Document:

Exhibit 10.2

 

 

ARIZONA PUBLIC SERVICE
COMPANY

 

TO

 

JPMORGAN CHASE BANK

 

Trustee

 

Seventh Supplemental
Indenture

 

Dated as of May 1, 2003

 

To

 

Indenture

 

Dated as of January 15,
1998

 

 

4.650% Notes due 2015

5.625% Notes due 2033

 

 

 

SEVENTH
SUPPLEMENTAL INDENTURE, dated as of May 1, 2003, 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 JPMorgan Chase Bank (formerly
known as 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 two new series of its Securities to
be known as its 4.650% Notes due 2015 (herein called the “Notes Due 2015”) and
its 5.625% Notes due 2033 (herein called the “Notes Due 2033”) (the Notes Due
2015 and the Notes Due 2033 are herein collectively referred to as the
“Notes”), the forms and substance of such Notes Due 2015 and such Notes Due
2033 and the terms, provisions, and conditions thereof to be set forth as
provided in the Indenture and this Seventh Supplemental Indenture.

 

All things necessary to make this Seventh Supplemental
Indenture a valid agreement of the Company, and to make the Notes Due 2015 and
the Notes Due 2033, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company, have been done.

 

NOW, THEREFORE, THIS
SEVENTH SUPPLEMENTAL INDENTURE WITNESSETH:

 

For and in consideration of the premises and the
purchase of the Notes Due 2015 and the Notes Due 2033 by the Holders thereof,
and for the purpose of setting forth, as provided in the Indenture, the form
and substance of the Notes Due 2015 and the Notes Due 2033 and the terms,
provisions, and conditions thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Notes Due 2015 and the Notes Due
2033, as follows:

 

ARTICLE ONE

 

GENERAL TERMS AND
CONDITIONS OF

THE NOTES DUE 2015 AND

THE NOTES DUE 2033

 

SECTION
101.                    There
shall be and is hereby authorized a series of Securities designated the “4.650%
Notes due 2015” initially limited in aggregate principal amount to
$300,000,000, which amount shall be as set forth in any Company Order for the
authentication and delivery of Notes Due 2015. 
There shall be and is hereby authorized a series of Securities
designated the “5.625% Notes

 

2

 

due 2033” initially limited in aggregate principal
amount to $200,000,000, which amount shall be as set forth in any Company Order
for the authentication and delivery of Notes Due 2033.  The Notes Due 2015 and the Notes Due 2033
shall mature and the principal shall be due and payable together with all
accrued and unpaid interest thereon on May 15, 2015 and May 15, 2033,
respectively, and shall be issued in the form of registered Notes without
coupons.

 

The foregoing principal amount of the Notes Due 2015
and the Notes Due 2033 may be increased from time to time as permitted by
Section 301 of the Indenture.  All Notes
Due 2015 and Notes Due 2033 need not be issued at the same time and such series
may be reopened at any time, without notice to, or the consent of, the then
existing Holders, for issuances of additional Notes Due 2015 and Notes Due
2033.  Any such additional Notes Due
2015 and Notes Due 2033 will be equal in rank and have the same respective
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
2015 and Notes Due 2033 and for the first payment of interest following the
issue date of the further Notes Due 2015 and Notes Due 2033, as those initially
issued.

 

SECTION 102.                    The Notes Due 2015 and Notes Due
2033 shall each be issued in certificated form, except that the Notes Due 2015
and Notes Due 2033 shall each 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 2015 and Notes Due 2033 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 2015 in Article Two hereof and at the top of the form of Note Due 2033
in Article Three hereof (in lieu of that set forth in Section 204 of the
Indenture), unless otherwise agreed by the Company, such agreement to be
confirmed in writing to the Trustee. 
Each such Global Security may be exchanged in whole or in part for Notes
Due 2015 or Notes Due 2033, as applicable, 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 2015 and Notes Due 2033 will be payable,
the transfer of Notes Due 2015 and Notes Due 2033 will be registrable and Notes
Due 2015 and Notes Due 2033, respectively, will be exchangeable for Notes Due
2015 and Notes Due 2033, respectively, 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 2015 will bear interest at the rate of 4.650% and each Note Due 2033
will bear interest at the rate of 5.625%, each from May 12, 2003 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 May 15 and November 15 of each year
(each, an “Interest Payment Date”), commencing on November 15, 2003,

 

