$400,000,000
ARIZONA PUBLIC SERVICE COMPANY
Medium-Term Notes
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DISTRIBUTION AGREEMENT
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(For Senior Notes)
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Ladies and Gentlemen:
1. Introduction. Arizona Public Service Company, an Arizona
corporation (the "Company"), confirms its agreement with each of you
(individually, a "Distributor" and collectively, the "Distributors") with
respect to the issue and sale from time to time by the Company of its
medium-term notes registered under the registration statements referred to in
Section 2(a) and described in the combined prospectus relating to such
registration statements as "Senior Notes" (any such medium-term notes being
hereinafter referred to as the "Securities," which expression shall, if the
context so admits, include any permanent global Security). Securities may be
offered and sold pursuant to Section 3 of this Agreement in an aggregate amount
not to exceed the amount of Registered Securities (as defined in Section 2(a)
hereof) registered pursuant to such registration statements reduced by the
aggregate amount of any other Registered Securities sold otherwise than pursuant
to Section 3 of this Agreement. The Securities will be issued under an
Indenture, dated as of November 15, 1996, between the Company and The Bank of
New York, as trustee (the "Trustee"), as amended and supplemented by two
indentures supplemental thereto (the "Basic Indenture"), and as further amended
and supplemented by one or more additional Supplemental Indentures relating
thereto (each a "Supplemental Indenture," and collectively, the "Supplemental
Indentures") (the Basic Indenture, as amended and supplemented by such
Supplemental Indentures, is hereinafter referred to as the "Indenture"). Subject
to Article 14 of the Basic Indenture, prior to the Release Date (as defined in
the Basic Indenture), the Securities will be secured by the Company's first
mortgage bonds (the "Senior Note Mortgage Bonds") issued pursuant to the
Mortgage and Deed of Trust dated as of July 1, 1946,
to The Bank of New York, as successor Trustee, as amended and supplemented by
fifty-five indentures supplemental thereto (the "Basic Mortgage"), and as
further amended and supplemented by one or more additional supplemental
indentures relating thereto (each a "Mortgage Supplemental Indenture" and
collectively, the "Mortgage Supplemental Indentures") (the Basic Mortgage as
amended and supplemented by such Mortgage Supplemental Indentures, is
hereinafter referred to as the "Mortgage").
The Securities shall have the terms described in the
Prospectus referred to in Section 2(a) as it may be amended or supplemented from
time to time, including any supplement to the Prospectus that sets forth only
the terms of a particular issue of the Securities (a "Pricing Supplement").
Securities will be issued, and the terms thereof established, from time to time
by the Company in accordance with the Indenture and the Procedures (as defined
in Section 3(d) hereof).
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each Distributor as follows:
(a) A registration statement (No. 333-27551) relating to
$50,000,000 of the Company's first mortgage bonds (the "Bonds"), or
unsecured debentures, notes or other evidences of indebtedness (the
"Unsecured Securities"), or Securities and a registration statement
(No. 333-________) relating to $350,000,000 of Bonds, Unsecured
Securities or Securities (together, the "Registered Securities")
(including a combined prospectus relating to up to $400,000,000 of
Bonds, Unsecured Securities or Securities), were filed with the
Securities and Exchange Commission (the "Commission") and have become
effective. Such registration statements, as each is amended as of the
Closing Date (as defined in Section 3(e) hereof), are hereinafter
referred to as the "First Registration Statement" and the "Second
Registration Statement," respectively, and, together with any related
Rule 462(b) registration statement or amendment thereto, are
hereinafter referred to collectively as the "Registration Statements,"
and such prospectus, as amended or as supplemented as of the Closing
Date, including all material incorporated by reference therein, is
hereinafter referred to as the "Prospectus." Any reference in this
Agreement to amending or supplementing the Prospectus shall be deemed
to include the filing of materials incorporated by reference in the
Prospectus after the Closing Date and any reference in this Agreement
to any amendment or supplement to the Prospectus shall be deemed to
include any such materials incorporated by reference in the Prospectus
after the Closing Date.
(b) Each part of the Registration Statements, when such part
became effective, conformed in all material respects to the
requirements of the Securities Act of 1933 (the "Act"), the Trust
Indenture Act of 1939 (the "Trust Indenture Act"), and the rules and
regulations (the "Rules and Regulations") of the Commission and did not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and on the Closing Date and at each
of the times of acceptance and of delivery referred to in Section 6(a)
hereof and at each of the times of amendment or supplementing referred
to in Section 6(b) hereof (the Closing Date and each such time being
herein sometimes referred to as a "Representation Date"), the
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Registration Statements and the Prospectus will conform in all material
respects to the requirements of the Act, the Trust Indenture Act, and
the Rules and Regulations, and at such date none of such documents will
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
foregoing does not apply to (a) statements in or omissions from any
such documents based upon written information furnished to the Company
by any Distributor specifically for use therein or (b) that part of the
Second Registration Statement that consists of the Statement of
Eligibility and Qualification (Form T-1) under the Trust Indenture Act
of 1939 of The Bank of New York, as Trustee under the Basic Indenture.
(c) An order of the Arizona Corporation Commission shall have
been granted authorizing (i) the execution and delivery of the
Supplemental Indenture relating to any series of Securities issued and
sold by the Company hereunder, (ii) the execution and delivery of the
Mortgage Supplemental Indenture, pursuant to which the Senior Note
Mortgage Bonds securing such Securities will be issued, and (iii) the
issuance and sale of such Securities on the terms and conditions herein
and in the Prospectus or in any Terms Agreement (as defined in Section
3(b)) relating to such Securities, and the approval or consent of no
other public body or authority is necessary to the execution and
delivery of such Supplemental Indenture or Mortgage Supplemental
Indenture or the validity of the issuance and sale of such Securities,
except as may be required under state securities or blue sky laws.
(d) The Company holds such valid franchises, certificates of
convenience and necessity, licenses, and permits as are necessary with
respect to the maintenance and operation of its property and business
as now conducted, except that (A) the Company from time to time makes
minor extensions of its system prior to the time a related franchise,
certificate, license, or permit is procured, (B) from time to time
communities already being served by the Company become incorporated and
considerable time may elapse before a franchise is procured, (C)
certain franchises may have expired prior to the renegotiation thereof,
(D) the Company may not have obtained certain permits or variances
relating to the environmental requirements described in any of its Form
10-K Report, its Form 10-Q Reports, and/or its Form 8-K Reports
incorporated by reference in the Registration Statements, (E) certain
minor defects and exceptions may exist which, individually and in the
aggregate, are not deemed material, and (F) the Company does not make
any representation regarding the geographical scope of any franchise,
certificate, license, or permit that is not specific as to its
geographical scope.
(e) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Arizona,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification.
(f) Except for property specifically excepted from the lien of
the Mortgage or released therefrom in accordance with the terms
thereof, the Company has good and marketable title in fee simple,
except for items described in (A), (B), and (C) below, to all of
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the real property purported in the Mortgage to be so held, good and
valid leasehold interests in all properties purported in the Mortgage
to be held under lease, and good and valid title to all other
properties described in the Mortgage as subject to the lien thereof
(which property excludes (i) the combined cycle plant referred to in
Note 9 of Notes to Financial Statements in the Company's Form 10-K
Report for the fiscal year ended December 31, 1997 (the "1997 Form 10-K
Report") incorporated by reference in the Registration Statements but
includes the Company's leasehold and related interests in that plant
and (ii) certain leased interests in Unit 2 of the Palo Verde Nuclear
Generating Station referred to in Note 9 of Notes to Financial
Statements in the 1997 Form 10-K Report), except that the transmission
and distribution lines of the Company, other than those located on land
owned in fee by the Company, and the property described in Section 15
of Article IV of the Forty-first Mortgage Supplemental Indenture, have
been installed in public streets or alleys and in highways under
ordinances and permits granted by the various governmental bodies
having jurisdiction, or have been constructed on leaseholds, easements
or rights-of-way granted, with minor exceptions, by the apparent owners
of record of the land and such leases, easements, or rights-of-way are
subject to any defects in or encumbrances on the title of the
respective lessors of such leases or grantors of such easements or
rights-of-way; title to the aforesaid properties is subject only to:
(A) the lien of the Mortgage, (B) Excepted Encumbrances as defined in
the Mortgage, and (C) other liens, encumbrances or defects, none of
which, individually or in the aggregate, materially interfere with the
business or operations of the Company (with respect to leasehold
interests on the Navajo Reservation, this representation is intended
and shall be understood to mean only that the Company is the owner of
the rights conferred upon it by the leases from the Navajo Tribe
relating to the sites on which the Navajo Plant and the Four Corners
Plant are located, and that while the Company is not aware of the
assertion of any claim contesting the interest of the Navajo Tribe in
the lands leased, the Company does not give any representation with
respect to the interest of the Navajo Tribe in the lands leased or with
respect to the enforceability of such leases against the Navajo Tribe);
the Mortgage, subject only as above set forth in this clause, now
constitutes, and the Mortgage and the Mortgage Supplemental Indentures
theretofore executed, subject only as above set forth in this clause,
when the latter shall have been duly recorded and filed, will
constitute, together and as a single instrument, a direct and valid
first mortgage lien upon said properties, which include all of the
properties of the Company (other than the classes or items of property
expressly excepted in the Mortgage); and all properties (other than the
classes or items of property expressly excepted in the Mortgage or
expressly released from the lien thereof) acquired by the Company after
the date hereof in each county in the States of Arizona and New Mexico
in which the Mortgage and the Mortgage Supplemental Indentures shall
have been duly recorded and filed (and, as to which properties, with
respect to priority only, any necessary recordation and/or filing has
been accomplished, including therein any necessary descriptions of
after-acquired real property and real property upon which
after-acquired fixtures are affixed) will, upon such acquisition,
become subject to the first mortgage lien thereof, subject, however, to
Excepted Encumbrances and to liens, if any, existing or placed thereon
at the time of the acquisition thereof by the Company and, with respect
to priority only, to liens, if any, existing prior to the time of any
necessary recordation and/or filing by the Company.
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3. Appointment as Distributors; Agreement of Distributors;
Solicitations.
(a) Subject to the terms and conditions stated herein, the
Company hereby appoints each of the Distributors as an agent of the
Company for the purpose of soliciting or receiving offers to purchase
the Securities from the Company by others during any Marketing Time.
For purposes of this Agreement, "Marketing Time" shall mean any time
when no suspension of solicitation of offers to purchase Securities
pursuant to Section 3(b) or Section 4(b) shall be in effect and any
time when either any Distributor shall own any Securities with the
intention of reselling them or the Company has accepted an offer to
purchase Securities but the related settlement has not occurred.
So long as this Agreement shall remain in effect with respect
to any Distributor, the Company shall not, without the consent of any
such Distributor, solicit or accept offers to purchase newly-issued
Securities from the Company otherwise than through one of the
Distributors; provided, however, that, subject to all of the terms and
conditions of this Agreement, the foregoing shall not be construed to
prevent the Company from selling at any time any Securities in a firm
commitment underwriting pursuant to an underwriting agreement that does
not provide for a continuous offering of such Securities; and provided,
further, that the Company reserves the right from time to time (i) to
purchase or sell Securities directly from or to an investor, and (ii)
to accept a specific offer to purchase newly-issued Securities from the
Company solicited by a dealer other than the Distributors (each an
"Other Dealer"), without obtaining the prior consent of any of
Distributors, provided that any Other Dealer shall agree to be bound by
and subject to the terms and conditions of this Agreement binding on
the Distributors (including the commission schedule set forth on
Exhibit B). Each Distributor is authorized to engage the services of
any other broker or dealer in connection with the offer or sale of
Securities purchased by such Distributor as principal for resale to
others and may reallow a portion of the commission, but such
Distributor is not authorized to appoint sub-agents.
(b) On the basis of the representations and warranties
contained herein, but subject to the terms and conditions herein set
forth, each Distributor agrees, as an agent of the Company, to use
reasonable best efforts when requested by the Company to solicit offers
to purchase the Securities upon the terms and conditions set forth in
the Prospectus, as from time to time amended or supplemented. No
Distributor shall have any responsibility for maintaining records with
respect to the aggregate principal amount of Securities sold, or
otherwise monitoring the availability of Securities for sale under the
Registration Statements. In connection therewith, each Distributor will
use the Prospectus (as amended or supplemented from time to time) in
the form most recently furnished to such Distributor by the Company and
will solicit offers to purchase the Securities in accordance with the
Act, the Rules and Regulations, and the applicable securities laws or
regulations of any other applicable jurisdiction in which such
Distributor solicits offers to purchase any Securities. In placing any
Securities pursuant to an offer accepted by the Company, the
Distributor that solicited or received such offer (the "Presenting
Distributor") may act as agent or purchase such Securities from the
Company as principal for resale. Upon acceptance by the Company of an
offer by the Presenting Distributor to purchase Securities as
principal,
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the Presenting Distributor may complete a Terms Agreement substantially
in the form of Exhibit A hereto (a "Terms Agreement") and transmit the
completed Terms Agreement to the Company by hand or by facsimile or
other similar means of telecommunication. Upon acceptance by the
Company of an offer to purchase Securities, unless the Company and the
Presenting Distributor otherwise agree in writing, any such Terms
Agreement or any other written confirmation or communication
transmitted by the Presenting Distributor to the Company or, in the
absence of a Terms Agreement or other written confirmation or
communication from the Presenting Distributor, the oral agreement with
respect to the terms of the Securities and of their offer and sale
evidenced by the offer communicated by the Presenting Distributor and
accepted by the Company, in each case together with the provisions of
this Agreement, shall constitute an agreement between the Presenting
Distributor and the Company for the sale and purchase of such
Securities (whether or not any Terms Agreement or other written
confirmation or communication shall have been executed by the Company
or the Presenting Distributor).
