S-3

As filed with the Securities and Exchange Commission on December 21, 2004

Registration No. 333-_______

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-3

REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

PINNACLE WEST CAPITAL CORPORATION

(Exact name of Registrant as specified in its charter)

ARIZONA
(State of Incorporation) 86-0512431
(I.R.S. Employer
Identification Number)

400 North Fifth Street
Phoenix, Arizona 85004
(602) 250-1000
(Address, including zip code, and telephone number, including area code,
of registrant’s principal executive offices)

MATTHEW P. FEENEY
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004
(602) 382-6239
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

     Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement, as determined by market conditions and other factors.

     If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o

     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. x

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

CALCULATION OF REGISTRATION FEE

			Proposed Maximum			Proposed Maximum		Amount of
Title of Each Class of	Amount to be		Offering Price			Aggregate Offering		Registration
Securities to be Registered	Registered(1)		per Unit(3)(4)			Price(1)(3)(4)		Fee(5)(8)
Debt Securities(6)		(2)		(2)			(2)
Preferred Stock(6)		(2)		(2)			(2)
Common Stock(6)(7)		(2)		(2)			(2)
Purchase Contracts(6)		(2)		(2)			(2)
Units(6)		(2)		(2)			(2)
Total(8)	$	272,000,000		100	%	$	272,000,000	$	32,015

(1) In United States dollars or the equivalent thereof in one or more foreign currencies or units of two or more foreign currencies or composite currencies (such as European Currency Units). The aggregate initial offering price of the above-referenced securities (collectively, the “Securities”) registered hereby will not exceed $272,000,000. Such amount represents the principal amount of any Debt Securities issued at their principal amount, the issue price rather than the principal amount of any Debt Securities issued at an original issue discount, the liquidation preference (or, if different, the issue price) of any Preferred Stock, the issue price of any Common Stock, the issue price of any Purchase Contracts and the issue price of any Units.

(2) Omitted pursuant to General Instruction II(D) of Form S-3 under the Securities Act of 1933, as amended (the “Securities Act”).

(3) Estimated solely for the purpose of determining the registration fee pursuant to Rule 457(o) under the Securities Act. The proposed maximum initial offering price per unit will be determined, from time to time, by the registrant in connection with the issuance of the securities.

(4) Exclusive of accrued interest or dividends, if any.

(5) Calculated pursuant to Rule 457(o) under the Securities Act. See Note (8).

(6) Includes such indeterminate principal amount or number of Debt Securities, shares of Preferred Stock, shares of Common Stock, Purchase Contracts, and Units, and such indeterminate amount of Securities as may be issued upon conversion of, or in exchange for, or upon exercise of, convertible or exchangeable Securities (including any Securities issuable upon stock splits and similar transactions pursuant to Rule 416 under the Securities Act) and such indeterminate amount of Securities as may be issuable upon settlement of Purchase Contracts, in each case as may be offered pursuant to this Registration Statement.

(7) Includes Pinnacle West Capital Corporation preferred share purchase rights. Prior to the occurrence of certain events, purchase rights for Pinnacle West Capital Corporation Series A Participating Preference Stock will not be evidenced separately from the Pinnacle West Capital Corporation Common Stock.

(8) Pursuant to Rule 429 under the Securities Act, this Registration Statement contains a combined prospectus relating to $228,000,000 of securities registered pursuant to Registration Statement No. 333-101457 initially filed November 25, 2002 and included herein under Rule 429, for which the filing fee was previously paid, and $272,000,000 registered hereby.

          The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION
Dated December 21, 2004

Prospectus

PINNACLE WEST CAPITAL CORPORATION

$500,000,000

Debt Securities
Preferred Stock
Common Stock
Purchase Contracts
Units

     We may offer and sell these securities from time to time in one or more offerings. This prospectus provides you with a general description of the securities we may offer.

     Each time we sell these securities, we will provide a supplement to this prospectus that contains specific information about the offering and the terms of the securities. The supplement may also add, update, or change information contained in this prospectus. You should carefully read this prospectus and any supplement, as well as the documents incorporated by reference in this prospectus, before you invest in any of these securities.

     See “Risk Factors” beginning on page 3 of this prospectus to read about certain factors you should consider before investing in these securities.

     Our principal executive offices are located at 400 North Fifth Street, Phoenix, AZ 85004. Our telephone number is (602) 250-1000.

     Our common stock is listed on the New York Stock Exchange under the symbol “PNW.”

     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

     We may offer and sell these securities directly to purchasers, through agents, dealers, or underwriters as designated from time to time, or through a combination of these methods. Additional information on our plan of distribution can be found inside under “Plan of Distribution.” We will describe the plan of distribution for any securities in the relevant prospectus supplement. If any agents, dealers or underwriters are involved in the sale of any securities, the relevant prospectus supplement will set forth any applicable commissions or discounts.

     This prospectus may not be used to consummate sales of these securities unless accompanied by the applicable prospectus supplement.

The date of this prospectus is           ,       

TABLE OF CONTENTS

	Page
Risk Factors		3
About This Prospectus		11
Forward-Looking Statements		12
Where You Can Find More Information		14
The Company		15
Ratio Of Earnings To Fixed Charges		15
Use Of Proceeds		16
General Description Of The Securities		16
Description Of Debt Securities		16
Description Of Preferred Stock		26
Description Of Common Stock		30
Description Of The Purchase Contracts		36
Description Of Units		36
Plan Of Distribution		36
Experts		38
Legal Opinions		38
Exhibit 1.1
Exhibit 1.3
Exhibit 4.3
Exhibit 4.5
Exhibit 4.10
Exhibit 5.1
Exhibit 5.2
Exhibit 12.1
Exhibit 12.2
Exhibit 23.3
Exhibit 25.1
Exhibit 25.2
Exhibit 25.3
Exhibit 25.4
Exhibit 25.5

     Unless otherwise indicated, currency amounts in this prospectus and any prospectus supplement are stated in United States dollars (“$,” “dollars,” “U.S. dollars,” or “U.S.$”).

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RISK FACTORS

     Before purchasing our securities you should carefully consider the following risk factors as well as the other information contained in this prospectus and the information incorporated by reference in order to evaluate an investment in our securities. Although we have tried to discuss key factors in this prospectus, please be aware that other risks may prove to be important in the future. New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. The documents we file with the SEC after the date of this prospectus may contain additional risk factors, or updates to the risk factors discussed below, which you should consider. See “Where You Can Find More Information.”

     We cannot predict the outcome of the general rate case of Arizona Public Service Company (“APS”), our principal subsidiary, pending before the Arizona Corporation Commission (the “ACC”).

     On June 27, 2003, APS filed a request with the ACC to increase its annual retail electricity revenues by approximately $175.1 million, or 9.8%, effective July 1, 2004. On August 18, 2004, a substantial majority of the parties to the rate case, including APS, the ACC staff, the Residential Utility Consumer Office, other customer groups, and merchant power plant intervenors entered into an agreement that proposes terms under which the rate case would be settled (the “Agreement”). The Agreement is subject to ACC approval. Key financial components of the Agreement are as follows:

• APS would receive an annual retail rate increase of approximately $75.5 million, or 4.21%. The increase would consist of an increase in base rates of approximately 3.77% and an increase of approximately 0.44% for recovery over five years of the past costs of APS’ compliance with the ACC’s retail electric competition rules (the “Rules”).

• APS would acquire from Pinnacle West Energy Corporation (“Pinnacle West Energy”) Redhawk Combined Cycle Units 1 and 2, West Phoenix Combined Cycle Units 4 and 5, and Saguaro Combustion Turbine Unit 3 (collectively, the “Dedicated Assets”) and rate base the Dedicated Assets at a rate base value of $700 million, which would result in a regulatory rate base disallowance of $148 million. As a result, for financial reporting purposes, we would recognize a one-time, after-tax net plant write-off of approximately $88 million in the period when the plant transfer to APS is completed, and would reduce annual depreciation expense by approximately $5 million.

• To bridge the time between the effective date of the rate increase and the actual date the Dedicated Assets transfer, APS and Pinnacle West Energy would enter into a cost-based purchase power agreement (the “Bridge PPA”), which would be based on the value of the Dedicated Assets described in the previous bullet point. The Bridge PPA would remain in effect until the Federal Energy Regulatory Commission (the “FERC”) approves the transfer of the Dedicated Assets to APS and the transfer is completed.

• If the FERC were to issue an order denying APS’ request to acquire the Dedicated Assets, the Bridge PPA would become a 30-year purchased power agreement, with prices reflecting cost-of-service as if APS had acquired and rate-based the Dedicated Assets at the value described above.

• If the FERC were to issue an order (a) approving APS’ request to transfer the Dedicated Assets at a value materially less than $700 million, (b) approving the transfer of fewer than all of the Dedicated Assets, or (c) that was materially inconsistent with the Agreement, APS would file an appropriate application with the ACC so that rates could be adjusted. In these circumstances, the Bridge PPA would continue at least until the conclusion of the subsequent proceeding to consider any appropriate adjustment to APS’ rates.

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• A power supply adjuster would provide for the recovery of fuel and purchased power costs, subject to specified parameters and procedures.

• APS would not restore and recover in rates the $234 million write-off recorded in 1999 as a result of a 1999 settlement agreement approved by the ACC related to the implementation of retail electric competition in Arizona (the “1999 Settlement Agreement”).

• APS would adopt longer service lives than originally requested for certain depreciable assets.

     This general rate case, including the proposed settlement, is the key issue affecting our financial outlook. ACC hearings on the Agreement concluded on December 3, 2004. The parties are awaiting the issuance of a recommended opinion and order from the administrative law judge, after which the ACC is expected to consider the proposed settlement. We cannot predict the outcome of this matter.

     The procurement of wholesale power by APS without the ability to adjust retail rates could have an adverse impact on our business and financial results.

     Although the Rules allow retail customers to have access to competitive providers of energy and energy services, under the Rules, APS is the “provider of last resort” for standard-offer, full-service customers under rates that have been approved by the ACC. In the event of shortfalls of electricity due to unforeseen increases in load demand or generation or transmission outages, APS may need to purchase additional supplemental power in the wholesale spot market. At various times, prices in the spot wholesale market have significantly exceeded the amount included in APS’ current retail rates. There can be no assurance that APS would be able to fully recover the costs of this power. Although the proposed settlement of APS’ general rate case would, among other things, allow APS to recover purchased power costs, there can be no assurance that the settlement agreement will be approved by the ACC as proposed.

     Deregulation or restructuring of the electric industry may result in increased competition, which could have a significant adverse impact on our business and our financial results.

     Retail competition could have a significant adverse financial impact on us due to an impairment of assets, a loss of retail customers, lower profit margins or increased costs of capital. Under the Rules, as modified by the 1999 Settlement Agreement, APS was required to transfer all of its competitive electric assets and services to an unaffiliated party or parties or to a separate corporate affiliate or affiliates no later than December 31, 2002. To satisfy this requirement, APS had planned to transfer its generation assets to Pinnacle West Energy. Pursuant to an ACC order dated September 10, 2002, the ACC unilaterally modified the 1999 Settlement Agreement and directed APS to cancel any plans to divest interests in any of its generating assets. The ACC further established a requirement that APS solicit bids for certain estimated amounts of capacity and energy for periods beginning July 1, 2003. Pinnacle West Energy bid on and entered into contracts to supply most of APS’ requirements in the summer months through September 2006. In addition, as discussed above, a proposed settlement of APS’ general rate case would result in Pinnacle West Energy transferring a significant amount of generation assets to APS. These regulatory developments and legal challenges to the Rules have raised considerable uncertainty about the status and pace of retail electric competition and of electric restructuring in Arizona. Although some very limited retail competition existed in APS’ service area in 1999 and 2000, there are currently no active retail competitors offering unbundled energy or other utility services to APS’ customers. As a result, we cannot predict when, and the extent to which, additional competitors will re-enter APS’ service territory.

     As a result of changes in federal law and regulatory policy, competition in the wholesale electricity market has greatly increased due to a greater participation by traditional electricity suppliers, non-utility generators, independent power producers, and wholesale power marketers and brokers. This increased competition could affect our load forecasts, plans for power supply and wholesale energy sales and

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related revenues. As a result of the changing regulatory environment and the relatively low barriers to entry, we expect wholesale competition to increase. As competition continues to increase, our financial position and results of operations could be adversely affected.

     We are subject to complex government regulation that may have a negative impact on our business and our results of operations.

     We are, directly and through our subsidiaries, subject to governmental regulation that may have a negative impact on our business and results of operations. We are a “holding company” within the meaning of the Public Utility Holding Company Act of 1935 (“PUHCA”); however, we are exempt from the provisions of PUHCA (except Section 9(a)(2) thereof) by virtue of our filing of an annual exemption statement with the Securities and Exchange Commission (the “SEC”).

     APS is subject to comprehensive regulation by several federal, state and local regulatory agencies, which significantly influence its operating environment and may affect its ability to recover costs from utility customers. APS is required to have numerous permits, approvals and certificates from the agencies that regulate APS’ business. The FERC, the Nuclear Regulatory Commission (“NRC”), the Environmental Protection Agency (“EPA”), and the ACC regulate many aspects of our utility operations, including siting and construction of facilities, customer service and the rates that APS can charge customers. We believe the necessary permits, approvals and certificates have been obtained for APS’ existing operations. However, changes in regulations or the imposition of additional regulations could have an adverse impact on our results of operations. We are also unable to predict the impact on our business and operating results from pending or future regulatory activities of any of these agencies.

     We are subject to numerous environmental laws and regulations that may increase our cost of operations, impact our business plans, or expose us to environmental liabilities.

     We are subject to numerous environmental laws and regulations affecting many aspects of our present and future operations, including air emissions, water quality, wastewater discharges, solid waste, and hazardous waste. These laws and regulations can result in increased capital, operating, and other costs, particularly with regard to enforcement efforts focused on power plant emissions obligations. These laws and regulations generally require us to obtain and comply with a wide variety of environmental licenses, permits, inspections and other approvals. Both public officials and private individuals may seek to enforce applicable environmental laws and regulations. We cannot predict the outcome (financial or operational) of any related litigation that may arise.

     In addition, we may be a responsible party for environmental clean up at sites identified by a regulatory body. We cannot predict with certainty the amount and timing of all future expenditures related to environmental matters because of the difficulty of estimating clean-up costs. There is also uncertainty in quantifying liabilities under environmental laws that impose joint and several liability on all potentially responsible parties.

     We cannot be sure that existing environmental regulations will not be revised or that new regulations seeking to protect the environment will not be adopted or become applicable to us. Revised or additional regulations that result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from APS’ customers, could have a material adverse effect on our results of operations.

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     There are inherent risks in the operation of nuclear facilities, such as environmental, health and financial risks and the risk of terrorist attack.

     Through APS, we have an ownership interest in and operate, on behalf of a group of owners, the Palo Verde Nuclear Generating Station (“Palo Verde”), which is the largest nuclear electric generating facility in the United States. Palo Verde is subject to environmental, health and financial risks such as the ability to dispose of spent nuclear fuel, the ability to maintain adequate reserves for decommissioning, potential liabilities arising out of the operation of these facilities, and the costs of securing the facilities against possible terrorist attacks and unscheduled outages due to equipment and other problems. We maintain nuclear decommissioning trust funds and external insurance coverage to minimize our financial exposure to some of these risks; however, it is possible that damages could exceed the amount of insurance coverage.

     The NRC has broad authority under federal law to impose licensing and safety-related requirements for the operation of nuclear generation facilities. In the event of noncompliance, the NRC has the authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. In addition, although we have no reason to anticipate a serious nuclear incident at Palo Verde, if an incident did occur, it could materially and adversely affect our results of operations or financial condition. A major incident at a nuclear facility anywhere in the world could cause the NRC to limit or prohibit the operation or licensing of any domestic nuclear unit.

     The operation of Palo Verde requires licenses that need to be periodically renewed and/or extended. We do not anticipate any problems renewing these licenses. However, as a result of potential terrorist threats and increased public scrutiny of utilities, the licensing process could result in increased licensing or compliance costs that are difficult or impossible to predict.

     The uncertain outcome regarding the creation of regional transmission organizations, or RTOs, and implementation of the FERC’s standard market design may materially impact our operations, cash flows or financial position.

     In a December 1999 order, the FERC established characteristics and functions that must be met by utilities in forming and operating RTOs. The characteristics for an acceptable RTO include independence from market participants, operational control over a region large enough to support efficient and nondiscriminatory markets and exclusive authority to maintain short-term reliability. Additionally, in a pending notice of proposed rulemaking, the FERC is considering implementing a standard market design for wholesale markets. On October 16, 2001, APS and other owners of electric transmission lines in the Southwest filed with the FERC a request for a declaratory order confirming that its proposal to form WestConnect RTO, LLC would satisfy the FERC’s requirements for the formation of an RTO. On October 10, 2002, the FERC issued an order finding that the WestConnect proposal, if modified to address specified issues, could meet the FERC’s RTO requirements and provide the basic framework for a standard market design for the Southwest. On September 15, 2003, the FERC issued an order granting clarification and rehearing, in part, of its prior orders. In particular, this order approved the use of a physical congestion management scheme, which is used to allocate transmission rights on congested lines, for WestConnect for an initial phase-in period. The FERC indicated that the WestConnect utilities and the appropriate regional state advisory committee should develop a market-based congestion management scheme for subsequent implementation. APS is now participating in a cost/benefit analysis of implementing WestConnect, the results of which are expected to be completed in 2005.

     If APS ultimately joins an RTO, APS could incur increased transmission-related costs and receive reduced transmission service revenues; APS may be required to expand its transmission system according to decisions made by the RTO rather than its internal planning process; and APS may experience other impacts on its operations, cash flows or financial position that will not be quantifiable until the final tariffs and other material terms of the RTO are known.

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     Recent events in the energy markets that are beyond our control may have negative impacts on our business.

     As a result of the energy crisis in California during the summer of 2001, the recent volatility of natural gas prices in North America, the filing of bankruptcy by the Enron Corporation, and investigations by governmental authorities into energy trading activities, companies generally in the regulated and unregulated utility businesses have been under an increased amount of public and regulatory scrutiny. The capital markets and rating agencies also have increased their level of scrutiny. We believe that we are in material compliance with all applicable laws, but it is difficult or impossible to predict or control what effect these or related issues may have on our business or our access to the capital markets.

     Our results of operations can be adversely affected by milder weather.

     Weather conditions directly influence the demand for electricity and affect the price of energy commodities. Electric power demand is generally a seasonal business. In Arizona, demand for power peaks during the hot summer months, with market prices also peaking at that time. As a result, our overall operating results fluctuate substantially on a seasonal basis. In addition, we have historically sold less power, and consequently earned less income, when weather conditions are milder. As a result, unusually mild weather could diminish our results of operations and harm our financial condition.

     Our cash flow largely depends on the performance of our subsidiaries.

     We conduct our operations primarily through subsidiaries. Substantially all of our consolidated assets are held by such subsidiaries. Accordingly, our cash flow is dependent upon the earnings and cash flows of these subsidiaries and their distributions to us. The subsidiaries are separate and distinct legal entities and have no obligation to make distributions to us.

     The debt agreements of some of our subsidiaries may restrict their ability to pay dividends, make distributions or otherwise transfer funds to us. As part of the ACC’s approval of a $500 million financing arrangement between APS and Pinnacle West Energy, an ACC order requires APS to maintain a common equity ratio of at least 40% and does not allow APS to pay common dividends if the payment would reduce its common equity below that threshold. As defined in the ACC financing order approving the arrangement, common equity ratio is common equity divided by common equity plus long-term debt, including current maturities of long-term debt. At September 30, 2004, APS’ common equity ratio was approximately 46%.

     The debt securities will be structurally subordinated to the debt securities and other obligations of our subsidiaries.

     Because we are structured as a holding company, all existing and future debt and other liabilities of our subsidiaries will be effectively senior in right of payment to our debt securities. None of the indentures under which we or our subsidiaries may issue debt securities limits our ability or the ability of our subsidiaries to incur additional debt in the future. The assets and cash flows of our subsidiaries will be available, in the first instance, to service their own debt and other obligations. Our ability to have the benefit of their assets and cash flows, particularly in the case of any insolvency or financial distress affecting our subsidiaries, would arise only through our equity ownership interests in our subsidiaries and only after their creditors have been satisfied.

     If we are not able to access capital at competitive rates, our ability to implement our financial strategy will be adversely affected.

     We rely on access to short-term money markets, longer-term capital markets and the bank markets as a significant source of liquidity and for capital requirements not satisfied by the cash flow from our operations. We believe that we will maintain sufficient access to these financial markets based upon current credit ratings. However, certain market disruptions or a downgrade of our credit ratings may

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increase our cost of borrowing or adversely affect our ability to access one or more financial markets. Such disruptions could include:

• an economic downturn;

• capital market conditions generally;

• the bankruptcy of an unrelated energy company;

• increased market prices for electricity and gas;

• terrorist attacks or threatened attacks on our facilities or those of unrelated energy companies; or

• the overall health of the utility industry.

     Changes in economic conditions could result in higher interest rates, which would increase our interest expense on our debt and reduce funds available to us for our current plans. Additionally, an increase in our leverage could adversely affect us by:

• increasing the cost of future debt financing;

• increasing our vulnerability to adverse economic and industry conditions;

• requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce funds available to us for operations, future business opportunities or other purposes; and

• placing us at a competitive disadvantage compared to our competitors that have less debt.

     A significant reduction in our credit ratings could materially and adversely affect our business, financial condition and results of operations.

     We cannot be sure that any of our current ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances in the future so warrant. Any downgrade could increase our borrowing costs, which would diminish our financial results. We would likely be required to pay a higher interest rate in future financings, and our potential pool of investors and funding sources could decrease. In addition, borrowing costs under certain of our existing credit facilities depend on our credit ratings. A downgrade could also require us to provide additional support in the form of letters of credit or cash or other collateral to various counterparties. If our short-term ratings were to be lowered, it could limit our access to the commercial paper market. We note that the ratings from rating agencies are not recommendations to buy, sell or hold our securities and that each rating should be evaluated independently of any other rating.

     The use of derivative contracts in the normal course of our business and changing interest rates and market conditions could result in financial losses that negatively impact our results of operations.

     Our operations include managing market risks related to commodity prices and, subject to specified risk parameters, engaging in marketing and trading activities intended to profit from market price movements. We are exposed to the impact of market fluctuations in the price and transportation costs of electricity, natural gas, coal, and emissions allowances and credits. We have established procedures to manage risks associated with these market fluctuations by utilizing various commodity derivatives, including exchange-traded futures and options and over-the-counter forwards, options, and swaps. As

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part of our overall risk management program, we enter into derivative transactions to hedge purchases and sales of electricity, fuels, and emissions allowances and credits. The changes in market value of such contracts have a high correlation to price changes in the hedged commodity.

     We are exposed to losses in the event of nonperformance or nonpayment by counterparties. We use a risk management process to assess and monitor the financial exposure of all counterparties. Despite the fact that the majority of trading counterparties are rated as investment grade by the rating agencies, there is still a possibility that one or more of these companies could default, resulting in a material adverse impact on our earnings for a given period.

     Changing interest rates will affect interest paid on variable-rate debt and interest earned by our pension plan and nuclear decommissioning trust funds. Our policy is to manage interest rates through the use of a combination of fixed-rate and floating-rate debt. The pension plan is also impacted by the discount rate, which is the interest rate used to discount future pension obligations. Continuation of recent decreases in the discount rate would result in increases in pension costs, cash contributions, and charges to other comprehensive income. The pension plan and nuclear decommissioning trust funds also have risks associated with changing market values of equity investments. A significant portion of the pension costs and all of the nuclear decommissioning costs are recovered in regulated electricity prices.

     Actual results could differ from estimates used to prepare our financial statements.

     In preparing our financial statements in accordance with accounting principles generally accepted in the United States of America, management must often make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period. Some of those judgments can be subjective and complex, and actual results could differ from those estimates. We consider the following accounting policies to be our most critical because of the uncertainties, judgments and complexities of the underlying accounting standards and operations involved.

• Regulatory Accounting - Regulatory accounting allows for the actions of regulators, such as the ACC and the FERC, to be reflected in the financial statements. Their actions may cause us to capitalize costs that would otherwise be included as an expense in the current period by unregulated companies. If future recovery of costs ceases to be probable, the assets would be written off as a charge in current period earnings. We had $169 million of regulatory assets on our balance sheet at September 30, 2004.

• Pensions and Other Postretirement Benefit Accounting - Changes in our actuarial assumptions used in calculating our pension and other postretirement benefit liability and expense can have a significant impact on our earnings, plan funding requirements and financial position. The most relevant actuarial assumptions are the discount rate used to measure our liability and net periodic cost, the expected long-term rate of return on plan assets used to estimate earnings on invested funds over the long-term, and the assumed healthcare cost trend rates. We review these assumptions on an annual basis and adjust them as necessary.

• Derivative Accounting - Derivative accounting requires evaluation of rules that are complex and subject to varying interpretations. Our evaluation of these rules, as they apply to our contracts, will determine whether we use accrual accounting or fair value (mark-to-market) accounting. Mark-to-market accounting requires that changes in fair value be recorded in earnings or, if certain hedge accounting criteria are met, in common stock equity (as a component of other comprehensive income (loss)).

• Mark-to-Market Accounting - The market value of our derivative contracts is not always readily determinable. In some cases, we use models and other valuation techniques to determine fair value. The use of these models and valuation techniques sometimes requires subjective and complex judgment. Actual results could differ from the results

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estimated through application of these methods. Our marketing and trading portfolio consists of structured activities hedged with a portfolio of forward purchases that protects the economic value of the sales transactions.

     The market price of our common stock may be volatile.

     The market price of our common stock could be subject to significant fluctuations in response to factors such as the following, some of which are beyond our control:

• variations in our quarterly operating results;

• operating results that vary from the expectations of management, securities analysts and investors;

• changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;

• developments generally affecting industries in which we operate, particularly the energy distribution and energy generation industries;

• announcements by us or our competitors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments;

• announcements by third parties of significant claims or proceedings against us;

• favorable or adverse regulatory developments;

• our dividend policy;

• future sales of our equity or equity-linked securities; and

• general domestic and international economic conditions.

     In addition, the stock market in general has experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the market price of our common stock.

     Our common stock price could be affected because a substantial number of our shares could be available for sale in the future.

     Sales in the public market of a substantial number of shares of common stock could depress the market price of the common stock and could impair our ability to raise capital through the sale of additional equity securities. Because of the number of shares of our common stock that we are authorized to issue under our articles of incorporation, a substantial number of shares of our common stock could be available for future sale.

     We may enter into credit and other agreements from time to time that restrict our ability to pay dividends.

     Payment of dividends on our common stock may be restricted by credit and other agreements entered into by us from time to time. At September 30, 2004, there were no material restrictions on our ability to pay dividends under any such agreement.

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     Certain provisions of our articles of incorporation and bylaws and of Arizona law make it more difficult for shareholders to change the composition of our board and may discourage takeover attempts that could be beneficial to us and our shareholders.

     Certain provisions of our articles of incorporation and bylaws and of Arizona law make it more difficult for shareholders to change the composition of our board and may discourage unsolicited attempts to acquire us, which could preclude our shareholders from receiving a change of control premium. These provisions include the following:

• provisions of our bylaws and Arizona law that restrict our ability to engage in a wide range of “business combination” transactions with an “interested shareholder” (generally, any person who owns 10% or more of our outstanding voting power or any of our affiliates or associates) or any affiliate or associate of an interested shareholder, unless specific conditions are met;

• anti-greenmail provisions of Arizona law and our bylaws that prohibit us from purchasing shares of our voting stock from beneficial owners of more than 5% of our outstanding shares unless specified conditions are satisfied;

• provisions of our bylaws and Arizona law that provide that shareholder action may be taken only at an annual or special meeting or by unanimous written consent, and provisions of our bylaws that provide that a special meeting of shareholders may only be called by a majority of our Board of Directors, the Chairman of our Board of Directors, or our President;

• advance notice procedures for nominating candidates to our Board of Directors or presenting matters at shareholder meetings;

• provisions of our articles and bylaws that provide for a staggered Board of Directors;

• provisions of our bylaws that provide that shareholders may only remove a director with or without cause if the votes cast in favor of such removal exceed the votes cast against such removal (with special requirements, based on cumulative voting rights, if less than the entire board is to be removed); and

• the ability of our Board of Directors to issue additional shares of common stock and shares of preferred stock and to determine the price and, with respect to preferred stock, the other terms, including preferences and voting rights, of those shares without shareholder approval.

     In addition, we have adopted a shareholder rights plan that may have the effect of discouraging unsolicited takeover proposals, including takeover proposals that could result in a premium over the market price of our common stock.

     While these provisions have the effect of encouraging persons seeking to acquire control of us to negotiate with our Board of Directors, they could enable the board to hinder or frustrate a transaction that some, or a majority, of our shareholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors. For more information, see “Description of Common Stock-Certain Anti-takeover Effects” in this prospectus.

ABOUT THIS PROSPECTUS

     This prospectus is part of a shelf registration statement that we filed with the SEC utilizing a “shelf” registration process. Under this shelf process, we may offer up to $500,000,000 aggregate initial offering price of the debt securities, preferred stock, common stock, purchase contracts and units

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described in this prospectus in one or more offerings. In this prospectus we will refer to the debt securities, preferred stock, common stock, purchase contracts and units collectively as the “securities.” This prospectus provides you with a general description of the securities we may offer. Each time we offer securities, we will provide you with a prospectus supplement and, if applicable, a pricing supplement. The prospectus supplement and any applicable pricing supplement will describe the specific terms of the securities being offered. The prospectus supplement and any applicable pricing supplement may also add to, update or change the information in this prospectus. If there is any inconsistency between the information in this prospectus and in any supplement, you should rely on the information in the supplement. In addition, the registration statement filed with the SEC includes exhibits that provide more details about the securities. Please carefully read this prospectus, the applicable prospectus supplement and any applicable pricing supplement, together with the information contained in the documents referred to under the heading “Where You Can Find More Information.” You should assume that the information appearing in this prospectus and any supplement to this prospectus is accurate only as of the dates on their covers. Our business, financial condition, results of operations, and prospects may have changed since those dates.

FORWARD-LOOKING STATEMENTS

     This prospectus, any accompanying prospectus supplement, and the additional information described under the heading “Where You Can Find More Information” may contain forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management, based on information currently available to our management. When we use words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “predicts,” “should,” or similar expressions, we are making forward-looking statements.

     Forward-looking statements are not guarantees of performance. They involve risks, including those described under “Risk Factors” above, uncertainties, and assumptions. Our future results may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict. Except to the extent required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. These factors include, but are not limited to:

• state and federal regulatory and legislative decisions and actions, including the outcome of the rate case APS filed with the ACC on June 27, 2003 and the wholesale electric price mitigation plan adopted by the FERC;

• the ongoing restructuring of the electric industry, including the introduction of retail electric competition in Arizona and decisions impacting wholesale competition;

• the outcome of regulatory, legislative and judicial proceedings relating to the restructuring;

• market prices for electricity and natural gas;

• power plant performance and outages, including transmission outages and constraints;

• weather variations affecting local and regional customer energy usage;

• customer growth and energy usage;

• regional economic and market conditions, including the results of litigation and other proceedings resulting from the California energy situation, volatile purchased power and

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	fuel costs and the completion of generation and transmission construction in the region, which could affect customer growth and the cost of power supplies;
•	the cost of debt and equity capital and access to capital markets;
•	the uncertainty that current credit ratings will remain in effect for any given period of time;
•	our ability to compete successfully outside traditional regulated markets (including the wholesale market);
•	the performance of our marketing and trading activities due to volatile market liquidity and any deteriorating counterparty credit and the use of derivative contracts in our business (including the interpretation of the subjective and complex accounting rules related to these contracts);
•	changes in accounting principles generally accepted in the United States of America and the interpretation of those principles;
•	the performance of the stock market and the changing interest rate environment, which affect the amount of our required contributions to our pension plan and nuclear decommissioning trust funds, as well as our reported costs of providing pension and other postretirement benefits;
•	technological developments in the electric industry;
•	the strength of the real estate market in SunCor Development Company’s market areas, which include Arizona, Idaho, New Mexico and Utah;
•	conservation programs; and
•	other uncertainties, all of which are difficult to predict and many of which are beyond our control.

     You are cautioned not to put undue reliance on any forward-looking statements. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for any forward-looking statements contained in this prospectus, including in the information incorporated by reference in this prospectus, and any prospectus supplement.

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WHERE YOU CAN FIND MORE INFORMATION

Available Information

     We file annual, quarterly, and current reports, and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s web site: http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room, which is located at Room 1024, Judiciary Plaza, 450 Fifth Street NW, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information on the public reference room. Reports and other information concerning us can also be inspected and copied at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005, and the Pacific Stock Exchange at 301 Pine Street, San Francisco, California 94104. Our filings with the SEC are also available on our own web site at http://www.pinnaclewest.com. The other information on our web site is not part of this prospectus or any prospectus supplement.

Incorporation By Reference

     The SEC allows us to incorporate by reference the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below, all documents we file with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 after the date of the initial registration statement to which this prospectus relates and prior to the effectiveness of the registration statement, and any future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until all securities are sold under this prospectus, excluding, in each case, information deemed furnished and not filed.

• Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (except for Item 8, which has been revised in the Current Report on Form 8-K filed December 20, 2004);

• Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June 30 and September 30, 2004;

• Current Reports on Form 8-K filed on January 9, January 28, January 29, February 2, February 4, April 21, May 7, June 2, June 23, July 29, August 9, August 18, October 22, October 25 and December 20, 2004.

• The description of the Company’s common stock contained in the registration statement on Form 8-B filed with the SEC on July 25, 1985, and any amendment or report which we have filed (or will file after the date of this prospectus and prior to the termination of this offering) for the purpose of updating such description, including the Company’s Current Report on Form 8-K dated March 22, 1999 and Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002.

     You may request a copy of these filings and will receive a copy of these filings, at no cost, by writing or telephoning us at the following address:

Pinnacle West Capital Corporation
Office of the Secretary
Station 9068
P.O. Box 53999
Phoenix, Arizona 85072-3999
(602) 250-3252

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THE COMPANY

     We own all of the outstanding common stock of APS. APS was incorporated in 1920 under the laws of Arizona. APS is a vertically-integrated electric utility that provides either retail or wholesale electric service to most of the State of Arizona. Through APS’ marketing and trading division, APS generates, sells and delivers electricity to wholesale customers in the western United States. APS’ marketing and trading division also sells, in the wholesale market, the generation output of our subsidiary, Pinnacle West Energy, that is not needed for APS’ native load, which includes loads for retail customers and traditional cost-of-service wholesale customers. The marketing and trading division focuses primarily on managing APS’ purchased power and fuel risks in connection with APS’ costs of serving retail customer energy requirements. APS does not distribute any products. APS currently has more than 931,500 customers. Our principal executive offices are located at 400 North Fifth Street, Phoenix, Arizona 85004, and the telephone number is 602-250-1000.

     Our other major subsidiaries are:

• Pinnacle West Energy, through which we conduct our unregulated electricity generation operations;

• APS Energy Services Company, Inc., which provides commodity-related energy services (such as direct access commodity contracts, energy procurement, and energy supply consultation) and energy-related products and services (such as energy master planning, energy use consultation and facility audits, cogeneration analysis and installation, and project management) to commercial, industrial and institutional retail customers in the western United States;

• SunCor Development Company, a developer of residential, commercial, and industrial real estate projects in Arizona, Idaho, New Mexico, and Utah; and

• El Dorado Investment Company, an investment firm.

RATIO OF EARNINGS TO FIXED CHARGES

     The following table shows our consolidated ratio of earnings to fixed charges and our consolidated ratio of earnings to combined fixed charges and preferred dividends (we have reclassified certain prior year amounts to conform to the current year presentation):

	Nine Months Ended		Twelve Months Ended
	September 30		December 31,
	2004		2003		2002		2001		2000		1999
Consolidated ratio of earnings to fixed charges		2.92		2.39		2.77		3.55		3.44		3.11
Consolidated ratio of earnings to combined fixed charges and preferred dividends		2.92		2.39		2.77		3.55		3.44		3.09

     The ratio of earnings to fixed charges was computed by dividing earnings by fixed charges. For this purpose, earnings consist of pre-tax income from continuing operations excluding extraordinary items and cumulative effect of change in accounting for derivatives, plus the amount of fixed charges as defined below. Fixed charges consist of: expensed interest; amortization of debt discount, premium and expense; and an estimate of interest implicit in rentals.

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     The ratio of earnings to combined fixed charges and preferred dividends was computed by dividing earnings by the sum of fixed charges and preferred dividends. For this purpose, earnings consist of pre-tax income from continuing operations excluding extraordinary items and cumulative effect of change in accounting for derivatives, plus the amount of combined fixed charges and preferred dividends as defined below. Combined fixed charges and preferred dividends consist of: expensed interest; amortization of debt discount, premium and expense; an estimate of interest implicit in rentals; and preferred stock dividend requirements of majority-owned subsidiaries increased to reflect our pre-tax earnings requirement.

USE OF PROCEEDS

     We intend to use the proceeds from the sale of these securities for general corporate purposes, which may include the repayment of indebtedness, capital expenditures, the funding of working capital, acquisitions and stock repurchases and/or capital infusions into one or more of our subsidiaries for any of those purposes. The specific use of proceeds from the sale of securities will be set forth in the prospectus supplement relating to each offering of these securities.

GENERAL DESCRIPTION OF THE SECURITIES

     We, directly or through agents, dealers or underwriters that we designate, may offer and sell, from time to time, up to $500,000,000 (or the equivalent in one or more foreign currencies or currency units) aggregate initial offering price of:

• our debt securities, in one or more series, which may be senior debt securities or subordinated debt securities, in each case consisting of notes or other unsecured evidences of indebtedness;

• shares of our preferred stock;

• shares of our common stock;

• purchase contracts to acquire any of the other securities that may be sold under this prospectus; or

• any combination of these securities, individually or as units.

     We may offer and sell these securities either individually or as units consisting of one or more of these securities, each on terms to be determined at the time of sale. We may issue debt securities and/or shares of preferred stock that are exchangeable for and/or convertible into common stock or any of the other securities that may be sold under this prospectus. When particular securities are offered, a supplement to this prospectus will be delivered with this prospectus, which will describe the terms of the offering and sale of the offered securities.

DESCRIPTION OF DEBT SECURITIES

General

     The following description highlights the general terms of the debt securities. When we offer debt securities in the future, the prospectus supplement will explain the particular terms of those securities and the extent to which any of these general provisions will not apply.

     We can issue an unlimited amount of debt securities under the indentures listed below. We can issue debt securities from time to time and in one or more series as determined by us. In addition, we can issue debt securities of any series with terms different from the terms of debt securities of any other series and the terms of particular debt securities within any series may differ from each other, all without

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the consent of the holders of previously issued series of debt securities. The debt securities of each series will be our direct, unsecured obligations. The debt securities may be issued in one or more new series under:

• an Indenture, dated as of December 1, 2000, between The Bank of New York and us, as amended from time to time, in the case of senior debt securities;

• an Indenture, dated as of December 1, 2000, as amended from time to time, between The Bank of New York and us, in the case of subordinated debt securities; or

• in the case of convertible debt securities, one of two new indentures between us and The Bank of New York, as trustee, for convertible senior debt securities or convertible subordinated debt securities.

     As of September 30, 2004, there was outstanding $300 million of our 6.40% Notes due 2006 and $165 million of our Floating Rate Senior Notes due 2005 under the senior debt securities indenture described above.

     As of September 30, 2004, there was no debt outstanding under the subordinated debt securities indenture.

     Because we are structured as a holding company, all existing and future indebtedness and other liabilities of our subsidiaries will be effectively senior in right of payment to our debt securities, whether senior debt securities or subordinated debt securities. None of the above Indentures limits our ability or the ability of our subsidiaries to incur additional indebtedness in the future. The assets and cash flows of our subsidiaries will be available, in the first instance, to service their own debt and other obligations and our ability to have the benefit of their assets and cash flows, particularly in the case of any insolvency or financial distress affecting our subsidiaries, would arise only through our equity ownership interests in our subsidiaries and only after their creditors had been satisfied. As of September 30, 2004, our subsidiaries, principally APS, had approximately $2.8 billion of debt outstanding.

     We have summarized selected provisions of the Indentures below. The summary is not complete. We have filed the senior and subordinated Indentures and the forms of the convertible Indentures as exhibits to the registration statement. You should read the Indentures in their entirety, including the definitions of certain terms, together with this prospectus and the prospectus supplement before you make any investment decision. Although separate Indentures are used for subordinated debt securities, senior debt securities, convertible subordinated debt securities and convertible senior debt securities, references to the “Indenture” and the description of the “Indenture” in this section apply to all Indentures, unless otherwise noted.

     You should refer to the prospectus supplement attached to this prospectus for the following information about a new series of debt securities:

• title of the debt securities;

• the aggregate principal amount of the debt securities or the series of which they are a part;

• the date on which the debt securities mature;

• the interest rate;

• when the interest on the debt securities accrues and is payable;

• the record dates for the payment of interest;

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• places where principal, premium, or interest will be payable;

• periods within which, and prices at which, we can redeem debt securities at our option;

• any obligation on our part to redeem or purchase debt securities pursuant to a sinking fund or at the option of the holder;

• denominations and multiples at which debt securities will be issued if other than $1,000;

• any index or formula from which the amount of principal or any premium or interest may be determined;

• any allowance for alternative currencies and determination of value;

• whether the debt securities are convertible and the terms and conditions applicable to conversion, including the conversion price or rate, the conversion period, and other conversion terms and provisions;

• whether the debt securities are defeasible under the terms of the Indenture;

• whether we are issuing the debt securities as global securities;

• any additional or different events of default and any change in the right of the trustee or the holders to declare the principal amount due and payable if there is any default;

• any addition to or change in the covenants in the Indenture; and

• any other terms.

     We may sell the debt securities at a substantial discount below their principal amount. The prospectus supplement may describe special federal income tax considerations that apply to debt securities sold at an original issue discount or to debt securities that are denominated in a currency other than United States dollars.

     Unless the applicable prospectus supplement specifies otherwise, the debt securities will not be listed on any securities exchange.

     Other than the protections described in this prospectus and in the prospectus supplement, holders of debt securities would not be protected by the covenants in the Indenture from a highly-leveraged transaction.

Subordination

     Each Indenture relating to the subordinated debt securities states that, unless otherwise provided in a supplemental indenture or a board resolution, the debt securities will be subordinate to all senior debt. This is true whether the senior debt is outstanding as of the date of the Indenture or is incurred afterwards. The balance of the information under this heading assumes that a supplemental indenture or a board resolution results in a series of debt securities being subordinated obligations.

     The Indenture states that we cannot make payments of principal, premium, or interest on the subordinated debt if:

• the principal, premium or interest on senior debt is not paid when due and the applicable grace period for the default has ended and the default has not been cured or waived; or

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• the maturity of any senior debt has been accelerated because of a default.

     The Indenture provides that we must pay all senior debt in full before the holders of the subordinated debt securities may receive or retain any payment if our assets are distributed to our creditors upon any of the following:

• dissolution;

• winding-up;

• liquidation;

• reorganization, whether voluntary or involuntary;

• bankruptcy;

• insolvency;

• receivership; or

• any other proceedings.

     The Indenture provides that when all amounts owing on the senior debt are paid in full, the holders of the subordinated debt securities will be subrogated to the rights of the holders of senior debt to receive payments or distributions applicable to senior debt.

     The Indenture defines senior debt as the principal, premium, interest and any other payment due under any of the following, whether outstanding at the date of the Indenture or thereafter incurred, created or assumed:

• all of our debt evidenced by notes, debentures, bonds, or other securities we sell for money;

• all debt of others of the kinds described in the preceding bullet point that we assume or guarantee in any manner; and

• all renewals, extensions, or refundings of debt of the kinds described in either of the two preceding bullet points.

     However, the preceding will not be considered senior debt if the document creating the debt or the assumption or guarantee of the debt states that it is not superior to or that it is on equal footing with the subordinated debt securities.

     The Indenture does not limit the aggregate amount of senior debt that we may issue. As of September 30, 2004, our outstanding senior debt (excluding the debt of our subsidiaries) was approximately $478 million.

Convertibility

     No series of debt securities, whether senior or subordinated, will be convertible into, or exchangeable for, other securities or property except as set forth in the applicable prospectus supplement. You should refer to the prospectus supplement that accompanies this prospectus for a description of the specific conversion provisions and terms of any series of convertible debt securities that we may offer by that prospectus supplement. These terms and provisions may include:

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• the title and specific designation of the convertible debt securities, including whether they are convertible senior debt securities or convertible subordinated debt securities;

• the terms and conditions upon which conversion of the convertible debt securities may be effected, including the conversion price, the conversion period and other conversion provisions;

• the terms and conditions on which we may, or may be required to, redeem the convertible debt securities;

• the place or places where we must pay the convertible debt securities and where any convertible debt securities issued in registered form may be sent for transfer, conversion or exchange; and

• any other terms of the convertible debt securities and any other deletions from or modifications or additions to the indenture in respect of the convertible debt securities, including those relating to the subordination of any convertible debt securities or any addition to or changes in the events of default or covenants of any convertible debt securities.

Form, Exchange, and Transfer

     Each series of debt securities will be issuable only in fully registered form and without coupons. In addition, unless otherwise specified in a prospectus supplement, the debt securities will be issued in denominations of $1,000 and multiples of $1,000. We, the trustee, and any of our agents may treat the registered holder of a debt security as the absolute owner for the purpose of making payments, giving notices, and for all other purposes.

     The holders of debt securities may exchange them for any other debt securities of the same series, in authorized denominations and equal principal amount. However, this type of exchange will be subject to the terms of the Indenture and any limitations that apply to global securities.

     A holder may transfer debt securities by presenting the endorsed security at the office of a security registrar or at the office of any transfer agent we designate. The holder will not be charged for any exchange or registration of transfer, but we may require payment to cover any tax or other governmental charge in connection with the transaction. We have appointed the trustee under each Indenture as security registrar. A prospectus supplement will name any transfer agent we designate for any debt securities if different from the security registrar. We may designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts at any time, except that we will maintain a transfer agent in each place of payment for debt securities.

     If the debt securities of any series are to be redeemed in part, we will not be required to do any of the following:

• issue, register the transfer of, or exchange any debt securities of that series and/or tenor beginning 15 days before the day of mailing of a notice of redemption of any debt security that may be selected for redemption and ending at the close of business on the day of the mailing; or

• register the transfer of or exchange any debt security selected for redemption, except for an unredeemed portion of a debt security that is being redeemed in part.

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Payment and Paying Agents

     Unless otherwise indicated in the applicable prospectus supplement, we will pay interest on a debt security on any interest payment date to the person in whose name the debt security is registered.

     Unless otherwise indicated in the applicable prospectus supplement, the principal, premium, and interest on the debt securities of a particular series will be payable at the office of the paying agents that we may designate. However, we may pay any interest by check mailed to the address, as it appears in the security register, of the person entitled to that interest. Also, unless otherwise indicated in the applicable prospectus supplement, the corporate trust office of the trustee in The City of New York will be our sole paying agent for payments with respect to debt securities of each series. Any other paying agent that we initially designate for the debt securities of a particular series will be named in the applicable prospectus supplement. We may at any time designate additional paying agents or rescind the designation of any paying agent or approve a change in the office through which any paying agent acts, except that we will maintain a paying agent in each place of payment for the debt securities of a particular series.

     All money that we pay to a paying agent for the payment of the principal, premium, or interest on any debt security that remains unclaimed at the end of two years after the principal, premium, or interest has become due and payable will be repaid to us, and the holder of the debt security may look only to us for payment.

Consolidation, Merger, and Sale Of Assets

     Unless otherwise indicated in the applicable prospectus supplement, we may not:

• consolidate with or merge into any other entity;

• convey, transfer, or lease our properties and assets substantially as an entirety to any entity; or

• permit any entity to consolidate with or merge into us or convey, transfer, or lease its properties and assets substantially as an entirety to us,

unless the following conditions are met:

• the successor entity is a corporation, partnership, unincorporated organization or trust, organized and validly existing under the laws of any domestic jurisdiction and assumes our obligations on the debt securities and under the Indenture;

• immediately after giving effect to the transaction, no event of default, and no event which, after notice or lapse of time or both, would become an event of default, shall have occurred and be continuing; and

• other conditions are met.

     Upon any merger, consolidation, or transfer or lease of properties, the successor person will be substituted for us under the Indenture, and, thereafter, except in the case of a lease, we will be relieved of all obligations and covenants under the Indenture and the debt securities.

Events of Default

     Each of the following will be an event of default under the Indenture with respect to debt securities of any series:

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• our failure to pay principal of or any premium on any debt security of that series when due;

• our failure to pay any interest on any debt securities of that series when due, and the continuance of that failure for 30 days;

• our failure to deposit any sinking fund payment, when due, in respect of any debt securities of that series;

• our failure to perform any of our other covenants in the Indenture relating to that series and the continuance of that failure for 90 days after written notice has been given by the trustee or the holders of at least 25% in principal amount of the outstanding debt securities of that series;

• bankruptcy, insolvency, or reorganization events involving us; and

• any other event of default for that series described in the applicable prospectus supplement.

     If an event of default occurs and is continuing, other than an event of default relating to bankruptcy, insolvency, or reorganization, either the trustee or the holders of at least 25% in aggregate principal amount of the outstanding debt securities of the affected series may declare the principal amount of the debt securities of that series to be due and payable immediately. In the case of any debt security that is an original issue discount security or the principal amount of which is not then determinable, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series may declare the portion of the principal amount of the debt security specified in the terms of such debt security to be immediately due and payable upon an event of default.

     If an event of default involving bankruptcy, insolvency, or reorganization occurs, the principal amount of all the debt securities of the affected series will automatically, and without any action by the trustee or any holder, become immediately due and payable. After any acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of the outstanding debt securities of that series may rescind and annul the acceleration if all events of default, other than the non-payment of accelerated principal, have been cured or waived as provided in the Indenture.

     The trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders, unless the holders have offered the trustee reasonable indemnity. Subject to provisions for the indemnification of the trustee, the holders of a majority in principal amount of the outstanding debt securities of any series will have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, with respect to the debt securities of that series.

     No holder of a debt security of any series will have any right to institute any proceeding under the Indenture, or for the appointment of a receiver or a trustee, or for any other remedy under the Indenture, unless:

• the holder has previously given the trustee written notice of a continuing event of default with respect to the debt securities of that series;

• the holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have made written request, and the holder or holders have offered reasonable indemnity, to the trustee to institute the proceeding as trustee; and

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• the trustee has failed to institute the proceeding, and has not received from the holders of a majority in aggregate principal amount of the outstanding debt securities of that series a direction inconsistent with the request within 60 days after the notice, request, and offer of indemnity.

     The limitations provided above do not apply to a suit instituted by a holder of a debt security for the enforcement of payment of the principal, premium, or interest on the debt security on or after the applicable due date.

     We are required to furnish to the trustee annually a certificate of various officers stating whether or not we are in default in the performance or observance of any of the terms, provisions, and conditions of the Indenture and, if so, specifying all known defaults.

