.S. dollars and payments of
principal of and any premium and interest on the Notes will be made in U.S.
dollars in the manner indicated in the Prospectus and the Prospectus Supplement.
Notes denominated in one or more currencies or currency units other than U.S.
dollars are referred to herein as "Foreign Currency Notes". For special
provisions relating to Foreign Currency Notes, see the sections entitled
"Special Provisions Relating to Foreign Currency Notes" in the Prospectus
Supplement . Specific information concerning the foreign currency or currency
unit in which a particular Foreign Currency Note is denominated, including
historical exchange rates and a description of the currency and any exchange
controls, shall be contained in a Pricing Supplement to the Prospectus
Supplement reflecting the terms of such Note.
Notes which provide that amounts payable by the Company in
respect of principal of or any premium or interest on the Notes shall be
determined by reference to the value, rate or price of one or more specified
indices, are referred to herein as "Indexed Notes". Specific information
pertaining to the method for determining the principal amounts payable, a
historical comparison of the value, rate or price of the specified index,
indices and the face amount of the Indexed Note and certain additional tax
considerations will be described in the applicable Pricing Supplement.
Administrative procedures and specific terms of the offering
are explained below. Part I indicates procedures applicable to all Notes; Part
II indicates specific procedures for Certificated Notes; and Part III indicates
specific procedures for Book-Entry Notes. Administrative and record-keeping
responsibilities will be handled for the Company by its Treasury Department. The
Company will advise the Distributors in writing of those persons handling
administrative responsibilities with whom the Distributors are to communicate
regarding offers to purchase Notes and the details of their delivery.
C-2
<PAGE>
PART I: PROCEDURES APPLICABLE TO ALL NOTES
- ------------------------------------------
Issue Date
- ----------
Each Note will be dated the date of its authentication. Each
Note will also bear an original issue date (the "Issue Date") which, with
respect to any such Note (or portion thereof), shall mean the date of its
original issuance and shall be specified therein. The Issue Date will remain the
same for all Notes subsequently issued upon transfer, exchange or substitution
of a Note, regardless of their dates of authentication.
Price to Public
- ---------------
Except as otherwise specified in a Pricing Supplement, each
Note will be issued at 100% of principal amount.
Maturities; Minimum Purchase;
- -----------------------------
Each Note will mature on a date, selected by the purchaser and
agreed to by the Company, which will be at least nine months from its Issue
Date. The minimum aggregate amount of Notes which may be offered to any
purchaser will be $100,000.
Interest Payments
- -----------------
Interest on each interest-bearing Note will be calculated and
paid in the manner described in such Note and in the Prospectus Supplement and
the applicable Pricing Supplement. Unless otherwise set forth therein, interest
on Fixed Rate Notes (including interest for partial periods) will be calculated
on the basis of a 360-day year of twelve 30-day months and will not accrue on
the 31st day of any month. Interest on Floating Rate Notes, except as otherwise
set forth therein, will be calculated on the basis of actual days elapsed and a
year of 360 days, except that in the case of a Floating Rate Note for which the
Base Rate is the Treasury Rate, interest will be calculated on the basis of the
actual number of days in the year.
On the fifth Market Day immediately preceding each Interest
Payment Date, the Trustee will furnish the Company with the total amount of
interest payments (whether in U.S. dollars or other currencies or currency
units) to be made on such Interest Payment Date. The Trustee will provide
monthly, to the Company's Treasury Department, a list of the principal and any
premium and interest to be paid on Notes maturing in the next succeeding month.
The Trustee will assume responsibility for withholding taxes on interest paid as
required by law.
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<PAGE>
Redemption/Repayment
- --------------------
If indicated in the applicable Pricing Supplement, the Notes
of a particular tenor will be subject to redemption in whole or in part (subject
to applicable minimum denominations), at the option of the Company on and after
an initial redemption date as set forth in the applicable Pricing Supplement and
in the applicable Note. The redemption price will be set forth in the applicable
Pricing Supplement and in the applicable Note.
If indicated in the applicable Pricing Supplement, the Notes
of a particular tenor will be subject to repayment at the option of the Holders
thereof in accordance with the terms of the Notes on a repayment date as set
forth in the applicable Pricing Supplement and in the applicable Note. The
repayment date or dates and repayment price will be set forth in the applicable
Pricing Supplement and in the applicable Note. The applicable Pricing Supplement
will also indicate whether a Note is subject to an optional extension beyond its
Stated Maturity or whether the term of all or any portion of a Note may be
extended beyond its initial Stated Maturity Date.
Procedures for Establishing the Terms of the Notes
- --------------------------------------------------
The Company and the Distributors will discuss from time to
time the price of and the rates to be borne by the Notes that may be sold as a
result of the solicitation of offers by the Distributors. Once any Distributor
has recorded any indication of interest in Notes upon certain terms, and
communicated with the Company, if the Company plans to accept an offer to
purchase Notes upon such terms, it will prepare a Pricing Supplement to the
Prospectus, as then amended or supplemented, reflecting the terms of such Notes
and, after approval from the Distributors, will arrange to have the Pricing
Supplement filed with, or transmitted by a means reasonably calculated to result
in filing with, the Securities and Exchange Commission (the "Commission") via
the Commission's Edgar System pursuant to Rule 424 under the Securities Act of
1933, as amended (the "Act").* The Company will supply at least 10 copies of the
Prospectus, as then amended or supplemented, and bearing such Pricing
Supplement, to the Distributor who presented the offer (the "Presenting
Distributor"). No settlements with respect to Notes upon such terms may occur
prior to such transmitting or filing and the Distributors will not, prior to
such transmitting or filing, mail confirmations to customers who have offered to
purchase Notes upon such terms. After such transmitting or filing, sales,
mailing of confirmations and settlements may occur with respect to Notes upon
such terms, subject to the provisions of "Delivery of Prospectus" below.
- -------------------
* If clause (b)(3) of Rule 424 is applicable, such filing shall be made
no later than the fifth business day following the earlier of the date
of determination of the settlement information described below or the
date such Pricing Supplement is first used. If clause (b)(2) or (b)(5)
of Rule 424 is applicable, such filing shall be made no later than the
second business day following the earlier of the date of determination
of the settlement information or the date such Pricing Supplement is
first used.
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<PAGE>
Pricing Supplements delivered to the Distributors will be
sent:
if sent to _________________________:
if sent to _________________________:
If the Company decides to post rates and a decision has been
reached to change interest rates, the Company will promptly notify each
Distributor. Each Distributor will forthwith suspend solicitation of purchases.
At that time, the Distributors will recommend and the Company will establish
rates to be so "posted." Following establishment of posted rates and prior to
the transmitting or filing described in the preceding paragraph, the
Distributors may only record indications of interest in purchasing Notes at the
posted rates. Once any Distributor has recorded any indication of interest in
Notes at the posted rates and communicated with the Company, if the Company
plans to accept an offer at the posted rate, it will prepare a Pricing
Supplement reflecting such posted rate and, after approval from the
Distributors, will arrange to have copies of the Pricing Supplement, filed with,
or transmitted by means reasonably calculated to result in filing with, the
Commission via the Commission's Edgar System pursuant to Rule 424(b) under the
Act and will supply at least 10 copies of the Prospectus, as then amended or
supplemented, and bearing such Pricing Supplement, to the Presenting
Distributor. No settlements at the posted rates may occur prior to such
transmitting or filing and the Distributors will not, prior to such transmitting
or filing, mail confirmations to customers who have offered to purchase Notes at
the posted rates. After such transmitting or filing, sales, mailing of
confirmations and settlements may resume, subject to the provisions of "Delivery
of Prospectus" below.