3

 

to the person in whose name such Note Due 2015 or Note
Due 2033 or any Predecessor Security is registered, at the close of business on
May 1 and November 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 2015 or Note Due 2033 (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 2015 or Notes Due 2033, as the case may
be, 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 2015 or Notes Due 2033 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 May 12, 2003 to, but not including, the relevant payment date.  In the event that any date on which interest
is payable on the Notes Due 2015 or the Notes Due 2033 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 2015 or Notes Due 2033, upon notice as provided in the
Indenture at a Redemption Price equal to the greater of (a) the principal
amount of the Notes Due 2015 or Notes Due 2033 (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 2015 or Notes Due 2033 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 2015 or Notes Due
2033 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 2015 or Notes Due 2033, 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 2015 or Notes Due 2033 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

 

4

 

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 2015 or Notes Due 2033 to be redeemed, 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 0.150%.

 

“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
2015 or Notes Due 2033, as the case may be, 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 Notes Due 2015 or Notes Due 2033, as the case may be.

 

“Quotation Agent” means the Reference Treasury Dealer selected by the
Trustee after consultation with the Company.

 

“Reference Treasury Dealer” means each 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.

 

5

 

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 2015 and the Notes Due 2033 shall be defeasible pursuant to Section
1302 or 1303 of the Indenture.

 

ARTICLE TWO

 

FORM OF NOTES DUE 2015

 

SECTION
201.                    The
Notes Due 2015 and the Trustee’s certificate of authentication to be endorsed
thereon are to be substantially in the following forms:

 

Form of Face of Security.

 

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

 

4.650% Note due 2015

 

	
  No.

  	
   

  	
  $300,000,000

  
	
  CUSIP No. 040555 CE 2

  

 

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 on May 15, 2015, and to pay interest thereon from
May 12, 2003 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually in arrears on May 15 and
November 15 in each year, commencing November 15, 2003, at the rate of 4.650%,
until the principal hereof is paid or made available for payment.

 

6

 

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 May 1 or November 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 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

  	
   

  
	
   

  	
   

  	
   

  	
  Senior Vice President and

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  
					

 

7

 

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 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
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 (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.

 

8

 

“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 0.150%.

 

“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 each 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.

 

9

 

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 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 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.

 

10

 

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.

 

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:

  	
  JPMORGAN CHASE BANK

  
	
   

  	
  As Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Authorized Officer

  

 

11

 

ARTICLE THREE

 

FORM OF NOTES DUE 2033

 

SECTION 301.  The Notes Due 2033 and the Trustee’s
Certificate of Authentication to be endorsed thereon are to be substantially in
the following forms:

 

Form of Face of Security

 

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

 

5.625% Note due 2033

 

	
  No.

  	
   

  	
  $200,000,000

  
	
   

  	
   

  	
  CUSIP No. 040555 CF 9

  

 

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
Two Hundred Million Dollars on May 15, 2033, and to pay interest thereon from
May 12, 2003 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually in arrears on May 15 and
November 15 in each year, commencing November 15, 2003, at the rate of 5.625%,
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 May 1 or November 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

 

12

 

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 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

  	
   

  
	
   

  	
   

  	
   

  	
  Senior Vice President and

  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  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 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

 

13

 

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 (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

 

14

 

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 0.150%.

 

“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 each 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 this 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.

 

15

 

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 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

 

16

 

of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.

 

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

 

No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

 

Prior
to due presentment of this Security for registration of transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Security is registered as the 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:

  	
   

  	
  JPMORGAN CHASE BANK

  
	
   

  	
   

  	
  As Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Authorized Officer

  

 

ARTICLE FOUR

 

ORIGINAL ISSUE OF NOTES
DUE 2015 AND NOTES DUE 2033

 

SECTION
401.  Subject to Section 101, the Notes
Due 2015 and the Notes Due 2033 in the aggregate principal amount of
$500,000,000 may, upon execution of this Seventh 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 2015 and

 

17

 

Notes Due 2033 in accordance with a Company Order
delivered to the Trustee by the Company, without any further action by the
Company.

 

ARTICLE FIVE

 

PAYING AGENT AND
REGISTRAR

 

SECTION 501. 
JPMorgan Chase Bank will be the Paying Agent and Security Registrar for
the Notes Due 2015 and the Notes Due 2033.

