Document:

<PAGE>   1
                                                                     EXHIBIT 4.4

                            AMERICAN HEALTHWAYS, INC.

                    2001 STOCK OPTION PLAN FOR NEW EMPLOYEES

         SECTION 1. PURPOSE; DEFINITIONS.

         The purpose of the American Healthways, Inc. 2001 Stock Option Plan for
New Employees (the "Plan") is to enable American Healthways, Inc. (the
"Corporation") to attract persons not previously employed by the Corporation and
to offer equity interests in the Corporation as an inducement essential to the
person's entering an employment contract with the Corporation. The creation of
the Plan shall not diminish or prejudice other compensation programs approved
from time to time by the Board.

         For purposes of the Plan, the following terms shall be defined as set
forth below:

                  A.       "Affiliate" means any entity other than the
Corporation and its Subsidiaries that is designated by the Board as a
participating employer under the Plan, provided that the Corporation directly or
indirectly owns at least 20% of the combined voting power of all classes of
stock of such entity or at least 20% of the ownership interests in such entity.

                  B.       "Board" means the Board of Directors of the
Corporation.

                  C.       "Cause" has the meaning provided in Section 5(j) of
the Plan.

                  D.       "Change in Control" has the meaning provided in
Section 6(b) of the Plan.

                  E.       "Change in Control Price" has the meaning provided in
Section 6(d) of the Plan.

                  F.       "Common Stock" means the Corporation's Common Stock,
par value $.001 per share.

                  G.       "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.

                  H.       "Committee" means the Committee referred to in
Section 2 of the Plan.

                  I.       "Corporation" means American Healthways, Inc., a
corporation organized under the laws of the State of Delaware, or any successor
corporation.

                  J.       "Disability" means disability as determined under the
Corporation's long-term disability insurance policy.

<PAGE>   2

                  K.       "Early Retirement" means retirement, for purposes of
this Plan with the express consent of the Corporation at or before the time of
such retirement, from active employment with the Corporation and any Subsidiary
or Affiliate prior to age 65, in accordance with any applicable early retirement
policy of the Corporation then in effect or as may be approved by the Committee.

                  L.       "Effective Date" has the meaning provided in Section
10 of the Plan.

                  M.       "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and any successor thereto.

                  N.       "Fair Market Value" means with respect to the Common
Stock, as of any given date or dates, unless otherwise determined by the
Committee in good faith, the reported closing price of a share of Common Stock
on Nasdaq or such other market or exchange as is the principal trading market
for the Common Stock, or, if no such sale of a share of Common Stock is reported
on Nasdaq or other exchange or principal trading market on such date, the fair
market value of a share of Common Stock as determined by the Committee in good
faith.

                  O.       "Immediate Family" means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
and shall include adoptive relationships.

                  P.       "Nasdaq" means The Nasdaq National Stock Market.

                  Q.       "New Employee" means an employee or consultant who
has not been employed or engaged by the Corporation or any Subsidiary or
Affiliate on a full-time or part-time basis at any time within the preceding six
months.

                  R.       "Non-Qualified Stock Option" means any stock option
that is not an incentive stock option within the meaning of Section 422 of the
Code granted pursuant to Section 5 hereof.

                  S.       "Normal Retirement" means retirement from active
employment with the Corporation and any Subsidiary or Affiliate on or after age
65.

                  T.       "Plan" means this American Healthways, Inc. 2001
Stock Option Plan for New Employees, as amended from time to time.

                  U.       "Retirement" means Normal or Early Retirement.

                  V.       "Subsidiary" means any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the Corporation
if each of the corporations (other than the last corporation in the unbroken
chain) owns stock

                                       2

<PAGE>   3

possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.

         SECTION 2. ADMINISTRATION.

         The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. The functions of the Committee specified in the
Plan may be exercised by an existing Committee of the Board composed exclusively
of Non-Employee Directors. The initial Committee shall be the Compensation
Committee of the Board. In the event there are not at least two Non-Employee
Directors on the Board, the Plan shall be administered by the Board and all
references herein to the Committee shall refer to the Board.

         The Committee shall have authority to grant, pursuant to the terms of
the Plan, Non-Qualified Stock Options to New Employees of the Corporation.

         In particular, the Committee, or the Board, as the case may be, shall
have the authority, consistent with the terms of the Plan:

                           (a)      to select the New Employees of the
         Corporation and its Subsidiaries and Affiliates to whom Non-Qualified
         Stock Options, may from time to time be granted hereunder;

                           (b)      to determine whether and to what extent
         Non-Qualified Stock Options are to be granted hereunder to one or more
         eligible persons;

                           (c)      to determine the number of shares to be
         covered by each such award granted hereunder;

                           (d)      to determine the terms and conditions, not
         inconsistent with the terms of the Plan, of any award granted hereunder
         (including, but not limited to, the share price and any restriction or
         limitation, or any vesting acceleration or waiver of forfeiture
         restrictions regarding any Non-Qualified Stock Option and/or the shares
         of Common Stock relating thereto, based in each case on such factors as
         the Committee shall determine, in its sole discretion); and to amend or
         waive any such terms and conditions to the extent permitted by Section
         7 hereof;

