Exhibit 4.2


 


UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
TO ARIZONA PUBLIC SERVICE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.


 


ARIZONA PUBLIC SERVICE COMPANY


 


8.750% Note due 2019


 


	
  No. 1

  	
   

  	
  $500,000,000

  
	
   

  	
   

  	
  CUSIP No. 040555CL6

  



 


Arizona
Public Service Company, a corporation duly organized and existing under the
laws of the State of Arizona (the “Company”, which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to Cede & Co., or registered assigns, the principal
sum of Five Hundred Million Dollars ($500,000,000) on March 1, 2019, and
to pay interest thereon and on any overdue interest from February 26, 2009
or from the most recent Interest Payment Date to which interest has been paid
or duly provided for, semi-annually in arrears on March 1 and September 1
of each year, commencing September 1, 2009, at the rate of 8.750% per
annum, until the principal hereof is paid or made available for payment. The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months.


 


The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, which
shall be February 15 or August 15, as the case may be, immediately
preceding the Interest Payment Date (whether or not a Business Day). Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in the Indenture.


 

















 


Payment
of the principal of (and premium, if any) and any interest on this Security
will be made at the office or agency of the Company maintained for that purpose
through the corporate trust office of the Trustee, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by wire transfer
to any Holder or by deposit to the account of the Holder of any such Securities
if such account is maintained with the Trustee, in each case according to the
written instructions given by such Holder on or prior to the applicable record
date to the Trustee, which written instructions shall remain in effect until
revised by such Holder by an instrument in writing delivered to the Trustee.


 


Reference is hereby made to the further provisions of this Security set
forth following the Company’s signature hereto, which further provisions shall
for all purposes have the same effect as if set forth at this place.


 


Unless
the certificate of authentication hereon has been executed by the Trustee
referred to following the Company’s signature hereto by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.


 


IN
WITNESS WHEREOF, the Company has caused this instrument to be duly executed
under its corporate seal.


 


 


	
  ARIZONA
  PUBLIC SERVICE COMPANY

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Chris
  N. Froggatt

  	
   

  
	
   

  	
  Vice
  President and Treasurer

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Nancy C. Loftin

  	
   

  
	
  Senior Vice President,
  General

  	
   

  
	
  Counsel and Secretary

  	
   

  



 


This Security is one of a duly authorized issue of
securities of the Company (herein called the “Securities”), issued and to be
issued in one or more series under an Indenture, dated as of January 15,
1998 (such instrument as originally executed and delivered and as supplemented
or amended from time to time, the “Indenture”), between the Company and The
Bank of New York Mellon Trust Company, N.A., successor to JPMorgan Chase Bank,
N.A. (formerly known as The Chase Manhattan Bank), as Trustee (the “Trustee,”
which term includes 


 

















 


any
successor trustee under the Indenture), and reference is hereby made to the
Indenture for a description of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof.


 


The
Company may redeem all or any portion of the Securities of this series, at its
option, at any time or from time to time, at a Redemption Price equal to the
greater of (a) 100% of the principal amount of the Securities of this
series being redeemed on the Redemption Date or (b) the sum of the present
values of the remaining scheduled payments of principal and interest on the
Securities of this series being redeemed on that Redemption Date (not including
the portion of any payments of interest accrued to the Redemption Date)
discounted to the Redemption Date on a semiannual basis at the Adjusted
Treasury Rate plus 50 basis points, as determined by a Reference Treasury
Dealer appointed by the Company for such purpose; plus, in each case, accrued
and unpaid interest thereon to the Redemption Date.  Notwithstanding the foregoing, installments
of interest on Securities of this series that are due and payable on Interest
Payment Dates falling on or prior to a Redemption Date will be payable on the
Interest Payment Date to the Holders as of the close of business on the
relevant record date in accordance with the terms of the Securities of this
series and the Indenture.  The Redemption
Price will be calculated on the basis of a 360-day year consisting of twelve
30-day months.


 


If
notice has been given as provided in the Indenture and funds for the redemption
of any Securities of this series (or any portion thereof) called for redemption
shall have been made available on the Redemption Date referred to in such
notice, such Securities (or any portion thereof) will cease to bear interest on
the date fixed for such redemption specified in such notice and the only right
of the Holders of such Securities will be to receive payment of the Redemption
Price.