 

ARTICLE SIX

 

SUNDRY PROVISIONS

 

SECTION 601. 
Except as otherwise expressly provided in this Seventh Supplemental
Indenture or in the form of Notes Due 2015 or Notes Due 2033 or otherwise
clearly required by the context hereof or thereof, all terms used herein or in
said form of Notes Due 2015 or Notes Due 2033 that are defined in the Indenture
shall have the several meanings respectively assigned to them thereby.

 

SECTION 602. 
The Indenture, as heretofore supplemented and amended, and as
supplemented by this Seventh Supplemental Indenture, is in all respects
ratified and confirmed, and this Seventh Supplemental Indenture shall be deemed
part of the Indenture in the manner and to the extent herein and therein
provided.

 

SECTION 603. 
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 Seventh
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 Seventh
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
Seventh 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.

 

18

 

IN
WITNESS WHEREOF, the parties hereto have caused this Seventh 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:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Betsy A. Pregulman

  	
   

  	
   

  	
   

  
	
  Betsy A. Pregulman

  	
   

  	
   

  
	
  Associate Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	 
	
   

  	
   

  	
  JPMORGAN CHASE BANK, as Trustee

  
	 
	
   

  	
   

  	
   

  
	 
	
   

  	
   

  	
   

  
	 
	
   

  	
   

  	
  By:

  	
  Kathleen Perry

  
	 
	
   

  	
   

  	
   

  	
  Kathleen Perry

  
	 
	
   

  	
   

  	
   

  	
  Vice President

  
	 
	
  Attest:

  	
   

  	
   

  
	 
	
   

  	
   

  	
   

  
	 
	
  Diane Darconte

  	
   

  	
   

  	
   

  
	 
	
  Name:  Diane
  Darconte

  	
   

  	
   

  
	 
	
  Title:   
  Trust Officer

  	
   

  	
   

  
						

 

19

 

	
  STATE OF ARIZONA

  	
  )

  
	
   

  	
  )  ss.:

  
	
  COUNTY OF MARICOPA

  	
  )

  

 

On the
9th day of May, 2003, 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.

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Debra L. Blondin

  
	
   

  	
   

  	
   

  	
  Notary Public

  
	
   

  	
   

  	
   

  	
   

  
	
  My Commission Expires:    June 7, 2004

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  STATE OF NEW YORK

  	
  )

  	
   

  	
   

  
	
   

  	
  )  ss.:

  	
   

  	
   

  
	
  COUNTY OF NEW YORK

  	
  )

  	
   

  	
   

  

 

On the
9th day of May, 2003, before me personally came Kathleen Perry, to me known,
who, being by me duly sworn, did depose and say that he/she is Vice President
of JPMorgan Chase Bank (formerly known as 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.

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Emily Fayan

  
	
   

  	
   

  	
  Notary Public

  
	
   

  	
   

  	
   

  
	
  My Commission Expires:    December 31, 2005

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

20Exhibit 10.22(b)

 

MODIFICATION OF CREDIT AGREEMENT

 

 

THIS MODIFICATION OF CREDIT AGREEMENT
(“Modification”) is made as of the 14th day of May, 2003, by and
between SOUTHTRUST
BANK, an Alabama corporation, formerly known as SouthTrust Bank,
National Association acting as a Lender and as Administrative Agent and Funding
Agent (collectively “Agent”) pursuant to the Credit Agreement (defined below), WACHOVIA
BANK, NATIONAL ASSOCIATION, a national banking association, formerly
known as First Union National Bank, a national banking association, acting as a
lender, NATIONAL
CITY BANK, NATIONAL ASSOCIATION, a national banking association,
acting as a lender, and SUNTRUST BANK, a Georgia corporation,
formerly known as SunTrust Bank, South Florida, N.A., a national banking
association acting as a lender (collectively the “Lenders”), and TODHUNTER
INTERNATIONAL, INC., a Delaware corporation (the “Borrower”)

 

W I T N E S S E T H:

 

WHEREAS, On October 19, 2001, Agent,
Lenders and Borrower entered into an Amended and Restated Credit Agreement (the
“Credit Agreement”) in connection with Revolving Loans, Term Loans and Letters
of Credit made available by Lenders to Borrower in an aggregate commitment of
$70,000,000.00; and

 

WHEREAS, as of January 1, 2003, Agent,
Lenders and Borrower entered into a Waiver of Defaults Under Credit Agreement
(the “Waiver”); and

 

WHEREAS, Borrower has requested Agent and
Lenders to make certain modifications to the Credit Agreement, as affected by
the Waiver, including modifications of the financial covenants and restoration
of the Revolving Commitment amount; and

 

WHEREAS, Lenders and Agent are willing to
amend the Credit Agreement on the terms and conditions set forth in this
Modification.

