Document:

exv4w2

 

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

5.80% Note due June 30, 2014

	 	 	 
	No. 1

	 	$300,000,000 
	

	 	CUSIP No. 040555 CG 7

     Arizona Public Service Company, a corporation duly organized and existing
under the laws of Arizona (herein called 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 Three Hundred Million Dollars ($300,000,000) on June 30, 2014,
and to pay interest thereon from June 29, 2004 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for,
semi-annually in arrears on June 30 and December 30 in each year, commencing
December 30, 2004, at the rate of 5.80%, until the principal hereof is paid or
made available for payment.

     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 June 15 or December 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 said 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 in the City of New York, in such coin or currency of the United
States of America as at the time of payment is legal

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tender for payment of public and private debts; provided, however, that at
the option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security Register.

     Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, 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 on the reverse hereof 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	 	/s/ Donald E. Brandt
	

	 	 	 	
 
	

	 	 	 	Donald E. Brandt
	

	 	 	 	Executive Vice President
and Chief Financial Officer
	 
 
	 	 	 	 
	Attest:
	 	 	 	 
	 
 
	 	 	 	 
	/s/ Nancy C. Loftin
	 	 	 	 
	
 
	 	 	 	 
	Nancy C. Loftin
	 	 	 	 
	Vice President, General Counsel
and Secretary
	 	 	 	 

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     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 (herein called the
“Indenture”, which term shall have the meaning assigned to it in such
instrument), between the Company and JPMorgan Chase Bank (formerly known as The
Chase Manhattan Bank), as Trustee (herein called the “Trustee”, which term
includes any successor trustee under the Indenture), and reference is hereby
made to the Indenture for a statement 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, which is unlimited in aggregate principal
amount.

     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
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 20 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 according to 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 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 fair and appropriate, the portion of such Securities to be redeemed
in whole or in part.

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     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 the Securities of this series 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 Securities.

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

     “Reference Treasury Dealer” means (A) Credit Suisse First Boston LLC and
J.P. Morgan Securities Inc. (or their respective affiliates which are Primary
Treasury Dealers), and their respective successors; provided, however, that if
any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a “Primary Treasury Dealer”), the Company will
substitute therefor another Primary Treasury Dealer; and (B) any other Primary
Treasury Dealer(s) selected by the Trustee after consultation with the Company.

     “Reference Treasury Dealer Quotations” means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined
by the Trustee, 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.

     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.

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     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 limited circumstances or with the
consent of the Holders of 66-2/3% in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, 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 thereunder, 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
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.

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     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 owner hereof for
all purposes, whether or not this Security be overdue, and neither the Company,
the Trustee nor 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: June 29, 2004

	 	 	 	JPMORGAN CHASE BANK

As Trustee	 	 
	 
 
	 	 	 	 	 	 
	

	 	By	 	Rosa Ciaccia	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	Authorized Officer
	 	 

6FOUNDERS INDUSTRIES, INC.

SUBSCRIPTION AGREEMENT

THE SECURITIES REFERRED TO IN THIS SUBSCRIPTION AGREEMENT QUESTIONNAIRE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "1933 ACT") AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT COVERING SUCH SECURITIES OR THE GENERAL PARTNER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO THE GENERAL PARTNER STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT.

	
TO:
	
Founders Industries, Inc. 

	 	
1026 West Main Street, Suite 104 

	 	
Lewisville, TX 75067

FAX No:        (972) 219-1832

Ladies & Gentlemen:

        This SUBSCRIPTION AGREEMENT (the "Subscription Agreement") is entered into by and among FOUNDERS INDUSTRIES, INC., a Nevada corporation (the "Company"), and the investor identified on the signature page attached hereto (the "Investor") in connection with the Investor's purchase of Common Shares of the Company and admission as a Shareholder of the Company. 

        1.        Subscription.  

                 (a)        Subject to the terms and conditions hereof, the Investor hereby tenders a subscription in the amount set forth opposite the heading "Subscription Amount" on the signature page hereto or such lesser amount as the Company shall choose to accept pursuant to paragraph 2(b) below (the "Subscription") for Common Shares.  

                 (b)        The Investor agrees, upon acceptance of its Subscription, to contribute to the Company an aggregate amount equal to the Subscription Amount. 

        2.        Acceptance of Subscription:  The Investor understands and agrees that this Subscription is made subject to the following terms and conditions:

                 (a)        The Company reserves the right to review the suitability of any person desiring to purchase shares of stock and, in connection with such review, to waive such suitability standards as to such person as the Company deems appropriate under applicable law. The Company shall have no obligation to accept Subscriptions in the order received.

                 (b)        The Company shall have the right to reject this Subscription Agreement, in whole, or in part, in the Company's sole discretion, and this Subscription Agreement shall be deemed to be accepted by the Company only when the Investor has been admitted to the Company as a Shareholder.  If the Company elects to accept only part of the Subscription Amount, then the Company shall be authorized to revise the amount set forth opposite the heading "Subscription Amount" on the signature page hereto and shall notify the Investor in writing of such revision promptly after the closing (the amount as so revised shall thereafter be the Investor's Subscription for all purposes hereof).  

                 (c)        The Investor hereby requests and authorizes the Company to enter Investor's name on its Share Register. 

        3.        Investor's Conditions to Closing.  The Investor's obligations hereunder are subject to the Company's performance and compliance with all agreements and conditions required by this Subscription Agreement to be performed or complied with by it prior to or at the closing.

