Exhibit 1.1
ARIZONA PUBLIC SERVICE COMPANY
FIRST MORTGAGE BONDS
UNDERWRITING AGREEMENT
Dear Sir or Madam:
1. INTRODUCTION. Arizona Public Service Company, an Arizona corporation
(the "Company"), proposes to issue and sell from time to time up to $725,000,000
in aggregate principal amount of its First Mortgage Bonds (the "Bonds")
registered under the registration statements referred to in Section 2(a). The
Bonds will be issued under its Mortgage and Deed of Trust dated as of July 1,
1946, to The Bank of New York, as successor Trustee, as amended and supplemented
by fifty-five indentures supplemental thereto (the "Mortgage"), and as further
amended and supplemented by one or more additional Supplemental Indentures
relating to the Bonds (the "Supplemental Indentures") (the Mortgage as amended
and supplemented by such Supplemental Indentures being sometimes hereinafter
referred to as the "Indenture"). The Bonds will be issued in one or more series,
which series may vary as to interest rates, maturities, redemption provisions,
selling prices, and other terms, with all such terms for any particular issue of
the Bonds being determined at the time of sale. Particular issues of the Bonds
may be sold from time to time to one or more of the firms to whom this Agreement
is addressed, and to such other purchasers as the Company shall designate and as
shall agree in writing to comply with the terms and conditions of this
Agreement, for resale in accordance with the terms of offering determined at the
time of sale. The Bonds involved in any such offering are hereinafter referred
to as the "Purchased Bonds," the parties that agree to purchase the same are
hereinafter referred to as the "Underwriters" of such Purchased Bonds, and the
representative or representatives of the Underwriters, if any, specified in a
Terms Agreement referred to in Section 3 are hereinafter referred to as the
"Representatives."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In connection with each
offering of the Purchased Bonds, the Company represents and warrants to, and
agrees with, the several Underwriters that:
(a) A registration statement (No. 333-94277) relating to $225,000,000
of the Bonds, unsecured debentures, notes, or other evidences of
indebtedness (the "Securities"), and a registration statement (No.
333-____) relating to $500,000,000 of the Bonds or Securities (including a
combined prospectus relating to up to $725,000,000 of the Bonds or
Securities) were filed with the Securities and Exchange Commission (the
"Commission") and have become effective. Such registration statements, as
each is amended at the time of the Terms Agreement referred to in Section 3
relating to the Purchased Bonds, are hereinafter referred to as the "First
Registration Statement" and the "Second Registration Statement,"
respectively, and, together with any related Rule 462(b) registration
statement or amendment thereto, are hereinafter referred to collectively as
the "Registration Statements," and such prospectus, as supplemented as
contemplated by Section 3 to reflect the terms of the Purchased Bonds and
terms of offering thereof, including all material incorporated by reference
therein, is hereinafter referred to as the "Prospectus."
(b) Each part of the Registration Statements relating to the Bonds,
when such part became effective, conformed in all material respects to the
requirements of the Securities Act of 1933 (the "Act"), the Trust Indenture
Act of 1939 (the "Trust Indenture Act") and the rules and regulations (the
"Rules and Regulations") of the Commission and did not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and on the date of each Prospectus Supplement referred to in
Section 3, the Registration Statements and the Prospectus will conform in
all material respects to the requirements of the Act, the Trust Indenture
Act and the Rules and Regulations, and at such date none of such documents
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the foregoing
does not apply to (a) statements in or omissions from any such documents
based upon written information furnished to the Company by any Underwriter
specifically for use therein or (b) that part of the Registration
Statements that consists of the Statement of Eligibility and Qualification
(Form T-1) under the Trust Indenture Act of 1939 of The Bank of New York,
as successor Trustee under the Mortgage.
(c) An order of the Arizona Corporation Commission shall have been
granted authorizing the execution and delivery of the Supplemental
Indenture relating to the Purchased Bonds and the issuance and sale of the
Purchased Bonds on the terms and conditions herein and in the Prospectus
and the Terms Agreement referred to in Section 3 relating to the Purchased
Bonds, and the approval or consent of no other public body or authority is
necessary to the execution and delivery of such Supplemental Indenture or
the validity of the issuance and sale of the Purchased Bonds, except as may
be required under state securities or blue sky laws.