 

NOW, THEREFORE, in consideration of mutual
promises and covenants of this Modification and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Lenders, Agent and Borrower agree as follows:

 

1.             Recitals.  The foregoing recitals are true and correct
and by this reference are made a material part of this Modification.  All capitalized terms used herein shall have
the meaning ascribed to them in the Credit Agreement unless the context shall
require otherwise.

 

2.             Revolving
Commitment Amount.  The Revolving
Commitment shall be $30,000,000.00, subject to permanent reduction pursuant to
Section 2.12 of the Credit Agreement.

 

3.             EBITDA
Calculation.  For purposes of the
quarterly calculation of EBITDA, the following expenses incurred through fiscal
year ending September 30, 2003 shall be excluded,

 

 

up to an aggregate amount of
$1,000,000.00:  (a) expenses and fees
related to the retirement of the current CFO; (b) expenses and fees related to
the recruitment of the new CFO; (c) expenses, fees and write-downs related to
taking Borrower private; (d) expenses, fees and write-downs related to the
V&S Joint Venture; (e) expenses, fees and write-downs related to the
CL/Angostura joint venture; and (f) expenses and fees related to waivers and
loan modifications.

 

4.             Funded
Debt Defined.  The definition of
Funded Debt in Section 1.01 of the Credit Agreement is hereby replaced in
its entirety with the following:

 

“Funded Debt” means without duplication, the
principal balance of all indebtedness, for money borrowed, purchase money
mortgages, capitalized leases, conditional sales contracts and similar title
retention debt instruments under which Borrower or any of its Subsidiaries is
an obligor, including any current maturities of such indebtedness, plus all
debt of other entities or Persons, other than Subsidiaries, which has been
guaranteed by the Borrower or any Subsidiary (other than the current balance of
the indebtedness of Premier Wines & Spirits, Ltd. as of the Effective Date
guaranteed by Borrower), or which is supported by a letter of credit issued for
the account of the Borrower or any Subsidiary which by its terms matures more
than one year from the date of any calculation thereof and/or which is
renewable or extendible at the option of the obligor to a date beyond one year
from such date; provided that,
for the purposes of this Agreement, “Funded Debt” shall exclude amounts
transferred quarterly to Borrower’s Bahamian or Virgin Islands’ Subsidiaries
and the bi-weekly excise tax payments made by Borrower in connection therewith.  Effective March 31, 2003, the maximum
amount thus excluded in the quarterly calculation of Funded Debt shall be
$7,500,000.00.  Any funds drawn on the
Revolving Credit Facility for such payments shall be repaid within seven (7)
business days.  “Funded Debt” shall also
exclude the Tank Loan.

 

5.             Minimum
Tangible Net Worth.  Section 11.01
of the Credit Agreement is hereby replaced in its entirety with the following:

 

SECTION
11.01.  Minimum Tangible Net Worth.  Maintain a Tangible
Net Worth as of the last day of fiscal quarter of Borrower ending
March 31, 2003 of not less than $35,331,000 and thereafter Tangible Net
Worth shall be a minimum of $35,331,000, plus 50% of the annual net income (but
not loss) of the Borrower and its Subsidiaries for the prior fiscal year of
Borrower (on a consolidated basis in accordance with GAAP), plus 75% of the net
proceeds of any equity or subordinated debt offering completed by Borrower
after the Agreement Date.  Tangible Net
Worth shall be tested on a quarterly basis and adjusted annually each
September 30th.

 

6.             Interest
Coverage Ratio.  Section 11.02 Interest
Coverage Ratio is hereby deleted in its entirety as of
January 1, 2003.