Upon receipt of notice from the Company as contemplated by
Section 4(b) hereof, each Distributor shall suspend its solicitation of
offers to purchase Securities until such time as the Company shall have
furnished it with an amendment or supplement to the Registration
Statements or the Prospectus, as the case may be, contemplated by
Section 4(b) and shall have advised such Distributor that such
solicitation may be resumed.
The Company reserves the right, in its sole discretion, to
suspend solicitation of offers to purchase the Securities commencing at
any time for any period of time or permanently. Upon receipt of at
least one Business Day's prior notice from the Company, the
Distributors will forthwith suspend solicitation of offers to purchase
Securities from the Company until such time as the Company has advised
the Distributors that such solicitation may be resumed. For the purpose
of the foregoing sentence, "Business Day" shall mean any day that is
not a Saturday or Sunday, and that in The City of New York or Phoenix,
Arizona is not a day on which banking institutions generally are
authorized or obligated by law or executive order to close.
The Distributors are authorized to solicit offers to purchase
Securities as described in the Prospectus, as amended or supplemented,
and only in a minimum aggregate amount of $1,000 (or the equivalent
thereof in one or more currencies or currency units other than U.S.
dollars). Each Distributor shall communicate to the Company, orally or
in writing, each reasonable offer to purchase Securities received by it
as agent. The Company shall have the sole right to accept offers to
purchase the Securities and may reject any such offer, in whole or in
part. Each Distributor shall have the right, in its discretion
reasonably exercised, without notice to the Company, to reject any
offer to purchase Securities received by it, in whole or in part, and
any such rejection shall not be deemed a breach of its agreement
contained herein.
In connection with the solicitation of offers to purchase
Securities, the Distributors are not authorized to provide to any
person any written information relating to the Company other than the
Prospectus and the documents incorporated by reference therein. No
Security which
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the Company has agreed to sell pursuant to this Agreement shall be
deemed to have been purchased and paid for, or sold by the Company,
until such Security shall have been delivered to the purchaser thereof
against payment by such purchaser.
(c) At the time of delivery of, and payment for, any
Securities sold by the Company as a result of a solicitation made by,
or offer to purchase received by, a Distributor, acting on an agency
basis, the Company agrees to pay such Distributor a commission in
accordance with the schedule set forth in Exhibit B hereto. The Company
agrees that each Distributor that purchases Securities as principal for
resale shall receive such compensation, in the form of a discount or
otherwise, as shall be agreed to between such Distributor and the
Company at the time the Company accepts an offer to purchase such
Securities, or, if no such compensation is agreed to, a commission in
accordance with Exhibit B hereto. Unless otherwise specified in a Terms
Agreement, a Distributor purchasing Securities may resell such
Securities to other dealers on the terms set forth in, or determined as
described in, the Prospectus (including, if applicable, the Pricing
Supplement).
(d) Administrative procedures respecting the sale of
Securities (the "Procedures") shall be agreed upon from time to time by
the Distributors and the Company. The initial Procedures, which are set
forth in Exhibit C hereto, shall remain in effect until changed by
agreement among the Company and the Distributors. Each Distributor and
the Company agree to perform the respective duties and obligations
specifically provided to be performed by each of them herein and in the
Procedures. The Company will furnish to the Trustee a copy of the
Procedures as from time to time in effect.
(e) The documents required to be delivered by Section 5 hereof
shall be delivered at the office of the Company, 400 North Fifth
Street, Phoenix, Arizona 85004, not later than 10:00 A.M., Arizona
time, on the date of this Agreement or at such later time as may be
mutually agreed by the Company and the Distributors, which in no event
shall be later than the time at which the Distributors commence
solicitation of purchases of Securities hereunder, such time and date
being herein called the "Closing Date".
4. Covenants of the Company. In connection with each offering
of Securities, the Company covenants and agrees with the Distributors that:
(a) The Company will advise the Distributors promptly of any
proposed amendment or supplementation of the First Registration
Statement, the Second Registration Statement, or the Prospectus and
will afford the Distributors a reasonable opportunity to comment on any
such proposed amendment or supplement (other than any Pricing
Supplement that relates to Securities not purchased through or by such
Distributors). The Company will also advise the Distributors of the
institution by the Commission of any stop order proceedings in respect
of the First Registration Statement, the Second Registration Statement,
or of any part thereof, and will use its best efforts to prevent the
issuance of any such stop order and to obtain as soon as possible its
lifting, if issued.
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(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact, or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
or if it is necessary at any time to amend or supplement the First
Registration Statement, the Second Registration Statement or the
Prospectus to comply with the Act, the Company promptly will notify
each Distributor to suspend solicitation of offers to purchase the
Securities and, if the Company shall decide to amend or supplement the
Registration Statements or Prospectus, the Company will promptly advise
each Distributor by telephone (with confirmation in writing) and
promptly will prepare and file with the Commission an amendment or
supplement that will correct such statement or omission or an amendment
that will effect such compliance; provided, however, that if during the
period referred to above any Distributor shall own any Securities that
it has purchased from the Company as principal with the intention of
reselling them and the Distributor has held such Securities for fewer
than 90 days or the Company has accepted an offer to purchase
Securities but the related settlement has not occurred, the Company
promptly will prepare and file with the Commission an amendment or
supplement that will correct such statement or omission or an amendment
that will effect such compliance.
(c) As soon as practicable, but not later than 18 months,
after the date of each acceptance by the Company of an offer to
purchase Securities hereunder, the Company will make generally
available to its security holders an earning statement or statements
(which need not be audited) covering a period of at least 12 months
beginning after the effective date of the Fourth Registration Statement
(as defined in Rule 158(c) under the Act), which will satisfy the
provisions of Section 11(a) of the Act and the rules and regulations
thereunder.
(d) The Company will furnish to the Distributors such copies
of the Registration Statements (including one copy of the Second
Registration Statement for the Distributors, and for the counsel for
the Distributors, which is signed and includes all exhibits), any
related preliminary prospectus supplements and the Prospectus,
including all amendments or supplements to such documents, as may be
reasonably requested.
(e) The Company will arrange or cooperate in arrangements for
the qualification of the Securities for sale and the determination of
their eligibility for investment under the laws of such jurisdictions
as the Distributors designate and will continue such qualifications in
effect so long as required for the distribution of the Securities,
provided that the Company shall not be required to qualify as a foreign
corporation in any State, to consent to service of process in any State
other than with respect to claims arising out of the offering or sale
of the Securities, or to meet other requirements deemed by it to be
unduly burdensome.
(f) For a period expiring on the earlier of (i) five years
after the applicable Representation Date and (ii) the last date on
which any Security sold pursuant to this Agreement is outstanding, the
Company will furnish to the Distributors thereunder (i) as soon as
practicable after the end of each fiscal year, a balance sheet and
statements of income and
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retained earnings of the Company as at the end of and for such year,
all in reasonable detail and certified by independent public
accountants, and (ii) (A) as soon as practicable after the end of each
quarterly fiscal period (except for the last quarterly fiscal period of
each fiscal year), a balance sheet and statement of income of the
Company as at the end of and for such period, all in reasonable detail
and certified by a principal financial or accounting officer of the
Company, (B) as soon as available, a copy of each report of the Company
mailed by the Company to stockholders or filed with the Commission, and
(C) from time to time, such other information concerning the Company as
may reasonably be requested. So long as the Company has active
subsidiaries, such financial statements will be on a consolidated basis
to the extent the accounts of the Company and its subsidiaries are
consolidated.
(g) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, and will reimburse
the Distributors for any reasonable expenses (including reasonable fees
and disbursements of counsel) incurred by them in connection with the
qualification of the Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions as the
Distributors may designate, and for any fees charged by investment
rating agencies for the rating of the Securities.
(h) Between the date of a Terms Agreement and the date of
delivery of Securities with respect thereto, the Company will not,
without the prior written consent of each Distributor which is a party
to such Terms Agreement, offer or sell, or enter into any agreement to
sell, any of its debt securities which are substantially similar to the
Securities other than borrowings under the Company's revolving credit
agreements and lines of credit, the private placement of securities,
and the issuance of commercial paper.
5. Conditions of Obligations. The obligations of each
Distributor, as agent of the Company, under this Agreement at any time to
solicit offers to purchase the Securities and to purchase Securities from the
Company as principal is subject to the accuracy, on the date hereof and on each
Representation Date, of the representations and warranties of the Company
herein, to the accuracy, on each such date, of the statements of the Company's
officers made pursuant to the provisions hereof, to the performance, on or prior
to each such date, by the Company of its obligations hereunder, and to each of
the following additional conditions precedent:
(a) The Prospectus, as amended or supplemented as of any
Representation Date, shall have been filed with the Commission in
accordance with the Rules and Regulations and no stop order suspending
the effectiveness of the Registration Statements or of any part thereof
shall have been issued and no proceedings for that purpose shall have
been instituted or, to the knowledge of the Company or any Distributor,
shall be contemplated by the Commission.
(b) Neither the Registration Statements nor the Prospectus, as
amended or supplemented as of any Representation Date, shall contain
any untrue statement of fact which, in the opinion of any Distributor,
is material or omits to state a fact which, in the opinion of any
Distributor, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
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(c) There shall not have occurred (i) any change, or any
development involving a prospective change, in or affecting
particularly the business or properties of the Company or its
subsidiaries which, in the judgment of the Distributors materially
impairs the investment quality of the Securities, (ii) a suspension or
material limitation in trading in securities generally on the New York
Stock Exchange, (iii) a general moratorium on commercial banking
activities in New York declared by either Federal or New York State
authorities, (iv) a lowering of the rating of any of the Company's debt
securities or a public announcement that any such debt securities have
been placed on CreditWatch, Watchlist, or under any similar
surveillance or review, in each case with negative implications, by any
recognized rating agency, and (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of
war by Congress or any other substantial national or international
calamity or emergency if, in the judgment of the Distributors the
effect of any such outbreak, escalation, declaration, calamity or
emergency makes it impractical or inadvisable to proceed with
completion of the sale of and payment for the Securities.