(d) Except for property specifically excepted from the lien of the
Indenture or released therefrom in accordance with the terms thereof, the
Company has good and marketable title in fee simple, except for items
described in (A), (B), and (C) below, to all
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of the real property purported in the Indenture to be so held, good and
valid leasehold interests in all properties purported in the Indenture to
be held under lease, and good and valid title to all other properties
described in the Indenture as subject to the lien thereof (which property
excludes 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 Company's Form 10-K Report for the fiscal year ended December 31,
2000 (the "2000 Form 10-K Report") incorporated by reference in the
Registration Statements, except that the transmission and distribution
lines of the Company, other than those located on land owned in fee by the
Company, and the property described in Section 15 of Article IV of the
Forty-first Supplemental Indenture, have been installed in public streets
or alleys and in highways under ordinances and permits granted by the
various governmental bodies having jurisdiction, or have been constructed
on leaseholds, easements or rights-of-way granted, with minor exceptions,
by the apparent owners of record of the land and such leases, easements, or
rights-of-way are subject to any defects in or encumbrances on the title of
the respective lessors of such leases or grantors of such easements or
rights-of-way; title to the aforesaid properties is subject only to: (A)
the lien of the Mortgage, (B) Excepted Encumbrances as defined in the
Mortgage, and (C) other liens, encumbrances or defects, none of which,
individually or in the aggregate, materially interfere with the business or
operations of the Company (with respect to leasehold interests on the
Navajo Reservation, this representation is intended and shall be understood
to mean only that the Company is the owner of the rights conferred upon it
by the leases from the Navajo Tribe relating to the sites on which the
Navajo Plant and the Four Corners Plant are located, and that while the
Company is not aware of the assertion of any claim contesting the interest
of the Navajo Tribe in the lands leased, the Company does not give any
representation with respect to the interest of the Navajo Tribe in the
lands leased or with respect to the enforceability of such leases against
the Navajo Tribe); the Mortgage, subject only as above set forth in this
clause, now constitutes, and the Mortgage and the Supplemental Indentures
theretofore executed, subject only as above set forth in this clause, when
the latter shall have been duly recorded and filed, will constitute,
together and as a single instrument, a direct and valid first mortgage lien
upon said properties, which include all of the properties of the Company
(other than the classes or items of property expressly excepted in the
Mortgage); and all properties (other than the classes or items of property
expressly excepted in the Mortgage or expressly released from the lien
thereof) acquired by the Company after the date of the Supplemental
Indenture relating to the Purchased Bonds in each county in the States of
Arizona and New Mexico in which the Mortgage and the Supplemental Indenture
shall have been duly recorded and filed (and, as to which properties, with
respect to priority only, any necessary recordation and/or filing has been
accomplished, including therein any necessary descriptions of
after-acquired real property and real property upon which after-acquired
fixtures are affixed) will, upon such acquisition, become subject to the
first mortgage lien thereof, subject, however, to Excepted Encumbrances and
to liens, if any, existing or placed thereon at the time of the acquisition
thereof by the Company and, with respect to priority only, to liens, if
any, existing prior to the time of any necessary recordation and/or filing
by the Company.
(e) The Company holds such valid franchises, certificates of
convenience and necessity, licenses, and permits as are necessary with
respect to the maintenance and
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operation of its property and business as now conducted, except that (A)
the Company from time to time makes minor extensions of its system prior to
the time a related franchise, certificate, license, or permit is procured,
(B) from time to time communities already being served by the Company
become incorporated and considerable time may elapse before a franchise is
procured, (C) certain franchises may have expired prior to the
renegotiation thereof, (D) the Company may not have obtained certain
permits or variances relating to the environmental requirements described
in any of its Form 10-K Report, its Form 10-Q Reports, and/or its Form 8-K
Reports incorporated by reference in the Registration Statements, (E)
certain minor defects and exceptions may exist which, individually and in
the aggregate, are not deemed material, and (F) the Company does not make
any representation regarding the geographical scope of any franchise,
certificate, license, or permit that is not specific as to its geographical
scope.