                           (e)      to determine whether and under what
         circumstances a Non-Qualified Stock Option may be settled in cash
         instead of Common Stock;

                           (f)      to determine whether, to what extent, and
         under what circumstances Non-Qualified Stock Option grants under the
         Plan are to be made, and operate, on a tandem basis vis-a-vis cash
         awards made outside of the Plan;

                                       3

<PAGE>   4

                           (g)      to determine whether, to what extent, and
         under what circumstances shares of Common Stock and other amounts
         payable with respect to an award under this Plan shall be deferred
         either automatically or at the election of the participant (including
         providing for and determining the amount (if any) of any deemed
         earnings on any deferred amount during any deferral period);

                           (h)      to determine whether to require payment of
         tax withholding requirements in shares of Common Stock subject to the
         award; and

                           (i)      to impose any holding period required to
         satisfy Section 16 under the Exchange Act.

         The Committee shall have the authority to adopt, alter, and repeal such
rules, guidelines, and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan; provided, however, that, to
the extent that this Plan otherwise requires the approval of the Board or the
shareholders of the Corporation, all decisions of the Committee shall be subject
to such Board or shareholder approval. Subject to the foregoing, all decisions
made by the Committee pursuant to the provisions of the Plan shall be made in
the Committee's sole discretion and shall be final and binding on all persons,
including the Corporation and Plan participants.

         SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.

                           (a)      As of the Effective Date, the aggregate
         number of shares of Common Stock that may be issued under the Plan
         shall be 600,000 shares. The shares of Common Stock issuable under the
         Plan may consist, in whole or in part, of authorized and unissued
         shares or treasury shares.

                           (b)      If any shares of Common Stock that have been
         optioned cease to be subject to a Non-Qualified Stock Option or any
         such award otherwise terminates without a payment being made to the
         participant in the form of Common Stock, such shares shall again be
         available for distribution in connection with future awards under the
         Plan.

                           (c)      In the event of any merger, reorganization,
         consolidation, recapitalization, extraordinary cash dividend, stock
         dividend, stock split or other change in corporate structure affecting
         the Common Stock, an appropriate substitution or adjustment shall be
         made in the maximum number of shares that may be awarded under the Plan
         and in the number and option price of shares subject to outstanding
         Non-Qualified Options granted under the Plan, provided that the number
         of shares subject to any award shall always be a whole number.

                                       4

<PAGE>   5

         SECTION 4. ELIGIBILITY.

         New Employees are eligible to be granted awards under the Plan as an
inducement essential to their entering into an employment contract with the
Corporation.

         SECTION 5. NON-QUALIFIED STOCK OPTIONS.

         Non-Qualified Stock Options may be granted alone, in addition to, or in
tandem with cash awards made outside of the Plan. Any Non-Qualified Stock Option
granted under the Plan shall be in such form as the Committee may from time to
time approve.

         Stock options granted under the Plan shall be Non-Qualified Stock
Options.

         The Committee shall have the authority to grant to any optionee
Non-Qualified Stock Options.

         Non-Qualified Stock Options granted to New Employees under the Plan
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable.

                           (a)      Option Price. The option price per share of
         Common Stock purchasable under a Non-Qualified Stock Option shall be
         determined by the Committee at the time of grant but shall be not less
         than 85% of the Fair Market Value of the Common Stock at grant.

                           (b)      Option Term. The term of each Non-Qualified
         Stock Option shall be fixed by the Committee.

                           (c)      Exercisability. Non-Qualified Stock Options
         shall be exercisable at such time or times and subject to such terms
         and conditions as shall be determined by the Committee at or after
         grant; provided, however, that except as provided in Section 5(g) and
         (h) and Section 6, unless otherwise determined by the Committee at or
         after grant, no Non-Qualified Stock Option shall be exercisable prior
         to the first anniversary date of the granting of the Non-Qualified
         Option. The Committee may provide that a Non-Qualified Stock Option
         shall vest over a period of future service at a rate specified at the
         time of grant, or that the Non-Qualified Stock Option is exercisable
         only in installments. If the Committee provides, in its sole
         discretion, that any Non-Qualified Stock Option is exercisable only in
         installments, the Committee may waive such installment exercise
         provisions at any time at or after grant, in whole or in part, based on
         such factors as the Committee shall determine in its sole discretion.

                           (d)      Method of Exercise. Subject to whatever
         installment exercise restrictions apply under Section 5(c),
         Non-Qualified Stock Options may be exercised in whole or in part at any
         time during the option period, by giving

                                       5

<PAGE>   6

         written notice of exercise to the Corporation specifying the number of
         shares to be purchased. Such notice shall be accompanied by payment in
         full of the purchase price, either by check, note, or such other
         instrument as the Committee may accept. As determined by the Committee,
         in its sole discretion, at or after grant, payment in full or in part
         may also be made in the form of shares of Common Stock already owned by
         the optionee valued at the Fair Market Value of the Common Stock on the
         date the Non-Qualified Stock Option is exercised. If payment of the
         exercise price is made in part or in full with Common Stock, the
         Committee may award to the employee a new Non-Qualified Stock Option to
         replace the Common Stock which was surrendered. No shares of Common
         Stock shall be issued until full payment therefor has been made. An
         optionee shall generally have the rights to dividends or other rights
         of a shareholder with respect to shares subject to the Non-Qualified
         Stock Option when the optionee has given written notice of exercise,
         has paid in full for such shares, and, if requested, has given the
         representation described in Section 9(a).