(d) With respect to any Security denominated in a currency
other than the U.S. dollar, more than one currency or a composite
currency or any Security the principal or interest of which is indexed
to such currency, currencies or composite currency, there shall not
have occurred a suspension or material limitation in foreign exchange
trading in such currency, currencies or composite currency by a major
international bank, a general moratorium on commercial banking
activities in the country or countries issuing such currency,
currencies of composite currency, the outbreak or escalation of
hostilities involving, the occurrence of any material adverse change in
the existing financial, political or economic conditions of, or the
declaration of war or a national emergency by, the country or countries
issuing such currency, currencies or composite currency or the
imposition or proposal of exchange controls by any governmental
authority in the country or countries issuing such currency, currencies
or composite currency;
(e) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Distributor purchasing
such Securities (the "Purchasing Distributor"), as the case may be,
shall have received an opinion, dated the Closing Date, or such date of
delivery, as the case may be, of Snell & Wilmer L.L.P., counsel for the
Company, to the effect that:
(i) The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Arizona and has full corporate power and authority to
carry on its business as presently conducted; and the Company
is duly qualified as a foreign corporation to do business and
is in good standing in the States of New Mexico, California,
Wyoming, Washington, Oregon and Montana, the only other
jurisdictions in which it owns or leases substantial
properties or in which the conduct of its business requires
such qualification;
(ii) The Indenture has been duly authorized,
executed, and delivered, has been duly qualified under the
Trust Indenture Act, and
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constitutes a valid and binding instrument enforceable in
accordance with its terms except as the same may be limited by
(a) general principles of equity or by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or other laws or
equitable principles relating to or affecting the enforcement
of creditors' rights generally or the enforcement of the
security provided by the Indenture, (b) the necessity for
compliance with the statutory procedural rights governing the
exercise of remedies by a secured creditor, and (c) the
qualification that certain waivers, procedures, remedies, and
other provisions of the Securities and the Indenture may be
unenforceable under or limited by the law of the State of
Arizona; however, such law does not in such counsel's opinion
substantially prevent the practical realization of the
benefits intended by such documents;
(iii) Any series of Securities established on or
prior to the date of such opinion in conformity with the
Indenture, and, when the terms of a particular Security and of
its issuance and sale have been duly authorized and
established by all necessary corporate action in conformity
with the Indenture, and such Security has been duly completed,
authenticated, and issued in accordance with the Indenture and
delivered against payment as contemplated by this Agreement,
such Security will constitute a valid and binding obligation
of the Company entitled to the benefits provided by the
Indenture (except as the same may be limited by (a) general
principles of equity or by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or other laws or
equitable principles relating to or affecting the enforcement
of creditors' rights generally or the enforcement of the
security provided by the Indenture, (b) the necessity for
compliance with the statutory procedural rights governing the
exercise of remedies by a secured creditor, and (c) the
qualification that certain waivers, procedures, remedies, and
other provisions of such Security and the Indenture may be
unenforceable under or limited by the law of the State of
Arizona; however, such law does not in such counsel's opinion
substantially prevent the practical realization of the
benefits intended by such documents), it being understood that
such counsel may (A) assume that at the time of the issuance,
sale and delivery of each Security the authorization of such
series will not have been modified or rescinded and there will
not have occurred any change in law affecting the validity,
legally binding character or enforceability of such Security,
(B) assume that neither the issuance, sale and delivery of any
Security, nor any of the terms of such Security, nor
compliance by the Company with such terms will violate any
applicable law, any agreement or instrument then binding upon
the Company or any restriction imposed by any court or
governmental body having jurisdiction over the Company and (C)
state that as of the date of such opinion a judgment for money
in an action based on Securities denominated in foreign
currencies or currency units in a Federal or State court in
the United States ordinarily would be enforced in the United
States only in United States dollars, and that the date used
to determine the rate of conversion of the foreign currency
unit in which a particular
11
Security is denominated into United States dollars will depend
upon various factors, including which court renders the
judgment;
(iv) The Mortgage has been duly authorized, executed,
and delivered, has been duly qualified under the Trust
Indenture Act, and constitutes a valid and binding instrument
enforceable in accordance with its terms, except as the same
may be limited by (a) general principles of equity or by
bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other laws or equitable principles relating to
or affecting the enforcement of creditors' rights generally or
the enforcement of the security provided by the Mortgage, (b)
the necessity for compliance with the statutory procedural
rights governing the exercise of remedies by a secured
creditor, and (c) the qualification that certain waivers,
procedures, remedies, and other provisions of the Senior Note
Mortgage Bonds and the Mortgage may be unenforceable under or
limited by the law of the State of Arizona; however, such law
does not in such counsel's opinion substantially prevent the
practical realization of the benefits intended by such
document;
(v) Any series of Senior Note Mortgage Bonds
established on or prior to the date of such opinion in
conformity with the Indenture and the Mortgage, and, when the
terms of a particular Senior Note Mortgage Bond and of its
issuance and sale have been duly authorized and established by
all necessary corporate action in conformity with the
Indenture and the Mortgage, and such Senior Note Mortgage Bond
has been duly completed, authenticated, and issued in
accordance with the Mortgage and delivered to the Trustee as
security for Securities, such Senior Note Mortgage Bond will
constitute a valid and binding obligation of the Company
entitled to the benefits provided by the Mortgage (except as
the same may be limited by (a) general principles of equity or
by bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other laws or equitable principles relating to
or affecting the enforcement of creditors' rights generally or
the enforcement of the security provided by the Mortgage, (b)
the necessity for compliance with the statutory procedural
rights governing the exercise of remedies by a secured
creditor, and (c) the qualification that certain waivers,
procedures, remedies, and other provisions of such Senior Note
Mortgage Bond and the Mortgage may be unenforceable under or
limited by the law of the State of Arizona; however, such law
does not in such counsel's opinion substantially prevent the
practical realization of the benefits intended by such
documents), it being understood that such counsel may (A)
assume that at the time of the issuance, sale and delivery of
each Senior Note Mortgage Bond the authorization of such
series will not have been modified or rescinded and there will
not have occurred any change in law affecting the validity,
legally binding character or enforceability of such Senior
Note Mortgage Bond, (B) assume that neither the issuance, sale
and delivery of any Senior Note Mortgage Bond, nor any of the
terms of such Senior Note Mortgage Bond, nor compliance by the
Company with such terms will violate
12
any applicable law, any agreement or instrument then binding
upon the Company or any restriction imposed by any court or
governmental body having jurisdiction over the Company and (C)
state that as of the date of such opinion a judgment for money
in an action based on Senior Note Mortgage Bonds denominated
in foreign currencies or currency units in a Federal or State
court in the United States ordinarily would be enforced in the
United States only in United States dollars, and that the date
used to determine the rate of conversion of the foreign
currency unit in which a particular Senior Note Mortgage Bond
is denominated into United States dollars will depend upon
various factors, including which court renders the judgment;
(vi) Except for property specifically excepted from
the lien of the Mortgage or released therefrom in accordance
with the terms thereof, the Company has good and marketable
title in fee simple, except for items described in (A), (B),
and (C) below, to all of the real property and fixtures
thereon purported in the Mortgage to be so held and that are
both located in the State of Arizona and described in those
title reports covering at least the Saguaro, Yucca, Cholla,
Ocotillo, West Phoenix, and Palo Verde plant sites that are
listed on an exhibit to such opinion (the "Title Documents")
(in giving such opinion, such counsel may rely solely upon the
Title Documents and may assume the accuracy thereof and of the
real property descriptions contained therein and may state
that no other investigation or inquiry has been made with
respect thereto), and in giving the opinions described below
with respect to any liens, defects, and encumbrances on such
title to such personal property, such counsel may assume that
the Company has good and valid title to all of the personal
property located in the State of Arizona and described in the
Mortgage as subject to the lien thereof (which property shall
not include fixtures), and such counsel may rely solely upon,
and assume the accuracy of, a search of the Uniform Commercial
Code Financing Statements filed in the records of the Arizona
Secretary of State and may assume that there are no liens or
other encumbrances on personal property (as used in the
Arizona Uniform Commercial Code) of the Company located in the
State of Arizona other than liens or other encumbrances that
have been perfected by filing with the Arizona Secretary of
State under Arizona Revised Statutes ("A.R.S.") Section
47-9401.A; such title is subject only to: (A) the lien of the
Mortgage, (B) Excepted Encumbrances as defined in the
Mortgage, and (C) other liens, encumbrances, or defects, none
of which, individually or in the aggregate, in the opinion of
such counsel, materially interfere with the business or
operations of the Company (in determining whether any such
other liens, encumbrances, or defects materially interfere
with the business or operations of the Company, such counsel
may rely solely upon a certificate of an officer or engineer
of the Company which shall be attached to such opinion and
such opinion may state that no other investigation or inquiry
with respect thereto has been made); the Mortgage, subject
only as above set forth in this clause, now constitutes, and
the Mortgage and the Mortgage Supplemental Indentures
theretofore
13
executed, subject only as above set forth in this clause, when
the latter shall have been duly recorded and filed, will
constitute, together and as a single instrument, a direct and
valid first mortgage lien upon said property; and all
properties (other than the classes or items of property
expressly excepted in the Mortgage or expressly released from
the lien thereof) acquired by the Company after the date of
such opinion in each county in the State of Arizona in which
the Mortgage and the Mortgage Supplemental Indentures shall
have been duly recorded and filed and, with respect to
priority only, any necessary recordation and/or filing has
been accomplished (including therein any necessary
descriptions of after-acquired real property and real property
upon which after-acquired fixtures are affixed) will, upon
such acquisition, become subject to the first mortgage lien
thereof, subject, however, to Excepted Encumbrances and to
liens, if any, existing or placed thereon at the time of the
acquisition thereof by the Company and, with respect to
priority only, to liens, if any, existing prior to the time of
any necessary recordation and/or filing by the Company;
(vii) The Company is the owner of the rights
conferred upon it by the leases from the Navajo Tribe relating
to the site on which the Navajo Plant is located and while
such counsel is not aware of the assertion of any claim
contesting the title of the Navajo Tribe to the lands leased,
such counsel shall not be required to express any opinion with
respect to the interest of the Navajo Tribe in the lands
leased or with respect to the enforceability of such leases
against the Navajo Tribe;
(viii) With certain exceptions, a public service
corporation is required to obtain certificates of convenience
and necessity from the Arizona Corporation Commission under
A.R.S. Section 40-281.A for construction of its lines, plant,
services, or systems, or any extensions thereof, within the
State of Arizona, and to obtain franchises or similar consents
or permits from counties and incorporated municipalities under
A.R.S. Section 40-283.A for the construction, operation, and
maintenance of transmission lines within the State of Arizona;
to the best of such counsel's knowledge after due inquiry, the
Company holds such valid franchises, certificates of
convenience and necessity, consents, and permits pursuant to
such statutory provisions as are necessary with respect to the
maintenance and operation of its property and business as now
conducted, except that (A) the Company from time to time makes
minor extensions of its system prior to the time a related
franchise, certificate, license, or permit is procured, (B)
from time to time communities already being served by the
Company become incorporated and considerable time may elapse
before a franchise is procured, (C) certain franchises may
have expired prior to the renegotiation thereof, (D) certain
minor defects and exceptions may exist which, individually and
in the aggregate, are not deemed material, and (E) such
counsel need not be required to express any opinion regarding
the geographical
14
scope of any franchise, certificate, license, or permit that
is not specific as to its geographical scope;
(ix) No consent, approval, authorization, or consent
of any public board or body is required for the consummation
of the transactions contemplated hereby or in any Terms
Agreement, including the issuance and sale of Securities and
Senior Note Mortgage Bonds and the execution and delivery of a
related Supplemental Indenture and Mortgage Supplemental
Indenture, except as may be required under state securities or
blue sky laws, as to which laws such counsel shall not be
required to express an opinion, and such other approvals
(specified in such opinion) as have been obtained;
(x) The First Registration Statement and the Second
Registration Statement have become effective under the Act,
and, to the best of the knowledge of such counsel, no stop
order suspending the effectiveness of the First Registration
Statement or the Second Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated under the Act, and each part of
the Registration Statements, when such part became effective,
and the Prospectus, as of the Closing Date, and any amendment
or supplement thereto, as of its date, complied as to form in
all material respects with the requirements of the Act, the
Trust Indenture Act, and the published Rules and Regulations;
such counsel has no reason to believe that any part of the
Registration Statements, when such part became effective, or
the Prospectus, as of the Closing Date, or any amendment or
supplement thereto, as of its date, contained any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading; the descriptions in the
Registration Statements and Prospectus of statutes, legal and
governmental proceedings and contracts, and other documents
are accurate and fairly present the information required to be
shown; and to the actual knowledge of those persons in the
lawyer group described in such opinion, there are no legal or
governmental proceedings required to be described in the
Prospectus that are not described as required, nor any
contracts or documents of a character required to be described
in the Registration Statements or Prospectus or to be filed as
exhibits to the Registration Statements that are not described
and filed as required (it being understood that such counsel
need express no opinion as to the financial statements or
other financial data contained in the Registration Statements
or the Prospectus); and
(xi) This Agreement has been duly authorized,
executed, and delivered by the Company.
In giving such opinion, (a) Snell & Wilmer L.L.P. may rely
solely upon certificates of the Company as to any factual matters upon
which any such opinions are based and may rely upon the opinion of
Keleher & McLeod, P.A., referred to below, as to all matters governed
by
15
the laws of the State of New Mexico, but the opinion of Snell & Wilmer
L.L.P. shall state that, though they are members of the Arizona Bar and
do not hold themselves out as experts on the laws of the State of New
Mexico, they have made a study of the laws of such State insofar as
such laws are involved in the conclusions stated in their opinion, and
from such study it is their opinion that such laws support such
conclusions and that, in their opinion, the Distributors and they are
justified to such extent in relying upon the opinion of Keleher &
McLeod, P.A.; (b) Snell & Wilmer L.L.P. may rely on the opinion
delivered pursuant to Section 5(g) as to all matters governed by the
laws of the State of New York; and (c) the lawyer group referred to in
such opinion will mean those lawyers in the offices of Snell & Wilmer
L.L.P. who (i) have billed any time on the particular transaction to
which such opinion relates or (ii) have billed more than ten hours to
any Company matter in the twelve-month period preceding the date on
which the list of such lawyers was compiled for purposes of inquiry
pursuant to such opinion.
(f) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Purchasing
Distributor, as the case may be, shall have received an opinion, dated
the Closing, or such date of delivery, as the case may be, of Keleher &
McLeod, P.A., New Mexico counsel for the Company, to the effect that:
(i) The Company is duly qualified as a foreign
corporation to do business and is in good standing in the
State of New Mexico and has full corporate power and authority
to engage in the State of New Mexico in the business now
conducted by it therein;
(ii) The activities of the Company in the State of
New Mexico to date do not constitute it a "public utility" as
that term is defined in the relevant laws of the State of New
Mexico, and accordingly, no public utility franchises or
certificates of convenience and necessity are necessary under
New Mexico law with respect to the maintenance and operation
of the Company's property and business as now conducted in the
State of New Mexico and no approval, authorization, or consent
of the New Mexico Public Utility Commission or any other
public board or body of the State of New Mexico is required
for the issuance and sale of the Securities or the Senior Note
Mortgage Bonds on the terms and conditions herein and in the
Prospectus set forth or contemplated or for the execution of
the Supplemental Indenture relating to the Securities or the
Mortgage Supplemental Indenture relating to the Senior Note
Mortgage Bonds, except as may be required under New Mexico
state securities or blue sky laws, as to which laws such
counsel shall not be required to express an opinion;
(iii) Assuming that the Company has good and valid
title to all of the personal property located in the State of
New Mexico and described in the Mortgage as subject to the
lien thereof (which property shall not include fixtures)
("Personal Property"), in giving the opinions described below
with respect to any liens, defects and encumbrances on such
title to such Personal
16
Property, such counsel may rely solely upon, and assume the
accuracy of, a search of the Uniform Commercial Code Financing
Statements filed in the records of the New Mexico Secretary of
State and may assume that there are no liens or other
encumbrances on personal property (as used in the New Mexico
Uniform Commercial Code) of the Company located in the State
of New Mexico other than liens or other encumbrances that have
been perfected by filing with the New Mexico Secretary of
State under Section 55-9-401, New Mexico Statutes Annotated
1978; such title to such Personal Property is subject only to:
(A) the lien of the Mortgage, (B) Excepted Encumbrances as
defined in the Mortgage, and (C) other liens, encumbrances, or
defects, none of which, individually or in the aggregate, in
the opinion of such counsel, materially interfere with the
business or operations of the Company (in determining whether
any such other liens, encumbrances, or defects materially
interfere with the business or operations of the Company, such
counsel may rely solely upon a certificate of an officer or
engineer of the Company which shall be attached to such
opinion and such opinion may state that no other investigation
or inquiry with respect thereto has been made); the Mortgage,
subject only as above set forth in this clause, now
constitutes, and the Mortgage and the Mortgage Supplemental
Indentures theretofore executed, subject only as above set
forth in this clause, when the latter shall have been duly
recorded and filed, will constitute, together and as a single
instrument, a direct and valid first mortgage lien upon such
Personal Property; and all properties (other than the classes
or items of property expressly excepted in the Mortgage or
expressly released from the lien thereof) acquired by the
Company after the date of this opinion in each county in the
State of New Mexico in which the Mortgage and the Mortgage
Supplemental Indentures shall have been duly recorded and
filed and, with respect to priority only, any necessary
recordation and/or filing has been accomplished (including
therein any necessary descriptions of after-acquired real
property and real property upon which after-acquired fixtures
are affixed) will, upon such acquisition, become subject to
the first mortgage lien thereof, subject, however, to Excepted
Encumbrances and to liens, if any, existing or placed thereon
at the time of the acquisition thereof by the Company and,
with respect to priority only, to liens, if any, existing
prior to the time of any necessary recordation and/or filing
by the Company; and
(iv) The Company is the owner of the rights conferred
upon it by the leases from the Navajo Tribe relating to the
site on which the Four Corners plant is located and while such
counsel is not aware of the assertion of any claim contesting
the interest of the Navajo Tribe in the lands leased, such
counsel shall not be required to express any opinion with
respect to the interest of the Navajo Tribe in the lands
leased or with respect to the enforceability of such leases
against the Navajo Tribe.