Modification and Waiver

     In limited cases, we and the trustee may make modifications and amendments to the Indenture without the consent of the holders of any series of debt securities. We and the trustee may also make modifications and amendments to the Indenture with the consent of the holders of not less than 66 2/3% in aggregate principal amount of the outstanding debt securities of each series affected by the modification or amendment. However, without the consent of the holder of each outstanding debt security affected, no modification or amendment may:

• reduce the principal amount of, or any premium or interest on, any debt security;

• reduce the amount of principal of an original issue discount security or any other debt security payable upon acceleration of the maturity of the security;

• change the stated maturity of the principal of, or any installment of principal of or interest on, any debt security;

• change the place or currency of payment of principal of, or any premium or interest on, any debt security;

• with respect to convertible debt securities only, adversely affect the right to convert any debt security;

• impair the right to institute suit for the enforcement of any payment on or with respect to any debt security; or

• reduce the percentage in principal amount of outstanding debt securities of any series, the consent of whose holders is required for modification or amendment of the Indenture or is necessary for waiver of compliance with certain provisions of the Indenture or of certain defaults, or modify the provisions of the Indenture relating to modification and waiver.

     In general, compliance with certain restrictive provisions of the Indenture may be waived by the holders of not less than 66-2/3% in aggregate principal amount of the outstanding debt securities of any series. The holders of a majority in aggregate principal amount of the outstanding debt securities of any series may waive any past default under the Indenture, except:

• a default in the payment of principal, premium, or interest; and

• a default under covenants and provisions of the Indenture which cannot be amended without the consent of the holder of each outstanding debt security of the affected series.

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     In determining whether the holders of the requisite principal amount of the outstanding debt securities have given or taken any direction, notice, consent, waiver, or other action under the Indenture as of any date:

• the principal amount of an outstanding original issue discount security will be the amount of the principal that would be due and payable upon acceleration of the maturity on that date,

• if the principal amount payable at the stated maturity of a debt security is not determinable, the principal amount of the outstanding debt security will be an amount determined in the manner prescribed for the debt security; and

• the principal amount of an outstanding debt security denominated in one or more foreign currencies will be the U.S. dollar equivalent of the principal amount of the debt security or, in the case of a debt security described in the previous bullet point above, the amount described in that bullet point.

     If debt securities have been fully defeased or if we have deposited money with the trustee to redeem debt securities, they will not be considered outstanding.

     Except in limited circumstances, we will be entitled to set any day as a record date for the purpose of determining the holders of outstanding debt securities of any series entitled to give or take any direction, notice, consent, waiver, or other action under the Indenture. In limited circumstances, the trustee will be entitled to set a record date for action by holders. If a record date is set for any action to be taken by holders of a particular series, the action may be taken only by persons who are holders of outstanding debt securities of that series on the record date. To be effective, the action must be taken by holders of the requisite principal amount of the debt securities within a specified period following the record date. For any particular record date, this period will be 180 days or any other shorter period that we may specify. The period may be shortened or lengthened, but not beyond 180 days.

Defeasance and Covenant Defeasance

     We may elect to have the provisions of the Indenture relating to defeasance and discharge of indebtedness, or defeasance of restrictive covenants in the Indenture, applied to the debt securities of any series, or to any specified part of a series. The prospectus supplement used in connection with the offering of any debt securities will state whether we can make these elections for that series.

     Defeasance and Discharge

     We will be discharged from all of our obligations with respect to the debt securities of a series if we deposit with the trustee money in an amount sufficient to pay the principal, premium, and interest on the debt securities of that series when due in accordance with the terms of the Indenture and the debt securities. We can also deposit securities that will provide the necessary monies. However, we will not be discharged from the obligations to exchange or register the transfer of debt securities, to replace stolen, lost, or mutilated debt securities, to maintain paying agencies, and to hold moneys for payment in trust. The defeasance or discharge may occur only if we deliver to the trustee an opinion of counsel stating that we have received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the effect that holders of such debt securities:

• will not recognize gain or loss for federal income tax purposes as a result of the deposit, defeasance, and discharge; and

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• will be subject to federal income tax on the same amount, in the same manner, and at the same times as would have been the case if the deposit, defeasance, and discharge were not to occur.

     Defeasance of Covenants

     We may elect to omit compliance with restrictive covenants in the Indenture and any additional covenants that may be described in the applicable prospectus supplement for a series of debt securities. This election will preclude some actions from being considered defaults under the Indenture for the applicable series. In order to exercise this option, we will be required to deposit, in trust for the benefit of the holders of debt securities, funds in an amount sufficient to pay the principal, premium and interest on the debt securities of the applicable series. We may also deposit securities that will provide the necessary monies. We will also be required to deliver to the trustee an opinion of counsel to the effect that holders of the debt securities will not recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if the deposit and defeasance were not to occur. If we exercise this option with respect to any debt securities and the debt securities are declared due and payable because of the occurrence of any event of default, the amount of funds deposited in trust would be sufficient to pay amounts due on the debt securities at the time of their respective stated maturities but may not be sufficient to pay amounts due on the debt securities on any acceleration resulting from an event of default. In that case, we would remain liable for the additional payments.

Governing Law

     The law of the State of New York will govern the Indenture and the debt securities.

Global Securities

     Some or all of the debt securities of any series may be represented, in whole or in part, by one or more global securities, which will have an aggregate principal amount equal to that of the debt securities they represent. We will register each global security in the name of a depositary or nominee identified in a prospectus supplement and deposit the global security with the depositary or nominee. Each global security will bear a legend regarding the restrictions on exchanges and registration of transfer referred to below and other matters specified in a supplemental indenture to the Indenture.

     No global security may be exchanged for debt securities registered, and no transfer of a global security may be registered, in the name of any person other than the depositary for the global security or any nominee of the depositary, unless:

• the depositary has notified us that it is unwilling or unable to continue as depositary for the global security or has ceased to be qualified to act as depositary;

• a default has occurred and is continuing with respect to the debt securities represented by the global security; or

• any other circumstances exist that may be described in the applicable supplemental indenture and prospectus supplement.

     We will register all securities issued in exchange for a global security or any portion of a global security in the names specified by the depositary.

     As long as the depositary or its nominee is the registered holder of a global security, the depositary or nominee will be considered the sole owner and holder of the global security and the debt

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securities that it represents. Except in the limited circumstances referred to above, owners of beneficial interests in a global security will not:

• be entitled to have the global security or debt securities registered in their names;

• receive or be entitled to receive physical delivery of certificated debt securities in exchange for a global security; and

• be considered to be the owners or holders of the global security or any debt securities for any purpose under the Indenture.

     We will make all payments of principal, premium, and interest on a global security to the depositary or its nominee. The laws of some jurisdictions require that purchasers of securities take physical delivery of securities in definitive form. These laws make it difficult to transfer beneficial interests in a global security.

     Ownership of beneficial interests in a global security will be limited to institutions that have accounts with the depositary or its nominee, referred to as Participants, and to persons that may hold beneficial interests through Participants. In connection with the issuance of any global security, the depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of debt securities represented by the global security to the accounts of its Participants. Ownership of beneficial interests in a global security will only be shown on records maintained by the depositary or the Participant. Likewise, the transfer of ownership interests will be effected only through the same records. Payments, transfers, exchanges, and other matters relating to beneficial interests in a global security may be subject to various policies and procedures adopted by the depositary from time to time. Neither we, the trustee, nor any of our agents will have responsibility or liability for any aspect of the depositary’s or any Participant’s records relating to, or for payments made on account of, beneficial interests in a global security, or for maintaining, supervising, or reviewing any records relating to the beneficial interests.

Regarding the Trustee

     The Bank of New York is the trustee under our Indentures relating to the senior debt securities and the convertible senior debt securities and our Indentures relating to the subordinated debt securities and the convertible subordinated debt securities. It is also trustee of our pension plan and under various indentures covering securities issued by APS or on APS’ behalf. We and our affiliates maintain normal commercial and banking relationships with The Bank of New York, including The Bank of New York serving as transfer agent and registrar for our common stock. In the future The Bank of New York and its affiliates may provide banking, investment and other services to us and our affiliates.

DESCRIPTION OF PREFERRED STOCK

     We may issue, from time to time, shares of one or more series of our preferred stock. The following description sets forth certain general terms and provisions of the preferred stock to which any prospectus supplement may relate. The particular terms of any series of preferred stock and the extent, if any, to which these general provisions may apply to the series of preferred stock offered will be described in the prospectus supplement relating to that preferred stock.

     The following summary of provisions of the preferred stock does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the provisions of our articles of incorporation, bylaws, and the amendment to our articles relating to a specific series of the preferred stock (the “statement of preferred stock designations”), which will be in the form filed as an exhibit to, or incorporated by reference in, the registration statement of which this prospectus is a part. Before

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investing in any series of our preferred stock, you should read our articles, bylaws and the relevant statement of preferred stock designations.

General

     Under our articles of incorporation, we have the authority to issue up to 10,000,000 shares of preferred stock. No shares of preferred stock are currently outstanding. 4,400,000 shares of preferred stock are reserved for issuance under our shareholders rights plan. See “Description of Common Stock—Certain Anti-takeover Effects—Shareholder Rights Plan.” Our Board of Directors is authorized to issue shares of preferred stock, in one or more series, and to fix for each series voting powers and those preferences and relative, participating, optional or other special rights and those qualifications, limitations or restrictions as are permitted by the Arizona Business Corporation Act (the “ABCA”).

     Our Board of Directors is authorized to determine the terms for each series of preferred stock, and the prospectus supplement will describe the terms of any series of preferred stock being offered, including:

• the designation of the shares and the number of shares that constitute the series;

• the dividend rate (or the method of calculation thereof), if any, on the shares of the series and the priority as to payment of dividends with respect to other classes or series of our capital stock;

• the dividend periods (or the method of calculation thereof);

• the voting rights of the shares;

• the liquidation preference and the priority as to payment of the liquidation preference with respect to other classes or series of our capital stock and any other rights of the shares of the series upon our liquidation or winding-up;

• whether and on what terms the shares of the series will be subject to redemption or repurchase at our option or at the option of the holders thereof;

• whether and on what terms the shares of the series will be convertible into or exchangeable for other securities;

• whether the shares of the series of preferred stock will be listed on a securities exchange;

• any special United States federal income tax considerations applicable to the series; and

• the other rights and privileges and any qualifications, limitations or restrictions of the rights or privileges of the series.

Dividends

     Holders of shares of preferred stock shall be entitled to receive, when and as declared by our Board of Directors out of our funds legally available therefor, a cash dividend payable at the dates and at the rates, if any, per share as set forth in the applicable prospectus supplement.

Convertibility

     No series of preferred stock will be convertible into, or exchangeable for, other securities or property except as set forth in the applicable prospectus supplement.

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Redemption and Sinking Fund

     No series of preferred stock will be redeemable or receive the benefit of a sinking fund except as set forth in the applicable prospectus supplement.

Liquidation Rights

     Unless otherwise set forth in the applicable prospectus supplement, in the event of our liquidation, dissolution or winding up, the holders of shares of each series of preferred stock are entitled to receive distributions out of our assets available for distribution to stockholders, before any distribution of assets is made to holders of (i) any other shares of preferred stock ranking junior to that series of preferred stock as to rights upon liquidation and (ii) shares of common stock. The amount of liquidating distributions received by holders of preferred stock will generally equal the liquidation preference specified in the applicable prospectus supplement for that series of preferred stock, plus any dividends accrued and accumulated but unpaid to the date of final distribution. The holders of each series of preferred stock will not be entitled to receive the liquidating distribution of, plus such dividends on, those shares until the liquidation preference of any shares of our capital stock ranking senior to that series of the preferred stock as to the rights upon liquidation shall have been paid or set aside for payment in full.

     If upon our liquidation, dissolution or winding up, the amounts payable with respect to the preferred stock, and any other preferred stock ranking as to any distribution on a parity with the preferred stock are not paid in full, then the holders of the preferred stock and the other parity preferred stock will share ratably in any distribution of assets in proportion to the full respective preferential amount to which they are entitled. Unless otherwise specified in a prospectus supplement for a series of preferred stock, after payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of preferred stock will not be entitled to any further participation in any distribution of our assets. Neither a consolidation or merger of us with another corporation nor a sale of securities shall be considered a liquidation, dissolution or winding up of us.

Voting Rights

     The holders of each series of preferred stock we may issue will have no voting rights, except as required by law and as described below or in the applicable prospectus supplement. Our Board of Directors may, upon issuance of a series of preferred stock, grant voting rights to the holders of that series, including rights to elect additional board members if we fail to pay dividends in a timely fashion.

     Arizona law provides for certain voting rights for holders of a class of stock, even if the stock does not have other voting rights. Thus, the holders of all shares of a class, would be entitled to vote on any amendment to our articles of incorporation that would:

• increase or decrease the aggregate number of authorized shares of the class the class;

• effect an exchange or reclassification of all or part of the shares of the class into shares of another class;

• effect an exchange or reclassification, or create the right of exchange of all or part of the shares of another class into shares of the class;

• change the designations, rights, obligations, preferences, or limitations of all or part of the shares of the class;

• change the shares of all or part of the class into a different number of shares of the same class;

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• create a new class of shares having rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially equal to the shares of the class;

• increase rights, preferences or number of authorized shares of any class that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolution that are prior, superior or substantially equal to the shares of the class;

• limit or deny an existing preemptive right of all or part of the class; and

• cancel or otherwise affect rights to distributions or dividends that have accumulated but have not yet been declared on all or part of the shares of the class.

     If the proposed amendment would affect a series of the class, but not the entire class, in one or more of the ways described in the bullets above, then the shares of the affected series will have the right to vote on the amendment as a separate voting group. However, if a proposed amendment that would entitle two or more series of the class to vote as separate voting groups would affect those series in the same or a substantially similar way, the shares of all the series so affected must vote together as a single voting group on the proposed amendment.

     Unless the articles of incorporation, Arizona law or the Board of Directors would require a greater vote or unless the articles or Arizona law would require a different quorum, if an amendment to the articles would allow the preferred stock or one or more series of the preferred stock to vote as voting groups, the vote required by each voting group would be:

• a majority of the votes entitled to be cast by the voting group, if the amendment would create dissenters’ rights for that voting group; and

• in any other case, if a quorum is present in person or by proxy consisting of a majority of the votes entitled to be cast on the matter by the voting group, the votes cast by the voting group in favor of the amendment must exceed the votes cast against the amendment by the voting group.

     Arizona law may also require that the preferred stock be entitled to vote on certain other extraordinary transactions.

Miscellaneous

     The holders of our preferred stock will have no preemptive rights. All shares of preferred stock being offered by the applicable prospectus supplement will be fully paid and not liable to further calls or assessment by us. If we should redeem or otherwise reacquire shares of our preferred stock, then these shares will resume the status of authorized and unissued shares of preferred stock undesignated as to series, and will be available for subsequent issuance. There are no restrictions on repurchase or redemption of the preferred stock while there is any arrearage on sinking fund installments except as may be set forth in an applicable prospectus supplement. Payment of dividends on any series of preferred stock may be restricted by loan agreements, indentures and other transactions entered into by us. Any material contractual restrictions on dividend payments will be described or incorporated by reference in the applicable prospectus supplement.

     When we offer to sell a series of preferred stock, we will describe the specific terms of the series in the applicable prospectus supplement. If any particular terms of a series of preferred stock described in a prospectus supplement differ from any of the terms described in this prospectus, then the terms described in the applicable prospectus supplement will be deemed to supersede the terms described in this prospectus.

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No Other Rights

     The shares of a series of preferred stock will not have any preferences, voting powers or relative, participating, optional or other special rights except as set forth above or in the applicable prospectus supplement, our articles of incorporation or the applicable statement of preferred stock designations or as otherwise required by law.

Transfer Agent and Registrar

     The transfer agent and registrar for each series of preferred stock will be designated in the applicable prospectus supplement.

DESCRIPTION OF COMMON STOCK

     We may issue, from time to time, shares of our common stock, the general terms and provisions of which are summarized below. This summary does not purport to be complete and is subject to, and is qualified in its entirety by express reference to, the provisions of our articles of incorporation, bylaws and the applicable prospectus supplement.

Authorized Shares

     Under our articles of incorporation, we have the authority to issue 150,000,000 shares of common stock. We have outstanding approximately 91,774,759 shares of our common stock (as of December 17, 2004) and we have reserved for issuance approximately 27,167,072 shares of our common stock (as of December 17, 2004), excluding any shares of common stock that could be issued under the shareholders rights plan.

Dividends

     Subject to any preferential rights of any series of preferred stock, holders of shares of common stock will be entitled to receive dividends on the stock out of assets legally available for distribution when, as and if authorized and declared by our Board of Directors. The payment of dividends on the common stock will be a business decision to be made by our Board of Directors from time to time based upon results of our operations and our financial condition and any other factors as our Board of Directors considers relevant. Payment of dividends on the common stock may be restricted by loan agreements, indentures and other transactions entered into by us from time to time. Any material contractual restrictions on dividend payments will be described in the applicable prospectus supplement.

Voting Rights

     Holders of common stock are entitled to one vote per share on all matters voted on generally by the stockholders, including the election of directors, and, except as otherwise required by law or except as provided with respect to any series of preferred stock, the holders of the shares possess all voting power. Arizona law provides for cumulative voting for the election of directors. As a result, any shareholder may cumulate his or her votes by casting them all for any one director nominee or by distributing them among two or more nominees.

Staggered Terms of Directors

     Our Board of Directors is elected in three classes with staggered three-year terms. We currently have five directors in class I and four directors each in classes II and III. One class of directors is elected each year for a three-year term. Election of directors with staggered terms lessens the effectiveness of cumulative voting rights by reducing the number of directors who are elected in any given year.

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Liquidation Rights

     Subject to any preferential rights of any series of preferred stock, holders of shares of common stock are entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up.

Absence of Other Rights

     Holders of common stock have no preferential, preemptive, conversion or exchange rights.

Miscellaneous

     All shares of common stock being offered by the applicable prospectus supplement will be fully paid and not liable to further calls or assessment by us.

Transfer Agent and Registrar

     The Bank of New York is the principal transfer agent and registrar for the common stock.

Preferred Stock

     Our Board of Directors has the authority, without any further action by our stockholders, to issue from time to time shares of preferred stock, in one or more series and to fix the designations, preferences, rights, qualifications, limitations and restrictions thereof, including voting rights, dividend rights, dividend rates, conversion rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series. The issuance of preferred stock with voting rights could have an adverse effect on the voting power of holders of common stock by increasing the number of outstanding shares having voting rights. In addition, if our board of directors authorizes preferred stock with conversion rights, the number of shares of common stock outstanding could potentially be increased up to the authorized amount. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to holders of common stock. Any such issuance could also have the effect of delaying, deterring or preventing a change in control of us and may adversely affect the rights of holders of our common stock. See also “Description of Preferred Stock” above.

Certain Anti-takeover Effects

     General. Certain provisions of our articles of incorporation, bylaws, and the Arizona Revised Statutes (“ARS”), as well as our shareholder rights plan, may have an anti-takeover effect and may delay or prevent a tender offer or other acquisition transaction that a shareholder might consider to be in his or her best interest, including a transaction that results in a premium over the market price of the common stock. The summary of the provisions of our articles, bylaws, shareholder rights plan, and the ARS set forth below does not purport to be complete and is qualified in its entirety by reference to our articles, bylaws, shareholder rights plan, and the ARS.

     Business Combinations. ARS § 10-2741 through 2743 and Article XII of our bylaws restrict a wide range of transactions (collectively, “business combinations”) between us or, in certain cases, one of our subsidiaries, and an interested shareholder (or any affiliate or associate of the interested shareholder). An “interested shareholder” is, generally, any person who beneficially owns, directly or indirectly, 10% or more of our outstanding voting power or any of our affiliates or associates who at any time within the prior three years was such a beneficial owner. The statute broadly defines “business combinations” to include, among other things and with certain exceptions:

• mergers and consolidations with an interested shareholder or an affiliate or associate of the interested shareholder;

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• share exchanges with an interested shareholder or an affiliate or associate of the interested shareholder;

• any sale, lease, exchange, mortgage pledge, transfer or other disposition of assets to an interested shareholder or an affiliate or associate of the interested shareholder, representing 10% or more of (i) the aggregate market value of all of our consolidated assets as of the end of the most recent fiscal quarter, (ii) the aggregate market value of all our outstanding shares, or (iii) our consolidated revenues or net income for the four most recent fiscal quarters;

• the issuance or transfer of shares of stock having an aggregate market value of 5% or more of the aggregate market value of all of our outstanding shares to an interested shareholder or an affiliate or associate of the interested shareholder;

• the adoption of a plan or proposal for our liquidation or dissolution or reincorporation in another state or jurisdiction pursuant to an agreement or arrangement with an interested shareholder or an affiliate or associate of the interested shareholder;

• corporate actions, such as stock splits and stock dividends, and other transactions resulting in an increase in the proportionate share of the outstanding shares of any series or class of stock of us or any of our subsidiaries owned by an interested shareholder or an affiliate or associate of the interested shareholder; and

• the receipt by an interested shareholder or an affiliate or associate of the interested shareholder of the benefit (other than proportionately as a shareholder) of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by or through us or any of our subsidiaries.

     The ARS and our bylaws provide that, subject to certain exceptions, we may not engage in a business combination with an interested shareholder (or any affiliate or associate of the interested shareholder) or authorize one of our subsidiaries to do so, for a period of three years after the date on which the interested shareholder first acquired the shares that qualify such person as an interested shareholder (the “share acquisition date”), unless either the business combination or the interested shareholder’s acquisition of shares on the share acquisition date is approved by a committee of our Board of Directors (comprised solely of disinterested directors or other disinterested persons) prior to the interested shareholder’s share acquisition date.

     In addition, after such three-year period, the ARS and our bylaws prohibit us from engaging in any business combination with an interested shareholder (or any affiliate or associate of the interested shareholder), subject to certain exceptions, unless:

• the business combination or acquisition of shares by the interested shareholder on the share acquisition date was approved by our Board of Directors prior to the share acquisition date;

• the business combination is approved by holders of a majority of our outstanding shares (excluding shares beneficially owned by the interested shareholder or any affiliate or associate of the interested shareholder) at a meeting called after such three-year period; or

• the business combination satisfies specified price and other requirements.

     Anti-Greenmail Provisions. ARS § 10-2704 and Article XIII of our bylaws prohibit us from purchasing any shares of our voting stock from any beneficial owner (or group of beneficial owners acting together to acquire, own or vote our shares) of more than 5% of the voting power of our outstanding

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shares at a price per share in excess of the average closing sale price during the 30 trading days preceding the purchase or if the person or persons have commenced a tender offer or announced an intention to seek control of us, during the 30 trading days prior to the commencement of the tender offer or the making of the announcement, unless

• the 5% beneficial owner has beneficially owned the shares to be purchased for a period of at least three years;

• holders of a majority of our voting power (excluding shares held by the 5% beneficial owner or its affiliates or associates or by any of our officers and directors) approve the purchase; or

• we make the repurchase offer available to all holders of the class or series of securities to be purchased and to all holders of other securities convertible into that class or series.

     Control Share Acquisition Statute. Through a provision in our bylaws, we have opted out of ARS § 10-2721 through 2727, the Arizona statutory provisions regulating control share acquisitions. As a result, potential acquirors are not subject to the limitations imposed by that statute.

     Shareholder Rights Plan. We have adopted a shareholder rights plan under which one preferred share purchase right is attached to each outstanding share of our common stock. The rights become exercisable and will be separated from the common stock on the Distribution Date, as such term is defined in the plan. Generally, subject to specified exceptions, the Distribution Date will occur on the earlier of:

• 10 days following a public announcement that a person or group of affiliated or associated persons (an “acquiring person”) has acquired beneficial ownership of 15% or more of our outstanding common stock, or

• 10 business days following the commencement of, or announcement of an intention to make, a tender offer or exchange offer that would result in the beneficial ownership by a person or group of 15% or more of our outstanding common stock.

     Each right entitles the registered holder to purchase from us one one-hundredth of a share of Series A Participating Preferred Stock at an exercise price of $130, subject to adjustment under specified circumstances. However, after any person has become an acquiring person (a “Flip-In Event”), upon exercise of the right, the holder will be entitled to receive common stock valued at twice the exercise price of the right. In other words, a rights holder may purchase common stock at a 50% discount. In some circumstances, the holder will receive cash, property or other securities instead of common stock. Upon the occurrence of a Flip-In Event, any rights owned by an acquiring person, its affiliates and associates and certain of its transferees will become null and void.

     In the event that a person becomes an acquiring person, we are then merged, and the common stock is exchanged or converted in the merger, then each right (other than those formerly held by the acquiring person, which became void) would “flip-over” and be exercisable for a number of shares of common stock of the acquiring company having a market value of two times the exercise price of the right. In other words, a rights holder may purchase the acquiring company’s common stock at a 50% discount.

     After a Flip-In Event but before a “flip-over” event (as described above) occurs and before an acquiring person becomes the owner of 50% or more of the common stock, the Board may cause the rights (either in whole or in part) to be exchanged for shares of common stock (or fractional interests in Series A Preferred Stock, or equivalent securities, of equal value) at a one-to-one exchange ratio. Rights held by the acquiring person, however, which became void upon the Flip-In Event, would not be entitled to participate in such exchange.

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     We may redeem the rights for $0.01 per right at any time prior to the date on which a person becomes an acquiring person. The shareholder rights plan and the rights expire in March 2009, subject to extension.

     For so long as the rights are redeemable, the terms of the rights may be amended or supplemented by the Board of Directors at any time and from time to time without the consent of the holders of the rights. At any time when the rights are not redeemable, the Board of Directors may amend or supplement the terms of the rights, provided that such amendment does not adversely affect the interests of the holders of the rights. In no event may any amendment or supplement be made which changes the redemption price.

     Until a right is exercised, the holder thereof will have no rights as a stockholder, including, without limitation, the right to vote or to receive dividends, except as holder of the common stock to which the right is attached.

     For information on the terms of the Series A Preferred Stock, see the certificate of designation for the Series A Preferred Stock, the form of which is attached as Exhibit A to the Amended and Restated Rights Agreement, dated as of March 26, 1999, filed as an exhibit to our Current Report on Form 8-K dated March 22, 1999, which is incorporated herein by reference.

     Special Meetings of Shareholders. Pursuant to ARS § 10-702, except with respect to certain business combinations, as required by Arizona law, a special meeting of shareholders may be called by a corporation’s Board of Directors or any other person authorized to do so in its articles of incorporation or bylaws. Our bylaws provide that, except as required by law, special meetings of shareholders may only be called by a majority of our Board of Directors, the Chairman of the Board, or the President.

     Election and Removal of Directors. Our Board of Directors is divided into three classes. The directors in each class serve for a three year term, with one class being elected each year by our shareholders. The classification of our Board of Directors generally makes it more difficult for shareholders to effect a change in control because at least two shareholder meetings are required to elect a majority of our Board. Arizona law provides for cumulative voting in the election of directors, which may make it more difficult for shareholders to elect a majority of the Board of Directors.

     Our bylaws provide that any director may be removed with or without cause, but only at a special meeting of shareholders called for that purpose, if the votes cast in favor of such removal exceed the votes cast against such removal. However, if less than the entire Board of Directors is to be removed, no one director may be removed if the votes cast against the director’s removal would be sufficient to elect the director if then cumulatively voted at an election of the class of directors of which the director is a part.

     Shareholder Proposals and Director Nominations. A shareholder can submit shareholder proposals and nominate candidates for election to our Board of Directors if he or she follows the advance notice provisions set forth in our bylaws.

     With respect to shareholder proposals to bring business before the annual meeting, shareholders must submit a written notice to the Secretary of the Company not fewer than 90 nor more than 120 days prior to the first anniversary of the date of our previous year’s annual meeting of shareholders. However, if we have changed the date of the annual meeting by more than 30 days from the date of the previous year’s annual meeting, the written notice must be submitted no earlier than 120 days before the annual meeting and not later than 90 days before the annual meeting or ten days after the day we make public the date of the annual meeting. The written notice must briefly describe the business the shareholder desires to bring before the meeting, the text of the proposal or business, the reasons for conducting such business at the meeting, and any material interest in the proposal of the shareholder and the beneficial owner, if any, on whose behalf the proposal is made.

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     With respect to director nominations, shareholders must submit written notice to the Secretary of the Company at least 180 days prior to the date of the annual meeting. This requirement is also contained in our articles of incorporation. Our bylaws require that the written notice must contain all information relating to the director nominee that is required to be included in a proxy statement pursuant to Regulation 14A under the Securities Exchange Act of 1934, as well as the written consent of the proposed nominee to be named in the proxy statement as a nominee and to serving as a director if elected.

     All written notices delivered pursuant to the advance notice provisions of our bylaws are required to state (i) the name and address as they appear on our books of the sponsoring shareholder and the beneficial owner, if any, on whose behalf the proposal or nomination is made, (ii) the class and number of shares that are owned beneficially and of record by the shareholder and such beneficial owner, (iii) a representation that the shareholder is a holder of record entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (iv) whether the shareholder or beneficial owner intends or is part of a group that intends to deliver a proxy statement to holders of at least the number of shares required to adopt the proposal or elect the nominee or otherwise solicit proxies in favor of the proposal or nomination.

     Shareholder proposals and director nominations that are late or that do not include all required information may be rejected. This could prevent shareholders from bringing certain matters before an annual meeting, including proposing the election of non-incumbent directors.

     A shareholder must also comply with all applicable laws in proposing business to be conducted and in nominating directors. The notice provisions of the bylaws do not affect rights of shareholders to request inclusion of proposals in our proxy statement pursuant to Rule 14a-8 of the Securities Exchange Act of 1934.

     Additional Authorized Shares of Capital Stock. The authorized but unissued shares of common stock and preferred stock available for issuance under our articles of incorporation could be issued at such times, under such circumstances, and with such terms and conditions as to impede an acquisition transaction.

     Amendment to Articles of Incorporation and Bylaws. ARS § 10-1001 through 1003 generally provide that both the Board of Directors and the shareholders must approve amendments to an Arizona corporation’s articles of incorporation, except that the Board of Directors may adopt specified ministerial amendments without shareholder approval. Unless the articles of incorporation, Arizona law or the Board of Directors would require a greater vote or unless the articles or Arizona law would require a different quorum, the vote required by each voting group allowed or required to vote on the amendment would be:

• a majority of the votes entitled to be cast by the voting group, if the amendment would create dissenters’ rights for that voting group; and

• in any other case, if a quorum is present in person or by proxy consisting of a majority of the votes entitled to be cast on the matter by the voting group, the votes cast by the voting group in favor of the amendment must exceed the votes cast against the amendment by the voting group.

     Our articles of incorporation require the approval of at least two-thirds of the total voting power of all outstanding shares of our voting stock to amend the provisions in Article Third relating to serial preferred stock, Article Fifth relating to the election of our directors, including number, classification, term, and nomination procedure, and Article Tenth relating to this voting requirement.

     ARS § 10-1020 provides that the Board of Directors may amend the corporation’s bylaws unless either: (i) the articles or applicable law reserves this power exclusively to shareholders in whole or in part or (ii) the shareholders in amending or repealing a particular bylaw provide expressly that the Board may

35

not amend or repeal that bylaw. An Arizona corporation’s shareholders may amend the corporation’s bylaws even though they may also be amended by the Board of Directors. Our bylaws may not be amended or repealed without the vote of a majority of the Board of Directors or the affirmative vote of a majority of votes cast on the matter at a meeting of shareholders.

DESCRIPTION OF THE PURCHASE CONTRACTS

     We may issue, from time to time, purchase contracts, including contracts obligating holders to purchase from us and us to sell to the holders, a specified principal amount of debt securities or a specified number of shares of common stock or preferred stock or any of the other securities that we may sell under this prospectus (or a range of principal amount or number of shares pursuant to a predetermined formula) at a future date or dates. The consideration payable upon settlement of the purchase contracts may be fixed at the time the purchase contracts are issued or may be determined by a specific reference to a formula set forth in the purchase contracts. The purchase contracts may be issued separately or as part of units consisting of a purchase contract and other securities or obligations issued by us or third parties, including United States treasury securities, securing the holders’ obligations to purchase the relevant securities under the purchase contracts. The purchase contracts may require us to make periodic payments to the holders of the purchase contracts or units or vice versa, and the payments may be unsecured or prefunded on some basis. The purchase contracts may require holders to secure their obligations under the purchase contracts in a specified manner and in certain circumstances we may deliver newly issued prepaid purchase contracts, often known as prepaid securities, upon release to a holder of any collateral securing such holder’s obligations under the original purchase contract.

     The applicable prospectus supplement will describe the terms of any purchase contracts or purchase units and, if applicable, such other securities or obligations. The description in the prospectus supplement will not necessarily be complete and will be qualified in its entirety by reference to the purchase contracts, and, if applicable, collateral arrangements and depositary arrangements, relating to the purchase contracts.

DESCRIPTION OF UNITS

     We may, from time to time, issue units comprised of one or more of the other securities that may be offered under this prospectus, in any combination. Each unit may be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately at any time, or at any time before a specified date.

     Any applicable prospectus supplement will describe:

• the material terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;

• any material provisions relating to the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and

• any material provisions of the governing unit agreement that differ from those described above.

PLAN OF DISTRIBUTION

     We may sell the securities to one or more underwriters for public offering and sale by them or may sell the securities to investors through agents or dealers. Any underwriter or agent involved in the

36

offer and sale of the securities will be named in the applicable prospectus supplement. We also reserve the right to sell securities directly to investors on our own behalf in those jurisdictions where we are authorized to do so.

     Underwriters may offer and sell the securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices. We also may, from time to time, authorize underwriters acting as our agents to offer and sell the securities upon the terms and conditions set forth in any prospectus supplement. In connection with the sale of the securities, underwriters may be deemed to have received compensation from us in the form of underwriting discounts or commissions and may also receive commissions from purchasers of the securities for whom they may act as agent.

     If a dealer is utilized in the sale of the securities in respect of which this prospectus is delivered, we may sell the securities to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the time of resale.

     Any underwriting compensation paid by us to underwriters or agents in connection with the offering of the securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable prospectus supplement. Underwriters, dealers and agents participating in the distribution of the securities may be deemed to be underwriters under the Securities Act, and any discounts and commissions received by them and any profit realized by them on resale of the securities may be deemed to be underwriting discounts and commissions under the Securities Act. Underwriters, dealers and agents may be entitled under agreements with us to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by us for certain expenses. Unless otherwise indicated in the prospectus supplement, any agreement we enter into with the underwriters will provide that the obligations of any underwriters to purchase the securities will be subject to certain conditions precedent and the underwriter or underwriters are obligated to purchase all of the securities offered in the prospectus supplement if any are purchased.

     In connection with underwritten offerings of securities, underwriters may over-allot or effect transactions that stabilize, maintain or otherwise affect the market price of the offered securities at levels above those that might otherwise prevail in the open market, including by entering stabilizing bids, effecting syndicate covering transactions or imposing penalty bids, each of which is described below.

• A stabilizing bid means the placing of any bid, or the effecting of any purchase, for the purpose of pegging, fixing or maintaining the price of a security.

• A syndicate covering transaction means the placing of any bid on behalf of the underwriting syndicate or the effecting of any purchase to reduce a short position created in connection with the offering.

• A penalty bid means an arrangement that permits the managing underwriter to reclaim a selling concession from a syndicate member in connection with the offering when offered securities originally sold by the syndicate member are purchased in syndicate covering transactions.

     These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise. Underwriters are not required to engage in any of these activities, or to continue the activities if commenced.

     The securities may also be offered and sold, if so indicated in the prospectus supplement, in connection with a remarketing upon their purchase, in accordance with a redemption or repayment pursuant to their terms, or otherwise, by one or more firms (“remarketing firms”), acting as principals for their own accounts or as agents for us. Any remarketing firm will be identified and the terms of its

37

agreement, if any, with us and its compensation will be described in the applicable prospectus supplement. Remarketing firms may be deemed to be underwriters in connection with the securities remarketed by them. Remarketing firms may be entitled under agreements which may be entered into with us to indemnification by us against certain liabilities, including liabilities under the Securities Act.

     The securities may or may not be listed on a national securities exchange or a foreign securities exchange. No assurances can be given that there will be a market for any of the securities.

     One or more of the underwriters, and/or one or more of their respective affiliates, may be a lender under our credit agreements or those of our affiliates and may provide other commercial banking, investment banking and other services to us and/or our affiliates in the ordinary course of business.

     We may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those securities, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sales transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and will be identified in the applicable prospectus supplement.

EXPERTS

     The financial statements and the related financial statement schedule incorporated in this prospectus by reference from Pinnacle West Capital Corporation’s Current Report on Form 8-K filed December 20, 2004, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report (which report expresses an unqualified opinion and includes explanatory paragraphs relating to the change in 2003 in the method of accounting for non-trading derivatives, to the change in 2002 in the method of accounting for trading activities and to the change in 2001 in the method of accounting for derivatives and hedging activities), which is incorporated by reference herein, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

LEGAL OPINIONS

     Snell & Wilmer L.L.P., One Arizona Center, Phoenix, Arizona 85004, will opine on the validity of the offered securities. We currently anticipate that Pillsbury Winthrop LLP, 1540 Broadway, New York, New York 10036, will opine on the validity of the offered securities for any underwriters of securities. Snell & Wilmer L.L.P. may rely as to all matters of New York law upon the opinion of Pillsbury Winthrop LLP. Pillsbury Winthrop LLP may rely as to all matters of Arizona law upon the opinion of Snell & Wilmer L.L.P.

38

$500,000,000

PINNACLE WEST CAPITAL CORPORATION

DEBT SECURITIES

PREFERRED STOCK

COMMON STOCK

PURCHASE CONTRACTS

UNITS

PNW

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses Of Issuance And Distribution.

Securities and Exchange Commission registration fee	$	32,015
Printing, engraving, and postage expenses		10,000	*
Legal fees		150,000	*
Accounting fees		275,000	*
Rating Agency fees		216,000	*
Trustee’s fees and expenses		10,000	*
Blue Sky fees and expenses		30,000	*
Miscellaneous		6,985	*
Total	$	730,000	*

* Estimated.

Item 15. Indemnification Of Directors And Officers.

     The Arizona Business Corporation Act (the “ABCA”) permits extensive indemnification of present and former directors, officers, employees or agents of an Arizona corporation, whether or not authority for such indemnification is contained in the indemnifying corporation’s articles of incorporation or bylaws. Specific authority for indemnification of present and former directors and officers to the fullest extent permitted by applicable law is contained in Article VII of our bylaws. Such indemnification is mandatory.

     Under the ABCA, in order for a corporation to indemnify a director or officer, a majority of the corporation’s disinterested directors, special legal counsel, or the shareholders must find that the conduct of the individual to be indemnified was in good faith and that the individual reasonably believed that the conduct was in the corporation’s best interests (in the case of conduct in an “official capacity” with the corporation) or that the conduct was at least not opposed to the corporation’s best interests (in all other cases). In the case of any criminal proceeding, the finding must be to the effect that the individual had no reasonable cause to believe the conduct was unlawful. Indemnification is permitted with respect to expenses, judgments, fines, and amounts paid in settlement by such individuals. However, a corporation cannot indemnify a director in the cases noted in clause (ii) of the second sentence of the following paragraph. Broader indemnification is allowed, with certain limitations, for a director as provided in a corporation’s articles of incorporation and for an officer who is not also a director or where the basis on which the officer was made a party to the proceeding is an act or omission solely as an officer, as provided in the articles of incorporation, bylaws, a resolution of the board of directors or a contract.

     Indemnification under the ABCA is permissive, except in the event of a successful defense, in which case a director or officer must be indemnified against reasonable expenses, including attorneys’ fees, incurred in connection with the proceeding. In addition, the ABCA requires Arizona corporations to indemnify any “outside director” (a director who is not an officer, employee or holder of more than five percent of any class of the corporation’s stock or the stock of any affiliate of the corporation) against liability unless (i) the corporation’s articles of incorporation limit such indemnification, (ii) the director is adjudged liable in a proceeding by or in the right of the corporation or in any other proceeding charging improper financial benefit to the director, whether or not involving action in the director’s official capacity, in which the director was adjudged liable on the basis that the financial benefit was improperly received by the director, or (iii) a court determines, before payment to the outside director, that the director failed to meet the standards of conduct described in the preceding paragraph. With certain limitations, a court may also order that an individual be indemnified if the court finds that the individual is fairly and reasonably entitled to indemnification in light of all of the relevant circumstances, whether or not the

II-1

individual has met the standards of conduct in this and the preceding paragraph or was adjudged liable as described above.

     In connection with the offering made by the prospectus which is a part of this registration statement, as it may be amended or supplemented, the underwriters of the securities, pursuant to the relevant underwriting agreement, will severally agree to indemnify and hold harmless us, each of our directors, each of our officers who has signed this registration statement, and each person, if any, who controls us within the meaning of the Securities Act of 1933, as amended (the “Act”), against certain losses, claims, damages, or liabilities, including liabilities under the Act, that arise out of or are based upon written information furnished by such underwriters to us for use in this registration statement or in such prospectus.

     Insurance is maintained on a regular basis (and not specifically in connection with this offering) against liabilities arising on the part of directors and officers out of their performance in such capacities or arising on our part out of the foregoing indemnification provisions, subject to certain exclusions and to the policy limits.

     For information regarding our undertaking to submit to adjudication the issue of indemnification for violation of the securities laws, see Item 17 below.

Item 16. Exhibits.

Exhibit No.	Description
1.1	Form of Underwriting Agreement with respect to Debt Securities
*1.2	Form of Underwriting Agreement with respect to Preferred Stock
1.3	Form of Underwriting Agreement with respect to Common Stock
*1.4	Form of Underwriting Agreement with respect to Purchase Contracts
*1.5	Form of Underwriting Agreement with respect to Units
*4.1	Form of Senior Debt Securities
*4.2	Form of Subordinated Debt Securities
4.3	Form of Convertible Senior Debt Securities Indenture
*4.4	Form of Convertible Senior Debt Securities
4.5	Form of Convertible Subordinated Debt Securities Indenture
*4.6	Form of Convertible Subordinated Debt Securities
*4.7	Form(s) of Supplemental Indenture relating to Debt Securities
*4.8	Statement of Preferred Stock Designations
*4.9	Form of Preferred Stock Certificate
4.10	Form of Purchase Contract (including form of Purchase Contract Certificate)

II-2

Exhibit No.	Description
*4.11	Form of Unit Agreement (including Unit Certificate)
*4.12	Form of Common Stock Certificate
5.1	Opinion of Snell & Wilmer L.L.P.
5.2	Opinion of Pillsbury Winthrop LLP
12.1	Computation of Ratio of Earnings to Fixed Charges
12.2	Computation of Ratio of Combined Earnings to Fixed Charges and Preferred Stock Dividends
23.1	Consent of Snell & Wilmer L.L.P. (included in Opinion filed as Exhibit 5.1)
23.2	Consent of Pillsbury Winthrop LLP (included in Opinion filed as Exhibit 5.2)
23.3	Consent of Deloitte & Touche LLP
24.1	Powers of Attorney (contained within the signature page hereto)
25.1	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Indenture relating to the Senior Debt Securities
25.2	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Indenture relating to the Subordinated Debt Securities
25.3	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Indenture relating to the Convertible Senior Debt Securities
25.4	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Indenture relating to the Convertible Subordinated Debt Securities
25.5	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Purchase Contract Agreement

* To be filed by an amendment to the registration statement or incorporated by reference from a Current Report on Form 8-K.

     In addition to those Exhibits shown above, the Company hereby incorporates the following Exhibits pursuant to Rule 411 of Regulation C promulgated under the Act by reference to the filings set forth below:

II-3

Exhibit		Previously Filed		Date
No.	Description	as Exhibit:	File No.a	Effective
4.13	Articles of Incorporation, restated as of July 29, 1988	Exhibit 19.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1988	1-8962	11-14-88
4.14	Bylaws, amended as of June 23, 2004	Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004	1-8962	8-9-04
4.15	Amended and Restated Rights Agreement, dated as of March 26, 1999, between Pinnacle West Capital Corporation and BankBoston, N.A., as Rights Agent, including (i) as Exhibit A thereto the form of Amended Certificate of Designation of Series A Participating Preferred Stock of Pinnacle West Capital Corporation, (ii) as Exhibit B thereto the Form of Rights Certificate and (iii) as Exhibit C thereto the Summary of Right to Purchase Preferred Shares	4.1 to the Company’s March 22, 1999 Form 8-K Report	1-8962	4-19-99
4.16	Amendment to Rights Agreement effective as of January 1, 2002	4.1 to March 2002 Form 10-Q Report	1-8962	5-15-02
4.17	Indenture dated as of December 1, 2000 between the Company and The Bank of New York, as Trustee, relating to Senior Debt Securities	4.1 to the Company’s Registration Statement No. 333-52476	1-8962	12-21-00
4.18	First Supplemental Indenture dated as of March 15, 2001	4.1 to the Company’s Registration Statement No. 333-52476	1-8962	3-26-01
4.19	Second Supplemental Indenture dated as of November 1, 2003	4.20 to the Company’s Registration Statement No. 333-101457 by means of November 6, 2003 Form 8-K Report	1-8962	11-12-03
4.20	Indenture dated as of December 1, 2000	4.2 to the Company’s	1-8962	12-21-00
	between the Company and The Bank of New York, as Trustee, relating to subordinated Debt Securities	Registration Statement No. 333-52476

^a Reports filed under File No. 1-8962 were filed in the office of the Securities and Exchange Commission located in Washington, D.C.

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Item 17. Undertakings.

     The undersigned registrant hereby undertakes:

     (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

     (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

     (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

     (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided however, that paragraphs (1)(i) and (1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

     (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

     (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (5) That, insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the provisions referred to in Item 15 of this Registration Statement, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-5

SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this registration statement on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Phoenix, State of Arizona on the 21st day of December, 2004.

PINNACLE WEST CAPITAL CORPORATION
By:	/s/ William J. Post
	(William J. Post, Chairman of the
	Board and Chief Executive Officer)

     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Each person whose signature appears below hereby authorizes Donald E. Brandt, Barbara M. Gomez and Nancy C. Loftin, and each of them, as attorneys-in-fact, to sign in his or her name and behalf, individually and in each capacity designated below, and to file any amendments, including post-effective amendments, to this registration statement.

Signature	Title	Date
/s/ William J. Post	Principal Executive	December 21, 2004
	Officer and Director
(William J. Post,
Chairman of the Board
and Chief Executive Officer
/s/ Jack E. Davis	Director	December 21, 2004
(Jack E. Davis,
President and Chief Operating Officer)
/s/ Donald E. Brandt
	Principal Accounting	December 21, 2004
(Donald E. Brandt,	Officer and
Executive Vice President and Chief	Principal Financial Officer
Financial Officer)
/s/ Edward N. Basha, Jr.	Director	December 21, 2004
(Edward N. Basha, Jr.)
/s/ Michael L. Gallagher	Director	December 21, 2004
(Michael L. Gallagher)
/s/ Pamela Grant	Director	December 21, 2004
(Pamela Grant)
/s/ Roy A. Herberger, Jr.	Director	December 21, 2004
(Roy A. Herberger, Jr.)

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Signature	Title	Date
/s/ Martha O. Hesse	Director	December 21, 2004
(Martha O. Hesse)
/s/ William S. Jamieson, Jr.	Director	December 21, 2004
(William S. Jamieson, Jr.)
/s/ Humberto S. Lopez	Director	December 21, 2004
(Humberto S. Lopez)
/s/ Kathryn L. Munro	Director	December 21, 2004
(Kathryn L. Munro)
/s/ Bruce J. Nordstrom	Director	December 21, 2004
(Bruce J. Nordstrom)
/s/ William L. Stewart	Director	December 21, 2004
(William L. Stewart)

II-7

Exhibit No.	Index to Exhibits
1.1	Form of Underwriting Agreement with respect to Debt Securities
*1.2	Form of Underwriting Agreement with respect to Preferred Stock
1.3	Form of Underwriting Agreement with respect to Common Stock
*1.4	Form of Underwriting Agreement with respect to Purchase Contracts
*1.5	Form of Underwriting Agreement with respect to Units
*4.1	Form of Senior Debt Securities
*4.2	Form of Subordinated Debt Securities
4.3	Form of Convertible Senior Debt Securities Indenture
*4.4	Form of Convertible Senior Debt Securities
4.5	Form of Convertible Subordinated Debt Securities Indenture
*4.6	Form of Convertible Subordinated Debt Securities
*4.7	Form(s) of Supplemental Indenture relating to Debt Securities
*4.8	Statement of Preferred Stock Designations
*4.9	Form of Preferred Stock Certificate
4.10	Form of Purchase Contract (including form of Purchase Contract Certificate)
*4.11	Form of Unit Agreement (including Unit Certificate)
*4.12	Form of Common Stock Certificate
5.1	Opinion of Snell & Wilmer L.L.P.
5.2	Opinion of Pillsbury Winthrop LLP
12.1	Computation of Ratio of Earnings to Fixed Charges
12.2	Computation of Ratio of Combined Earnings to Fixed Charges and Preferred Stock Dividends
23.1	Consent of Snell & Wilmer L.L.P. (included in Opinion filed as Exhibit 5.1)
23.2	Consent of Pillsbury Winthrop LLP (included in Opinion filed as Exhibit 5.2)
23.3	Consent of Deloitte & Touche LLP
24.1	Powers of Attorney (contained within the signature page hereto)
25.1	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Indenture relating to the Senior Debt Securities
25.2	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Indenture relating to the Subordinated Debt Securities
25.3	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Indenture relating to the Convertible Senior Debt Securities
25.4	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Indenture relating to the Convertible Subordinated Debt Securities
25.5	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, under the Purchase Contract Agreement

* To be filed by an amendment to the registration statement or incorporated by reference from a Current Report on Form 8-K.

For a description of the Exhibits incorporated in this filing by reference, see Item 16.

EX-1.1

Exhibit 1.1

PINNACLE WEST CAPITAL CORPORATION

UNDERWRITING AGREEMENT

[__________], [____]

[__________]
[__________]
[__________]

Dear Sir or Madam:

     1. Introduction. Pinnacle West Capital Corporation, an Arizona corporation (the “Company”), proposes to issue and sell to the Underwriters (as defined herein) $[____],000,000 aggregate principal amount of the Company’s Senior Notes due [____], [__________] (the “Notes”). The term “Underwriters”, as used herein, shall be deemed to mean [_____________] (the “Representative”) and the other several persons, firms or corporations named in Schedule A hereto (including all substituted Underwriters under the provisions of Section 7 hereof). All obligations of the Underwriters hereunder are several and not joint.

2. Representations and Warranties of the Company. In connection with the offering of the Notes, the Company represents and warrants to, and agrees with, the several Underwriters that:

          (a) Two registration statements on Form S-3 (File Nos. 333-101457 and 333-[__________]) in respect of the Notes (and certain other securities) have been filed with the Securities and Exchange Commission (the “Commission”) (the earliest of such registration statements being sometimes called the “First Registration Statement” and the later the “Second Registration Statement”) and have become effective. Each such registration statement, as amended as of the date hereof, together with any related Rule 462(b) registration statement or amendment thereto, including all exhibits thereto and the documents incorporated by reference in the prospectus contained in the registration statements, are hereinafter collectively called the “Registration Statement” and the combined prospectus included in the Second Registration Statement when it became effective, as supplemented as of the date hereof, including by a Prospectus Supplement (as defined below), to reflect the terms of the Notes and the terms of the offering thereof, including all material incorporated by reference therein, is hereinafter referred to as the “Prospectus.” The details of the terms of the offering of the Notes shall be reflected in the prospectus supplement relating to the offering of the Notes and filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 4(a) of this Agreement (the “Prospectus Supplement”). Any reference herein to any preliminary prospectus relating to the Notes, the Prospectus, or any amendment or supplement thereto, shall be deemed to refer to and include the documents incorporated by reference therein pursuant to the applicable form under the Act, as of the date of such preliminary prospectus, the Prospectus,

or any amendment or supplement thereto, as the case may be; any reference to any amendment or supplement to any preliminary prospectus relating to the Notes, the Prospectus, or any amendment or supplement thereto, shall be deemed to refer to and include any documents filed after the date of such preliminary prospectus, the Prospectus, or any amendment or supplement thereto, as the case may be, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and incorporated by reference in such preliminary prospectus relating to the shares, the Prospectus, or any amendment or supplement thereto, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Registration Statement that is incorporated by reference in the Registration Statement.