 

7.             Fixed
Charge Coverage Ratio.  The
definition of Fixed Charge Coverage Ratio in Section 1.01 of the Credit
Agreement is hereby revised to mean the ratio of (i) EBITDA less

 

2

 

capital expenditures, to (ii) cash interest,
cash taxes and scheduled principal payments, but not including any additional
principal payments made by Borrower pursuant to Section 2.09 of the Credit
Agreement (all as determined in accordance with GAAP) in accordance with the
ratio grid set forth in Section 11.03, measured on a four rolling quarter
basis.  Section 11.03 Fixed Charge
Coverage is hereby replaced in its entirety with the following:

 

SECTION
11.03.  Fixed Charge Coverage.  Maintain at all times a Fixed Charge
Coverage Ratio within the following Fixed Charge Coverage Ratio grid:

 

	
  Date

  	
   

  	
  6/03

  	
   

  	
  9/03

  	
   

  	
  12/03

  	
   

  	
  3/04

  	
   

  	
  6/04

  	
   

  	
  9/04

  	
   

  	
  Thereafter

  	
   

  
	
  Required

  	
   

  	
  0.65

  	
   

  	
  0.80

  	
   

  	
  1.00

  	
   

  	
  1.00

  	
   

  	
  1.00

  	
   

  	
  1.00

  	
   

  	
  1.0

  	
   

  

 

The Fixed Charge Coverage Ratio requirement for the quarter ended
March 31, 2003 has been waived.

 

8.             Funded
Debt to EBITDA.  Section 11.05
Funded Debt to EBITDA is hereby replaced in its entirety with the following:

 

SECTION 11.05.  Funded Debt
to EBITDA.  Maintain a ratio of Funded Debt to EBITDA
as of the end of any fiscal quarter of Borrower of not more than the following:

 

Ratio

 

	
  4.65
  to 1.0

  	
   

  	
  For the fiscal quarter ending
  June 30, 2003.

  	
   

  
	
  3.85
  to 1.0

  	
   

  	
  For the fiscal quarter ending
  September 30, 2003.

  	
   

  
	
  3.25
  to 1.0

  	
   

  	
  For the fiscal quarters ending
  December 31, 2003 through September 30, 2004.

  	
   

  
	
  3.0
  to 1.0

  	
   

  	
  For the fiscal quarter ending
  December 31, 2004 and each fiscal quarter thereafter.

  	
   

  

 

Such ratio shall be measured on the basis of
the financial results of Borrower for the most recent four (4) fiscal quarters
of Borrower ending on the dates of measurement.  This requirement is waived for fiscal quarters ending
December 31, 2002 and March 31, 2003.

 

9.             Pricing.  The pricing grid incorporated into the
definition of Applicable Margin in Section 1.01 of the Credit Agreement is
hereby replaced in its entirety with the following:

 

3

 

	
   

  	
   

  	
   

  	
   

  	
  Applicable
  Margin

  Revolving Loans

  	
   

  	
  Applicable
  Margin

  Term Loans

  	
   

  
	
  Level

  	
   

  	
  Funded 

  Debt/EBITDA

  	
   

  	
  Eurodollar

  Rate

  	
   

  	
  Base Rate

  	
   

  	
  Unused

  Fee

  	
   

  	
  Eurodollar

  Rate

  	
   

  	
  Base Rate

  	
   

  
	
  I

  	
   

  	
  < 4.65 and > 4.50

  	
   

  	
  3.75

  	
  %

  	
  1.25

  	
  %

  	
  0.50

  	
  %

  	
  4.25

  	
  %

  	
  1.50

  	
  %

  
	
  II

  	
   

  	
  < 4.50 and > 4.00

  	
   

  	
  3.50

  	
  %

  	
  1.25

  	
  %

  	
  0.50

  	
  %

  	
  4.00

  	
  %

  	
  1.50

  	
  %

  
	
  III

  	
   

  	
  < 4.00 and > 3.50

  	
   

  	
  3.25

  	
  %

  	
  1.25

  	
  %

  	
  0.50

  	
  %

  	
  3.75

  	
  %

  	
  1.50

  	
  %

  
	
  IV

  	
   

  	
  < 3.50 and > 3.00

  	
   

  	
  3.00

  	
  %

  	
  1.00

  	
  %

  	
  0.375

  	
  %

  	
  3.50

  	
  %

  	
  1.25

  	
  %

  
	
  V

  	
   

  	
  < 3.00 and > 2.50

  	
   

  	
  2.75

  	
  %

  	
  0.75

  	
  %

  	
  0.375

  	
  %

  	
  3.25

  	
  %

  	
  1.00

  	
  %

  
	
  VI

  	
   

  	
  < 2.50 and > 2.00

  	
   

  	
  2.50

  	
  %

  	
  0.50

  	
  %

  	
  0.25

  	
  %

  	
  3.00

  	
  %

  	
  0.75

  	
  %

  
	
  VII

  	
   

  	
  <
  2.00

  	
   

  	
  2.25

  	
  %

  	
  0.25

  	
  %

  	
  0.25

  	
  %

  	
  2.75

  	
  %

  	
  0.50

  	
  %

  

 

As of the date of this Modification,
Borrower’s Applicable Margins shall be at Level I until adjusted in
accordance with the Credit Agreement on the basis of results for fiscal quarter
ending June 30, 2003.