17
In giving such opinion, Keleher & McLeod, P.A. may rely solely upon
certificates of the Company as to any factual matters upon which any
such opinions are based.
(g) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Purchasing
Distributor, as the case may be, shall have received an opinion, dated
the Closing Date, or such date of delivery, as the case may be, from
counsel for the Distributors or the Purchasing Distributor, as the case
may be, dated the Closing Date or such date of delivery, as the case
may be, with respect to the incorporation of the Company, the validity
of the Securities, the Senior Note Mortgage Bonds, the Registration
Statements, the Prospectus, and other related matters as may reasonably
be required, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters. In rendering such opinion, such counsel may rely as to
the incorporation of the Company and all other matters governed by the
laws of the States of Arizona and New Mexico upon the opinions of Snell
& Wilmer L.L.P. and Keleher & McLeod, P.A., referred to above.
(h) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Purchasing
Distributor, as the case may be, shall have received a certificate of
the President or any Vice President and a principal financial or
accounting officer of the Company, dated the Closing Date or such date
of delivery, as the case may be, in which such officers, to the best of
their knowledge after reasonable investigation, shall state that the
representations and warranties of the Company in this Agreement are
true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to the Closing Date, that no stop order suspending the
effectiveness of the First Registration Statement or the Second
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission, and
that, subsequent to the date of the most recent financial statements in
the Prospectus, there has been no material adverse change in the
financial position or results of operations of the Company and its
subsidiaries except as set forth or contemplated in the Prospectus or
as described in such certificate.
(i) At the Closing Date and, if specified in a Terms
Agreement, if any, at the time of delivery of the Securities described
in such Terms Agreement, the Distributors or the Purchasing
Distributor, as the case may be, shall have received a letter of
Deloitte & Touche LLP, dated the Closing Date or such date of delivery,
as the case may be, confirming that they are independent certified
public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder, and stating in effect that
(i) in their opinion the financial statements and schedules of the
Company audited by them and incorporated by reference in the
Registration Statements comply as to form in all material respects with
the applicable accounting requirements of the Securities Exchange Act
of 1934 (the "1934 Act") and the published Rules and Regulations
thereunder and (ii) on the basis of a reading of the latest available
interim financial statements of the Company, inquiries of officials of
the Company responsible for financial and accounting matters, and other
specified procedures, nothing came to their attention that caused them
to believe that (A) the unaudited financial
18
statements incorporated by reference, if any, in the Registration
Statements do not comply as to form in all material respects with the
applicable accounting requirements of the 1934 Act and the published
Rules and Regulations thereunder or are not stated on a basis
substantially consistent with that of the audited financial statements
incorporated by reference in the Registration Statements, (B) at the
date of the most recent available unaudited financial statements and at
a specified date not more than five days prior to the date of this
Agreement, there was any increase in the amounts of common stock,
redeemable preferred stock, or non-redeemable preferred stock of the
Company or any increase, exceeding $10,000,000, in long-term debt of
the Company or, at the date of the most recent available unaudited
financial statements there was any decrease in net assets as compared
with amounts shown in the most recent financial statements incorporated
by reference in the Registration Statements, or (C) for the
twelve-month period ended at the date of the most recent available
unaudited financial statements there were any decreases, exceeding 3%,
as compared with the twelve-month period ended at the date of the most
recent financial statements incorporated by reference in the
Registration Statements, in the amounts of total revenues or net
income, except in all cases for increases or decreases which result
from the declaration or payment of dividends, or which the Registration
Statements (including any material incorporated by reference therein)
disclose have occurred or may occur, or which are described in such
letter.
The Company will furnish the Distributors with such conformed
copies of such opinions, certificates, letters, and documents as may be
reasonably requested.
6. Additional Covenants of the Company. The Company agrees
that:
(a) Each acceptance by the Company of an offer for the
purchase of Securities shall be deemed to be an affirmation that its
representations and warranties contained in this Agreement are true and
correct at the time of such acceptance and a covenant that such
representations and warranties will be true and correct at the time of
delivery to the purchaser of the Securities as though made at and as of
each such time, it being understood that such representations and
warranties shall relate to the Registration Statements and the
Prospectus as amended or supplemented at each such time. Each such
acceptance by the Company of an offer to purchase Securities shall be
deemed to constitute an additional representation, warranty and
agreement by the Company that, as of the date of delivery of such
Securities to the purchaser thereof, after giving effect to the
issuance of such Securities, of any other Securities to be issued on or
prior to such delivery date and of any other Registered Securities to
be issued and sold by the Company on or prior to such delivery date,
the aggregate amount of Registered Securities (including any
Securities) which have been issued and sold by the Company will not
exceed the amount of Registered Securities registered pursuant to the
Registration Statements.
(b) Each time that the Registration Statements or the
Prospectus shall be amended or supplemented (other than by a Pricing
Supplement, an amendment or supplement which relates exclusively to an
offering of securities other than the Securities, or an amendment or
supplement that occurs through the filing an incorporated document
(other than a Form 10-K or Form 10-Q) with the Commission), the Company
shall, (A) concurrently
19
with such amendment or supplement, if such amendment or supplement
shall occur at a Marketing Time, or (B) immediately at the next
Marketing Time if such amendment or supplement shall not occur at a
Marketing Time, furnish the Distributors with a certificate, dated the
date of delivery thereof, of the President or any Vice President and a
principal financial or accounting officer of the Company, in form
satisfactory to the Distributors, to the effect that the statements
contained in the certificate covering the matters set forth in Section
5(h) hereof which was last furnished to the Distributors pursuant to
this Section 6(b) are true and correct at the time of such amendment or
supplement, as though made at and as of such time or, in lieu of such
certificate, a certificate of the same tenor as the certificate
referred to in Section 5(h).
(c) At each Representation Date referred to in Section 6(b),
the Company shall, (A) concurrently if such Representation Date shall
occur at a Marketing Time, or (B) immediately at the next Marketing
Time if such Representation Date shall not occur at a Marketing Time,
furnish the Distributors with a written opinion or opinions, dated the
date of such Representation Date, of counsel for the Company, in form
satisfactory to the Distributors, to the effect set forth in Sections
5(e) and 5(f) hereof; provided, however, that to the extent appropriate
such opinion or opinions may reconfirm matters set forth in a prior
opinion delivered at the Closing Date or under this Section 6(c);
provided further, however, that any opinion or opinions furnished under
this Section 6(c) shall relate to the Registration Statements and the
Prospectus as amended or supplemented at such Representation Date.
(d) At each Representation Date referred to in Section 6(b) on
which the Registration Statements or the Prospectus shall be amended or
supplemented to include additional financial information, the Company
shall cause Deloitte & Touche LLP, (A) concurrently if such
Representation Date shall occur at a Marketing Time, or (B) immediately
at the next Marketing Time if such Representation Date shall not occur
at a Marketing Time, to furnish the Distributors with a letter,
addressed jointly to the Company and the Distributors and dated the
date of such Representation Date, to the effect set forth in Section
5(i) hereof; provided, however, that to the extent appropriate such
letter may reconfirm matters set forth in a prior letter delivered at
the Closing Date or pursuant to this Section 6(d); provided further,
however, that any letter furnished under this Section 6(d) shall relate
to the Registration Statements and the Prospectus as amended or
supplemented at such Representation Date, with such changes as may be
necessary to reflect changes in the financial statements and other
information derived from the accounting records of the Company.
(e) On each date for the delivery of Securities to the
purchaser thereof, the Company shall, if requested by the Distributor
that solicited or received the offer to purchase any Securities being
delivered on such settlement date, furnish such Distributor with a
written opinion or opinions, dated the date of delivery thereof, of
counsel for the Company, to the effect set forth in Sections 5(e) and
5(f) hereof; provided, however, that in lieu of each opinion, such
counsel may furnish the Distributor with a letter to the effect that
the Distributor may rely on such prior opinion to the same extent as
though it was dated such
20
delivery date (except that statements in such prior opinion shall be
deemed to relate to the Registration Statements and Prospectus as
amended or supplemented to the time of delivery of such letter
authorizing reliance).
(f) The Company agrees that any obligation of a person who has
agreed to purchase Securities, to make payment for, and take delivery
of such Securities shall be subject to (i) the accuracy, on the related
settlement date fixed pursuant to the Procedures, of the Company's
representation and warranty deemed to be made to the Distributors
pursuant to the last sentence of subsection (a) of this Section 6, and
(ii) the satisfaction, on such settlement date, of each of the
conditions set forth in Sections 5(a), (b) and (c), it being understood
that under no circumstance shall any Distributor have any duty or
obligation to exercise the judgment permitted under Section 5(b) or (c)
on behalf of any such person.
7. Indemnification.
(a) The Company will indemnify and hold harmless each
Distributor and each person, if any, who controls such Distributor
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any part of
the Registration Statements relating to the Securities, when such part
became effective, any preliminary prospectus or preliminary prospectus
supplement, the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will
reimburse each Distributor and each such controlling person for any
legal or other expenses reasonably incurred by such Distributor or such
controlling person in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that
the Company will not be liable in any such case to the extent that any
such loss, claim, damage, or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in any of such documents in reliance upon and in
conformity with written information furnished to the Company by any
Distributor specifically for use therein. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Distributor will severally indemnify and hold
harmless the Company, each of its directors, each of its officers who
have signed the Registration Statements, and each person, if any, who
controls the Company within the meaning of the Act, against any losses,
claims, damages, or liabilities to which the Company or any such
director, officer, or controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in any part of the Registration Statements relating to
the Securities, when such part became effective, any preliminary
prospectus or preliminary prospectus supplement, the Prospectus, or any
21
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
Distributor specifically for use therein; and will reimburse any legal
or other expenses reasonably incurred by the Company or any such
director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or
action. This indemnity agreement will be in addition to any liability
which such Distributor may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability that it may
have to any indemnified party otherwise than under this Section. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, without the
consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. An indemnifying party shall not
be liable for any settlement of a claim or action effected without its
written consent, which shall not be unreasonably withheld.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party for
any loss, claim, damage, liability, or action described in subsection
(a) or (b) above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or
(b) above on the following basis: (1) if such loss, claim, damage,
liability, or action arises under subsection (a) above, then (i) in
such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Distributor[s] on the
other from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Distributors on the other in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant
equitable considerations; and (2) if such loss, claim, damage,
liability, or action arises under subsection (b) above, then in such
proportion as is appropriate to reflect the relative fault of the
Company on the one hand and the Distributors on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities as well as any other relevant equitable
considerations. For the purposes of clause (1) above, the
22
relative benefits received by the Company on the one hand and the
Distributors on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Distributors. For the purposes of clauses
(1) and (2) above, the relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Distributors and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement
or omission. The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is
the subject of this subsection (d). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Distributors' obligations in
this subsection (d) to contribute are several in proportion to their
respective obligations and not joint.
8. Status of Each Distributor. In soliciting offers to
purchase the Securities from the Company pursuant to this Agreement and in
assuming its other obligations hereunder (other than any obligation to purchase
Securities pursuant to Section 3 hereof), each Distributor is acting
individually and not jointly and is acting solely as agent for the Company and
not as principal. In connection with the placement of any Securities by a
Distributor, acting as agent, (a) each Distributor will make reasonable efforts
to assist the Company in obtaining performance by each purchaser whose offer to
purchase Securities from the Company has been solicited by such Distributor and
accepted by the Company, but such Distributor shall have no liability to the
Company in the event any such purchase is not consummated for any reason; and
(b) if the Company shall default on its obligations to deliver Securities to a
purchaser whose offer it has accepted, the Company (i) shall hold the
Distributors harmless against any loss, claim or damage arising from or as a
result of such default by the Company, and (ii) in particular, shall pay to the
Distributors any commission to which they would be entitled in connection with
such sale.
