Exhibit 4.1


 




 





ARIZONA PUBLIC
SERVICE COMPANY


 


TO


 


THE BANK OF NEW
YORK MELLON TRUST COMPANY, N.A.


 


As Trustee under
Arizona Public Service Company’s Indenture dated as of January 15, 1998


 


Eleventh
Supplemental Indenture


 


Dated as of  February 26, 2009


 


8.750% Notes due
2019


 




 





 

















 


This
ELEVENTH SUPPLEMENTAL INDENTURE, dated as of February 26, 2009, is between
Arizona Public Service Company, a corporation duly organized and existing under
the laws of the State of Arizona (herein called the “Company”), having its
principal office at 400 North Fifth Street, Phoenix, Arizona 85004, 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), a national banking
association, as Trustee (herein called the “Trustee”) under the Indenture dated
as of January 15, 1998 between the Company and the Trustee (the “Indenture”).


 


RECITALS OF THE COMPANY


 


The
Company has executed and delivered the Indenture to the Trustee to provide for
the issuance from time to time of its unsecured debentures, notes or other
evidences of indebtedness (the “Securities”), said Securities to be issued in
one or more series as provided in the Indenture.


 


Section 901(7) of
the Indenture provides that, without the consent of any Holders, the Company
and the Trustee may enter into one or more indentures supplemental to the
Indenture for the purpose of establishing the form or terms of Securities of
any series.


 


Pursuant
to the terms of the Indenture, the Company desires to provide for the
establishment of a new series of its Securities to be known as its 8.750% Notes
due 2019 (herein called the “Notes”), the forms and substance of such Notes and
the terms, provisions, and conditions thereof to be set forth as provided in
the Indenture and this Eleventh Supplemental Indenture.


 


All
things necessary to make this Eleventh Supplemental Indenture a valid agreement
of the Company, and to make the Notes described herein, when executed by the
Company and authenticated and delivered by the Trustee, the valid obligations
of the Company, have been done.


 


NOW,
THEREFORE, THIS ELEVENTH SUPPLEMENTAL INDENTURE WITNESSETH:


 


For
and in consideration of the premises and the purchase of the Notes by the
Holders thereof, and for the purpose of setting forth, as provided in the
Indenture, the form and substance of each of the Notes and the terms,
provisions, and conditions thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Notes, as applicable, as follows:


 


ARTICLE ONE


 


GENERAL TERMS AND CONDITIONS OF THE NOTES


 


SECTION 101.               Authentication and Delivery.  There
shall be and is hereby authorized a series of Securities designated the “8.750%
Notes due 2019” initially limited in aggregate principal amount to $500,000,000,
which amount shall be as set forth in any Company Order for the authentication
and delivery of Notes.  The Notes shall
mature and the principal 


 


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shall be due and payable
together with all accrued and unpaid interest thereon on March 1, 2019,
and the Notes shall be issued in the form of registered Securities without
coupons.


 


The
foregoing principal amount of the Notes may be increased from time to time as
permitted by Section 301 of the Indenture. 
All Notes need not be issued at the same time and such series may be
reopened at any time, without notice to, or the consent of, the then existing
Holders, for issuance of additional Notes. 
Any such additional Notes will be equal in rank and have the same
respective maturity, payment terms, redemption features, and other terms as the
Notes initially issued, except for the issue date, public offering price,
payment of interest accruing prior to the issue date, and first payment of
interest following the issue date of the additional Notes.