3. PURCHASE AND OFFERING. The obligation of the Underwriters to purchase,
and the obligation of the Company to sell, the Purchased Bonds will be evidenced
by an exchange of facsimile transmission or other written communications (the
"Terms Agreement") at the time the Company determines to sell the Purchased
Bonds. The Terms Agreement shall specify (by incorporation by reference or
otherwise) the parties that will be Underwriters, the principal amount to be
purchased by each, the purchase price to be paid by the Underwriters, any
compensation or commissions to be paid to Underwriters, the offering price, and
the terms of the Purchased Bonds not already specified in the Indenture,
including, but not limited to, interest rates, maturity, redemption provisions,
and sinking fund requirements, if any. The Terms Agreement shall also specify
(by incorporation by reference or otherwise) the time and date of delivery and
payment (the "Closing Date"), the place of delivery and payment, and any details
of the terms of offering that should be reflected in the prospectus supplement
relating to the offering of the Purchased Bonds (the "Prospectus Supplement").
It is understood that the Underwriters will offer the Purchased Bonds for sale
as set forth in the Prospectus. The obligations of the Underwriters to purchase
the Purchased Bonds shall be several and not joint. Except as may otherwise be
set forth in the Terms Agreement, the Purchased Bonds will be in definitive form
and in such denominations and registered in such names as the Underwriters may
request.
4. COVENANTS OF THE COMPANY. In connection with each offering of Purchased
Bonds, the Company covenants and agrees with the several Underwriters that:
(a) The Company will advise the Underwriters or the Representatives
promptly of any proposed amendment or supplementation of the First
Registration Statement, the Second Registration Statement, or the
Prospectus. The Company will also advise the Underwriters or the
Representatives of the institution by the Commission of any stop order
proceedings in respect of the First Registration Statement, the Second
Registration Statement, or of any part thereof, and will use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible its lifting, if issued.
(b) If, at any time when a prospectus relating to the Purchased Bonds
is required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact, or omit to
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state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
if it is necessary at any time to amend or supplement the First
Registration Statement, the Second Registration Statement, or the
Prospectus to comply with the Act, the Company promptly will prepare and
file with the Commission an amendment or supplement that will correct such
statement or omission or an amendment that will effect such compliance.
(c) As soon as practicable, but not later than 18 months, after the
date of the Terms Agreement relating to the Purchased Bonds, the Company
will make generally available to its securityholders an earning statement
or statements (which need not be audited) covering a period of at least 12
months beginning after the effective date of the Second Registration
Statement (as defined in Rule 158(c) under the Act), which will satisfy the
provisions of Section 11(a) of the Act and the rules and regulations
thereunder.
(d) The Company will furnish to the Underwriters or the
Representatives such copies of the Registration Statements (including one
copy of the Second Registration Statement for each Representative, or for
each Underwriter if there are no Representatives, and for the counsel for
the Underwriters, which is signed and includes all exhibits), any related
preliminary prospectus supplements and the Prospectus, including all
amendments or supplements to such documents, as may be reasonably
requested.
(e) The Company will arrange or cooperate in arrangements for the
qualification of the Purchased Bonds for sale and the determination of
their eligibility for investment under the laws of such jurisdictions as
the Underwriters or the Representatives designate and will continue such
qualifications in effect so long as required for the distribution of the
Purchased Bonds, provided that the Company shall not be required to qualify
as a foreign corporation in any State, to consent to service of process in
any State other than with respect to claims arising out of the offering or
sale of the Purchased Bonds, or to meet other requirements deemed by it to
be unduly burdensome.
(f) During the period of five years after the date of the Terms
Agreement relating to the Purchased Bonds, the Company will furnish to the
Underwriters or the Representatives thereunder, and, upon request, each of
the other Underwriters, (i) as soon as practicable after the end of each
fiscal year, a balance sheet and statements of income and retained earnings
of the Company as at the end of and for such year, all in reasonable detail
and certified by independent public accountants, and (ii) (A) as soon as
practicable after the end of each quarterly fiscal period (except for the
last quarterly fiscal period of each fiscal year), a balance sheet and
statement of income of the Company as at the end of and for such period,
all in reasonable detail and certified by a principal financial or
accounting officer of the Company, (B) as soon as available, a copy of each
report of the Company mailed by the Company to stockholders or filed with
the Commission, and (C) from time to time, such other information
concerning the Company as may reasonably be requested. So long as the
Company has active subsidiaries, such financial statements will be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated.