 

10.           Management.  Agent and Lenders hereby acknowledge and
accept the appointment of Jay Maltby as Chairman, Chief Executive Officer and
President and Ezra Shashoua as Executive Vice President and Chief Financial
Officer of Borrower.

 

11.           Warranty.  Borrower hereby warrants and represents to
Lenders that, since the date of the Credit Agreement, other than matters
addressed in the Waiver, Borrower has been and is in compliance with all
provisions of the Credit Agreement and all other Loan Documents and that no
default or Event of Default has occurred thereunder nor has any event occurred
or failed to occur which with the passage of time or the giving of notice or
both would comprise such a Default or Event of Default.

 

12.           Ratifications.  Borrower hereby ratifies and confirms each
of its obligations and indebtedness under the Credit Agreement and each of the
other Loan Documents, as amended hereby, and hereby represents and warrants to
Lenders and Agent that Borrower neither has nor claims any defenses,
counterclaims or offsets to any such obligations or indebtedness.

 

13.           Fees.  The effectiveness of this Modification and
the amendments contemplated herein are expressly conditioned upon the payment
by Borrower to Agent for the prorata benefit of Lenders an amendment fee of
$160,000.00 (based on twenty-five (25) basis points of the current committed
amount ($64,000,000)) and reimbursement by Borrower of Agent for all reasonable
attorneys’ fees and expenses incurred in connection with this Modification.

 

4

 

14.           Miscellaneous.

 

(a) 
This agreement shall be governed by and construed in accordance with the
laws of the State of Florida.  Paragraph
headings used herein are for convenience only and shall not be used to
interpret any term hereof.  The Credit
Agreement shall continue in full force and effect as modified by this
Modification.  In the event the terms of
this Modification conflict with the terms of the  Credit Agreement, the terms of this Modification shall control.

 

(b) 
This Modification constitutes the entire agreement among the parties
hereto and supersedes all prior agreements, understandings, negotiations and
discussions, both written and oral among the parties hereto with respect to the
subject matter hereof, all of which prior agreements, understanding,
negotiations and discussions, both written and oral, are merged into this
Modification.  All provisions of the
Credit Agreement and each of the other Loan Documents shall remain in full
force and effect as modified by this Modification.  Without limiting the generality of any of the provisions of this
Modification, nothing herein or in any instrument or agreement shall be deemed
or construed to constitute a novation, satisfaction or refinancing of all or
any portion of the Loan or in any manner affect or impair the lien or priority
of the Credit Agreement or any of the Loan Documents as amended hereby.

 

(c) 
This Modification may be executed in any number of counterparts with each
executed counterpart constituting an original, but altogether constituting but
one and the same instrument.

 

(d) 
This Modification shall be binding upon and inure to the benefit of
Borrower, Agent and Lenders and their respective heirs, legal representatives,
executors, successors and assigns.

 

15.           RELEASE.  IN CONSIDERATION OF THE ACCOMMODATIONS
PROVIDED HEREIN, BORROWER HEREBY UNCONDITIONALLY IRREVOCABLY AND FOREVER
RELEASES, ACQUITS AND DISCHARGES LENDERS AND EACH OF LENDERS’ RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND COUNSEL FROM ANY AND ALL CLAIMS,
DEMANDS AND CAUSES OF ACTION THAT ANY OF THEM HAD, NOW HAS OR MAY IN THE FUTURE
HAVE AGAINST ANY ONE OR MORE OF THE LENDERS OR ANY ONE OR MORE OF LENDERS’
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR COUNSEL FOR THE ACTS OR OMISSIONS OF
ANY OF THE FOREGOING PARTIES FROM THE BEGINNING OF TIME THROUGH, TO AND
INCLUDING THE DATE OF THE EFFECTIVENESS OF THIS MODIFICATION, WHICH RELATED TO
ANY CLAIMS ARISING OUT OF OR CONNECTED IN ANY MANNER WITH THE TRANSACTIONS
CONTEMPLATED HEREIN OR IN THE CREDIT AGREEMENT AS AMENDED HEREBY OR ANY OTHER
LOAN DOCUMENTS AS THE SAME MAY BE AMENDED HEREBY, AS THE CASE MAY BE.