                           (e)      Transferability of Options. No Non-Qualified
         Stock Option shall be transferable by the optionee without the prior
         written consent of the Committee other than (i) transfers by the
         Optionee to a member of his or her Immediate Family or a trust for the
         benefit of the optionee or a member of his or her Immediate Family, or
         (ii) transfers by will or by the laws of descent and distribution.

                           (f)      Bonus for Taxes. In the case of a
         Non-Qualified Stock Option, the Committee in its discretion may award
         at the time of grant or thereafter the right to receive upon exercise
         of such Non-Qualified Stock Option a cash bonus calculated to pay part
         or all of the federal and state, if any, income tax incurred by the
         optionee upon such exercise.

                           (g)      Termination by Death. If an optionee's
         employment by the Corporation and any Subsidiary or Affiliate
         terminates by reason of death, any Non-Qualified Stock Option held by
         such optionee may thereafter be exercised, to the extent such option
         was exercisable at the time of death or on such accelerated basis as
         the Committee may determine at or after grant (or as may be determined
         in accordance with procedures established by the Committee) by the
         legal representative of the estate or by the legatee of the optionee
         under the will of the optionee, for a period of one year (or such other
         period as the Committee may specify at or after grant) from the date of
         such death or until the expiration of the stated term of such
         Non-Qualified Stock Option, whichever period is the shorter.

                           (h)      Termination by Reason of Disability. If an
         optionee's employment by the Corporation and any Subsidiary or
         Affiliate terminates by reason of Disability, any Non-Qualified Stock
         Option held by such optionee may thereafter be exercised by the
         optionee, to the extent it was exercisable at the time of termination
         or on such accelerated basis as the Committee may determine at or

                                       6

<PAGE>   7

         after grant (or as may be determined in accordance with procedures
         established by the Committee), for a period of three years (or such
         other period as the Committee may specify at or after grant) from the
         date of such termination of employment or until the expiration of the
         stated term of such Non-Qualified Stock Option, whichever period is the
         shorter, provided however, that, if the optionee dies within the period
         specified above (or other such period as the committee shall specify at
         or after grant), any unexercised Non-Qualified Stock Option held by
         such optionee shall thereafter be exercisable to the extent to which it
         was exercisable at the time of death for a period of twelve months from
         the date of such death or until the expiration of the stated term of
         such Non-Qualified Stock Option, whichever period is shorter.

                           (i)      Termination by Reason of Retirement If an
         optionee's employment by the Corporation and any Subsidiary or
         Affiliate terminates by reason of Normal or Early Retirement, any
         Non-Qualified Stock Option held by such optionee may thereafter be
         exercised by the optionee, to the extent it was exercisable at the time
         of such Retirement or on such accelerated basis as the Committee may
         determine at or after grant or, as may be determined in accordance with
         procedures established by the Committee, for a period of three years
         (or such other period as the Committee may specify at or after grant)
         from the date of such termination of employment or the expiration of
         the stated term of such Non-Qualified Stock Option, whichever period is
         the shorter; provided however, that, if the optionee dies within the
         period specified above (or other such period as the Committee shall
         specify at or after grant), any unexercised Non-Qualified Stock Option
         held by such optionee shall thereafter be exercisable to the extent to
         which it was exercisable at the time of death for a period of twelve
         months from the date of such death or until the expiration of the
         stated term of such Non-Qualified Stock Option, whichever period is
         shorter.

                           (j)      Other Termination. Unless otherwise
         determined by the Committee (or pursuant to procedures established by
         the Committee) at or after grant, if an optionee's employment by the
         Corporation and any Subsidiary or Affiliate is involuntarily terminated
         for any reason other than death, Disability or Normal or Early
         Retirement, or if optionee voluntarily terminates employment, the
         Non-Qualified Stock Option shall thereupon terminate, except that such
         Non-Qualified Stock Option may be exercised, to the extent otherwise
         then exercisable, for the lesser of three months or the balance of such
         Non-Qualified Stock Option's term if the involuntary termination is
         without Cause. For purposes of this Plan, "Cause" means (i) a felony
         conviction of a participant or the failure of a participant to contest
         prosecution for a felony, or (ii) a participant's willful misconduct or
         dishonesty, which is directly and materially harmful to the business or
         reputation of the Corporation or any Subsidiary or Affiliate. If an
         optionee voluntarily terminates employment with the Corporation and any
         Subsidiary or Affiliate (except for Disability, Normal or Early
         Retirement), the Non-Qualified Stock Option shall thereupon terminate;
         provided, however, that the Committee at grant or thereafter may extend
         the exercise period

                                       7

<PAGE>   8

         in this situation for the lesser of three months or the balance of such
         Non-Qualified Stock Option's term.