          (b) Each part of the Registration Statement relating to the Notes, when such part became effective, conformed in all material respects to the requirements of the Securities Act of 1933 (the “Act”), the Trust Indenture Act of 1939 (the “Trust Indenture Act”) and the rules and regulations (the “Rules and Regulations”) of the Commission and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; any preliminary prospectus filed pursuant to Rule 424(b) under the Act complied when so filed in all material respects with the Act and the Rules and Regulations. On the date of the Prospectus, the Registration Statement and the Prospectus will conform in all material respects to the requirements of the Act, the Trust Indenture Act and the Rules and Regulations, and at such date neither the Registration Statement nor the Prospectus will include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, however, that the foregoing does not apply to statements in or omissions from any such documents based upon written information furnished to the Company by any Underwriter specifically for use therein. The Company hereby consents to the use of the Prospectus in connection with the sale and distribution of the Notes by the Underwriters.

          (c) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Arizona, and is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, and where the failure to be so qualified would have a material adverse effect on the current or future consolidated financial position, stockholders’ equity or results of operation of the Company and its consolidated subsidiaries (“Material Adverse Effect”).

          (d) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change, or any development involving a prospective material adverse change, in or affecting the consolidated financial position, stockholders’ equity or results of operations of the Company and its consolidated subsidiaries, other than as set forth or contemplated in the Prospectus.

          (e) The Indenture dated as of December 1, 2000 between the Company and The Bank of New York, as trustee, as supplemented and amended by various supplemental indentures to the date hereof (the “Senior Note Indenture”) has been duly qualified under the

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Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general principles of equity.

          (f) The [__________] Supplemental Indenture, to be dated as of [__________], [____], establishing the terms of the Notes (the “[__________] Supplemental Indenture” and together with the Senior Note Indenture, the “Indenture”) has been duly authorized by the Company and, when executed and delivered by the Company, will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general principles of equity. The [__________] Supplemental Indenture will be executed by the Company on or prior to the Closing Date.

          (g) The Notes have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Underwriters in accordance with the terms of this Agreement, will be entitled to the benefits of the Indenture, will be valid and binding obligations of the Company, in each case enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general principles of equity and will conform to the description of the Notes contained in the Prospectus.

          (h) The issuance, execution, delivery, and sale of the Notes by the Company and the compliance by the Company with all of the provisions of this Agreement, the Indenture and the Notes and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, nor will such action result in any violation of the provisions of the Articles of Incorporation or By-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Notes or the consummation by the Company of the transactions contemplated by this Agreement, except the registration of the Notes under the Act, the qualification of the Indenture under the Trust Indenture Act, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Notes by the Underwriters.

          (i) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries, is a party which, if determined adversely to the Company or any of its subsidiaries, would have a Material Adverse Effect and, to the Company’s knowledge, no such proceedings are threatened by governmental authorities or others.

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          (j) Except as disclosed in the Prospectus, the operations and properties of the Company, Arizona Public Service Company (“APS”) and Pinnacle West Energy Corporation (“PWEC”) comply in all material respects with all applicable foreign, federal, state or local laws and regulations and any decision or order of any governmental agency or body or any court relating to the environment, the effect of the environment on human health or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), except where the necessity of compliance therewith is being contested in good faith by appropriate proceedings or such noncompliance with Environmental Laws is not reasonably likely to have a Material Adverse Effect.

          (k) The Company is not and, after giving effect to the offering and sale of the Notes, will not be an “investment company”, as such term is defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

          (l) The financial statements included in the Registration Statements and the Prospectus present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis (except as disclosed therein); the schedules included in the Registration Statements present fairly in all material respects the information required to be stated therein; and the Company and its subsidiaries maintain systems of internal accounting controls and processes sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles; and (iii) assets are safeguarded from loss or unauthorized use.

          (m) This Agreement has been duly authorized, executed and delivered by the Company.

          (n) The Company (i) is a “holding company”, as such term is defined in the Public Utility Holding Company Act of 1935, as amended, and (ii) is currently exempt from all provisions of the Public Utility Holding Company Act of 1935, as amended, except Section 9(a)(2) thereof.

     3. Purchase, Sale and Delivery of Notes. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Underwriters, and the Underwriters agree, severally and not jointly, to purchase from the Company, the principal amount of the Notes set forth opposite the names of the Underwriters in Schedule A hereto at the price specified in Schedule B hereto. Payment for the Notes shall be made to the Company in Federal or other funds immediately available at the time (the “Closing Date”) and place set forth in Schedule B hereto, upon delivery to the Representative of the Notes, in fully registered global form registered in the name of Cede & Co., for the respective accounts of the several Underwriters of the Notes.

     The Company is advised by the Underwriters that they propose to make a public offering of the Notes as soon after this Agreement has been entered into as in the judgment of the

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Representative is advisable. The terms of the public offering of the Notes are set forth in the Prospectus.

     4. Covenants of the Company. The Company covenants and agrees with each Underwriter that:

          (a) The Company will file the Prospectus with the Commission pursuant to and in accordance with Rule 424(b) under the Act not later than the second business day following the execution of this Agreement.

          (b) The Company will advise the Representative promptly of any proposed amendment or supplementation of the Registration Statement or the Prospectus prior to the completion of the offering of the Notes as contemplated herein. The Company will also advise the Representative of the institution by the Commission of any stop order proceedings in respect of the Registration Statement or of any part thereof prior to the completion of the offering of the Notes as contemplated herein, and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued.

          (c) If, at any time when a prospectus relating to the Notes is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend or supplement the Registration Statement or the Prospectus to comply with applicable law, the Company promptly will prepare and file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses the Representative will furnish to the Company) to which Notes have been sold by the Representative on behalf of the Underwriters and to any other dealers upon request, an amendment or supplement that will correct such statement or omission or an amendment that will effect such compliance. Neither the Representative’s consent to, nor the Underwriters’ delivery of, any such amendment or supplement shall constitute a waiver of any conditions set forth in Section 5 hereof.

          (d) As soon as practicable, but not later than 18 months, after the date of this Agreement, the Company will make generally available to its security holders an earning statement or statements (which need not be audited) covering a period of at least 12 months beginning after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), which will satisfy the provisions of Section 11 (a) of the Act and the rules and regulations thereunder.

          (e) The Company will furnish to the Representative such copies of the Registration Statement (including one copy of the Registration Statement for the Representative and for the counsel for the Underwriters, which is signed and includes all exhibits), any related preliminary prospectus and the Prospectus, and all amendments or supplements to such documents, as may be reasonably requested.

          (f) The Company will arrange or cooperate in arrangements for the qualification of the Notes for sale under the securities or Blue Sky laws of such jurisdictions as

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the Representative designates and will continue such qualifications in effect so long as required for the distribution of the Notes, provided that the Company shall not be required to qualify as a foreign corporation in any State, to consent to service of process in any State other than with respect to claims arising out of the offering or sale of the Notes, or to meet other requirements deemed by it to be unduly burdensome.

          (g) The Company will pay all expenses incident to the performance of its obligations under this Agreement, and will reimburse the Underwriters for any reasonable expenses (including reasonable fees and disbursements of counsel) incurred by them in connection with the qualification of the Notes under the laws of such jurisdictions as the Representative shall designate, and the printing of memoranda relating thereto, and for any fees charged by investment rating agencies for the rating of the Notes. It is understood, however, that, except as provided in this Section 4(g) and Section 6 and 7, the Underwriters will pay all of their own costs and expenses.

          (h) For the period beginning on the date of this Agreement and ending on the Closing Date, the Company will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any additional debt securities of the Company (or warrants to purchase debt securities of the Company) that mature more than one year after the Closing Date and that are substantially similar to the Notes, without the prior written consent of the Representative.

     5. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Notes on the Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder, and to the following additional conditions precedent:

          (a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date there shall not have occurred any downgrading or withdrawal, nor shall any notice have been given of any intended or potential downgrading or withdrawal or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company’s securities by Moody’s Investor Service’s, Inc. or Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.; and

          (b) At the Closing Date the Notes shall be rated at least [____] by S&P and [___] by Moody’s, and the Company shall have delivered to the Underwriters a letter, dated the Closing Date, from each such rating agency, or other evidence reasonably satisfactory to the Underwriters, confirming that the Notes have been assigned such ratings.

          (c) On the Closing Date, the Underwriters shall have received a letter, dated the Closing Date, of Deloitte & Touche confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating to the effect that:

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          (i) in their opinion the financial statements and any schedules and any summary of earnings examined by them and included in the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations;

          (ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 100, Interim Financial Information, on any unaudited financial statements included in the Registration Statement;

          (iii) on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that:

               (A) the unaudited financial statements, if any, and any summary of earnings included in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations or any material modifications should be made to such unaudited financial statements and summary of earnings for them to be in conformity with generally accepted accounting principles;

               (B) if any unaudited “capsule” information is contained in the Prospectus, the unaudited consolidated operating revenues, gross income, net income and net income per share amounts or other amounts constituting such “capsule” information and described in such letter do not agree with the corresponding amounts set forth in the unaudited consolidated financial statements or were not determined on a basis substantially consistent with that of the corresponding amounts in the audited statements of income;

               (C) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of such letter, there was any change in the amounts of common stock, redeemable preferred stock, or non-redeemable preferred stock of the Company or any increase, exceeding $10,000,000, in long-term debt of the Company or, at the date of the most recent available unaudited financial statements there was any decrease in net assets as compared with amounts shown in the most recent financial statements incorporated by reference in the Registration Statement; or

               (D) for the period from the closing date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year and with the period of corresponding length ended the date of the latest income statement included in the Prospectus, in the amounts of total revenues or net income, except in all cases

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for increases or decreases which result from the declaration or payment of dividends;

except in all cases set forth in clauses (C) and (D) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and

          (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Prospectus (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company’s accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter.

All financial statements and schedules included in material incorporated by reference into the Prospectus shall be deemed included in the Prospectus for purposes of this subsection.

          (d) No stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued, and no order directed to the adequacy of any document incorporated by reference in the Prospectus, and no proceedings for either purpose shall have been instituted or threatened or, to the knowledge of the Company or the Underwriters, shall be contemplated by the Commission.

          (e) Subsequent to the execution of this Agreement and prior to the Closing Date, (i) there shall not have occurred any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Company or its subsidiaries, (ii) there shall not have occurred a suspension of trading of any securities of the Company by the Commission or the New York Stock Exchange or a suspension or material limitation in trading in securities generally on the New York Stock Exchange, (iii) there shall not have occurred a general moratorium on commercial banking activities in New York declared by either Federal or New York State authorities, (iv) no rating of any of the Company’s debt securities shall have been lowered and there shall have been no public announcement that any such debt securities have been placed on CreditWatch, Watchlist, or under any similar surveillance or review, in each case with negative implications, by any recognized rating agency, (v) there shall not have occurred any major disruption of settlement of securities or clearance services in the United States, and (vi) there shall not have occurred any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of the Representative, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the sale of and payment for the Notes. If the Underwriters elect not to purchase the Notes as a result of the occurrence of one of the events specified in this Section 5(e), the Representatives will promptly notify the Company.

          (f) The Underwriters shall have received an opinion of Snell & Wilmer L.L.P., counsel for the Company, dated the Closing Date, to the effect that:

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          (i) The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Arizona with the corporate power and authority to carry on its business as described in the Prospectus;

          (ii) APS and PWEC have been duly incorporated and are validly existing as corporations in good standing under the laws of their jurisdictions of incorporation; APS and PWEC are duly qualified as a foreign corporations to do business, and are in good standing, in the States of (a) California, Montana, New Mexico, Oregon, Texas, Washington and Wyoming and (b) California, Nevada and New Mexico, respectively;

          (iii) To such counsel’s knowledge, except as described in the Prospectus, there are no pending or overtly threatened actions or proceedings before any court or governmental agency in which the Company or any of its subsidiaries is a party or in which any property of the Company or any of its subsidiaries is the subject, which are likely to have a materially adverse effect on the current or future consolidated financial position, stockholders equity or results of operations of the Company and its consolidated subsidiaries. With respect to the matters discussed in the immediately preceding sentence, the standard of materiality considered is that provided for in Item 103 (Reg. § 229.103) of Regulation S-K promulgated under the Act;

          (iv) This Agreement has been duly authorized, executed and delivered by the Company;

          (v) The execution and delivery by the Company of, and the issue and sale of the Notes by the Company and the compliance by the Company with all of the provisions of this Agreement, the Indenture and the Notes do not contravene or constitute a default under (a) the Articles or the By-laws of the Company, or (b) any contractual or legal restriction contained in any document listed in the Certificate (as defined in and attached to such opinion). In giving the opinion expressed in clause (b) of the immediately preceding sentence, such counsel may express no opinion regarding compliance by the Company or any subsidiary with any financial covenants required to be maintained by the Company or any subsidiary under any agreement or document;

          (vi) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Notes or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Notes, the qualification of the Indenture under the Trust Indenture Act, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws (as to which such counsel shall not be required to express an opinion);

          (vii) The statements set forth in the Prospectus under the caption “Description of Debt Securities”, insofar as they purport to constitute a summary of the terms of the Notes, are accurate, complete and fair in material respects;

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          (viii) The Company is not an “investment company”, as such term is defined in the Investment Company Act;

          (ix) The documents incorporated by reference in the Prospectus as amended or supplemented as of the Closing Date (other than financial statements and schedules and other financial or statistical data included or incorporated by reference therein or omitted therefrom, as to which such counsel expresses no opinion), when they became effective or were filed with the Commission, as the case may be, complied as to form in all material respects with the requirements of the Act or the Exchange Act, as applicable, and the Rules and Regulations of the Commission thereunder;

          (x) The Registration Statement and the Prospectus, and each amendment or supplement thereto, as of the Closing Date (other than financial statements and schedules and other financial, statistical or accounting data included or incorporated by reference therein or omitted therefrom, as to which such counsel expresses no opinion) comply as to form in all material respects with the requirements of the Act and the Rules and Regulations thereunder. Although such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statements or the Prospectus, except for those referred to in the opinion in subsection (vii) hereof, such counsel has no reason to believe that the Registration Statement, as of its effective date, or the Prospectus, as of the date of the Prospectus Supplement, or in either case, as of the Closing Date, or any amendment thereto, as of the Closing Date, excluding in all cases financial statements and schedules and other financial, statistical or accounting data included or incorporated by reference therein or omitted therefrom, as to which such counsel expresses no opinion, contained any untrue statement of material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading. To such counsel’s knowledge, there are no legal or governmental proceedings required to be described in the Prospectus that are not described as required, nor any contracts or documents of a character required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described and filed as required (it being understood that such counsel need express no opinion as to the statements of eligibility and qualification of the trustee under the Indenture);

          (xi) the Indenture has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general principles of equity; and

          (xii) the Notes have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Underwriters in accordance with the terms of this Agreement, will be entitled to the benefits of the Indenture, and will be valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general principles of equity.

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     Whenever the opinions required by this Agreement are stated to be “to the knowledge of such counsel” or “to such counsel’s knowledge”, such statements are intended to signify that those attorneys in the firm responsible for preparing the opinion or who have given substantive attention to the transactions contemplated by this Agreement, after consultation with such other attorneys in such firm who have worked on legal matters related to the Company and its subsidiaries as they considered appropriate, do not have current actual knowledge of the inaccuracy of such statement. However, except where expressly stated otherwise, such counsel need not undertake any special or independent investigation to determine the existence or absence of such facts, and no inference as to such counsel’s knowledge of the existence or absence of such facts should be drawn from its representation of the Company in connection with this transaction or otherwise.

     In giving such opinion, Snell & Wilmer L.L.P. may rely to the extent such counsel deems appropriate upon certificates of the Company as to any factual matters upon which any such opinions are based and may rely on the opinion of Underwriters’ counsel as to all matters governed by the law of the State of New York, and further may rely upon the opinion of Morgan, Lewis & Bockius LLP, delivered to you at the Closing Date, as to all matters under the Public Utility Holding Company Act of 1935, as amended, and the Federal Power Act, as amended.

          (g) The Underwriters shall have received from counsel for the Underwriters such opinion or opinions, dated the Closing Date, with respect to such matters as the Underwriters may reasonably require and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon any such matters. In rendering such opinion, such counsel may rely as to the incorporation of the Company and all other matters governed by the laws of the State of Arizona upon the opinion of Snell & Wilmer L.L.P.

          (h) The Underwriters shall have received a certificate of the President or any Vice President and a principal financial or accounting officer of the Company, dated the Closing Date, in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to such Closing Date, that no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission, and that, subsequent to the date of the most recent financial statements in the Prospectus, there has been no material adverse change in, or any development involving a prospective material adverse change, in or affecting the consolidated financial position, stockholders’ equity or results of operations of the Company and its consolidated subsidiaries, otherwise than as set forth or contemplated in the Prospectus or as described in such certificate).

          (i) The Company will furnish the Underwriters with such conformed copies of such opinions, certificates, letters, and documents as may be reasonably requested.

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     6. Indemnification.

          (a) The Company will indemnify and hold harmless each Underwriter and each person, if any, who controls such Underwriter within the meaning of the Act, against any losses, claims, damages or liabilities, joint or several, to which such Underwriter or such controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of the Registration Statement relating to the Notes, when such part became effective, any preliminary prospectus relating the Notes, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, not misleading; and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or such controlling person, as incurred, in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter specifically for use therein and provided, further, that with respect to any untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary prospectus relating to the Notes or the Prospectus, as amended or supplemented, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased the Notes concerned, insofar as such indemnity relates to an untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary prospectus relating to the Notes or the Prospectus, but eliminated or remedied prior to the consummation of such sale in the Prospectus, or any amendment or supplement thereto, furnished on a timely basis by the Company to the Underwriters, unless a copy of the Prospectus (in the case of such a statement or omission made in such preliminary prospectus) or such amendment or supplement (in the case of such a statement or omission made in the Prospectus) (excluding, however, any document then incorporated or deemed to be incorporated by reference in the Prospectus or such amendment or supplement) is furnished by such Underwriter to such person (i) with or prior to the written confirmation of the sale involved or (ii) as soon as available after such written confirmation (if it is made available to the Underwriters prior to settlement of such sale). This indemnity agreement will be in addition to any liability which the Company may otherwise have.

          (b) Each Underwriter will severally indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, and each person, if any, who controls the Company within the meaning of the Act, against any losses, claims, damages, or liabilities to which the Company or any such director, officer, or controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of the Registration Statement relating to the Notes, when such part became effective, any preliminary prospectus relating to the shares, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated

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therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter specifically for use therein; and will reimburse any legal or other expenses reasonably incurred, as incurred, by the Company or any such director, officer, or controlling person in connection with investigating or defending any such loss, claim, damage, liability, or action. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have.

          (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a) and (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, without the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its assumption of the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties. Such firm shall be designated in writing by the Representative, in the case of parties indemnified pursuant to Section 6(a) above, and by the Company, in the case of parties indemnified pursuant to Section 6(b) above. An indemnifying party shall not be liable for any settlement of a claim or action effected without its written consent, which shall not be unreasonably withheld.

          (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party for any loss, claim, damage, liability, or action described in subsection (a) or (b) above, then each indemnifying party shall contribute to the

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amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above on the following basis: (i) if such loss, claim, damage, liability, or action arises under subsection (a) above, then (A) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Notes or (B) if the allocation provided by clause (A) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (A) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations; and (ii) if such loss, claim, damage, liability, or action arises under subsection (b) above, then in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Underwriter on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. For the purposes of clause (i) above, the relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters. For the purposes of clauses (i) and (ii) above, the relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and each of the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Notes underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint.

     7. Default of Underwriters; Termination by Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Notes pursuant to this Agreement and the principal amount of Notes that such defaulting Underwriter or Underwriters agreed but failed to purchase is ten percent (10%) or less of the principal amount of Notes that the Underwriters are obligated to purchase, the Underwriters may make arrangements satisfactory to the Company for the purchase of such Notes by other persons, including any of the Underwriters, but if no such arrangements are made by the Closing Date the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder to purchase the Notes that

14

such defaulting Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or Underwriters so default and the principal amount of Notes with respect to which such default or defaults occur is more than the above-described amount and arrangements satisfactory to the remaining Underwriters and the Company for the purchase of such Notes by other persons are not made within thirty-six hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company, except as provided in Section 8. In any such case either the Representative or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. As used in this Agreement, the term “Underwriter” includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default.

     If this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company shall not be liable to any Underwriter or to any member of any selling group for the loss of anticipated profits from the transactions contemplated by this Agreement. However, in such an event, the Company will reimburse the Underwriters for all out of pocket expenses (including the reasonable fees and disbursements of their counsel) reasonably incurred by the Underwriters in connection with this Agreement and the offering contemplated hereunder; provided, however, that if the Notes are not delivered by or on behalf of the Company solely as a result of the failure to satisfy the condition set forth in Section 5(e) hereof, the Company shall have no liability to the Underwriters except as provided in Sections 4(g) and 6 of this Agreement.

     8. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties, and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Underwriters or the Company or any of its officers or directors or any controlling person, and will survive delivery of and payment for the Notes. If this Agreement is terminated pursuant to Section 7, or if for any reason a purchase pursuant to this Agreement is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 4 and the respective obligations of the Company and the Underwriters pursuant to Section 6 shall remain in effect.

     9. Notices. All communications hereunder relating to any offering of Notes will be in writing, and, if sent to the Underwriters, may be mailed, delivered, or telecopied and confirmed to the Representative, c/o [__________],[__________],[__________], [____] [__________], Attention: [__________] (fax: [__________]) provided, however, that any notice to an Underwriter pursuant to Section 6 will be mailed, delivered, or telecopied and confirmed to each such Underwriter at its own address. All communications hereunder to the Company shall be mailed to the Company, Attention: Treasurer, at P.O. Box 53999, Phoenix, Arizona 85072-3999, or delivered, or telecopied and confirmed to the Company at 400 North Fifth Street, Phoenix, Arizona 85004 (fax: 602-250-5640).

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     10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and the Underwriter or Underwriters as are named in Schedule A hereto and their respective successors and the officers and directors and controlling persons referred to in Section 6, and no other person will have any right or obligation hereunder.

     11. Representation of Underwriters. The Representative may act for the Underwriters in connection with the offering contemplated by this Agreement, and any action under this Agreement taken by the Representative will be binding upon the Underwriters.

     12. Execution in Counterpart. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute a single instrument.

     13. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.

     14. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.

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     If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicate hereof, whereupon it will become a binding agreement between the Company and the Underwriters in accordance with its terms.

	Very truly yours,
	PINNACLE WEST CAPITAL CORPORATION
	By:
		Name: Barbara M. Gomez
		Title: Vice President and Treasurer
By: [__________]
[__________]
[__________].

By:
	Name: Title:

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Schedule A

Underwriter	Principal Amount of Notes
[__________]	$[__________]
[__________]	[__________]
[__________]	[__________]
Total	$[__________]

Schedule B

Underwriting Agreement dated [__________], [____]

Registration Statement No. 333-[__________]

Lead Underwriter and Address:

[__________]
[__________]
[__________]

Designation:	Senior Notes due [__________], [_____]
Principal Amount:	$[_____],000,000
Date of Maturity:	[__________], [_____]
Interest Rate for
initial Rate Period:	[_____]
Interest Payment Dates:	[__________] and [__________] of each year,
	commencing [__________], [_____]
Interest Determination
Dates:	[__________] and [__________]
Purchase Price:	[_____]% of the principal amount thereof
Public Offering Price:	[_____]% of the principal amount thereof, plus
	accrued interest, if any, from the date of
	original issuance thereof
Closing Date and Location:	[__________], [_____]
	Pinnacle West Capital Corporation
	400 North Fifth Street
	Phoenix, Arizona 85004

EX-1.3

EXHIBIT 1.3

PINNACLE WEST CAPITAL CORPORATION

Common Stock

UNDERWRITING AGREEMENT

[____________], [____]

[____________]
[____________]

As Representatives of the Several Underwriters

c/o [____________]
[____________]
[____________]

Dear Sir or Madam:

     1. Introduction. Pinnacle West Capital Corporation, an Arizona corporation (the “Company”), proposes to issue and sell to [____________] (the “Representative”) and the other several Underwriters named in Schedule A hereto (collectively, the “Underwriters”) an aggregate of [____________] shares (the “Firm Shares”) and, at the election of the Underwriters, up to [____________] additional shares (the “Optional Shares”) of Common Stock, no par value per share (the “Stock”) of the Company (the Firm Shares and the Optional Shares that the Underwriters elect to purchase being collectively called the “Shares”). All obligations of the Underwriters hereunder are several and not joint.

     2. Representations and Warranties of the Company. In connection with each offering of the Shares, the Company represents and warrants to, and agrees with, the several Underwriters that:

          (a) Two registration statements on Form S-3 (File Nos. 333-101457 and 333-[____________]) in respect of the Shares (and certain other securities) have been filed with the Securities and Exchange Commission (the “Commission”) (the earliest of such registration statements being sometimes called the “First Registration Statement” and the later the “Second Registration Statement”) and have become effective. Each such registration statement, as amended as of the date hereof, together with any related Rule 462(b) registration statement or amendment thereto, including all exhibits thereto and the documents incorporated by reference in the prospectus contained in the registration statements, are hereinafter collectively called the “Registration Statement” and the combined prospectus included in the Second Registration Statement when it became effective, as supplemented as of the date hereof, including by a Prospectus Supplement (as defined below), to reflect the terms of the Shares and the terms of the offering thereof, including all material incorporated by reference therein, is hereinafter referred to as the “Prospectus.” The details of the terms of offering of the Shares shall be reflected in the prospectus supplement relating to the offering of the Shares and filed

with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 4(a) of this Agreement (the “Prospectus Supplement”). Any reference herein to any preliminary prospectus relating to the Shares, the Prospectus, or any amendment or supplement thereto, shall be deemed to refer to and include the documents incorporated by reference therein pursuant to the applicable form under the Act, as of the date of such preliminary prospectus, the Prospectus, or any amendment or supplement thereto, as the case may be; any reference to any amendment or supplement to any preliminary prospectus, the Prospectus, or any amendment or supplement thereto, shall be deemed to refer to and include any documents filed after the date of such preliminary prospectus, Prospectus, or any amendment or supplement thereto, as the case may be, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and incorporated by reference in such preliminary prospectus, the Prospectus, or any amendment or supplement thereto, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Registration Statement that is incorporated by reference in the Registration Statement.

          (b) Each part of the Registration Statement relating to the Shares, when such part became effective, conformed in all material respects to the requirements of the Securities Act of 1933 (the “Act”), and the rules and regulations (the “Rules and Regulations”) of the Commission and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; any preliminary prospectus filed pursuant to Rule 424(b) under the Act complied when so filed in all material respects with the Act and the Rules and Regulations. On the date of the Prospectus, the Registration Statement and the Prospectus will conform in all material respects to the requirements of the Act, and the Rules and Regulations, and at such date neither the Registration Statement nor the Prospectus will include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, however, that the foregoing does not apply to statements in or omissions from any such documents based upon written information furnished to the Company by any Underwriter specifically for use therein. The Company hereby consents to the use of the Prospectus in connection with the sale and distribution of the Shares by the Underwriters.

          (c) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Arizona and is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, and where the failure to be so qualified would have a material adverse effect on the current or future consolidated financial position, stockholders’ equity or results of operation of the Company and its consolidated subsidiaries (“Material Adverse Effect”).

          (d) Each of Arizona Public Service Company (“APS”) and Pinnacle West Energy Corporation (“PWEC” and, together with APS, the “Material Subsidiaries”) has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; and all of the issued shares of capital stock of each Material Subsidiary have been duly and validly authorized and issued, are fully paid and nonassessable,

2

and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims.

          (e) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change, or any development involving a prospective material adverse change, in or affecting the consolidated financial position, stockholders’ equity or results of operations of the Company and its consolidated subsidiaries, other than as set forth or contemplated in the Prospectus.

          (f) The Company has an authorized capitalization as set forth in the Prospectus; all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable and conform to the description thereof contained in the Prospectus; and the stockholders and other security holders of the Company have no preemptive rights with respect to any shares of capital stock of the Company except as described in the Prospectus.

          (g) The unissued Shares to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and nonassessable and will conform to the description of the Stock contained in the Prospectus.

          (h) The issue and sale of the Shares by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its Material Subsidiaries is a party or by which the Company or any of its Material Subsidiaries is bound or to which any of the property or assets of the Company or any of its Material Subsidiaries is subject, nor will such action result in any violation of the provisions of the Articles of Incorporation or By-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters.

          (i) The statements set forth in the Prospectus under the caption “Description of Common Stock”, insofar as they purport to constitute a summary of the terms of the Stock, are accurate, complete and fair.

          (j) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party which, if determined adversely to the Company or any of its subsidiaries, would have a Material

3

Adverse Effect and, to the Company’s knowledge, no such proceedings are threatened by governmental authorities or others.

          (k) Except as disclosed in the Prospectus, the Company and each of its Material Subsidiaries has all corporate and other legal powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any such license, authorization, consent or approval would not have a Material Adverse Effect, and, as to APS, except that (a) APS from time to time may make minor extensions of its lines, plants, services or systems prior to the time a related franchise, certificate of convenience and necessity, license or permit is procured, (b) from time to time communities served by APS may become incorporated and considerable time may elapse before such a franchise is procured, (c) certain such franchises may have expired prior to the renegotiation thereof, (d) certain minor defects and exceptions may exist which, individually and in the aggregate, are not material and (e) certain franchises, certificates, licenses and permits may not be specific as to their geographical scope.

          (l) To the extent material to the Company and its Material Subsidiaries taken as a whole, they have good and marketable title to the real and personal property owned by them, and any real properties and buildings held under lease by the Company or its Material Subsidiaries are held under valid and enforceable leases, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not and will not have a Material Adverse Effect; provided, however, that this representation and warranty as to leases shall not extend to property held under lease from the Navajo Nation or under easement from the Federal Government, certain issues with respect to which are set forth in the Company’s latest annual report on Form 10-K, as amended, as filed with the Commission.

          (m) Except as disclosed in the Prospectus, the operations and properties of the Company and its Material Subsidiaries comply in all material respects with all applicable foreign, federal, state or local laws and regulations and any decision or order of any governmental agency or body or any court relating to the environment, the effect of the environment on human health or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), except where the necessity of compliance therewith is being contested in good faith by appropriate proceedings or such noncompliance with Environmental Laws is not reasonably likely to have a Material Adverse Effect.

          (n) The Company is not and, after giving effect to the offering and sale of the Shares, will not be an “investment company”, as such term is defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

          (o) The financial statements included in the Registration Statements and the Prospectus present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis (except as disclosed therein); and the schedules included in the Registration Statements present fairly in all material respects the information required to be stated therein.

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          (p) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act.

          (q) Not later than the earliest Closing Date hereunder, the Shares will have been approved for listing on the New York Stock Exchange subject to notice of issuance.

          (r) This Agreement has been duly authorized, executed and delivered by the Company.

     3. Purchase, Sale and Delivery of Shares. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Underwriters, and the Underwriters agree, severally and not jointly, to purchase from the Company, at a purchase price of $[_______] per share, the respective numbers of Firm Shares set forth opposite the names of the Underwriters in Schedule A hereto.

     In addition, upon written notice from the Representatives given to the Company from time to time not more than 30 days subsequent to the date of this Agreement, the Underwriters may purchase all or less than all of the Optional Shares at the purchase price per share to be paid for the Firm Shares. The Company agrees to sell to the Underwriters the number of Optional Shares specified in such notice and the Underwriters agree, severally and not jointly, to purchase such Optional Shares. Such Optional Shares shall be purchased for the account of each Underwriter in the same proportion as the number of Firm Shares set forth opposite such Underwriter’s name bears to the total of Firm Shares (subject to adjustment to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Shares. No Optional Shares shall be sold or delivered unless the Firm Shares previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Shares or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by the Representatives to the Company.

     The time and date of delivery and payment shall be, with respect to the Firm Shares, 10:00 a.m., New York time, on [____________], [_______] or such other time and date as the Representatives and the Company may agree upon in writing, and with respect to the Optional Shares, [_________] a.m., New York time, on the date specified by the Representatives in the written notice given by the Representatives of the Underwriters’ election to purchase such Optional Shares, or such other time and date as the Representatives and the Company may agree upon in writing. The time and date for delivery of the Firm Shares is herein called the “First Closing Date”. Each time for the delivery of and payment for the Optional Shares, the “Optional Closing Date”, which may be the First Closing Date, shall be determined by the Representatives but shall be not later than five full business days after written notice of election to purchase Optional Shares is given. Each such date for delivery is herein called a “Closing Date”.

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     The Shares to be purchased by each Underwriter on the applicable Closing Date, shall be registered in such names as the Representatives may request upon at least forty-eight hours’ prior notice to the Company and shall be delivered by or on behalf of the Company to the Representatives, through the facilities of the Depository Trust Company (“DTC”), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company to the Representatives at least forty-eight hours in advance. The Company will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the applicable Closing Date with respect thereto at the office of DTC or its designated custodian.

     4. Covenants of the Company. The Company covenants and agrees with each Underwriter that:

          (a) The Company will file the Prospectus with the Commission pursuant to and in accordance with Rule 424(b) under the Act not later than the second business day following the execution of this Agreement.

          (b) The Company will advise the Representatives promptly of any proposed amendment or supplementation of the Registration Statement, or the Prospectus. The Company will also advise the Representatives of the institution by the Commission of any stop order proceedings in respect of the Registration Statement or of any part thereof, and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued.

          (c) If, at any time when a prospectus relating to the Shares is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend or supplement the Registration Statement or the Prospectus to comply with applicable law, the Company promptly will prepare and file with the Commission an amendment or supplement that will correct such statement or omission or an amendment that will effect such compliance. Neither the Representatives’ consent to, nor the Underwriters’ delivery of, any such amendment or supplement shall constitute a waiver of any conditions set forth in Section 5 hereof.

          (d) As soon as practicable, but not later than 18 months, after the date of this Agreement, the Company will make generally available to its security holders an earning statement or statements (which need not be audited) covering a period of at least 12 months beginning after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), which will satisfy the provisions of Section 11 (a) of the Act and the rules and regulations thereunder.

          (e) The Company will furnish to the Underwriters or the Representatives such copies of the Registration Statement (including one copy of the Registration Statement for the Representatives and for the counsel for the Underwriters, which is signed and includes all

6

exhibits), any preliminary prospectus related to the Shares and the Prospectus, and all amendments or supplements to such documents, as may be reasonably requested.

          (f) The Company will arrange or cooperate in arrangements for the qualification of the Shares for sale under the securities or Blue Sky laws of such jurisdictions as the Representatives designate and will continue such qualifications in effect so long as required for the distribution of the Shares, provided that the Company shall not be required to qualify as a foreign corporation in any State, to consent to service of process in any State other than with respect to claims arising out of the offering or sale of the Shares, or to meet other requirements deemed by it to be unduly burdensome.

          (g) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation, printing or reproduction and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), each preliminary prospectus related to the Shares, the Prospectus, or any amendment or supplement to any of them; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each preliminary prospectus related to the Shares, the Prospectus, or any amendment or supplement thereto, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Shares; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp or transfer taxes in connection with the original issuance and sale of the Shares; (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Shares; (v) the registration of the Shares under the Exchange Act and the listing of the Shares on the New York Stock Exchange; (vi) any registration or qualification of the Shares for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Underwriters relating to such registration and qualification); (vii) the transportation and other expenses incurred by or on behalf of Company representatives (other than the Underwriters) in connection with presentations to prospective purchasers of the Shares; (viii) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company; and (ix) all other costs and expenses incident to the performance by the Company of its obligations hereunder. It is understood, however, that, except as provided in this Section 4(g) and Section 6 and 7, the Underwriters will pay all of their own costs and expenses.

          (h) For a period of 90 days after the date of this Agreement, the Company will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any additional shares of its Common Stock or securities convertible into or exchangeable or exercisable for any shares of its Stock, or publicly disclose the intention to make any such offer, sale, pledge, disposition or filing, without the prior written consent of the Representatives; provided, however, that the Company may issue and sell the Shares or Stock, or grant stock options and other stock-based awards, in connection with its existing equity incentive and compensation plans, its savings plan, and its direct stock purchase and dividend reinvestment plan.

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     5. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Shares on the First Closing Date and the Optional Shares to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder, and to the following additional conditions precedent:

          (a) On or prior to the date of this Agreement, the Representatives shall have received a letter, dated the date of delivery thereof, of Deloitte & Touche confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating to the effect that:

               (i) in their opinion the financial statements and any schedules and any summary of earnings examined by them and included in the Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations;

               (ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 100, Interim Financial Information, on any unaudited financial statements included in the Registration Statement;

               (iii) on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that:

                    (A) the unaudited financial statements, if any, and any summary of earnings included in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations or any material modifications should be made to such unaudited financial statements and summary of earnings for them to be in conformity with generally accepted accounting principles;

                    (B) if any unaudited “capsule” information is contained in the Prospectus, the unaudited consolidated operating revenues, gross income, net income and net income per share amounts or other amounts constituting such “capsule” information and described in such letter do not agree with the corresponding amounts set forth in the unaudited consolidated financial statements or were not determined on a basis substantially consistent with that of the corresponding amounts in the audited statements of income;

                    (C) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than three business days prior to the date of such letter, there was any change in the amounts of common stock, redeemable preferred stock, or non-redeemable preferred stock of the Company or any increase, exceeding $10,000,000, in long-term debt of the

8

Company or, at the date of the most recent available unaudited financial statements there was any decrease in net assets as compared with amounts shown in the most recent financial statements incorporated by reference in the Registration Statement; or

                    (D) for the period from the closing date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year and with the period of corresponding length ended the date of the latest income statement included in the Prospectus, in the amounts of total revenues or net income, except in all cases for increases or decreases which result from the declaration or payment of dividends;

except in all cases set forth in clauses (C) and (D) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and

               (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Prospectus (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company’s accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter.

All financial statements and schedules included in material incorporated by reference into the Prospectus shall be deemed included in the Prospectus for purposes of this subsection.

          (b) No stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued, and no order directed to the adequacy of any document incorporated by reference in the Prospectus, and no proceedings for either purpose shall have been instituted or threatened or, to the knowledge of the Company or the Underwriters, shall be contemplated by the Commission.

          (c) Subsequent to the execution of this Agreement, (i) there shall not have occurred any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Company or its subsidiaries which, in the judgment of the Representatives, materially impairs the investment quality of the Shares, (ii) there shall not have occurred a suspension of trading in the Company’s Stock by the Commission or the New York Stock Exchange or a suspension or material limitation in trading in securities generally on the New York Stock Exchange, (iii) there shall not have occurred a general moratorium on commercial banking activities in New York declared by either Federal or New York State authorities,

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(iv) there shall not have occurred any major disruption of settlements of securities or clearance services in the United States, and (v) there shall not have occurred any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of the Representatives, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the sale of and payment for the Shares. If the Underwriters elect not to purchase the Shares as a result of the occurrence of one of the events specified in this Section 5(c), the Representatives will promptly notify the Company.

          (d) The Underwriters shall have received an opinion of Snell & Wilmer L.L.P., counsel for the Company, dated the relevant Closing Date, to the effect that:

               (i) The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Arizona with the corporate power and authority to carry on its business as described in the Prospectus;

               (ii) The Company has authorized capitalization as set forth in the Prospectus, and the Shares have been duly and validly authorized, executed, issued and delivered, and are fully paid and nonassessable, and conform to the description thereof in the Prospectus;

               (iii) APS and PWEC have been duly incorporated and are validly existing as corporations in good standing under the laws of their jurisdictions of incorporation; APS and PWEC are duly qualified as a foreign corporations to do business, and are in good standing, in the States of (a) California, Montana, New Mexico, Oregon, Texas, Washington and Wyoming and (b) California, Nevada and New Mexico, respectively; and all of the issued shares of capital stock of each such subsidiary are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect to matters of fact upon certificates of officers of the Company or its subsidiaries, UCC searches or other appropriate information, provided that such counsel shall specify in its opinion the items relied upon);

               (iv) To such counsel’s knowledge, except as described in the Prospectus, there are no pending or overtly threatened actions or proceedings before any court or governmental agency in which the Company or any of its subsidiaries is a party or in which any property of the Company or any of its subsidiaries is the subject, which are likely to have a materially adverse effect on the current or future consolidated financial position, stockholders equity or results of operations of the Company and its consolidated subsidiaries. With respect to the matters discussed in the immediately preceding sentence, the standard of materiality considered is that provided for in Item 103 (Reg. § 229.103) of Regulation S-K promulgated under the Act;

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               (v) This Agreement has been duly authorized, executed and delivered by the Company;

               (vi) The issue and sale of the Shares and the performance by the Company of its obligations under the Underwriting Agreement do not contravene or constitute a default under (a) the Articles or the Bylaws of the Company, (b) any material provision of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties known to such counsel and, in the case of any such order, described in the Company Certificate (as defined in and attached to such opinion), or (c) any contractual or legal restriction contained in any document listed in any of the Certificates (as defined in and attached to such opinion). In giving the opinion expressed in clause (c) of the immediately preceding sentence, such counsel may express no opinion regarding compliance by the Company or any subsidiary with any financial covenants required to be maintained by the Company or any subsidiary under any agreement or document;

               (vii) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws, as to which such counsel shall not be required to express an opinion;

               (viii) The statements set forth in the Prospectus under the caption “Description of Common Stock”, insofar as they purport to constitute a summary of the terms of the Stock are accurate, complete and fair in all material respects;

               (ix) The Company is not an “investment company”, as such term is defined in the Investment Company Act;

               (x) The documents incorporated by reference in the Prospectus as amended or supplemented as of the Closing Date (other than financial statements and schedules and other financial or statistical data included or incorporated by reference therein or omitted therefrom, as to which such counsel expresses no opinion), when they became effective or were filed with the Commission, as the case may be, complied as to form in all material respects with the requirements of the Act or the Exchange Act, as applicable, and the Rules and Regulations of the Commission thereunder; and

               (xi) The Registration Statement and the Prospectus, and each amendment or supplement thereto, as of the Closing Date (other than financial statements and schedules and other financial, statistical or accounting data included or incorporated by reference therein or omitted therefrom, as to which such counsel expresses no opinion) comply as to form in all material respects with the requirements of the Act and the Rules and Regulations thereunder. Although such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statements or the Prospectus, except for those referred to in the opinion in subsection (ix)

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hereof, such counsel has no reason to believe that the Registration Statement, as of its effective date, or the Prospectus, as of the date of the Prospectus Supplement, or in either case, as of the Closing Date, or any amendment thereto, as of the Closing Date, excluding in all cases financial statements and schedules and other financial, statistical or accounting data included or incorporated by reference therein or omitted therefrom, as to which such counsel expresses no opinion, contained any untrue statement of material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading. To such counsel’s knowledge, there are no legal or governmental proceedings required to be described in the Prospectus that are not described as required, nor any contracts or documents of a character required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described and filed as required.

     Whenever the opinions required by this Agreement are stated to be “to the knowledge of such counsel” or “to such counsel’s knowledge”, such statements are intended to signify that those attorneys in the firm responsible for preparing the opinion or who have given substantive attention to the transactions contemplated by this Agreement, after consultation with such other attorneys in such firm who have worked on legal matters related to the Company and its subsidiaries as they considered appropriate, do not have current actual knowledge of the inaccuracy of such statement. However, except where expressly stated otherwise, such counsel need not undertake any special or independent investigation to determine the existence or absence of such facts, and no inference as to such counsel’s knowledge of the existence or absence of such facts should be drawn from its representation of the Company in connection with this transaction or otherwise.

     In giving such opinion, Snell & Wilmer L.L.P. may rely to the extent such counsel deems appropriate upon certificates of the Company as to any factual matters upon which any such opinions are based and may rely on the opinion of Underwriters’ counsel as to all matters governed by the law of the State of New York, and further may rely upon the opinion of Morgan, Lewis & Bockius LLP, delivered to you at the Closing Date, as to all matters under the Public Utility Holding Company Act of 1935, as amended, and the Federal Power Act, as amended.

          (e) The Underwriters shall have received from counsel for the Underwriters an opinion or opinions, dated the relevant Closing Date, with respect to such matters as they may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. In rendering such opinion, such counsel may rely as to the incorporation of the Company and all other matters governed by the laws of the State of Arizona upon the opinion of Snell & Wilmer L.L.P.

          (f) The Underwriters shall have received a certificate of the President or any Vice President and a principal financial or accounting officer of the Company, dated the relevant Closing Date, in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to such Closing Date, that no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission, and

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that, subsequent to the date of the most recent financial statements in the Prospectus, there has been no material adverse change in, or any development involving a prospective material adverse change, in or affecting the consolidated financial position, stockholders’ equity or results of operations of the Company and its consolidated subsidiaries, otherwise than as set forth or contemplated in the Prospectus or as described in such certificate.

          (g) The Underwriters shall have received a letter of Deloitte & Touche LLP, dated the relevant Closing Date, which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three days prior to the Closing Date for the purposes of this subsection.

          (h) The Representatives shall have received signed lockup agreements in the form attached hereto as Exhibit A, dated the date of this Agreement, from each of the directors and executive officers (as defined under Section 16 of the Exchange Act) of the Company.

          (i) The Company will furnish the Underwriters with such conformed copies of such opinions, certificates, letters, and documents as may be reasonably requested.

     6. Indemnification.

          (a) The Company will indemnify and hold harmless each Underwriter and each person, if any, who controls such Underwriter within the meaning of the Act, against any losses, claims, damages or liabilities, joint or several, to which such Underwriter or such controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of the Registration Statement relating to the Shares, when such part became effective, any preliminary prospectus relating the Shares, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, not misleading; and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or such controlling person, as incurred, in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter specifically for use therein and provided, further, that with respect to any untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary prospectus relating to the Shares or the Prospectus, as amended or supplemented, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased the Shares concerned, insofar as such indemnity relates to an untrue statement or alleged untrue statement in or omission or alleged omission from any preliminary prospectus relating to the Shares or the Prospectus, but eliminated or remedied prior to the consummation of such sale in the Prospectus, or any amendment or supplement thereto, furnished on a timely basis by the Company to the Underwriters, unless a copy of the Prospectus (in the case of such a statement or omission made

13

in such preliminary prospectus) or such amendment or supplement (in the case of such a statement or omission made in the Prospectus) (excluding, however, any document then incorporated or deemed to be incorporated by reference in the Prospectus or such amendment or supplement) is furnished by such Underwriter to such person (i) with or prior to the written confirmation of the sale involved or (ii) as soon as available after such written confirmation (if it is made available to the Underwriters prior to settlement of such sale). This indemnity agreement will be in addition to any liability which the Company may otherwise have.

          (b) Each Underwriter will severally indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, and each person, if any, who controls the Company within the meaning of the Act, against any losses, claims, damages, or liabilities to which the Company or any such director, officer, or controlling person may become subject, under the Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of the Registration Statement relating to the Shares, when such part became effective, any preliminary prospectus relating to the Shares, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter specifically for use therein; and will reimburse any legal or other expenses reasonably incurred, as incurred, by the Company or any such director, officer, or controlling person in connection with investigating or defending any such loss, claim, damage, liability, or action. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have.

          (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a) and (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, without the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its assumption of the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party

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and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties. Such firm shall be designated in writing by the Representative, in the case of parties indemnified pursuant to Section 6(a) above, and by the Company, in the case of parties indemnified pursuant to Section 6(b) above. An indemnifying party shall not be liable for any settlement of a claim or action effected without its written consent, which shall not be unreasonably withheld.

          (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party for any loss, claim, damage, liability, or action described in subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above on the following basis: (i) if such loss, claim, damage, liability, or action arises under subsection (a) above, then (A) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares or (B) if the allocation provided by clause (A) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (A) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations; and (ii) if such loss, claim, damage, liability, or action arises under subsection (b) above, then in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Underwriter on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. For the purposes of clause (i) above, the relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters. For the purposes of clauses (i) and (ii) above, the relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and each of the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which

15

is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount in excess of the underwriting discount or commission applicable to the Shares purchased by such Underwriter hereunder. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint.

     7. Default of Underwriters; Termination by Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Shares pursuant to this Agreement and the number of Shares that such defaulting Underwriter or Underwriters agreed but failed to purchase is ten percent (10%) or less of the number of Shares that the Underwriters are obligated to purchase, the Underwriters may make arrangements satisfactory to the Company for the purchase of such Shares by other persons, including any of the Underwriters, but if no such arrangements are made by the Closing Date the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Shares that such defaulting Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or Underwriters so default and the number of Shares with respect to which such default or defaults occur is more than the above-described amount and arrangements satisfactory to the remaining Underwriters and the Company for the purchase of such Shares by other persons are not made within thirty-six hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company, except as provided in Section 8. In any such case either the Representatives or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. As used in this Agreement, the term “Underwriter” includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default.

     If this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company shall not be liable to any Underwriter or to any member of any selling group for the loss of anticipated profits from the transactions contemplated by this Agreement. However, in such an event, the Company will reimburse the Underwriters for all out of pocket expenses (including reasonable fees and disbursements of their counsel) reasonably incurred by the Underwriters in connection with this Agreement and the offering contemplated hereunder; provided, however, that if the Shares are not delivered by or on behalf of the Company solely as a result of the failure to satisfy the condition set forth in Section 5(c) hereof, the Company shall have no liability to the Underwriters except as provided in Sections 4(g) and 6 of this Agreement.

     8. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties, and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Underwriters or the Company or any of its officers or directors or any controlling person,

16

and will survive delivery of and payment for the Shares. If this Agreement is terminated pursuant to Section 7, or if for any reason a purchase pursuant to this Agreement is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 4 and the respective obligations of the Company and the Underwriters pursuant to Section 6 shall remain in effect.

     9. Notices. All communications hereunder relating to any offering of Shares will be in writing, and, if sent to the Underwriters, may be mailed, delivered, or telecopied and confirmed to the Representatives, c/o [____________], Attention: [____________] (fax: [____________]) and c/o [____________] Attention: [____________] (fax: [____________]); provided, however, that any notice to an Underwriter pursuant to Section 6 will be mailed, delivered, or telecopied and confirmed to each such Underwriter at its own address. All communications hereunder to the Company shall be mailed to the Company, Attention: Treasurer, at P.O. Box 53999, Phoenix, Arizona 85072-3999, or delivered, or telecopied and confirmed to the Company at 400 North Fifth Street, Phoenix, Arizona 85004 (fax: 602-250-5640).

     10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and the Underwriter or Underwriters as are named in Schedule A hereto and their respective successors and the officers and directors and controlling persons referred to in Section 6, and no other person will have any right or obligation hereunder.

     11. Representation of Underwriters. The Representatives may act for the Underwriters in connection with the offering contemplated by this Agreement, and any action under this Agreement taken by the Representatives will be binding upon the Underwriters.

     12. Execution in Counterpart. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute a single instrument.

     13. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.

     14. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.

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     If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed duplicate hereof, whereupon it will become a binding agreement between the Company and the Underwriters in accordance with its terms.