Outdated Pricing Supplements, and copies of the Prospectus to
which they are attached (other than those retained for files), will be
destroyed.
C-5
<PAGE>
Suspension of Solicitation: Amendment or Supplement
- ---------------------------------------------------
As provided in the Distribution Agreement, the Company may
instruct the Distributors to suspend solicitation of offers to purchase at any
time, and upon receipt of at least one Market Day's prior notice from the
Company, the Distributors will each forthwith suspend solicitation until such
time as the Company has advised them that solicitation of offers to purchase may
be resumed.
If the Distributors receive the notice from the Company
contemplated by Section 3(b) or 4(b) of the Distribution Agreement, they will
promptly suspend solicitation and will only resume solicitation as provided in
the Distribution Agreement. If the Company is required, pursuant to Section 4(b)
of the Distribution Agreement, to prepare an amendment or supplement, it will
promptly furnish each Distributor with the proposed amendment or supplement; if
the Company decides to amend or supplement the Registration Statement or the
Prospectus relating to the Notes, it will promptly advise each Distributor and
will furnish each Distributor with the proposed amendment or supplement in
accordance with the terms of the Distribution Agreement. The Company will
promptly file such amendment or supplement with the Commission, provide the
Distributors with copies of any such amendment or supplement, confirm to the
Distributors that such amendment or supplement has been filed with the
Commission and advise the Distributors that solicitation may be resumed.
Any such suspension shall not affect the Company's obligations
under the Distribution Agreement; and in the event that at the time the Company
suspends solicitation of offers to purchase there shall be any offers already
accepted by the Company outstanding for settlement, the Company will have the
sole responsibility for fulfilling such obligations. The Company will in
addition promptly advise the Distributors and the Trustee if such offers are not
to be settled and if copies of the Prospectus as in effect at the time of the
suspension may not be delivered in connection with the settlement of such
offers.
Acceptance of Offers
- --------------------
Each Distributor will promptly advise the Company, at its
option orally or in writing, of each reasonable offer to purchase Notes received
by it, other than those rejected by such Distributor. Each Distributor may, in
its discretion reasonably exercised, without notice to the Company, reject any
offer received by it, in whole or in part. The Company will have the sole right
to accept offers to purchase Notes and may reject any such offer, in whole or in
part. If the Company accepts or rejects an offer, in whole or in part, the
Company will promptly so notify the Presenting Distributor.
Confirmation
- ------------
For each accepted offer, the Presenting Distributor will issue
a confirmation, in writing, to the purchaser, with a copy to the Company's
Treasury Department, setting forth the
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<PAGE>
Purchase Information (as defined under II below with respect to Certificated
Notes and III below with respect to Book-Entry Notes) and delivery and payment
instructions; provided, however, that, in the case of the confirmation issued to
the purchaser, no confirmation shall be delivered to the purchaser prior to the
delivery of the Prospectus referred to below.
Determination of Settlement Date
- --------------------------------
The receipt of immediately available funds by the Company in
payment for a Note and (i) in the case of Certificated Notes, the authentication
and issuance of such Note and (ii) in the case of Book-Entry Notes, entry by the
Presenting Distributor of an SDFS deliver order through DTC's Participant
Terminal System to credit such Note to the account of a Participant purchasing,
or acting for the purchaser of, such Note, shall, with respect to such Note,
constitute "settlement." All offers accepted by the Company will be settled on
the third Market Day next succeeding the date of acceptance, unless otherwise
agreed by the purchaser and the Company. The settlement date shall be specified
upon receipt of an offer to purchase. Prior to 3:00 p.m., New York City time, on
the Market Day prior to the settlement date, the Company will instruct the
Trustee to authenticate and deliver the Notes no later than 2:15 p.m., New York
City time, on the settlement date except as to Book-entry Notes described below.
Delivery of Prospectus
- ----------------------
A copy of the Prospectus as most recently amended or
supplemented on the date of delivery thereof (except as provided below) must be
delivered to a purchaser prior to or together with the earlier of the delivery
of (i) the written confirmation provided for above, and (ii) any Note purchased
by such purchaser. (For this purpose, entry of an SDFS deliver order through
DTC's Participant Terminal System to credit a Note to the account of a
Participant purchasing, or acting for the purchaser of, a Note shall be deemed
to constitute delivery of such Note.) The Company shall ensure that the
Presenting Distributor receives copies of the Prospectus and each amendment or
supplement thereto (including appropriate Pricing Supplements) in such
quantities and within such time limits as will enable the Presenting Distributor
to deliver such confirmation or Note to a purchaser as contemplated by these
procedures and in compliance with the first sentence of this paragraph. If,
since the date of acceptance of a purchaser's offer, the Prospectus shall have
been supplemented solely to reflect any sale of Notes on terms different from
those agreed to between the Company and such purchaser or a change in posted
rates not applicable to such purchaser, such purchaser shall not receive the
Prospectus as supplemented by such new supplement, but shall receive the
Prospectus as supplemented to reflect the terms of the Notes being purchased by
such purchaser and otherwise as most recently amended or supplemented on the
date of delivery of the Prospectus.
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<PAGE>
Authenticity of Signatures
- --------------------------
The Company will cause the Trustee to furnish the Distributors
from time to time with the specimen signatures of each of the Trustee's
officers, employees or agents who have been authorized by the Trustee to
authenticate Notes, but no Distributor will have any obligation or liability to
the Company or the Trustee in respect of the authenticity of the signature of
any officer, employee or agent of the Company or the Trustee on any Note or the
Global Note (as defined in Part III).
Advertising Expenses
- --------------------
The Company will determine with the Distributors the amount of
advertising that may be appropriate in offering the Notes. Advertising expenses
will be paid by the Company.
Market Day
- ----------
"Market Day" means (a) with respect to any Note (unless
otherwise provided in this definition), any day that is a Business Day in The
City of New York, (b) with respect to LIBOR Notes only, any Business Day in New
York that is also a London Market Day, (c) with respect to Foreign Currency
Notes (other than Foreign Currency Notes denominated in European Currency Units
("ECUs")) only, any day that is a Business Day both in New York and in the
principal financial center in the country of the Specified Currency and (d) with
respect to Foreign Currency Notes denominated in ECU, any date that is a
Business Day in The City of New York that is designated as an ECU settlement day
by the ECU Banking Association in Paris or otherwise generally regarded in the
ECU interbank market as a day in which payments in ECU are made.
Trustee Not to Risk Funds
- -------------------------
Nothing herein shall be deemed to require the Trustee to risk
or expend its own funds in connection with any payment made to the Company, the
Distributors, DTC or any Holder of a Note, it being understood by all parties
that payments made by the Trustee to the Company, the Distributors, DTC or any
Holder of a Note shall be made only to the extent that funds are provided to the
Trustee for such purpose.
PART II: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
- ---------------------------------------------------------
Form and Denominations
- ----------------------
The Certificated Notes shall be issued only in fully
registered form in denominations of $1,000 and integral multiples of $1,000, or,
in the case of Foreign Currency Notes, in such minimum denomination, not less
than the equivalent of $1,000, and such greater
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<PAGE>
denomination or denominations in excess thereof, as shall be set forth in the
applicable Pricing Supplement.