 


SECTION 102.               Global Security.  The Notes shall be issued in certificated
form, except that the Notes shall be issued initially as a Global Security to
and registered in the name of Cede & Co., as nominee of The Depository
Trust Company, as Depositary therefor. 
Any Notes to be issued or transferred to, or to be held by, Cede &
Co. (or any successor thereof) for such purpose shall bear the depositary
legend in substantially the form set forth at the top of the form of Note in Section 301
hereof (in lieu of that set forth in Section 204 of the Indenture), unless
otherwise agreed by the Company, such agreement to be confirmed in writing to
the Trustee.  Each such Global Security
may be exchanged in whole or in part for Notes registered, and any transfer of
such Global Security in whole or in part may be registered, in the name(s) of
Persons other than such Depositary or a nominee thereof only under the
circumstances set forth in clause (2) of the last paragraph of Section 305
of the Indenture, or such other circumstances in addition to or in lieu of
those set forth in clause (2) of the last paragraph of Section 305 of
the Indenture as to which the Company shall agree, such agreement to be
confirmed in writing to the Trustee.  Upon
the occurrence of any such event, the Notes will be issued in such names as the
Depositary shall instruct the Trustee.


 


SECTION 103.               Place of Payment and Place for
Registration of Transfers and Exchange.  Principal of, and premium, if any, and interest
on, the Notes will be payable, the transfer of Notes will be registrable and
the Notes will be exchangeable for Notes bearing identical terms and
provisions, at the office or agency of the Company in the Borough of Manhattan,
The City and State of New York; 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 Notes 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.


 


SECTION 104.               Payment of Interest.  The Notes will bear interest at the rate of
8.750% per annum from February 26, 2009 or from the most recent Interest
Payment Date (as hereinafter defined) to which interest has been paid or duly
provided for until the principal thereof is paid or made available for payment,
payable on March 1 and September 1 of each year (each, an “Interest
Payment Date”), commencing on September 1, 2009, to the person in whose
name such Note or any Predecessor Security is registered, at the close of
business on February 15 and August 15, as the case may be, whether or
not a Business Day, immediately preceding the Interest Payment Date. Any such
interest installment not punctually paid or duly provided for 


 


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shall forthwith cease to
be payable to the Holders on such Regular Record Date, and may be paid to the
Person in whose name such Note (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date to be fixed by the
Trustee for the payment of such Defaulted Interest, notice whereof shall be
given to the Holders of the Notes not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required by such exchange,
all as more fully described in the Indenture.


 


The
amount of interest payable for any period will be computed on the basis of a
360-day year of twelve 30-day months. 
Interest will accrue from February 26, 2009 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for to,
but not including, the relevant payment date. 
In the event that any date on which interest is payable on the Notes is
not a Business Day, then payment of interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), in each case with the same force
and effect as if made on such date.  A “Business
Day” shall mean any day except a Saturday, a Sunday or a legal holiday in The
City of New York on which banking institutions are authorized or required by
law, regulation or executive order to close.


 


SECTION 105.               Redemption of the Notes.  The
Company may redeem all or any portion of the Notes, at its option, at any time
or from time to time, upon notice as provided in the Indenture.  The Redemption Price for any of the Notes to
be redeemed on any Redemption Date will be equal to the greater of the
following amounts:


 


(a)          100%
of the principal amount of the Notes 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 Notes being redeemed on that Redemption Date (not including any
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 the Notes 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 such Notes and the Indenture.  The Redemption Price will be calculated on
the basis of a 360-day year consisting of twelve 30-day months.


 


For
purposes of this Section 105, the following terms shall have the following
meanings:


 


“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.


 


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“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 the Notes 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
Notes.


 


“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
Company shall give the Trustee written notice of the Redemption Price, promptly
after the calculation thereof.


 


The
Trustee shall be under no duty to inquire into, may conclusively presume the
correctness of, and shall be fully protected in acting upon, the Company’s
calculation of any Redemption Price.


 


No Notes of $1,000 principal amount or less can be
redeemed in part.


 


Notwithstanding
Section 1104 of the Indenture, any notice of redemption given pursuant to
said Section with respect to the foregoing redemption need not set forth the
Redemption Price but only the manner of calculation thereof.


 


SECTION 106.               Defeasance of the Notes.  The Notes shall be defeasible pursuant to Section 1302
or 1303 of the Indenture.