9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company or its officers and of the Distributors set forth in
or made pursuant to this Agreement will remain in full force and effect
regardless of any investigation, or statement as to the results thereof, made by
or on behalf of the Distributors or the Company or any of its officers or
directors or any controlling person, and will survive delivery of and payment
for the Securities. If this Agreement is terminated pursuant to Section 10 or
for any other reason or if for any reason the sale of Securities described in a
confirmation or Terms Agreement referred to Section 3 by the Company to a
Distributor is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 4(g) and the
obligations of the Company under Sections 4(c) and 4(f) and the respective
obligations of the Company and the Distributors pursuant to Section 7 shall
remain in effect. In addition, if any such termination of this Agreement shall
occur either (i) at a time when any Distributor shall own any Securities that it
has purchased from the Company as principal with the intention of reselling them
and the Distributor has held such Securities for fewer than 90 days or (ii)
after the Company has accepted
23
an offer to purchase Securities but the related settlement has not occurred, the
obligations of the Company under the proviso in Section 4(b), under Sections
4(a), 4(d), 4(e) and 4(h) and, in the case of a termination occurring as
described in (ii) above, under Sections 3(c), 6(a), 6(e) and 6(f) and under the
last sentence of Section 8, shall also remain in effect.
10. Termination. This Agreement may be terminated for any
reason at any time by the Company as to any Distributor or, in the case of any
Distributor, by such Distributor insofar as this Agreement relates to such
Distributor, upon the giving of one day's written notice of such termination to
the other parties hereto; provided, however, that this Agreement may not be
terminated with respect to a Distributor by the giving of such notice following
receipt by the Company of a confirmation or Terms Agreement referred to in
Section 3 relating to the purchase of Securities by such Distributor and prior
to delivery of the Securities described in such confirmation or Terms Agreement,
unless the sale and purchase of Securities contemplated thereby is rejected by
the Company in accordance with Section 3. Any settlement with respect to
Securities placed by a Distributor on an agency basis occurring after
termination of this Agreement shall be made in accordance with the Procedures
and each Distributor agrees, if requested by the Company, to take the steps
therein provided to be taken by such Distributor in connection with such
settlement.
11. Sales of Securities Denominated in a Currency other than
U.S. Dollars or of Indexed Securities. If at any time the Company and any of the
Distributors shall determine to issue and sell Securities denominated in a
currency other than U.S. dollars, which other currency may include a currency
unit, or with respect to which an index is used to determine the amounts of
payments of principal and any premium and interest, the Company and any such
Distributor may execute and deliver a supplement to this Agreement for the
purpose of making any appropriate additions to and modifications of the terms of
this Agreement (and the Procedures) applicable to such Securities and the offer
and sale thereof. The Distributors are authorized to solicit offers to purchase
Securities with respect to which an index is used to determine the amounts of
payments of principal and any premium and interest, and the Company shall agree
to any sales of such Securities (whether offered on an agency or principal
basis), only in a minimum aggregate amount of $2,500,000. The Company will not
issue Securities denominated in Yen otherwise than in compliance with applicable
Japanese laws, regulations and policies. In particular, the Company or its
designated agent shall submit such reports or information as may be required
from time to time by applicable law, regulations and guidelines promulgated by
Japanese governmental and regulatory authorities in the case of the issue and
purchase of the Securities and the Company shall ensure that each such Security
shall have a minimum denomination of (Y)1,000,000 and a minimum maturity of one
year or such other minimum denomination and maturity as may be allowed from time
to time by Japanese governmental and regulatory authorities.
12. Notices. All communications hereunder relating to any
offering of Securities will be in writing, and, if sent to the Distributors, may
be mailed, delivered, or telecopied and confirmed at their addresses furnished
to the Company in writing for the purpose of communications. All communications
hereunder to the Company shall be mailed to the Company, Attention: Treasurer,
at
24
P.O. Box 53999, Phoenix, Arizona 85072-3999, or delivered, or telecopied and
confirmed to the Company at 400 North Fifth Street, Phoenix, Arizona 85004.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and the Distributors as are named in any
Terms Agreement and their respective successors and the officers and directors
and controlling persons referred to in Section 7 and, to the extent provided in
Section 6(f), any person who has agreed to purchase Securities from the Company,
and no other person will have any right or obligation hereunder.
14. Governing Laws; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
This Agreement and any Terms Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute a single instrument.
25
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it will become a binding agreement between the Company and the
Underwriters in accordance with its terms.
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY
By:___________________________
Confirmed and Accepted, as of the
date first above written:
[NAME OF DISTRIBUTOR]
By:____________________________________
[NAME OF DISTRIBUTOR]
By:____________________________________
26
Exhibit A
Arizona Public Service Company
("Company")
Medium Term Notes, Series _____
Due Nine Months or More from Date of Issue
TERMS AGREEMENT
---------------
___________, 199__
Arizona Public Service Company
400 North 5th Street
Phoenix, AZ 85004
Attention: Treasurer
Ladies and Gentlemen:
We offer to purchase, on and subject to the terms and
conditions of the Distribution Agreement filed as an exhibit to the Company's
registration statement on Form S-3 (No. 333-_____) ("Distribution Agreement"),
the following Securities ("Notes") on the following terms:
Title:
Currency or Currency Units:
Stated Maturity:
Principal Amount:
Public Offering Price: [___%, subject to change by the
undersigned -- The Distributor
proposes to reoffer the above Notes
from time to time at market prices
prevailing at the time of sale, at
prices related to such prevailing
market prices or at negotiated
prices.]
Original Issue Discount Security: Yes ____ No ____
Denominations:
Purchase Price (to be paid in immediately available funds):
___% [, plus accrued interest, if any, from the Trade Date to
the Settlement Date]
Underwriting Discount or Commission received from the Company
(%):
Proceeds to Company (If different from Public Offering Price)
(%):
In the case of Fixed Rate Notes, the interest rate and, if
different from the dates set forth in the Prospectus
Supplement, the Interest Payment Date or Dates and
corresponding Regular Record Date or Dates:
In the case of Floating Rate Notes, the interest rate formula,
Initial Interest Rate, the Index Maturity, the Spread or
Spread Multiplier (if any), the maximum or minimum Interest
rate limitations (if any), the Interest Reset Dates, the
Interest Determination Dates, the Calculation Agent, the
Calculation Dates, the Interest Payment Dates and the Regular
Record Dates, in each case to the extent applicable:
Optional Redemption (option of the Company):
Redemption Date(s):
Redemption Prices(s)(%):
Notice Period:
Optional Redemption (option of the Holder):
Redemption Date(s):
Redemption Price(s)(%):
Notice Period:
Sinking Fund:
Other Terms:
Trade Date:
Settlement Date (Issue Date):
-2-
* * * * *
Details for Settlement
- ----------------------
(Additional Purchase Information -- to be completed by
Distributor, if desired, to the extent available):
Exact name in which the Note or Notes are to be
registered ("registered owner"):
Exact address of registered owner and, if different,
the address for delivery of notices and payment of
principal and any premium and interest:
Taxpayer identification number of registered owner:
Principal amount of each Note in authorized
denominations to be delivered to registered owner:
Exchange rate applicable to purchase Foreign Currency
Notes to be paid for in U.S. dollars:
* * * * *
Our agreement to purchase the Notes hereunder is subject to
the conditions set forth in the Distribution Agreement, including the conditions
set forth in paragraphs (d), (e), (f), (g), (h), and (i) of Section 5 thereof.
If for any reason the purchase by the undersigned of the Notes is not
consummated other than because of a default by the undersigned or a failure to
satisfy a condition set forth in clause (ii), (iii) or (v) of Section 5(c) of
the Distribution Agreement, the Company shall reimburse the undersigned for all
out-of-pocket expenses reasonably incurred by the undersigned in connection with
the offering of the Notes and not otherwise required to be reimbursed pursuant
to Section 4 of the Distribution Agreement.
-3-
Unless the undersigned has received notification from the
Company within [one Business Day (as defined in the Distribution Agreement)]
that the Company does not agree to the terms set forth herein, this Terms
Agreement shall constitute an agreement between the Company and the undersigned
for the sale and purchase of the Notes upon the terms set forth herein and in
the Distribution Agreement.
Very truly yours,
[NAME OF DISTRIBUTOR]
By ____________________________________
Accepted and agreed to
as of the date set forth above.
ARIZONA PUBLIC SERVICE COMPANY
By _________________________________
-4-
EXHIBIT B
COMMISSION SCHEDULE TO FOLLOW
EXHIBIT C
ADMINISTRATIVE PROCEDURES
-------------------------
The medium-term notes due nine months or more from their issue
date (the "Notes"), are to be offered on a continuing basis by Arizona Public
Service Company (the "Company"). _______________________ and
_____________________ (individually, a "Distributor" and collectively, the
"Distributors"), have each agreed to use reasonable efforts to solicit offers to
purchase the Notes. Each Distributor may, but will not be obligated to, purchase
Notes as principal for its own account. The Notes are being sold pursuant to a
Distribution Agreement, dated ______________, 19__ (the "Distribution
Agreement"), between the Company and the Distributors, and will be issued
pursuant to an Indenture, dated as of November 15, 1996, as amended from time to
time (the "Indenture"), between the Company and The Bank of New York, as trustee
(the "Trustee"). Subject to Article 14 of the Indenture, until the Release Date,
the Notes will be secured by one or more series of the Company's first mortgage
bonds issued and delivered by the Company to the Trustee for the Notes. On the
Release Date, the Notes will cease to be secured by the Company's first mortgage
bonds, will become unsecured general obligations of the Company, and will rank
on a parity with other unsecured senior indebtedness of the Company. For a
description of the terms of the Notes and the offering and sale thereof, see the
sections entitled "Description of Senior Notes", "Special Provisions Relating to
Foreign Currency Notes", "Plan of Distribution of Senior Notes" and "Glossary"
in the Prospectus Supplement relating to the Notes, dated ________, 19__,
attached hereto and hereinafter referred to as the "Prospectus Supplement", and
the sections entitled "Description of Senior Notes" and "Plan of Distribution"
in the Prospectus relating to the Notes, dated _______________, 19__, attached
hereto and hereinafter referred to as the "Prospectus." Defined terms used
herein but not defined herein shall have the meanings assigned to them in the
Distribution Agreement, the Prorospectus Supplement.
The Notes will be represented either by Global Notes delivered
to The Depository Trust Company ("DTC") or its nominee and recorded in the
book-entry system maintained by DTC or such nominee ("Book-Entry Notes") or by
certificates issued in definitive form delivered to the Holders thereof or
Persons designated by such Holders ("Certificated Notes"). Notes for which
interest is calculated on the basis of a fixed interest rate are referred to
herein as "Fixed Rate Notes". Notes for which interest is calculated at a rate
or rates determined by reference to an interest rate formula are referred to
herein as "Floating Rate Notes".
Notes may be issued as Indexed Notes, with the principal
amount payable at Maturity, the amount of interest payable on an Interest
Payment Date, or both, to be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors, as
indicated in the applicable Pricing Supplement. Holders of Indexed Notes may
receive a principal amount at Maturity that is greater than or less than the
face amount of such Notes depending upon the fluctuation of the relative value,
rate or price of the specified index. Specific information pertaining to the
method for determining the principal amount payable at
Maturity, a historical comparison of the relative value, rate or price of the
specified index and the face amount of the Indexed Note and any additional tax
considerations will be described in the applicable Pricing Supplement.
Notes which are issued at a price lower than the principal
amount thereof and which provide that upon redemption or acceleration of the
Maturity thereof an amount less than the principal thereof shall become due and
payable are referred to herein as "Original Issue Discount Notes". For special
provisions relating to Original Issue Discount Notes and other Notes issued at a
discount for tax purposes, see the section entitled "United States Taxation --
Original Issue Discount" in the Prospectus Supplement.
Unless otherwise indicated in the applicable Pricing
Supplement, the Notes will be denominated in U.S. dollars and payments of
principal of and any premium and interest on the Notes will be made in U.S.
dollars in the manner indicated in the Prospectus and the Prospectus Supplement.
Notes denominated in one or more currencies or currency units other than U.S.
dollars are referred to herein as "Foreign Currency Notes". For special
provisions relating to Foreign Currency Notes, see the sections entitled
"Special Provisions Relating to Foreign Currency Notes" in the Prospectus
Supplement . Specific information concerning the foreign currency or currency
unit in which a particular Foreign Currency Note is denominated, including
historical exchange rates and a description of the currency and any exchange
controls, shall be contained in a Pricing Supplement to the Prospectus
Supplement reflecting the terms of such Note.
Notes which provide that amounts payable by the Company in
respect of principal of or any premium or interest on the Notes shall be
determined by reference to the value, rate or price of one or more specified
indices, are referred to herein as "Indexed Notes". Specific information
pertaining to the method for determining the principal amounts payable, a
historical comparison of the value, rate or price of the specified index,
indices and the face amount of the Indexed Note and certain additional tax
considerations will be described in the applicable Pricing Supplement.
Administrative procedures and specific terms of the offering
are explained below. Part I indicates procedures applicable to all Notes; Part
II indicates specific procedures for Certificated Notes; and Part III indicates
specific procedures for Book-Entry Notes. Administrative and record-keeping
responsibilities will be handled for the Company by its Treasury Department. The
Company will advise the Distributors in writing of those persons handling
administrative responsibilities with whom the Distributors are to communicate
regarding offers to purchase Notes and the details of their delivery.
C-2
PART I: PROCEDURES APPLICABLE TO ALL NOTES
- ------------------------------------------
Issue Date
- ----------
Each Note will be dated the date of its authentication. Each
Note will also bear an original issue date (the "Issue Date") which, with
respect to any such Note (or portion thereof), shall mean the date of its
original issuance and shall be specified therein. The Issue Date will remain the
same for all Notes subsequently issued upon transfer, exchange or substitution
of a Note, regardless of their dates of authentication.