Transfers and Exchanges
- -----------------------
A Certificated Note may be presented for transfer or exchange
at the principal corporate trust office of the Trustee in The City of New York.
Certificated Notes will be exchangeable for other Certificated Notes of any
authorized denominations and of like tenor and in a like aggregate principal
amount, upon surrender of the Certificated Notes to be exchanged at the
corporate trust office of the Trustee. Certificated Notes will not be
exchangeable for Book-Entry Notes.
Payment at Maturity
- -------------------
Upon presentation of each Certificated Note at Maturity, the
Trustee (or a duly authorized Paying Agent) will pay the principal amount
thereof, together with any premium and accrued interest due at Maturity. Such
payment will be made in immediately available funds, provided that the
Certificated Note is presented in time for the Paying Agent to make payment in
such funds in accordance with its normal procedures. The Company will provide
the Trustee (and any Paying Agent) with funds available for immediate use for
such purpose. Certificated Notes presented at Maturity will be canceled by the
Trustee as provided in the Indenture. For special provisions relating to Foreign
Currency Notes, see the section entitled "Special Provisions Relating to Foreign
Currency Notes" in the Prospectus Supplement.
Details for Settlement
- ----------------------
For each offer for Certificated Notes accepted by the Company,
the Presenting Distributor shall communicate to the Company's Treasury
Department prior to 3:00 p.m., New York City time, on the Market Day preceding
the settlement date, by telephone, telex, facsimile transmission or other
acceptable means, the following information (the "Purchase Information"):
1. Exact name in which the Note or Notes are to be
registered ("registered owner").
2. Exact address of registered owner and, if different,
the address for delivery, notices and payment of
principal and any premium and interest.
3. Taxpayer identification number of registered owner.
4. Principal amount of each Note in authorized
denominations to be delivered to registered owner.
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<PAGE>
5. Stated Maturity of each Note.
6. In the case of Fixed Rate Notes, the interest rate of
each Note, whether such Note is an Amortizing Note
and, if so, the amortization schedule; in the case of
Floating Rate Notes or Indexed Notes, the interest
rate formula, the Spread or Spread Multiplier (if
any), the maximum or minimum interest rate limitation
(if any), the Calculation or Determination Agent, the
Calculation Dates, the Initial Interest Rate, the
Interest Payment Dates, the Regular Record Dates, the
Index Maturity, the Interest Determination Dates and
the Interest Reset Dates, in each case, to the extent
applicable with respect to each Note.
7. Redemption and/or repayment provisions, if any, of
each Note.
8. Trade date of each Note.
9. Settlement date (Issue Date) of each Note.
10. Presenting Distributor's commission (to be paid in
the form of a discount from the proceeds remitted to
the Company upon settlement).
11. Price.
12. Currency or currency unit in which each Note is to be
denominated and exchange rate applicable to purchase
Foreign Currency Notes to be paid for in U.S.
dollars.
13. Original issue discount, if any.
14. Whether the Company has the option to extend the
Stated Maturity of the Note and if so, the Extension
Period, the Election Dates and the Final Maturity of
such Note.
15. Whether the Note is a Renewable Note, and if it is a
Renewable Note, the Initial Maturity Date and the
Final Maturity Date.
16. In the case of an Indexed Note, any additional
information relevant to determination of the amounts
of principal (and premium, if any) or interest
payable.
C-10
<PAGE>
17. Any additional applicable terms of each Note.
The Issue Date of, and the settlement date for, Certificated
Notes will be the same. Before accepting any offer to purchase Certificated
Notes to be settled in less than three Market Days, the Company shall verify
that the Trustee will have adequate time to prepare and authenticate the Notes.
Immediately after receiving the details for each offer for
Certificated Notes from the Presenting Distributor, the Company will, after
recording the details and any necessary calculations, communicate the Purchase
Information by telephone, telex, facsimile transmission or other acceptable
means, to the Trustee. Each such instruction given by the Company to the Trustee
shall constitute a continuing representation and warranty by the Company to the
Trustee and the Distributors that (i) the issuance and delivery of such Notes
have been duly and validly authorized by the Company and (ii) such Notes, when
completed, authenticated and delivered, shall constitute the valid and legally
binding obligation of the Company. The Trustee will assign to and enter on each
Note a transaction number.
The Company will deliver to the Trustee a pre-printed four-ply
packet for such Certificated Note, which packet will contain the following
documents in forms that have been approved by the Company, the Distributors and
the Trustee:
1. Certificated Note with customer confirmation.
2. Stub One - For the Trustee.
3. Stub Two - For the Presenting Distributor.
4. Stub Three - For the Company.
Prior to 2:00 p.m., New York City time, on the Settlement
Date, the Trustee will complete such Certificated Note and will authenticate
such Certificated Note and deliver it (with the confirmation) and Stubs One and
Two to such Distributor, and such Distributor will acknowledge receipt of the
Note by stamping or otherwise marking Stub One and returning it to the Trustee.
The Trustee will send Stub Three to the Company by first-class mail.
Settlement; Note Deliveries and Cash Payment
- --------------------------------------------
The Company will deliver to the Trustee at the commencement of
the program and from time to time thereafter a supply of duly executed
Certificated Notes with pre-printed control numbers adequate to implement the
program. Upon the receipt of appropriate documentation and instructions from the
Company in accordance with the applicable Officers' Certificate and verification
thereof, the Trustee will cause the Certificated Notes to be completed and
authenticated and hold the Certificated Notes for delivery against payment.
C-11
<PAGE>
The Trustee will deliver the Certificated Notes (with the
confirmation) and Stubs One and Two, in accordance with instructions from the
Company, to the Presenting Distributor. If the Distributor is placing such
Certificated Notes as agent, such delivery will be made for the benefit of the
purchaser only against receipt and the Presenting Distributor will acknowledge
receipt of the Notes through a broker's receipt. Such delivery will be made only
against such acknowledgement of receipt and evidence that instructions have been
given for payment to the Company at such account of the Company as it may
specify in writing, in immediately available funds, of an amount equal to the
principal amount of such Notes, less the applicable commission. If the
Presenting Distributor in any instance advances its own funds, the Company shall
not use any of the proceeds of such sale to acquire securities.
If the Distributor is placing such Certificated Notes as
agent, the Presenting Distributor, as the Company's agent, will deliver the
Notes (with the written confirmation provided for above) to the purchaser
thereof against payment therefor by such purchaser in immediately available
funds.
Delivery of any confirmation or Note to a purchaser thereof by
a Distributor, acting as agent or principal, will be made in compliance with
"Delivery of Prospectus" in Part I above.
Certificated Notes delivered to the Distributors will be sent:
If sent to _________________________
If sent to _________________________
Fails (Distributor Acting as Agent)
- -----------------------------------
In the event that a purchaser shall fail to accept delivery of
and make payment for a Certificated Note on the settlement date, the Presenting
Distributor will notify the Trustee and the
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<PAGE>
Company, by telephone, confirmed in writing. If such Certificated Note has been
delivered to the Presenting Distributor, as the Company's agent, the Presenting
Distributor shall return such Note to the Trustee. If funds have been advanced
for the purchase of such Note, the Trustee will, immediately upon receipt of
such Note, debit the account of the Company for the amount so advanced and the
Trustee shall refund the payment previously made by the Presenting Distributor
in immediately available funds. Such payments will be made on the settlement
date, if possible, and in any event not later than the Market Day following the
settlement date. If the fail shall have occurred for any reason other than the
failure of the Presenting Distributor to provide the Purchase Information to the
Company or to provide a confirmation to the purchaser, the Company will
reimburse the Presenting Distributor on an equitable basis for its loss of the
use of funds during the period when the funds were credited to the account of
the Company.