 


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ARTICLE TWO


 


ADDITIONAL COVENANT


 


SECTION 201.              Negative
Lien Covenant.  (a)  So
long as any of the Notes are Outstanding, the Company will not issue, assume,
guarantee or permit to exist any Debt secured by any mortgage, security
interest, pledge or lien (herein referred to as a “Mortgage”) of or upon any
Operating Property of the Company, whether owned at the date of this Eleventh
Supplemental Indenture or hereafter acquired, without effectively securing the
Notes (together with, if the Company shall so determine, any other indebtedness
or obligations of the Company ranking senior to, or equally with, the Notes)
equally and ratably with such Debt (but only so long as such Debt is so
secured); provided, however, that the
foregoing restriction shall not apply to Debt secured by any of the following:


 


(1)           Mortgages
on any property existing at the time of acquisition thereof (which Mortgages
may also extend to subsequent repairs, alterations and improvements to that
property);


 


(2)           Mortgages
on property of a corporation existing at the time such corporation is merged
into or consolidated with the Company or at the time of a sale, lease or other
disposition of the properties of such corporation or a division thereof as an
entirety or substantially as an entirety to the Company;


 


(3)           Mortgages
on property to secure all or part of the cost of acquiring, constructing,
developing or substantially repairing, 
altering or improving such property or to secure indebtedness incurred
to provide funds for any such purpose or for reimbursement of funds previously
expended for any such purpose, provided such Mortgages are created or assumed
contemporaneously with, or within eighteen (18) months after, such acquisition
or completion of construction, development or substantial repair, alteration or
improvement;


 


(4)           Mortgages
in favor of the United States of America or any State thereof, or any
department, agency, instrumentality or political subdivision of the United
States of America or any State thereof, or for the benefit of holders of
securities issued by any such entity (or providers of credit enhancement with
respect to those securities), to secure any Debt (including the Company’s
obligations with respect to industrial development, pollution control or
similar revenue bonds) incurred for the purpose of financing or refinancing all
or any part of the purchase price or the cost of constructing, developing or
substantially repairing, altering or 
improving the property of the Company;


 


(5)           Mortgages
to compensate the Trustee as provided in the Indenture; or


 


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(6)           any
extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Mortgage referred to in the
foregoing clauses (1) to (5), inclusive; provided, however, that the
principal amount of Debt secured thereby and not otherwise authorized by said
clauses (1) to (5), inclusive, shall not exceed the principal amount of
Debt, plus any premium or fee payable in connection with any such extension, renewal
or replacement, so secured at the time of such extension, renewal or
replacement.


 


(b)           Notwithstanding
the provisions of Section 201(a), the Company may issue, assume or
guarantee or permit to exist Debt, secured by Mortgages that would otherwise be
subject to the restrictions of Section 201(a): (x) in
connection with the Company’s existing sale and lease-back transactions
relating to Unit 2 of the Palo Verde Nuclear Generating Station (the “Unit 2
Sale and Lease-Back Transactions”), including but not limited to Mortgages on
the leased interests in Unit 2 of the Palo Verde Nuclear Generating Station and
related rights if the Company reacquires ownership in any of those interests or
acquires any of the equity or owner participants’ interests in the trusts that
hold title to such leased interests, whether or not it also directly assumes
the Sale Leaseback Obligation Bonds, and Mortgages on the Company’s interests
in the trusts that hold title to such leased interests and related rights in
the event that the Company acquires any of the equity or owner participants’
interests in such trusts pursuant to a “special transfer” under the Unit 2 Sale
and Lease-Back Transactions; and, in addition, (y) up to an aggregate
principal amount that, together with the principal amount of all other Debt of
the Company secured by Mortgages, does not at the time exceed ten percent (10%)
of Tangible Assets.


 


(c)           For
purposes of this Section 201, the following terms shall have the
following meanings:


 


 “Debt” means any outstanding debt of the
Company for money borrowed evidenced by notes, debentures, bonds or other
securities, or guarantees of any thereof.


 


“Operating
Property” means (i) any interest in real property owned by the Company and
(ii) any asset owned by the Company that is depreciable in accordance with
generally accepted accounting principles, excluding in any case any interest of
the Company as lessee under any lease.