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(g) The Company will pay all expenses incident to the performance of
its obligations under this Agreement, and will reimburse the Underwriters
for any reasonable expenses (including reasonable fees and disbursements of
counsel) incurred by them in connection with the qualification of the
Purchased Bonds with respect to which the Terms Agreement relating to the
Purchased Bonds has been entered for sale, and the determination of their
eligibility for investment, under the laws of such jurisdictions as the
Representatives or, if there are no Representatives, the Underwriters
designate, and the printing of memoranda relating thereto, and for any fees
charged by investment rating agencies for the rating of the Purchased
Bonds.
(h) The Company will not offer or sell any of its First Mortgage Bonds
for a period beginning at the time of execution of the Terms Agreement
relating to the Purchased Bonds and ending on the Closing Date relating
thereto without prior consent of the Underwriters or the Representatives.
5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of
the several Underwriters to purchase and pay for the Purchased Bonds will be
subject to the accuracy of the representations and warranties on the part of the
Company herein, to the accuracy of the statements of Company officers made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the following additional conditions precedent:
(a) The Underwriters or the Representatives shall have received a
letter from DELOITTE & TOUCHE LLP, dated the date of the Terms Agreement,
confirming that they are independent certified public accountants within
the meaning of the Act and the applicable published Rules and Regulations
thereunder, and stating in effect that (i) in their opinion the financial
statements and schedules of the Company examined by them and incorporated
by reference in the Registration Statements comply as to form in all
material respects with the applicable accounting requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and the published Rules
and Regulations thereunder and (ii) on the basis of a reading of the latest
available interim financial statements of the Company, inquiries of
officials of the Company responsible for financial and accounting matters,
and other specified procedures, nothing came to their attention that caused
them to believe that (A) the unaudited financial statements incorporated by
reference, if any, in the Registration Statements do not comply as to form
in all material respects with the applicable accounting requirements of the
1934 Act and the published Rules and Regulations thereunder or are not
stated on a basis substantially consistent with that of the audited
financial statements incorporated by reference in the Registration
Statements, (B) at the date of the most recent available unaudited
financial statements and at a specified 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,
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exceeding 3%, as compared with the twelve-month period ended at the date of
the most recent financial statements incorporated by reference in the
Registration Statements, in the amounts of total revenues or net income,
except in all cases for increases or decreases which result from the
declaration or payment of dividends, or which the Registration Statements
(including any material incorporated by reference therein) disclose have
occurred or may occur, or which are described in such letter.
(b) No stop order suspending the effectiveness of the First
Registration Statement, the Second Registration Statement, or any part
thereof shall have been issued and no proceedings for that purpose shall
have been instituted or, to the knowledge of the Company or the
Underwriters, shall be contemplated by the Commission.
(c) Subsequent to the execution of the Terms Agreement relating to the
Purchased Bonds, (i) there shall not have occurred any change, or any
development involving a prospective change, in or affecting particularly
the business or properties of the Company or its subsidiaries which, in the
judgment of a majority in interest of the Underwriters under such Terms
Agreement, including any Representatives, materially impairs the investment
quality of the Purchased Bonds, (ii) there shall not have occurred a
suspension or material limitation in trading in securities generally on the
New York Stock Exchange, (iii) there shall not have occurred a general
moratorium on commercial banking activities in New York declared by either
Federal or New York State authorities, (iv) no rating of any of the
Company's debt securities shall have been lowered and there shall have been
no public announcement that any such debt securities have been placed on
CreditWatch, Watchlist, or under any similar surveillance or review, in
each case with negative implications, by any recognized rating agency, and
(v) there shall not have occurred any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war
by Congress or any other substantial national or international calamity or
emergency if, in the judgment of a majority in interest of the Underwriters
under such Terms Agreement, including any Representatives, the effect of
any such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the sale of and
payment for the Purchased Bonds.