Immediately upon receipt of the Certificated Note in respect
of which the fail occurred, the Trustee will make appropriate entries in its
records to reflect the fact that the Note was never issued and the Note will be
canceled and disposed of as provided in the Indenture.
PART III: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES
- --------------------------------------------------------
In connection with the qualification of the Book-Entry Notes
for eligibility in the book-entry system maintained by DTC, the Trustee will
perform the custodial, document control and administrative functions described
below, in accordance with its obligations under a Letter of Representations (the
"Letter") from the Company and the Trustee to DTC dated as of April 9, 1997, and
a Medium-Term Note Certificate Agreement between the Trustee and DTC dated as of
August 17, 1989, and its obligations as a participant in DTC, including DTC's
Same-Day Funds Settlement System ("SDFS").
Form, Denominations and Registration
- ------------------------------------
All Book-Entry Notes of the same tenor and having the same
Issue Date, will be represented initially by a single note (a "Global Note") in
fully registered form without coupons. Unless otherwise stated in the applicable
Pricing Supplement, Book-Entry Notes will represent Notes denominated in U.S.
dollars. Global Notes will be issued in denominations of $1,000 and integral
multiples thereof. Global Notes will be denominated in principal amounts not in
excess of $150,000,000. If one or more Book-Entry Notes having an aggregate
principal amount in excess of $150,000,000 would, but not for the preceding
sentence, be represented by a single Global Note, then one Global Note will be
issued to represent each $150,000,000 principal amount of such Book-Entry Note
or Notes and an additional Global Note will be issued to represent any remaining
principal amount of such Book-Entry Note or Notes. In such a case, each of the
Global Notes representing such Book-Entry note or Notes shall be assigned the
same CUSIP number. Each Global Note will be registered in the name of Cede &
Co., as nominee for DTC, on the Security Register maintained under the
Indenture. The beneficial owner of a Book-Entry Note (or one or more indirect
participants in DTC designated by such owner) will designate one or more
participants in DTC (with respect to such Note, the "Participants") to act as
agent or
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<PAGE>
agents for such owner in connection with the book-entry system maintained by
DTC, and DTC will record in book-entry form, in accordance with instructions
provided by such Participants, a credit balance with respect to such Note in the
account of such Participants. The ownership interest of such beneficial owner in
such Note will be recorded through the records of such Participants or through
the separate records of such Participants and one or more indirect participants
in DTC.
CUSIP Numbers
- -------------
The Company has arranged with the CUSIP Service Bureau of
Standard & Poor's Corporation (the "CUSIP Service Bureau") for the reservation
of a series of CUSIP numbers (including tranche numbers), such series consisting
of approximately 900 CUSIP numbers and relating to Global Notes representing
Book-Entry Notes. The Company has obtained from the CUSIP Service Bureau a
written list of such reserved CUSIP numbers and has delivered it to the Trustee
and DTC. The Trustee will assign CUSIP numbers serially to Global Notes as
described below under "Details for Settlement." DTC will notify the CUSIP
Service Bureau periodically of the CUSIP numbers that the Trustee has assigned
to Global Notes. The Trustee will notify the Company at the time when fewer than
100 of the reserved CUSIP numbers remain unassigned to the Global Notes; and the
Company will reserve additional CUSIP numbers for assignment to Global Notes
representing Book-Entry Notes. Upon obtaining such additional CUSIP numbers, the
Company shall deliver a list of such additional CUSIP numbers to the Trustee and
DTC.
Transfers and Exchanges for the Purpose of Consolidation
- --------------------------------------------------------
Transfers of a Book-Entry Note will be accomplished by book
entries made by DTC and, in turn, by Participants (and, in certain cases, one or
more indirect participants in DTC) acting on behalf of beneficial transferors
and transferees of such Note.
The Trustee may upon notice to the Company deliver to DTC and
the CUSIP Service Bureau at any time a written notice (a copy of which shall be
attached to the Global Note resulting from such exchange) specifying (i) the
CUSIP numbers of two or more outstanding Global Notes that represent Book-Entry
Notes of the same tenor and having the same Issue Date, and for which interest
(if any) has been paid to the same date, (ii) a date occurring at least thirty
days after such written notice is delivered and at least thirty days before the
next Interest Payment Date (if any) for such Notes, on which such Global Notes
shall be exchanged for a single replacement Global Note and (iii) a new CUSIP
number to be assigned to such replacement Global Note. Upon receipt of such a
notice, DTC will send to its Participants (including the Trustee) a written
reorganization notice to the effect that such exchange will occur on such date.
Prior to the specified exchange date, the Trustee will deliver to the CUSIP
Service Bureau a written notice setting forth such exchange date and the new
CUSIP number and stating that, as of such exchange date, the CUSIP numbers of
the Global Notes to be exchanged will no longer be valid. On the specified
exchange date, the Trustee will exchange such Global Notes for a single Global
Note bearing the new CUSIP number and the CUSIP numbers of the exchanged Global
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<PAGE>
Notes will, in accordance with CUSIP Service Bureau procedures, be canceled and
not immediately reassigned.
Notice of Interest Payment Dates and Regular Record Dates
- ---------------------------------------------------------
To the extent then known, on the first Market Day of March,
June, September, and December of each year, the Trustee will deliver to the
Company and DTC a written list of Record Dates and Interest Payment Dates that
will occur with respect to Floating Rate Book-Entry Notes during the six-month
period beginning on such first Market Day.
Payments of Principal and Interest
- ----------------------------------
(a) Payments of Interest Only. Promptly after each Regular
Record Date, the Trustee will deliver to the Company and DTC a written notice
specifying by CUSIP number the amount of interest to be paid on each Global Note
on the following Interest Payment Date (other than an Interest Payment Date
coinciding with Maturity) and the total of such amounts. The Company will
confirm with the Trustee the amount payable on each Global Note on such Interest
Payment Date. DTC will confirm the amount payable on each Global Note on such
Interest Payment Date by reference to the daily or weekly bond reports published
by Standard & Poor's Corporation. The Company will pay to the Trustee the total
amount of interest due on such Interest Payment Date (other than at Maturity),
and the Trustee will pay such amount to DTC at the times and in the manner set
forth below under "Manner of Payment".
(b) Payments at Stated Maturity. On or about the first Market
Day of each month, the Trustee will deliver to the Company and DTC a written
list of principal and interest to be paid on each Global Note maturing in the
following month. The Company, the Trustee and DTC will confirm the amounts of
such principal and interest payments with respect to each such Global Note on or
about the fifth Market Day preceding the Stated Maturity of such Global Note.
The Company will pay to the Trustee, as the paying agent, the principal amount
of such Global Note, together with interest due at such Stated Maturity. Upon
surrender of a Global Note, the Trustee will pay such amounts to DTC at the
times and in the manner set forth below under "Manner of Payment". If any Stated
Maturity of a Global Note representing Book-Entry Notes is not a Market Day, the
payment due on such day shall be made on the next succeeding Market Day and no
interest shall accrue on such payment for the period from and after such Stated
Maturity. Promptly after payment to DTC of the principal and any interest due at
the Stated Maturity of such Global Note, the Trustee will cancel such Global
Note and return such Global Note to the Company in accordance with the terms of
the Indenture.