         SECTION 6. CHANGE IN CONTROL PROVISIONS.

                  (a)      Impact of Event. In the event of:

                           (1)      a "Change in Control" as defined in Section
         6(b); or

                           (2)      a "Potential Change in Control" as defined
         in Section 6(c), but only if and to the extent so determined by the
         Committee or the Board at or after grant (subject to any right of
         approval expressly reserved by the Committee or the Board at the time
         of such determination),

         Subject to the limitations set forth below in this Section 6(a), the
following acceleration provision shall apply:

                           (i)      Any Non-Qualified Stock Option awarded under
                  the Plan not previously exercisable and vested shall become
                  fully exercisable and vested.

                           (ii)     Subject to the limitations set forth below
                  in this Section 6(a), the value of all outstanding
                  Non-Qualified Stock Options to the extent vested, shall,
                  unless otherwise determined Board or by the Committee in its
                  sole discretion prior to any Change in Control, be cashed out
                  on the basis of the "Change in Control Price" as defined in
                  Section 6(d) as of the date such Change in Control or such
                  Potential Change in Control is determined to have occurred or
                  such other date as the Board or Committee may determine prior
                  to the Change in Control.

                           (iii)    The Board or the Committee may impose
                  additional conditions on the acceleration or valuation of any
                  option in the option agreement.

                  (b)      Definition of Change in Control. For purposes of
         Section 6(a), a "Change in Control" means the happening of any of the
         following:

                           (i)      any person or entity, including a "group" as
                  defined in Section 13(d)(3) of the Exchange Act, other than
                  the Corporation or a wholly-owned subsidiary thereof or any
                  employee benefit plan of the Corporation or any of its
                  Subsidiaries, becomes the beneficial owner of the
                  Corporation's securities having 35% or more of the combined
                  voting power of the then outstanding securities of the
                  Corporation that may be cast for the election of

                                       8

<PAGE>   9

                  directors of the Corporation (other than as a result of an
                  issuance of securities initiated by the Corporation in the
                  ordinary course of business); or

                           (ii)     as the result of, or in connection with, any
                  cash tender or exchange offer, merger or other business
                  combination, sales of assets or contested election, or any
                  combination of the foregoing transactions, less than a
                  majority of the combined voting power of the then outstanding
                  securities of the Corporation or any successor corporation or
                  entity entitled to vote generally in the election of the
                  directors of the Corporation or such other corporation or
                  entity after such transaction are held in the aggregate by the
                  holders of the Corporation's securities entitled to vote
                  generally in the election of directors of the Corporation
                  immediately prior to such transaction; or

                           (iii)    during any period of two consecutive years,
                  individuals who at the beginning of any such period constitute
                  the Board cease for any reason to constitute at least a
                  majority thereof, unless the election, or the nomination for
                  election by the Corporation's shareholders, of each director
                  of the Corporation first elected during such period was
                  approved by a vote of at least two-thirds of the directors of
                  the Corporation then still in office who were directors of the
                  Corporation at the beginning of any such period.

                  (c)      Definition of Potential Change in Control. For
         purposes of Section 6(a), a "Potential Change in Control" means the
         happening of any one of the following:

                           (i)      The approval by shareholders of an agreement
                  by the Corporation, the consummation of which would result in
                  a Change in Control of the Corporation as defined in Section
                  6(b); or

                           (ii)     The acquisition of beneficial ownership,
                  directly or indirectly, by any entity, person or group (other
                  than the Corporation or a Subsidiary or any Corporation
                  employee benefit plan (including any trustee of such plan
                  acting as such trustee)) of securities of the Corporation
                  representing 5% or more of the combined voting power of the
                  Corporation's outstanding securities and the adoption by the
                  Committee of a resolution to the effect that a Potential
                  Change in Control of the Corporation has occurred for purposes
                  of this Plan.

                  (d)      Change in Control Price. For purposes of this Section
         6, "Change in Control Price" means the highest price per share paid in
         any transaction reported on Nasdaq or such other exchange or market as
         is the

                                       9

<PAGE>   10

         principal trading market for the Common Stock, or paid or offered in
         any bona fide transaction related to a Potential or actual Change in
         Control of the Corporation at any time during the 60 day period
         immediately preceding the occurrence of the Change in Control (or,
         where applicable, the occurrence of the Potential Change in Control
         event), in each case as determined by the Committee.

         SECTION 7. AMENDMENTS AND TERMINATION.

         The Board may at any time amend, alter or discontinue the Plan;
provided, however, that, without the approval of the Corporation's shareholders,
no amendment or alteration may be made which would make any change for which
applicable law or regulatory authority (including the regulatory authority of
Nasdaq or any other market or exchange on which the Common Stock is traded)
would require shareholder approval. No amendment, alteration, or discontinuation
shall be made which would impair the rights of an optionee or participant under
a Non-Qualified Stock Option theretofore granted, without the participant's
consent.