(d) The Underwriters or the Representatives shall have received an
opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel for the Company, dated the
relevant Closing Date, to the effect that:
(i) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Arizona and has full
corporate power and authority to carry on its business as presently
conducted; and the Company is duly qualified as a foreign corporation
to do business and is in good standing in the States of New Mexico,
California, Oregon, Washington, Montana, Wyoming, and Texas, the only
other jurisdictions in which it owns or leases substantial properties
or in which the conduct of its business requires such qualification;
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(ii) The Purchased Bonds have been duly authorized, executed,
authenticated, issued, and delivered, constitute valid and legally
binding obligations of the Company entitled to the benefits and
security provided by the Indenture (except as the same may be limited
by (a) general principles of equity or by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or other laws or equitable
principles relating to or affecting the enforcement of creditors'
rights generally or the enforcement of the security provided by the
Indenture, (b) the necessity for compliance with the statutory
procedural requirements governing the exercise of remedies by a
secured creditor, and (c) the qualification that certain waivers,
procedures, remedies, and other provisions of the Purchased Bonds and
the Indenture may be unenforceable under or limited by the law of the
State of Arizona; however, such law does not in such counsel's opinion
substantially prevent the practical realization of the benefits
intended by such documents) and conform to the description thereof in
the Prospectus;
(iii) The Indenture has been duly authorized, executed, and delivered,
has been duly qualified under the Trust Indenture Act, and constitutes
a valid and binding instrument enforceable in accordance with its
terms except as the same may be limited by (a) general principles of
equity or by bankruptcy, insolvency, reorganization, arrangement,
moratorium, or other laws or equitable principles relating to or
affecting the enforcement of creditors' rights generally or the
enforcement of the security provided by the Indenture, (b) the
necessity for compliance with the statutory procedural requirements
governing the exercise of remedies by a secured creditor, and (c) the
qualification that certain waivers, procedures, remedies, and other
provisions of the Purchased Bonds and the Indenture may be
unenforceable under or limited by the law of the State of Arizona;
however, such law does not in such counsel's opinion substantially
prevent the practical realization of the benefits intended by such
documents;
(iv) Except for property specifically excepted from the lien of the
Indenture or released therefrom in accordance with the terms thereof,
the Company has good and marketable title in fee simple, except for
items described in (A), (B), and (C) below, to all of the real
property and fixtures thereon purported in the Indenture to be so held
and that are both located in the State of Arizona and described in
those title reports covering at least the Saguaro, Yucca, Cholla,
Ocotillo, West Phoenix, and Palo Verde plant sites that are listed on
an exhibit to such opinion (the "Title Documents") (in giving such
opinion, such counsel may rely solely upon the Title Documents and may
assume the accuracy thereof and of the real property descriptions
contained therein and may state that no other investigation or inquiry
has been made with respect thereto), and in giving the opinions
described below with respect to any liens, defects, and encumbrances
on such title to such personal property, such counsel may assume that
the Company has good and valid title to all of the personal property
located in the State of Arizona and described in the Indenture as
subject to the lien thereof (which property shall not include
fixtures), and such counsel may rely solely upon, and assume the
accuracy of, a search of the
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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 Supplemental Indentures
theretofore executed, subject only as above set forth in this clause,
when the latter shall have been duly recorded and filed, will
constitute, together and as a single instrument, a direct and valid
first mortgage lien upon said property; and all properties (other than
the classes or items of property expressly excepted in the Mortgage or
expressly released from the lien thereof) acquired by the Company
after the date of the Supplemental Indenture relating to the Purchased
Bonds in each county in the State of Arizona in which the Mortgage and
the Supplemental Indenture shall have been duly recorded and filed
and, with respect to priority only, any necessary recordation and/or
filing has been accomplished (including therein any necessary
descriptions of after-acquired real property and real property upon
which after-acquired fixtures are affixed) will, upon such
acquisition, become subject to the first mortgage lien thereof,
subject, however, to Excepted Encumbrances and to liens, if any,