(c) Payment upon Redemption. The Trustee will comply with the
terms of the Letter with regard to redemptions or repayments of the Book-Entry
Notes. In the case of Book-Entry Notes stated by their terms to be redeemable
prior to Stated Maturity, [at least 60 calendar days before the date fixed for
redemption] (the "Redemption Date"), the Company shall notify the Trustee of the
Company's election to redeem such Book-Entry Notes in whole or in part and the
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<PAGE>
principal amount of such Book-Entry Notes to be so redeemed. At least 30
calendar days but not more than 60 calendar days prior to the Redemption Date,
the Trustee shall notify DTC of the Company's election to redeem such Book-Entry
Notes. The Trustee shall notify the Company and DTC of the CUSIP numbers of the
particular Book-Entry Notes to be redeemed either in whole or in part. The
Company, the Trustee and DTC will confirm the amounts of such principal and any
premium and interest payable with respect to each such Book-Entry Note on or
about the fifth Market Day preceding the Redemption Date of such Book-Entry
Note. The Company will pay the Trustee, in accordance with the terms of the
Indenture, the amount necessary to redeem each such Book-Entry Note or the
applicable portion of each such Book-Entry Note. The Trustee will pay such
amount to DTC at the times and in the manner set forth herein. Promptly after
payment to DTC of the amount due on the Redemption Date for such Book-Entry
Note, the Trustee shall cancel any such Book-Entry Note redeemed in whole and
shall deliver it to the Company with an appropriate debit advice. If a Global
Note is to be redeemed in part, the Trustee will cancel such Global Note and
issue a Global Note which shall represent the remaining portion of such Global
Note and shall bear the CUSIP number of the canceled Global Note.
(d) Manner of Payment. The total amount of any principal and
interest due on Global Notes on any Interest Payment Date or at Maturity shall
be paid by the Company to the Trustee in immediately available funds on such
date available for use as of 9:30 A.M. New York City time. The Company will make
such payment on such Global Notes by wire transfer to the Trustee. The Company
will confirm instructions regarding payment in writing to the Trustee. Prior to
1:00 p.m., New York City time, on each date of Maturity of a Book-Entry Note or
as soon as possible thereafter, the Trustee will pay by separate wire transfer
(using Fedwire message entry instructions in a form previously specified by DTC)
to an account at the Federal Reserve Bank of New York previously specified by
DTC in funds available for immediate use by DTC, each payment of principal
(together with interest thereon) due at Maturity on Book-Entry Notes. On each
Interest Payment Date, interest payment shall be made to DTC in same day funds
in accordance with existing arrangements between the Trustee and DTC.
Thereafter, on each such date, DTC will pay, in accordance with its SDFS
operating procedures then in effect, such amounts in funds available for
immediate use to the respective Participants in whose names the Book-Entry Notes
represented by such Global Notes are recorded in the book-entry system
maintained by DTC. NEITHER THE COMPANY NOR THE TRUSTEE SHALL HAVE ANY DIRECT
RESPONSIBILITY OR LIABILITY FOR THE PAYMENT BY DTC TO SUCH PARTICIPANTS OF THE
PRINCIPAL OF AND ANY PREMIUM AND INTEREST ON THE BOOK-ENTRY NOTES.
(e) Withholding Taxes. The amount of any taxes required under
applicable law to be withheld from any interest payment on a Book-Entry Note
will be determined and withheld by the Participant, indirect participant in DTC
or other person responsible for forwarding payments and materials directly to
the beneficial owner of such Note.
Details for Settlement
- ----------------------
For each offer for Book-Entry Notes accepted by the Company,
the Presenting Distributor shall communicate to the Company's Treasury
Department prior to 11:00 a.m., New
C-16
<PAGE>
York City time, on the first Market Day after the sale date (or on the sale date
if such sale is to be settled within one Market Day), by telephone, telex,
facsimile transmission or other acceptable means, the following information (the
"Purchase Information"):
1. Principal amount of the Notes.
2. Stated Maturity of the Notes.
3. In the case of Fixed Rate Notes, the interest rate of
the Notes and whether such Note is an Amortizing
Note, and, if so, the amortization schedule; in the
case of Floating Rate Notes or Indexed Notes,
interest rate formula, the Spread or Spread
Multiplier (if any), the maximum or minimum Interest
rate limitation (if any), the Calculation or
Determination Agent, the Calculation Dates, the
Initial Interest Rate, the Interest Payment Dates,
the Regular Record Dates, the Index Maturity, the
Interest Determination Dates and the Interest Reset
Dates, in each case, to the extent applicable with
respect to the Notes.
4. Redemption and/or repayment provisions, if any, of
the Notes.
5. Trade date of the Notes.
6. Settlement date (Issue Date) of the Notes.
7. Presenting Distributor's commission (to be paid in
the form of a discount from the proceeds remitted to
the Company upon settlement).
8. Price.
9. Currency or currency unit in which the Notes are to
be denominated and exchange rate applicable to
purchase Foreign Currency Notes payable in U.S.
dollars.
10. Original issue discount, if any.
11. Whether the Company has the option to extend the
Stated Maturity of the Note and if so, the Extension
Period, the Election Dates and the Final Maturity of
such Note.
C-17
<PAGE>
12. Whether the Note is a Renewable Note, and if it is a
Renewable Note, the Initial Maturity Date and the
Final Maturity Date.
13. In the case of an Indexed Note, any additional
information relevant to determination of the amounts
of principal (and premium, if any) or interest
payable.
14. Any additional applicable terms of the Notes.
The Issue Date of, a-Entry Notes will be the same.
Before accepting any offer to purchase Book-Entry Notes to be settled in less
than three Market Days, the Company shall verify that the Trustee will have
adequate time to prepare and authenticate the Global Notes.
If the initial interest rate for a Floating Rate Book-Entry
Note has not been determined at the time that the foregoing procedure is
completed, the procedures described in the following two paragraphs shall be
completed as soon as such rate has been determined but no later than 12:00 Noon
and 2:00 p.m., New York City time, as the case may be, on the Market Day before
the settlement date.
Immediately after receiving the details for each offer for
Book-Entry Notes from the Presenting Distributor and in any event no later than
12:00 Noon, New York City time, on the first Market Day after the sale date (or
on the sale date if such sale is to be settled within one Market Day), the
Company will, after recording the details and any necessary calculations,
communicate the Purchase Information by telephone, telex, facsimile transmission
or other acceptable means, to the Trustee. Each such instruction given by the
Company to the Trustee shall constitute a continuing representation and warranty
by the Company to the Trustee and the Distributors that (i) the issuance and
delivery of such Note have been duly and validly authorized by the Company and
(ii) such Note, when duly issued, shall constitute the valid and legally binding
obligation of the Company.
Immediately after receiving the Purchase Information from the
Company and in any event no later than 2:00 P.M., New York City time, on the
first Market Day after the sale date (or on the sale date if such sale is to be
settled within one Market Day), the Trustee will assign a CUSIP number to the
Global Note representing such Book-Entry Note and will telephone the Company and
advise the Company of such CUSIP number and, as soon thereafter as practicable,
the Company shall notify the Presenting Distributor of such CUSIP number. The
Trustee will enter a pending deposit message through DTC's Participant Terminal
System, providing settlement information to DTC (which shall route such
information to Standard & Poor's Corporation). Standard & Poor's Corporation
will use the information received in the pending deposit message to include the
amount of any interest payable and certain other information regarding the
related Global Note in the appropriate daily or weekly bond report published by
Standard & Poor's Corporation.