         The Committee may amend the terms of any Non-Qualified Stock Option or
other award theretofore granted, prospectively or retroactively, but, subject to
Section 2 above, no such amendment shall impair the rights of any holder without
the holder's consent. The Committee may also substitute new Non-Qualified Stock
Options for previously granted Non-Qualified Stock Options (on a one for one or
other basis), including previously granted Non-Qualified Stock Options having
higher option exercise prices.

         SECTION 8. UNFUNDED STATUS OF PLAN.

         The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Corporation, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of hereunder;
provided, however, that, unless the Committee otherwise determines with the
consent of the affected participant, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.

         SECTION 9. GENERAL PROVISIONS.

                  (a)      The Committee may require each person purchasing
         shares pursuant to a Non-Qualified Stock Option under the Plan to
         represent to and agree with the Corporation in writing that the
         optionee or participant is acquiring the shares without a view to
         distribution thereof. The certificates for such shares may include any
         legend which the Committee deems appropriate to reflect any
         restrictions on transfer. All certificates for shares of Common Stock
         or other securities delivered under the Plan shall be subject to such
         stop-transfer orders and other restrictions as the Committee may deem
         advisable under the rules,

                                       10

<PAGE>   11

         regulations, and other requirements of the Commission, any stock
         exchange upon which the Common Stock is then listed, and any applicable
         Federal or state securities law, and the Committee may cause a legend
         or legends to be put on any such certificates to make appropriate
         reference to such restrictions.

                  (b)      Nothing contained in this Plan shall prevent the
         Board from adopting other or additional compensation arrangements,
         subject to shareholder approval if such approval is required; and such
         arrangements may be either generally applicable or applicable only in
         specific cases.

                  (c)      The adoption of the Plan shall not confer upon any
         New Employee of the Corporation or any Subsidiary or Affiliate any
         right to continued employment with the Corporation or a Subsidiary or
         Affiliate, as the case may be, nor shall it interfere in any way with
         the right of the Corporation or a Subsidiary or Affiliate to terminate
         the employment of any of its employees at any time.

                  (d)      No later than the date as of which an amount first
         becomes includible in the gross income of the participant for Federal
         income tax purposes with respect to any award under the Plan, the
         participant shall pay to the Corporation, or make arrangements
         satisfactory to the Committee regarding the payment of, any Federal,
         state, or local taxes of any kind required by law to be withheld with
         respect to such amount. The Committee may require withholding
         obligations to be settled with Common Stock, including Common Stock
         that is part of the award that gives rise to the withholding
         requirement. The obligations of the Corporation under the Plan shall be
         conditional on such payment or arrangements and the Corporation and its
         Subsidiaries or Affiliates shall, to the extent permitted by law, have
         the right to deduct any such taxes from any payment of any kind
         otherwise due to the participant.

                  (e)      The Plan and all awards made and actions taken
         thereunder shall be governed by and construed in accordance with the
         laws of the State of Delaware.

                  (f)      The members of the Committee and the Board shall not
         be liable to any employee or other person with respect to any
         determination made hereunder in a manner that is not inconsistent with
         their legal obligations as members of the Board. In addition to such
         other rights of indemnification as they may have as directors or as
         members of the Committee, the members of the Committee shall be
         indemnified by the Corporation against the reasonable expenses,
         including attorneys' fees actually and necessarily incurred in
         connection with the defense of any action, suit or proceeding, or in
         connection with any appeal therein, to which they or any of them may be
         a party by reason of any action taken or failure to act under or in
         connection with the Plan or any option granted thereunder, and against
         all amounts paid by them in settlement thereof (provided such
         settlement is approved by independent legal counsel selected by the
         Corporation) or paid by them in satisfaction of a judgment in any

                                       11

<PAGE>   12

         such action, suit or proceeding, except in relation to matters as to
         which it shall be adjudged in such action, suit or proceeding that such
         Committee member is liable for negligence or misconduct in the
         performance of his duties; provided that within 60 days after
         institution of any such action, suit or proceeding, the Committee
         member shall in writing offer the Corporation the opportunity, at its
         own expense, to handle and defend the same.

                  (g)      The Committee may, at or after grant, condition the
         receipt of any payment in respect of any award or the transfer of any
         shares subject to an award on the satisfaction of a six-month holding
         period, if such holding period is required for compliance with Section
         16 under the Exchange Act.

         SECTION 10. EFFECTIVE DATE OF PLAN.

         The Plan shall be effective April 19, 2001 (the "Effective Date").

         SECTION 11. TERM OF PLAN.

         No Non-Qualified Stock Option shall be granted pursuant to the Plan on
or after the tenth anniversary of the Effective Date of the Plan, but awards
granted prior to such tenth anniversary may be extended beyond that date.

                                       12Exhibit 4.1

                  ---------------------------------------------

                         ARIZONA PUBLIC SERVICE COMPANY

                                       TO

                            THE CHASE MANHATTAN BANK

                                     TRUSTEE

                          Fifth Supplemental Indenture

                           Dated as of October 1, 2001

                                       To

                                    Indenture

                          Dated as of January 15, 1998

                              6.375% Notes Due 2011

                  ---------------------------------------------
<PAGE>
     FIFTH SUPPLEMENTAL INDENTURE,  dated as of October 1, 2001, 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  Chase
Manhattan  Bank, a New York banking  corporation,  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.