Price to Public
- ---------------
Except as otherwise specified in a Pricing Supplement, each
Note will be issued at 100% of principal amount.
Maturities; Minimum Purchase;
- -----------------------------
Each Note will mature on a date, selected by the purchaser and
agreed to by the Company, which will be at least nine months from its Issue
Date. The minimum aggregate amount of Notes which may be offered to any
purchaser will be $100,000.
Interest Payments
- -----------------
Interest on each interest-bearing Note will be calculated and
paid in the manner described in such Note and in the Prospectus Supplement and
the applicable Pricing Supplement. Unless otherwise set forth therein, interest
on Fixed Rate Notes (including interest for partial periods) will be calculated
on the basis of a 360-day year of twelve 30-day months and will not accrue on
the 31st day of any month. Interest on Floating Rate Notes, except as otherwise
set forth therein, will be calculated on the basis of actual days elapsed and a
year of 360 days, except that in the case of a Floating Rate Note for which the
Base Rate is the Treasury Rate, interest will be calculated on the basis of the
actual number of days in the year.
On the fifth Market Day immediately preceding each Interest
Payment Date, the Trustee will furnish the Company with the total amount of
interest payments (whether in U.S. dollars or other currencies or currency
units) to be made on such Interest Payment Date. The Trustee will provide
monthly, to the Company's Treasury Department, a list of the principal and any
premium and interest to be paid on Notes maturing in the next succeeding month.
The Trustee will assume responsibility for withholding taxes on interest paid as
required by law.
C-3
Redemption/Repayment
- --------------------
If indicated in the applicable Pricing Supplement, the Notes
of a particular tenor will be subject to redemption in whole or in part (subject
to applicable minimum denominations), at the option of the Company on and after
an initial redemption date as set forth in the applicable Pricing Supplement and
in the applicable Note. The redemption price will be set forth in the applicable
Pricing Supplement and in the applicable Note.
If indicated in the applicable Pricing Supplement, the Notes
of a particular tenor will be subject to repayment at the option of the Holders
thereof in accordance with the terms of the Notes on a repayment date as set
forth in the applicable Pricing Supplement and in the applicable Note. The
repayment date or dates and repayment price will be set forth in the applicable
Pricing Supplement and in the applicable Note. The applicable Pricing Supplement
will also indicate whether a Note is subject to an optional extension beyond its
Stated Maturity or whether the term of all or any portion of a Note may be
extended beyond its initial Stated Maturity Date.
Procedures for Establishing the Terms of the Notes
- --------------------------------------------------
The Company and the Distributors will discuss from time to
time the price of and the rates to be borne by the Notes that may be sold as a
result of the solicitation of offers by the Distributors. Once any Distributor
has recorded any indication of interest in Notes upon certain terms, and
communicated with the Company, if the Company plans to accept an offer to
purchase Notes upon such terms, it will prepare a Pricing Supplement to the
Prospectus, as then amended or supplemented, reflecting the terms of such Notes
and, after approval from the Distributors, will arrange to have the Pricing
Supplement filed with, or transmitted by a means reasonably calculated to result
in filing with, the Securities and Exchange Commission (the "Commission") via
the Commission's Edgar System pursuant to Rule 424 under the Securities Act of
1933, as amended (the "Act").* The Company will supply at least 10 copies of the
Prospectus, as then amended or supplemented, and bearing such Pricing
Supplement, to the Distributor who presented the offer (the "Presenting
Distributor"). No settlements with respect to Notes upon such terms may occur
prior to such transmitting or filing and the Distributors will not, prior to
such transmitting or filing, mail confirmations to customers who have offered to
purchase Notes upon such terms. After such transmitting or filing, sales,
mailing of confirmations and settlements may occur with respect to Notes upon
such terms, subject to the provisions of "Delivery of Prospectus" below.
- -------------------
* If clause (b)(3) of Rule 424 is applicable, such filing shall be made
no later than the fifth business day following the earlier of the date
of determination of the settlement information described below or the
date such Pricing Supplement is first used. If clause (b)(2) or (b)(5)
of Rule 424 is applicable, such filing shall be made no later than the
second business day following the earlier of the date of determination
of the settlement information or the date such Pricing Supplement is
first used.
C-4
Pricing Supplements delivered to the Distributors will be
sent:
if sent to _________________________:
if sent to _________________________:
If the Company decides to post rates and a decision has been
reached to change interest rates, the Company will promptly notify each
Distributor. Each Distributor will forthwith suspend solicitation of purchases.
At that time, the Distributors will recommend and the Company will establish
rates to be so "posted." Following establishment of posted rates and prior to
the transmitting or filing described in the preceding paragraph, the
Distributors may only record indications of interest in purchasing Notes at the
posted rates. Once any Distributor has recorded any indication of interest in
Notes at the posted rates and communicated with the Company, if the Company
plans to accept an offer at the posted rate, it will prepare a Pricing
Supplement reflecting such posted rate and, after approval from the
Distributors, will arrange to have copies of the Pricing Supplement, filed with,
or transmitted by means reasonably calculated to result in filing with, the
Commission via the Commission's Edgar System pursuant to Rule 424(b) under the
Act and will supply at least 10 copies of the Prospectus, as then amended or
supplemented, and bearing such Pricing Supplement, to the Presenting
Distributor. No settlements at the posted rates may occur prior to such
transmitting or filing and the Distributors will not, prior to such transmitting
or filing, mail confirmations to customers who have offered to purchase Notes at
the posted rates. After such transmitting or filing, sales, mailing of
confirmations and settlements may resume, subject to the provisions of "Delivery
of Prospectus" below.
Outdated Pricing Supplements, and copies of the Prospectus to
which they are attached (other than those retained for files), will be
destroyed.
C-5
Suspension of Solicitation: Amendment or Supplement
- ---------------------------------------------------
As provided in the Distribution Agreement, the Company may
instruct the Distributors to suspend solicitation of offers to purchase at any
time, and upon receipt of at least one Market Day's prior notice from the
Company, the Distributors will each forthwith suspend solicitation until such
time as the Company has advised them that solicitation of offers to purchase may
be resumed.
If the Distributors receive the notice from the Company
contemplated by Section 3(b) or 4(b) of the Distribution Agreement, they will
promptly suspend solicitation and will only resume solicitation as provided in
the Distribution Agreement. If the Company is required, pursuant to Section 4(b)
of the Distribution Agreement, to prepare an amendment or supplement, it will
promptly furnish each Distributor with the proposed amendment or supplement; if
the Company decides to amend or supplement the Registration Statement or the
Prospectus relating to the Notes, it will promptly advise each Distributor and
will furnish each Distributor with the proposed amendment or supplement in
accordance with the terms of the Distribution Agreement. The Company will
promptly file such amendment or supplement with the Commission, provide the
Distributors with copies of any such amendment or supplement, confirm to the
Distributors that such amendment or supplement has been filed with the
Commission and advise the Distributors that solicitation may be resumed.
Any such suspension shall not affect the Company's obligations
under the Distribution Agreement; and in the event that at the time the Company
suspends solicitation of offers to purchase there shall be any offers already
accepted by the Company outstanding for settlement, the Company will have the
sole responsibility for fulfilling such obligations. The Company will in
addition promptly advise the Distributors and the Trustee if such offers are not
to be settled and if copies of the Prospectus as in effect at the time of the
suspension may not be delivered in connection with the settlement of such
offers.
Acceptance of Offers
- --------------------
Each Distributor will promptly advise the Company, at its
option orally or in writing, of each reasonable offer to purchase Notes received
by it, other than those rejected by such Distributor. Each Distributor may, in
its discretion reasonably exercised, without notice to the Company, reject any
offer received by it, in whole or in part. The Company will have the sole right
to accept offers to purchase Notes and may reject any such offer, in whole or in
part. If the Company accepts or rejects an offer, in whole or in part, the
Company will promptly so notify the Presenting Distributor.
Confirmation
- ------------
For each accepted offer, the Presenting Distributor will issue
a confirmation, in writing, to the purchaser, with a copy to the Company's
Treasury Department, setting forth the
C-6
Purchase Information (as defined under II below with respect to Certificated
Notes and III below with respect to Book-Entry Notes) and delivery and payment
instructions; provided, however, that, in the case of the confirmation issued to
the purchaser, no confirmation shall be delivered to the purchaser prior to the
delivery of the Prospectus referred to below.
Determination of Settlement Date
- --------------------------------
The receipt of immediately available funds by the Company in
payment for a Note and (i) in the case of Certificated Notes, the authentication
and issuance of such Note and (ii) in the case of Book-Entry Notes, entry by the
Presenting Distributor of an SDFS deliver order through DTC's Participant
Terminal System to credit such Note to the account of a Participant purchasing,
or acting for the purchaser of, such Note, shall, with respect to such Note,
constitute "settlement." All offers accepted by the Company will be settled on
the third Market Day next succeeding the date of acceptance, unless otherwise
agreed by the purchaser and the Company. The settlement date shall be specified
upon receipt of an offer to purchase. Prior to 3:00 p.m., New York City time, on
the Market Day prior to the settlement date, the Company will instruct the
Trustee to authenticate and deliver the Notes no later than 2:15 p.m., New York
City time, on the settlement date except as to Book-entry Notes described below.
Delivery of Prospectus
- ----------------------
A copy of the Prospectus as most recently amended or
supplemented on the date of delivery thereof (except as provided below) must be
delivered to a purchaser prior to or together with the earlier of the delivery
of (i) the written confirmation provided for above, and (ii) any Note purchased
by such purchaser. (For this purpose, entry of an SDFS deliver order through
DTC's Participant Terminal System to credit a Note to the account of a
Participant purchasing, or acting for the purchaser of, a Note shall be deemed
to constitute delivery of such Note.) The Company shall ensure that the
Presenting Distributor receives copies of the Prospectus and each amendment or
supplement thereto (including appropriate Pricing Supplements) in such
quantities and within such time limits as will enable the Presenting Distributor
to deliver such confirmation or Note to a purchaser as contemplated by these
procedures and in compliance with the first sentence of this paragraph. If,
since the date of acceptance of a purchaser's offer, the Prospectus shall have
been supplemented solely to reflect any sale of Notes on terms different from
those agreed to between the Company and such purchaser or a change in posted
rates not applicable to such purchaser, such purchaser shall not receive the
Prospectus as supplemented by such new supplement, but shall receive the
Prospectus as supplemented to reflect the terms of the Notes being purchased by
such purchaser and otherwise as most recently amended or supplemented on the
date of delivery of the Prospectus.
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Authenticity of Signatures
- --------------------------
The Company will cause the Trustee to furnish the Distributors
from time to time with the specimen signatures of each of the Trustee's
officers, employees or agents who have been authorized by the Trustee to
authenticate Notes, but no Distributor will have any obligation or liability to
the Company or the Trustee in respect of the authenticity of the signature of
any officer, employee or agent of the Company or the Trustee on any Note or the
Global Note (as defined in Part III).
Advertising Expenses
- --------------------
The Company will determine with the Distributors the amount of
advertising that may be appropriate in offering the Notes. Advertising expenses
will be paid by the Company.
Market Day
- ----------
"Market Day" means (a) with respect to any Note (unless
otherwise provided in this definition), any day that is a Business Day in The
City of New York, (b) with respect to LIBOR Notes only, any Business Day in New
York that is also a London Market Day, (c) with respect to Foreign Currency
Notes (other than Foreign Currency Notes denominated in European Currency Units
("ECUs")) only, any day that is a Business Day both in New York and in the
principal financial center in the country of the Specified Currency and (d) with
respect to Foreign Currency Notes denominated in ECU, any date that is a
Business Day in The City of New York that is designated as an ECU settlement day
by the ECU Banking Association in Paris or otherwise generally regarded in the
ECU interbank market as a day in which payments in ECU are made.
Trustee Not to Risk Funds
- -------------------------
Nothing herein shall be deemed to require the Trustee to risk
or expend its own funds in connection with any payment made to the Company, the
Distributors, DTC or any Holder of a Note, it being understood by all parties
that payments made by the Trustee to the Company, the Distributors, DTC or any
Holder of a Note shall be made only to the extent that funds are provided to the
Trustee for such purpose.
PART II: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
- ---------------------------------------------------------
Form and Denominations
- ----------------------
The Certificated Notes shall be issued only in fully
registered form in denominations of $1,000 and integral multiples of $1,000, or,
in the case of Foreign Currency Notes, in such minimum denomination, not less
than the equivalent of $1,000, and such greater
C-8
denomination or denominations in excess thereof, as shall be set forth in the
applicable Pricing Supplement.
Transfers and Exchanges
- -----------------------
A Certificated Note may be presented for transfer or exchange
at the principal corporate trust office of the Trustee in The City of New York.
Certificated Notes will be exchangeable for other Certificated Notes of any
authorized denominations and of like tenor and in a like aggregate principal
amount, upon surrender of the Certificated Notes to be exchanged at the
corporate trust office of the Trustee. Certificated Notes will not be
exchangeable for Book-Entry Notes.
Payment at Maturity
- -------------------
Upon presentation of each Certificated Note at Maturity, the
Trustee (or a duly authorized Paying Agent) will pay the principal amount
thereof, together with any premium and accrued interest due at Maturity. Such
payment will be made in immediately available funds, provided that the
Certificated Note is presented in time for the Paying Agent to make payment in
such funds in accordance with its normal procedures. The Company will provide
the Trustee (and any Paying Agent) with funds available for immediate use for
such purpose. Certificated Notes presented at Maturity will be canceled by the
Trustee as provided in the Indenture. For special provisions relating to Foreign
Currency Notes, see the section entitled "Special Provisions Relating to Foreign
Currency Notes" in the Prospectus Supplement.