Very truly yours,
PINNACLE WEST CAPITAL CORPORATION
By:
	Name: Barbara M. Gomez
	Title: Vice President and Treasurer

The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written, on behalf of
themselves and the other several Underwriters
named in Schedule A.

[____________]
[____________]

By: [____________],
       as Representative

By:
	Name: Title:

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Schedule A

Underwriter	Number of Firm Shares
[____________]	[____________]
[____________]	[____________]
[____________]	[____________]
[____________]	[____________]
[____________]	[____________]
[____________]	[____________]
[____________]	[____________]
Total	[____________]

Schedule A

Exhibit A

[Form of Lock-up]

[____________], [____]

[____________]
[____________]

Ladies and Gentlemen:

     As an inducement to the Underwriters to execute the Underwriting Agreement, pursuant to which an offering will be made that is intended to result in an orderly market for the Common Stock, no par value per share (the “Securities”) of Pinnacle West Capital Corporation, and any successor (by merger or otherwise) thereto, (the “Company”), the undersigned hereby agrees that from the date hereof and until 90 days after the public offering date set forth on the final prospectus used to sell the Securities (the “Public Offering Date”) pursuant to the Underwriting Agreement, to which you are or expect to become parties, the undersigned will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of Securities or securities convertible into or exchangeable or exercisable for any shares of Securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Securities, whether any such aforementioned transaction is to be settled by delivery of the Securities or such other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of [____________] and [____________] provided, however, that the undersigned may allow the Company to withhold a portion of the Securities to which the undersigned would otherwise be entitled to receive upon the vesting of an equity incentive award to satisfy applicable tax withholding requirements. In addition, the undersigned agrees that, without the prior written consent of [____________] and [____________], the undersigned will not, during the period commencing on the date hereof and ending 90 days after the Public Offering Date, make any demand for or exercise any right with respect to, the registration of any Securities or any security convertible into or exercisable or exchangeable for the Securities.

     Any Securities received upon exercise of options granted to the undersigned will also be subject to this Agreement. Any Securities acquired by the undersigned in the open market after the completion of the offering of the Securities will not be subject to this Agreement. A bona fide gift or a transfer of Securities to a family member or trust may be made, provided the gift recipient or transferee agrees to be bound in writing by the terms of this Agreement.

     In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Securities if such transfer would constitute a violation or breach of this Agreement

     This Agreement shall be binding on the undersigned and the successors, heirs, personal representatives and assigns of the undersigned. This Agreement shall lapse and become null and void if the Public Offering Date shall not have occurred on or before [____________], [_____].

Very truly yours,

[NAME]

21

EX-4.3

Exhibit 4.3

                        PINNACLE WEST CAPITAL CORPORATION

                                       TO

                              THE BANK OF NEW YORK

                                     TRUSTEE

                                    INDENTURE

                            DATED AS OF ______, 20__

                       (For Senior Convertible Securities)

    CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318,
                 INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:



  TRUST INDENTURE
    ACT SECTION                                                            INDENTURE SECTION
                                                                        
ss. 310(a)(1)..........................................................     609
       (a)(2)..........................................................     609
       (a)(3)..........................................................     Not Applicable
       (a)(4)..........................................................     Not Applicable
       (b).............................................................     608
          .............................................................     610
ss. 311(a).............................................................     613
       (b).............................................................     613
ss. 312(a).............................................................     701
          .............................................................     702
       (b).............................................................     702
       (c).............................................................     702
ss. 313(a).............................................................     703
       (b).............................................................     703
       (c).............................................................     703
       (d).............................................................     703
ss. 314(a).............................................................     704
       (a)(4)..........................................................     101
             ..........................................................     1004
       (b).............................................................     Not Applicable
       (c)(1)..........................................................     102
       (c)(2)..........................................................     102
       (c)(3)..........................................................     Not Applicable
       (d).............................................................     Not Applicable
       (e).............................................................     102
ss. 315(a).............................................................     601
       (b).............................................................     602
       (c).............................................................     601
       (d).............................................................     601
       (e).............................................................     514
ss. 316(a).............................................................     101
       (a)(1)(A).......................................................     502
                .......................................................     512
       (a)(1)(B).......................................................     513
       (a)(2)..........................................................     Not Applicable
       (b).............................................................     508
       (c).............................................................     104
ss. 317(a)(1)..........................................................     503
       (a)(2)..........................................................     504
       (b).............................................................     1003
ss. 318(a).............................................................     107


- ----------

NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.



                                TABLE OF CONTENTS



                                                                                 Page
                                                                                 ----
                                                                              
PREAMBLE......................................................................     1
Recitals of the Company.......................................................     1

                                   ARTICLE ONE

             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 101.  Definitions.....................................................     1
Section 102.  Compliance Certificates and Opinions............................     7
Section 103.  Form of Documents Delivered to Trustee..........................     7
Section 104.  Acts of Holders; Record Dates...................................     8
Section 105.  Notices, Etc., to Trustee and Company...........................    10
Section 106.  Notice to Holders; Waiver.......................................    10
Section 107.  Conflict with Trust Indenture Act...............................    11
Section 108.  Effect of Headings and Table of Contents........................    11
Section 109.  Successors and Assigns..........................................    11
Section 110.  Separability Clause.............................................    11
Section 111.  Benefits of Indenture...........................................    11
Section 112.  Governing Law...................................................    11
Section 113.  Legal Holidays..................................................    11

                                   ARTICLE TWO

                                 SECURITY FORMS

Section 201.  Forms Generally.................................................    12
Section 202.  Form of Face of Security........................................    12
Section 203.  Form of Reverse of Security.....................................    14
Section 204.  Form of Legend for Global Securities............................    18
Section 205.  Form of Trustee's Certificate of Authentication.................    18

                                  ARTICLE THREE

                                 THE SECURITIES

Section 301.  Amount Unlimited; Issuable in Series............................    19
Section 302.  Denominations...................................................    21
Section 303.  Execution, Authentication, Delivery and Dating..................    22
Section 304.  Temporary Securities............................................    23
Section 305.  Registration, Registration of Transfer and Exchange.............    23
Section 306.  Mutilated, Destroyed, Lost and Stolen Securities................    25


                                       -i-


                                                                               
Section 307.  Payment of Interest; Interest Rights Preserved..................    26
Section 308.  Persons Deemed Owners...........................................    27
Section 309.  Cancellation....................................................    27
Section 310.  Computation of Interest.........................................    28
Section 311.  CUSIP Numbers...................................................    28

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

Section 401.  Satisfaction and Discharge of Indenture.........................    28
Section 402.  Application of Trust Money......................................    29

                                  ARTICLE FIVE

                                    REMEDIES

Section 501.  Events of Default...............................................    29
Section 502.  Acceleration of Maturity; Rescission and Annulment..............    31
Section 503.  Collection of Indebtedness and Suits for Enforcement by Trustee.    32
Section 504.  Trustee May File Proofs of Claim................................    32
Section 505.  Trustee May Enforce Claims Without Possession of Securities.....    33
Section 506.  Application of Money Collected..................................    33
Section 507.  Limitation on Suits.............................................    33
Section 508.  Unconditional Right of Holders to Receive Principal, Premium,
                Interest and to Convert.......................................    34
Section 509.  Restoration of Rights and Remedies..............................    34
Section 510.  Rights and Remedies Cumulative..................................    35
Section 511.  Delay or Omission Not Waiver....................................    35
Section 512.  Control by Holders..............................................    35
Section 513.  Waiver of Past Defaults.........................................    35
Section 514.  Undertaking for Costs...........................................    36
Section 515.  Waiver of Usury, Stay or Extension Laws.........................    36

                                   ARTICLE SIX

                                   THE TRUSTEE

Section 601.  Certain Duties and Responsibilities.............................    36
Section 602.  Notice of Defaults..............................................    36
Section 603.  Certain Rights of Trustee.......................................    37
Section 604.  Not Responsible for Recitals or Issuance of Securities..........    38
Section 605.  May Hold Securities.............................................    38
Section 606.  Money Held in Trust.............................................    39
Section 607.  Compensation and Reimbursement..................................    39
Section 608.  Conflicting Interests...........................................    39



                                      -ii-


                                                                               
Section 609.  Corporate Trustee Required; Eligibility.........................    40
Section 610.  Resignation and Removal; Appointment of Successor...............    40
Section 611.  Acceptance of Appointment by Successor..........................    41
Section 612.  Merger, Conversion, Consolidation or Succession to Business.....    42
Section 613.  Preferential Collection of Claims Against Company...............    43
Section 614.  Appointment of Authenticating Agent.............................    43

                                  ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

Section 701.  Company to Furnish Trustee Names and Addresses of Holders.......    44
Section 702.  Preservation of Information; Communications to Holders..........    45
Section 703.  Reports by Trustee..............................................    45
Section 704.  Reports by Company..............................................    45

                                  ARTICLE EIGHT

              CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

Section 801. Company May Consolidate, Etc., Only on Certain Terms.............    46
Section 802. Successor Substituted............................................    47

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

Section 901.  Supplemental Indentures Without Consent of Holders..............    47
Section 902.  Supplemental Indentures With Consent of Holders.................    48
Section 903.  Execution of Supplemental Indentures............................    49
Section 904.  Effect of Supplemental Indentures...............................    49
Section 905.  Conformity with Trust Indenture Act.............................    49
Section 906.  Reference in Securities to Supplemental Indentures..............    50

                                   ARTICLE TEN

                                    COVENANTS

Section 1001. Payment of Principal, Premium and Interest......................    50
Section 1002. Maintenance of Office or Agency.................................    50
Section 1003. Money for Securities Payments to Be Held in Trust...............    50
Section 1004. Statement by Officers as to Default.............................    52
Section 1005. Existence.......................................................    52
Section 1006. Maintenance of Properties.......................................    52
Section 1007. Payment of Taxes and Other Claims...............................    52
Section 1008. Waiver of Certain Covenants.....................................    52
Section 1009. Calculation of Original Issue Discount..........................    53



                                      -iii-


                                                                               
                                 ARTICLE ELEVEN

                            REDEMPTION OF SECURITIES

Section 1101. Applicability of Article........................................    53
Section 1102. Election to Redeem; Notice to Trustee...........................    53
Section 1103. Selection by Trustee of Securities to Be Redeemed...............    53
Section 1104. Notice of Redemption............................................    54
Section 1105. Deposit of Redemption Price.....................................    55
Section 1106. Securities Payable on Redemption Date...........................    55
Section 1107. Securities Redeemed in Part.....................................    56

                                 ARTICLE TWELVE

                                  SINKING FUNDS

Section 1201. Applicability of Article........................................    56
Section 1202. Satisfaction of Sinking Fund Payments with Securities...........    56
Section 1203. Redemption of Securities for Sinking Fund.......................    57

                                ARTICLE THIRTEEN

                       DEFEASANCE AND COVENANT DEFEASANCE

Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance....    57
Section 1302. Defeasance and Discharge........................................    57
Section 1303. Covenant Defeasance.............................................    58
Section 1304. Conditions to Defeasance or Covenant Defeasance.................    58

Section 1305. Deposited Money and U.S. Government Obligations to Be Held in
              Trust; Miscellaneous Provisions.................................    60
Section 1306. Reinstatement...................................................    61

                                ARTICLE FOURTEEN

                            CONVERSION OF SECURITIES

Section 1401. Conversion Privilege............................................    61
Section 1402. Exercise of Conversion Privilege................................    61
Section 1403. Fractions of Shares.............................................    63
Section 1404. [Intentionally Left Blank]......................................    63
Section 1405. Notice of Adjustments of Conversion Price.......................    68
Section 1406. Notice of Certain Corporate Action..............................    68
Section 1407. Company to Reserve Common Stock.................................    69
Section 1408. Taxes on Conversions............................................    69
Section 1409. Covenant as to Common Stock.....................................    69
Section 1410. Cancellation of Converted Securities............................    69

Section 1411. Provisions in Case of Consolidation, Merger of Sale of Assets...    69
Section 1412. Trustee Adjustment Disclaimer...................................    70



                                      -iv-


INDENTURE, dated as of _______, 20__, between Pinnacle West Capital Corporation,
a corporation duly organized and existing under the laws of the State of Arizona
(herein called the "Company"), having its principal office at 400 North Fifth
Street, Phoenix, Arizona 85004, and The Bank of New York, a New York banking
corporation, as Trustee (herein called the "Trustee").

                             RECITALS OF THE COMPANY

The Company has duly authorized the execution and delivery of this Indenture to
provide for the issuance from time to time of its unsecured, convertible
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.

All things necessary to make this Indenture a valid agreement of the Company, in
accordance with its terms, have been done.

                   NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Securities by
the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Securities or of series thereof, as follows:

                                   ARTICLE ONE

                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATION

SECTION 101. DEFINITIONS.

For all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:

(1) the terms defined in this Article have the meanings assigned to them in this
Article and include the plural as well as the singular;

(2) all other terms used herein which are defined in the Trust Indenture Act,
either directly or by reference therein, have the meanings assigned to them
therein;

(3) all accounting terms not otherwise defined herein have the meanings assigned
to them in accordance with generally accepted accounting principles, and, except
as otherwise herein expressly provided, the term "generally accepted accounting
principles" with respect to any computation required or permitted hereunder
shall mean such accounting principles as are generally accepted in the United
States of America;

(4) unless the context otherwise requires, any reference to an "Article" or a
"Section" refers to an Article or a Section, as the case may be, of this
Indenture; and

(5) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.

"Act", when used with respect to any Holder, has the meaning specified in
Section 104.

"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

"Authenticating Agent" means any Person authorized by the Trustee pursuant to
Section 614 to act on behalf of the Trustee to authenticate Securities of one or
more series.

"Board of Directors" means either the board of directors of the Company or any
duly authorized committee of that board.

"Board Resolution" means a copy of a resolution certified by the Secretary or an
Assistant Secretary or Associate Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.

"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.

"Commission" means the Securities and Exchange Commission, from time to time
constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Article Fourteen, shares issuable on conversion of Securities
shall include only shares of the class designated as Common Stock of the Company
at the date of this instrument or shares of any class or classes resulting from
any reclassification or reclassifications thereof and which have no preference
in respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company; PROVIDED that, if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of

                                       -2-


shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.

"Company" means the Person named as the "Company" in the first paragraph of this
instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.

"Company Request" or "Company Order" means a written request or order signed in
the name of the Company by its Chairman of the Board, its Vice Chairman of the
Board, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary or Associate Secretary, and
delivered to the Trustee.

"Corporate Trust Office" means the designated corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date hereof is located at 700 South Flower
Street, Suite 500, Los Angeles, California 90017.

"corporation" means a corporation, association, company, joint-stock company or
business trust.

"Covenant Defeasance" has the meaning specified in Section 1303.

"Defaulted Interest" has the meaning specified in Section 307.

"Defeasance" has the meaning specified in Section 1302.

"Depositary" means, with respect to Securities of any series issuable in whole
or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 301.

"Event of Default" has the meaning specified in Section 501.

"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.

"Expiration Date" has the meaning specified in Section 104.

"Global Security" means a Security that evidences all or part of the Securities
of any series and bears the legend set forth in Section 204 (or such legend as
may be specified as contemplated by Section 301 for such Securities).

"Holder" means a Person in whose name a Security is registered in the Security
Register.

"Indenture" means this instrument as originally executed and as it may from time
to time be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, including, for all
purposes of this instrument and any such supplemental indenture, the provisions
of the Trust Indenture Act that are deemed to be a part of and govern

                                       -3-


this instrument and any such supplemental indenture, respectively. The term
"Indenture" shall also include the terms of particular series of Securities
established as contemplated by Section 301.

"interest", when used with respect to an Original Issue Discount Security which
by its terms bears interest only after Maturity, means interest payable after
Maturity.

"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.

"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.

"Maturity", when used with respect to any Security, means the date on which the
principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.

"Notice of Default" means a written notice of the kind specified in Section
501(4).

"Officers' Certificate" means a certificate signed by the Chairman of the Board,
a Vice Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary or
Associate Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 1004 shall
be the principal executive, financial or accounting officer of the Company.

"Opinion of Counsel" means a written opinion of counsel, who may be counsel for
the Company, or other counsel who shall be acceptable to the Trustee.

"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.

"Outstanding", when used with respect to Securities, means, as of the date of
determination, all Securities theretofore authenticated and delivered under this
Indenture, except:

(1) Securities theretofore cancelled by the Trustee or delivered to the Trustee
for cancellation;

(2) Securities for whose payment or redemption money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company (if the
Company shall act as its own Paying Agent) for the Holders of such Securities;
PROVIDED that, if such Securities are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;

(3) Securities as to which Defeasance has been effected pursuant to Section
1302; and

                                       -4-


(4) Securities which have been paid pursuant to Section 306 or in exchange for
or in lieu of which other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such Securities in respect of which
there shall have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands such Securities
are valid obligations of the Company;

PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount of
the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security which shall
be deemed to be Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a Security denominated
in one or more foreign currencies or currency units which shall be deemed to be
Outstanding shall be the U.S. dollar equivalent, determined as of such date in
the manner provided as contemplated by Section 301, of the principal amount of
such Security (or, in the case of a Security described in Clause (A) or (B)
above, of the amount determined as provided in such Clause), and (D) Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, waiver or other action, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.

"Paying Agent" means any Person authorized by the Company to pay the principal
of or any premium or interest on any Securities on behalf of the Company.

"Person" means any individual, corporation, partnership, joint venture, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of and any premium and interest on
the Securities of that series are payable as specified as contemplated by
Section 301.

"Predecessor Security" of any particular Security means every previous Security
evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

                                       -5-


"Redemption Date", when used with respect to any Security to be redeemed, means
the date fixed for such redemption by or pursuant to this Indenture.

"Redemption Price", when used with respect to any Security to be redeemed, means
the price at which it is to be redeemed pursuant to this Indenture.

"Regular Record Date" for the interest payable on any Interest Payment Date on
the Securities of any series means the date specified for that purpose as
contemplated by Section 301.

"Responsible Officer", when used with respect to the Trustee, means any vice
president, any assistant secretary, any assistant treasurer, any trust officer
or assistant trust officer, or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.

"Securities" has the meaning stated in the first recital of this Indenture and
more particularly means any Securities authenticated and delivered under this
Indenture.

"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.

"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.

"Special Record Date" for the payment of any Defaulted Interest means a date
fixed by the Trustee pursuant to Section 307.

"Stated Maturity", when used with respect to any Security or any installment of
principal thereof or interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.

"Subsidiary" means a corporation more than 50% of the outstanding voting stock
of which is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries, or by the Company and one or more other Subsidiaries. For
the purposes of this definition, "voting stock" means stock which ordinarily has
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power by reason of any contingency.

"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the
date as of which this instrument was executed; PROVIDED, HOWEVER, that in the
event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.

"Trustee" means the Person named as the "Trustee" in the first paragraph of this
instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or

                                       -6-


include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.

"U.S. Government Obligation" has the meaning specified in Section 1304.

"Vice President", when used with respect to the Company or the Trustee, means
any vice president, whether or not designated by a number or a word or words
added before or after the title "vice president".

SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.

Upon any application or request by the Company to the Trustee to take any action
under any provision of this Indenture, the Company shall furnish to the Trustee
such certificates and opinions as may be required under the Trust Indenture Act.
Each such certificate or opinion shall be given in the form of an Officers'
Certificate, if to be given by an officer of the Company, or an Opinion of
Counsel, if to be given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirements set forth in this Indenture.

Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include,

(1) a statement that each individual signing such certificate or opinion has
read such covenant or condition and the definitions herein relating thereto;

(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(3) a statement that, in the opinion of each such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

(4) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.

SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

In any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company may be based, insofar as
it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations

                                       -7-


with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

Where any Person is required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.

SECTION 104. ACTS OF HOLDERS; RECORD DATES.

Any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.

The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.

The ownership of Securities shall be proved by the Security Register.

Any request, demand, authorization, direction, notice, consent, waiver or other
Act of the Holder of any Security shall bind every future Holder of the same
Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.

The Company may set any day as a record date for the purpose of determining the
Holders of Outstanding Securities of any series entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities of such series, PROVIDED that the Company may not set a
record date for, and the provisions of this paragraph shall not apply with
respect to, the giving or making of any notice, declaration, request or
direction referred to in the next paragraph. If any record date is set pursuant
to this paragraph, the Holders of Outstanding Securities of the relevant series
on such record date, and no other Holders, shall be entitled to take the
relevant action, whether or not such Holders remain Holders after such record
date; PROVIDED that no such action shall be effective hereunder unless taken on

                                       -8-


or prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities of such series on such record date. Nothing in
this paragraph shall be construed to prevent the Company from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities of the relevant series on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Company, at its own
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Trustee in writing and to
each Holder of Securities of the relevant series in the manner set forth in
Section 106.

The Trustee may set any day as a record date for the purpose of determining the
Holders of Outstanding Securities of any series entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section 512, in each
case with respect to Securities of such series. If any record date is set
pursuant to this paragraph, the Holders of Outstanding Securities of such series
on such record date, and no other Holders, shall be entitled to join in such
notice, declaration, request or direction, whether or not such Holders remain
Holders after such record date; PROVIDED that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Securities of such series on
such record date. Nothing in this paragraph shall be construed to prevent the
Trustee from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be cancelled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities of the relevant series on the date such action is taken.
Promptly after any record date is set pursuant to this paragraph, the Trustee,
at the Company's expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be given to the Company
in writing and to each Holder of Securities of the relevant series in the manner
set forth in Section 106.

With respect to any record date set pursuant to this Section, the party hereto
which sets such record dates may designate any day as the "Expiration Date" and
from time to time may change the Expiration Date to any earlier or later day;
PROVIDED that no such change shall be effective unless notice of the proposed
new Expiration Date is given to the other party hereto in writing, and to each
Holder of Securities of the relevant series in the manner set forth in Section
106, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially

                                       -9-


designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.

Without limiting the foregoing, a Holder entitled hereunder to take any action
hereunder with regard to any particular Security may do so with regard to all or
any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.

SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.

Any request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,

(1) the Trustee by any Holder or by the Company shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing to or with the
Trustee at its Corporate Trust Office, Attention: Corporate Trust
Administration, or

(2) the Company by the Trustee or by any Holder shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if in writing and
mailed, first-class postage prepaid, to the Company addressed to it at the
address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.

SECTION 106. NOTICE TO HOLDERS; WAIVER.

Where this Indenture provides for notice to Holders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each Holder affected by such
event, at his address as it appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.

In case by reason of the suspension of regular mail service or by reason of any
other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.

                                      -10-


SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.

If any provision hereof limits, qualifies or conflicts with a provision of the
Trust Indenture Act which is required under such Act to be a part of and govern
this Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.

SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

SECTION 109. SUCCESSORS AND ASSIGNS.

All covenants and agreements in this Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.

SECTION 110. SEPARABILITY CLAUSE.

In case any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

SECTION 111. BENEFITS OF INDENTURE.

Nothing in this Indenture or in the Securities, express or implied, shall give
to any Person, other than the parties hereto and their successors hereunder and
the Holders, any benefit or any legal or equitable right, remedy or claim under
this Indenture.

SECTION 112. GOVERNING LAW.

This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York, without regard to conflicts of
laws principles thereof.

SECTION 113. LEGAL HOLIDAYS.

In any case where any Interest Payment Date, Redemption Date or Stated Maturity
of any Security or the last date on which a Holder of Securities has the right
to convert its Securities, shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or principal
(and premium, if any) or conversion of the Securities need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity or on such
last day for conversion.

                                      -11-


                                   ARTICLE TWO

                                 SECURITY FORMS

SECTION 201. FORMS GENERALLY.

The Securities of each series shall be in substantially the form set forth in
this Article, or in such other form as shall be established by or pursuant to a
Board Resolution or in one or more indentures supplemental hereto, in each case
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or Depositary therefor or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution thereof. If
the form of Securities of any series is established by action taken pursuant to
a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary or Associate Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and delivery of
such Securities.

The definitive Securities shall be printed, lithographed or engraved on steel
engraved borders or may be produced in any other manner, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.

SECTION 202. FORM OF FACE OF SECURITY.

[Insert any legend required by the Internal Revenue Code and the regulations
thereunder.]

                        PINNACLE WEST CAPITAL CORPORATION

No. ________ $________ CUSIP No._____

Pinnacle West Capital Corporation, 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 ____________________, or registered assigns,
the principal sum of ___________ Dollars on ____________________ [IF THE
SECURITY IS TO BEAR INTEREST PRIOR TO MATURITY, INSERT _ , and to pay interest
thereon from _________ or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on _________ and
__________ in each year, commencing _______, at the rate of ____% per annum,
until the principal hereof is paid or made available for payment [IF APPLICABLE,
INSERT _ , PROVIDED that any principal and premium, and any such installment of
interest, which is overdue shall bear interest at the rate of ___% per annum (to
the extent that the payment of such interest shall be legally enforceable), from
the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand]. 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

                                      -12-


(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the ______ or
______. (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. 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].

[IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT _ THE
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ____ % per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment. Interest on any overdue
principal or premium shall be payable on demand. Any such interest on overdue
principal or premium which is not paid on demand shall bear interest at the rate
of ____.% per annum (to the extent that the payment of such interest on interest
shall be legally enforceable), from the date of such demand until the amount so
demanded is paid or made available for payment. Interest on any overdue interest
shall be payable on demand.]

Payment of the principal of (and premium, if any) and [IF APPLICABLE, INSERT _
any such] interest on this Security will be made at the office or agency of the
Company maintained for that purpose in ________, 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 [IF APPLICABLE, INSERT _ ; 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.

                        PINNACLE WEST CAPITAL CORPORATION

                        BY______________________________________

ATTEST:

                                      -13-


SECTION 203. 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 December ___, 2000 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and The Bank of New York, 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 [IF APPLICABLE,
INSERT _ , limited in aggregate principal amount to $ _______].

Subject to and upon compliance with the provisions of the Indenture, the Holder
of this Security is entitled, at his option, at any time [on or after the
opening of business on _________, 20__ and] on or before the close of business
on _________, or in case this Security or a portion hereof is called for
redemption, then in respect of this Security or such portion hereof until and
including, but (unless the Company defaults in making the payment due upon
redemption) not after, the close of business on the Business Day prior to the
Redemption Date, to convert this Security (or any portion of the principal
amount hereof which is $1,000 or an integral multiple thereof), at the principal
amount hereof, or of such portion, into fully paid and non-assessable shares
(calculated as to each conversion to the nearest 1/100 of a share) of Common
Stock of the Company at [a conversion price equal to $___ aggregate principal
amount of Securities for each share of Common Stock -- the rate of __ shares of
Common Stock for each $1,000 principal amount of Securities] (or at the current
adjusted conversion [price][rate] if an adjustment has been made as provided in
the Indenture) by surrender of this Security, duly endorsed or assigned to the
Company or in blank, to the Company at its office or agency in ____________,
accompanied by written notice to the Company that the Holder hereof elects to
convert this Security, or if less than the entire principal amount hereof is to
be converted, the portion hereof to be converted, and, in case such surrender
shall be made during the period from the close of business on any Regular Record
Date next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date (unless this Security or the portion thereof being
converted has been called for redemption on a Redemption Date within such
period), also accompanied by payment in _________ clearing house or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of this Security then being
converted. Subject to the aforesaid requirement for payment and, in the case of
a conversion from the close of business on the Regular Record Date next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date, to the right of the Holder of this Security (or any Predecessor
Security) of record on such Regular Record Date to receive an installment of
interest (with certain exceptions provided in the Indenture), no payment or
adjustment is to be made on conversion for interest accrued hereon or for
dividends on the Common Stock issued on conversion. No fractions of shares or
scrip representing fractions of shares

                                      -14-


will be issued on conversion, but instead of any fractional interest the Company
shall pay a cash adjustment as provided in the Indenture. The conversion

[price][rate] is subject to adjustment as provided in the Indenture. [In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party or the transfer of substantially all of
the assets of the Company, the Indenture shall be amended, without the consent
of any Holders of Securities, so that this Security, if then outstanding, will
be convertible thereafter, during the period this Security shall be convertible
as specified above, only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares of Common Stock into which this Security might have been
converted immediately prior to such consolidation, merger or transfer (assuming
such holder of Common Stock failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality of
non-electing shares) [, assuming, if such consolidation, merger or transfer is
prior to _________, 20__, that this Security were convertible at the time of
such consolidation, merger or transfer at the initial conversion [price][rate]
specified above as adjusted from _________, 20__ to such time pursuant to the
Indenture]].

[IF APPLICABLE, INSERT _ The Securities of this series are subject to redemption
upon not less than 30 days' notice by mail, [IF APPLICABLE, INSERT _

(1) on ______ in any year commencing with the year _______ and ending with the
year ______ through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [IF
APPLICABLE, INSERT _ on or after ___________, 20___], as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [IF APPLICABLE, INSERT _ on or

      before ______________, _____%, and if redeemed] during the 12-month period
      beginning _________________ of the years indicated,



                    Redemption                                    Redemption
Year                   Price                   Year                 Price
- ----                   -----                   ----                 -----
                                                         


and thereafter at a Redemption Price equal to ________% of the principal amount,
together in the case of any such redemption [IF APPLICABLE, INSERT _ (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]

[IF APPLICABLE, INSERT _ The Securities of this series are subject to redemption
upon not less than 30 days' notice by mail, (1) on _______________ in any year
commencing with the year ____ and ending with the year ____ through operation of
the sinking fund for this series at the Redemption Prices for redemption through
operation of the sinking fund (expressed as percentages of

                                      -15-


the principal amount) set forth in the table below, and (2) at any time [IF
APPLICABLE, INSERT _ on or after ____________], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during the 12-month period

      beginning ____________ of the years indicated,



                                Redemption Price For      Redemption Price For
                                 Redemption Through       Redemption Otherwise
                                  Operation of the       Than Through Operation
Year                                Sinking Fund          of the Sinking Fund
- ----                                ------------          -------------------
                                                   


and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]

[IF APPLICABLE, INSERT _ Notwithstanding the foregoing, the Company may not,
prior to _____________, redeem any Securities of this series as contemplated by
[IF APPLICABLE, INSERT _ Clause (2) of] the preceding paragraph as a part of, or
in anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an interest cost to the Company
(calculated in accordance with generally accepted financial practice) of less
than _____% per annum.]

[IF APPLICABLE, INSERT _ The sinking fund for this series provides for the
redemption on ____________ in each year beginning with the year _______ and
ending with the year ______ of [IF APPLICABLE, INSERT _ not less than
$__________ ("mandatory sinking fund") and not more than] $_________ aggregate
principal amount of Securities of this series. Securities of this series
acquired, converted pursuant to the Indenture or redeemed by the Company
otherwise than through [IF APPLICABLE, INSERT _ mandatory] sinking fund payments
may be credited against subsequent [IF APPLICABLE, INSERT _ mandatory] sinking
fund payments otherwise required to be made [IF APPLICABLE, INSERT _ , in the
inverse order in which they become due].]

In the event of [IF APPLICABLE, INSERT _ redemption or] conversion of this
Security in part only, a new Security or Securities of this series and of like
tenor for the [IF APPLICABLE, INSERT _ unredeemed or] unconverted portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.

[IF APPLICABLE, INSERT _ 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.]

                                      -16-


   [IF THE SECURITY IS NOT AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT _ 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.]

     [IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT _ IF AN

Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to _ INSERT FORMULA FOR DETERMINING THE
AMOUNT. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]

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 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 therefor 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 or to convert this Security as provided in the Indenture.

                                      -17-


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 $_______ 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.

SECTION 204. FORM OF LEGEND FOR GLOBAL SECURITIES.

Unless otherwise specified as contemplated by Section 301 for the Securities
evidenced thereby, every Global Security authenticated and delivered hereunder
shall bear a legend in substantially the following form:

This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. This Security may not be exchanged in whole or in part for a
Security registered, and no transfer of this Security in whole or in part may be
registered, in the name of any Person other than such Depositary or a nominee
thereof, except in the limited circumstances described in the Indenture.

SECTION 205. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

The Trustee's certificates of authentication shall be in substantially the
following form:

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

                                      -18-


                              THE BANK OF NEW YORK,
                                   AS TRUSTEE

                        BY_______________________________
                           AUTHORIZED SIGNATORY

                                  ARTICLE THREE

                                 THE SECURITIES

SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.

The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.

The Securities may be issued in one or more series. There shall be established
in or pursuant to a Board Resolution and, subject to Section 303, set forth, or
determined in the manner provided, in an Officers' Certificate, or established
in one or more indentures supplemental hereto, prior to the issuance of
Securities of any series,

(1) the title of the Securities of the series (which shall distinguish the
Securities of the series from Securities of any other series);

(2) any limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture (except for
Securities authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities of the series pursuant to Section
304, 305, 306, 906, 1107 or 1402 and except for any Securities which, pursuant
to Section 303, are deemed never to have been authenticated and delivered
hereunder);

(3) the Person to whom any interest on a Security of the series shall be
payable, if other than the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest;

(4) the date or dates on which the principal of any Securities of the series is
payable;

(5) the rate or rates at which any Securities of the series shall bear interest,
if any, the date or dates from which any such interest shall accrue, the
Interest Payment Dates on which any such interest shall be payable, the manner
(if any) of determination of such Interest Payment Dates and the Regular Record
Date for any such interest payable on any Interest Payment Date;

(6) the right, if any, to extend the interest payment periods and the duration
of such extension;

                                      -19-


(7) the place or places where the principal of and any premium and interest on
any Securities of the series shall be payable;

(8) the period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series may be redeemed, in
whole or in part, at the option of the Company and, if other than by a Board
Resolution, the manner in which any election by the Company to redeem the
Securities shall be evidenced;

(9) the obligation, if any, of the Company to redeem or purchase any Securities
of the series pursuant to any sinking fund or analogous provisions or at the
option of the Holder thereof and the period or periods within which, the price
or prices at which and the terms and conditions upon which any Securities of the
series shall be redeemed or purchased, in whole or in part, pursuant to such
obligation;

(10) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which any Securities of the series shall be issuable;

(11) if the amount of principal of or any premium or interest on any Securities
of the series may be determined with reference to an index or pursuant to a
formula, the manner in which such amounts shall be determined;

(12) if other than the currency of the United States of America, the currency,
currencies or currency units in which the principal of or any premium or
interest on any Securities of the series shall be payable and the manner of
determining the equivalent thereof in the currency of the United States of
America for any purpose, including for purposes of the definition of
"Outstanding" in Section 101;

(13) if the principal of or any premium or interest on any Securities of the
series is to be payable, at the election of the Company or the Holder thereof,
in one or more currencies or currency units other than that or those in which
such Securities are stated to be payable, the currency, currencies or currency
units in which the principal of or any premium or interest on such Securities as
to which such election is made shall be payable, the periods within which and
the terms and conditions upon which such election is to be made and the amount
so payable (or the manner in which such amount shall be determined);

(14) if other than the entire principal amount thereof, the portion of the
principal amount of any Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;

(15) if the principal amount payable at the Stated Maturity of any Securities of
the series will not be determinable as of any one or more dates prior to the
Stated Maturity, the amount which shall be deemed to be the principal amount of
such Securities as of any such date for any purpose thereunder or hereunder,
including the principal

                                      -20-


amount thereof which shall be due and payable upon any Maturity other than the
Stated Maturity or which shall be deemed to be Outstanding as of any date prior
to the Stated Maturity (or, in any such case, the manner in which such amount
deemed to be the principal amount shall be determined);

(16) if applicable, that the Securities of the series, in whole or any specified
part, shall be defeasible pursuant to Section 1302 or Section 1303 or both such
Sections and, if other than by a Board Resolution, the manner in which any
election by the Company to defease such Securities shall be evidenced;

(17) if applicable, that any Securities of the series shall be issuable in whole
or in part in the form of one or more Global Securities and, in such case, the
respective Depositaries for such Global Securities, the form of any legend or
legends which shall be borne by any such Global Security in addition to or in
lieu of that set forth in Section 204 and any circumstances in addition to or in
lieu of those set forth in Clause (2) of the last paragraph of Section 305 in
which any such Global Security may be exchanged in whole or in part for
Securities 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 the
Depositary for such Global Security or a nominee thereof;

(18) any addition to or change in the Events of Default which applies to any
Securities of the series and any change in the right of the Trustee or the
requisite Holders of such Securities to declare the principal amount thereof due
and payable pursuant to Section 502;

(19) any addition to or change in the covenants set forth in Article Ten which
applies to Securities of the series;

(20) the price or rate at which shares of Common Stock will be delivered upon
conversion of the Securities of the series, any circumstances in which such
price or rate will be adjusted, and any addition to or change in article Fifteen
with respect to Securities of the series; and

(21) any other terms of the series (which terms shall not be inconsistent with
the provisions of this Indenture, except as permitted by Section 901(5)).

All Securities of any one series shall be substantially identical except as to
denomination and except as may otherwise be provided in or pursuant to the Board
Resolution referred to above and (subject to Section 303) set forth, or
determined in the manner provided, in the Officers' Certificate referred to
above or in any such indenture supplemental hereto.

If any of the terms of the series are established by action taken pursuant to a
Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary or Associate Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of the series.

SECTION 302. DENOMINATIONS.

The Securities of each series shall be issuable only in fully registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination

                                      -21-


with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.

SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

The Securities shall be executed on behalf of the Company by its Chairman of the
Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries or Associate Secretaries. The
signature of any of these officers on the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of individuals who were at
any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.

At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions as permitted by Sections 201, 301 and
1402, in authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,

(1) if the form of such Securities has been established by or pursuant to Board
Resolution as permitted by Section 201, that such form has been established in
conformity with the provisions of this Indenture;

(2) if the terms of such Securities have been established by or pursuant to
Board Resolution as permitted by Section 301, that such terms have been
established in conformity with the provisions of this Indenture; and

(3) that such Securities, when authenticated and delivered by the Trustee and
issued by the Company in the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute valid and legally binding obligations
of the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.

                                      -22-


Notwithstanding the provisions of Section 301 and of the preceding paragraph, if
all Securities of a series are not to be originally issued at one time, it shall
not be necessary to deliver the Officers' Certificate otherwise required
pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise
required pursuant to such preceding paragraph at or prior to the authentication
of each Security of such series if such documents are delivered at or prior to
the authentication upon original issuance of the first Security of such series
to be issued.

Each Security shall be dated the date of its authentication.

No Security shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by manual signature and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder. Notwithstanding the foregoing, if any
Security shall have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such Security to the
Trustee for cancellation as provided in Section 309, for all purposes of this
Indenture such Security shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits of this
Indenture.

SECTION 304. TEMPORARY SECURITIES.

Pending the preparation of definitive Securities of any series, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.

If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations and of like tenor
and aggregate principal amount. Until so exchanged, the temporary Securities of
any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series and tenor.

SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office or in any other office or
agency of the Company in a Place of Payment being herein sometimes referred to
as the "Security Register") in which, subject to such reasonable

                                      -23-


regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.

Upon surrender for registration of transfer of any Security of a series at the
office or agency of the Company in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series, of any authorized denominations and of like tenor and aggregate
principal amount.

At the option of the Holder, Securities of any series may be exchanged for other
Securities of the same series, of any authorized denominations and of like tenor
and aggregate principal amount, upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.

All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.

Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.

No service charge shall be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 304, 906, 1107 or 1402 not involving any transfer.

If the Securities of any series (or of any series and specified tenor) are to be
redeemed, the Company shall not be required (A) to issue, register the transfer
of or exchange any Securities of that series (or of that series and specified
tenor, as the case may be) during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of any such
Securities selected for redemption and ending at the close of business on the
day of such mailing, or (B) to register the transfer of or exchange any Security
so selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.

The provisions of Clauses (1), (2), (3) and (4) below shall apply only to Global
Securities:

(1) Each Global Security authenticated under this Indenture shall be registered
in the name of the Depositary designated for such Global Security or a nominee
thereof and delivered to such Depositary or a

                                      -24-


nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.

(2) Notwithstanding any other provision in this Indenture, no Global Security
may be exchanged in whole or in part for Securities registered, and no transfer
of a Global Security in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Security or a nominee thereof
unless (A) such Depositary (i) has notified the Company that it is unwilling or
unable to continue as Depositary for such Global Security or (ii) has ceased to
be a clearing agency registered under the Exchange Act, (B) there shall have
occurred and be continuing an Event of Default with respect to such Global
Security or (C) there shall exist such circumstances, if any, in addition to or
in lieu of the foregoing as have been specified for this purpose as contemplated
by Section 301.

(3) Subject to Clause (2) above, any exchange of a Global Security for other
Securities may be made in whole or in part, and all Securities issued in
exchange for a Global Security or any portion thereof shall be registered in
such names as the Depositary for such Global Security shall direct.

(4) Every Security authenticated and delivered upon registration of transfer of,
or in exchange for or in lieu of, a Global Security or any portion thereof,
whether pursuant to this Section, Section 304, 306, 906, 1107 or 1402 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Security, unless such Security is registered in the name of a Person
other than the Depositary for such Global Security or a nominee thereof.

SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (i) evidence to their
satisfaction of the destruction, loss or theft of any Security and (ii) such
security or indemnity as may be required by them to save each of them and any
agent of either of them harmless, then, in the absence of notice to the Company
or the Trustee that such Security has been acquired by a bona fide purchaser,
the Company shall execute and the Trustee shall authenticate and deliver, in
lieu of any such destroyed, lost or stolen Security, a new Security of the same
series and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.

                                      -25-


Every new Security of any series issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities.

SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

Except as otherwise provided as contemplated by Section 301 with respect to any
series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.

Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:

(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security of such series
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
given to each Holder of Securities of such series in the manner set forth in
Section 106, not

                                      -26-


less than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following Clause (2).

(2) The Company may make payment of any Defaulted Interest on the Securities of
any series in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause, such
manner of payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section, each Security delivered
under this Indenture upon registration of transfer of or in exchange for or in
lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.

In the case of any Security which is converted from the close of business on any
Regular Record Date to the opening of business on the next succeeding Interest
Payment Date (other than any Security whose Maturity is prior to such Interest
Payment Date), interest whose Stated Maturity is on such Interest Payment Date
shall be payable on such Interest Payment Date notwithstanding such conversion,
and such interest (whether or not punctually paid or duly provided for) shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on such Regular Record Date.
Except as otherwise expressly provided in the immediately preceding sentence, in
the case of any Security which is converted, interest whose Stated Maturity is
after the date of conversion of such Security shall not be payable.

SECTION 308. PERSONS DEEMED OWNERS.

Prior to due presentment of a 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 such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and any premium and
(subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

SECTION 309. CANCELLATION.

All Securities surrendered for payment, redemption, conversion, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be

                                      -27-


authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order; PROVIDED, HOWEVER, that the Trustee shall not be required to destroy such
cancelled Securities.

SECTION 310. COMPUTATION OF INTEREST.

Except as otherwise specified as contemplated by Section 301 for Securities of
any series, interest on the Securities of each series shall be computed on the
basis of a 360-day year of twelve 30-day months.

SECTION 311. CUSIP NUMBERS.

The Company in issuing the Securities may use "CUSIP" numbers (if then generally
in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company shall promptly notify the Trustee of any
change in the CUSIP numbers.

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.

This Indenture shall upon Company Request cease to be of further effect (except
as to any surviving rights of conversion, registration of transfer or exchange
of Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when

(1) either

(A) all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been delivered to the Trustee for
cancellation; or

(B) all such Securities not theretofore delivered to the Trustee for
cancellation

                                      -28-


(i) have become due and payable, or

(ii) will become due and payable at their Stated Maturity within one year, or

(iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company,

and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the purpose
money in an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for cancellation, for
principal and any premium and interest to the date of such deposit (in the case
of Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;

(2) the Company has paid or caused to be paid all other sums payable hereunder
by the Company; and

(3) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.

SECTION 402. APPLICATION OF TRUST MONEY.

Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee. All
moneys deposited with the Trustee pursuant to Section 401 (and held by it or any
Paying Agent) for the payment of Securities subsequently converted shall be
returned to the Company upon Company Request.

                                      -29-


                                  ARTICLE FIVE

                                    REMEDIES

SECTION 501. EVENTS OF DEFAULT.

"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

(1) default in the payment of any interest upon any Security of that series when
it becomes due and payable, and continuance of such default for a period of 30
days; or

(2) default in the payment of the principal of or any premium on any Security of
that series at its Maturity; or

(3) default in the deposit of any sinking fund payment, when and as due by the
terms of a Security of that series; or

(4) default in the performance, or breach, of any covenant or warranty of the
Company in this Indenture (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically dealt with
or which has expressly been included in this Indenture solely for the benefit of
series of Securities other than that series), and continuance of such default or
breach for a period of 90 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the Outstanding Securities
of that series a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder; or

(5) the entry by a court having jurisdiction in the premises of (A) a decree or
order for relief in respect of the Company in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or ordering the winding up
or liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a period
of 90 consecutive days; or

(6) the commencement by the Company of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case

                                      -30-


or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable Federal or State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action; or

(7) any other Event of Default provided with respect to Securities of that
series.

SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

If an Event of Default (other than an Event of Default specified in Section
501(5) or 501(6)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount of all the Securities of that
series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in Section 501(5)
or 501(6) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified by the terms
thereof) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.

At any time after such a declaration of acceleration with respect to Securities
of any series has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in principal amount of the Outstanding
Securities of that series, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if

(1) the Company has paid or deposited with the Trustee a sum sufficient to pay

(A) all overdue interest on all Securities of that series,

(B) the principal of (and premium, if any, on) any Securities of that series
which have become due otherwise than by such declaration of acceleration and any
interest thereon at the rate or rates prescribed therefor in such Securities,

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(C) to the extent that payment of such interest is lawful, interest upon overdue
interest at the rate or rates prescribed therefor in such Securities, and

(D) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel;

and

(2) all Events of Default with respect to Securities of that series, other than
the non-payment of the principal of Securities of that series which have become
due solely by such declaration of acceleration, have been cured or waived as
provided in Section 513.

No such rescission shall affect any subsequent default or impair any right
consequent thereon.

SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.

The Company covenants that if

(1) default is made in the payment of any interest on any Security when such
interest becomes due and payable and such default continues for a period of 30
days, or

(2) default is made in the payment of the principal of (or premium, if any, on)
any Security at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.

If an Event of Default with respect to Securities of any series occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.

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SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.

In case of any judicial proceeding relative to the Company (or any other obligor
upon the Securities), its property or its creditors, the Trustee shall be
entitled and empowered, by intervention in such proceeding or otherwise, to take
any and all actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.

No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; PROVIDED, HOWEVER,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.

SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.

All rights of action and claims under this Indenture or the Securities may be
prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.

SECTION 506. APPLICATION OF MONEY COLLECTED.

Any money collected by the Trustee pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money on account of principal or any premium or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee under Section 607;

SECOND: To the payment of the amounts then due and unpaid for principal of and
any premium and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and any premium and interest, respectively; and

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THIRD: To the payment of the balance, if any, to the Company or any other Person
or Persons legally entitled thereto.

SECTION 507. LIMITATION ON SUITS.

No Holder of any Security of any series shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless

(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;

(2) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;

(3) such Holder or Holders have offered to the Trustee indemnity satisfactory to
it against the costs, expenses and liabilities to be incurred in compliance with
such request;

(4) the Trustee for 60 days after its receipt of such notice, request and offer
of indemnity has failed to institute any such proceeding; and

(5) no direction inconsistent with such written request has been given to the
Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.

SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM,
INTEREST AND TO CONVERT.

Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to convert
such Security in accordance herewith and to institute suit for the enforcement
of any such payment and right to convert, and such rights shall not be impaired
without the consent of such Holder.

                                      -34-


SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.

If the Trustee or any Holder has instituted any proceeding to enforce any right
or remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.

SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.

Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

SECTION 511. DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.

SECTION 512. CONTROL BY HOLDERS.

The Holders of a majority in principal amount of the Outstanding Securities of
any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series, provided that

(1) such direction shall not be in conflict with any rule of law or with this
Indenture,

(2) the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction, and

(3) subject to the provisions of Section 601, the Trustee shall have the right
to decline to follow any such direction if the Trustee in good faith shall, by a
Responsible Officer or Officers of the Trustee, determine that the proceedings
so directed would involve the Trustee in personal liability.

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SECTION 513. WAIVER OF PAST DEFAULTS.

The Holders of not less than a majority in principal amount of the Outstanding
Securities of any series may on behalf of the Holders of all the Securities of
such series waive any past default hereunder with respect to such series and its
consequences, except a default

(1) in the payment of the principal of or any premium or interest on any
Security of such series, or

(2) in respect of a covenant or provision hereof which under Article Nine cannot
be modified or amended without the consent of the Holder of each Outstanding
Security of such series affected.

Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

SECTION 514. UNDERTAKING FOR COSTS.

In any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken, suffered or omitted by it
as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess costs against any such
party litigant, in the manner and to the extent provided in the Trust Indenture
Act; PROVIDED that neither this Section nor the Trust Indenture Act shall be
deemed to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company or the Trustee.

SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.

The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any usury, stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                   ARTICLE SIX

                                   THE TRUSTEE

SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.

The duties and responsibilities of the Trustee shall be as provided by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable

                                      -36-


grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.

SECTION 602. NOTICE OF DEFAULTS.

If a default occurs hereunder with respect to Securities of any series, the
Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the Trust Indenture Act; PROVIDED,
HOWEVER, that in the case of any default of the character specified in Section
501(4) with respect to Securities of such series, no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.

SECTION 603. CERTAIN RIGHTS OF TRUSTEE.

Subject to the provisions of Section 601:

(1) the Trustee may conclusively rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;

(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any resolution
of the Board of Directors shall be sufficiently evidenced by a Board Resolution;

(3) whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;

(4) the Trustee may consult with counsel of its selection and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;

(5) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity satisfactory to it against the costs, expenses
and liabilities which might be incurred by it in compliance with such request or
direction;

                                      -37-


(6) the Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;

(7) the Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder;

(8) the Trustee shall not be liable for any action taken, suffered or omitted to
be taken by it in good faith and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Indenture;

(9) the Trustee shall not be deemed to have notice of any default or Event of
Default unless a Responsible Officer of the Trustee has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Officer of the Trustee, and such notice
references the Securities and this Indenture;

(10) the rights, privileges, protections, immunities and benefits given to the
Trustee, including, without limitation, its rights to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, [and each agent, custodian and other Person employed to act
hereunder]; and

(11) the Trustee may request that the Company deliver an Officers' Certificate
setting forth the names of individuals and/or titles of officers authorized at
such time to take specified actions pursuant to this Indenture, which Officers'
Certificate may be signed by any person authorized to sign an Officers'
Certificate, including any person specified as so authorized in any such
certificate previously delivered and not superseded.

SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.

The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.

                                      -38-


SECTION 605. MAY HOLD SECURITIES.

The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar
or any other agent of the Company, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to Sections 608 and 613,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such
other agent.

SECTION 606. MONEY HELD IN TRUST.

Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.

SECTION 607. COMPENSATION AND REIMBURSEMENT.

The Company agrees

(1) to pay to the Trustee from time to time such compensation as shall be agreed
to in writing between the Company and the Trustee for all services rendered by
it hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);

(2) except as otherwise expressly provided herein, to reimburse the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and

(3) to indemnify the Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.

The Trustee shall have a lien prior to the Securities upon all property and
funds held by it hereunder for any amount owing it or any predecessor Trustee
pursuant to this Section 607, except with respect to funds held in trust for the
benefit of the Holders of particular Securities.

Without limiting any rights available to the Trustee under applicable law, when
the Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 501(5) or Section 501(6), the expenses (including
the reasonable charges and expenses of its counsel) and the compensation for the
services are intended to constitute expenses of administration under any
applicable Federal or State bankruptcy, insolvency or other similar law.