 


“Sale
Leaseback Obligation Bonds” means PVNGS II Funding Corp.’s: (i) 8.00%
Secured Lease Obligation Bonds, Series 1993, due 2015; (ii) any other
bonds issued in connection with the Unit 2 Sale and Lease-Back Transactions;
and (iii) any refinancing or refunding of the obligations specified in
subclauses (i) and (ii) above.


 


 “Tangible Assets” means the amount shown as
total assets on the most recent balance sheet of the Company, less: (i) intangible
assets, including, but without limitation, goodwill, trademarks, trade names,
patents and unamortized debt discount and expense and (ii) appropriate
adjustments, if any, on account of minority interests; provided, however, that if, subsequent to
the date of the most recent balance sheet of the Company, the Company acquires
any property, whether by acquisition (including by way of 


 


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capital lease) from a third party, through merger or
consolidation, through construction, development or substantial repair,
alteration or improvement of property, or by any other means, and such property
is or becomes subject to any Mortgage securing Debt, the Company may prepare a
pro forma balance sheet to include the value of such property in any
calculation of Tangible Assets hereunder. 
Subject to the foregoing, Tangible Assets shall be determined in
accordance with generally accepted accounting principles and practices
applicable to the type of business in which the Company is engaged and that are
approved by the independent accountants regularly retained by the Company, and
may be determined as of a date not more than 60 days prior to the happening of
the event for which such determination is being made.


 


ARTICLE THREE


 


FORM OF NOTES


 


SECTION 301.                       Form of Notes.
The Notes and the Trustee’s certificate of authentication thereon shall be
substantially in the following forms:


 


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.

  	
   

  	
   

  	
   

  	
  $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


 


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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.


 


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  ARIZONA
  PUBLIC SERVICE COMPANY

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
			



 


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 


 


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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 


 


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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 


 


11

















 


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.


 


Form of
Trustee’s Certificate of Authentication.


 


CERTIFICATE OF AUTHENTICATION


 


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


 


Dated:


 


	
   

  	
  THE BANK OF NEW YORK MELLON

  TRUST COMPANY, N.A.,

  
	
   

  	
   

  
	
   

  	
  As Trustee

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Authorized Officer

  



 


12

















 


SECTION 302.                       General Provisions.  The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage.  The terms and provisions contained in the Notes
shall constitute, and are hereby expressly made, a part of this Eleventh
Supplemental Indenture, and the Company, by its execution and delivery of this
Eleventh Supplemental Indenture, expressly agrees to such terms and provisions
and to be bound thereby.  However, to the
extent any provision of the Notes conflicts with the express provisions of this
Eleventh Supplemental Indenture or the Indenture, the provisions of this
Eleventh Supplemental Indenture or the Indenture, as applicable, shall govern
and be controlling.


 


ARTICLE FOUR




ORIGINAL ISSUE OF NOTES


 


SECTION 401.                       Issuance of Notes.  Subject to Section 101, Notes in the
aggregate principal amount of $500,000,000 may, upon execution of this Eleventh
Supplemental Indenture, or from time to time thereafter, be executed by the
Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Notes, in accordance with a Company
Order delivered to the Trustee by the Company, without any further action by
the Company.


 


ARTICLE FIVE




PAYING AGENT AND REGISTRAR


 


SECTION 501.                       Appointment of Paying
Agent and Registrar.  The Bank of New
York Mellon Trust Company, N.A. will be the Paying Agent and Security Registrar
for the Notes.


 


ARTICLE SIX




SUNDRY PROVISIONS


 


SECTION 601.                       Associate Secretary.  For all purposes relating to this Eleventh
Supplemental Indenture and the Notes, the term “Assistant Secretary” when used
in the Indenture with respect to the Company will include an Associate
Secretary of the Company.


 


SECTION 602.                       Defined Terms.  Except as otherwise expressly provided in
this Eleventh Supplemental Indenture or in the form of the Notes, or otherwise
clearly required by 


 


13

















 


the context hereof or
thereof, all terms used herein or in said form of the Notes that are defined in
the Indenture shall have the several meanings respectively assigned to them
thereby.