 

16.           WAIVER
OF JURY TRIAL.  BORROWER, AGENT AND
LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS

 

5

 

MODIFICATION OR ANY AGREEMENT EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS, (WHETHER
VERBAL OR WRITTEN) OR ACTIONS BY ANY PARTY. 
THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDERS’ ENTERING INTO THIS
MODIFICATION AND MAKING ANY LOAN, ADVANCE OR OTHER EXTENSION OF CREDIT TO
BORROWER.  FURTHER, BORROWER HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDERS, NOR THE AGENT OR ANY OF
AGENT’S COUNSEL OR LENDERS’ COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT AGENT OR ANY OF AGENT’S COUNSEL OR LENDERS WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.  NO REPRESENTATIVE OR AGENT OF LENDERS, NOR
AGENT OR ANY OF AGENT’S COUNSEL OR LENDERS’ COUNSEL HAS THE AUTHORITY TO WAIVE,
CONDITION, OR MODIFY THIS PROVISION.

 

IN WITNESS WHEREOF, Borrower, Agent and
Lenders have caused this agreement to be effective as of the day and year set
forth above.

 

	
  WITNESSES:

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  TODHUNTER INTERNATIONAL, INC., a Delaware corporation

  
	
   

  	
   

  
	
  /s/ William Viggiano

  	
   

  	
  By:

  	
  /s/ Jay S. Maltby

  	
   

  
	
  Print
  Name: William Viggiano

  	
  Print Name:

  	
  Jay S. Maltby

  	
   

  
	
  /s/ Elisa Martinez

  	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  	
   

  
	
  Print
  Name:  Elisa Martinez

  	
   

  
	
   

  	
   

  
	
  STATE OF FLORIDA

  	
  )

  
	
   

  	
  )

  
	
  COUNTY OF PALM BEACH

  	
  )

  
										

 

The foregoing instrument was acknowledged
before me this 14th day of May, 2003 by Jay S. Maltby as Chairman and CEO of
Todhunter International, Inc., on behalf of the corporation.  He/She is personally known to me or has
produced                                  
(type of identification) as identification.

 

	
   

  	
  /s/ Jennifer Lubrano-Murphy

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  State of Florida

  
	
   

  	
   

  
	
   

  	
  Jennifer Lubrano-Murphy

  	
   

  
	
   

  	
  (Print,
  Type or Stamp Commissioned Name of Notary Public)

  

 

6

 

	
  WITNESSES:

  	
  AGENT:

  
	
   

  	
   

  
	
   

  	
  SOUTHTRUST BANK, an Alabama banking corporation

  
	
   

  	
   

  
	
  /s/ Mark Dierks

  	
   

  	
  By:

  	
  /s/ Tom Turnberger

  	
   

  
	
  Print
  Name:

  	
  Mark Dierks

  	
   

  	
  Print Name:

  	
  Tom Turnberger

  	
   

  
	
  /s/ Antonio Corey

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
  Print
  Name:

  	
  Antonio
  Corey

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF FLORIDA

  	
  )

  
	
   

  	
  )

  
	
  COUNTY OF BROWARD

  	
  )

  
										

 

The foregoing instrument was acknowledged
before me this 14th day of May, 2003 by Tom Turnberger as Vice President of
SouthTrust Bank, on behalf of the bank. 
He/She is personally known to me or has produced                                  (type
of identification) as identification.

 

	
   

  	
  /s/ Florence Lindley

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  State of Florida

  
	
   

  	
   

  
	
   

  	
  Florence Lindley

  	
   

  
	
   

  	
  (Print,
  Type or Stamp Commissioned Name of Notary Public)

  

 

7

 

	
  WITNESSES:

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  SOUTHTRUST BANK, an Alabama banking corporation

  
	
   

  	
   

  
	
  /s/ Mark Dierks

  	
   

  	
  By:

  	
  /s/ Tom Turnberger

  	
   

  
	
  Print
  Name:

  	
  Mark Dierks

  	
   

  	
  Print Name:

  	
  Tom Turnberger

  	
   

  
	
  /s/ Antonio Corey

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
  Print
  Name:

  	
  Antonio
  Corey

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF FLORIDA

  	
  )

  
	
   

  	
  )

  
	
  COUNTY OF BROWARD

  	
  )

  
										

 

The foregoing instrument was acknowledged
before me this 14th day of 2003. by Tom Turnberger as Vice President
of SouthTrust Bank, on behalf of the bank. 
He/She is personally known to me or has
produced                          (type
of identification) as identification.