     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 6.375%
Notes Due 2011 (herein  called the "Notes Due 2011"),  the form and substance of
such Notes Due 2011 and the terms, provisions,  and conditions thereof to be set
forth as provided in the Indenture and this Fifth Supplemental Indenture.

     All things  necessary  to make this Fifth  Supplemental  Indenture  a valid
agreement of the Company,  and to make the Notes Due 2011,  when executed by the
Company and authenticated and delivered by the Trustee, the valid obligations of
the Company, have been done.

          NOW, THEREFORE, THIS FIFTH SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in  consideration of the premises and the purchase of the Notes Due
2011 by the Holders  thereof,  and for the purpose of setting forth, as provided
in the  Indenture,  the form and  substance of the Notes Due 2011 and the terms,
provisions,  and conditions  thereof,  it is mutually agreed,  for the equal and
proportionate benefit of all Holders of the Notes Due 2011, as follows:

                                   ARTICLE ONE

                         GENERAL TERMS AND CONDITIONS OF
                               THE NOTES DUE 2011

     SECTION 101. There shall be and is hereby authorized a series of Securities
designated the "6.375% Notes Due 2011" initially limited in aggregate  principal
amount to $400,000,000,  which amount shall be as set forth in any Company Order
for the  authentication and delivery of Notes Due 2011. The Notes Due 2011 shall
mature and the principal shall be due and payable  together with all accrued and
unpaid interest  thereon on October 15, 2011, and shall be issued in the form of
registered Notes Due 2011 without coupons.

     The foregoing  principal amount of the Notes Due 2011 may be increased from
time to time as  permitted by Section 301 of the  Indenture.  All Notes Due 2011
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

                                       2
<PAGE>
existing  Holders,  for  issuances  of  additional  Notes  Due  2011.  Any  such
additional  Notes  Due 2011  will be  equal in rank and have the same  maturity,
payment terms,  redemption features,  and other terms, except for the payment of
interest  accruing prior to the issue date of the further Notes Due 2011 and for
the first payment of interest  following the issue date of the further Notes Due
2011, as those initially issued.

     SECTION  102.  The Notes Due 2011  shall be  issued in  certificated  form,
except that the Notes Due 2011 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 Due 2011 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 Due 2011 in Article Two 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. Such Global Security may be
exchanged in whole or in part for Notes Due 2011 registered, and any transfer of
such Global Security in whole or in part may be registered, in the name or names
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.  Principal  of, and premium,  if any, and interest on the Notes Due
2011 will be payable,  the  transfer of Notes Due 2011 will be  registrable  and
Notes Due 2011 will be exchangeable  for Notes Due 2011 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  check  mailed  to the
registered holder at such address as shall appear in the Security Register.

     SECTION  103.  Each Note Due 2011 will bear  interest at the rate of 6.375%
from  October  5,  2001 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 April 15
and October 15 of each year (each, an "Interest  Payment  Date"),  commencing on
April  15,  2002,  to the  person  in  whose  name  such  Note  Due  2011 or any
Predecessor  Security  is  registered,  at the close of  business  on April 1 or
October  1, 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 shall forthwith cease to be payable to the
registered holders on such regular record date, and may be paid to the person in
whose  name  the  Note  Due  2011  (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  registered  holders  of the  Notes  Due 2011 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  Due 2011 may be  listed,  and upon  such  notice as may be
required by such exchange, all as more fully provided 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 October 5,
2001 to, but not including, the

                                       3
<PAGE>
relevant  payment date. In the event that any date on which  interest is payable
on the Notes Due 2011 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 104. The Company,  at its option,  may redeem all, or, from time to
time any part of the Notes Due 2011, upon notice as provided in the Indenture at
a Redemption Price equal to the greater of (a) the principal amount of the Notes
Due 2011 (or portion  thereof) to be redeemed  plus interest (if any) accrued to
the Redemption  Date or (b) the Make-Whole  Amount with respect to the Notes Due
2011 to be redeemed.

     For  purposes  of this  Section  104,  the  following  terms shall have the
following meanings:

          "MAKE-WHOLE AMOUNT" means the sum, as determined by a Quotation Agent,
of the  present  values  of the  principal  amount  of the  Notes Due 2011 to be
redeemed, together with scheduled payments of interest (exclusive of interest to
the  Redemption  Date) from the  Redemption  Date to the Stated  Maturity of the
Notes Due 2011, in each case  discounted to the Redemption Date on a semi-annual
basis,  assuming a 360-day  year  consisting  of twelve  30-day  months,  at the
Adjusted  Treasury Rate, plus accrued  interest (if any) on the principal amount
of the Notes Due 2011 being redeemed to the Redemption Date.