 


Notice
of any optional redemption of Securities of this series (or any portion
thereof) will be given to Holders at their addresses, as shown in the Security
Register for such Securities, not more than 60 nor less than 30 days prior to
the date fixed for redemption. The notice of redemption will specify, among
other items, the manner of calculation of the Redemption Price and the
principal amount of the Securities of this series held by such Holder to be
redeemed if less than all of such Securities. 
If less than all of the Securities of this series are to be redeemed at
the option of the Company, the Trustee shall select, in such manner as it shall
deem appropriate, the portion of such Securities to be redeemed.


 


As
used herein:


 


“Adjusted Treasury Rate” means, with respect
to any Redemption Date, the rate per annum equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date.


 


“Comparable Treasury Issue” means the U.S.
Treasury security selected by a Reference Treasury Dealer appointed by the
Company for such purpose as having a maturity comparable to the remaining term
of this Security to be redeemed that would be utilized, at the 


 

















 


time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such Security.


 


“Comparable Treasury Price” means, with
respect to any Redemption Date, (A) if the Company obtains three or more
Reference Treasury Dealer Quotations, the average of such Reference Treasury
Dealer Quotations for such Redemption Date, after excluding the highest and
lowest of such Reference Treasury Dealer Quotations, (B) if the Company
obtains two such Reference Treasury Dealer Quotations, the average of such
quotations, or (C) if only one Reference Treasury Dealer Quotation is
received, such quotation.


 


“Primary
Treasury Dealer” means a primary U.S. government securities
dealer in the United States.


 


“Reference Treasury Dealer” means (A) Barclays
Capital Inc., BNY Mellon Capital Markets, LLC and Credit Suisse Securities
(USA) LLC (or their respective affiliates that are Primary Treasury Dealers),
and their respective successors; provided, however, that if any of the
foregoing shall cease to be a Primary Treasury Dealer, the Company will
substitute therefor another Primary Treasury Dealer; and (B) any other
Primary Treasury Dealer(s) selected by the Company.


 


“Reference Treasury Dealer Quotations”
means, with respect to each Reference Treasury Dealer and any Redemption Date,
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. (New
York City time) on the third Business Day preceding such Redemption Date.


 


The
Securities of this series will not be subject to any sinking fund.


 


In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.


 


The
Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security and certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.


 


The
Indenture contains provisions limiting the Company’s ability to issue, assume,
guarantee or permit to exist any Debt secured by any mortgage, security
interest, pledge or lien upon any of its Operating Property, subject to the
exceptions and qualifications set forth in the Indenture.


 


If an
Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.


 


The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders of the Securities of each series to be affected under
the Indenture at any time by the 


 

















 


Company and the Trustee without the consent of such
Holders in certain circumstances, or with the consent of the Holders of 66-2/3%
in principal amount of the affected Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the affected Securities at the time
Outstanding, on behalf of the Holders of all such Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.


 


As
provided in and subject to the provisions of the Indenture, the Holder of this
Security shall not have the right to institute any proceeding with respect to
the Indenture or for the appointment of a receiver or trustee or for any other
remedy under the Indenture, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made
written request to the Trustee to institute proceedings in respect of such
Event of Default as Trustee and offered the Trustee reasonable indemnity, and
the Trustee shall not have received from the Holders of a majority in principal
amount of Securities of this series at the time Outstanding a direction
inconsistent with such request, and shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of indemnity.
The foregoing shall not apply to any suit instituted by the Holder of this
Security for the enforcement of any payment of principal hereof or any premium
or interest hereon on or after the respective due dates expressed herein.


 


No
reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.


 


As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Security is registrable in the Security Register, upon
surrender of this Security for registration of transfer at the office or agency
of the Company in any place where the principal of and any premium and interest
on this Security are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his or her attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees.


 


The
Securities of this series are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. As provided in
the Indenture and subject to certain limitations therein set forth, Securities
of this series are exchangeable for a like aggregate principal amount of
Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.


 


No
service charge shall be made for any such registration of transfer or exchange,
but the 


 

















 


Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.


 


Prior
to due presentment of this Security for registration of transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Security is registered as the absolute owner hereof for all
purposes, whether or not this Security be overdue, and none of the Company, the
Trustee or any such agent shall be affected by notice to the contrary.


 


All
terms used in this Security which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.


 


CERTIFICATE OF AUTHENTICATION


 


This
is one of the Securities of the series designated therein referred to in the
within-mentioned Indenture.


 


Dated:
February 26, 2009


 


	
   

  	
  THE BANK OF NEW YORK MELLON

  TRUST COMPANY, N.A.,

  
	
   

  	
   

  
	
   

  	
  As Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Authorized Officer