Exhibit 1.1
ARIZONA PUBLIC SERVICE COMPANY
SECURITIES
UNDERWRITING AGREEMENT
May 7, 2003
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
$500,000,000 in aggregate principal amount of its unsecured debentures, notes or
other evidences of indebtedness (the "Securities") registered under the
registration statement referred to in Section 2(a). The Securities will be
issued under the Indenture, dated as of January 15, 1998 (the "Original
Indenture"), between the Company and JPMorgan Chase Bank (formerly known as The
Chase Manhattan Bank), as trustee (the "Trustee"), as amended and supplemented
by one or more Supplemental Indentures between the Company and the Trustee
(each, a "Supplemental Indenture") (the Original 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 "Representative."
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:
(a) A registration statement (No. 333-90824) relating to $500,000,000
of the Securities or the Company's first mortgage bonds (the "Bonds") was
filed with the Securities and Exchange Commission (the "Commission") and
has become effective. Such registration statement, as amended at the time
of the Terms Agreement referred to in Section 3 relating to the Purchased
Securities, is hereinafter referred to as the "Registration Statement" and,
together with any related 462(b) registration statement or amendment
thereto, is hereinafter referred to collectively as the "Registration
Statement" and the prospectus included in the Registration Statement when
it became effective, 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 Statement 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 Statement 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 (i) statements in or omissions from
any such documents based upon written information furnished to the Company
by any Underwriter specifically for use therein or (ii) that part of the
Registration Statement that consists of the Statement of Eligibility (Form
T-1) under the Trust Indenture Act of 1939 of JPMorgan Chase 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 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 (i) 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, (ii) from time to time
communities already being served by the Company become incorporated and
considerable time may elapse before a franchise is procured, (iii) certain
franchises may have expired prior to the renegotiation thereof, (iv) the
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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 Statement, (v) certain minor defects and exceptions may
exist which, individually and in the aggregate, are not deemed material,
and (vi) 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 is not an "investment company" or entity "controlled"
by an "investment company," as such terms are defined in the United States
Investment Company Act of 1940, as amended (the "1940 Act").
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.
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 Representative promptly of any
proposed amendment or supplementation of the Registration Statement or the
Prospectus. The Company will also advise the Representative of the
institution by the Commission of any stop order proceedings in respect of
the 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 Registration Statement or
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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 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 and the
Representative such copies of the Registration Statement (including one
copy of the Registration Statement 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 investment under the laws of such jurisdictions as
the Representative or, if there is no Representative, the Underwriters,
designates 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 Representative 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 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
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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 Representative or, if there is no Representative, 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) Except for the issuance of commercial paper in the ordinary
course of business, 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 Representative or, if
there is no Representative, the Underwriters.
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 and the Representative 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 Statement 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 Statement 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
Statement, (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 Statement, 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
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reference in the Registration Statement, 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
Statement (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 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 the Representative, 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 or any suspension of trading of
any securities of the Company on any exchange in the over-the-counter
market, (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, (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 the Representative, the effect of any such outbreak,
escalation, declaration, calamity or emergency, (including, without
limitation an act of terrorism that results in any such substantial
national or international calamity or emergency) makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the
Purchased Securities, and (vi) there shall not have occurred any material
disruption of securities settlement or clearance services.
(d) The Underwriters and the Representative 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
with the full corporate power and authority to carry on its business
as described in the Prospectus; and the Company is duly qualified as a
foreign corporation to do business in the States of New Mexico,
California, Oregon, Washington, Montana, Wyoming, and Texas;
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(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 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
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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 Registration Statement has become effective under the
Act, and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the 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 Statement 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, other than financial statements
and schedules, and other financial or statistical data included or
incorporated by reference therein or omitted therefrom, as to which
such counsel need express no opinion, complied as to form in all
material respects with the requirements of the Act, the Trust
Indenture Act, and the published Rules and Regulations. Although such
counsel does not assume any responsibility for the accuracy, or
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, those persons in the lawyer
group described in such opinion have no reason to believe that any
part of the Registration Statement, 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,
other than financial statements and schedules, and other financial or
statistical data included or incorporated by reference therein or
omitted therefrom, as to which such counsel need express no opinion,
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; 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
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documents of a character required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement that are not described and filed as required (it being
understood that such counsel need express no opinion as to the
statements of eligibility and qualification of the trustee under the
Indenture); and
(vii) This Agreement and the Terms Agreement have been duly
authorized, executed, and delivered by the Company.
(viii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the 1940 Act.
In giving such opinion, 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, and may rely on the opinion of Underwriters' counsel as to all
matters governed by the law of the State of New York, and further may relay
upon the opinion of Morgan, Lewis & Bockius LLP, delivered to you at
closing, as to all matters under the Public Utility Holding Company Act of
1935, as amended, and the Federal Power Act, as amended.