existing or placed thereon at the time of the acquisition thereof by
the Company and, with respect to priority only, to liens, if any,
existing prior to the time of any necessary recordation and/or filing
by the Company;
(v) The Company is the owner of the rights conferred upon it by the
leases from the Navajo Tribe relating to the site on which the Navajo
Plant is located and while such counsel is not aware of the assertion
of any claim contesting the title of the Navajo Tribe to the lands
leased, such counsel shall not be required to express any opinion with
respect to the interest of the Navajo Tribe in the lands leased or
with respect to the enforceability of such leases against the Navajo
Tribe;
(vi) With certain exceptions, a public service corporation is required
to obtain certificates of convenience and necessity from the Arizona
Corporation Commission under A.R.S. Section 40-281.A for construction
of its lines, plant, services, or systems, or any extensions thereof,
within the State of Arizona, and to obtain franchises or similar
consents or permits from counties and incorporated municipalities
under A.R.S. Section 40-283.A for the construction, operation, and
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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 scope of any franchise,
certificate, license, or permit that is not specific as to its
geographical scope;
(vii) The issuance and sale of the Purchased Bonds on the terms and
conditions set forth or contemplated herein and in the Prospectus and
the Terms Agreement relating to the Purchased Bonds and the execution
and delivery of the Supplemental Indenture relating to the Purchased
Bonds have been duly authorized by the Arizona Corporation Commission,
said Commission had jurisdiction in the premises, and no further
approval, authorization, or consent of any other public board or body
is necessary to the validity of such issuance and sale of such
Purchased Bonds or the execution and delivery of such Supplemental
Indenture, except as may be required under state securities or blue
sky laws, as to which laws such counsel shall not be required to
express an opinion;
(viii) The First Registration Statement and the Second Registration
Statement have become effective under the Act, and, to the best of the
knowledge of such counsel, no stop order suspending the effectiveness
of the First Registration Statement or the Second Registration
Statement has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Act, and each
part of the Registration Statements relating to the Bonds, when such
part became effective, and the Prospectus, as of the date of the
Prospectus Supplement, and each amendment or supplement thereto, as of
their respective effective or issue dates, complied as to form in all
material respects with the requirements of the Act, the Trust
Indenture Act, and the published Rules and Regulations; such counsel
has no reason to believe that any part of the Registration Statements,
when such part became effective, or the Prospectus, as of the date of
the Prospectus Supplement, or as of the Closing Date, or any amendment
or supplement thereto, as of their respective effective or issue
dates, or as of the Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading; the descriptions in 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
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the lawyer group described in such opinion, there are no legal or
governmental proceedings required to be described in the Prospectus
that are not described as required, nor any contracts or documents of
a character required to be described in the Registration Statements or
Prospectus or to be filed as exhibits to the Registration Statements
that are not described and filed as required (it being understood that
such counsel need express no opinion as to the financial statements or
other financial data contained in the Registration Statements or the
Prospectus); and
(ix) This Agreement and the Terms Agreement have been duly authorized,
executed, and delivered by the Company.
In giving such opinion, (a) ▇▇▇▇▇ & ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.,
referred to below, as to all matters governed by the laws of the State of New
Mexico, but the opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. shall state that, though they
are members of the Arizona Bar and do not hold themselves out as experts on the
laws of the State of New Mexico, they have made a study of the laws of such
State insofar as such laws are involved in the conclusions stated in their
opinion, other than such laws as relate to matters of title, and from such study
it is their opinion that such laws support such conclusions and that, in their
opinion, the Underwriters and they are justified to such extent in relying upon
the opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.; and (b) the lawyer group referred to in
such opinion will mean those lawyers in the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. who
(i) have billed any time on the particular transaction to which such opinion
relates or (ii) have billed more than ten hours to any Company matter in the
twelve-month period preceding the date on which the list of such lawyers was
compiled for purposes of inquiry pursuant to such opinion.