Details for Settlement
- ----------------------
For each offer for Certificated Notes accepted by the Company,
the Presenting Distributor shall communicate to the Company's Treasury
Department prior to 3:00 p.m., New York City time, on the Market Day preceding
the settlement date, by telephone, telex, facsimile transmission or other
acceptable means, the following information (the "Purchase Information"):
1. Exact name in which the Note or Notes are to be
registered ("registered owner").
2. Exact address of registered owner and, if different,
the address for delivery, notices and payment of
principal and any premium and interest.
3. Taxpayer identification number of registered owner.
4. Principal amount of each Note in authorized
denominations to be delivered to registered owner.
C-9
5. Stated Maturity of each Note.
6. In the case of Fixed Rate Notes, the interest rate of
each Note, whether such Note is an Amortizing Note
and, if so, the amortization schedule; in the case of
Floating Rate Notes or Indexed Notes, the interest
rate formula, the Spread or Spread Multiplier (if
any), the maximum or minimum interest rate limitation
(if any), the Calculation or Determination Agent, the
Calculation Dates, the Initial Interest Rate, the
Interest Payment Dates, the Regular Record Dates, the
Index Maturity, the Interest Determination Dates and
the Interest Reset Dates, in each case, to the extent
applicable with respect to each Note.
7. Redemption and/or repayment provisions, if any, of
each Note.
8. Trade date of each Note.
9. Settlement date (Issue Date) of each Note.
10. Presenting Distributor's commission (to be paid in
the form of a discount from the proceeds remitted to
the Company upon settlement).
11. Price.
12. Currency or currency unit in which each Note is to be
denominated and exchange rate applicable to purchase
Foreign Currency Notes to be paid for in U.S.
dollars.
13. Original issue discount, if any.
14. Whether the Company has the option to extend the
Stated Maturity of the Note and if so, the Extension
Period, the Election Dates and the Final Maturity of
such Note.
15. Whether the Note is a Renewable Note, and if it is a
Renewable Note, the Initial Maturity Date and the
Final Maturity Date.
16. In the case of an Indexed Note, any additional
information relevant to determination of the amounts
of principal (and premium, if any) or interest
payable.
C-10
17. Any additional applicable terms of each Note.
The Issue Date of, and the settlement date for, Certificated
Notes will be the same. Before accepting any offer to purchase Certificated
Notes to be settled in less than three Market Days, the Company shall verify
that the Trustee will have adequate time to prepare and authenticate the Notes.
Immediately after receiving the details for each offer for
Certificated Notes from the Presenting Distributor, the Company will, after
recording the details and any necessary calculations, communicate the Purchase
Information by telephone, telex, facsimile transmission or other acceptable
means, to the Trustee. Each such instruction given by the Company to the Trustee
shall constitute a continuing representation and warranty by the Company to the
Trustee and the Distributors that (i) the issuance and delivery of such Notes
have been duly and validly authorized by the Company and (ii) such Notes, when
completed, authenticated and delivered, shall constitute the valid and legally
binding obligation of the Company. The Trustee will assign to and enter on each
Note a transaction number.
The Company will deliver to the Trustee a pre-printed four-ply
packet for such Certificated Note, which packet will contain the following
documents in forms that have been approved by the Company, the Distributors and
the Trustee:
1. Certificated Note with customer confirmation.
2. Stub One - For the Trustee.
3. Stub Two - For the Presenting Distributor.
4. Stub Three - For the Company.
Prior to 2:00 p.m., New York City time, on the Settlement
Date, the Trustee will complete such Certificated Note and will authenticate
such Certificated Note and deliver it (with the confirmation) and Stubs One and
Two to such Distributor, and such Distributor will acknowledge receipt of the
Note by stamping or otherwise marking Stub One and returning it to the Trustee.
The Trustee will send Stub Three to the Company by first-class mail.
Settlement; Note Deliveries and Cash Payment
- --------------------------------------------
The Company will deliver to the Trustee at the commencement of
the program and from time to time thereafter a supply of duly executed
Certificated Notes with pre-printed control numbers adequate to implement the
program. Upon the receipt of appropriate documentation and instructions from the
Company in accordance with the applicable Officers' Certificate and verification
thereof, the Trustee will cause the Certificated Notes to be completed and
authenticated and hold the Certificated Notes for delivery against payment.
C-11
The Trustee will deliver the Certificated Notes (with the
confirmation) and Stubs One and Two, in accordance with instructions from the
Company, to the Presenting Distributor. If the Distributor is placing such
Certificated Notes as agent, such delivery will be made for the benefit of the
purchaser only against receipt and the Presenting Distributor will acknowledge
receipt of the Notes through a broker's receipt. Such delivery will be made only
against such acknowledgement of receipt and evidence that instructions have been
given for payment to the Company at such account of the Company as it may
specify in writing, in immediately available funds, of an amount equal to the
principal amount of such Notes, less the applicable commission. If the
Presenting Distributor in any instance advances its own funds, the Company shall
not use any of the proceeds of such sale to acquire securities.
If the Distributor is placing such Certificated Notes as
agent, the Presenting Distributor, as the Company's agent, will deliver the
Notes (with the written confirmation provided for above) to the purchaser
thereof against payment therefor by such purchaser in immediately available
funds.
Delivery of any confirmation or Note to a purchaser thereof by
a Distributor, acting as agent or principal, will be made in compliance with
"Delivery of Prospectus" in Part I above.
Certificated Notes delivered to the Distributors will be sent:
If sent to _________________________
If sent to _________________________
Fails (Distributor Acting as Agent)
- -----------------------------------
In the event that a purchaser shall fail to accept delivery of
and make payment for a Certificated Note on the settlement date, the Presenting
Distributor will notify the Trustee and the
C-12
Company, by telephone, confirmed in writing. If such Certificated Note has been
delivered to the Presenting Distributor, as the Company's agent, the Presenting
Distributor shall return such Note to the Trustee. If funds have been advanced
for the purchase of such Note, the Trustee will, immediately upon receipt of
such Note, debit the account of the Company for the amount so advanced and the
Trustee shall refund the payment previously made by the Presenting Distributor
in immediately available funds. Such payments will be made on the settlement
date, if possible, and in any event not later than the Market Day following the
settlement date. If the fail shall have occurred for any reason other than the
failure of the Presenting Distributor to provide the Purchase Information to the
Company or to provide a confirmation to the purchaser, the Company will
reimburse the Presenting Distributor on an equitable basis for its loss of the
use of funds during the period when the funds were credited to the account of
the Company.
Immediately upon receipt of the Certificated Note in respect
of which the fail occurred, the Trustee will make appropriate entries in its
records to reflect the fact that the Note was never issued and the Note will be
canceled and disposed of as provided in the Indenture.
PART III: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES
- --------------------------------------------------------
In connection with the qualification of the Book-Entry Notes
for eligibility in the book-entry system maintained by DTC, the Trustee will
perform the custodial, document control and administrative functions described
below, in accordance with its obligations under a Letter of Representations (the
"Letter") from the Company and the Trustee to DTC dated as of April 9, 1997, and
a Medium-Term Note Certificate Agreement between the Trustee and DTC dated as of
August 17, 1989, and its obligations as a participant in DTC, including DTC's
Same-Day Funds Settlement System ("SDFS").
Form, Denominations and Registration
- ------------------------------------
All Book-Entry Notes of the same tenor and having the same
Issue Date, will be represented initially by a single note (a "Global Note") in
fully registered form without coupons. Unless otherwise stated in the applicable
Pricing Supplement, Book-Entry Notes will represent Notes denominated in U.S.
dollars. Global Notes will be issued in denominations of $1,000 and integral
multiples thereof. Global Notes will be denominated in principal amounts not in
excess of $150,000,000. If one or more Book-Entry Notes having an aggregate
principal amount in excess of $150,000,000 would, but not for the preceding
sentence, be represented by a single Global Note, then one Global Note will be
issued to represent each $150,000,000 principal amount of such Book-Entry Note
or Notes and an additional Global Note will be issued to represent any remaining
principal amount of such Book-Entry Note or Notes. In such a case, each of the
Global Notes representing such Book-Entry note or Notes shall be assigned the
same CUSIP number. Each Global Note will be registered in the name of Cede &
Co., as nominee for DTC, on the Security Register maintained under the
Indenture. The beneficial owner of a Book-Entry Note (or one or more indirect
participants in DTC designated by such owner) will designate one or more
participants in DTC (with respect to such Note, the "Participants") to act as
agent or
C-13
agents for such owner in connection with the book-entry system maintained by
DTC, and DTC will record in book-entry form, in accordance with instructions
provided by such Participants, a credit balance with respect to such Note in the
account of such Participants. The ownership interest of such beneficial owner in
such Note will be recorded through the records of such Participants or through
the separate records of such Participants and one or more indirect participants
in DTC.
CUSIP Numbers
- -------------
The Company has arranged with the CUSIP Service Bureau of
Standard & Poor's Corporation (the "CUSIP Service Bureau") for the reservation
of a series of CUSIP numbers (including tranche numbers), such series consisting
of approximately 900 CUSIP numbers and relating to Global Notes representing
Book-Entry Notes. The Company has obtained from the CUSIP Service Bureau a
written list of such reserved CUSIP numbers and has delivered it to the Trustee
and DTC. The Trustee will assign CUSIP numbers serially to Global Notes as
described below under "Details for Settlement." DTC will notify the CUSIP
Service Bureau periodically of the CUSIP numbers that the Trustee has assigned
to Global Notes. The Trustee will notify the Company at the time when fewer than
100 of the reserved CUSIP numbers remain unassigned to the Global Notes; and the
Company will reserve additional CUSIP numbers for assignment to Global Notes
representing Book-Entry Notes. Upon obtaining such additional CUSIP numbers, the
Company shall deliver a list of such additional CUSIP numbers to the Trustee and
DTC.
Transfers and Exchanges for the Purpose of Consolidation
- --------------------------------------------------------
Transfers of a Book-Entry Note will be accomplished by book
entries made by DTC and, in turn, by Participants (and, in certain cases, one or
more indirect participants in DTC) acting on behalf of beneficial transferors
and transferees of such Note.
The Trustee may upon notice to the Company deliver to DTC and
the CUSIP Service Bureau at any time a written notice (a copy of which shall be
attached to the Global Note resulting from such exchange) specifying (i) the
CUSIP numbers of two or more outstanding Global Notes that represent Book-Entry
Notes of the same tenor and having the same Issue Date, and for which interest
(if any) has been paid to the same date, (ii) a date occurring at least thirty
days after such written notice is delivered and at least thirty days before the
next Interest Payment Date (if any) for such Notes, on which such Global Notes
shall be exchanged for a single replacement Global Note and (iii) a new CUSIP
number to be assigned to such replacement Global Note. Upon receipt of such a
notice, DTC will send to its Participants (including the Trustee) a written
reorganization notice to the effect that such exchange will occur on such date.
Prior to the specified exchange date, the Trustee will deliver to the CUSIP
Service Bureau a written notice setting forth such exchange date and the new
CUSIP number and stating that, as of such exchange date, the CUSIP numbers of
the Global Notes to be exchanged will no longer be valid. On the specified
exchange date, the Trustee will exchange such Global Notes for a single Global
Note bearing the new CUSIP number and the CUSIP numbers of the exchanged Global
C-14
Notes will, in accordance with CUSIP Service Bureau procedures, be canceled and
not immediately reassigned.
Notice of Interest Payment Dates and Regular Record Dates
- ---------------------------------------------------------
To the extent then known, on the first Market Day of March,
June, September, and December of each year, the Trustee will deliver to the
Company and DTC a written list of Record Dates and Interest Payment Dates that
will occur with respect to Floating Rate Book-Entry Notes during the six-month
period beginning on such first Market Day.
Payments of Principal and Interest
- ----------------------------------
(a) Payments of Interest Only. Promptly after each Regular
Record Date, the Trustee will deliver to the Company and DTC a written notice
specifying by CUSIP number the amount of interest to be paid on each Global Note
on the following Interest Payment Date (other than an Interest Payment Date
coinciding with Maturity) and the total of such amounts. The Company will
confirm with the Trustee the amount payable on each Global Note on such Interest
Payment Date. DTC will confirm the amount payable on each Global Note on such
Interest Payment Date by reference to the daily or weekly bond reports published
by Standard & Poor's Corporation. The Company will pay to the Trustee the total
amount of interest due on such Interest Payment Date (other than at Maturity),
and the Trustee will pay such amount to DTC at the times and in the manner set
forth below under "Manner of Payment".
(b) Payments at Stated Maturity. On or about the first Market
Day of each month, the Trustee will deliver to the Company and DTC a written
list of principal and interest to be paid on each Global Note maturing in the
following month. The Company, the Trustee and DTC will confirm the amounts of
such principal and interest payments with respect to each such Global Note on or
about the fifth Market Day preceding the Stated Maturity of such Global Note.
The Company will pay to the Trustee, as the paying agent, the principal amount
of such Global Note, together with interest due at such Stated Maturity. Upon
surrender of a Global Note, the Trustee will pay such amounts to DTC at the
times and in the manner set forth below under "Manner of Payment". If any Stated
Maturity of a Global Note representing Book-Entry Notes is not a Market Day, the
payment due on such day shall be made on the next succeeding Market Day and no
interest shall accrue on such payment for the period from and after such Stated
Maturity. Promptly after payment to DTC of the principal and any interest due at
the Stated Maturity of such Global Note, the Trustee will cancel such Global
Note and return such Global Note to the Company in accordance with the terms of
the Indenture.