(e) The Underwriters and the Representative 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 Regulation 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
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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 and the Representative 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 Statement, 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 and the Representative 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, 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 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 and the Representative 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 and the Representative 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,
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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 Statement 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
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 Statement, 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 Statement 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
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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: (i) if such loss, claim, damage, liability, or action
arises under subsection (a) above, then (A) 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 (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (A) 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 (ii) 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 (i) 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 (i) and (ii) 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). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Purchased Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
12
omission or alleged omission. 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 Representative or, if
there is no Representative, the Underwriters, 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.
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 at the
address furnished to the Company in writing for the purpose of communications,
as follows: Attention: Debt Capital Markets, Power Group (with copy to General
Counsel at the same address), at 745 Seventh Avenue, New York, New York 10019,
or if there is no Representative, to 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,
13
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.
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.
14
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 Barbara M. Gomez
-------------------------------------
Treasurer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
LEHMAN BROTHERS
By Victor Forte
------------------------------------
As Representative
15
TERMS AGREEMENT
May 7, 2003
Arizona Public Service Company
400 North Fifth Street
Phoenix, Arizona 85004
Attention: Treasurer
Ladies and Gentlemen:
Arizona Public Service Company (the "Company") hereby agrees to sell to the
several Underwriters (the "Underwriters") listed in the Company's Prospectus
Supplement (the "Prospectus Supplement") of even date herewith relating to
$300,000,000 in aggregate principal amount of its 4.650% Notes due 2015 (the
"2015 Notes") and $200,000,000 in aggregate principal amount of its 5.625% Notes
due 2033 (the "2033 Notes") (the 2015 Notes and the 2033 Notes are hereinafter
collectively referred to as the "Purchased Securities"), and the Underwriters
hereby agree to purchase, severally and not jointly, at a purchase price of
98.564% of the principal amount of the 2015 Notes and 97.981% of the principal
amount of the 2033 Notes, plus any accrued interest from the date of original
issuance, the respective principal amounts of Purchased Securities set forth
opposite the names of the Underwriters in the Prospectus Supplement. The sale of
the Purchased Securities by the Company and the purchase thereof by the
Underwriters shall be made on the basis of the representations, warranties, and
agreements contained in the Underwriting Agreement (the "Underwriting
Agreement"), dated May 7, 2003, relating to the issuance and sale of up to
$500,000,000 of the Company's Securities under the Company's Indenture, and
shall be subject to the terms and conditions set forth in such Underwriting
Agreement. The provisions of the Underwriting Agreement are incorporated herein
by reference. As contemplated by Section 3 of the Underwriting Agreement,
certain terms of the Purchased Securities are described in the Prospectus
Supplement.
The Underwriters propose to offer the Purchased Securities to the public in
the manner and upon the terms set out in the Prospectus Supplement.
On May 12, 2003 the Company will deliver the Purchased Securities to the
Underwriters in book-entry form through the facilities of The Depository Trust
Company at the office of the Company, 400 North Fifth Street, Phoenix, Arizona
85004, against payment of the purchase price by transfer of funds by Fed Wire
from the Underwriters to the Company's account at a bank in Phoenix, Arizona
designated by the Company. Such purchase price will be deemed to have been
received by the Company upon the Company's receipt of the Fed Wire reference
number relating to such transfer of funds. Closing shall occur at the office of
the Company, 400 North Fifth Street, Phoenix, Arizona, at 8:00 a.m. Phoenix
time, on May 12, 2003, or at such other time and date as the Underwriters and
the Company may agree upon in writing, such time and date being referred to as
the "Closing Date." All of the Purchased Securities referred to in this
paragraph shall be in global form and registered in the name of Cede & Co. and
deposited with The Depository Trust Company, as depositary.
If the foregoing is acceptable to you, please sign below and transmit
evidence of such signing to Lehman Brothers at your earliest convenience. At
that point, the agreement signified hereby will constitute the Terms Agreement,
as described in the Underwriting Agreement, with respect to the $500,000,000 of
Purchased Securities referred to herein.
All capitalized terms herein, not otherwise defined herein, are used as
defined in the Underwriting Agreement. This agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
such respective counterparts shall together constitute a single instrument.
Very truly yours,
Citigroup Global Markets Inc.
Barclays Capital Inc.
Banc of America Securities LLC
Banc One Capital Markets, Inc.
BNY Capital Markets, Inc.
J.P. Morgan Securities Inc.
KBC Financial Products USA Inc.
UBS Warburg LLC
By: LEHMAN BROTHERS INC.
(As Representative of the Several
Underwriters)
By: Barbara M. Gomez
------------------------------------
Confirmed and accepted as
of the date first above written.
ARIZONA PUBLIC SERVICE COMPANY
By Victor Forte
------------------------------
Treasurer