C-18
<PAGE>
Settlement; Global Note Delivery and Cash Payment
- -------------------------------------------------
The Company will deliver to the Trustee at the commencement of
the program and from time to time thereafter a supply of duly executed Global
Notes with pre-printed control numbers adequate to implement the program. Upon
the receipt of appropriate documentation and instructions from the Company in
accordance with the applicable Officers' Certificate and verification thereof,
the Trustee will cause the Global Note to be completed and authenticated and
hold the Global Note for delivery against payment.
Prior to 10:00 a.m., New York City time, on the Settlement
Date, the Trustee will enter instructions through DTC's Participant Terminal
System, using the function MT II, and DTC will credit such Note to the Trustee's
participant account at DTC. Prior to 2:00 p.m., New York City time, on the
Settlement Date, the Trustee will enter an SDFD deliver order through DTC's
Participant Terminal System instructing DTC to (i) debit such Note to the
Trustee's participant account and credit such Note to the Presenting
Distributor's participant account and (ii) debit the Presenting Distributor's
settlement account and credit the Trustee's settlement account for an amount
equal to the price of such Note less such Distributor's commission (in
accordance with SDFS operating procedures in effect on the Settlement Date). The
entry of such a deliver order shall constitute a representation and warranty by
the Trustee to DTC that (i) the Global Note representing such Book-Entry Note
has been executed, delivered and authenticated and (ii) the Trustee is holding
such Global Note pursuant to the relevant Medium-Term Note Certificate Agreement
between the Trustee and DTC.
Prior to 2:00 p.m., New York City time, on the Settlement Date
unless the Presenting Distributor is the end purchaser of such Note, the
Presenting Distributor will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC (i) to debit such Note to such
Distributor's participant account and credit such Note to the Participant
accounts of the Participants with respect to such Note and (ii) to debit the
settlement accounts of such Participants and credit the settlement account of
such Distributor for an amount equal to the price of such Note (in accordance
with SDFS operating procedures in effect on the settlement date).
Transfers of funds are subject to extension in accordance with
any extension of Fedwire closing deadlines and in the other events specified in
the SDFS operating procedures in effect on the settlement date.
The Trustee, upon confirming receipt of such funds, will wire
transfer the amount transferred to the Trustee, in funds available for immediate
use, for the account of the Company, to account no. __________ at [name of
bank], [location of bank] (ABA No. __________).
Unless the Presenting Distributor is the end purchaser of such
Note, such Distributor will confirm the purchase of such Note to the purchaser
either by transmitting to the Participants with respect to such Note a
confirmation order or orders through DTC's institutional delivery system or by
mailing a written confirmation to such purchaser.
C-19
<PAGE>
Fails
- -----
If settlement of a Book-Entry Note is rescheduled or
cancelled, the Company shall notify the Trustee, and upon receipt of such
notice, the Trustee will deliver to DTC, through DTC's Participant Terminal
System, a cancellation message to such effect by no later than 2:00 p.m., New
York City time, on the Market Day immediately preceding the scheduled settlement
date.
If the Agent or Trustee has not entered an SDFS deliver order
with respect to a Book-Entry Note, then upon written request (which may be
evidenced by telecopy transmission) of the Company, the Trustee shall deliver to
DTC, through DTC's Participant Terminal System, as soon as practicable, but no
later than 2:00 p.m., New York City time, on any Market Day, a withdrawal
message instructing DTC to debit such Note to the Trustee's participant account.
DTC will process the withdrawal message, provided that the Trustee's participant
account contains a principal amount of the Global Note representing such Note
that is at least equal to the principal amount to be debited. If withdrawal
messages are processed with respect to all the Book-Entry Notes represented by a
Global Note, the Trustee will mark such Global Note "cancelled", make
appropriate entries in the Trustee's records and send such cancelled Global Note
to the Company. The CUSIP number assigned to such Global Note shall, in
accordance with CUSIP Service Bureau procedures, be cancelled and not
immediately reassigned. If withdrawal messages are processed with respect to one
or more, but not all, of the Book-Entry Notes represented by a Global Note, the
Trustee will exchange such Global Note for two Global Notes, one of which shall
represent such Book-Entry Note or Notes and shall be cancelled immediately after
issuance and the other of which shall represent the remaining Book-Entry Notes
previously represented by the surrendered Global Note and shall bear the CUSIP
number of the surrendered Global Note.
If the purchase price for any Book-Entry Note is not timely
paid to the Participants with respect to such Note by the beneficial purchaser
thereof (or a person, including an indirect participant in DTC, acting on behalf
of such purchaser), such Participants and, in turn, the Presenting Distributor
may enter an SDFS deliver order through DTC's Participant Terminal System
debiting such Note to such Distributor's participant account and crediting such
Note free to the participant account of the Trustee and shall notify the Trustee
and the Company thereof. Thereafter, the Trustee, (i) will immediately notify
the Company, once the Trustee has confirmed that such Note has been credited to
its participant account, and the Company shall immediately transfer by Fedwire
(in immediately available funds) to the Presenting Distributor an amount equal
to the price of such Note which was previously sent by wire transfer to the
account of the Company maintained at _______________, and (ii) the Trustee will
deliver the withdrawal message and take the related actions described in the
preceding paragraph. Such debits and credits will be made on the settlement
date, if possible, and in any event not later than 5:00 p.m. __________ time on
the following Market Day. If the fail shall have occurred for any reason other
than failure of the Presenting Distributor to provide the Purchase Information
to the Company or to provide a confirmation to the purchaser, the Company will
reimburse the
C-20
<PAGE>
Presenting Distributor on an equitable basis for its loss of the use of funds
during the period when the funds were credited to the account of the Company.
Notwithstanding the foregoing, upon any failure to settle with
respect to a Book- Entry Note, DTC may take any actions in accordance with its
SDFS operating procedures then in effect. In the event of a failure to settle
with respect to one or more, but not all, of the Book-Entry Notes to have been
represented by a Global Note, the Trustee will provide for the authentication
and issuance of a Global Note representing the other Book-Entry Notes to have
been represented by such Global Note and will make appropriate entries in its
records.
C-21
July 2, 1998
Arizona Public Service Company
400 North Fifth Street
Phoenix, Arizona 85004
Ladies and Gentlemen:
Reference is made to (a) your proposed offering of up to $400,000,000
of your Securities (the "Securities"), as contemplated by the combined
prospectus contained in the Registration Statement (the "Registration
Statement") on Form S-3 to be filed by you on July 2, 1998, with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act"), which Securities include (i) $350,000,000 of New Bonds, Senior Notes, or
Debt Securities (as such terms are defined in the Registration Statement), or
any combination thereof, to be registered pursuant to the Registration
Statement, (ii) $50,000,000 of New Bonds, Senior Notes, or Debt Securities, or
any combination thereof, previously registered under Registration No. 333-27551;
and (b) any registration statement registering additional Securities pursuant to
Rule 462(b) of the Act that relates to the Registration Statement (the "Rule
462(b) Registration Statement").
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such corporate records, agreements, and other
instruments, certificates, orders, opinions, correspondence with public
officials, certificates provided by your officers and representatives, and other
documents as we have deemed necessary or advisable for the purposes of rendering
the opinions set forth herein.