The provisions of this Section shall survive the termination of this Indenture.

                                      -39-


SECTION 608. CONFLICTING INTERESTS.

If the Trustee has or shall acquire a conflicting interest within the meaning of
the Trust Indenture Act, the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.

SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

There shall at all times be one (and only one) Trustee hereunder with respect to
the Securities of each series, which may be Trustee hereunder for Securities of
one or more other series. Each Trustee shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section and to
the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee with respect to the Securities of any series shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.

SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 611.

The Trustee may resign at any time with respect to the Securities of one or more
series by giving written notice thereof to the Company. If the instrument of
acceptance by a successor Trustee required by Section 611 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition, at the expense of the Company,
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.

The Trustee may be removed at any time with respect to the Securities of any
series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.

If at any time:

(1) the Trustee shall fail to comply with Section 608 after written request
therefor by the Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or

                                      -40-


(2) the Trustee shall cease to be eligible under Section 609 and shall fail to
resign after written request therefor by the Company or by any such Holder, or

(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt
or insolvent or a receiver of the Trustee or of its property shall be appointed
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,

then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.

If the Trustee shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any cause, with respect to the
Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the Securities
of that or those series (it being understood that any such successor Trustee may
be appointed with respect to the Securities of one or more or all of such series
and that at any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.

The Company shall give notice of each resignation and each removal of the
Trustee with respect to the Securities of any series and each appointment of a
successor Trustee with respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.

SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

In case of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee so appointed shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any

                                      -41-


further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder.

In case of the appointment hereunder of a successor Trustee with respect to the
Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Securities of one or more
series shall execute and deliver an indenture supplemental hereto wherein each
successor Trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of
the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.

Upon request of any such successor Trustee, the Company shall execute any and
all instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts referred to in the first or
second preceding paragraph, as the case may be.

No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article.

SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business

                                      -42-


of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.

SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

If and when the Trustee shall be or become a creditor of the Company (or any
other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).

SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.

The Trustee may appoint an Authenticating Agent or Agents with respect to one or
more series of Securities which shall be authorized to act on behalf of the
Trustee to authenticate Securities of such series issued upon original issue and
upon exchange, registration of transfer, partial conversion or partial
redemption thereof or pursuant to Section 306, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.

Any corporation into which an Authenticating Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which such Authenticating Agent shall be a party,
or any corporation succeeding to all or substantially all of the corporate
agency or corporate trust business of an Authenticating Agent, shall continue to
be an Authenticating Agent, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice thereof
to the Trustee and to the Company. The Trustee may at any time terminate the
agency of an Authenticating Agent by giving written notice thereof to such

                                      -43-


Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.

The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.

If an appointment with respect to one or more series is made pursuant to this
Section, the Securities of such series may have endorsed thereon, in addition to
the Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:

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

                              THE BANK OF NEW YORK,
                                   AS TRUSTEE

                        BY._____________________________
                           AS AUTHENTICATING AGENT

                        By _____________________________
                           AUTHORIZED OFFICER

                                  ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.

The Company will furnish or cause to be furnished to the Trustee

(1) fifteen days after each Regular Record Date, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders of
Securities of each series as of such Regular Record Date, and

                                      -44-


(2) at such other times as the Trustee may request in writing, within 30 days
after the receipt by the Company of any such request, a list of similar form and
content as of a date not more than 15 days prior to the time such list is
furnished;

EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.

SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.

The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list furnished
to the Trustee as provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar. The Trustee may
destroy any list furnished to it as provided in Section 701 upon receipt of a
new list so furnished.

The rights of Holders to communicate with other Holders with respect to their
rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.

Every Holder of Securities, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.

SECTION 703. REPORTS BY TRUSTEE.

The Trustee shall transmit to Holders such reports concerning the Trustee and
its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within
sixty days after each May 15 following the date of this Indenture deliver to
Holders a brief report, dated as of such May 15, which complies with the
provisions of such Section 313(a).

A copy of each such report shall, at the time of such transmission to Holders,
be filed by the Trustee with each stock exchange upon which any Securities are
listed, with the Commission and with the Company. The Company will promptly
notify the Trustee when any Securities are listed on any stock exchange and of
any delisting thereof.

SECTION 704. REPORTS BY COMPANY.

The Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; PROVIDED that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission.

                                      -45-


Except as otherwise required by the Trust Indenture Act, and except with respect
to any Officers' Certificate provided under Section 1004, delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).

                                  ARTICLE EIGHT

              CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.

The Company shall not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, and the Company shall not permit any Person to consolidate with or merge
into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:

(1) in case the Company shall consolidate with or merge into another Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an entirety
shall be a corporation, partnership, unincorporated organization or trust, shall
be organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment of
the principal of and any premium and interest on all the Securities and the
performance or observance of every covenant of this Indenture on the part of the
Company to be performed or observed and shall have provided for conversion
rights in accordance with Article Fourteen;

(2) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Company or any Subsidiary as a
result of such transaction as having been incurred by the Company or such
Subsidiary at the time of such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing;

(3) if, as a result of any such consolidation or merger or such conveyance,
transfer or lease, properties or assets of the Company would become subject to a
mortgage, pledge, lien, security interest or other encumbrance which would not
be permitted by this Indenture, the Company or such successor Person, as the
case may be, shall take such steps as shall be necessary effectively to secure
the Securities equally and ratably with (or prior to) all indebtedness secured
thereby; and

                                      -46-


(4) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with this Article and
that all conditions precedent herein provided for relating to such transaction
have been complied with.

SECTION 802. SUCCESSOR SUBSTITUTED.

Upon any consolidation of the Company with, or merger of the Company into, any
other Person or any conveyance, transfer or lease of the properties and assets
of the Company substantially as an entirety in accordance with Section 801, the
successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under this
Indenture and the Securities.

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.

Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:

(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein and in
the Securities; or

(2) to add to the covenants of the Company for the benefit of the Holders of all
or any series of Securities (and if such covenants are to be for the benefit of
less than all series of Securities, stating that such covenants are expressly
being included solely for the benefit of such series) or to surrender any right
or power herein conferred upon the Company; or

(3) to add any additional Events of Default for the benefit of the Holders of
all or any series of Securities (and if such additional Events of Default are to
be for the benefit of less than all series of Securities, stating that such
additional Events of Default are expressly being included solely for the benefit
of such series); or

(4) to add to or change any of the provisions of this Indenture to such extent
as shall be necessary to permit or facilitate the issuance of Securities in
bearer form, registrable or not registrable as to principal, and with or without
interest coupons, or to permit or facilitate the issuance of Securities in
uncertificated form; or

                                      -47-


(5) to add to, change or eliminate any of the provisions of this Indenture in
respect of one or more series of Securities, PROVIDED that any such addition,
change or elimination (A) shall neither (i) apply to any Security of any series
created prior to the execution of such supplemental indenture and entitled to
the benefit of such provision nor (ii) modify the rights of the Holder of any
such Security with respect to such provision or (B) shall become effective only
when there is no such Security Outstanding; or

(6) to secure the Securities; or

(7) to establish the form or terms of Securities of any series as permitted by
Sections 201 and 301; or

(8) to evidence and provide for the acceptance of appointment hereunder by a
successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 611; or

(9) to cure any ambiguity, to correct or supplement any provision herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture, PROVIDED that such action pursuant to this Clause (9) shall not
adversely affect the interests of the Holders of Securities of any series in any
material respect; or

(10) to make provision with respect to conversion rights of Holders pursuant to
the requirements of Article Fourteen.

SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.

With the consent of the Holders of not less than 66-2/3% in principal amount of
the Outstanding Securities of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; PROVIDED, HOWEVER, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,

(1) change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an Original Issue
Discount Security or any other Security which would be due and payable upon a
declaration of

                                      -48-


acceleration of the Maturity thereof pursuant to Section 502, or change any
Place of Payment where, or the coin or currency in which, any Security or any
premium or interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or adversely
affect the right to convert any Security as provided in this Indenture (except
as permitted herein), or

(2) reduce the percentage in principal amount of the Outstanding Securities of
any series, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or

(3) modify any of the provisions of this Section, Section 513 or Section 1008,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Outstanding Security affected thereby; PROVIDED, HOWEVER,
that this clause shall not be deemed to require the consent of any Holder with
respect to changes in the references to "the Trustee" and concomitant changes in
this Section and Section 1008, or the deletion of this proviso, in accordance
with the requirements of Sections 611 and 901(8).

A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

It shall not be necessary for any Act of Holders under this Section to approve
the particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.

SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.

In executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.

Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental

                                      -49-


indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.

SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.

Every supplemental indenture executed pursuant to this Article shall conform to
the requirements of the Trust Indenture Act.

SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.

Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.

                                   ARTICLE TEN

                                    COVENANTS

SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.

The Company covenants and agrees for the benefit of each series of Securities
that it will duly and punctually pay the principal of and any premium and
interest on the Securities of that series in accordance with the terms of the
Securities and this Indenture.

SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.

The Company will maintain in each Place of Payment for any series of Securities
an office or agency where Securities of that series may be presented or
surrendered for payment, where Securities of that series may be surrendered for
registration of transfer or exchange, where Securities may be surrendered for
conversion and where notices and demands to or upon the Company in respect of
the Securities of that series and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.

The Company may also from time to time designate one or more other offices or
agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency

                                      -50-


in each Place of Payment for Securities of any series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.

SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.

If the Company shall at any time act as its own Paying Agent with respect to any
series of Securities, it will, on or before each due date of the principal of or
any premium or interest on any of the Securities of that series, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal and any premium and interest so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee of its action or failure so to act.

Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, prior to each due date of the principal of or any premium
or interest on any Securities of that series, deposit with a Paying Agent a sum
sufficient to pay such amount, such sum to be held as

provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.

The Company will cause each Paying Agent for any series of Securities other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will (1) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (2) during the continuance
of any default by the Company (or any other obligor upon the Securities of that
series) in the making of any payment in respect of the Securities of that
series, upon the written request of the Trustee, forthwith pay to the Trustee
all sums held in trust by such Paying Agent for payment in respect of the
Securities of that series.

The Company may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

Any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of or any premium or interest
on any Security of any series and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily

                                      -51-


published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.

SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.

The Company will deliver to the Trustee, within 120 days after the end of each
fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.

SECTION 1005. EXISTENCE.

Subject to Article Eight, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and franchises; PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.

SECTION 1006. MAINTENANCE OF PROPERTIES.

The Company will cause all properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.

SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.

The Company will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary, and (2) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Company or any Subsidiary; PROVIDED, HOWEVER, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.

                                      -52-


SECTION 1008. WAIVER OF CERTAIN COVENANTS.

Except as otherwise specified as contemplated by Section 301 for Securities of
such series, the Company may, with respect to the Securities of any series, omit
in any particular instance to comply with any term, provision or condition set
forth in any covenant provided pursuant to Section 301(19), 901(2) or 901(7) for
the benefit of the Holders of such series or in any of Sections 1006 through
1007 if before the time for such compliance the Holders of at least 66-2/3% in
principal amount of the Outstanding Securities of such series shall, by Act of
such Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.

SECTION 1009. CALCULATION OF ORIGINAL ISSUE DISCOUNT.

The Company shall file with the Trustee promptly at the end of each calendar
year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on Outstanding Securities as
of the end of such year.

                                 ARTICLE ELEVEN

                            REDEMPTION OF SECURITIES

SECTION 1101. APPLICABILITY OF ARTICLE.

Securities of any series which are redeemable before their Stated Maturity shall
be redeemable in accordance with their terms and (except as otherwise specified
as contemplated by Section 301 for such Securities) in accordance with this
Article.

SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.

The election of the Company to redeem any Securities shall be evidenced by a
Board Resolution or in another manner specified as contemplated by Section 301
for such Securities. In case of any redemption at the election of the Company,
the Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date, of the principal amount of Securities of
such series to be redeemed and, if applicable, of the tenor of the Securities to
be redeemed. In the case of any redemption of Securities (a) prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, or (b) pursuant to an election of the
Company which is subject to a condition specified in the terms of such
Securities or elsewhere in this Indenture, the Company shall furnish the Trustee
with an Officers' Certificate evidencing compliance with such restriction or
condition.

SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.

Unless otherwise specified as contemplated by Section 301, if less than all the
Securities of any series are to be redeemed (unless all the Securities of such
series and of a specified tenor are to be redeemed or unless such

                                      -53-


redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities of such series not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of a portion
of the principal amount of any Security of such series, PROVIDED that the
unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series and specified tenor not previously called
for redemption in accordance with the preceding sentence.

If any Security selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the Security
so selected, the converted portion of such Security shall be deemed (so far as
may be) to be the portion selected for redemption. Securities which have been
converted during a selection of Securities to be redeemed shall be treated by
the Trustee as Outstanding for the purpose of such selection.

The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption as aforesaid and, in case of any Securities selected for
partial redemption as aforesaid, the principal amount thereof to be redeemed.

The provisions of the two preceding paragraphs shall not apply with respect to
any redemption affecting only a single Security, whether such Security is to be
redeemed in whole or in part. In the case of any such redemption in part, the
unredeemed portion of the principal amount of the Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security.

For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Securities redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be redeemed.

SECTION 1104. NOTICE OF REDEMPTION.

Notice of redemption shall be given by first-class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the Redemption Date, to each
Holder of Securities to be redeemed, at his address appearing in the Security
Register.

All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and shall state:

(1) the Redemption Date,

(2) the Redemption Price,

                                      -54-


(3) if less than all the Outstanding Securities of any series and of a specified
tenor consisting of more than a single Security are to be redeemed, the
identification (and, in the case of partial redemption of any such Securities,
the principal amounts) of the particular Securities to be redeemed and, if less
than all the Outstanding Securities of any series and of a specified tenor
consisting of a single Security are to be redeemed, the principal amount of the
particular Security to be redeemed,

(4) that on the Redemption Date the Redemption Price will become due and payable
upon each such Security to be redeemed and, if applicable, that interest thereon
will cease to accrue on and after said date,

(5) the place or places where each such Security is to be surrendered for
payment of the Redemption Price,

(6) that the redemption is for a sinking fund, if such is the case, and

(7) the conversion price or rate, as the case may be, the date on which the
right to convert the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for conversion.

Notice of redemption of Securities to be redeemed at the election of the Company
shall be given by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company and shall be irrevocable.

SECTION 1105. DEPOSIT OF REDEMPTION PRICE.

Prior to any Redemption Date, the Company shall deposit with the Trustee or with
a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 1003) an amount of money sufficient to
pay the Redemption Price of, and (except if the Redemption Date shall be an
Interest Payment Date) accrued interest on, all the Securities which are to be
redeemed on that date other than any Securities called for redemption on that
date which have been converted prior to the date of such deposit.

If any Security called for redemption is converted, any money deposited with the
Trustee or with any Paying Agent or so segregated and held in trust for the
redemption of such Security shall (subject to any right of the Holder of such
Security or any Predecessor Security to receive interest as provided in the last
paragraph of Section 307) be paid to the Company upon Company Request or, if
then held by the Company, shall be discharged from such trust.

SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE.

Notice of redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest

                                      -55-


to the Redemption Date; PROVIDED, HOWEVER, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.

If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.

SECTION 1107. SECURITIES REDEEMED IN PART.

Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.

                                 ARTICLE TWELVE

                                  SINKING FUNDS

SECTION 1201. APPLICABILITY OF ARTICLE.

The provisions of this Article shall be applicable to any sinking fund for the
retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.

The minimum amount of any sinking fund payment provided for by the terms of any
Securities is herein referred to as a "mandatory sinking fund payment", and any
payment in excess of such minimum amount provided for by the terms of such
Securities is herein referred to as an "optional sinking fund payment". If
provided for by the terms of any Securities, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities as provided for by
the terms of such Securities.

SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.

The Company (1) may deliver Outstanding Securities of a series (other than any
previously called for redemption) and (2) may apply as a credit Securities of a
series which have been converted pursuant to this Indenture or which have been
redeemed either at the election of the Company pursuant to the terms of such
Securities or through the application of permitted optional sinking fund
payments pursuant to the terms of such Securities, in each case in satisfaction
of all or any part of any sinking fund payment with respect to any Securities of
such series required to be made pursuant to the terms of such Securities as and
to the extent provided for by the terms of such Securities; PROVIDED that the
Securities to be so credited have not been previously so credited. The

                                      -56-


Securities to be so credited shall be received and credited for such purpose by
the Trustee at the Redemption Price, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.

SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.

Not less than 60 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and stating the basis for such credit and that such Securities have
not been previously so credited and will also deliver to the Trustee any
Securities to be so delivered. Not less than 30 days prior to each such sinking
fund payment date, the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 1104. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms and
in the manner stated in Sections 1106 and 1107.

                                ARTICLE THIRTEEN

                       DEFEASANCE AND COVENANT DEFEASANCE

SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.

The Company may elect, at its option at any time, to have Section 1302 or
Section 1303 applied to any Securities or any series of Securities, as the case
may be, designated pursuant to Section 301 as being defeasible pursuant to such
Section 1302 or 1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions set forth below
in this Article. Any such election shall be evidenced by a Board Resolution or
in another manner specified as contemplated by Section 301 for such Securities.

SECTION 1302. DEFEASANCE AND DISCHARGE.

Upon the Company's exercise of its option (if any) to have this Section applied
to any Securities or any series of Securities, as the case may be, the Company
shall be deemed to have been discharged from its obligations with respect to
such Securities as provided in this Section on and after the date the conditions
set forth in Section 1304 are satisfied (hereinafter called "Defeasance"). For
this purpose, such Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by such Securities and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), [subject to the following which shall survive until otherwise terminated
or discharged hereunder: (1) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 1304 and as more fully
set forth in such Section, payments in respect of the principal of and any
premium and interest on such Securities when payments are due and any rights of

                                      -57-


such Holder to convert such Securities as provided herein, (2) the Company's
obligations with respect to such Securities under Sections 304, 305, 306, 1002
and 1003, and with respect to the Trustee under Section 607 and with respect to
any rights to convert such Securities as provided herein, (3) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and (4) this
Article. Subject to compliance with this Article, the Company may exercise its
option (if any) to have this Section applied to any Securities notwithstanding
the prior exercise of its option (if any) to have Section 1303 applied to such
Securities.

SECTION 1303. COVENANT DEFEASANCE.

Upon the Company's exercise of its option (if any) to have this Section applied
to any Securities or any series of Securities, as the case may be, (1) the
Company shall be released from its obligations under Section 801(3), Sections
1006 through 1007, inclusive, and any covenants provided pursuant to Section
301(19), 901(2), 901(6) or 901(7) for the benefit of the Holders of such
Securities and (2) the occurrence of any event specified in Sections 501(4)
(with respect to any of Section 801(3), Sections 1006 through 1007, inclusive,
and any such covenants provided pursuant to Section 301(19), 901(2), 901(6) or
901(7)) and 501(7) shall be deemed not to be or result in an Event of Default
with respect to such Securities as provided in this Section on and after the
date the conditions set forth in Section 1304 are satisfied (hereinafter called
"Covenant Defeasance"). For this purpose, such Covenant Defeasance means that,
with respect to such Securities, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such specified Section (to the extent so specified in the case of Section
501(4)), whether directly or indirectly by reason of any reference elsewhere
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the remainder of this
Indenture and such Securities shall be unaffected thereby.

SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.

The following shall be the conditions to the application of Section 1302 or
Section 1303 to any Securities or any series of Securities, as the case may be:

(1) The Company shall irrevocably have deposited or caused to be deposited with
the Trustee as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) money in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee to pay and discharge, the principal of
and any premium and interest on such Securities on the respective Stated
Maturities or on any Redemption Date established pursuant to clause (9) below,
in accordance with the

                                      -58-


terms of this Indenture and such Securities. As used herein, "U.S. Government
Obligation" means (x) any security which is (i) a direct obligation of the
United States of America for the payment of which the full faith and credit of
the United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America, which, in
either case (i) or (ii), is not callable or redeemable at the option of the
issuer thereof, and (y) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S.
Government Obligation which is specified in Clause (x) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any specific payment of principal of or interest on any U.S. Government
Obligation which is so specified and held, PROVIDED that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal or interest evidenced by such depositary receipt.

(2) In the event of an election to have Section 1302 apply to any Securities or
any series of Securities, as the case may be, the Company shall have delivered
to the Trustee an Opinion of Counsel stating that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling or
(B) since the date of this instrument, there has been a change in the applicable
Federal income tax law, in either case (A) or (B) to the effect that, and based
thereon such opinion shall confirm that, the Holders of such Securities will not
recognize gain or loss for Federal income tax purposes as a result of the
deposit, Defeasance and discharge to be effected with respect to such Securities
and will be subject to Federal income tax on the same amount, in the same manner
and at the same times as would be the case if such deposit, Defeasance and
discharge were not to occur.

(3) In the event of an election to have Section 1303 apply to any Securities or
any series of Securities, as the case may be, the Company shall have delivered
to the Trustee an Opinion of Counsel to the effect that the Holders of such
Securities will not recognize gain or loss for Federal income tax purposes as a
result of the deposit and Covenant Defeasance to be effected with respect to
such Securities and will be subject to Federal income tax on the same amount, in
the same manner and at the same times as would be the case if such deposit and
Covenant Defeasance were not to occur.

(4) The Company shall have delivered to the Trustee an Officers' Certificate to
the effect that neither such Securities nor any other Securities of the same
series, if then listed on any securities exchange, will be delisted as a result
of such deposit.

                                      -59-


(5) No event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to such Securities or any other Securities shall
have occurred and be continuing at the time of such deposit or, with regard to
any such event specified in Sections 501(5) and (6), at any time on or prior to
the 90th day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until after such 90th day).

(6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a
conflicting interest within the meaning of the Trust Indenture Act (assuming all
Securities are in default within the meaning of such Act).

(7) Such Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which it is bound.

(8) Such Defeasance or Covenant Defeasance shall not result in the trust arising
from such deposit constituting an investment company within the meaning of the
Investment Company Act unless such trust shall be registered under such Act or
exempt from registration thereunder.

(9) If the Securities are to be redeemed prior to Stated Maturity (other than
from mandatory sinking fund payments or analogous payments), notice of such
redemption shall have been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee shall have been made.

(10) The Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent with
respect to such Defeasance or Covenant Defeasance have been complied with.

SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; MISCELLANEOUS PROVISIONS.

Subject to the provisions of the last paragraph of Section 1003, all money and
U.S. Government Obligations (including the proceeds thereof) deposited with the
Trustee pursuant to Section 1304 in respect of any Securities shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
such Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities, of all sums due and to
become due thereon in respect of principal and any premium and interest, but
money so held in trust need not be segregated from other funds except to the
extent required by law.

The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 1304 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of Outstanding Securities.

                                      -60-


Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to such Securities.

SECTION 1306. REINSTATEMENT.

If the Trustee or the Paying Agent is unable to apply any money in accordance
with this Article with respect to any Securities by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1305 with respect to such Securities
in accordance with this Article; PROVIDED, HOWEVER, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.

                                ARTICLE FOURTEEN

                            CONVERSION OF SECURITIES

SECTION 1401. CONVERSION PRIVILEGE.

Subject to and upon compliance with the provisions of this Article, at the
option of the Holder thereof, Securities of any series or any portion of the
principal amount thereof which is $1,000 or an integral multiple of $1,000 may
be converted at the principal amount thereof, or of such portion thereof, into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock of the Company, in accordance with the
terms of such series of Securities and (except as otherwise specified as
contemplated by Section 301) in accordance with this Article. In case a Security
or portion thereof is called for redemption, such conversion right in respect of
the Security or portion so called shall expire at the close of business on the
Business Day which is immediately preceding the Redemption Date, unless the
Company defaults in making the payment due upon redemption.

The price at which shares of Common Stock shall be delivered upon conversion,
which shall be specified as contemplated by Section 301, shall be referred to
herein as the "conversion price." The conversion price shall be adjusted in
certain instances as specified as provided in Section 301.

                                      -61-


SECTION 1402. EXERCISE OF CONVERSION PRIVILEGE.

In order to exercise the conversion privilege, the Holder of any Security to be
converted shall surrender such Security, duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained for that
purpose pursuant to Section 1002, accompanied by written notice to the Company
at such office or agency that the Holder elects to convert such Security or, if
less than the entire principal amount thereof is to be converted, the portion
thereof to be converted. Securities surrendered for conversion during the period
from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
shall be accompanied by payment in funds reasonably acceptable to the Company of
an amount equal to the interest payable on such Interest Payment Date on the
principal amount of Securities being surrendered for conversion (with similar
provision to be made for bearer Securities).

The interest so payable on such Interest Payment Date in respect of any Security
(or portion thereof, as the case may be) that has not been called for redemption
on a Redemption Date with the consequence of termination of the conversion right
as aforesaid, which Security (or portion thereof, as the case may be) is
surrendered for conversion during the period from the close of business on any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date, shall be paid to the Holder of such
Security as of such Regular Record Date. Except as provided in this paragraph
and subject to the last paragraph of Section 307, no cash payment or adjustment
shall be made upon any conversion on account of any interest accrued from the
Interest Payment Date next preceding the conversion date, in respect of any
Security (or part thereof, as the case may be) surrendered for conversion, or on
account of any dividends on the Common Stock issued upon conversion. The
Company's delivery to the Holder of the number of shares of Common Stock (and
cash in lieu of fractions thereof, as provided in this Indenture) into which a
Security is convertible will be deemed to satisfy the Company's obligation to
pay the principal amount of the Security.

Securities shall be deemed to have been converted immediately prior to the close
of business on the day of surrender of such Securities for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated

                                      -62-


for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 1403.

In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.

SECTION 1403. FRACTIONS OF SHARES.

No fractional shares of Common Stock shall be issued upon conversion of
Securities. If more than one Security shall be surrendered for conversion at one
time by the same Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Securities (or specified portions thereof) so surrendered. Instead
of any fractional share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions thereof), the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the closing price per share of Common Stock (as
determined in the manner described in the second sentence of Section 1404(8)) at
the close of business on the day of conversion.

SECTION 1404. [INTENTIONALLY LEFT BLANK.]

                                      -63-


SECTION 1405. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.

Whenever the conversion price is adjusted as herein provided:

(1) the Company shall compute the adjusted conversion price in accordance
herewith and shall prepare a certificate signed by the Treasurer of the Company,
or other applicable officer, setting forth the adjusted conversion price and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed at each office or agency maintained
for the purpose of conversion of Securities pursuant to Section 1002; and

(2) a notice stating that the conversion price has been adjusted and setting
forth the adjusted conversion price shall forthwith be required, and as soon as
practicable after it is required, such notice shall be mailed by the Company to
all Holders at their last addresses as they shall appear in the Security
Register.

SECTION 1406. NOTICE OF CERTAIN CORPORATE ACTION.

In case:

(1) the Company shall declare a dividend (or any other distribution) on its
Common Stock such that any adjustment to the conversion price would be required
pursuant to this Indenture;

(2) the Company shall authorize the granting to the holders of its Common Stock
of rights or warrants to subscribe for or purchase any shares of capital stock
of any class or of any other rights;

(3) of any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding shares of Common Stock), or of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or of the sale or transfer of
all or substantially all of the assets of the Company; or

                                      -64-


(4) of the voluntary or involuntary dissolution, liquidation or winding up of
the Company;

then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 1002, and shall
cause to be mailed to all Holders at their last addresses as they shall appear
in the Security Register or as otherwise allowed by Section 106, at least 10
days (or five days in any case specified in clause (1) or (2) above) prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up.

The Company shall cause to be filed at each office or agency maintained for the
purpose of conversion of Securities pursuant to Section 1002, and shall cause to
be provided to all Holders in accordance with Section 106, notice of any tender
offer by the Company or any subsidiary of the Company for all or any portion of
the Common Stock at or about the time that such notice of tender offer is
provided to the public generally.

SECTION 1407. COMPANY TO RESERVE COMMON STOCK.

The Company shall at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued Common Stock, for the purpose of
effecting the conversion of Securities, the full number of shares of Common
Stock then issuable upon the conversion of all outstanding Securities.

SECTION 1408. TAXES ON CONVERSIONS.

The Company will pay any and all taxes that may be payable in respect of the
issue or delivery of shares of Common Stock on conversion of Securities pursuant
hereto. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of shares
of Common Stock in a name other than that of the Holder of the Security or
Securities to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Company the amount of
any such tax, or has established to the satisfaction of the Company that such
tax has been paid.

SECTION 1409. COVENANT AS TO COMMON STOCK.

The Company covenants that all shares of Common Stock which may be issued upon
conversion of Securities will upon issue be fully paid and nonassessable and,
except as provided in Section 1408, the Company will pay all taxes, liens and
charges with respect to the issue thereof.

                                      -65-


SECTION 1410. CANCELLATION OF CONVERTED SECURITIES.

All Securities delivered for conversion shall be delivered to the Trustee to be
cancelled by or at the direction of the Trustee, which shall dispose of the same
as provided in Section 309.

SECTION 1411. PROVISIONS IN CASE OF CONSOLIDATION, MERGER OF SALE OF ASSETS.

In case of any consolidation of the Company with, or merger of the Company into,
any other Person, any merger of another Person into the Company (other than a
merger which does not result in any reclassification, conversion, exchange or
cancellation of Outstanding shares of Common Stock of the Company) or any sale
or transfer or conveyance of all or substantially all of the assets of the
Company, the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver to
the Trustee a supplemental indenture providing that the Holder of each Security
then outstanding shall have the right thereafter, during the period such
Security shall be convertible as specified in Section 1401, to convert such
Security only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer or conveyance by a
holder of the number of shares of Common Stock of the Company into which such
Security might have been converted immediately prior to such consolidation,
merger, sale or transfer or conveyance, assuming such holder of Common Stock of
the Company (i) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be ("constituent Person"), or an Affiliate
of a constituent Person and (ii) failed to exercise his rights of election, if
any, as to the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer or conveyance (provided that
if the kind or amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer is not the same for each share of
Common Stock of the Company held immediately prior to such consolidation,
merger, sale or transfer by others than a constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("nonelecting share"), then for the purpose of this Section the kind
and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each nonelecting share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
nonelecting shares). Such supplemental indenture shall provide for adjustments
which, for events subsequent to the effective date of such supplemental
indenture, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Indenture applicable to the Securities
immediately prior to the consolidation, merger, sale of, transfer or conveyance.
The above provisions of this Section shall similarly apply to successive
consolidations, mergers, sales or transfers. Notice of the execution of such a
supplemental indenture shall be given by the Company to the Holder of each
Security as provided in Section 106 promptly upon such execution.

The Company shall be solely responsible for performing the duties and
responsibilities contained in this Article and the Trustee shall have no
responsibility therefor.

SECTION 1412. TRUSTEE ADJUSTMENT DISCLAIMER.

The Trustee has no duty to determine when an adjustment of the conversion price
should be made, how it should be made or what it should be. The Trustee shall
not be accountable for and makes no representation as to the validity or value

                                      -66-


of any securities or assets issued upon conversion of Securities. The Trustee
shall not be responsible for the Company's failure to comply with this Article
Fourteen. Each Conversion Agent (other than the Company or an Affiliate of the
Company) shall have the same protection under this Section 1412 as the Trustee.

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.

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

                        PINNACLE WEST CAPITAL CORPORATION

                                       By
Name:
                                     Title:

                        THE BANK OF NEW YORK, AS TRUSTEE

                                       By
Name:
                                     Title:

                                      -67-

EX-4.5

Exhibit 4.5

                        PINNACLE WEST CAPITAL CORPORATION

                                       TO

                              THE BANK OF NEW YORK

                                     TRUSTEE

                                    INDENTURE

                            DATED AS OF ______, 20__

(For Subordinated Convertible Securities or, if Article Fourteen is made
non-applicable (as permitted by Section 301), for Senior Convertible Securities)

           CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310
           THROUGH 318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:



  TRUST INDENTURE
    ACT SECTION                                                             INDENTURE SECTION
                                                                         
ss. 310(a)(1)..........................................................      609
       (a)(2)..........................................................      609
       (a)(3)..........................................................      Not Applicable
       (a)(4)..........................................................      Not Applicable
       (b).............................................................      608
          .............................................................      610
ss. 311(a).............................................................      613
       (b).............................................................      613
ss. 312(a).............................................................      701
          .............................................................      702
       (b).............................................................      702
       (c).............................................................      702
ss. 313(a).............................................................      703
       (b).............................................................      703
       (c).............................................................      703
       (d).............................................................      703
ss. 314(a).............................................................      704
       (a)(4)..........................................................      101
             ..........................................................      1004
       (b).............................................................      Not Applicable
       (c)(1)..........................................................      102
       (c)(2)..........................................................      102
       (c)(3)..........................................................      Not Applicable
       (d).............................................................      Not Applicable
       (e).............................................................      102
ss. 315(a).............................................................      601
       (b).............................................................      602
       (c).............................................................      601
       (d).............................................................      601
       (e).............................................................      514
ss. 316(a).............................................................      101
       (a)(1)(A).......................................................      502
                .......................................................      512
       (a)(1)(B).......................................................      513
       (a)(2)..........................................................      Not Applicable
       (b).............................................................      508
       (c).............................................................      104
ss. 317(a)(1)..........................................................      503
       (a)(2)..........................................................      504
       (b).............................................................      1003
ss. 318(a).............................................................      107




                                TABLE OF CONTENTS

                                   ARTICLE ONE

             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION



                                                                                 Page
                                                                                 ----
                                                                              
PREAMBLE......................................................................     1
Recitals of the Company.......................................................     1

                                   ARTICLE ONE

             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 101.  Definitions.....................................................     1
Section 102.  Compliance Certificates and Opinions............................     7
Section 103.  Form of Documents Delivered to Trustee..........................     8
Section 104.  Acts of Holders; Record Dates...................................     8
Section 105.  Notices, Etc., to Trustee and Company...........................    10
Section 106.  Notice to Holders; Waiver.......................................    10
Section 107.  Conflict with Trust Indenture Act...............................    11
Section 108.  Effect of Headings and Table of Contents........................    11
Section 109.  Successors and Assigns..........................................    11
Section 110.  Separability Clause.............................................    11
Section 111.  Benefits of Indenture...........................................    11
Section 112.  Governing Law...................................................    11
Section 113.  Legal Holidays..................................................    12

                                   ARTICLE TWO

                                 SECURITY FORMS

Section 201.  Forms Generally.................................................    12
Section 202.  Form of Face of Security........................................    12
Section 203.  Form of Reverse of Security.....................................    14
Section 204.  Form of Legend for Global Securities............................    19
Section 205.  Form of Trustee's Certificate of Authentication.................    19


                                       -i-


                                                                               
                                  ARTICLE THREE

                                 THE SECURITIES

Section 301.  Amount Unlimited; Issuable in Series............................    19
Section 302.  Denominations...................................................    22
Section 303.  Execution, Authentication, Delivery and Dating..................    22
Section 304.  Temporary Securities............................................    23
Section 305.  Registration, Registration of Transfer and Exchange.............    24
Section 306.  Mutilated, Destroyed, Lost and Stolen Securities................    26
Section 307.  Payment of Interest; Interest Rights Preserved..................    26
Section 308.  Persons Deemed Owners...........................................    28
Section 309.  Cancellation....................................................    28
Section 310.  Computation of Interest.........................................    28
Section 311.  CUSIP Numbers...................................................    28

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

Section 401.  Satisfaction and Discharge of Indenture.........................    29
Section 402.  Application of Trust Money......................................    30

                                  ARTICLE FIVE

                                    REMEDIES

Section 501.  Events of Default...............................................    30
Section 502.  Acceleration of Maturity; Rescission and Annulment..............    31
Section 503.  Collection of Indebtedness and Suits for Enforcement
                by Trustee....................................................    32
Section 504.  Trustee May File Proofs of Claim................................    33
Section 505.  Trustee May Enforce Claims Without Possession of Securities.....    33
Section 506.  Application of Money Collected..................................    34
Section 507.  Limitation on Suits.............................................    34
Section 508.  Unconditional Right of Holders to Receive Principal, Premium,
                Interest and to Convert.......................................    35
Section 509.  Restoration of Rights and Remedies..............................    35
Section 510.  Rights and Remedies Cumulative..................................    35
Section 511.  Delay or Omission Not Waiver....................................    35
Section 512.  Control by Holders..............................................    35
Section 513.  Waiver of Past Defaults.........................................    36
Section 514.  Undertaking for Costs...........................................    36
Section 515.  Waiver of Usury, Stay or Extension Laws.........................    36



                                      -ii-


                                                                               
                                   ARTICLE SIX

                                   THE TRUSTEE

Section 601.  Certain Duties and Responsibilities.............................    37
Section 602.  Notice of Defaults..............................................    37
Section 603.  Certain Rights of Trustee.......................................    37
Section 604.  Not Responsible for Recitals or Issuance of Securities..........    39
Section 605.  May Hold Securities.............................................    39
Section 606.  Money Held in Trust.............................................    39
Section 607.  Compensation and Reimbursement..................................    39
Section 608.  Conflicting Interests...........................................    40
Section 609.  Corporate Trustee Required; Eligibility.........................    40
Section 610.  Resignation and Removal; Appointment of Successor...............    40
Section 611.  Acceptance of Appointment by Successor..........................    42
Section 612.  Merger, Conversion, Consolidation or Succession to Business.....    43
Section 613.  Preferential Collection of Claims Against Company...............    43
Section 614.  Appointment of Authenticating Agent.............................    43

                                  ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

Section 701.  Company to Furnish Trustee Names and Addresses of Holders.......    45
Section 702.  Preservation of Information; Communications to Holders..........    45
Section 703.  Reports by Trustee..............................................    45
Section 704.  Reports by Company..............................................    46

                                  ARTICLE EIGHT

              CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

Section 801.  Company May Consolidate, Etc., Only on Certain Terms............    46
Section 802.  Successor Substituted...........................................    47

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

Section 901.  Supplemental Indentures Without Consent of Holders..............    47
Section 902.  Supplemental Indentures With Consent of Holders.................    48
Section 903.  Execution of Supplemental Indentures............................    49
Section 904.  Effect of Supplemental Indentures...............................    50
Section 905.  Conformity with Trust Indenture Act.............................    50
Section 906.  Reference in Securities to Supplemental Indentures..............    50



                                      -iii-


                                                                               
                                   ARTICLE TEN

                                    COVENANTS

Section 1001. Payment of Principal, Premium and Interest......................    50
Section 1002. Maintenance of Office or Agency.................................    50
Section 1003. Money for Securities Payments to Be Held in Trust...............    51
Section 1004. Statement by Officers as to Default.............................    52
Section 1005. Existence.......................................................    52
Section 1006. Maintenance of Properties.......................................    52
Section 1007. Payment of Taxes and Other Claims...............................    53
Section 1008. Waiver of Certain Covenants.....................................    53
Section 1009. Calculation of Original Issue Discount..........................    53

                                 ARTICLE ELEVEN

                            REDEMPTION OF SECURITIES

Section 1101. Applicability of Article........................................    53
Section 1102. Election to Redeem; Notice to Trustee...........................    53
Section 1103. Selection by Trustee of Securities to Be Redeemed...............    54
Section 1104. Notice of Redemption............................................    54
Section 1105. Deposit of Redemption Price.....................................    55
Section 1106. Securities Payable on Redemption Date...........................    56
Section 1107. Securities Redeemed in Part.....................................    56

                                 ARTICLE TWELVE

                                  SINKING FUNDS

Section 1201. Applicability of Article........................................    56
Section 1202. Satisfaction of Sinking Fund Payments with Securities...........    57
Section 1203. Redemption of Securities for Sinking Fund.......................    57

                                ARTICLE THIRTEEN

                       DEFEASANCE AND COVENANT DEFEASANCE

Section 1301. Company's Option to Effect Defeasance or Covenant Defeasance....    57
Section 1302. Defeasance and Discharge........................................    57
Section 1303. Covenant Defeasance.............................................    58
Section 1304. Conditions to Defeasance or Covenant Defeasance.................    58

Section 1305. Deposited Money and U.S. Government Obligations to Be Held
                in Trust; Miscellaneous Provisions............................    61
Section 1306. Reinstatement...................................................    61



                                       -iv


                                                                               
                                ARTICLE FOURTEEN

                           SUBORDINATION OF DEBENTURES

Section 1401. Securities Subordinate to Senior Debt...........................    62
Section 1402. Payment Over of Proceeds Upon Default...........................    62
Section 1403. Payment Over of Proceeds Upon Dissolution, Etc..................    63
Section 1404. Subrogation to Rights of Holders of Senior Debt.................    64
Section 1405. Trustee to Effectuate Subordination.............................    65
Section 1406. Notice to Trustee...............................................    65
Section 1407. Rights of Trustee as Holder of Senior Debt; Preservation
                of Trustee's Rights...........................................    65
Section 1408. Trustee Not Fiduciary for Holders of Senior Debt................    66
Section 1409. No Waiver of Subordination Provisions...........................    66
Section 1410. Defeasance of this Article Fourteen.............................    66

                                 ARTICLE FIFTEEN

                            CONVERSION OF SECURITIES

Section 1501. Conversion Privilege............................................    67
Section 1502. Exercise of Conversion Privilege................................    67
Section 1503. Fractions of Shares.............................................    68
Section 1504. [Intentionally Left Blank]......................................    69
Section 1505. Notice of Adjustments of Conversion Price.......................    73
Section 1506. Notice of Certain Corporate Action..............................    74
Section 1507. Company to Reserve Common Stock.................................    75
Section 1508. Taxes on Conversions............................................    75
Section 1509. Covenant as to Common Stock.....................................    75
Section 1510. Cancellation of Converted Securities............................    75
Section 1511. Provisions in Case of Consolidation, Merger of Sale of Assets...    75
Section 1512. Certain Conversions Deemed Payment..............................    76
Section 1513. Trustee Adjustment Disclaimer...................................    76



                                       -v-


INDENTURE, dated as of _______, 20__, between Pinnacle West Capital Corporation,
a corporation duly organized and existing under the laws of the State of Arizona
(herein called the "Company"), having its principal office at 400 North Fifth
Street, Phoenix, Arizona 85004, and The Bank of New York, a New York banking
corporation, as Trustee (herein called the "Trustee").

                             RECITALS OF THE COMPANY

The Company has duly authorized the execution and delivery of this Indenture to
provide for the issuance from time to time of its unsecured, convertible
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.

All things necessary to make this Indenture a valid agreement of the Company, in
accordance with its terms, have been done.

                   NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Securities by
the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Securities or of series thereof, as follows:

                                   ARTICLE ONE

                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATION

SECTION 101. DEFINITIONS.

For all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:

(1) the terms defined in this Article have the meanings assigned to them in this
Article and include the plural as well as the singular;

(2) all other terms used herein which are defined in the Trust Indenture Act,
either directly or by reference therein, have the meanings assigned to them
therein;

(3) all accounting terms not otherwise defined herein have the meanings assigned
to them in accordance with generally accepted accounting principles;

(4) unless the context otherwise requires, any reference to an "Article" or a
"Section" refers to an Article or a Section, as the case may be, of this
Indenture; and

(5) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.

"Act", when used with respect to any Holder, has the meaning specified in
Section 104.

"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

"Authenticating Agent" means any Person authorized by the Trustee pursuant to
Section 614 to act on behalf of the Trustee to authenticate Securities of one or
more series.

"Board of Directors" means either the board of directors of the Company or any
duly authorized committee of that board.

"Board Resolution" means a copy of a resolution certified by the Secretary or an
Assistant Secretary or Associate Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the date
of such certification, and delivered to the Trustee.

"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.

"Commission" means the Securities and Exchange Commission, from time to time
constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Article Fourteen, shares issuable on conversion of Securities
shall include only shares of the class designated as Common Stock of the Company
at the date of this instrument or shares of any class or classes resulting from
any reclassification or reclassifications thereof and which have no preference
in respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company; PROVIDED that, if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.

                                       -2-


"Company" means the Person named as the "Company" in the first paragraph of this
instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.

"Company Request" or "Company Order" means a written request or order signed in
the name of the Company by its Chairman of the Board, its Vice Chairman of the
Board, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary or Associate Secretary, and
delivered to the Trustee.

"Corporate Trust Office" means the designated corporate trust office of the
Trustee  at which at any particular time its corporate trust business shall be
administered, which office at the date hereof is located at 700 South Flower
Street, Suite 500, Los Angeles, California 90017.

"corporation" means a corporation, association, company, joint-stock company or
business trust.

"Covenant Defeasance" has the meaning specified in Section 1303.

"Defaulted Interest" has the meaning specified in Section 307.

"Defeasance" has the meaning specified in Section 1302.

"Depositary" means, with respect to Securities of any series issuable in whole
or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 301.

"Event of Default" has the meaning specified in Section 501.

"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.

"Expiration Date" has the meaning specified in Section 104.

"Global Security" means a Security that evidences all or part of the Securities
of any series and bears the legend set forth in Section 204 (or such legend as
may be specified as contemplated by Section 301 for such Securities).

"Holder" means a Person in whose name a Security is registered in the Security
Register.

"Indenture" means this instrument as originally executed and as it may from time
to time be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, including, for all
purposes of this instrument and any such supplemental indenture, the provisions
of the Trust Indenture Act that are deemed to be a part of and govern this
instrument and any such supplemental indenture, respectively. The term
"Indenture" shall also include the terms of particular series of Securities
established as contemplated by Section 301.

                                       -3-


"interest", when used with respect to an Original Issue Discount Security which
by its terms bears interest only after Maturity, means interest payable after
Maturity.

"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.

"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.

"Maturity", when used with respect to any Security, means the date on which the
principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.

"Notice of Default" means a written notice of the kind specified in Section
501(4).

"Officers' Certificate" means a certificate signed by the Chairman of the Board,
a Vice Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary or
Associate Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 1004 shall
be the principal executive, financial or accounting officer of the Company.

"Opinion of Counsel" means a written opinion of counsel, who may be counsel for
the Company, or other counsel who shall be acceptable to the Trustee.

"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.

"Outstanding", when used with respect to Securities, means, as of the date of
determination, all Securities theretofore authenticated and delivered under this
Indenture, except:

(1) Securities theretofore cancelled by the Trustee or delivered to the Trustee
for cancellation;

(2) Securities for whose payment or redemption money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the Company (if the
Company shall act as its own Paying Agent) for the Holders of such Securities;
PROVIDED that, if such Securities are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;

(3) Securities as to which Defeasance has been effected pursuant to Section
1302; and

(4) Securities which have been paid pursuant to Section 306 or in exchange for
or in lieu of which other Securities have been authenticated and delivered
pursuant to this Indenture, other than any

                                       -4-


such Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands such Securities are valid obligations of the Company;

PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount of
the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security which shall
be deemed to be Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a Security denominated
in one or more foreign currencies or currency units which shall be deemed to be
Outstanding shall be the U.S. dollar equivalent, determined as of such date in
the manner provided as contemplated by Section 301, of the principal amount of
such Security (or, in the case of a Security described in Clause (A) or (B)
above, of the amount determined as provided in such Clause), and (D) Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, waiver or other action, only Securities which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.

"Paying Agent" means any Person authorized by the Company to pay the principal
of or any premium or interest on any Securities on behalf of the Company.

"Person" means any individual, corporation, partnership, joint venture, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of and any premium and interest on
the Securities of that series are payable as specified as contemplated by
Section 301.

"Predecessor Security" of any particular Security means every previous Security
evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

"Redemption Date", when used with respect to any Security to be redeemed, means
the date fixed for such redemption by or pursuant to this Indenture.

                                       -5-


"Redemption Price", when used with respect to any Security to be redeemed, means
the price at which it is to be redeemed pursuant to this Indenture.

"Regular Record Date" for the interest payable on any Interest Payment Date on
the Securities of any series means the date specified for that purpose as
contemplated by Section 301.

"Responsible Officer", when used with respect to the Trustee, means any vice
president, any assistant secretary, any assistant treasurer, any trust officer
or assistant trust officer, or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.

"Securities" has the meaning stated in the first recital of this Indenture and
more particularly means any Securities authenticated and delivered under this
Indenture.

"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.

"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.

"Senior Debt" of the Company means the principal of, premium, if any, interest
on and any other payment due pursuant to any of the following, whether
outstanding at the date of execution of this Indenture or thereafter incurred,
created or assumed: (a) all indebtedness of the Company evidenced by notes,
debentures, bonds or other securities sold by the Company for money, (b) all
indebtedness of others of the kinds described in the preceding clause (a)
assumed by or guaranteed in any manner by the Company, including through an
agreement to purchase, contingent or otherwise, and (c) all renewals, extensions
or refundings of indebtedness of the kinds described in any of the preceding
causes (a) and (b) unless, in the case of any particular indebtedness, renewal,
extension or refunding, the instrument creating or evidencing the same or the
assumption or guarantee of the same expressly provides that such indebtedness,
renewal, extension or refunding is not superior in right of payment to or is
PARI PASSU with the Securities.

"Special Record Date" for the payment of any Defaulted Interest means a date
fixed by the Trustee pursuant to Section 307.

"Stated Maturity", when used with respect to any Security or any installment of
principal thereof or interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.

"Subsidiary" means a corporation more than 50% of the outstanding voting stock
of which is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries, or by the Company and one or more other Subsidiaries. For
the purposes of this definition, "voting stock" means stock which ordinarily has
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power by reason of any contingency.

                                       -6-


"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the
date as of which this instrument was executed; PROVIDED, HOWEVER, that in the
event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.

"Trustee" means the Person named as the "Trustee" in the first paragraph of this
instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.

"U.S. Government Obligation" has the meaning specified in Section 1304.

"Vice President", when used with respect to the Company or the Trustee, means
any vice president, whether or not designated by a number or a word or words
added before or after the title "vice president".

SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.

Upon any application or request by the Company to the Trustee to take any action
under any provision of this Indenture, the Company shall furnish to the Trustee
such certificates and opinions as may be required under the Trust Indenture Act.
Each such certificate or opinion shall be given in the form of an Officers'
Certificate, if to be given by an officer of the Company, or an Opinion of
Counsel, if to be given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirements set forth in this Indenture.

Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include,

(1) a statement that each individual signing such certificate or opinion has
read such covenant or condition and the definitions herein relating thereto;

(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(3) a statement that, in the opinion of each such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

(4) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.

                                       -7-


SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

In any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such matters
be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more other
such Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company may be based, insofar as
it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

Where any Person is required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.

SECTION 104. ACTS OF HOLDERS; RECORD DATES.

Any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.

The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.

The ownership of Securities shall be proved by the Security Register.

                                       -8-


Any request, demand, authorization, direction, notice, consent, waiver or other
Act of the Holder of any Security shall bind every future Holder of the same
Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.

The Company may set any day as a record date for the purpose of determining the
Holders of Outstanding Securities of any series entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Securities of such series, PROVIDED that the Company may not set a
record date for, and the provisions of this paragraph shall not apply with
respect to, the giving or making of any notice, declaration, request or
direction referred to in the next paragraph. If any record date is set pursuant
to this paragraph, the Holders of Outstanding Securities of the relevant series
on such record date, and no other Holders, shall be entitled to take the
relevant action, whether or not such Holders remain Holders after such record
date; PROVIDED that no such action shall be effective hereunder unless taken on
or prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities of such series on such record date. Nothing in
this paragraph shall be construed to prevent the Company from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities of the relevant series on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Company, at its own
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Trustee in writing and to
each Holder of Securities of the relevant series in the manner set forth in
Section 106.