(c) Payment upon Redemption. The Trustee will comply with the
terms of the Letter with regard to redemptions or repayments of the Book-Entry
Notes. In the case of Book-Entry Notes stated by their terms to be redeemable
prior to Stated Maturity, [at least 60 calendar days before the date fixed for
redemption] (the "Redemption Date"), the Company shall notify the Trustee of the
Company's election to redeem such Book-Entry Notes in whole or in part and the
C-15
principal amount of such Book-Entry Notes to be so redeemed. At least 30
calendar days but not more than 60 calendar days prior to the Redemption Date,
the Trustee shall notify DTC of the Company's election to redeem such Book-Entry
Notes. The Trustee shall notify the Company and DTC of the CUSIP numbers of the
particular Book-Entry Notes to be redeemed either in whole or in part. The
Company, the Trustee and DTC will confirm the amounts of such principal and any
premium and interest payable with respect to each such Book-Entry Note on or
about the fifth Market Day preceding the Redemption Date of such Book-Entry
Note. The Company will pay the Trustee, in accordance with the terms of the
Indenture, the amount necessary to redeem each such Book-Entry Note or the
applicable portion of each such Book-Entry Note. The Trustee will pay such
amount to DTC at the times and in the manner set forth herein. Promptly after
payment to DTC of the amount due on the Redemption Date for such Book-Entry
Note, the Trustee shall cancel any such Book-Entry Note redeemed in whole and
shall deliver it to the Company with an appropriate debit advice. If a Global
Note is to be redeemed in part, the Trustee will cancel such Global Note and
issue a Global Note which shall represent the remaining portion of such Global
Note and shall bear the CUSIP number of the canceled Global Note.
(d) Manner of Payment. The total amount of any principal and
interest due on Global Notes on any Interest Payment Date or at Maturity shall
be paid by the Company to the Trustee in immediately available funds on such
date available for use as of 9:30 A.M. New York City time. The Company will make
such payment on such Global Notes by wire transfer to the Trustee. The Company
will confirm instructions regarding payment in writing to the Trustee. Prior to
1:00 p.m., New York City time, on each date of Maturity of a Book-Entry Note or
as soon as possible thereafter, the Trustee will pay by separate wire transfer
(using Fedwire message entry instructions in a form previously specified by DTC)
to an account at the Federal Reserve Bank of New York previously specified by
DTC in funds available for immediate use by DTC, each payment of principal
(together with interest thereon) due at Maturity on Book-Entry Notes. On each
Interest Payment Date, interest payment shall be made to DTC in same day funds
in accordance with existing arrangements between the Trustee and DTC.
Thereafter, on each such date, DTC will pay, in accordance with its SDFS
operating procedures then in effect, such amounts in funds available for
immediate use to the respective Participants in whose names the Book-Entry Notes
represented by such Global Notes are recorded in the book-entry system
maintained by DTC. NEITHER THE COMPANY NOR THE TRUSTEE SHALL HAVE ANY DIRECT
RESPONSIBILITY OR LIABILITY FOR THE PAYMENT BY DTC TO SUCH PARTICIPANTS OF THE
PRINCIPAL OF AND ANY PREMIUM AND INTEREST ON THE BOOK-ENTRY NOTES.
(e) Withholding Taxes. The amount of any taxes required under
applicable law to be withheld from any interest payment on a Book-Entry Note
will be determined and withheld by the Participant, indirect participant in DTC
or other person responsible for forwarding payments and materials directly to
the beneficial owner of such Note.
Details for Settlement
- ----------------------
For each offer for Book-Entry Notes accepted by the Company,
the Presenting Distributor shall communicate to the Company's Treasury
Department prior to 11:00 a.m., New
C-16
York City time, on the first Market Day after the sale date (or on the sale date
if such sale is to be settled within one Market Day), by telephone, telex,
facsimile transmission or other acceptable means, the following information (the
"Purchase Information"):
1. Principal amount of the Notes.
2. Stated Maturity of the Notes.
3. In the case of Fixed Rate Notes, the interest rate of
the Notes and whether such Note is an Amortizing
Note, and, if so, the amortization schedule; in the
case of Floating Rate Notes or Indexed Notes,
interest rate formula, the Spread or Spread
Multiplier (if any), the maximum or minimum Interest
rate limitation (if any), the Calculation or
Determination Agent, the Calculation Dates, the
Initial Interest Rate, the Interest Payment Dates,
the Regular Record Dates, the Index Maturity, the
Interest Determination Dates and the Interest Reset
Dates, in each case, to the extent applicable with
respect to the Notes.
4. Redemption and/or repayment provisions, if any, of
the Notes.
5. Trade date of the Notes.
6. Settlement date (Issue Date) of the Notes.
7. Presenting Distributor's commission (to be paid in
the form of a discount from the proceeds remitted to
the Company upon settlement).
8. Price.
9. Currency or currency unit in which the Notes are to
be denominated and exchange rate applicable to
purchase Foreign Currency Notes payable in U.S.
dollars.
10. Original issue discount, if any.
11. Whether the Company has the option to extend the
Stated Maturity of the Note and if so, the Extension
Period, the Election Dates and the Final Maturity of
such Note.
C-17
12. Whether the Note is a Renewable Note, and if it is a
Renewable Note, the Initial Maturity Date and the
Final Maturity Date.
13. In the case of an Indexed Note, any additional
information relevant to determination of the amounts
of principal (and premium, if any) or interest
payable.
14. Any additional applicable terms of the Notes.
The Issue Date of, a-Entry Notes will be the same.
Before accepting any offer to purchase Book-Entry Notes to be settled in less
than three Market Days, the Company shall verify that the Trustee will have
adequate time to prepare and authenticate the Global Notes.
If the initial interest rate for a Floating Rate Book-Entry
Note has not been determined at the time that the foregoing procedure is
completed, the procedures described in the following two paragraphs shall be
completed as soon as such rate has been determined but no later than 12:00 Noon
and 2:00 p.m., New York City time, as the case may be, on the Market Day before
the settlement date.
Immediately after receiving the details for each offer for
Book-Entry Notes from the Presenting Distributor and in any event no later than
12:00 Noon, New York City time, on the first Market Day after the sale date (or
on the sale date if such sale is to be settled within one Market Day), the
Company will, after recording the details and any necessary calculations,
communicate the Purchase Information by telephone, telex, facsimile transmission
or other acceptable means, to the Trustee. Each such instruction given by the
Company to the Trustee shall constitute a continuing representation and warranty
by the Company to the Trustee and the Distributors that (i) the issuance and
delivery of such Note have been duly and validly authorized by the Company and
(ii) such Note, when duly issued, shall constitute the valid and legally binding
obligation of the Company.
Immediately after receiving the Purchase Information from the
Company and in any event no later than 2:00 P.M., New York City time, on the
first Market Day after the sale date (or on the sale date if such sale is to be
settled within one Market Day), the Trustee will assign a CUSIP number to the
Global Note representing such Book-Entry Note and will telephone the Company and
advise the Company of such CUSIP number and, as soon thereafter as practicable,
the Company shall notify the Presenting Distributor of such CUSIP number. The
Trustee will enter a pending deposit message through DTC's Participant Terminal
System, providing settlement information to DTC (which shall route such
information to Standard & Poor's Corporation). Standard & Poor's Corporation
will use the information received in the pending deposit message to include the
amount of any interest payable and certain other information regarding the
related Global Note in the appropriate daily or weekly bond report published by
Standard & Poor's Corporation.
C-18
Settlement; Global Note Delivery and Cash Payment
- -------------------------------------------------
The Company will deliver to the Trustee at the commencement of
the program and from time to time thereafter a supply of duly executed Global
Notes with pre-printed control numbers adequate to implement the program. Upon
the receipt of appropriate documentation and instructions from the Company in
accordance with the applicable Officers' Certificate and verification thereof,
the Trustee will cause the Global Note to be completed and authenticated and
hold the Global Note for delivery against payment.
Prior to 10:00 a.m., New York City time, on the Settlement
Date, the Trustee will enter instructions through DTC's Participant Terminal
System, using the function MT II, and DTC will credit such Note to the Trustee's
participant account at DTC. Prior to 2:00 p.m., New York City time, on the
Settlement Date, the Trustee will enter an SDFD deliver order through DTC's
Participant Terminal System instructing DTC to (i) debit such Note to the
Trustee's participant account and credit such Note to the Presenting
Distributor's participant account and (ii) debit the Presenting Distributor's
settlement account and credit the Trustee's settlement account for an amount
equal to the price of such Note less such Distributor's commission (in
accordance with SDFS operating procedures in effect on the Settlement Date). The
entry of such a deliver order shall constitute a representation and warranty by
the Trustee to DTC that (i) the Global Note representing such Book-Entry Note
has been executed, delivered and authenticated and (ii) the Trustee is holding
such Global Note pursuant to the relevant Medium-Term Note Certificate Agreement
between the Trustee and DTC.
Prior to 2:00 p.m., New York City time, on the Settlement Date
unless the Presenting Distributor is the end purchaser of such Note, the
Presenting Distributor will enter an SDFS deliver order through DTC's
Participant Terminal System instructing DTC (i) to debit such Note to such
Distributor's participant account and credit such Note to the Participant
accounts of the Participants with respect to such Note and (ii) to debit the
settlement accounts of such Participants and credit the settlement account of
such Distributor for an amount equal to the price of such Note (in accordance
with SDFS operating procedures in effect on the settlement date).
Transfers of funds are subject to extension in accordance with
any extension of Fedwire closing deadlines and in the other events specified in
the SDFS operating procedures in effect on the settlement date.
The Trustee, upon confirming receipt of such funds, will wire
transfer the amount transferred to the Trustee, in funds available for immediate
use, for the account of the Company, to account no. __________ at [name of
bank], [location of bank] (ABA No. __________).
Unless the Presenting Distributor is the end purchaser of such
Note, such Distributor will confirm the purchase of such Note to the purchaser
either by transmitting to the Participants with respect to such Note a
confirmation order or orders through DTC's institutional delivery system or by
mailing a written confirmation to such purchaser.
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Fails
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If settlement of a Book-Entry Note is rescheduled or
cancelled, the Company shall notify the Trustee, and upon receipt of such
notice, the Trustee will deliver to DTC, through DTC's Participant Terminal
System, a cancellation message to such effect by no later than 2:00 p.m., New
York City time, on the Market Day immediately preceding the scheduled settlement
date.
If the Agent or Trustee has not entered an SDFS deliver order
with respect to a Book-Entry Note, then upon written request (which may be
evidenced by telecopy transmission) of the Company, the Trustee shall deliver to
DTC, through DTC's Participant Terminal System, as soon as practicable, but no
later than 2:00 p.m., New York City time, on any Market Day, a withdrawal
message instructing DTC to debit such Note to the Trustee's participant account.
DTC will process the withdrawal message, provided that the Trustee's participant
account contains a principal amount of the Global Note representing such Note
that is at least equal to the principal amount to be debited. If withdrawal
messages are processed with respect to all the Book-Entry Notes represented by a
Global Note, the Trustee will mark such Global Note "cancelled", make
appropriate entries in the Trustee's records and send such cancelled Global Note
to the Company. The CUSIP number assigned to such Global Note shall, in
accordance with CUSIP Service Bureau procedures, be cancelled and not
immediately reassigned. If withdrawal messages are processed with respect to one
or more, but not all, of the Book-Entry Notes represented by a Global Note, the
Trustee will exchange such Global Note for two Global Notes, one of which shall
represent such Book-Entry Note or Notes and shall be cancelled immediately after
issuance and the other of which shall represent the remaining Book-Entry Notes
previously represented by the surrendered Global Note and shall bear the CUSIP
number of the surrendered Global Note.
If the purchase price for any Book-Entry Note is not timely
paid to the Participants with respect to such Note by the beneficial purchaser
thereof (or a person, including an indirect participant in DTC, acting on behalf
of such purchaser), such Participants and, in turn, the Presenting Distributor
may enter an SDFS deliver order through DTC's Participant Terminal System
debiting such Note to such Distributor's participant account and crediting such
Note free to the participant account of the Trustee and shall notify the Trustee
and the Company thereof. Thereafter, the Trustee, (i) will immediately notify
the Company, once the Trustee has confirmed that such Note has been credited to
its participant account, and the Company shall immediately transfer by Fedwire
(in immediately available funds) to the Presenting Distributor an amount equal
to the price of such Note which was previously sent by wire transfer to the
account of the Company maintained at _______________, and (ii) the Trustee will
deliver the withdrawal message and take the related actions described in the
preceding paragraph. Such debits and credits will be made on the settlement
date, if possible, and in any event not later than 5:00 p.m. __________ time on
the following Market Day. If the fail shall have occurred for any reason other
than failure of the Presenting Distributor to provide the Purchase Information
to the Company or to provide a confirmation to the purchaser, the Company will
reimburse the
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Presenting Distributor on an equitable basis for its loss of the use of funds
during the period when the funds were credited to the account of the Company.
Notwithstanding the foregoing, upon any failure to settle with
respect to a Book- Entry Note, DTC may take any actions in accordance with its
SDFS operating procedures then in effect. In the event of a failure to settle
with respect to one or more, but not all, of the Book-Entry Notes to have been
represented by a Global Note, the Trustee will provide for the authentication
and issuance of a Global Note representing the other Book-Entry Notes to have
been represented by such Global Note and will make appropriate entries in its
records.
C-21