Based on the foregoing, it is our opinion that after (i) the
Registration Statement, and the Rule 462(b) Registration Statement, if
applicable, shall have become effective, (ii) all required regulatory approvals
have been obtained, and (iii) you shall have entered into one or more
underwriting or distribution agreements with respect to the Securities then to
be offered and the initial public offering price for each of such Securities and
the discounts therefrom and commission therefor shall have been determined in
accordance with such underwriting or distribution agreements, pursuant to the
authorization of your Board of Directors and the applicable order of the Arizona
Corporation Commission, then, when (i) the Securities have been issued, sold,
executed, authenticated, and delivered, and (ii) the purchase price therefor has
been paid to you as contemplated in the Registration Statement and the Rule
462(b) Registration Statement, if applicable
<PAGE>
Arizona Public Service Company
July 2, 1998
Page 2
(including the Exhibits thereto), and in any relevant amendment thereto or in
any Rule 424 supplement to the prospectus contained in the Registration
Statement, the Securities will be validly issued and will constitute legal,
valid, and binding obligations of you except as the same may be limited by (a)
general principles of equity or by bankruptcy, insolvency, reorganization,
arrangement, moratorium, or other laws or equitable principles relating to or
affecting the enforcement of creditors' rights generally, or by equitable
principles that limit the right to specific performance or otherwise limit
remedial action or the enforcement of the security provided for the Securities,
(b) the necessity for compliance with the statutory procedural requirements
governing the exercise of remedies by a secured creditor, and (c) the
qualification that certain waivers, procedures, remedies, and other provisions
of the Securities may be unenforceable under or limited by the law of the State
of Arizona; however, such law does not in our opinion substantially prevent the
practical realization of the benefits thereof. In giving the above opinion, we
have assumed that the law of the jurisdiction or jurisdictions that govern the
Securities is substantially the same as the law of the State of Arizona.
Consent is hereby given to the use of this opinion as part of the
Registration Statement, and the Rule 462(b) Registration Statement, if
applicable, and to the use of our name wherever it appears in said Registration
Statement, the related prospectus, and the Rule 462(b) Registration Statement,
if applicable.
Very truly yours,
Snell & Wilmer L.L.P.
Snell & Wilmer L.L.P.
Exhibit 12.1
ARIZONA PUBLIC SERVICE COMPANY
COMPUTATION OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
<TABLE>
<CAPTION>
Twelve Months Ended
-------------------------------------------------------------------------
March 31, December 31,
--------- ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net Income ..................... $ 254,784 $ 251,493 $ 243,471 $ 239,570 $ 243,486 $ 250,386
Income taxes (1) ............... 155,381 153,324 132,961 141,267 177,244 188,907
Fixed Charges .................. 193,856 195,055 203,855 214,768 213,581 220,590
--------- --------- --------- --------- --------- ---------
Total ....................... $ 604,021 $ 599,872 $ 580,287 $ 595,605 $ 634,311 $ 659,883
========= ========= ========= ========= ========= =========
Fixed Charges:
Interest expense ............... $ 149,445 $ 150,335 $ 158,287 $ 168,175 $ 166,045 $ 171,272
Amortization of debt discount,
premium and expense ......... 7,738 7,791 8,176 8,622 8,854 9,203
Estimated interest portion of
annual rents (2) ............ 36,673 36,929 37,392 37,971 38,682 40,115
--------- --------- --------- --------- --------- ---------
Total ....................... $ 193,856 $ 195,055 $ 203,855 $ 214,768 $ 213,581 $ 220,590
========= ========= ========= ========= ========= =========
Ratio of Earnings to Fixed Charges
(rounded down) ................. 3.11 3.07 2.84 2.77 2.96 2.99
========= ========= ========= ========= ========= =========
(1) Income Taxes:
Charged to operations .......... $ 186,909 $ 184,737 $ 178,513 $ 178,865 $ 168,202 $ 168,056
Charged (credited) to other
accounts .................... (31,528) (31,413) (45,552) (37,598) 9,042 20,851
--------- --------- --------- --------- --------- ---------
Total ....................... $ 155,381 $ 153,324 $ 132,961 $ 141,267 $ 177,244 $ 188,907
========= ========= ========= ========= ========= =========
(2) Estimated interest portion of
Unit 2 lease payments included
in estimated interest portion of
annual rentals ................. $ 34,621 $ 34,720 $ 35,083 $ 35,422 $ 35,710 $ 37,407
========= ========= ========= ========= ========= =========
</TABLE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Arizona Public Service Company on Form S-3 of our report dated March 4, 1998,
appearing in the Annual Report on Form 10-K of Arizona Public Service Company
for the year ended December 31, 1997 and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Phoenix, Arizona
July 2, 1998
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-----------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-----------------------------
ARIZONA PUBLIC SERVICE COMPANY
(Exact name of obligor as specified in its charter)
Arizona 86-0011170
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
400 North Fifth Street, P.O. Box 53999
Phoenix, Arizona 85072-3999
(Address of principal executive offices) (Zip code)
-----------------------------
First Mortgage Bonds
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 29th day of June, 1998.
THE BANK OF NEW YORK
By: VAN K. BROWN
--------------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
Exhibit 7
---------
-----------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ..................................... $ 5,742,986
Interest-bearing balances .............................. 1,342,769
Securities:
Held-to-maturity securities ............................ 1,099,736
Available-for-sale securities .......................... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell ...................... 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ............................................... 35,019,608
LESS: Allowance for loan and
lease losses ......................................... 627,350
LESS: Allocated transfer risk
reserve .............................................. 0
Loans and leases, net of unearned
income, allowance, and reserve ....................... 34,392,258
Assets held in trading accounts .......................... 2,521,451
Premises and fixed assets (including
capitalized leases) .................................... 659,209
Other real estate owned .................................. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .............................................. 226,263
Customers' liability to this bank on
acceptances outstanding ................................ 1,187,449
Intangible assets ........................................ 781,684
Other assets ............................................. 1,736,574
------------
Total assets ............................................. $ 56,153,587
============
LIABILITIES
Deposits:
In domestic offices .................................... $ 27,031,362
Noninterest-bearing .................................... 11,899,507
Interest-bearing ....................................... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ....................... 13,794,449
Noninterest-bearing .................................... 590,999
Interest-bearing ....................................... 13,203,450
Federal funds purchased and Securities
sold under agreements to repurchase .................... 2,338,881
Demand notes issued to the U.S. ..........................
Treasury ............................................... 173,851
Trading liabilities ...................................... 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .............................................. 1,905,330
With remaining maturity of more than
one year through three years ......................... 0
With remaining maturity of more than
three years .......................................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .................................. 1,195,923
Subordinated notes and debentures ........................ 1,012,940
Other liabilities ........................................ 2,018,960
------------
Total liabilities ........................................ 51,192,576
------------
EQUITY CAPITAL
Common stock ............................................. 1,135,284
Surplus .................................................. 731,319
Undivided profits and capital
reserves ............................................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ............................................. 36,866
Cumulative foreign currency transla-
tion adjustments ....................................... (36,184)
------------
Total equity capital ..................................... 4,961,011
------------
Total liabilities and equity
capital ................................................ $ 56,153,587
============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------------------
ARIZONA PUBLIC SERVICE COMPANY
(Exact name of obligor as specified in its charter)
Arizona 86-0011170
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
400 North Fifth Street, P.O. Box 53999
Phoenix, Arizona 85072-3999
(Address of principal executive offices) (Zip code)
------------------------
Debt Securities
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 29th day of June, 1998.