          "ADJUSTED  TREASURY RATE" means,  with respect to any Redemption Date,
(i)  the  yield,  under  the  heading  which  represents  the  average  for  the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15 (519)" or any successor  publication which is published
weekly  by the  Board of  Governors  of the  Federal  Reserve  System  and which
establishes  yields on actively  traded  U.S.  Treasury  securities  adjusted to
constant  maturity under the caption  "Treasury  Constant  Maturities,"  for the
maturity  corresponding  to the  Comparable  Treasury  Issue (if no  maturity is
within three months  before or after the  remaining  term of the Notes Due 2011,
yields  for the two  published  maturities  most  closely  corresponding  to the
Comparable  Treasury  Issue shall be determined  and the Adjusted  Treasury Rate
shall be interpolated or extrapolated from such yields on a straight line basis,
rounding  to the  nearest  month)  or  (ii) if such  release  (or any  successor
release) is not published during the week preceding the calculation date or does
not contain such yields,  the rate per year equal to the semi-annual  equivalent
yield to maturity of the Comparable Treasury Issue, calculated using 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, in each
case calculated on the third Business Day preceding the Redemption Date, plus in
each case 0.25%.

          "COMPARABLE  TREASURY ISSUE" means the U.S. Treasury security selected
by the Quotation  Agent as having a maturity  comparable  to the remaining  term
from the Redemption Date to the Stated Maturity of the Notes Due 2011 that would
be utilized, at the time of selection and in

                                       4
<PAGE>
accordance with customary financial practice, in pricing new issues of corporate
debt  securities of comparable  maturity to the remaining  term of the Notes Due
2011.

          "QUOTATION AGENT" means the Reference  Treasury Dealer selected by the
Trustee after consultation with the Company.

          "REFERENCE TREASURY DEALER" means a primary U.S. Government securities
dealer selected by the Company.

          "COMPARABLE  TREASURY  PRICE"  means,  with respect to any  Redemption
Date, if clause (ii) of the definition of Adjusted  Treasury Rate is applicable,
the  average of three,  or such lesser  number as is  obtained  by the  Trustee,
Reference Treasury Dealer Quotations for such Redemption Date.

          "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  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, including any Make-Whole Amount.

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

     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  105.  The Notes Due 2011 shall be  defeasible  pursuant to Section
1302 or 1303 of the Indenture.

                                   ARTICLE TWO

                             FORM OF NOTES DUE 2011

     SECTION  201.  The  Notes  Due  2011  and  the  Trustee's   certificate  of
authentication  to be endorsed  thereon are to be substantially in the following
forms:

Form of Face of Security:

                                       5
<PAGE>
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

                              6.375% Note Due 2011

No. _________                                                       $400,000,000
                                                           CUSIP No. 040555 CC 6

     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 Four Hundred  Million  Dollars on October 15, 2011,  and to pay
interest  thereon from October 5, 2001 or from the most recent Interest  Payment
Date to which  interest has been paid or duly  provided  for,  semi-annually  in
arrears on April 15 and October 15 in each year,  commencing  April 15, 2002, at
the rate of 6.375%,  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 April 1 or October 1, 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 tender for

                                       6
<PAGE>
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
                                           -------------------------------------
                                           Vice President, Finance

Attest:

---------------------------------
Vice President and Secretary

Form of Reverse of Security.

     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 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 Securities of this series are subject to redemption  upon not less than
30 days' notice by mail at the option of the Company,  in whole or in part, from
time to time at a  Redemption  Price equal to the  greater of (a) the  principal
amount of the Securities (or portion thereof) of this series to be redeemed plus
interest (if any) accrued to the Redemption  Date or (b) the  Make-Whole  Amount

                                       7
<PAGE>
(as defined  below) with respect to the Securities of this series to be redeemed
(the "Redemption Price").

     If notice has been given as  provided  in the  Indenture  and funds for the
redemption of any  Securities  (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  Redemption  Price or, if not then known,  the manner of
calculation  thereof,  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.

     As used herein:

          "MAKE-WHOLE AMOUNT" means the sum, as determined by a Quotation Agent,
of the present  values of the principal  amount of the Securities of this series
to be redeemed,  together  with  scheduled  payments of interest  (exclusive  of
interest to the Redemption Date) from the Redemption Date to the Stated Maturity
of the Securities of this series, in each case discounted to the Redemption Date
on a  semi-annual  basis,  assuming a 360-day year  consisting  of twelve 30-day
months,  at the Adjusted  Treasury Rate,  plus accrued  interest (if any) on the
principal  amount  of the  Securities  of  this  series  being  redeemed  to the
Redemption Date.

          "ADJUSTED  TREASURY RATE" means,  with respect to any Redemption Date,
(i)  the  yield,  under  the  heading  which  represents  the  average  for  the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15 (519)" or any successor  publication which is published
weekly  by the  Board of  Governors  of the  Federal  Reserve  System  and which
establishes  yields on actively  traded  U.S.  Treasury  securities  adjusted to
constant  maturity under the caption  "Treasury  Constant  Maturities,"  for the
maturity  corresponding  to the  Comparable  Treasury  Issue (if no  maturity is
within three months before or after the remaining term of the Securities of this
series,  yields for the two published  maturities most closely  corresponding to
the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate
shall be interpolated or extrapolated from such yields on a straight line basis,
rounding  to the  nearest  month)  or  (ii) if such  release  (or any  successor
release) is not published during the week preceding the calculation date or does
not contain such yields,  the rate per year equal to the semi-annual  equivalent
yield to maturity of the Comparable Treasury Issue, calculated using 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, in each
case calculated on the third Business Day preceding the Redemption Date, plus in
each case 0.25%.