(e) The Underwriters or the Representatives shall have received an
opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., New Mexico counsel for the Company,
dated the Closing Date, to the effect that:
(i) The Company is duly qualified as a foreign corporation to do
business and is in good standing in the State of New Mexico and has
full corporate power and authority to engage in the State of New
Mexico in the business now conducted by it therein;
(ii) The activities of the Company in the State of New Mexico to date
do not constitute it a "public utility" as that term is defined in the
relevant laws of the State of New Mexico, and accordingly, no public
utility franchises or certificates of convenience and necessity are
necessary under New Mexico law with respect to the maintenance and
operation of the Company's property and business as now conducted in
the State of New Mexico and no approval, authorization, or consent of
the New Mexico Public Regulation Commission or any other public board
or body of the State of New Mexico is required for the issuance and
sale of the Purchased Bonds on the terms and conditions herein and in
the Prospectus set forth or
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contemplated or for the execution of the Supplemental Indenture
relating to the Purchased Bonds, except as may be required under New
Mexico state securities or blue sky laws, as to which laws such
counsel shall not be required to express an opinion;
(iii) Assuming that the Company has good and valid title to all of the
personal property located in the State of New Mexico and described in
the Indenture as subject to the lien thereof (which property shall not
include fixtures) ("Personal Property"), in giving the opinions
described below with respect to any liens, defects and encumbrances on
such title to such Personal Property, such counsel may rely solely
upon, and assume the accuracy of, a search of the Uniform Commercial
Code Financing Statements filed in the records of the New Mexico
Secretary of State and may assume that there are no liens or other
encumbrances on personal property (as used in the New Mexico Uniform
Commercial Code) of the Company located in the State of New Mexico
other than liens or other encumbrances that have been perfected by
filing with the New Mexico Secretary of State under Section 55-9-401,
New Mexico Statutes Annotated 1978; such title to such Personal
Property is subject only to: (A) the lien of the Mortgage, (B)
Excepted Encumbrances as defined in the Mortgage, and (C) other liens,
encumbrances, or defects, none of which, individually or in the
aggregate, in the opinion of such counsel, materially interfere with
the business or operations of the Company (in determining whether any
such other liens, encumbrances, or defects materially interfere with
the business or operations of the Company, such counsel may rely
solely upon a certificate of an officer or engineer of the Company
which shall be attached to such opinion and such opinion may state
that no other investigation or inquiry with respect thereto has been
made); the Mortgage, subject only as above set forth in this clause,
now constitutes, and the Mortgage and the Supplemental Indentures
theretofore executed, subject only as above set forth in this clause,
when the latter shall have been duly recorded and filed, will
constitute, together and as a single instrument, a direct and valid
first mortgage lien upon such Personal Property; and all properties
(other than the classes or items of property expressly excepted in the
Mortgage or expressly released from the lien thereof) acquired by the
Company after the date of the Supplemental Indenture relating to the
Purchased Bonds in each county in the State of New Mexico in which the
Mortgage and the Supplemental Indenture shall have been duly recorded
and filed and, with respect to priority only, any necessary
recordation and/or filing has been accomplished (including therein any
necessary descriptions of after-acquired real property and real
property upon which after-acquired fixtures are affixed) will, upon
such acquisition, become subject to the first mortgage lien thereof,
subject, however, to Excepted Encumbrances and to liens, if any,
existing or placed thereon at the time of the acquisition thereof by
the Company and, with respect to priority only, to liens, if any,
existing prior to the time of any necessary recordation and/or filing
by the Company; and
(iv) The Company is the owner of the rights conferred upon it by the
leases from the Navajo Tribe relating to the site on which the Four
Corners plant is located and
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while such counsel is not aware of the assertion of any claim
contesting the interest of the Navajo Tribe in the lands leased, such
counsel shall not be required to express any opinion with respect to
the interest of the Navajo Tribe in the lands leased or with respect
to the enforceability of such leases against the Navajo Tribe.
In giving such opinion, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A. may rely solely upon certificates
of the Company as to any factual matters upon which any such opinions are based.
(f) The Underwriters or the Representatives shall have received from
counsel for the Underwriters such opinion or opinions, dated the Closing
Date, with respect to the incorporation of the Company, the validity of the
Purchased Bonds, the Registration Statements, the Prospectus, and other
related matters as may reasonably be required, and the Company shall have
furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters. In rendering such opinion, such
counsel may rely as to the incorporation of the Company and all other
matters governed by the laws of the States of Arizona and New Mexico upon
the opinions of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., referred
to above.
(g) The Underwriters or the Representatives shall have received a
certificate of the President or any Vice President and a principal
financial or accounting officer of the Company, dated the Closing Date, in
which such officers, to the best of their knowledge after reasonable
investigation, shall state that the representations and warranties of the
Company in this Agreement are true and correct, that the Company has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Date, that no stop order
suspending the effectiveness of the First Registration Statement or the
Second Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission, and
that, subsequent to the date of the most recent financial statements in the
Prospectus, there has been no material adverse change in the financial
position or results of operations of the Company and its subsidiaries
except as set forth or contemplated in the Prospectus or as described in
such certificate.
(h) The Underwriters or the Representatives shall have received a
letter of DELOITTE & TOUCHE LLP, dated the Closing Date, which meets the
requirements of subsection (a) of this Section, except that the specified
date referred to in such subsection will be a date not more than five days
prior to the Closing Date for the purposes of this subsection.