 

	
   

  	
  /s/ Florence Lindley

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  State of Florida

  
	
   

  	
   

  
	
   

  	
  Florence Lindley

  	
   

  
	
   

  	
  (Print,
  Type or Stamp Commissioned Name of Notary Public)

  
	
   

  	
  WITNESSES:

  

 

8

 

	
  WITNESSES:

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
  /s/ Michelle Gerber

  	
   

  	
  By:

  	
  /s/ David F. Abee

  	
   

  
	
  Print
  Name:

  	
  Michelle Gerber

  	
   

  	
  Print Name:

  	
  David F. Abee

  	
   

  
	
  /s/ Liza Grant-Smith

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
  Print
  Name:

  	
  Liza
  Grant-Smith

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF FLORIDA

  	
  )

  
	
   

  	
  )

  
	
  COUNTY OF PALM BEACH

  	
  )

  
												

 

The foregoing instrument was acknowledged
before me this 14th day of May, 2003 by David F. Abee as Vice
President of Wachovia Bank, National Association, on behalf of the bank.  He/She is personally known to me or has
produced                                     
(type of identification) as identification.

 

	
   

  	
  /s/ Laura Forbes

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  State of Florida

  
	
   

  	
   

  
	
   

  	
  Laura Forbes

  	
   

  
	
   

  	
  (Print,
  Type or Stamp Commissioned Name of Notary Public)

  

 

9

 

	
  WITNESSES:

  	
  SUNTRUST BANK, a Georgia corporation

  
	
   

  	
   

  
	
  /s/ Alexander del Pro

  	
   

  	
  By:

  	
  /s/ Sandra N. Tozzie

  	
   

  
	
  Print
  Name:

  	
  Alexander del Pro

  	
   

  	
  Print Name:

  	
  Sandra N. Tozzie

  	
   

  
	
  /s/ Lyn Humbrecht

  	
   

  	
  Title:

  	
  First Vice President

  	
   

  
	
  Print
  Name:

  	
  Lyn Humbrecht

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF FLORIDA

  	
  )

  
	
   

  	
  )

  
	
  COUNTY OF

  	
  )

  
										

 

The foregoing instrument was acknowledged
before me this 14th day of May, 2003 by Sandra N. Tozzie as First Vice
President of SunTrust Bank, on behalf of the bank.  He/She is personally known to me or has produced                                                
(type of identification) as identification.

 

	
   

  	
  /s/ Diane L. Libotte

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  State of Florida

  
	
   

  	
   

  
	
   

  	
  Diane L. Libotte

  	
   

  
	
   

  	
  (Print,
  Type or Stamp Commissioned Name of Notary Public)

  

 

10

 

	
  WITNESSES:

  	
  NATIONAL CITY BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
  /s/ Tom Gurbach

  	
   

  	
  By:

  	
  /s/ Daniel R. Raynor

  	
   

  
	
  Print
  Name:

  	
  Tom Gurbach

  	
   

  	
  Print Name:

  	
  Daniel R. Raynor

  	
   

  
	
  /s/ John DeFrancesco

  	
   

  	
  Title:

  	
  Assistant Vice President

  	
   

  
	
  Print
  Name:

  	
  John DeFrancesco

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF OHIO

  	
  )

  
	
   

  	
  )

  
	
  COUNTY OF LAKE

  	
  )

  
											

 

The foregoing instrument was acknowledged
before me this 14th day of May, 2003 by Daniel R. Raynor as Assistant Vice  President
of National City Bank, on behalf of the bank. 
He/She is personally known to me or has
produced                                   (type
of identification) as identification.

 

	
   

  	
  /s/ Ellen M. Brown

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
  State of Florida

  
	
   

  	
   

  
	
   

  	
  Ellen M. Brown

  	
   

  
	
   

  	
  (Print,
  Type or Stamp Commissioned Name of Notary Public)

  

 

11

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