                                       8
<PAGE>
          "COMPARABLE  TREASURY ISSUE" means the U.S. Treasury security selected
by the Quotation  Agent as having a maturity  comparable  to the remaining  term
from the Redemption Date to the Stated Maturity of the Securities of this series
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 the Securities of this series.

          "QUOTATION AGENT" means the Reference  Treasury Dealer selected by the
Trustee after consultation with the Company.

          "REFERENCE TREASURY DEALER" means a primary U.S. Government securities
dealer selected by the Company.

          "COMPARABLE  TREASURY  PRICE"  means,  with respect to any  Redemption
Date, if clause (ii) of the definition of Adjusted  Treasury Rate is applicable,
the  average of three,  or such lesser  number as is  obtained  by the  Trustee,
Reference Treasury Dealer Quotations for such Redemption Date.

          "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 the  Security or 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.

     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

                                       9
<PAGE>
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.

                                       10
<PAGE>
     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.

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 CHASE MANHATTAN BANK
                                        AS TRUSTEE

                                        By
                                           -------------------------------------
                                           AUTHORIZED OFFICER

                                  ARTICLE THREE

                        ORIGINAL ISSUE OF NOTES DUE 2011

     SECTION 301.  Subject to Section  101, the Notes Due 2011 in the  aggregate
principal amount of $400,000,000 may, upon execution of this Fifth  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 Due 2011 in accordance with a Company Order
delivered  to the Trustee by the  Company,  without  any  further  action by the
Company.

                                  ARTICLE FOUR

                           PAYING AGENT AND REGISTRAR

     SECTION 401. The Chase Manhattan Bank will be the Paying Agent and Security
Registrar for the Notes Due 2011.

                                       11
<PAGE>
                                  ARTICLE FIVE

                                SUNDRY PROVISIONS

     SECTION  501.  Except  as  otherwise   expressly  provided  in  this  Fifth
Supplemental  Indenture  or in the form of Notes Due 2011 or  otherwise  clearly
required by the context hereof or thereof, all terms used herein or in said form
of Notes Due 2011 that are  defined  in the  Indenture  shall  have the  several
meanings respectively assigned to them thereby.

     SECTION 502. The Indenture,  as heretofore supplemented and amended, and as
supplemented by this Fifth Supplemental  Indenture,  is in all respects ratified
and confirmed, and this Fifth Supplemental Indenture shall be deemed part of the
Indenture in the manner and to the extent herein and therein provided.

     SECTION  503.  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 Fifth  Supplemental  Indenture or
for or in respect of the recitals  contained  herein,  all of which recitals are
made by the  Company  solely.  In  general,  each and every  term and  condition
contained in Article Six of the Indenture shall apply to and form a part of this
Fifth 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
Fifth Supplemental Indenture.

     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.

                                       12
<PAGE>
     IN WITNESS WHEREOF,  the parties hereto have caused this Fifth Supplemental
Indenture  to be duly  executed,  and  their  respective  corporate  seals to be
hereunto affixed and attested, all as of the day and year first above written.

                                        ARIZONA PUBLIC SERVICE COMPANY

                                        By: Barbara M. Gomez
                                            ------------------------------------
                                            Barbara M. Gomez
                                            Treasurer

Attest:

Faye Widenmann
------------------------------------
Faye Widenmann
Vice President and Secretary

                                        THE CHASE MANHATTAN BANK, as Trustee

                                        By: Natalia Rodriguez
                                            ------------------------------------
                                            Natalia Rodriguez
                                            Assistant Vice President

Attest:

------------------------------------
Name:
Title:

                                       13
<PAGE>
STATE OF ARIZONA     )
                     )  ss.:
COUNTY OF MARICOPA   )

     On the ____ day of October,  2001,  before me  personally  came  Barbara M.
Gomez, to me known,  who, being by me duly sworn, did depose and say that she is
the  Treasurer  of  Arizona  Public  Service  Company,  one of the  corporations
described in and which  executed the  foregoing  instrument;  that she knows the
seal of said  corporation;  that the seal  affixed  to said  instrument  is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that she signed her name thereto by like authority.

                                        ----------------------------------------
                                        Notary Public

My Commission Expires:

------------------------------------

STATE OF NEW YORK    )
                     )  ss.:
COUNTY OF NEW YORK   )

     On the ___ day of October,  2001, before me personally came ______________,
to me known,  who,  being by me duly sworn,  did depose and say that he/she is a
Vice President of The Chase Manhattan Bank, one of the corporations described in
and which executed the foregoing instrument;  that he/she knows the seal of said
corporation;  that the seal affixed to said  instrument is such corporate  seal;
that  it was so  affixed  by  authority  of  the  Board  of  Directors  of  said
corporation; and that he/she signed his/her name thereto by like authority.

                                        ----------------------------------------
                                        Notary Public

My Commission Expires:

------------------------------------

                                       14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00030-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00030-of-00352.parquet"}]]