        4.        Company's Conditions to Closing.  The Company's obligations hereunder are subject to acceptance by the Company of the Investor's Subscription, and to the fulfillment, prior to or at the time of closing, of each of the following conditions:

                 (a)        The representations and warranties of the Investor contained in this Agreement shall be true and correct at the time of closing, except to the extent that the Investor notifies the Company in writing prior to the closing.

                 (b)        All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in substance and form to the Company and its counsel, and the Company or its counsel shall have received all such counterpart originals or certified or other copies of such documents as the Company may request.

        5.        Investor's Representations.  In connection with the Investor's purchase of the shares,  the Investor makes the following representations and warranties on which the Company and the Company's counsel are entitled to rely.  If in any respect such representations shall not be true and accurate prior to the sale of the share, the Investor shall give immediate notice of such fact to the Company, specifying which representations and warranties are not true and accurate and the reasons therefor.  

                 (a)        The Investor is acquiring the shares solely for its own account for investment and not with a view to distribution or resale.  The Investor will not sell, hypothecate, pledge or otherwise dispose of the shares in whole or in part unless the shares either have been registered under the 1933 Act and any applicable state securities law, or are exempt from the registration requirements of the 1933 Act and any such state securities law. 

                 (b)        The Investor has sufficient knowledge and experience in business and financial matters to evaluate the Company, its proposed activities and the risks and merits of this investment.  The Investor has the ability to accept the high risk and lack of liquidity inherent in this type of investing.

                 (c)        The Investor has had the opportunity to ask questions of and receive answers from the Company concerning the terms, conditions and proposed activities of the Company and to obtain any additional information necessary to verify the accuracy of the information provided.

                 (d)        The Investor has been advised to consult with its own attorney regarding legal matters concerning the Company and to consult with an independent tax adviser regarding the tax consequences of participating in the Company.

                 (e)        The Investor understands that the shares have not been registered under the 1933 Act (and that no such registration is contemplated) and are being sold in reliance upon the exemption from the registration requirements under that Act provided in Regulation D and/or Section 4(2).  The Investor further understands that it is not anticipated that there will be any market for its shares in the Company and the Investor must therefore bear the economic risk of this investment for the term of the Company.

                 (f)        Accredited Investor Representation.  The Investor makes one of the following representations regarding its status as an "accredited investor" and certain related matters.  [Please check the applicable subparagraph.]  

	
___
	
1.
	
The Investor is a trust with total assets in excess of $5,000,000 whose purchase is directed by a person with such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of the prospective investment.

	
___
	
2.
	
The Investor is a bank, insurance company, investment company registered under the Investment Company Act of 1940, a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, a business development company, a Small Business Investment Company licensed by the U.S. Small Business Administration, a plan with total assets in excess of $5,000,000 established and maintained by a state for the benefit of its employees, or a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.  

	
___
	
3.
	
The Investor is an employee benefit plan and either all investment decisions are made by a bank, savings and loan association, insurance company, or registered investment advisor, or the Investor has total assets in excess of $5,000,000 or, if such plan is a self-directed plan, investment decisions are made solely by persons who are accredited investors.

	
___
	
4.
	
The Investor is (A) a corporation, (B) partnership, (C) business trust, or (D) an organization described in section 501(c)(3) of the Internal Revenue Code and has total assets in excess of $5,000,000.

	
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5.
	
If the Investor is not an entity described in paragraphs (g)(1) through (g)(4), the Investor represents that each of its equity owners is either (i) an entity described in paragraphs (g)(2) through (g)(4); or (ii) an individual who (A) has an individual net worth, or a joint net worth with such individual's spouse, in excess of $1,000,000, or (B) has had an individual income in excess of $200,000 in each of the two most recent years, or a joint income with one's spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year, or (C) is a director or executive officer of the Company.

	
X
	
6.
	
If the Investor is an individual, the Investor represents that either he or she (i) has a net worth, either individually or upon a joint basis with the Investor's spouse, of at least $1,000,000, (ii) has had an individual income in excess of $200,000 for each of the two most recent years, or a joint income with the Investor's spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year, or (iii) is a director or executive officer of the Company.

	
___
	
7.
	
The Investor cannot make any of the  representations set forth in paragraphs (g)(1) through (g)(6) above.

[Rest of Page Intentionally Left Blank]

        IN WITNESS WHEREOF, the parties hereto have entered into THIS SUBSCRIPTION AGREEMENT effective as of January 3, 2003.

INVESTOR:

Richard C. Smith                                                                  Subscription Amount:  $200,000

(Investor)

By: /s/ Richard C. Smith                                                      Common Shares:  800,000

     (Signature)

Name:_______________________________

                         (Print Name)

Title:________________________________

Type of Investor:  Please check the applicable box:

	
X     Individual
	
__   Trust______________________________

	
__   Corporation
	
__   Other______________________________

	
__   Company
	

State of Organization: (non-individuals only)________________________________________

	
Primary contact person
	
Richard C. Smith
	 
	
Address:
	
1026 W. Main #103
	 
	 	
Lewisville, TX 75067
	 
	
Telephone Number:
	
(972 ) 679-7734
	 
	
Fax Number:
	
(972) 219-1832
	 
	
E-mail Address:
	
rcscpa@aol.com
	 
	
Other persons who should receive
	 	 
	
Company correspondence:
	
____________________
	
____________________

	 	
____________________
	
____________________

	 	
____________________
	
____________________

	
Please specify your Tax I.D. Number or 
	 
	
check the appropriate box:
	
__   Tax I.D. No.:________________

	 	
__   Exempt under IRC Section401(a)

		
__   Exempt under IRS Section501(c)(3)

ACCEPTED BY:

COMPANY:

FOUNDERS INDUSTRIES, INC.

By: /s/ Bryan Walker                            

Chief Executive Officer

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