The Trustee may set any day as a record date for the purpose of determining the
Holders of Outstanding Securities of any series entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 502, (iii) any request to institute proceedings referred
to in Section 507(2) or (iv) any direction referred to in Section 512, in each
case with respect to Securities of such series. If any record date is set
pursuant to this paragraph, the Holders of Outstanding Securities of such series
on such record date, and no other Holders, shall be entitled to join in such
notice, declaration, request or direction, whether or not such Holders remain
Holders after such record date; PROVIDED that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Securities of such series on
such record date. Nothing in this paragraph shall be construed to prevent the
Trustee from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be cancelled
and of no effect), and nothing in this paragraph shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Securities of the relevant series on the date such action is taken.
Promptly after any record date is set pursuant to this paragraph, the Trustee,
at the Company's expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be given to the Company
in writing and to each Holder of Securities of the relevant series in the manner
set forth in Section 106.

                                       -9-


With respect to any record date set pursuant to this Section, the party hereto
which sets such record dates may designate any day as the "Expiration Date" and
from time to time may change the Expiration Date to any earlier or later day;
PROVIDED that no such change shall be effective unless notice of the proposed
new Expiration Date is given to the other party hereto in writing, and to each
Holder of Securities of the relevant series in the manner set forth in Section
106, on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.

Without limiting the foregoing, a Holder entitled hereunder to take any action
hereunder with regard to any particular Security may do so with regard to all or
any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.

SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.

Any request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,

(1) the Trustee by any Holder or by the Company shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing to or with the
Trustee at its Corporate Trust Office, Attention: Corporate Trust
Administration, or

(2) the Company by the Trustee or by any Holder shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if in writing and
mailed, first-class postage prepaid, to the Company addressed to it at the
address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.

SECTION 106. NOTICE TO HOLDERS; WAIVER.

Where this Indenture provides for notice to Holders of any event, such notice
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each Holder affected by such
event, at his address as it appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to

                                      -10-


receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.

In case by reason of the suspension of regular mail service or by reason of any
other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.

SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.

If any provision hereof limits, qualifies or conflicts with a provision of the
Trust Indenture Act which is required under such Act to be a part of and govern
this Indenture, the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.

SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

SECTION 109. SUCCESSORS AND ASSIGNS.

All covenants and agreements in this Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.

SECTION 110. SEPARABILITY CLAUSE.

In case any provision in this Indenture or in the Securities shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

SECTION 111. BENEFITS OF INDENTURE.

Nothing in this Indenture or in the Securities, express or implied, shall give
to any Person, other than the parties hereto and their successors hereunder and
the Holders, any benefit or any legal or equitable right, remedy or claim under
this Indenture.

SECTION 112. GOVERNING LAW.

This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York, without regard to conflicts of
laws principles thereof.

                                      -11-


SECTION 113. LEGAL HOLIDAYS.

In any case where any Interest Payment Date, Redemption Date or Stated Maturity
of any or the last date on which a Holder of Securities has the right to convert
its Securities, Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or principal
(and premium, if any) or conversion of the Securities need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on the
Interest Payment Date or Redemption Date, or at the Stated Maturity or on such
last day for conversion.

                                   ARTICLE TWO

                                 SECURITY FORMS

SECTION 201. FORMS GENERALLY.

The Securities of each series shall be in substantially the form set forth in
this Article, or in such other form as shall be established by or pursuant to a
Board Resolution or in one or more indentures supplemental hereto, in each case
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or Depositary therefor or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution thereof. If
the form of Securities of any series is established by action taken pursuant to
a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary or Associate Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and delivery of
such Securities.

The definitive Securities shall be printed, lithographed or engraved on steel
engraved borders or may be produced in any other manner, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.

SECTION 202. FORM OF FACE OF SECURITY.

[Insert any legend required by the Internal Revenue Code and the regulations
thereunder.]

                        PINNACLE WEST CAPITAL CORPORATION

No. ________ $_______ CUSIP No._____

Pinnacle West Capital Corporation, 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

                                      -12-


value received, hereby promises to pay to ____________________, or registered
assigns, the principal sum of ___________ Dollars on ____________________ [IF
THE SECURITY IS TO BEAR INTEREST PRIOR TO MATURITY, INSERT _ , and to pay
interest thereon from _________ or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on _________
and __________ in each year, commencing _______, at the rate of ____% per annum,
until the principal hereof is paid or made available for payment [IF APPLICABLE,
INSERT _ , PROVIDED that any principal and premium, and any such installment of
interest, which is overdue shall bear interest at the rate of ___% per annum (to
the extent that the payment of such interest shall be legally enforceable), from
the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand]. 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 the ______ or
______. (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. 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].

    [IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT _ THE

principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ____ % per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment. Interest on any overdue
principal or premium shall be payable on demand. Any such interest on overdue
principal or premium which is not paid on demand shall bear interest at the rate
of ____.% per annum (to the extent that the payment of such interest on interest
shall be legally enforceable), from the date of such demand until the amount so
demanded is paid or made available for payment. Interest on any overdue interest
shall be payable on demand.]

Payment of the principal of (and premium, if any) and [IF APPLICABLE, INSERT _
any such] interest on this Security will be made at the office or agency of the
Company maintained for that purpose in ________, 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 [IF APPLICABLE, INSERT _ ; 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.

                                      -13-


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.

                        PINNACLE WEST CAPITAL CORPORATION

                         BY______________________________________

ATTEST:

SECTION 203. 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 December ___, 2000 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and The Bank of New York, 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 [IF APPLICABLE,
INSERT _ , limited in aggregate principal amount to $ _______].

Subject to and upon compliance with the provisions of the Indenture, the Holder
of this Security is entitled, at his option, at any time [on or after the
opening of business on _________, 20__ and] on or before the close of business
on _________, or in case this Security or a portion hereof is called for
redemption, then in respect of this Security or such portion hereof until and
including, but (unless the Company defaults in making the payment due upon
redemption) not after, the close of business on the Business Day prior to the
Redemption Date, to convert this Security (or any portion of the principal
amount hereof which is $1,000 or an integral multiple thereof), at the principal
amount hereof, or of such portion, into fully paid and non-assessable shares
(calculated as to each conversion to the nearest 1/100 of a share) of Common
Stock of the Company at [a conversion price equal to $___ aggregate principal
amount of Securities for each share of Common Stock -- the rate of __ shares of
Common Stock for each $1,000 principal amount of Securities] (or at the current
adjusted conversion [price][rate] if an adjustment has been made as provided in
the Indenture) by surrender of this Security, duly endorsed or assigned to the
Company or in blank, to the Company at its office or agency in ____________,
accompanied by written notice to the Company that the Holder hereof elects to
convert this Security, or if less than the entire principal amount hereof is to
be converted, the portion hereof to be converted, and, in case such surrender
shall be made during the period from the close of business on any Regular Record
Date next preceding any Interest Payment Date to the opening of business on such

                                      -14-


Interest Payment Date (unless this Security or the portion thereof being
converted has been called for redemption on a Redemption Date within such
period), also accompanied by payment in _________ clearing house or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of this Security then being
converted. Subject to the aforesaid requirement for payment and, in the case of
a conversion from the close of business on the Regular Record Date next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date, to the right of the Holder of this Security (or any Predecessor
Security) of record on such Regular Record Date to receive an installment of
interest (with certain exceptions provided in the Indenture), no payment or
adjustment is to be made on conversion for interest accrued hereon or for
dividends on the Common Stock issued on conversion. No fractions of shares or
scrip representing fractions of shares will be issued on conversion, but instead
of any fractional interest the Company shall pay a cash adjustment as provided
in the Indenture. The conversion [price][rate] is subject to adjustment as
provided in the Indenture. [In addition, the Indenture provides that in case of
certain consolidations or mergers to which the Company is a party or the
transfer of substantially all of the assets of the Company, the Indenture shall
be amended, without the consent of any Holders of Securities, so that this
Security, if then outstanding, will be convertible thereafter, during the period
this Security shall be convertible as specified above, only into the kind and
amount of securities, cash and other property receivable upon the consolidation,
merger or transfer by a holder of the number of shares of Common Stock into
which this Security might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Common Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares) [, assuming, if such
consolidation, merger or transfer is prior to _________, 20__, that this
Security were convertible at the time of such consolidation, merger or transfer
at the initial conversion [price][rate] specified above as adjusted from
_________, 20__ to such time pursuant to the Indenture]].

[IF APPLICABLE, INSERT _ The Securities of this series are subject to redemption
upon not less than 30 days' notice by mail, [IF APPLICABLE, INSERT _

(1) on ___________ in any year commencing with the year ______ and ending with
the year ______ through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [IF
APPLICABLE, INSERT _ on or after __________, 20___], as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [IF APPLICABLE, INSERT _ on or
before _______________, ___%, and if redeemed] during the 12-month period
beginning _____________ of the years indicated,



               Redemption                          Redemption
Year              Price              Year            Price
- ----              -----              ----            -----
                                          


and thereafter at a Redemption Price equal to _____% of the principal amount,
together in the case of any such redemption [IF APPLICABLE, INSERT _ (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,

                                      -15-


or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]

[IF APPLICABLE, INSERT _ The Securities of this series are subject to redemption
upon not less than 30 days' notice by mail, (1) on ____________ in any year
commencing with the year ____ and ending with the year ____ through operation of
the sinking fund for this series at the Redemption Prices for redemption through
operation of the sinking fund (expressed as percentages of the principal amount)
set forth in the table below, and (2) at any time [IF APPLICABLE, INSERT _ on or
after ____________], as a whole or in part, at the election of the Company, at
the Redemption Prices for redemption otherwise than through operation of the
sinking fund (expressed as percentages of the principal amount) set forth in the
table below: If redeemed during the 12-month period

      beginning ____________ of the years indicated,



                                Redemption Price For      Redemption Price For
                                 Redemption Through       Redemption Otherwise
                                  Operation of the       Than Through Operation
Year                                Sinking Fund          of the Sinking Fund
- ----                                ------------          -------------------
                                                   


and thereafter at a Redemption Price equal to _____% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]

[IF APPLICABLE, INSERT _ Notwithstanding the foregoing, the Company may not,
prior to _____________, redeem any Securities of this series as contemplated by
[IF APPLICABLE, INSERT _ Clause (2) of] the preceding paragraph as a part of, or
in anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an interest cost to the Company
(calculated in accordance with generally accepted financial practice) of less
than _____% per annum.]

[IF APPLICABLE, INSERT _ The sinking fund for this series provides for the
redemption on ____________ in each year beginning with the year _______ and
ending with the year ______ of [IF APPLICABLE, INSERT _ not less than
$__________ ("mandatory sinking fund") and not more than] $_________ aggregate
principal amount of Securities of this series. Securities of this series
acquired, converted pursuant to the Indenture or redeemed by the Company
otherwise than through [IF APPLICABLE, INSERT _ mandatory] sinking fund payments
may be credited against subsequent [IF APPLICABLE, INSERT _ mandatory] sinking
fund payments otherwise required to be made [IF APPLICABLE, INSERT _ , in the
inverse order in which they become due].]

                                      -16-


In the event of [IF APPLICABLE, INSERT _ redemption or] conversion of this
Security in part only, a new Security or Securities of this series and of like
tenor for the [IF APPLICABLE, INSERT _ unredeemed or] unconverted portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.

    [IF APPLICABLE, INSERT PARAGRAPH REGARDING SUBORDINATION OF THE SECURITY,
WHICH MAY BE AS FOLLOWS, OR A VARIATION THEREOF:

the indebtedness evidenced by this Security is, to the extent provided in the
Indenture, subordinate and subject in right of payment to the prior payment in
full of all Senior Debt, and this Security is issued subject to the provisions
of the Indenture. Each holder of this Security, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes.]

[IF APPLICABLE, INSERT _ 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 THE SECURITY IS NOT AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT _ 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.]

     [IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT _ IF AN

Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to _ INSERT FORMULA FOR DETERMINING THE
AMOUNT. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]

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 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

                                      -17-


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 therefor 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 or to convert this Security as provided in the Indenture.

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 $....... 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.

                                      -18-


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

SECTION 204. FORM OF LEGEND FOR GLOBAL SECURITIES.

Unless otherwise specified as contemplated by Section 301 for the Securities
evidenced thereby, every Global Security authenticated and delivered hereunder
shall bear a legend in substantially the following form:

This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. This Security may not be exchanged in whole or in part for a
Security registered, and no transfer of this Security in whole or in part may be
registered, in the name of any Person other than such Depositary or a nominee
thereof, except in the limited circumstances described in the Indenture.

SECTION 205. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

The Trustee's certificates of authentication shall be in substantially the
following form:

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

                              THE BANK OF NEW YORK,
                                   AS TRUSTEE

                          BY___________________________
                              AUTHORIZED SIGNATORY

                                  ARTICLE THREE

                                 THE SECURITIES

SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.

The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.

The Securities may be issued in one or more series. There shall be established
in or pursuant to a Board Resolution and, subject to Section 303, set forth, or
determined in the manner provided, in an Officers' Certificate, or established
in one or more indentures supplemental hereto, prior to the issuance of
Securities of any series,

(1) the title of the Securities of the series (which shall distinguish the
Securities of the series from Securities of any other series);

(2) any limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture (except for
Securities authenticated and

                                      -19-


delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 or
1502 and except for any Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);

(3) the Person to whom any interest on a Security of the series shall be
payable, if other than the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest;

(4) the date or dates on which the principal of any Securities of the series is
payable;

(5) the rate or rates at which any Securities of the series shall bear interest,
if any, the date or dates from which any such interest shall accrue, the
Interest Payment Dates on which any such interest shall be payable, the manner
of determination of such Interest Payment Dates and the Regular Record Date for
any such interest payable on any Interest Payment Date;

(6) the right, if any, to extend the interest payment periods and the duration
of such extension;

(7) the place or places where the principal of and any premium and interest on
any Securities of the series shall be payable;

(8) the period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series may be redeemed, in
whole or in part, at the option of the Company and, if other than by a Board
Resolution, the manner in which any election by the Company to redeem the
Securities shall be evidenced;

(9) the obligation, if any, of the Company to redeem or purchase any Securities
of the series pursuant to any sinking fund or analogous provisions or at the
option of the Holder thereof and the period or periods within which, the price
or prices at which and the terms and conditions upon which any Securities of the
series shall be redeemed or purchased, in whole or in part, pursuant to such
obligation;

(10) if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which any Securities of the series shall be issuable;

(11) if the amount of principal of or any premium or interest on any Securities
of the series may be determined with reference to an index or pursuant to a
formula, the manner in which such amounts shall be determined;

(12) if other than the currency of the United States of America, the currency,
currencies or currency units in which the principal of

                                      -20-


or any premium or interest on any Securities of the series shall be payable and
the manner of determining the equivalent thereof in the currency of the United
States of America for any purpose, including for purposes of the definition of
"Outstanding" in Section 101;

(13) if the principal of or any premium or interest on any Securities of the
series is to be payable, at the election of the Company or the Holder thereof,
in one or more currencies or currency units other than that or those in which
such Securities are stated to be payable, the currency, currencies or currency
units in which the principal of or any premium or interest on such Securities as
to which such election is made shall be payable, the periods within which and
the terms and conditions upon which such election is to be made and the amount
so payable (or the manner in which such amount shall be determined);

(14) if other than the entire principal amount thereof, the portion of the
principal amount of any Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;

(15) if the principal amount payable at the Stated Maturity of any Securities of
the series will not be determinable as of any one or more dates prior to the
Stated Maturity, the amount which shall be deemed to be the principal amount of
such Securities as of any such date for any purpose thereunder or hereunder,
including the principal amount thereof which shall be due and payable upon any
Maturity other than the Stated Maturity or which shall be deemed to be
Outstanding as of any date prior to the Stated Maturity (or, in any such case,
the manner in which such amount deemed to be the principal amount shall be
determined);

(16) if applicable, that the Securities of the series, in whole or any specified
part, shall be defeasible pursuant to Section 1302 or Section 1303 or both such
Sections and, if other than by a Board Resolution, the manner in which any
election by the Company to defease such Securities shall be evidenced;

(17) if applicable, that any Securities of the series shall be issuable in whole
or in part in the form of one or more Global Securities and, in such case, the
respective Depositaries for such Global Securities, the form of any legend or
legends which shall be borne by any such Global Security in addition to or in
lieu of that set forth in Section 204 and any circumstances in addition to or in
lieu of those set forth in Clause (2) of the last paragraph of Section 305 in
which any such Global Security may be exchanged in whole or in part for
Securities 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 the
Depositary for such Global Security or a nominee thereof;

(18) any addition to or change in the Events of Default which applies to any
Securities of the series and any change in the right of

                                      -21-


the Trustee or the requisite Holders of such Securities to declare the principal
amount thereof due and payable pursuant to Section 502;

(19) any addition to or change in the covenants set forth in Article Ten which
applies to Securities of the series;

(20) the non-application of, or any addition to or change in, Article Fourteen
with respect to Securities of the series;

(21) the price or rate at which shares of Common Stock will be delivered upon
conversion of the Securities of the series, any circumstances in which such
price or rate will be adjusted, and any addition to or change in article Fifteen
with respect to Securities of the series; and

(22) any other terms of the series (which terms shall not be inconsistent with
the provisions of this Indenture, except as permitted by Section 901(5)).

The Securities shall be convertible as provided in Article Fifteen.

All Securities of any one series shall be substantially identical except as to
denomination and except as may otherwise be provided in or pursuant to the Board
Resolution referred to above and (subject to Section 303) set forth, or
determined in the manner provided, in the Officers' Certificate referred to
above or in any such indenture supplemental hereto.

If any of the terms of the series are established by action taken pursuant to a
Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary or Associate Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of the series.

SECTION 302. DENOMINATIONS.

The Securities of each series shall be issuable only in registered form without
coupons and only in such denominations as shall be specified as contemplated by
Section 301. In the absence of any such specified denomination with respect to
the Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.

SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

The Securities shall be executed on behalf of the Company by its Chairman of the
Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries or Associate Secretaries. The
signature of any of these officers on the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of individuals who were at
any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.

At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the

                                      -22-


form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions as permitted by Sections 201, 301 and
1502, in authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,

(1) if the form of such Securities has been established by or pursuant to Board
Resolution as permitted by Section 201, that such form has been established in
conformity with the provisions of this Indenture;

(2) if the terms of such Securities have been established by or pursuant to
Board Resolution as permitted by Section 301, that such terms have been
established in conformity with the provisions of this Indenture; and

(3) that such Securities, when authenticated and delivered by the Trustee and
issued by the Company in the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute valid and legally binding obligations
of the Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.

Notwithstanding the provisions of Section 301 and of the preceding paragraph, if
all Securities of a series are not to be originally issued at one time, it shall
not be necessary to deliver the Officers' Certificate otherwise required
pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise
required pursuant to such preceding paragraph at or prior to the authentication
of each Security of such series if such documents are delivered at or prior to
the authentication upon original issuance of the first Security of such series
to be issued.

Each Security shall be dated the date of its authentication.

No Security shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder. Notwithstanding the foregoing, if any
Security shall have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such Security to the
Trustee for cancellation as provided in Section 309, for all purposes of this
Indenture such Security shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits of this
Indenture.

                                      -23-


SECTION 304. TEMPORARY SECURITIES.

Pending the preparation of definitive Securities of any series, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.

If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations and of like tenor
and aggregate principal amount. Until so exchanged, the temporary Securities of
any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series and tenor.

SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency of the Company in a Place of Payment being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.

Upon surrender for registration of transfer of any Security of a series at the
office or agency of the Company in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series, of any authorized denominations and of like tenor and aggregate
principal amount.

At the option of the Holder, Securities of any series may be exchanged for other
Securities of the same series, of any authorized denominations and of like tenor
and aggregate principal amount, upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.

                                      -24-


All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.

Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.

No service charge shall be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 304, 906, 1107 or 1502 not involving any transfer.

If the Securities of any series (or of any series and specified tenor) are to be
redeemed in part, the Company shall not be required (A) to issue, register the
transfer of or exchange any Securities of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of any
such Securities selected for redemption under Section 1103 and ending at the
close of business on the day of such mailing, or (B) to register the transfer of
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.

The provisions of Clauses (1), (2), (3) and (4) below shall apply only to Global
Securities:

(1) Each Global Security authenticated under this Indenture shall be registered
in the name of the Depositary designated for such Global Security or a nominee
thereof and delivered to such Depositary or a nominee thereof or custodian
therefor, and each such Global Security shall constitute a single Security for
all purposes of this Indenture.

(2) Notwithstanding any other provision in this Indenture, no Global Security
may be exchanged in whole or in part for Securities registered, and no transfer
of a Global Security in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Security or a nominee thereof
unless (A) such Depositary (i) has notified the Company that it is unwilling or
unable to continue as Depositary for such Global Security or (ii) has ceased to
be a clearing agency registered under the Exchange Act, (B) there shall have
occurred and be continuing an Event of Default with respect to such Global
Security or (C) there shall exist such circumstances, if any, in addition to or
in lieu of the foregoing as have been specified for this purpose as contemplated
by Section 301.

(3) Subject to Clause (2) above, any exchange of a Global Security for other
Securities may be made in whole or in part, and all

                                      -25-


Securities issued in exchange for a Global Security or any portion thereof shall
be registered in such names as the Depositary for such Global Security shall
direct.

(4) Every Security authenticated and delivered upon registration of transfer of,
or in exchange for or in lieu of, a Global Security or any portion thereof,
whether pursuant to this Section, Section 304, 306, 906, 1107 or 1502 or
otherwise, shall be authenticated and delivered in the form of, and shall be, a
Global Security, unless such Security is registered in the name of a Person
other than the Depositary for such Global Security or a nominee thereof.

SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (i) evidence to their
satisfaction of the destruction, loss or theft of any Security and (ii) such
security or indemnity as may be required by them to save each of them and any
agent of either of them harmless, then, in the absence of notice to the Company
or the Trustee that such Security has been acquired by a bona fide purchaser,
the Company shall execute and the Trustee shall authenticate and deliver, in
lieu of any such destroyed, lost or stolen Security, a new Security of the same
series and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.

Every new Security of any series issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities.

SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

Except as otherwise provided as contemplated by Section 301 with respect to any
series of Securities, interest on any Security which is payable, and is

                                      -26-


punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.

Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:

(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security of such series
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
given to each Holder of Securities of such series in the manner set forth in
Section 106, not less than 10 days prior to such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following Clause (2).

(2) The Company may make payment of any Defaulted Interest on the Securities of
any series in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause, such
manner of payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section, each Security delivered
under this Indenture upon registration of transfer of or in exchange

                                      -27-


for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.

In the case of any Security which is converted from the close of business on any
Regular Record Date to the opening of business on the next succeeding Interest
Payment Date (other than any Security whose Maturity is prior to such Interest
Payment Date), interest whose Stated Maturity is on such Interest Payment Date
shall be payable on such Interest Payment Date notwithstanding such conversion,
and such interest (whether or not punctually paid or duly provided for) shall be
paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on such Regular Record Date.
Except as otherwise expressly provided in the immediately preceding sentence, in
the case of any Security which is converted, interest whose Stated Maturity is
after the date of conversion of such Security shall not be payable.

SECTION 308. PERSONS DEEMED OWNERS.

Prior to due presentment of a 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 such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and any premium and
(subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

SECTION 309. CANCELLATION.

All Securities surrendered for payment, redemption, conversion, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order; PROVIDED, HOWEVER, that the Trustee shall not be required to destroy such
cancelled Securities.

SECTION 310. COMPUTATION OF INTEREST.

Except as otherwise specified as contemplated by Section 301 for Securities of
any series, interest on the Securities of each series shall be computed on the
basis of a 360-day year of twelve 30-day months.

SECTION 311. CUSIP NUMBERS.

The Company in issuing the Securities may use "CUSIP" numbers (if then generally
in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of
redemption as a convenience to Holders; provided that any such notice may

                                      -28-


state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company shall promptly notify
the Trustee of any change in the CUSIP numbers.

                                  ARTICLE FOUR

                           SATISFACTION AND DISCHARGE

SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.

This Indenture shall upon Company Request cease to be of further effect (except
as to any surviving rights of conversion, registration of transfer or exchange
of Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when

(1) either

(A) all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been delivered to the Trustee for
cancellation; or

(B) all such Securities not theretofore delivered to the Trustee for
cancellation

(i) have become due and payable, or

(ii) will become due and payable at their Stated Maturity within one year, or

(iii) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company,

and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the purpose
money in an amount sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for cancellation, for
principal and any premium and interest to the date of such deposit (in the case
of Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;

                                      -29-


(2) the Company has paid or caused to be paid all other sums payable hereunder
by the Company; and

(3) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.

SECTION 402. APPLICATION OF TRUST MONEY.

Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee. All
moneys deposited with the Trustee pursuant to Section 401 (and held by it or any
Paying Agent) for the payment of Securities subsequently converted shall be
returned to the Company upon Company Request.

                                  ARTICLE FIVE

                                    REMEDIES

SECTION 501. EVENTS OF DEFAULT.

"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

(1) default in the payment of any interest upon any Security of that series when
it becomes due and payable, and continuance of such default for a period of 30
days; or

(2) default in the payment of the principal of or any premium on any Security of
that series at its Maturity; or

(3) default in the deposit of any sinking fund payment, when and as due by the
terms of a Security of that series; or

                                      -30-


(4) default in the performance, or breach, of any covenant or warranty of the
Company in this Indenture (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically dealt with
or which has expressly been included in this Indenture solely for the benefit of
series of Securities other than that series), and continuance of such default or
breach for a period of 90 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the Outstanding Securities
of that series a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder; or

(5) the entry by a court having jurisdiction in the premises of (A) a decree or
order for relief in respect of the Company in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under any
applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or ordering the winding up
or liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a period
of 90 consecutive days; or

(6) the commencement by the Company of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by it to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in furtherance
of any such action; or

(7) any other Event of Default provided with respect to Securities of that
series.

SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

If an Event of Default (other than an Event of Default specified in Section
501(5) or 501(6)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the

                                      -31-


Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount of all the Securities of that
series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in Section 501(5)
or 501(6) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified by the terms
thereof) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.

At any time after such a declaration of acceleration with respect to Securities
of any series has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in principal amount of the Outstanding
Securities of that series, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if

(1) the Company has paid or deposited with the Trustee a sum sufficient to pay

(A) all overdue interest on all Securities of that series,

(B) the principal of (and premium, if any, on) any Securities of that series
which have become due otherwise than by such declaration of acceleration and any
interest thereon at the rate or rates prescribed therefor in such Securities,

(C) to the extent that payment of such interest is lawful, interest upon overdue
interest at the rate or rates prescribed therefor in such Securities, and

(D) all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel;

and

(2) all Events of Default with respect to Securities of that series, other than
the non-payment of the principal of Securities of that series which have become
due solely by such declaration of acceleration, have been cured or waived as
provided in Section 513.

No such rescission shall affect any subsequent default or impair any right
consequent thereon.

                                      -32-


SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.

The Company covenants that if

(1) default is made in the payment of any interest on any Security when such
interest becomes due and payable and such default continues for a period of 30
days, or

(2) default is made in the payment of the principal of (or premium, if any, on)
any Security at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.

If an Event of Default with respect to Securities of any series occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.

SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.

In case of any judicial proceeding relative to the Company (or any other obligor
upon the Securities), its property or its creditors, the Trustee shall be
entitled and empowered, by intervention in such proceeding or otherwise, to take
any and all actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.

No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; PROVIDED, HOWEVER,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.

                                      -33-


SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.

All rights of action and claims under this Indenture or the Securities may be
prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.

SECTION 506. APPLICATION OF MONEY COLLECTED.

Any money collected by the Trustee pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money on account of principal or any premium or
interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee under Section 607; and

SECOND: To the payment of the amounts then due and unpaid for principal of and
any premium and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and any premium and interest, respectively.

SECTION 507. LIMITATION ON SUITS.

No Holder of any Security of any series shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless

(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;

(2) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;

(3) such Holder or Holders have offered to the Trustee indemnity satisfactory to
it against the costs, expenses and liabilities to be incurred in compliance with
such request;

(4) the Trustee for 60 days after its receipt of such notice, request and offer
of indemnity has failed to institute any such proceeding; and

                                      -34-


(5) no direction inconsistent with such written request has been given to the
Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.

SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM,
INTEREST AND TO CONVERT.

Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to convert
such Security in accordance herewith and to institute suit for the enforcement
of any such payment and right to convert, and such rights shall not be impaired
without the consent of such Holder.

SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.

If the Trustee or any Holder has instituted any proceeding to enforce any right
or remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.

SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.

Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

SECTION 511. DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to

                                      -35-


the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.

SECTION 512. CONTROL BY HOLDERS.

The Holders of a majority in principal amount of the Outstanding Securities of
any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series, provided that

(1) such direction shall not be in conflict with any rule of law or with this
Indenture,

(2) the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction, and

(3) subject to the provisions of Section 601, the Trustee shall have the right
to decline to follow any such direction if the Trustee in good faith shall, by a
Responsible Officer or Officers of the Trustee, determine that the proceedings
so directed would involve the Trustee in personal liability.

SECTION 513. WAIVER OF PAST DEFAULTS.

The Holders of not less than a majority in principal amount of the Outstanding
Securities of any series may on behalf of the Holders of all the Securities of
such series waive any past default hereunder with respect to such series and its
consequences, except a default

(1) in the payment of the principal of or any premium or interest on any
Security of such series, or

(2) in respect of a covenant or provision hereof which under Article Nine cannot
be modified or amended without the consent of the Holder of each Outstanding
Security of such series affected.

Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

SECTION 514. UNDERTAKING FOR COSTS.

In any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken, suffered or omitted by it
as Trustee, a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess costs against any such
party litigant, in the manner and to the extent provided in the Trust Indenture
Act; PROVIDED that neither this Section nor the Trust Indenture Act shall be
deemed to authorize any court to require such an undertaking or to make such an
assessment in any suit instituted by the Company or the Trustee.

                                      -36-


SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.

The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any usury, stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                   ARTICLE SIX

                                   THE TRUSTEE

SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.

The duties and responsibilities of the Trustee shall be as provided by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.

SECTION 602. NOTICE OF DEFAULTS.

If a default occurs hereunder with respect to Securities of any series, the
Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the Trust Indenture Act; PROVIDED,
HOWEVER, that in the case of any default of the character specified in Section
501(4) with respect to Securities of such series, no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.

SECTION 603. CERTAIN RIGHTS OF TRUSTEE.

Subject to the provisions of Section 601:

(1) the Trustee may conclusively rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;

(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any resolution
of the Board of Directors shall be sufficiently evidenced by a Board Resolution;

                                      -37-


(3) whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;

(4) the Trustee may consult with counsel of its selection and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;

(5) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity satisfactory to it against the costs, expenses
and liabilities which might be incurred by it in compliance with such request or
direction;

(6) the Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;

(7) the Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder;

(8) the Trustee shall not be liable for any action taken, suffered or omitted to
be taken by it in good faith and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Indenture;

(9) the Trustee shall not be deemed to have notice of any default or Event of
Default unless a Responsible Officer of the Trustee has actual knowledge thereof
or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities in this Indenture;

(10) the rights, privileges, protections, immunities and benefits given to the
Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee

                                      -38-


in each of its capacities hereunder, [and each agent, custodian and other Person
employed to act hereunder;] and

(11) the Trustee may request that the Company deliver an Officers' Certificate
setting forth the names of individuals and/or titles of officers authorized at
such time to take specified actions pursuant to this Indenture, which Officers'
Certificate may be signed by any person authorized to sign an Officers'
Certificate, including any person specified as so authorized in any such
certificate previously delivered and not superseded.

SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.

The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.

SECTION 605. MAY HOLD SECURITIES.

The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar
or any other agent of the Company, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to Sections 608 and 613,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such
other agent.

SECTION 606. MONEY HELD IN TRUST.

Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.

SECTION 607. COMPENSATION AND REIMBURSEMENT.

The Company agrees

(1) to pay to the Trustee from time to time such compensation as shall be agreed
to in writing between the Company and the Trustee for all services rendered by
it hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);

(2) except as otherwise expressly provided herein, to reimburse the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and

                                      -39-


(3) to indemnify the Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.

The Trustee shall have a lien prior to the Securities as to all property and
funds held by it hereunder for any amount owing it or any predecessor Trustee
pursuant to this Section 607, except with respect to funds held in trust for the
benefit of the Holders of particular Securities.

When the Trustee incurs expenses or renders services in connection with an Event
of Default specified in Section 501(5) or Section 501(6), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.

The provisions of this Section shall survive the termination of this Indenture.

SECTION 608. CONFLICTING INTERESTS.

If the Trustee has or shall acquire a conflicting interest within the meaning of
the Trust Indenture Act, the Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.

SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

There shall at all times be one (and only one) Trustee hereunder with respect to
the Securities of each series, which may be Trustee hereunder for Securities of
one or more other series. Each Trustee shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section and to
the extent permitted by the Trust Indenture Act, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee with respect to the Securities of any series shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.

SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 611.

                                      -40-


The Trustee may resign at any time with respect to the Securities of one or more
series by giving written notice thereof to the Company. If the instrument of
acceptance by a successor Trustee required by Section 611 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition, at the expense of the Company,
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.

The Trustee may be removed at any time with respect to the Securities of any
series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.

If at any time:

(1) the Trustee shall fail to comply with Section 608 after written request
therefor by the Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or

(2) the Trustee shall cease to be eligible under Section 609 and shall fail to
resign after written request therefor by the Company or by any such Holder, or

(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt
or insolvent or a receiver of the Trustee or of its property shall be appointed
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation,

then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.

If the Trustee shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any cause, with respect to the
Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the Securities
of that or those series (it being understood that any such successor Trustee may
be appointed with respect to the Securities of one or more or all of such series
and that at any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or

                                      -41-


the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.

The Company shall give notice of each resignation and each removal of the
Trustee with respect to the Securities of any series and each appointment of a
successor Trustee with respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.

SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

In case of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee so appointed shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.

In case of the appointment hereunder of a successor Trustee with respect to the
Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Securities of one or more
series shall execute and deliver an indenture supplemental hereto wherein each
successor Trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates; but, on request of

                                      -42-


the Company or any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.

Upon request of any such successor Trustee, the Company shall execute any and
all instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts referred to in the first or
second preceding paragraph, as the case may be.

No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article.

SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.

SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

If and when the Trustee shall be or become a creditor of the Company (or any
other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).

SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.

The Trustee may appoint an Authenticating Agent or Agents with respect to one or
more series of Securities which shall be authorized to act on behalf of the
Trustee to authenticate Securities of such series issued upon original issue and
upon exchange, registration of transfer, partial conversion or partial
redemption thereof or pursuant to Section 306, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports of

                                      -43-


condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section.

Any corporation into which an Authenticating Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which such Authenticating Agent shall be a party,
or any corporation succeeding to all or substantially all of the corporate
agency or corporate trust business of an Authenticating Agent, shall continue to
be an Authenticating Agent, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice thereof
to the Trustee and to the Company. The Trustee may at any time terminate the
agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.

The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section.

If an appointment with respect to one or more series is made pursuant to this
Section, the Securities of such series may have endorsed thereon, in addition to
the Trustee's certificate of authentication, an alternative certificate of
authentication in the following form:

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

                              THE BANK OF NEW YORK,
                                   AS TRUSTEE

                         BY.___________________________
                          AS AUTHENTICATING AGENT

                         BY.___________________________
                            AS AUTHORIZED OFFICER

                                      -44-


                                  ARTICLE SEVEN

                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.

The Company will furnish or cause to be furnished to the Trustee

(1) fifteen days after each Regular Record Date, a list, in such form as the
Trustee may reasonably require, of the names and addresses of the Holders of
Securities of each series as of such Regular Record Date, and

(2) at such other times as the Trustee may request in writing, within 30 days
after the receipt by the Company of any such request, a list of similar form and
content as of a date not more than 15 days prior to the time such list is
furnished;

EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.

SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.

The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list furnished
to the Trustee as provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar. The Trustee may
destroy any list furnished to it as provided in Section 701 upon receipt of a
new list so furnished.

The rights of Holders to communicate with other Holders with respect to their
rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.

Every Holder of Securities, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.

SECTION 703. REPORTS BY TRUSTEE.

The Trustee shall transmit to Holders such reports concerning the Trustee and
its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within
sixty days after each May 15 following the date of this Indenture deliver to
Holders a brief report, dated as of such May 15, which complies with the
provisions of such Section 313(a).

                                      -45-


A copy of each such report shall, at the time of such transmission to Holders,
be filed by the Trustee with each stock exchange upon which any Securities are
listed, with the Commission and with the Company. The Company will promptly
notify the Trustee when any Securities are listed on any stock exchange and of
any delisting thereof.

SECTION 704. REPORTS BY COMPANY.

The Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; PROVIDED that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission.

Except as otherwise required by the Trust Indenture Act, and except with respect
to any Officers' Certificate provided under Section 1004, delivery of such
reports, information and documents to the Trustee is for informational purposes
only and the Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).

                                  ARTICLE EIGHT

              CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.

The Company shall not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, and the Company shall not permit any Person to consolidate with or merge
into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless:

(1) in case the Company shall consolidate with or merge into another Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an entirety
shall be a corporation, partnership, unincorporated organization or trust, shall
be organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment of
the principal of and any premium and interest on all the Securities and the
performance or observance of every covenant of this Indenture on the part of the
Company to be performed or observed and shall have provided for conversion
rights in accordance with Article Fifteen;

(2) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Company

                                      -46-


or any Subsidiary as a result of such transaction as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become an Event
of Default, shall have happened and be continuing;

(3) if, as a result of any such consolidation or merger or such conveyance,
transfer or lease, properties or assets of the Company would become subject to a
mortgage, pledge, lien, security interest or other encumbrance which would not
be permitted by this Indenture, the Company or such successor Person, as the
case may be, shall take such steps as shall be necessary effectively to secure
the Securities equally and ratably with (or prior to) all indebtedness secured
thereby; and

(4) the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with this Article and
that all conditions precedent herein provided for relating to such transaction
have been complied with.

SECTION 802. SUCCESSOR SUBSTITUTED.

Upon any consolidation of the Company with, or merger of the Company into, any
other Person or any conveyance, transfer or lease of the properties and assets
of the Company substantially as an entirety in accordance with Section 801, the
successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under this
Indenture and the Securities.

                                  ARTICLE NINE

                             SUPPLEMENTAL INDENTURES

SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.

Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:

(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company herein and in
the Securities; or

(2) to add to the covenants of the Company for the benefit of the Holders of all
or any series of Securities (and if such covenants are to be for the benefit of
less than all series of Securities, stating

                                      -47-


that such covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the Company; or

(3) to add any additional Events of Default for the benefit of the Holders of
all or any series of Securities (and if such additional Events of Default are to
be for the benefit of less than all series of Securities, stating that such
additional Events of Default are expressly being included solely for the benefit
of such series); or

(4) to add to or change any of the provisions of this Indenture to such extent
as shall be necessary to permit or facilitate the issuance of Securities in
bearer form, registrable or not registrable as to principal, and with or without
interest coupons, or to permit or facilitate the issuance of Securities in
uncertificated form; or

(5) to add to, change or eliminate any of the provisions of this Indenture in
respect of one or more series of Securities, PROVIDED that any such addition,
change or elimination (A) shall neither (i) apply to any Security of any series
created prior to the execution of such supplemental indenture and entitled to
the benefit of such provision nor (ii) modify the rights of the Holder of any
such Security with respect to such provision or (B) shall become effective only
when there is no such Security Outstanding; or

(6) to secure the Securities; or

(7) to establish the form or terms of Securities of any series as permitted by
Sections 201 and 301; or

(8) to evidence and provide for the acceptance of appointment hereunder by a
successor Trustee with respect to the Securities of one or more series and to
add to or change any of the provisions of this Indenture as shall be necessary
to provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 611;

(9) to cure any ambiguity, to correct or supplement any provision herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture, PROVIDED that such action pursuant to this Clause (9) shall not
adversely affect the interests of the Holders of Securities of any series in any
material respect; or

(10) to make provision with respect to conversion rights of Holders pursuant to
the requirements of Article Fifteen.

                                      -48-


SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.

With the consent of the Holders of not less than 66-2/3% in principal amount of
the Outstanding Securities of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; PROVIDED, HOWEVER, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,

(1) change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an Original Issue
Discount Security or any other Security which would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502, or
change any Place of Payment where, or the coin or currency in which, any
Security or any premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or adversely affect the right to convert any Security as provided in this
Indenture (except as permitted herein), or

(2) reduce the percentage in principal amount of the Outstanding Securities of
any series, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or

(3) modify any of the provisions of this Section, Section 513 or

Section 1008, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby; PROVIDED,
HOWEVER, that this clause shall not be deemed to require the consent of any
Holder with respect to changes in the references to "the Trustee" and
concomitant changes in this Section and Section 1008, or the deletion of this
proviso, in accordance with the requirements of Sections 611 and 901(8).

A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

                                      -49-


It shall not be necessary for any Act of Holders under this Section to approve
the particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.

SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.

In executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.

Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.

SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.

Every supplemental indenture executed pursuant to this Article shall conform to
the requirements of the Trust Indenture Act.

SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.

Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.

                                   ARTICLE TEN

                                    COVENANTS

SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.

The Company covenants and agrees for the benefit of each series of Securities
that it will duly and punctually pay the principal of and any premium and
interest on the Securities of that series in accordance with the terms of the
Securities and this Indenture.

                                      -50-


SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.

The Company will maintain in each Place of Payment for any series of Securities
an office or agency where Securities of that series may be presented or
surrendered for payment, where Securities of that series may be surrendered for
registration of transfer or exchange, where Securities may be surrendered for
conversion and where notices and demands to or upon the Company in respect of
the Securities of that series and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.

The Company may also from time to time designate one or more other offices or
agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; PROVIDED, HOWEVER, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in each Place of Payment for Securities of any series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.

SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.

If the Company shall at any time act as its own Paying Agent with respect to any
series of Securities, it will, on or before each due date of the principal of or
any premium or interest on any of the Securities of that series, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal and any premium and interest so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee of its action or failure so to act.

Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, prior to each due date of the principal of or any premium
or interest on any Securities of that series, deposit with a Paying Agent a sum
sufficient to pay such amount, such sum to be held as

provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.

The Company will cause each Paying Agent for any series of Securities other than
the Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will (1) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (2) during the continuance
of any default by the Company (or any other obligor upon the Securities of that
series) in the making of any payment in respect of the Securities of that
series, upon the written request of the Trustee, forthwith pay to the Trustee
all sums held in trust by such Paying Agent for payment in respect of the
Securities of that series.

                                      -51-


The Company may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

Any money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of or any premium or interest
on any Security of any series and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.

SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.

The Company will deliver to the Trustee, within 120 days after the end of each
fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.

SECTION 1005. EXISTENCE.

Subject to Article Eight, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(charter and statutory) and franchises; PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.

SECTION 1006. MAINTENANCE OF PROPERTIES.

The Company will cause all properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment

                                      -52-


and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.

SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.

The Company will pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (1) all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary, and (2) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Company or any Subsidiary; PROVIDED, HOWEVER, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.

SECTION 1008. WAIVER OF CERTAIN COVENANTS.

Except as otherwise specified as contemplated by Section 301 for Securities of
such series, the Company may, with respect to the Securities of any series, omit
in any particular instance to comply with any term, provision or condition set
forth in any covenant provided pursuant to Section 301(18), 901(2) or 901(7) for
the benefit of the Holders of such series if before the time for such compliance
the Holders of at least 66-2/3% in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.

SECTION 1009. CALCULATION OF ORIGINAL ISSUE DISCOUNT.

The Company shall file with the Trustee promptly at the end of each calendar
year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on Outstanding Securities as
of the end of such year.

                                      -53-


                                 ARTICLE ELEVEN

                            REDEMPTION OF SECURITIES

SECTION 1101. APPLICABILITY OF ARTICLE.

Securities of any series which are redeemable before their Stated Maturity shall
be redeemable in accordance with their terms and (except as otherwise specified
as contemplated by Section 301 for such Securities) in accordance with this
Article.

SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.

The election of the Company to redeem any Securities shall be evidenced by a
Board Resolution or in another manner specified as contemplated by Section 301
for such Securities. In case of any redemption at the election of the Company,
the Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date, of the principal amount of Securities of
such series to be redeemed and, if applicable, of the tenor of the Securities to
be redeemed. In the case of any redemption of Securities prior to the expiration
of any restriction on such redemption provided in the terms of such Securities
or elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.

SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.

Unless otherwise specified as contemplated by Section 301, if less than all the
Securities of any series are to be redeemed (unless all the Securities of such
series and of a specified tenor are to be redeemed or unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series not previously called for
redemption, by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of a portion of the principal
amount of any Security of such series, PROVIDED that the unredeemed portion of
the principal amount of any Security shall be in an authorized denomination
(which shall not be less than the minimum authorized denomination) for such
Security. If less than all the Securities of such series and of a specified
tenor are to be redeemed (unless such redemption affects only a single
Security), the particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series and specified tenor not previously called for
redemption in accordance with the preceding sentence.

If any Security selected for partial redemption is converted in part before
termination of the conversion right with respect to the portion of the Security
so selected, the converted portion of such Security shall be deemed (so far as
may be) to be the portion selected for redemption. Securities which have been
converted during a selection of Securities to be redeemed shall be treated by
the Trustee as Outstanding for the purpose of such selection.

The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption as aforesaid and, in case of any Securities selected for
partial redemption as aforesaid, the principal amount thereof to be redeemed.

                                      -54-


The provisions of the two preceding paragraphs shall not apply with respect to
any redemption affecting only a single Security, whether such Security is to be
redeemed in whole or in part. In the case of any such redemption in part, the
unredeemed portion of the principal amount of the Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security.

For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Securities shall relate, in the case of
any Securities redeemed or to be redeemed only in part, to the portion of the
principal amount of such Securities which has been or is to be redeemed.

SECTION 1104. NOTICE OF REDEMPTION.

Notice of redemption shall be given by first-class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the Redemption Date, to each
Holder of Securities to be redeemed, at his address appearing in the Security
Register.

All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number) and shall state:

(1) the Redemption Date,

(2) the Redemption Price,

(3) if less than all the Outstanding Securities of any series consisting of more
than a single Security are to be redeemed, the identification (and, in the case
of partial redemption of any such Securities, the principal amounts) of the
particular Securities to be redeemed and, if less than all the Outstanding
Securities of any series consisting of a single Security are to be redeemed, the
principal amount of the particular Security to be redeemed,

(4) that on the Redemption Date the Redemption Price will become due and payable
upon each such Security to be redeemed and, if applicable, that interest thereon
will cease to accrue on and after said date,

(5) the place or places where each such Security is to be surrendered for
payment of the Redemption Price,

(6) that the redemption is for a sinking fund, if such is the case, and

(7) the conversion price or rate, as the case may be, the date on which the
right to convert the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for conversion.

Notice of redemption of Securities to be redeemed at the election of the Company
shall be given by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company and shall be irrevocable.

                                      -55-


SECTION 1105. DEPOSIT OF REDEMPTION PRICE.

Prior to any Redemption Date, the Company shall deposit with the Trustee or with
a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 1003) an amount of money sufficient to
pay the Redemption Price of, and (except if the Redemption Date shall be an
Interest Payment Date) accrued interest on, all the Securities which are to be
redeemed on that date other than any Securities called for redemption on that
date which have been converted prior to the date of such deposit.

If any Security called for redemption is converted, any money deposited with the
Trustee or with any Paying Agent or so segregated and held in trust for the
redemption of such Security shall (subject to any right of the Holder of such
Security or any Predecessor Security to receive interest as provided in the last
paragraph of Section 307) be paid to the Company upon Company Request or, if
then held by the Company, shall be discharged from such trust.

SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE.

Notice of redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; PROVIDED, HOWEVER, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.

If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.

SECTION 1107. SECURITIES REDEEMED IN PART.

Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.

                                      -56-


                                 ARTICLE TWELVE

                                  SINKING FUNDS

SECTION 1201. APPLICABILITY OF ARTICLE.

The provisions of this Article shall be applicable to any sinking fund for the
retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.

The minimum amount of any sinking fund payment provided for by the terms of any
Securities is herein referred to as a "mandatory sinking fund payment", and any
payment in excess of such minimum amount provided for by the terms of such
Securities is herein referred to as an "optional sinking fund payment". If
provided for by the terms of any Securities, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities as provided for by
the terms of such Securities.

SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.

The Company (1) may deliver Outstanding Securities of a series (other than any
previously called for redemption) and (2) may apply as a credit Securities of a
series which have been converted pursuant to this Indenture or which have been
redeemed either at the election of the Company pursuant to the terms of such
Securities or through the application of permitted optional sinking fund
payments pursuant to the terms of such Securities, in each case in satisfaction
of all or any part of any sinking fund payment with respect to any Securities of
such series required to be made pursuant to the terms of such Securities as and
to the extent provided for by the terms of such Securities; PROVIDED that the
Securities to be so credited have not been previously so credited. The
Securities to be so credited shall be received and credited for such purpose by
the Trustee at the Redemption Price, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.

SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.

Not less than 60 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 30 days prior to each such sinking fund payment date,
the Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 1103 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 1104. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 1106 and 1107.

                                      -57-


                                ARTICLE THIRTEEN

                       DEFEASANCE AND COVENANT DEFEASANCE

SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.

The Company may elect, at its option at any time, to have Section 1302 or
Section 1303 applied to any Securities or any series of Securities, as the case
may be, designated pursuant to Section 301 as being defeasible pursuant to such
Section 1302 or 1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions set forth below
in this Article. Any such election shall be evidenced by a Board Resolution or
in another manner specified as contemplated by Section 301 for such Securities.

SECTION 1302. DEFEASANCE AND DISCHARGE.

Upon the Company's exercise of its option (if any) to have this Section applied
to any Securities or any series of Securities, as the case may be, the Company
shall be deemed to have been discharged from its obligations, and the provisions
of Article Fourteen shall cease to be effective with respect to such Securities
as provided in this Section on and after the date the conditions set forth in
Section 1304 are satisfied (hereinafter called "Defeasance"). For this purpose,
such Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by such Securities and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), subject to
the following which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of such Securities to receive, solely from
the trust fund described in Section 1304 and as more fully set forth in such
Section, payments in respect of the principal of and any premium and interest on
such Securities when payments are due and any rights of such Holder to convert
such Securities as provided herein, (2) the Company's obligations with respect
to such Securities under Sections 304, 305, 306, 1002 and 1003, and with respect
to the Trustee under Section 607 and with respect to any rights to convert such
Securities as provided herein, (3) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and (4) this Article. Subject to compliance
with this Article, the Company may exercise its option (if any) to have this
Section applied to any Securities notwithstanding the prior exercise of its
option (if any) to have Section 1303 applied to such Securities.

SECTION 1303. COVENANT DEFEASANCE.

Upon the Company's exercise of its option (if any) to have this Section applied
to any Securities or any series of Securities, as the case may be, (1) the
Company shall be released from its obligations under Section 801(3), Sections
1006 through 1007, inclusive, and any covenants provided pursuant to Section
301(19), 901(2) or 901(7) for the benefit of the Holders of such Securities and
(2) the occurrence of any event specified in Sections 501(4) (with respect to
any of Section 801(3), Sections 1006 through 1007, inclusive, and any such
covenants provided pursuant to Section 301(19), 901(2) or 901(7)) and 501(7)
shall be deemed not to be or result in an Event of Default and the provisions of
Article Fourteen shall cease to be effective, in each case with respect to such
Securities as provided in this Section on and after the date the conditions set
forth in Section 1304 are satisfied (hereinafter called "Covenant

                                      -58-


Defeasance"). For this purpose, such Covenant Defeasance means that, with
respect to such Securities, the Company may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such specified Section (to the extent so specified in the case of Section
501(4)), or Article Fourteen whether directly or indirectly by reason of any
reference elsewhere herein to any such Section Article or by reason of any
reference in any such Section Article or to any other provision herein or in any
other document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.

SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.

The following shall be the conditions to the application of Section 1302 or
Section 1303 to any Securities or any series of Securities, as the case may be:

(1) The Company shall irrevocably have deposited or caused to be deposited with
the Trustee (or another trustee which satisfies the requirements contemplated by
Section 609 and agrees to comply with the provisions of this Article applicable
to it) as trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefits of
the Holders of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (C) a combination
thereof, in each case sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or any such other qualifying trustee) to pay and discharge, the
principal of and any premium and interest on such Securities on the respective
Stated Maturities in accordance with the terms of this Indenture and such
Securities. As used herein, "U.S. Government Obligation" means (x) any security
which is (i) a direct obligation of the United States of America for the payment
of which the full faith and credit of the United States of America is pledged or
(ii) an obligation of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof, and (y) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any U.S. Government Obligation which is specified in
Clause (x) above and held by such bank for the account of the holder of such
depositary receipt, or with respect to any specific payment of principal of or
interest on any U.S. Government Obligation which is so specified and held,
PROVIDED that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal or interest evidenced
by such depositary receipt.

                                      -59-


(2) In the event of an election to have Section 1302 apply to any Securities or
any series of Securities, as the case may be, the Company shall have delivered
to the Trustee an Opinion of Counsel stating that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling or
(B) since the date of this instrument, there has been a change in the applicable
Federal income tax law, in either case (A) or (B) to the effect that, and based
thereon such opinion shall confirm that, the Holders of such Securities will not
recognize gain or loss for Federal income tax purposes as a result of the
deposit, Defeasance and discharge to be effected with respect to such Securities
and will be subject to Federal income tax on the same amount, in the same manner
and at the same times as would be the case if such deposit, Defeasance and
discharge were not to occur.

(3) In the event of an election to have Section 1303 apply to any Securities or
any series of Securities, as the case may be, the Company shall have delivered
to the Trustee an Opinion of Counsel to the effect that the Holders of such
Securities will not recognize gain or loss for Federal income tax purposes as a
result of the deposit and Covenant Defeasance to be effected with respect to
such Securities and will be subject to Federal income tax on the same amount, in
the same manner and at the same times as would be the case if such deposit and
Covenant Defeasance were not to occur.

(4) The Company shall have delivered to the Trustee an Officers' Certificate to
the effect that neither such Securities nor any other Securities of the same
series, if then listed on any securities exchange, will be delisted as a result
of such deposit.

(5) No event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to such Securities or any other Securities shall
have occurred and be continuing at the time of such deposit or, with regard to
any such event specified in Sections 501(5) and (6), at any time on or prior to
the 90th day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until after such 90th day).

(6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a
conflicting interest within the meaning of the Trust Indenture Act (assuming all
Securities are in default within the meaning of such Act).

(7) Such Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which it is bound.

(8) Such Defeasance or Covenant Defeasance shall not result in the trust arising
from such deposit constituting an investment company within the meaning of the
Investment Company Act unless such trust shall be registered under such Act or
exempt from registration thereunder.

                                      -60-


(9) At the time of such deposit, (A) no default in the payment of any principal
of or premium or interest on any Senior Debt shall have occurred and be
continuing, (B) no event of default with respect to any Senior Debt shall have
resulted in such Senior Debt becoming, and continuing to be, due and payable
prior to the date on which it would otherwise have become due and payable
(unless payment of such Senior Debt has been made or duly provided for), and (C)
no other event of default with respect to any Senior Debt shall have occurred
and be continuing permitting (after notice or lapse of time or both) the holders
of such Senior Debt (or a trustee on behalf of such holders) to declare such
Senior Debt due and payable prior to the date on which it would otherwise have
become due and payable.

(10) The Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent with
respect to such Defeasance or Covenant Defeasance have been complied with.

SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; MISCELLANEOUS PROVISIONS.

Subject to the provisions of the last paragraph of Section 1003, all money and
U.S. Government Obligations (including the proceeds thereof) deposited with the
Trustee or other qualifying trustee (solely for purposes of this Section and
Section 1306, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1304 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law. Money and U.S. Government
Obligations so held in trust shall not be subject to the provisions of Article
Fourteen.

The Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 1304 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of Outstanding Securities.

Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to such Securities.

                                      -61-


SECTION 1306. REINSTATEMENT.

If the Trustee or the Paying Agent is unable to apply any money in accordance
with this Article with respect to any Securities by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1305 with respect to such Securities
in accordance with this Article; PROVIDED, HOWEVER, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.

                                ARTICLE FOURTEEN

                           SUBORDINATION OF DEBENTURES

SECTION 1401. SECURITIES SUBORDINATE TO SENIOR DEBT.

Unless otherwise provided in a supplemental indenture or pursuant to
Section 301, the Company covenants and agrees, and each Holder of Securities
issued hereunder by his acceptance thereof likewise covenants and agrees, that
all Securities shall be issued subject to the provisions of this Article
Fourteen; and each Holder of a Security, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by such
provisions.

The payment of the principal of, premium, if any, and interest on all Securities
issued hereunder shall, to the extent and in the manner hereinafter set forth,
be subordinate and subject in right of payment to the prior payment in full of
all Senior Debt, whether outstanding at the date of this Indenture or thereafter
incurred [; PROVIDED, HOWEVER, that nothing in this Section shall prevent the
satisfaction of any sinking fund in accordance with Article Twelve by delivering
and crediting pursuant to Section 1202 Securities which have been acquired (upon
redemption or otherwise) prior to such declaration of acceleration or which have
been converted pursuant to Article Fifteen.]

No provision of this Article Fourteen shall prevent the occurrence of any
default or Event of Default hereunder.

SECTION 1402. PAYMENT OVER OF PROCEEDS UPON DEFAULT.

In the event and during the continuation of any default in the payment of
principal, premium, interest or any other payment due on any Senior Debt
continuing beyond the period of grace, if any, specified in the instrument
evidencing such Senior Debt, unless and until such default shall have been cured
or waived or shall have ceased to exist, and in the event that the maturity of
any Senior Debt has been accelerated because of a default, then no payment shall
be made by the Company with respect to the principal of, or premium, if any, or
interest on the Securities [; PROVIDED, HOWEVER, that nothing in this Section
shall prevent the satisfaction of any sinking fund in accordance with Article
Twelve by delivering and crediting pursuant to Section 1202 Securities which

                                      -62-


have been acquired (upon redemption or otherwise) prior to such declaration of
acceleration or which have been converted pursuant to Article Fifteen].

In the event that, notwithstanding the foregoing, any payment shall be received
by the Trustee or any holder when such payment is prohibited by the preceding
paragraphs of this Section 1402, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
or their respective representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Debt may have been issued, as
their respective interests may appear, but only to the extent that the holders
of the Senior Debt (or their representative or representatives or a trustee)
notify the Trustee within 90 days of such payment of the amounts then due and
owing on the Senior Debt and only the amounts specified in such notice to the
Trustee shall be paid to the holders of Senior Debt.

SECTION 1403. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.

Upon any payment by the Company, or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any dissolution or winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, all amounts due or to become due upon all Senior Debt shall
first be paid in full, or payment thereof provided for in money in accordance
with its terms, before any payment is made on account of the principal with its
terms, before any payment is made on account of the principal (and premium, if
any) or interest on the Securities; and upon any such dissolution or winding-up
or liquidation or reorganization any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Securities or the Trustee would be
entitled, except for the provisions of this Article Fourteen, shall be paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, or by the Holders of
the Securities or by the Trustee under this Indenture if received by them or it,
directly to the holders of Senior Debt (pro rata to such holders on the basis of
the respective amounts of Senior Debt held by such holders, as calculated by the
Company) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
Senior Debt may have been issued, as their respective interests may appear, to
the extent necessary to pay all Senior Debt in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt, before any payment or distribution is made to the
holders of Securities or to the Trustee.

In the event that, notwithstanding the foregoing, any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, prohibited by the foregoing, shall be received by the Trustee or the
holders of the Securities before all Senior Debt is paid in full, or provision
is made for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over or
delivered to the holders of Senior Debt or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Debt may have been issued, as their
respective interests may appear, as calculated by the Company, for

                                      -63-


application to the payment of all Senior Debt remaining unpaid to the extent
necessary to pay all Senior Debt in full in money in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Debt.

For purposes of this Article Fourteen, the words, "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article Fourteen with
respect to the Securities to the payment of all Senior Debt which may at the
time be outstanding; provided that (i) the Senior Debt is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of the Senior Debt are not, without the consent
of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company following the
conveyance or transfer of its property as an entirety, or substantially as an
entirety, to another corporation upon the terms and conditions provided for in
Article Eight hereof shall not be deemed a dissolution, winding-up, liquidation
or reorganization for the proposes of this Section 1403 if such other
corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article Eight hereof. Nothing in
Section 1402 or in this Section 1403 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 607.

SECTION 1404. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.

Subject to the payment in full of all Senior Debt, the rights of the holders of
the Securities shall be subrogated to the rights of the holders of Senior Debt
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Debt until the principal (and premium, if any)
and interest on the Securities shall be paid in full; and, for the purposes of
such subrogation, no payment or distributions to the holders of the Senior Debt
of any cash, property or securities to which the holders of the Securities or
the Trustee would be entitled except for the provisions of this Article
Fourteen, and no payment over pursuant to the provisions of this Article
Fourteen, to or for the benefit of the holders of Senior Debt by holders of the
Securities or the Trustee, shall, as between the Company, its creditors other
than holders of Senior Debt, and the Holders of the Securities, be deemed to be
a payment by the Company to or on account of the Senior Debt. It is understood
that the provisions of this Article Fourteen are and are intended solely for the
purposes of defining the relative rights of the holders of the Securities, on
the one hand, and the holders of the Senior Debt on the other hand.

Nothing contained in this Article Fourteen or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Debt, and the holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Securities the principal of (and premium, if any)
and interest on the Securities as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Securities and creditors of the Company other than
the holders of the Senior Securities, nor shall anything herein or therein
prevent the Trustee or the holder of any Security from exercising all remedies

                                      -64-


otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article Fourteen of the holders of Senior Debt
in respect of cash, property or securities of the Company received upon the
exercise of any such remedy.

Upon any payment of distribution of assets of the Company referred to in this
Article Fourteen, the Trustee, subject to the provision of Article Six, and the
holders of the Securities shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization, liquidation or reorganization
proceedings are pending, or a certificate of the receiver, trustee in
bankruptcy, liquidation trustee, agent or other person making such payment or
distribution, delivered to the Trustee or to the Holders of the Securities, for
the purposes of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount hereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Fourteen.

SECTION 1405. TRUSTEE TO EFFECTUATE SUBORDINATION

Each Holder of a Security by his acceptance thereof authorizes and directs the
Trustee in his behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article Fourteen and appoints the
Trustee his attorney-in-fact for any and all such purposes.

SECTION 1406. NOTICE TO TRUSTEE.

The Company shall give prompt written notice to a Responsible Officer of the
Trustee of any fact known to the Company which would prohibit the making of any
payment of monies to or by the Trustee in respect of the Securities pursuant to
the provisions of this Article Fourteen. Notwithstanding the provisions of this
Article Fourteen or any other provision of this Indenture, the Trustee shall not
be charged with knowledge of the existence of any facts which would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article Fourteen, unless and until
a Responsible Officer of the Trustee shall have received written notice thereof
at the Principal Office of the Trustee from the Company or a holder or holders
of Senior Debt or from any trustee therefor; and before the receipt of any such
written notice, the Trustee, subject to the provisions of Article Six, shall be
entitled in all respects to assume that no such facts exist; PROVIDED, HOWEVER,
that if the Trustee shall not have received the notice provided for in this
Section 1406 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (or premium, if any) or interest on
any Security), then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such money and to
apply the same to the purposes for which they were received, and shall not be
affected by any notice to the contrary which may be received by it within two
Business Days prior to such date.

The Trustee, subject to the provisions of Article Six, shall be entitled to rely
on the delivery to it of a written notice by a person representing himself to be
a holder of Senior Debt (or a trustee on behalf of such holder) to establish
that such notice has been given by a holder of Senior Debt or a trustee on
behalf of any such holder or holders. In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
person as a holder of Senior Debt to participate in any payment or distribution
pursuant to this Article Fourteen, the Trustee may request such

                                      -65-


person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Debt held by such Person, the extent to which such person
is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article Fourteen, and if such
evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.

SECTION 1407. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.

The Trustee in its individual capacity shall be entitled to all the rights set
forth in this Article Fourteen in respect of any Senior Debt at any time held by
it, to the same extent as any other holder of Senior Debt, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder.

Nothing in this Article Fourteen shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.

SECTION 1408. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.

The Trustee shall not be deemed to own any fiduciary duty to the holders of
Senior Debt and, subject to the provisions of Article Six, the Trustee shall not
be liable to any holder of Senior Debt if it shall in good faith mistakenly pay
over or deliver to holders of Securities, the Company or any other person money
or assets to which any holder of Senior Debt shall be entitled by virtue of this
Article Fourteen or otherwise.

SECTION 1409. NO WAIVER OF SUBORDINATION PROVISIONS.

No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with.

Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the holders of the Securities, without
incurring responsibility to the holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any person liable in any manner
for the collection of Senior Debt; and (iv) exercise or refrain from exercising
any rights against the Company and any other person.

                                      -66-


SECTION 1410. DEFEASANCE OF THIS ARTICLE FOURTEEN.

The subordination of the Securities provided by this Article Fourteen is
expressly made subject to the provisions for Defeasance or Covenant Defeasance
in Article Thirteen hereof and, anything herein to the contrary notwithstanding,
upon the effectiveness of any such Defeasance or Covenant Defeasance, the
Securities then outstanding shall thereupon cease to be subordinated pursuant to
this Article Fourteen.

                                 ARTICLE FIFTEEN

                            CONVERSION OF SECURITIES

SECTION 1501. CONVERSION PRIVILEGE.

Subject to and upon compliance with the provisions of this Article, at the
option of the Holder thereof, Securities of any series or any portion of the
principal amount thereof which is $1,000 or an integral multiple of $1,000 may
be converted at the principal amount thereof, or of such portion thereof, into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock of the Company, in accordance with the
terms of such series of Securities and (except as otherwise specified as
contemplated by Section 301) in accordance with this Article. In case a Security
or portion thereof is called for redemption, such conversion right in respect of
the Security or portion so called shall expire at the close of business on the
Business Day which is immediately preceding the Redemption Date, unless the
Company defaults in making the payment due upon redemption.

The price at which shares of Common Stock shall be delivered upon conversion,
which shall be specified as contemplated by Section 301, shall be referred to
herein as the "conversion price." The conversion price shall be adjusted in
certain instances as specified as provided in Section 301.

SECTION 1502. EXERCISE OF CONVERSION PRIVILEGE.

In order to exercise the conversion privilege, the Holder of any Security to be
converted shall surrender such Security, duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained for that
purpose pursuant to Section 1002, accompanied by written notice to the Company
at such office or agency that the Holder elects to convert such Security or, if
less than the entire principal amount thereof is to be converted, the portion
thereof to be converted. Securities surrendered for conversion during the period
from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
shall payment in funds reasonably acceptable to the Company of an amount equal
to the interest payable on such Interest Payment Date on the principal amount of
Securities being surrendered for conversion (with similar provision to be made
for bearer Securities).

                                      -67-


The interest so payable on such Interest Payment Date in respect of any Security
(or portion thereof, as the case may be) that has not been called for redemption
on a Redemption Date with the consequence of termination of the conversion right
as aforesaid, which Security (or portion thereof, as the case may be) is
surrendered for conversion during the period from the close of business on any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date, shall be paid to the Holder of such
Security as of such Regular Record Date. Except as provided in this paragraph
and subject to the last paragraph of Section 307, no cash payment or adjustment
shall be made upon any conversion on account of any interest accrued from the
Interest Payment Date next preceding the conversion date, in respect of any
Security (or part thereof, as the case may be) surrendered for conversion, or on
account of any dividends on the Common Stock issued upon conversion. The
Company's delivery to the Holder of the number of shares of Common Stock (and
cash in lieu of fractions thereof, as provided in this Indenture) into which a
Security is convertible will be deemed to satisfy the Company's obligation to
pay the principal amount of the Security.

Securities shall be deemed to have been converted immediately prior to the close
of business on the day of surrender of such Securities for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 1503.

In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.

SECTION 1503. FRACTIONS OF SHARES.

No fractional shares of Common Stock shall be issued upon conversion of
Securities. If more than one Security shall be surrendered for conversion at one
time by the same Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Securities (or specified portions thereof) so surrendered. Instead
of any fractional share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions thereof), the

                                      -68-


Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the closing price per share of Common Stock (as
determined in the manner described in the second sentence of Section 1504(8)) at
the close of business on the day of conversion.

SECTION 1504. [INTENTIONALLY LEFT BLANK.]

SECTION 1505. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.

Whenever the conversion price is adjusted as herein provided:

(1) the Company shall compute the adjusted conversion price in accordance
herewith and shall prepare a certificate signed by the Treasurer of the Company,
or other applicable officer, setting

                                      -69-


forth the adjusted conversion price and showing in reasonable detail the facts
upon which such adjustment is based, and such certificate shall forthwith be
filed at each office or agency maintained for the purpose of conversion of
Securities pursuant to Section 1002; and

(2) a notice stating that the conversion price has been adjusted and setting
forth the adjusted conversion price shall forthwith be required, and as soon as
practicable after it is required, such notice shall be mailed by the Company to
all Holders at their last addresses as they shall appear in the Security
Register.

SECTION 1506. NOTICE OF CERTAIN CORPORATE ACTION.

In case:

(1) the Company shall declare a dividend (or any other distribution) on its
Common Stock such that any adjustment to the conversion price would be required
pursuant to this Indenture;

(2) the Company shall authorize the granting to the holders of its Common Stock
of rights or warrants to subscribe for or purchase any shares of capital stock
of any class or of any other rights;

(3) of any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding shares of Common Stock), or of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or of the sale or transfer of
all or substantially all of the assets of the Company; or

(4) of the voluntary or involuntary dissolution, liquidation or winding up of
the Company;

then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 1002, and shall
cause to be mailed to all Holders at their last addresses as they shall appear
in the Security Register or as otherwise allowed by Section 106, at least 10
days (or five days in any case specified in clause (1) or (2) above) prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up.

                                      -70-


The Company shall cause to be filed at each office or agency maintained for the
purpose of conversion of Securities pursuant to Section 1002, and shall cause to
be provided to all Holders in accordance with Section 106, notice of any tender
offer by the Company or any subsidiary of the Company for all or any portion of
the Common Stock at or about the time that such notice of tender offer is
provided to the public generally.

SECTION 1507. COMPANY TO RESERVE COMMON STOCK.

The Company shall at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued Common Stock, for the purpose of
effecting the conversion of Securities, the full number of shares of Common
Stock then issuable upon the conversion of all outstanding Securities.

SECTION 1508. TAXES ON CONVERSIONS.

The Company will pay any and all taxes that may be payable in respect of the
issue or delivery of shares of Common Stock on conversion of Securities pursuant
hereto. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of shares
of Common Stock in a name other than that of the Holder of the Security or
Securities to be converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Company the amount of
any such tax, or has established to the satisfaction of the Company that such
tax has been paid.

SECTION 1509. COVENANT AS TO COMMON STOCK.

The Company covenants that all shares of Common Stock which may be issued upon
conversion of Securities will upon issue be fully paid and nonassessable and,
except as provided in Section 1508, the Company will pay all taxes, liens and
charges with respect to the issue thereof.

SECTION 1510. CANCELLATION OF CONVERTED SECURITIES.

All Securities delivered for conversion shall be delivered to the Trustee to be
cancelled by or at the direction of the Trustee, which shall dispose of the same
as provided in Section 309.

SECTION 1511. PROVISIONS IN CASE OF CONSOLIDATION, MERGER OF SALE OF ASSETS.

In case of any consolidation of the Company with, or merger of the Company into,
any other Person, any merger of another Person into the Company (other than a
merger which does not result in any reclassification, conversion, exchange or
cancellation of Outstanding shares of Common Stock of the Company) or any sale
or transfer or conveyance of all or substantially all of the assets of the
Company, the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver to
the Trustee a supplemental indenture providing that the Holder of each Security
then outstanding shall have the right thereafter, during the period such
Security shall be convertible as specified in Section 1401, to convert such
Security only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer or conveyance by a
holder of the number of shares of Common Stock of the Company into which such
Security might have been converted immediately prior to such

                                      -71-


consolidation, merger, sale or transfer or conveyance, assuming such holder of
Common Stock of the Company (i) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such sale or transfer was made, as the case may be ("constituent
Person"), or an Affiliate of a constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer or
conveyance (provided that if the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer is not the
same for each share of Common Stock of the Company held immediately prior to
such consolidation, merger, sale or transfer by others than a constituent Person
or an Affiliate thereof and in respect of which such rights of election shall
not have been exercised ("nonelecting share"), then for the purpose of this
Section the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer by each nonelecting share
shall be deemed to be the kind and amount so receivable per share by a plurality
of the nonelecting shares). Such supplemental indenture shall provide for
adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Indenture applicable to the Securities
immediately prior to the consolidation, merger, sale of transfer or conveyance.
The above provisions of this Section shall similarly apply to successive
consolidations, mergers, sales or transfers. Notice of the execution of such a
supplemental indenture shall be given by the Company to the Holder of each
Security as provided in Section 106 promptly upon such execution.

The Company shall be solely responsible for performing the duties and
responsibilities contained in this Article and the Trustee shall have no
responsibility therefor.

SECTION 1512. CERTAIN CONVERSIONS DEEMED PAYMENT.

For purposes of Article Fourteen only, the issuance and delivery of Common Stock
or securities junior to Senior Debt in accordance with this Article shall not be
deemed to constitute a payment or distribution on account of the principal of or
premium or interest on Securities or on account of the purchase or other
acquisition of Securities; PROVIDED, HOWEVER that the payment issuance or
delivery of cash, property or securities (other than securities junior to Senior
Debt) upon conversion of a Security shall be deemed to constitute payment on
account of the principal of such Security. Nothing contained in Article Fourteen
or elsewhere in this indenture or in the Securities is intended to or shall
impair, as among the Company, its creditors (other than holders of Senior Debt)
and the Holders of Securities, the right, which is absolute and unconditional,
of the Holder of any Security to convert such Security in accordance with this
Article Fifteen.

SECTION 1513. TRUSTEE ADJUSTMENT DISCLAIMER.

The Trustee has no duty to determine when an adjustment of the conversion should
be made, how it should be made or what it should be. The Trustee shall not be
accountable for and makes no representation as to the validity of value of any
securities or assets issued upon conversion of Securities. The Trustee shall not
be responsible for the Company's failure to comply with this Article Fifteen.
Each Conversion Agent (other than the Company or an Affiliate of the Company)
shall have the same protection under this Section 1513 as the Trustee.

                                      -72-


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.

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

                        PINNACLE WEST CAPITAL CORPORATION

                                       By

                        THE BANK OF NEW YORK, AS TRUSTEE

                                       By

                                      -73-

EX-4.10

                                                                    EXHIBIT 4.10

================================================================================

                        PINNACLE WEST CAPITAL CORPORATION

                                       AND

                              THE BANK OF NEW YORK

                           as Purchase Contract Agent
                                   and Trustee

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

                           PURCHASE CONTRACT AGREEMENT

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

                            DATED AS OF
                                       -----------
================================================================================


                                    TIE SHEET



    Section of                                                                              Section of
Trust Indenture Act                                                                     Purchase Contract
of 1939, as amended                                                                          Agreement
- -------------------                                                                     --------------------
                                                                                     
310(a)................................................................................  7.8
310(b)................................................................................  7.9(d) and (g), 11.8
310(c)................................................................................  Inapplicable
311(a)................................................................................  11.2(b)
311(b)................................................................................  11.2(b)
311(c)................................................................................  Inapplicable
312(a)................................................................................  11.2(a)
312(b)................................................................................  11.2(b)
313...................................................................................  11.3
314(a)................................................................................  11.4
314(b)................................................................................  Inapplicable
314(c)................................................................................  11.5
314(d)................................................................................  Inapplicable
314(e)................................................................................  1.2
314(f)................................................................................  11.1
315(a)................................................................................  7.1(a)
315(b)................................................................................  7.2
315(c)................................................................................  7.1(h)
315(d)(1).............................................................................  7.1(a) and (b)
315(d)(2).............................................................................  7.1(b)
315(d)(3).............................................................................  11.9
316(a)(1)(A)..........................................................................  11.9
316(a)(1)(B)..........................................................................  11.6
316(b)................................................................................  6.1
316(c)................................................................................  11.2
317(a)................................................................................  Inapplicable
317(b)................................................................................  Inapplicable
318(a)................................................................................  11.1(b)


- ----------------
*        This Cross-Reference Table does not constitute part of the Purchase
         Contract Agreement and shall not affect the interpretation of any of
         its terms or provisions.



                                                TABLE OF CONTENTS



                                                                                                              PAGE
                                                                                                              ----
                                                                                                           
                        ARTICLE I. Definitions and Other Provisions of General Application

SECTION 1.1    Definitions................................................................................      1
SECTION 1.2    Compliance Certificates and Opinions.......................................................     13
SECTION 1.3    Form of Documents Delivered to Agent.......................................................     13
SECTION 1.4    Acts of Holders; Record Dates..............................................................     14
SECTION 1.5    Notices....................................................................................     15
SECTION 1.6    Notice to Holders; Waiver..................................................................     16
SECTION 1.7    Effect of Headings and Table of Contents...................................................     16
SECTION 1.8    Successors and Assigns.....................................................................     17
SECTION 1.9    Separability Clause........................................................................     17
SECTION 1.10   Benefits of Agreement......................................................................     17
SECTION 1.11   Governing Law..............................................................................     17
SECTION 1.12   Legal Holidays.............................................................................     17
SECTION 1.13   Counterparts...............................................................................     18
SECTION 1.14   Inspection of Agreement....................................................................     18

                                          ARTICLE II. Certificate Forms

SECTION 2.1    Forms of Certificates Generally............................................................     18
SECTION 2.2    Form of Agent's Certificate of Authentication..............................................     19

                                              ARTICLE III. The Units

SECTION 3.1    Title and Terms; Denominations.............................................................     19
SECTION 3.2    Rights and Obligations Evidenced by the Certificates.......................................     19
SECTION 3.3    Execution, Authentication, Delivery and Dating.............................................     20
SECTION 3.4    Temporary Certificates.....................................................................     21
SECTION 3.5    Registration; Registration of Transfer and Exchange........................................     21
SECTION 3.6    Book-Entry Interests.......................................................................     23
SECTION 3.7    Notices to Holders.........................................................................     23
SECTION 3.8    Appointment of Successor Clearing Agency...................................................     24
SECTION 3.9    Definitive Certificates....................................................................     24
SECTION 3.10   Mutilated, Destroyed, Lost and Stolen Certificates.........................................     24
SECTION 3.11   Persons Deemed Owners......................................................................     25
SECTION 3.12   Cancellation...............................................................................     26
SECTION 3.13   Establishment of Stripped Units............................................................     26
SECTION 3.14   Re-establishment of Normal Units...........................................................     28
SECTION 3.15   Transfer of Collateral Upon Occurrence of Termination Event................................     29
SECTION 3.16   No Consent to Assumption...................................................................     29


                                        i



                                                                                                            
                                              ARTICLE IV. The Notes

SECTION 4.1    Payment of Interest; Rights to Interest Payments Preserved; Notice.........................     30
SECTION 4.2    Notice and Voting..........................................................................     30
SECTION 4.3    Tax Event Redemption.......................................................................     31
SECTION 4.4    Consent to Treatment for Tax Purposes......................................................     32

                                ARTICLE V. The Purchase Contracts; the Remarketing

SECTION 5.1    Purchase of Shares of Common Stock.........................................................     32
SECTION 5.2    Contract Adjustment Payments...............................................................     34
SECTION 5.3    Deferral of Contract Adjustment Payments...................................................     35
SECTION 5.4    Payment of Purchase Price; Remarketing.....................................................     36
SECTION 5.5    Issuance of Shares of Common Stock.........................................................     40
SECTION 5.6    Adjustment of Settlement Rate..............................................................     41
SECTION 5.7    Notice of Adjustments and Certain Other Events.............................................     46
SECTION 5.8    Termination Event; Notice..................................................................     47
SECTION 5.9    Early Settlement...........................................................................     47
SECTION 5.10   Early Settlement upon Cash Merger..........................................................     49
SECTION 5.11   Charges and Taxes..........................................................................     50
SECTION 5.12   No Fractional Shares.......................................................................     50

                                               ARTICLE VI. Remedies

SECTION 6.1    Unconditional Right of Holders to Receive Purchase Contract Adjustment
               Payments and Purchase Common Stock.........................................................     51
SECTION 6.2    Restoration of Rights and Remedies.........................................................     51
SECTION 6.3    Rights and Remedies Cumulative.............................................................     51
SECTION 6.4    Delay or Omission Not Waiver...............................................................     52
SECTION 6.5    Undertaking for Costs......................................................................     52
SECTION 6.6    Waiver of Stay or Extension Laws...........................................................     52

                                              ARTICLE VII. The Agent

SECTION 7.1    Certain Duties and Responsibilities........................................................     52
SECTION 7.2    Notice of Default..........................................................................     53
SECTION 7.3    Certain Rights of Agent....................................................................     54
SECTION 7.4    Not Responsible for Recitals, Etc. ........................................................     55
SECTION 7.5    May Hold Units and Other Dealings..........................................................     55
SECTION 7.6    Money Held In Custody......................................................................     55
SECTION 7.7    Compensation and Reimbursement.............................................................     55
SECTION 7.8    Corporate Agent Required; Eligibility......................................................     56
SECTION 7.9    Resignation and Removal; Appointment of Successor..........................................     57
SECTION 7.10   Acceptance of Appointment by Successor.....................................................     58
SECTION 7.11   Merger, Conversion, Consolidation or Succession to Business................................     58
SECTION 7.12   Preservation of Information; Communications to Holders.....................................     58



                                       ii


                                                                                                            
SECTION 7.13   No Obligations of Agent....................................................................     59
SECTION 7.14   Tax Compliance.............................................................................     59

                                      ARTICLE VIII. Supplemental Agreements

SECTION 8.1    Supplemental Agreements without Consent of Holders.........................................     59
SECTION 8.2    Supplemental Agreements with Consent of Holders............................................     60
SECTION 8.3    Execution of Supplemental Agreements.......................................................     61
SECTION 8.4    Effect of Supplemental Agreements..........................................................     61
SECTION 8.5    Reference to Supplemental Agreements.......................................................     61

                              ARTICLE IX. Consolidation, Merger, Sale or Conveyance

SECTION 9.1    Covenant Not to Merge, Consolidate, Sell or Convey Property Except Under
               Certain Conditions.........................................................................     62
SECTION 9.2    Rights and Duties of Successor Entity......................................................     62
SECTION 9.3    Opinion of Counsel Given to Agent..........................................................     63

                                               ARTICLE X. Covenants

SECTION 10.1   Performance Under Purchase Contracts.......................................................     63
SECTION 10.2   Maintenance of Office or Agency............................................................     63
SECTION 10.3   Company to Reserve Common Stock............................................................     63
SECTION 10.4   Covenants as to Common Stock...............................................................     64

                                         ARTICLE XI. Trust Indenture Act

SECTION 11.1   Trust Indenture Act; Application...........................................................     64
SECTION 11.2   Lists of Holders of Securities.............................................................     64
SECTION 11.3   Reports by the Agent.......................................................................     64
SECTION 11.4   Periodic Reports to Agent..................................................................     65
SECTION 11.5   Evidence of Compliance with Conditions Precedent...........................................     65
SECTION 11.6   Defaults; Waiver...........................................................................     65
SECTION 11.7   Agent's Knowledge of Defaults..............................................................     65
SECTION 11.8   Conflicting Interests......................................................................     65
SECTION 11.9   Direction of Agent.........................................................................     65



EXHIBIT A    Form of Normal Units Certificate

EXHIBIT B    Form of Stripped Units Certificate

EXHIBIT C    Instruction from Purchase Contract Agent to Collateral Agent

EXHIBIT D    Instruction to Purchase Contract Agent

EXHIBIT E    Notice to Settle by Separate Cash

                                      iii


         PURCHASE CONTRACT AGREEMENT, dated as of _______________, between
Pinnacle West Capital Corporation, an Arizona corporation (the "Company"), and
The Bank of New York, a banking corporation of the State of New York, acting as
purchase contract agent, attorney-in-fact and trustee for the Holders of Units
from time to time (in any one or more of such capacities, the "Agent").

                                    RECITALS

         The Company has duly authorized the execution and delivery of this
Agreement and the Certificates evidencing the Units.

         All things necessary to make the Purchase Contracts, when the
Certificates are executed by the Company and authenticated, executed on behalf
of the Holders and delivered by the Agent, as provided in this Agreement, the
valid obligations of the Company and the Holders, and to constitute this
Agreement a valid agreement of the Company, in accordance with its terms, have
been done.

                                   WITNESSETH:

         For and in consideration of the premises and the purchase of the Units
by the Holders thereof, it is mutually agreed as follows:

                                   ARTICLE I.

                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATION

SECTION 1.1 DEFINITIONS.

         For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:

         (a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular, and nouns
and pronouns of the masculine gender include the feminine and neuter genders;

         (b) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles in
the United States; and

         (c) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;

         "ACT" when used with respect to any Holder, has the meaning specified
in Section 1.4.

         "AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.



         "AGENT" means the Person named as the "Agent" in the first paragraph of
this instrument until a successor Agent shall have become such pursuant to the
applicable provisions of this Agreement, and thereafter "Agent" shall mean such
Person.

         "AGENT-PURCHASED TREASURY CONSIDERATION" has the meaning specified in
Section 5.4(b)(i).

         "AGREEMENT" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.

         "APPLICABLE MARKET VALUE" has the meaning specified in Section 5.1(c).

         "APPLICABLE OWNERSHIP INTEREST" means, with respect to a Normal Unit
and the U.S. Treasury securities in the Treasury Portfolio, (A) a _____, or
_____%, undivided beneficial ownership interest in a $1,000 principal or
interest amount of a principal or interest strip in a U.S. Treasury security
included in such Treasury Portfolio which matures on or prior to _______________
and (B) for the scheduled interest Payment Date on the Notes that occurs on the
Stock Purchase Date, in the case of a successful remarketing pursuant to the
provisions of Section 5.4, or for each scheduled interest Payment Date on the
Notes that occurs after the Tax Event Redemption Date and on or before the Stock
Purchase Date, in the case of a Tax Event Redemption, a _____% undivided
beneficial ownership interest in a $1,000 principal or interest of a principal
or interest strip in a U.S. Treasury security included in the Treasury Portfolio
that matures on or prior to that interest Payment Date or Dates.

         "APPLICANTS" has the meaning specified in Section 7.12(b).

         "AUTHORIZED OFFICER" means the Chairman of the Board, the President,
any Vice President, the Treasurer, any Assistant Treasurer, or any other officer
or agent of the Company duly authorized by the Board of Directors to act in
respect of matters relating to this Agreement.

         "BANKRUPTCY CODE" means Title 11 of the United States Code, or any
other law of the United States that from time to time provides a uniform system
of bankruptcy laws.

         "BENEFICIAL OWNER" means, with respect to a Book-Entry Interest, a
Person who is the beneficial owner of such Book-Entry Interest as reflected on
the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).

         "BOARD OF DIRECTORS" means the Board of Directors of the Company or the
Executive Committee of such Board or any other duly authorized committee of such
Board.

         "BOARD RESOLUTION" means (i) a copy of a resolution certified by the
Secretary or the Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, (ii) a copy of a unanimous written consent of the Board of
Directors or (iii) a certificate signed by the authorized officer or officers

                                       2


to whom the Board of Directors has delegated its authority, and in each case,
delivered to the Agent.

         "BOOK-ENTRY INTEREST" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 3.6.

         "BUSINESS DAY" means any day that is not a Saturday, Sunday or day on
which banking institutions and trust companies in the State of New York or at
any other place of payment are authorized or required by law, regulation or
executive order to close.

         "CAPITAL STOCK" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated, whether voting or non-voting) corporate stock or similar
interests in other types of entities.

         "CASH MERGER" has the meaning set forth in Section 5.10.

         "CASH SETTLEMENT" has the meaning set forth in Section 5.4(a).

         "CERTIFICATE" means a Normal Units Certificate or a Stripped Units
Certificate.

         "CLEARING AGENCY" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as a
depositary for the Units and in whose name, or in the name of a nominee of that
organization, shall be registered a Global Certificate and which shall undertake
to effect book-entry transfers and pledges of the Units.

         "CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, trust
company, clearing corporation, other financial institution or other Person for
whom from time to time the Clearing Agency effects book-entry transfers and
pledges of securities deposited with the Clearing Agency.

         "CLOSING PRICE" has the meaning specified in Section 5.1(c).

         "COLLATERAL" has the meaning specified in Section 2.1(a)(iii) of the
Pledge Agreement.

         "COLLATERAL AGENT" means _______________, _____  __________, as
Collateral Agent under the Pledge Agreement until a successor Collateral Agent
shall have become such pursuant to the applicable provisions of the Pledge
Agreement, and thereafter "Collateral Agent" shall mean the Person who is then
the Collateral Agent thereunder.

         "COLLATERAL SUBSTITUTION" has the meaning specified in Section 3.13(a).

         "COMMON STOCK" means the common stock, no par value of the Company
including, where applicable, the preferred share purchase rights attached
thereto.

         "COMPANY" means the Person named as the "Company" in the first
paragraph of this instrument until a successor shall have become such pursuant
to the applicable provisions of this Agreement, and thereafter "Company" shall
mean such successor.

                                       3


         "COMPANY CERTIFICATE" means a certificate signed by an Authorized
Officer and delivered to the Agent.

         "CONSTITUENT PERSON" has the meaning specified in Section 5.6(b).

         "CONTRACT ADJUSTMENT PAYMENTS" means, in the case of Normal Units and
Stripped Units, the amount payable by the Company in respect of each Purchase
Contract constituting a part of such Unit, which amount shall be equal to ____%
per year of the Stated Amount, in each case computed (i) for any full quarterly
period on the basis of a 360-day year of twelve 30-day months and (ii) for any
period shorter than a full quarterly period, on the basis of a 30-day month, and
for periods of less than a month, on the basis of the actual number of days
elapsed per 30-day month, plus any Deferred Contract Adjustment Payments accrued
pursuant to Section 5.3.

         "CORPORATE TRUST OFFICE" means the corporate trust office of the Agent
at which, at any particular time, its corporate trust business shall be
principally administered, which office at the date hereof is located at 700
South Flower Street, Suite 500, Los Angeles, California 90017.

         "COUPON RATE" means the percentage rate per annum at which each Note
will bear interest initially.

         "CURRENT MARKET PRICE" has the meaning specified in Section 5.6(a)(8).

         "CUSTODIAL AGENT" means _______________, a ________________, as
Custodial Agent under the Pledge Agreement until a successor Custodial Agent
shall have become such pursuant to the applicable provisions of the Pledge
Agreement, and thereafter Custodial Agent shall mean the Person who is then the
Custodial Agent thereunder.

         "DEFAULT" means a default by the Company in any of its obligations
under this Agreement.

         "DEFERRED CONTRACT ADJUSTMENT PAYMENTS" has the meaning specified in
Section 5.3(a).

         "DEPOSITARY" means, initially, DTC until another Clearing Agency
becomes its successor.

         "DTC" means The Depository Trust Company, the initial Clearing Agency.

         "EARLY SETTLEMENT" has the meaning specified in Section 5.9(a).

         "EARLY SETTLEMENT AMOUNT" has the meaning specified in Section 5.9(a).

         "EARLY SETTLEMENT DATE" has the meaning specified in Section 5.9(a).

         "EARLY SETTLEMENT RATE" has the meaning specified in Section 5.9(b).

                                       4


         "EXCHANGE ACT" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time, and the
rules and regulations promulgated thereunder.

         "EXPIRATION DATE" has the meaning specified in Section 1.4(f).

         "EXPIRATION TIME" has the meaning specified in Section 5.6(a)(6).

         "FAILED REMARKETING" has the meaning specified in Section 5.4(b)(ii).

         "FAIR MARKET VALUE" with respect to securities distributed in a
Spin-Off means (a) in the case of any Spin-Off that is effected simultaneously
with an Initial Public Offering of such securities, the initial public offering
price of those securities, and (b) in the case of any other Spin-Off, (i) the
average of the Sale Price of those securities over the first ten Trading Days
after the effective date of such Spin-Off or (ii) if the Sale Price is required
to be defined without regard to the price on any Trading Days, the Sale Price as
of the effective date of such Spin-Off.

         "GLOBAL CERTIFICATE" means a Certificate that evidences all or part of
the Units and is registered in the name of the Depositary or a nominee thereof.

         "HOLDER" means the Person in whose name the Unit evidenced by a Normal
Units Certificate and/or a Stripped Units Certificate is registered in the
related Normal Units Register and/or the Stripped Units Register, as the case
may be.

         "INDENTURE" means the Indenture, dated as of December 1, 2000, between
the Company and the Indenture Trustee pursuant to which the Notes are to be
issued, as originally executed and delivered and as it may from time to time be
supplemented or amended by one or more indentures supplemental thereto entered
into pursuant to the applicable provisions thereof and shall include the terms
of a particular series established as contemplated by Section 2.05(c) thereof.

         "INDENTURE TRUSTEE" means The Bank of new York, a banking corporation
of the State of New York, as trustee under the Indenture, or any successor
thereto.

         "INITIAL PUBLIC OFFERING" with respect to a Spin-Off means the first
time securities of the same class or type as the securities being distributed in
such Spin-Off are bona fide offered to the public for cash.

         "ISSUER ORDER" or "ISSUER REQUEST" means a written order or request
signed in the name of the Company by an Authorized Officer and delivered to the
Agent.

         "LAST FAILED REMARKETING" has the meaning specified in Section
5.4(b)(ii).

         "MERGER EARLY SETTLEMENT" has the meaning specified in Section 5.10(a).

         "MERGER EARLY SETTLEMENT AMOUNT" has the meaning specified in Section
5.10(b).

         "MERGER EARLY SETTLEMENT DATE" has the meaning specified in Section
5.10(a).

                                       5


         "NON-ELECTING SHARE" has the meaning specified in Section 5.6(b).

         "NORMAL UNIT" means the collective rights and obligations of a Holder
of a Normal Units Certificate in respect of a Note or the appropriate Treasury
Consideration or Applicable Ownership Interest in the Treasury Portfolio, as the
case may be, subject in each case to the Pledge thereof, and the related
Purchase Contract.

         "NORMAL UNITS CERTIFICATE" means a certificate evidencing the rights
and obligations of a Holder in respect of the number of Normal Units specified
on such certificate, substantially in the form of Exhibit A hereto.

         "NORMAL UNITS REGISTER" and "NORMAL UNITS REGISTRAR" have the
respective meanings specified in Section 3.5(a).

         "NOTES" means the series of debt securities of the Company designated
the "Notes due _______________", to be issued under the Indenture.

         "NYSE" has the meaning specified in Section 5.1(c).

         "OPINION OF COUNSEL" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company or an Affiliate and
who shall be reasonably acceptable to the Agent.

         "OPT-OUT TREASURY CONSIDERATION" has meaning specified in Section
5.4(b)(iv).

         "OUTSTANDING UNITS" means, as of the date of determination, all Normal
Units or Stripped Units evidenced by Certificates theretofore authenticated,
executed and delivered under this Agreement, except:

                  (i) If a Termination Event has occurred, (A) Stripped Units
         and (B) Normal Units for which the related Note or the appropriate
         Treasury Consideration or Applicable Ownership Interest in the Treasury
         Portfolio, as the case may be, has been theretofore deposited with the
         Agent in trust for the Holders of such Normal Units;

                  (ii) Normal Units and Stripped Units evidenced by Certificates
         theretofore cancelled by the Agent or delivered to the Agent for
         cancellation or deemed cancelled pursuant to the provisions of this
         Agreement; and

                  (iii) Normal Units and Stripped Units evidenced by
         Certificates in exchange for or in lieu of which other Certificates
         have been authenticated, executed on behalf of the Holder and delivered
         pursuant to this Agreement, other than any such Certificate in respect
         of which there shall have been presented to the Agent proof
         satisfactory to it that such Certificate is held by a bona fide
         purchaser in whose hands the Normal Units or Stripped Units evidenced
         by such Certificate are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite
number of the Normal Units or Stripped Units have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Normal Units or
Stripped Units owned by the Company or any

                                       6


Affiliate of the Company shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Agent shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Normal Units or Stripped Units which a Responsible Officer of the Agent
knows to be so owned shall be so disregarded. Normal Units or Stripped Units so
owned which have been pledged in good faith may be regarded as Outstanding Units
if the pledgee establishes to the satisfaction of the Agent the pledgee's right
so to act with respect to such Normal Units or Stripped Units and that the
pledgee is not the Company or any Affiliate of the Company.

         "PAYMENT DATE" means each ______, ______, ______ and ______, commencing
_______________.

         "PERSON" means a legal person, including any individual, corporation,
limited liability company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof or any other entity of whatever nature.

         "PLEDGE" means the pledge under the Pledge Agreement of the Notes, the
Treasury Securities or the appropriate Treasury Consideration or Applicable
Ownership Interest in the Treasury Portfolio, in each case constituting a part
of the Units, property, cash, securities, financial assets and security
entitlements of the Collateral Account (as defined in the Pledge Agreement) and
any Proceeds (as defined in the Pledge Agreement) of any of the foregoing.

         "PLEDGE AGREEMENT" means the Pledge Agreement, dated as of the date
hereof, by and among the Company, the Collateral Agent, the Custodial Agent, the
Securities Intermediary and the Agent, on its own behalf and as attorney-in-fact
for the Holders from time to time of the Units.

         "PLEDGED APPLICABLE OWNERSHIP INTEREST IN THE TREASURY PORTFOLIO" has
the meaning set forth in Section 2.1(c) of the Pledge Agreement.

         "PLEDGED NOTES" has the meaning set forth in Section 2.1(c) of the
Pledge Agreement.

         "PLEDGED TREASURY CONSIDERATION" has the meaning set forth in Section
2.1(c) of the Pledge Agreement.

         "PLEDGED TREASURY SECURITIES" has the meaning set forth in Section
2.1(c) of the Pledge Agreement.

         "PREDECESSOR CERTIFICATE" means a Predecessor Normal Units Certificate
or a Predecessor Stripped Units Certificate.

         "PREDECESSOR NORMAL UNITS CERTIFICATE" of any particular Normal Units
Certificate means every previous Normal Units Certificate evidencing all or a
portion of the rights and obligations of the Company and the Holder under the
Normal Units evidenced thereby; and, for the purposes of this definition, any
Normal Units Certificate authenticated and delivered under Section 3.10 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Normal Units

                                       7


Certificate shall be deemed to evidence the same rights and obligations of the
Company and the Holder as the mutilated, destroyed, lost or stolen Normal Units
Certificate.

         "PREDECESSOR STRIPPED UNITS CERTIFICATE" of any particular Stripped
Units Certificate means every previous Stripped Units Certificate evidencing all
or a portion of the rights and obligations of the Company and the Holder under
the Stripped Units evidenced thereby; and, for the purposes of this definition,
any Stripped Units Certificate authenticated and delivered under Section 3.10 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Stripped Units
Certificate shall be deemed to evidence the same rights and obligations of the
Company and the Holder as the mutilated, destroyed, lost or stolen Stripped
Units Certificate.

         "PURCHASE CONTRACT," when used with respect to any Unit, means the
contract forming a part of such Unit and obligating the Company to sell and the
Holder of such Unit to purchase Common Stock on the terms and subject to the
conditions set forth in Article V.

         "PURCHASE CONTRACT SETTLEMENT FUND" has the meaning specified in
Section 5.5.

         "PURCHASE PRICE" has the meaning specified in Section 5.1(a).

         "PURCHASED SHARES" has the meaning specified in Section 5.6(a)(6).

         "QUOTATION AGENT" means each of _______________ and _______________ or
any of their respective successors or any other primary U.S. government
securities dealer in New York City selected by the Company.

         "RECORD DATE" for the payment of distributions payable on any Payment
Date means, as to any Global Certificate, the Business Day next preceding such
Payment Date, and as to any other Certificate, the ____ calendar day preceding
such Payment Date.

         "REDEMPTION AMOUNT" means, for each Note, the product of (i) the
principal amount of such Note and (ii) a fraction whose numerator is the
applicable Treasury Portfolio Purchase Price and whose denominator is the
applicable Tax Event Redemption Principal Amount.

         "REDEMPTION PRICE" means the amount per Note equal to the Redemption
Amount plus any accrued and unpaid interest on such Note to the date of
redemption.

         "REGISTER" means the Normal Units Register and the Stripped Units
Register, as applicable.

         "REGISTRAR" means the Normal Units Registrar and the Stripped Units
Registrar, as applicable.

         "REMARKETING AGENT" has the meaning specified in Section 5.4(b)(i).

         "REMARKETING AGREEMENT" means the Remarketing Agreement dated as of
_______________, by and among the Company, the Remarketing Agent and the Agent.

         "REMARKETING DATE" means the third business day preceding ____________.

                                       8


         "REMARKETING FEE" has the meaning specified in Section 5.4(b)(i).

         "REMARKETING PERIOD" means either (i) the three Business Day period
beginning on the Remarketing Date and ending after the two immediately following
Business Days; (ii) the three Business Day period immediately preceding
_______________; or (iii) the third Business Day immediately preceding
_______________.

         "REMARKETING RATE" means the percentage rate per year at which each
Note will bear interest after a successful remarketing of the Notes pursuant to
the provisions of Section 5.4.

         "REMARKETING VALUE" means the sum of

                  (i) the value at the Remarketing Date or any Subsequent
         Remarketing Date, as the case may be, of U.S. Treasury securities that
         will pay, on or prior to the Stock Purchase Date, an amount of cash
         equal to the aggregate interest payments that are scheduled to be
         payable on that date on the Notes which are included in Normal Units
         and are participating in the remarketing, assuming for that purpose,
         even if not true, that the interest rate on the Notes is equal to the
         Coupon Rate, and

                  (ii) the value at the Remarketing Date or any Subsequent
         Remarketing Date, as the case may be, of U.S. Treasury securities that
         will pay, on or prior to the Stock Purchase Date, an amount of cash
         equal to the Stated Amount of such Notes that are included in Normal
         Units and which are participating in the remarketing,

provided that for purposes of clauses (i) and (ii) above, the Remarketing Value
shall be calculated on the assumptions that (x) the U.S. Treasury securities are
highly liquid and mature on or within 35 days prior to the Stock Purchase Date,
as determined in good faith by the Remarketing Agent in a manner intended to
minimize the cash value of the U.S. Treasury securities, and (y) the U.S.
Treasury securities are valued based on the ask-side price of the U.S. Treasury
securities at a time between 9:00 a.m. and 11:00 a.m., New York City time,
selected by the Remarketing Agent, on the Remarketing Date or any Subsequent
Remarketing Date, as the case may be, as determined on a third-day settlement
basis by a reasonable and customary means selected in good faith by the
Remarketing Agent, plus accrued interest to that date.

