Exhibit 1.1
ARIZONA PUBLIC SERVICE COMPANY
First Mortgage Bonds
UNDERWRITING AGREEMENT
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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
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
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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
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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
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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
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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.
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(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
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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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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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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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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
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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
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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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(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
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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
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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 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
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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.
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(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
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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.
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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__________________________________
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