THE BANK OF NEW YORK
By: VAN K. BROWN
------------------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
Exhibit 7
---------
-----------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ..................................... $ 5,742,986
Interest-bearing balances .............................. 1,342,769
Securities:
Held-to-maturity securities ............................ 1,099,736
Available-for-sale securities .......................... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell ...................... 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ............................................... 35,019,608
LESS: Allowance for loan and
lease losses ......................................... 627,350
LESS: Allocated transfer risk
reserve .............................................. 0
Loans and leases, net of unearned
income, allowance, and reserve ....................... 34,392,258
Assets held in trading accounts .......................... 2,521,451
Premises and fixed assets (including
capitalized leases) .................................... 659,209
Other real estate owned .................................. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .............................................. 226,263
Customers' liability to this bank on
acceptances outstanding ................................ 1,187,449
Intangible assets ........................................ 781,684
Other assets ............................................. 1,736,574
------------
Total assets ............................................. $ 56,153,587
============
LIABILITIES
Deposits:
In domestic offices .................................... $ 27,031,362
Noninterest-bearing .................................... 11,899,507
Interest-bearing ....................................... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ....................... 13,794,449
Noninterest-bearing .................................... 590,999
Interest-bearing ....................................... 13,203,450
Federal funds purchased and Securities
sold under agreements to repurchase .................... 2,338,881
Demand notes issued to the U.S. ..........................
Treasury ............................................... 173,851
Trading liabilities ...................................... 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .............................................. 1,905,330
With remaining maturity of more than
one year through three years ......................... 0
With remaining maturity of more than
three years .......................................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .................................. 1,195,923
Subordinated notes and debentures ........................ 1,012,940
Other liabilities ........................................ 2,018,960
------------
Total liabilities ........................................ 51,192,576
------------
EQUITY CAPITAL
Common stock ............................................. 1,135,284
Surplus .................................................. 731,319
Undivided profits and capital
reserves ............................................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ............................................. 36,866
Cumulative foreign currency transla-
tion adjustments ....................................... (36,184)
------------
Total equity capital ..................................... 4,961,011
------------
Total liabilities and equity
capital ................................................ $ 56,153,587
============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
Arizona Public Service Company
(Exact name of obligor as specified in its charter)
Arizona 86-0011170
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
400 North Fifth Street
Phoenix, Arizona 85004
(Address of principal executive offices) (Zip Code)
--------------------------------------------
Debt Securities
(Title of the indenture securities)
---------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 26th day of June, 1998.
THE CHASE MANHATTAN BANK
By T.J. Foley
----------------------------
T.J. Foley
Vice President
- 3 -
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1998, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ...................................... $ 12,037
Interest-bearing balances .............................. 4,054
Securities:
Held to maturity
securities .................................................. 2,340
Available for sale securities ............................... 50,134
Federal funds sold and securities purchased under
agreements to resell ................................... 24,982
Loans and lease financing receivables:
Loans and leases, net of unearned income .... $127,958
Less: Allowance for loan and lease losses ... 2,797
Less: Allocated transfer risk reserve ....... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve ................................. 125,161
Trading Assets .............................................. 61,820
Premises and fixed assets (including capitalized
leases) ..................................................... 2,961
Other real estate owned ..................................... 347
Investments in unconsolidated subsidiaries and
associated companies ................................... 242
Customers' liability to this bank on acceptances
outstanding ............................................ 1,380
Intangible assets............................................ 1,549
Other assets ................................................ 11,727
--------
TOTAL ASSETS ................................................ $298,734
========
- 4 -
<PAGE>
LIABILITIES
Deposits
In domestic offices .................................... $ 96,682
Noninterest-bearing ......................... $ 38,074
Interest-bearing ............................ 58,608
---------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's
. ........................................................... 72,630
Noninterest-bearing .............................. $ 3,289
Interest-bearing ............................ 69,341
Federal funds purchased and securities sold under agree-
ments to repurchase ......................................... 42,735
Demand notes issued to the U.S. Treasury .................... 872
Trading liabilities ......................................... 45,545
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less .......... 4,454
With a remaining maturity of more than one year
through three years ............................. 231
With a remaining maturity of more than three years .... 106
Bank's liability on acceptances executed and outstanding .... 1,380
Subordinated notes and debentures ........................... 5,708
Other liabilities ........................................... 11,295
TOTAL LIABILITIES ........................................... 281,638
---------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............... 0
Common stock ................................................ 1,211
Surplus (exclude all surplus related to preferred stock) ... 10,291
Undivided profits and capital reserves ...................... 5,579
Net unrealized holding gains (losses)
on available-for-sale securities ............................ (1)
Cumulative foreign currency translation adjustments ......... 16
TOTAL EQUITY CAPITAL ........................................ 17,096
---------
TOTAL LIABILITIES AND EQUITY CAPITAL ........................ $ 298,734
=========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued by
the appropriate Federal regulatory authority and is true to
the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of
this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and belief
has been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
---------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
---------------------------
ARIZONA PUBLIC SERVICE COMPANY
(Exact name of obligor as specified in its charter)
Arizona 86-0011170
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
400 North Fifth Street, P.O. Box 53999
Phoenix, Arizona 85072-3999
(Address of principal executive offices) (Zip code)
---------------------------
Senior Notes
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 29th day of June, 1998.
THE BANK OF NEW YORK
By: VAN K. BROWN
-----------------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
Exhibit 7
---------
-----------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ..................................... $ 5,742,986
Interest-bearing balances .............................. 1,342,769
Securities:
Held-to-maturity securities ............................ 1,099,736
Available-for-sale securities .......................... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell ...................... 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ............................................... 35,019,608
LESS: Allowance for loan and
lease losses ......................................... 627,350
LESS: Allocated transfer risk
reserve .............................................. 0
Loans and leases, net of unearned
income, allowance, and reserve ....................... 34,392,258
Assets held in trading accounts .......................... 2,521,451
Premises and fixed assets (including
capitalized leases) .................................... 659,209
Other real estate owned .................................. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .............................................. 226,263
Customers' liability to this bank on
acceptances outstanding ................................ 1,187,449
Intangible assets ........................................ 781,684
Other assets ............................................. 1,736,574
------------
Total assets ............................................. $ 56,153,587
============
LIABILITIES
Deposits:
In domestic offices .................................... $ 27,031,362
Noninterest-bearing .................................... 11,899,507
Interest-bearing ....................................... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ....................... 13,794,449
Noninterest-bearing .................................... 590,999
Interest-bearing ....................................... 13,203,450
Federal funds purchased and Securities
sold under agreements to repurchase .................... 2,338,881
Demand notes issued to the U.S. ..........................
Treasury ............................................... 173,851
Trading liabilities ...................................... 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .............................................. 1,905,330
With remaining maturity of more than
one year through three years ......................... 0
With remaining maturity of more than
three years .......................................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .................................. 1,195,923
Subordinated notes and debentures ........................ 1,012,940
Other liabilities ........................................ 2,018,960
------------
Total liabilities ........................................ 51,192,576
------------
EQUITY CAPITAL
Common stock ............................................. 1,135,284
Surplus .................................................. 731,319
Undivided profits and capital
reserves ............................................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ............................................. 36,866
Cumulative foreign currency transla-
tion adjustments ....................................... (36,184)
------------
Total equity capital ..................................... 4,961,011
------------
Total liabilities and equity
capital ................................................ $ 56,153,587
============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