 


SECTION 603.                       Ratification of
Indenture.  The Indenture, as
heretofore supplemented and amended, and as supplemented by this Eleventh
Supplemental Indenture, is in all respects ratified and confirmed, and this
Eleventh Supplemental Indenture shall be deemed part of the Indenture in the
manner and to the extent herein and therein provided.


 


SECTION 604.                       About the Trustee.  The Trustee hereby accepts the trusts herein
declared, provided, created, supplemented or amended and agrees to perform the
same upon the terms and conditions herein and in the Indenture, as heretofore
supplemented and amended, set forth and upon the following terms and
conditions:


 


The
Trustee shall not be responsible in any manner whatsoever for or in respect of
the validity or sufficiency of this Eleventh Supplemental Indenture or for or
in respect of the recitals contained herein, all of which recitals are made by
the Company solely. Each and every term and condition contained in Article Six
of the Indenture shall apply to and form a part of this Eleventh Supplemental
Indenture with the same force and effect as if the same were herein set forth
in full with such omissions, variations and insertions, if any, as may be
appropriate to make the same conform to the provisions of this Eleventh
Supplemental Indenture.


 


The Trustee agrees to accept and act upon instructions
or directions pursuant to this Eleventh Supplemental Indenture sent by
unsecured e-mail, pdf, facsimile transmission or other similar unsecured
electronic methods; provided, however, that (a) the party providing such
written instructions, subsequent to such transmission of written instructions,
shall provide the originally executed instructions or directions to the Trustee
in a timely manner, and (b) such originally executed instructions or directions
shall be signed by an authorized representative of the party providing such instructions
or directions.  If the party elects to
give the Trustee e-mail or facsimile instructions (or instructions by a similar
electronic method) and the Trustee in its discretion elects to act upon such
instructions, the Trustee’s understanding of such instructions shall be deemed
controlling.  The Trustee shall not be
liable for any losses, costs or expenses arising directly or indirectly from
the Trustee’s reliance upon and compliance with such instructions
notwithstanding such instructions conflict or are inconsistent with a
subsequent written instruction.  The
party providing electronic instructions agrees to assume all risks arising out
of the use of such electronic methods to submit instructions and directions to
the Trustee, including without limitation the risk of the Trustee acting on
unauthorized instructions, and the risk or interception and misuse by third
parties.


 


SECTION 605.                       Counterparts.  This instrument may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.


 


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14

















 


IN
WITNESS WHEREOF, the parties hereto have caused this Eleventh Supplemental
Indenture to be duly executed as of the day and year first above written.


 


	
   

  	
  ARIZONA
  PUBLIC SERVICE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Chris N. Froggatt

  
	
   

  	
  Vice President and Treasurer

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Diane Wood

  	
   

  
	
  Associate Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
  THE
  BANK OF NEW YORK MELLON TRUST

  COMPANY, N.A., as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


[Signature
Page to Eleventh Supplemental Indenture]


 

















 


	
  STATE
  OF ARIZONA

  	
  )

  
	
   

  	
  )
  ss.:

  
	
  COUNTY
  OF MARICOPA

  	
  )

  



 


On the
       day of                   ,
2009, before me personally came Chris N. Froggatt, to me known, who, being by
me duly sworn, did depose and say that he is the Vice President and Treasurer
of Arizona Public Service Company, one of the corporations described in and
which executed the foregoing instrument and that he signed his name thereto by
authority of the Board of Directors of said corporation.


 


	
   

  	
   

  
	
  Notary
  Public

  	
   

  
	
  My Commission Expires

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
			



 


STATE OF CALIFORNIA


COUNTY OF                                      


 


On the                                  
, before me, April Iniguez, a notary public, personally appeared                                              
, who proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.


 


I certify under PENALTY OF PERJURY under the laws of
the State of California that the forgoing paragraph is true and correct.


 


WITNESS my hand and official seal.


 


 


Signature                                                        
(seal)