The Company will furnish the Underwriters or the Representatives with such
conformed copies of such opinions, certificates, letters, and documents as may
be reasonably requested.
6. INDEMNIFICATION. (a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become
subject, under the Act or otherwise, insofar as such losses,
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claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any part of the Registration Statements relating to the Bonds,
when such part became effective, any preliminary prospectus or preliminary
prospectus supplement, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse each Underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter specifically for use
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statements, and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages, or
liabilities to which the Company or any such director, officer, or controlling
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any part of the Registration Statements relating to the Bonds,
when such part became effective, any preliminary prospectus or preliminary
prospectus supplement, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter specifically for use
therein; and will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, or controlling person in connection
with investigating or defending any such loss, claim, damage, liability, or
action. This indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party otherwise than under this
Section. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, without the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or
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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: (l) if such
loss, claim, damage, liability, or action arises under subsection (a) above,
then (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Bonds or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations; and (2) if such loss, claim, damage, liability, or action arises
under subsection (b) above, then in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. For the purposes of clause (1) above, the relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters. For the
purposes of clauses (1) and (2) above, the relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
7. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters default in
their obligations to purchase Purchased Bonds pursuant to this Agreement and the
Terms Agreement and the principal amount of Purchased Bonds that such defaulting
Underwriter or Underwriters agreed but failed to purchase is ten percent (10%)
or less of the principal amount of Purchased Bonds to which such Terms Agreement
relates, the Underwriters or the Representatives may make arrangements
satisfactory to the Company for the purchase of such Purchased Bonds by other
persons, including any of the Underwriters, but if no such arrangements are made
by the Closing
15
Date the nondefaulting Underwriters shall be obligated severally, in proportion
to their respective commitments hereunder and under such Terms Agreement, to
purchase the Purchased Bonds that such defaulting Underwriter or Underwriters
agreed but failed to purchase. If any Underwriter or Underwriters so default and
the aggregate principal amount of Purchased Bonds with respect to which such
default or defaults occur is more than the above-described amount and
arrangements satisfactory to the remaining Underwriters and the Company for the
purchase of such Purchased Bonds by other persons are not made within thirty-six
hours after such default, the Terms Agreement will terminate without liability
on the part of any non-defaulting Underwriter or the Company, except as provided
in Section 8. As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.
8. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties, and other statements of
the Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter or the Company or any of its officers or directors or any
controlling person, and will survive delivery of and payment for the Purchased
Bonds. If any Terms Agreement is terminated pursuant to Section 7, or if for any
reason a purchase pursuant to any Terms Agreement is not consummated, the
Company shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 4 and the respective obligations of the Company and the
Underwriters pursuant to Section 6 shall remain in effect.
9. NOTICES. All communications hereunder relating to any offering of
Purchased Bonds will be in writing, and, if sent to the Underwriters, may be
mailed, delivered, or telecopied and confirmed to the Representative first named
in the Terms Agreement relating to such Purchased Bonds or the Underwriters at
their addresses furnished to the Company in writing for the purpose of
communications; provided, however, that any notice to an Underwriter pursuant to
Section 6 will be mailed, delivered, or telecopied and confirmed to each such
Underwriter at its own address. All communications hereunder to the Company
shall be mailed to the Company, Attention: Treasurer, at ▇.▇. ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or delivered, or telecopied and confirmed to the
Company at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
10. SUCCESSORS. This Agreement will inure to the benefit of and be binding
upon the parties hereto and such Underwriters as are named in Terms Agreements
and their respective successors and the officers and directors and controlling
persons referred to in Section 6, and no other person will have any right or
obligation hereunder.
11. REPRESENTATION OF UNDERWRITERS. The Representatives, if any, may act
for the several Underwriters in connection with any offering to which a Terms
Agreement may relate, and any action under this Agreement or such Terms
Agreement taken by the Representatives jointly or the Representative first named
in such Terms Agreement in such capacity will be binding upon all the
Underwriters of Purchased Bonds to which such Terms Agreement relates.
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12. EXECUTION IN COUNTERPART. This Agreement and any Terms Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute a
single instrument.
17
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicate hereof, whereupon it will
become a binding agreement between the Company and the several Underwriters in
accordance with its terms.
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY
By
-------------------------------------
Treasurer
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
By
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