         "REORGANIZATION EVENT" has the meaning specified in Section 5.6(b).

         "RESPONSIBLE OFFICER" when used with respect to the Agent, means any
officer within the corporate trust department of the Agent (or any successor of
the Agent), including any Vice President, any assistant Vice President, any
assistant treasurer, any trust officer or any other officer of the Agent who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such person's knowledge of and familiarity with
the particular subject.

         "SALE PRICE" of any securities distributed in a Spin-Off on any Trading
Day means the closing sale price per share (or if no closing sale price is
reported, the average of the bid and ask prices or, if more than one in either
case, the average of the average bid and the average asked prices) on such
Trading Day as reported in composite transactions for the principal U.S.

                                       9


securities exchange on which such securities are traded or, if such securities
are not listed on a U.S. national or regional securities exchange, as reported
by The Nasdaq Stock Market, or if such securities are not so reported, the last
quoted bid price for such securities in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or, if such bid price
is not available, the market value of such securities on such date as determined
by a nationally recognized independent investment banking firm retained by the
Company for this purpose.

         "SECURITIES ACT" means the Securities Act of 1933, and any statute
successor thereto, in each case as amended from time to time, and the rules and
regulations promulgated thereunder.

         "SECURITIES INTERMEDIARY" means _______________, _______________, in
its capacity as Securities Intermediary under the Pledge Agreement, together
with its successors in such capacity.

         "SENIOR INDEBTEDNESS" means indebtedness of any kind of the Company
unless the instrument under which such indebtedness is incurred expressly
provides that it is in parity or subordinate in right of payment to the Contract
Adjustment Payments.

         "SEPARATE NOTES" has the meaning set forth in the Pledge Agreement.

         "SETTLEMENT DATE" means any Early Settlement Date or Merger Early
Settlement Date or the Stock Purchase Date.

         "SETTLEMENT RATE" has the meaning specified in Section 5.1(a).

         "SPIN-OFF" means a dividend or other distribution on the Common Stock
of shares of Capital Stock of any class or series, or similar equity interests,
of or relating to a subsidiary or other business unit of the Company.

         "STATED AMOUNT" means, with respect to any one Note, Normal Unit or
Stripped Unit, _____.

         "STOCK PURCHASE DATE" means _______________.

         "STRIPPED UNIT" means the collective rights and obligations of a Holder
of a Stripped Units Certificate in respect of a _____ undivided beneficial
interest in a Treasury Security, subject to the Pledge thereof, and the related
Purchase Contract.

         "STRIPPED UNITS CERTIFICATE" means a certificate evidencing the rights
and obligations of a Holder in respect of the number of Stripped Units specified
on such certificate, substantially in the form of Exhibit B hereto.

         "STRIPPED UNITS REGISTER" and "STRIPPED UNITS REGISTRAR" have the
respective meanings specified in Section 3.5(a).

         "SUBSEQUENT REMARKETING DATE" means, provided there has been one or
more Failed Remarketings, the date on which the Remarketing Agent has
consummated a successful

                                       10


remarketing in accordance with Section 5.4 hereof, such date to be no later than
the third Business Day immediately preceding the Stock Purchase Date.

         "TAX EVENT" means the receipt by the Company of an opinion of a
nationally recognized tax counsel experienced in such matters, which may be
_______________, to the effect that there is more than an insubstantial risk
that interest payable by the Company on the Notes on the next Payment Date will
not be deductible, in whole or in part, by the Company for United States federal
income tax purposes as a result of (a) any amendment to, or change (including
any announced proposed change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein affecting taxation, (b) any amendment to or change in an official
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority or (c) any official
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the generally accepted position on
_______________, which amendment, change or proposed change is effective or
which interpretation or pronouncement is announced on or after _______________.

         "TAX EVENT REDEMPTION" means, if a Tax Event shall occur and be
continuing, the redemption of the Notes, at the option of the Company, in whole
but not in part, on not less than 30 days nor more than 60 days prior written
notice.

         "TAX EVENT REDEMPTION DATE" means the date on which a Tax Event
Redemption is to occur.

         "TAX EVENT REDEMPTION PRINCIPAL AMOUNT" means (i) in the case of a Tax
Event Redemption Date occurring prior to a successful remarketing of the Notes
pursuant to the provisions of Section 5.4, the aggregate principal amount of
Notes included in Normal Units on such date, and (ii) in the case of a Tax Event
Redemption Date occurring after a successful remarketing of the Notes pursuant
to the provisions of Section 5.4, the aggregate principal amount of the Notes.

         "TERMINATION DATE" means the date, if any, on which a Termination Event
occurs.

         "TERMINATION EVENT" means the occurrence of any of the following
events:

                  (i) at any time on or prior to the Stock Purchase Date, a
         judgment, decree or court order shall have been entered granting relief
         under the Bankruptcy Code or any other similar federal or state law,
         adjudicating the Company to be insolvent, or approving as properly
         filed a petition seeking reorganization or liquidation of the Company,
         and, unless such judgment, decree or order shall have been entered
         within 60 days prior to the Stock Purchase Date, such decree or order
         shall have continued undischarged and unstayed for a period of 60 days;

                  (ii) at any time on or prior to the Stock Purchase Date, a
         judgment, decree or court order for the appointment of a receiver or
         liquidator or trustee or assignee in bankruptcy or insolvency of the
         Company or of its property, or for the winding up or liquidation of its
         affairs, shall have been entered, and, unless such judgment, decree or
         order shall have been entered within 60 days prior to the Stock
         Purchase Date, such

                                       11


         judgment, decree or order shall have continued undischarged and
         unstayed for a period of 60 days; or

                  (iii) at any time on or prior to the Stock Purchase Date, the
         Company shall file a petition for relief under the Bankruptcy Code or
         any other similar federal or state law, or shall consent to the filing
         of a bankruptcy proceeding against it, or shall file a petition or
         answer or consent seeking reorganization or liquidation under the
         Bankruptcy Code or any other similar federal or state law, or shall
         consent to the filing of any such petition, or shall consent to the
         appointment of a receiver or liquidator or trustee or assignee in
         bankruptcy or insolvency of it or of its property, or shall make an
         assignment for the benefit of creditors, or shall admit in writing its
         inability to pay its debts generally as they become due.

         "THRESHOLD APPRECIATION PRICE" has the meaning specified in Section
5.1(a)(i).

         "TIA" means the Trust Indenture Act of 1939, and any statute successor
thereto, in each case as amended from time to time, and the rules and
regulations promulgated thereunder.

         "TRADING DAY" has the meaning specified in Section 5.1(c).

         "TREASURY CONSIDERATION" means the Agent-purchased Treasury
Consideration or the Opt-out Treasury Consideration.

         "TREASURY PORTFOLIO" means: (i) if a Tax Event Redemption occurs prior
to a successful remarketing of the Notes pursuant to the provisions of Section
5.4, a portfolio of zero-coupon U.S. Treasury securities consisting of principal
or interest strips of U.S. Treasury securities that mature on or prior to the
Stock Purchase Date in an aggregate amount equal to the applicable Tax Event
Redemption Principal Amount and with respect to each scheduled interest Payment
Date on the Notes that occurs after the Tax Event Redemption Date and on or
before the Stock Purchase Date, interest or principal strips of U.S. Treasury
securities that mature on or prior to such interest Payment Date in an aggregate
amount equal to the aggregate interest payment that would be due on the
applicable Tax Event Redemption Principal Amount on such date if the interest
rate of the Notes were not reset on the applicable Remarketing Date, and (ii)
solely for purposes of determining the Treasury Portfolio Purchase Price in the
case of a Tax Event Redemption Date occurring after a successful remarketing of
the Notes pursuant to the provisions of Section 5.4, a portfolio of zero-coupon
U.S. Treasury securities consisting of principal or interest strips of U.S.
Treasury securities that mature on or prior to _______________ in an aggregate
amount equal to the applicable Tax Event Redemption Principal Amount and with
respect to each scheduled interest Payment Date on the Notes that occurs after
the Tax Event Redemption Date and on or before _______________, interest or
principal strips of U.S. Treasury securities that mature on or prior to such
interest Payment Date in an aggregate amount equal to the aggregate interest
payment that would be due on the applicable Tax Event Redemption Principal
Amount of the Notes outstanding on the Tax Event Redemption Date.

         "TREASURY PORTFOLIO PURCHASE PRICE" means the lowest aggregate price
quoted by a primary U.S. government securities dealer in New York City to the
Quotation Agent on the third

                                       12


Business Day immediately preceding the Tax Event Redemption Date for the
purchase of the Treasury Portfolio for settlement on the Tax Event Redemption
Date.

         "TREASURY SECURITY" means a zero-coupon U.S. Treasury security (CUSIP
Number __________) maturing on the Stock Purchase Date that will pay $1,000 on
such maturity date.

         "UNDERWRITING AGREEMENT" means the Underwriting Agreement relating to
the Units dated _______________ among the Company and the underwriters named
therein.

         "UNIT" means a Normal Unit or a Stripped Unit.

         "VICE-PRESIDENT" means any vice-president, whether or not designated by
a number or a word or words added before or after the title "Vice-President."

SECTION 1.2 COMPLIANCE CERTIFICATES AND OPINIONS.

         Except as otherwise expressly provided by this Agreement, upon any
application or request by the Company to the Agent to take any action under any
provision of this Agreement, the Company shall furnish to the Agent a Company
Certificate stating that all conditions precedent, if any, provided for in this
Agreement relating to the proposed action have been complied with and, if
requested by the Agent, an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Agreement relating to such particular application or request, no additional
certificate or opinion need be furnished.

         Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement shall include:

         (a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;

         (b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

         (c) a statement that, in the opinion of each such individual, he or she
has made such examination or investigation as is necessary to enable such
individual to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

         (d) a statement as to whether, in the opinion of such individual, such
condition or covenant has been complied with.

SECTION 1.3 FORM OF DOCUMENTS DELIVERED TO AGENT.

         (a) In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters

                                       13


and one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.

         (b) Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

         Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.

SECTION 1.4. ACTS OF HOLDERS; RECORD DATES.

         (a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Agent and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and (subject to Section 7.1) conclusive in favor of the Agent and the
Company, if made in the manner provided in this Section.

         (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Agent deems
sufficient.

         (c) The ownership of Units shall be proved by the Normal Units Register
or the Stripped Units Register, as the case may be.

         (d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Certificate shall bind every future
Holder of the same Certificate and the Holder of every Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Agent or the
Company in reliance thereon, whether or not notation of such action is made upon
such Certificate.

         (e) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Units entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Agreement to be

                                       14


given, made or taken by Holders of Units. If any record date is set pursuant to
this paragraph, the Holders of the Outstanding Normal Units and the Outstanding
Stripped Units, as the case may be, on such record date, and no other Holders,
shall be entitled to take the relevant action with respect to the Normal Units
or the Stripped Units, as the case may be, whether or not such Holders remain
Holders after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite number of Outstanding Units on such record date. Nothing in
this paragraph shall be construed to prevent the Company from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite number of Outstanding Units on the date
such action is taken. Promptly after any record date is set pursuant to this
paragraph, the Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable Expiration Date to be
given to the Agent in writing and to each Holder of Units in the manner set
forth in Section 1.6.

         (f) With respect to any record date set pursuant to this Section, the
Company may designate any date as the "Expiration Date" and from time to time
may change the Expiration Date to any earlier or later day; provided that no
such change shall be effective unless notice of the proposed new Expiration Date
is given to the Agent in writing, and to each Holder of Units in the manner set
forth in Section 1.6, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the Company shall be deemed to have initially designated the
180th day after such record date as the Expiration Date with respect thereto,
subject to its right to change the Expiration Date as provided in this
paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than
the 180th day after the applicable record date.

SECTION 1.5 NOTICES.

         Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Agreement to
be made upon, given or furnished to, or filed with:

         (a) the Agent by any Holder or by the Company shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if made,
given, furnished or filed in writing and personally delivered, mailed,
first-class postage prepaid, telecopied or delivered by overnight air courier
guaranteeing next day delivery, to the Agent at _______________,
_______________, _______________, Attention: _______________, telecopy:
_______________ or at any other address furnished in writing by the Agent to the
Holders and the Company; or

         (b) the Company by the Agent or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if made,
given, furnished or filed in writing and personally delivered, mailed,
first-class postage prepaid, telecopied or delivered by overnight air courier
guaranteeing next day delivery, to the Company at Pinnacle West Capital
Corporation, 400 North Fifth Street, Phoenix, Arizona 85004, telecopy: (602)
250-5640,

                                       15


Attention: Vice President and Treasurer or at any other address furnished in
writing to the Agent by the Company; or

         (c) the Collateral Agent by the Agent, the Company or any Holder shall
be sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if made, given, furnished or filed in writing and personally
delivered, mailed, first-class postage prepaid, telecopied or delivered by
overnight air courier guaranteeing next day delivery, addressed to the
Collateral Agent at _______________, c/o _______________, _______________,
_______________, Attention: _______________, telecopy: _______________ or at any
other address furnished in writing by the Collateral Agent to the Agent, the
Company and the Holders; or

         (d) the Indenture Trustee by the Company shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if made, given,
furnished or filed in writing and personally delivered, mailed, first-class
postage prepaid, telecopied or delivered by overnight air courier guaranteeing
next day delivery, addressed to the Indenture Trustee at 700 South Flower
Street, Suite 500, Los Angeles, California 90017, Attention: Corporate Trust
Administration, telecopy: _______________ or at any other address furnished in
writing by the Trustee to the Company.

SECTION 1.6 NOTICE TO HOLDERS; WAIVER.

         (a) Where this Agreement provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at its address as it appears in the applicable Register,
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice nor any defect in any
notice so mailed to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Agreement provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Agent, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.

         (b) In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Agent shall
constitute a sufficient notification for every purpose hereunder.

SECTION 1.7 EFFECT OF HEADINGS AND TABLE OF CONTENTS.

         The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.

                                       16


SECTION 1.8 SUCCESSORS AND ASSIGNS.

         All covenants and agreements in this Agreement by the Company shall
bind its successors and assigns, whether so expressed or not.

SECTION 1.9 SEPARABILITY CLAUSE.

         In case any provision in this Agreement or in the Units shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof and thereof shall not in any way be affected or
impaired thereby.

SECTION 1.10 BENEFITS OF AGREEMENT.

         Nothing in this Agreement or in the Units, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and, to the extent provided hereby, the Holders, any benefits or any legal or
equitable right, remedy or claim under this Agreement. The Holders from time to
time shall be beneficiaries of this Agreement and shall be bound by all of the
terms and conditions hereof and of the Units evidenced by their Certificates by
their acceptance of delivery of such Certificates.

SECTION 1.11 GOVERNING LAW.

         This Agreement and the Units shall be governed by and deemed to be a
contract under, and construed in accordance with, the laws of the State of New
York, without regard to conflicts of laws principles thereof.

SECTION 1.12 LEGAL HOLIDAYS.

         (a) In any case where any Payment Date shall not be a Business Day,
then (notwithstanding any other provision of this Agreement or the Certificates)
payments on the Notes or the payment of Contract Adjustment Payments shall not
be made on such date, but such payments shall be made on the next succeeding
Business Day with the same force and effect as if made on such Payment Date,
provided that no interest or additional payment shall accrue or be payable by
the Company for the period from and after any such Payment Date, except that if
such next succeeding Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day with the same
force and effect as if made on such Payment Date.

         (b) In any case where the Stock Purchase Date shall not be a Business
Day, then (notwithstanding any other provision of this Agreement or the
Certificates), the Purchase Contracts shall not be performed on such date, but
the Purchase Contracts shall be performed on the next succeeding Business Day
with the same force and effect as if performed on the Stock Purchase Date.

                                       17


SECTION 1.13 COUNTERPARTS.

         This Agreement may be executed in any number of counterparts by the
parties hereto on separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.

SECTION 1.14 INSPECTION OF AGREEMENT.

         A copy of this Agreement shall be available at all reasonable times
during normal business hours at the Corporate Trust Office for inspection by any
Holder.

                                   ARTICLE II.

                                CERTIFICATE FORMS

SECTION 2.1 FORMS OF CERTIFICATES GENERALLY.

         (a) The Normal Units Certificates (including the form of Purchase
Contract forming part of the Normal Units evidenced thereby) shall be in
substantially the form set forth in Exhibit A hereto, with such letters, numbers
or other marks of identification or designation and such legends or endorsements
printed, lithographed or engraved thereon as may be required by the rules of any
securities exchange or quotation system on which the Normal Units are listed or
quoted for trading or any depositary therefor, or as may, consistently herewith,
be determined by the officers of the Company executing such Normal Units
Certificates, as evidenced by their execution of the Normal Units Certificates.

         (b) The definitive Normal Units Certificates shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers of the Company executing such
Normal Units Certificates, consistent with the provisions of this Agreement, as
evidenced by their execution thereof.

         (c) The Stripped Units Certificates (including the form of Purchase
Contract forming part of the Stripped Units evidenced thereby) shall be in
substantially the form set forth in Exhibit B hereto, with such letters, numbers
or other marks of identification or designation and such legends or endorsements
printed, lithographed or engraved thereon as may be required by the rules of any
securities exchange or the quotation system on which the Stripped Units may be
listed or quoted for trading or any depositary therefor, or as may, consistently
herewith, be determined by the officers of the Company executing such Stripped
Units Certificates, as evidenced by their execution of the Stripped Units
Certificates.

         (d) The definitive Stripped Units Certificates shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers of the Company executing such
Stripped Units Certificates, consistent with the provisions of this Agreement,
as evidenced by their execution thereof.

         (e) Every Global Certificate authenticated, executed on behalf of the
Holders and delivered hereunder shall bear a legend in substantially the
following form:

                                       18


         THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN THE
NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO TRANSFER OF
THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT.

         Unless this Certificate is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the
Company or its agent for registration of transfer, exchange or payment, and any
Certificate issued is registered in the name of Cede & Co., or such other name
as requested by an authorized representative of The Depository Trust Company,
and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.

SECTION 2.2 FORM OF AGENT'S CERTIFICATE OF AUTHENTICATION.

         (a) The form of the Agent's certificate of authentication of the Normal
Units shall be in substantially the form set forth on the form of the Normal
Units Certificates.

         (b) The form of the Agent's certificate of authentication of the
Stripped Units shall be in substantially the form set forth on the form of the
Stripped Units Certificates.

                                  ARTICLE III.

                                    THE UNITS

SECTION 3.1 TITLE AND TERMS; DENOMINATIONS.

         (a) The aggregate number of Normal Units and Stripped Units, if any,
evidenced by Certificates authenticated, executed on behalf of the Holders and
delivered hereunder is limited to __________ (__________ if the Underwriters'
(as defined in the Underwriting Agreement) option to purchase additional Normal
Units pursuant to the Underwriting Agreement is exercised in full), except for
Certificates authenticated, executed and delivered upon registration of transfer
of, in exchange for, or in lieu of, other Certificates pursuant to Section 3.4,
3.5, 3.10, 3.13, 3.14, 5.9, 5.10 or 8.5.

         (b) The Certificates shall be issuable only in registered form and only
in denominations of a single Unit and any integral multiple thereof.

SECTION 3.2 RIGHTS AND OBLIGATIONS EVIDENCED BY THE CERTIFICATES.

         (a) Each Normal Units Certificate shall evidence the number of Normal
Units specified therein, with each such Normal Unit representing the ownership
by the Holder thereof of a beneficial interest in a Note or the appropriate
Treasury Consideration or Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, subject to the Pledge of such

                                       19


Note, Treasury Consideration or Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, by such Holder pursuant to the Pledge Agreement,
and the rights and obligations of the Holder thereof and the Company under one
Purchase Contract. The Agent as attorney-in-fact for, and on behalf of, the
Holder of each Normal Unit shall pledge, pursuant to the Pledge Agreement, the
Note or the appropriate Treasury Consideration or Applicable Ownership Interest
in the Treasury Portfolio, as the case may be, forming a part of such Normal
Unit, to the Collateral Agent and grant to the Collateral Agent a security
interest in the right, title and interest of such Holder in such Note, Treasury
Consideration or Applicable Ownership Interest in the Treasury Portfolio, as the
case may be, for the benefit of the Company, to secure the obligation of the
Holder under each Purchase Contract to purchase the Common Stock of the Company.
Prior to the purchase of shares of Common Stock under each Purchase Contract,
such Purchase Contracts shall not entitle the Holders of Normal Units
Certificates to any of the rights of a holder of shares of Common Stock,
including, without limitation, the right to vote or receive any dividends or
other payments or to consent or to receive notice as stockholders in respect of
the meetings of stockholders or for the election of directors of the Company or
for any other matter, or any other rights whatsoever as stockholders of the
Company.

         (b) Each Stripped Units Certificate shall evidence the number of
Stripped Units specified therein, with each such Stripped Unit representing the
ownership by the Holder thereof of a _____ undivided beneficial interest in a
Treasury Security, subject to the Pledge of such interest in such Treasury
Security by such Holder pursuant to the Pledge Agreement, and the rights and
obligations of the Holder thereof and the Company under one Purchase Contract.
Prior to the purchase of shares of Common Stock under each Purchase Contract,
such Purchase Contracts shall not entitle the Holders of Stripped Units
Certificates to any of the rights of a holder of shares of Common Stock,
including, without limitation, the right to vote or receive any dividends or
other payments or to consent or to receive notice as stockholders in respect of
the meetings of stockholders or for the election of directors of the Company or
for any other matter, or any other rights whatsoever as stockholders of the
Company.

SECTION 3.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

         (a) Subject to the provisions of Sections 3.13 and 3.14, upon the
execution and delivery of this Agreement, and at any time and from time to time
thereafter, the Company may deliver Certificates executed by the Company to the
Agent for authentication, execution on behalf of the Holders and delivery,
together with its Issuer Order for authentication of such Certificates, and the
Agent in accordance with such Issuer Order shall authenticate, execute on behalf
of the Holders and deliver such Certificates.

         (b) The Certificates shall be executed on behalf of the Company by an
Authorized Officer and delivered to the Agent. The signature of any of these
officers on the Certificates may be manual or facsimile.

         (c) Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such Certificates.

                                       20


         (d) No Purchase Contract evidenced by a Certificate shall be valid
until such Certificate has been executed on behalf of the Holder by the manual
signature of an authorized signatory of the Agent, as such Holder's
attorney-in-fact. Such signature by an authorized signatory of the Agent shall
be conclusive evidence that the Holder of such Certificate has entered into the
Purchase Contracts evidenced by such Certificate.

         (e) Each Certificate shall be dated the date of its authentication.

         (f) No Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on such
Certificate a certificate of authentication substantially in the form provided
for herein executed by an authorized signatory of the Agent by manual signature,
and such certificate upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been duly authenticated and delivered
hereunder.

SECTION 3.4 TEMPORARY CERTIFICATES.

         (a) Pending the preparation of definitive Certificates, the Company
shall execute and deliver to the Agent, and the Agent shall authenticate,
execute on behalf of the Holders, and deliver, in lieu of such definitive
Certificates, temporary Certificates which are in substantially the form set
forth in Exhibit A or Exhibit B hereto, as the case may be, with such letters,
numbers or other marks of identification or designation and such legends or
endorsements printed, lithographed or engraved thereon as may be required by the
rules of any securities exchange of quotation system on which the Normal Units
or Stripped Units, as the case may be, are listed or quoted for trading or any
depositary therefor, or as may, consistently herewith, be determined by the
officers of the Company executing such Certificates, as evidenced by their
execution of the Certificates.

         (b) If temporary Certificates are issued, the Company will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the Corporate Trust Office, at the expense of the Company and
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Certificates, the Company shall execute and deliver to the Agent, and
the Agent shall authenticate, execute on behalf of the Holder, and deliver in
exchange therefor, one or more definitive Certificates of like tenor and
denominations and evidencing a like number of Normal Units or Stripped Units, as
the case may be, as the temporary Certificate or Certificates so surrendered.
Until so exchanged, the temporary Certificates shall in all respects evidence
the same benefits and the same obligations with respect to the Normal Units or
Stripped Units, as the case may be, evidenced thereby as definitive
Certificates.

SECTION 3.5 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.

         (a) The Agent shall keep at the Corporate Trust Office a register (the
"Normal Units Register") in which, subject to such reasonable regulations as it
may prescribe, the Agent shall provide for the registration of Normal Units
Certificates and of transfers of Normal Units Certificates (the Agent, in such
capacity, the "Normal Units Registrar") and a register (the "Stripped Units
Register") in which, subject to such reasonable regulations as it may prescribe,

                                       21


the Agent shall provide for the registration of the Stripped Units Certificates
and transfers of Stripped Units Certificates (the Agent, in such capacity, the
"Stripped Units Registrar").

         (b) Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office, the Company shall execute and deliver to the Agent,
and the Agent shall authenticate, execute on behalf of the designated transferee
or transferees, and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of like tenor and denominations, and
evidencing a like number of Normal Units or Stripped Units, as the case may be.

         (c) At the option of the Holder, Certificates may be exchanged for
other Certificates, of like tenor and denominations and evidencing a like number
of Normal Units or Stripped Units, as the case may be, upon surrender of the
Certificates to be exchanged at the Corporate Trust Office. Whenever any
Certificates are so surrendered for exchange, the Company shall execute and
deliver to the Agent, and the Agent shall authenticate, execute on behalf of the
Holder, and deliver the Certificates which the Holder making the exchange is
entitled to receive.

         (d) All Certificates issued upon any registration of transfer or
exchange of a Certificate shall evidence the ownership of the same number of
Normal Units or Stripped Units, as the case may be, and be entitled to the same
benefits and subject to the same obligations, under this Agreement as the Normal
Units or Stripped Units, as the case may be, evidenced by the Certificate
surrendered upon such registration of transfer or exchange.

         (e) Every Certificate presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Agent) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Agent duly executed, by the Holder thereof
or its attorney duly authorized in writing.

         (f) No service charge shall be made for any registration of transfer or
exchange of a Certificate, but the Company and the Agent may require payment
from the Holder of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates, other than any exchanges pursuant to Sections 3.6, 3.9
and 8.5 not involving any transfer.

         (g) Notwithstanding the foregoing, the Company shall not be obligated
to execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder and deliver any Certificate
presented or surrendered for registration of transfer or for exchange on or
after the Business Day immediately preceding the earlier of the Stock Purchase
Date or the Termination Date. In lieu of delivery of a new Certificate, upon
satisfaction of the applicable conditions specified above in this Section and
receipt of appropriate registration or transfer instructions from such Holder,
the Agent shall,

                  (i) if the Stock Purchase Date has occurred, deliver the
         shares of Common Stock issuable in respect of the Purchase Contracts
         forming a part of the Units evidenced by such Certificate,

                  (ii) in the case of Normal Units, if a Termination Event shall
         have occurred prior to the Stock Purchase Date, transfer the Notes or
         the appropriate Treasury

                                       22


         Consideration or Applicable Ownership Interest in the Treasury
         Portfolio, as applicable, relating to such Normal Units, or

                  (iii) in the case of Stripped Units, if a Termination Event
         shall have occurred prior to the Stock Purchase Date, transfer the
         Treasury Securities relating to such Stripped Units,

in each case subject to the applicable conditions and in accordance with the
applicable provisions of Article V.

SECTION 3.6 BOOK-ENTRY INTERESTS.

         The Certificates, on original issuance, will be issued in the form of
one or more fully registered Global Certificates, to be delivered to the
Depositary or a nominee or custodian thereof by, or on behalf of, the Company.
Such Global Certificates shall initially be registered on the books and records
of the Company in the name of Cede & Co., the nominee of the Depositary, and no
Beneficial Owner will receive a definitive Certificate representing such
Beneficial Owner's interest in such Global Certificate, except as provided in
Section 3.9. The Agent shall enter into an agreement with the Depositary if so
requested by the Company. Unless and until definitive, fully registered
Certificates have been issued to Beneficial Owners pursuant to Section 3.9:

         (a) the provisions of this Section 3.6 shall be in full force and
effect;

         (b) the Company shall be entitled to deal with the Clearing Agency for
all purposes of this Agreement (including the payment of Contract Adjustment
Payments, if any, and receiving approvals, votes or consents hereunder) as the
Holder of the Units and the sole holder of the Global Certificate(s) and shall
have no obligation to the Beneficial Owners;

         (c) to the extent that the provisions of this Section 3.6 conflict with
any other provisions of this Agreement or any Certificate, the provisions of
this Section 3.6 shall control; and

         (d) the rights of the Beneficial Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Beneficial Owners and the Clearing Agency and/or the
Clearing Agency Participants.

         The Clearing Agency will make book-entry transfers among Clearing
Agency Participants and receive and transmit payments of Contract Adjustment
Payments to such Clearing Agency Participants.

SECTION 3.7 NOTICES TO HOLDERS.

         Whenever a notice or other communication to the Holders is required to
be given under this Agreement, the Company or the Company's agent shall give
such notices and communications to the Holders and, with respect to any Units
registered in the name of a Clearing Agency or the nominee of a Clearing Agency,
the Company or the Company's agent shall, except as set forth herein, have no
obligation to the Beneficial Owners.

                                       23


SECTION 3.8 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.

         If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Units, the Company may, in its sole discretion,
appoint a successor Clearing Agency with respect to the Units.

SECTION 3.9 DEFINITIVE CERTIFICATES.

         If

                  (i) a Clearing Agency notifies the Company that it is
         unwilling or unable to continue its services as securities depositary
         with respect to the Units and a successor Clearing Agency is not
         appointed within 90 days after such discontinuance pursuant to Section
         3.8, or

                  (ii) the Company elects to terminate the book-entry system
         through the Clearing Agency with respect to the Units,

then upon surrender of the Global Certificates representing the Book-Entry
Interests with respect to the Units by the Clearing Agency, accompanied by
registration instructions, the Company shall cause definitive Certificates to be
delivered to Beneficial Owners in accordance with the instructions of the
Clearing Agency. The Company shall not be liable for any delay in delivery of
such instructions and may conclusively rely on and shall be protected in relying
on, such instructions.

SECTION 3.10 MUTILATED, DESTROYED, LOST AND STOLEN CERTIFICATES.

         (a) If any mutilated Certificate is surrendered to the Agent, the
Company shall execute and deliver to the Agent, and the Agent shall
authenticate, execute on behalf of the Holder, and deliver in exchange therefor,
a new Certificate at the cost of the Holder, evidencing the same number of
Normal Units or Stripped Units, as the case may be, and bearing a Certificate
number not contemporaneously outstanding.

         (b) If there shall be delivered to the Company and the Agent (i)
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) such security or indemnity at the cost of the Holder as
may be required by them to hold each of them and any agent of either of them
harmless, then, in the absence of notice to the Company or the Agent that such
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and deliver to the Agent, and the Agent shall authenticate, execute on
behalf of the Holder, and deliver to the Holder, in lieu of any such destroyed,
lost or stolen Certificate, a new Certificate, evidencing the same number of
Normal Units or Stripped Units, as the case may be, and bearing a Certificate
number not contemporaneously outstanding.

         (c) Notwithstanding the foregoing, the Company shall not be obligated
to execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder, and deliver any Certificate on or
after the Business Day immediately preceding the earlier of the Stock Purchase
Date or the Termination Date. In lieu of delivery of a new Certificate, upon
satisfaction of the applicable conditions specified above in this Section and

                                       24


receipt of appropriate registration or transfer instructions from such Holder,
the Agent shall (i) if the Stock Purchase Date has occurred, deliver the shares
of Common Stock issuable in respect of the Purchase Contracts forming a part of
the Units evidenced by such Certificate, or (ii) if a Termination Event shall
have occurred prior to the Stock Purchase Date, transfer the Notes, the
appropriate Treasury Consideration or Applicable Ownership Interest in the
Treasury Portfolio, or the Treasury Securities, as the case may be, evidenced
thereby, in each case subject to the applicable conditions and in accordance
with the applicable provisions of Article V.

         (d) Upon the issuance of any new Certificate under this Section, the
Company and the Agent may require the payment by the Holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Agent)
connected therewith.

         (e) Every new Certificate issued pursuant to this Section in lieu of
any destroyed, lost or stolen Certificate shall constitute an original
additional contractual obligation of the Company and of the Holder in respect of
the Unit evidenced thereby, whether or not the destroyed, lost or stolen
Certificate (and the Units evidenced thereby) shall be at any time enforceable
by anyone, and shall be entitled to all the benefits and be subject to all the
obligations of this Agreement equally and proportionately with any and all other
Certificates delivered hereunder.

         (f) The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.

SECTION 3.11 PERSONS DEEMED OWNERS.

         (a) Prior to due presentment of a Certificate for registration of
transfer, the Company, the Agent and its Affiliates, and any agent of the
Company or the Agent, may treat the Person in whose name such Certificate is
registered on the Register as the owner of the Units evidenced thereby for the
purpose of receiving quarterly payments on the Notes, the Treasury Consideration
or the Applicable Ownership Interest in the Treasury Portfolio, as the case may
be, receiving payments of Contract Adjustment Payments, if any, and any Deferred
Contract Adjustment Payments, performance of the Purchase Contracts and for all
other purposes whatsoever, whether or not any payments in respect thereof shall
be overdue and notwithstanding any notice to the contrary, and neither the
Company, the Agent, such Affiliates nor any agent of the Company, the Agent or
such Affiliates, shall be affected by notice to the contrary.

         (b) Notwithstanding the foregoing, with respect to any Global
Certificate, nothing herein shall prevent the Company, the Agent or any agent of
the Company or the Agent, from treating the Clearing Agency as the sole Holder
of such Global Certificate or from giving effect to any written certification,
proxy or other authorization furnished by any Clearing Agency (or its nominee),
as a Holder, with respect to such Global Certificate or impair, as between such
Clearing Agency and owners of beneficial interests in such Global Certificate,
the operation of customary practices governing the exercise of rights of such
Clearing Agency (or its nominee) as Holder of such Global Certificate.

                                       25


SECTION 3.12 CANCELLATION.

         (a) All Certificates surrendered (i) for delivery of shares of Common
Stock on or after any Settlement Date; (ii) upon the transfer of Notes, the
appropriate Treasury Consideration or Applicable Ownership Interest in the
Treasury Portfolio, or Treasury Securities, as the case may be, after the
occurrence of a Termination Event; or (iii) upon the registration of a transfer
or exchange of a Unit shall, if surrendered to any Person other than the Agent,
be delivered to the Agent and, if not already cancelled, shall be promptly
cancelled by it. The Company may at any time deliver to the Agent for
cancellation any Certificates previously authenticated, executed and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Certificates so delivered shall, upon Issuer Order, be promptly cancelled by the
Agent. No Certificates shall be authenticated, executed on behalf of the Holder
and delivered in lieu of or in exchange for any Certificates cancelled as
provided in this Section, except as expressly permitted by this Agreement. All
cancelled Certificates held by the Agent shall upon written request be returned
to the Company.

         (b) If the Company or any Affiliate of the Company shall acquire any
Certificate, such acquisition shall not operate as a cancellation of such
Certificate unless and until such Certificate is delivered to the Agent
cancelled or for cancellation.

SECTION 3.13 ESTABLISHMENT OF STRIPPED UNITS.

         (a) A Holder may separate the Pledged Notes, Pledged Treasury
Consideration or Pledged Applicable Ownership Interest in the Treasury
Portfolio, as applicable, from the related Purchase Contracts in respect of the
Normal Units held by such Holder by substituting for such Pledged Notes, Pledged
Treasury Consideration or Pledged Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, Treasury Securities that will pay, on the Stock
Purchase Date, an amount equal to the aggregate principal amount of such Notes
or the appropriate Treasury Consideration or Applicable Ownership Interest (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio (a "Collateral Substitution"), at any time from and after the date of
this Agreement and on or prior to the second Business Day immediately preceding
the Stock Purchase Date, by (i) depositing with the Collateral Agent Treasury
Securities having an aggregate principal amount equal to the aggregate Stated
Amount of such Normal Units, and (ii) transferring the related Normal Units to
the Agent accompanied by a notice to the Agent, substantially in the form of
Exhibit D hereto, stating that the Holder has transferred the relevant amount of
Treasury Securities to the Collateral Agent and requesting that the Agent
instruct the Collateral Agent to release the Pledged Notes, Pledged Treasury
Consideration or Pledged Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, underlying such Normal Units, whereupon the Agent
shall promptly give such instruction to the Collateral Agent, substantially in
the form of Exhibit C hereto. Notwithstanding the foregoing, a Holder may not
separate the Pledged Notes, Pledged Treasury Consideration or Pledged Applicable
Ownership Interest of the Treasury Portfolio, as the case may be, from the
related Purchase Contracts in respect of the Normal Units held by such Holder
during the periods beginning on the fourth Business Day prior to the first day
of any Remarketing Period and ending on the third business day after the end of
such Remarketing Period. Upon receipt of the Treasury Securities described in
clause (i) above and the instruction described in clause (ii) above, in
accordance with the terms of the Pledge Agreement, the

                                       26


Collateral Agent will release to the Agent, on behalf of the Holder, such
Pledged Notes, Pledged Treasury Consideration or Pledged Applicable Ownership
Interest of the Treasury Portfolio, as the case may be, from the Pledge, free
and clear of the Company's security interest therein, and upon receipt thereof
the Agent shall promptly:

                  (i) cancel the related Normal Units;

                  (ii) transfer the Pledged Notes, Pledged Treasury
         Consideration or Pledged Applicable Ownership Interest of the Treasury
         Portfolio, as the case may be, to the Holder; and

                  (iii) authenticate, execute on behalf of such Holder and
         deliver a Stripped Units Certificate executed by the Company in
         accordance with Section 3.3 evidencing the same number of Purchase
         Contracts as were evidenced by the cancelled Normal Units.

         (b) Holders who elect to separate the Pledged Notes, Pledged Treasury
Consideration or Pledged Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, from the related Purchase Contract and to
substitute Treasury Securities for such Pledged Notes, Pledged Treasury
Consideration or Pledged Applicable Ownership Interest of the Treasury
Portfolio, as the case may be, shall be responsible for any fees or expenses
payable to the Collateral Agent for its services as Collateral Agent in respect
of the substitution, and the Company shall not be responsible for any such fees
or expenses.

         (c) Holders may make Collateral Substitutions (i) if Treasury
Securities are being substituted for Pledged Notes, only in integral multiples
of ____ Normal Units, or (ii) if the Collateral Substitutions occur after the
Remarketing Date or any Subsequent Remarketing Date, or after a Tax Event
Redemption, as the case may be, only in integral multiples of Normal Units such
that the Treasury Securities to be deposited and the Treasury Consideration, or
the Applicable Ownership Interest in the Treasury Portfolio, as the case may be,
to be released are in integral multiples of $1,000.

         (d) In the event a Holder making a Collateral Substitution pursuant to
this Section 3.13 fails to effect a book-entry transfer of the Normal Units or
fails to deliver a Normal Units Certificate to the Agent after depositing
Treasury Securities with the Collateral Agent, the Pledged Notes, Pledged
Treasury Consideration or Pledged Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, constituting a part of such Normal Units, and any
distributions on such Pledged Notes, Pledged Treasury Consideration or Pledged
Applicable Ownership Interest in the Treasury Portfolio, as the case may be,
shall be held in the name of the Agent or its nominee in trust for the benefit
of such Holder, until such Normal Units are so transferred or the Normal Units
Certificate is so delivered, as the case may be, or, with respect to a Normal
Units Certificate, such Holder provides evidence satisfactory to the Company and
the Agent that such Normal Units Certificate has been destroyed, lost or stolen,
together with any indemnity that may be required by the Agent and the Company.

         (e) Except as described in this Section 3.13, for so long as the
Purchase Contract underlying a Normal Unit remains in effect, such Normal Unit
shall not be separable into its constituent parts, and the rights and
obligations of the Holder of such Normal Unit in respect of

                                       27


the Pledged Note, Pledged Treasury Consideration or Pledged Applicable Ownership
Interest in the Treasury Portfolio, as the case may be, and the Purchase
Contract comprising such Normal Unit may be acquired, and may be transferred and
exchanged, only as a Normal Unit.

SECTION 3.14 RE-ESTABLISHMENT OF NORMAL UNITS.

         (a) A Holder of Stripped Units may reestablish Normal Units at any time
from and after the date of this Agreement and on or prior to the second Business
Day immediately preceding the Stock Purchase Date, by (i) depositing with the
Collateral Agent the Notes or the appropriate Treasury Consideration or
Applicable Ownership Interest in the Treasury Portfolio (identified and
calculated by reference to the Treasury Consideration then comprising Normal
Units), as the case may be, then comprising such number of Normal Units as is
equal to such Stripped Units and (ii) transferring such Stripped Units to the
Agent accompanied by a notice to the Agent, substantially in the form of Exhibit
D hereto, stating that the Holder has transferred the relevant amount of Notes
or the appropriate Treasury Consideration or Applicable Ownership Interest in
the Treasury Portfolio, as the case may be, to the Collateral Agent and
requesting that the Agent instruct the Collateral Agent to release the Pledged
Treasury Securities underlying such Stripped Unit, whereupon the Agent shall
promptly give such instruction to the Collateral Agent, substantially in the
form of Exhibit C hereto. Notwithstanding the foregoing, a Holder may not
reestablish Normal Units during the periods beginning on the fourth Business Day
prior to the first day of any Remarketing Period and ending on the third
business day after the end of such Remarketing Period. Upon receipt of the Notes
or the appropriate Treasury Consideration or Applicable Ownership Interest in
the Treasury Portfolio, as the case may be, described in clause (i) above and
the instruction described in clause (ii) above, in accordance with the terms of
the Pledge Agreement, the Collateral Agent will release to the Agent, on behalf
of the Holder, such Pledged Treasury Securities from the Pledge, free and clear
of the Company's security interest therein, and upon receipt thereof the Agent
shall promptly:

                  (i) cancel the related Stripped Units;

                  (ii) transfer the Pledged Treasury Securities to the Holder;
         and

                  (iii) authenticate, execute on behalf of such Holder and
         deliver a Normal Units Certificate executed by the Company in
         accordance with Section 3.3 evidencing the same number of Purchase
         Contracts as were evidenced by the cancelled Stripped Units.

         (b) Holders of Stripped Units may reestablish Normal Units (i) only in
integral multiples of ____ Stripped Units for ____ Normal Units or (ii) if the
re-establishment occurs after a successful remarketing of the Notes pursuant to
the provisions of Section 5.4, or after a Tax Event Redemption, only in integral
multiples of Stripped Units such that the Treasury Consideration or Applicable
Ownership Interest in the Treasury Portfolio to be deposited and the Treasury
Securities to be released are in integral multiples of $1,000.

         (c) Except as provided in this Section 3.14, for so long as the
Purchase Contract underlying a Stripped Unit remains in effect, such Stripped
Unit shall not be separable into its constituent parts, and the rights and
obligations of the Holder of such Stripped Unit in respect of

                                       28


the Treasury Security and Purchase Contract comprising such Stripped Unit may be
acquired, and may be transferred and exchanged, only as a Stripped Unit.

SECTION 3.15 TRANSFER OF COLLATERAL UPON OCCURRENCE OF TERMINATION EVENT.

         Upon the occurrence of a Termination Event and the transfer to the
Agent of the Notes, the appropriate Treasury Consideration or Applicable
Ownership Interest in the Treasury Portfolio, or the Treasury Securities, as the
case may be, underlying the Normal Units and the Stripped Units pursuant to the
terms of the Pledge Agreement, the Agent shall request transfer instructions
with respect to such Notes or the appropriate Treasury Consideration or
Applicable Ownership Interest in the Treasury Portfolio or the Treasury
Securities, as the case may be, from each Holder by written request mailed to
such Holder at its address as it appears in the Normal Units Register or the
Stripped Units Register, as the case may be. Upon book-entry transfer of the
Normal Units or Stripped Units or delivery of a Normal Units Certificate or
Stripped Units Certificate to the Agent with such transfer instructions, the
Agent shall transfer the Notes, the appropriate Treasury Consideration or
Applicable Ownership Interest in the Treasury Portfolio, or the Treasury
Securities, as the case may be, underlying such Normal Units or Stripped Units,
as the case may be, to such Holder by book-entry transfer, or other appropriate
procedures, in accordance with such instructions. In the event a Holder of
Normal Units or Stripped Units fails to effect such transfer or delivery, the
Notes, the appropriate Treasury Consideration or Applicable Ownership Interest
in the Treasury Portfolio, or the Treasury Securities, as the case may be,
underlying such Normal Units or Stripped Units, as the case may be, and any
distributions thereon, shall be held in the name of the Agent or its nominee in
trust for the benefit of such Holder, until such Normal Units or Stripped Units
are transferred or the Normal Units Certificate or Stripped Units Certificate is
surrendered or such Holder provides satisfactory evidence that such Normal Units
Certificate or Stripped Units Certificate has been destroyed, lost or stolen,
together with any indemnity that may be required by the Agent and the Company.
In the case of the Treasury Portfolio or any Treasury Securities, the Agent may
dispose of the subject securities for cash and pay the applicable portion of
such cash to the Holders in lieu of such Holders' Applicable Ownership Interest
in such Treasury Portfolio, or any Treasury Securities, where such Holder would
otherwise have been entitled to receive less than $1,000 of any such security.

SECTION 3.16 NO CONSENT TO ASSUMPTION.

         Each Holder of a Unit, by acceptance thereof, will be deemed expressly
to have withheld any consent to the assumption (i.e., affirmance) under Section
365 of the Bankruptcy Code or otherwise, of the Purchase Contract by the
Company, its trustee in bankruptcy, any receiver, liquidator or person or entity
performing similar functions in the event that the Company becomes a debtor
under the Bankruptcy Code or subject to other similar state or federal law
providing for reorganization or liquidation.

                                       29


                                   ARTICLE IV.

                                    THE NOTES

SECTION 4.1 PAYMENT OF INTEREST; RIGHTS TO INTEREST PAYMENTS PRESERVED; NOTICE.

         (a) A payment on any Note, Treasury Consideration or Applicable
Ownership Interest in the Treasury Portfolio, as the case may be, which is paid
on any Payment Date shall, subject to receipt thereof by the Agent from the
Collateral Agent as provided by the terms of the Pledge Agreement, be paid to
the Person in whose name the Normal Units Certificate (or one or more
Predecessor Normal Units Certificates) of which such Note or the appropriate
Treasury Consideration or Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, is a part is registered at the close of business
on the Record Date for such Payment Date.

         (b) Each Normal Units Certificate evidencing Notes delivered under this
Agreement upon registration of transfer of or in exchange for or in lieu of any
other Normal Units Certificate shall carry the rights to interest accrued and
unpaid, and to accrue interest, which is carried by the Notes underlying such
other Normal Units Certificate.

         (c) In the case of any Normal Unit with respect to which Early
Settlement of the underlying Purchase Contract is effected on an Early
Settlement Date, Merger Early Settlement of the underlying Purchase Contract is
effected on a Merger Early Settlement Date, Cash Settlement is effected on the
Business Day immediately preceding the Stock Purchase Date, or a Collateral
Substitution is effected, in each case on a date that is after any Record Date
and on or prior to the next succeeding Payment Date, payments on the Note or the
appropriate Treasury Consideration or Applicable Ownership Interest in the
Treasury Portfolio, as the case may be, underlying such Normal Unit otherwise
payable on such Payment Date shall be payable on such Payment Date
notwithstanding such Early Settlement, Merger Early Settlement, Cash Settlement
or Collateral Substitution, as the case may be, and such payments shall, subject
to receipt thereof by the Agent, be payable to the Person in whose name the
Normal Units Certificate (or one or more Predecessor Normal Unit Certificates)
was registered at the close of business on the Record Date. Except as otherwise
expressly provided in the immediately preceding sentence, in the case of any
Normal Unit with respect to which Early Settlement, Merger Early Settlement or
Cash Settlement of the underlying Purchase Contract is effected, or with respect
to which a Collateral Substitution has been effected, payments on the related
Notes or payments on the appropriate Treasury Consideration or Applicable
Ownership Interest in the Treasury Portfolio, as the case may be, that would
otherwise be payable after the applicable Settlement Date or after such
Collateral Substitution, as the case may be, shall not be payable hereunder to
the Holder of such Normal Unit; provided, that to the extent that such Holder
continues to hold the Separate Notes that formerly comprised a part of such
Holder's Normal Units, such Holder shall be entitled to receive the payments on
such Separate Notes.

SECTION 4.2 NOTICE AND VOTING.

         Under and subject to the terms of the Pledge Agreement and this
Agreement, the Agent will be entitled to exercise the voting and any other
consensual rights pertaining to the Pledged Notes but only to the extent
instructed by the Holders as described below. Upon receipt of notice

                                       30


of any meeting at which holders of Notes are entitled to vote or upon any
solicitation of consents, waivers or proxies of holders of Notes, the Agent
shall, as soon as practicable thereafter, mail to the Holders of Normal Units a
notice (a) containing such information as is contained in the notice or
solicitation, (b) stating that each Holder on the record date set by the Agent
therefor (which, to the extent possible, shall be the same date as the record
date for determining the holders of Notes entitled to vote) shall be entitled to
instruct the Agent as to the exercise of the voting rights pertaining to the
Pledged Notes constituting a part of such Holder's Normal Units and (c) stating
the manner in which such instructions may be given. Upon the written request of
the Holders of Normal Units on such record date, the Agent shall endeavor
insofar as practicable to vote or cause to be voted, in accordance with the
instructions set forth in such requests, the maximum number of Pledged Notes as
to which any particular voting instructions are received. In the absence of
specific instructions from the Holder of a Normal Unit, the Agent shall abstain
from voting the Pledged Note underlying such Normal Unit. The Company hereby
agrees, if applicable, to solicit Holders of Normal Units to timely instruct the
Agent in order to enable the Agent to vote such Pledged Notes.

SECTION 4.3 TAX EVENT REDEMPTION.

         Upon the occurrence of a Tax Event Redemption prior to a successful
remarketing of the Notes pursuant to the provisions of Section 5.4, the Company
may elect to instruct in writing the Collateral Agent to apply, and upon such
written instruction, the Collateral Agent shall apply, out of the aggregate
Redemption Price for the Notes that are components of Normal Units, an amount
equal to the aggregate Tax Event Redemption Principal Amount for the Notes that
are components of Normal Units to purchase on behalf of the Holders of Normal
Units the Treasury Portfolio and promptly remit the remaining portion of such
Redemption Price to the Agent for payment to the Holders of such Normal Units.
The Treasury Portfolio will be substituted for the Pledged Notes, and will be
pledged to the Collateral Agent in accordance with the terms of the Pledge
Agreement to secure the obligation of each Holder of a Normal Unit to purchase
the Common Stock under the Purchase Contract constituting a part of such Normal
Unit. Following the occurrence of a Tax Event Redemption prior to a successful
remarketing of the Notes pursuant to the provisions of Section 5.4, the Holders
of Normal Units and the Collateral Agent shall have such security interests,
rights and obligations with respect to the Treasury Portfolio as the Holder of
Normal Units and the Collateral Agent had in respect of the Notes, as the case
may be, subject to the Pledge thereof as provided in Articles II, III, IV, V and
VI of the Pledge Agreement, and any reference herein or in the Certificates to
the Note shall be deemed to be a reference to such Treasury Portfolio and any
reference herein or in the Certificates to interest on the Notes shall be deemed
to be a reference to corresponding distributions on the Treasury Portfolio. The
Company may cause to be made in any Normal Unit Certificates thereafter to be
issued such change in phraseology and form (but not in substance) as may be
appropriate to reflect the substitution of the Treasury Portfolio for Notes as
collateral.

         The Company shall cause notice of any Tax Event Redemption to be
mailed, at least 30 calendar days but not more than 60 calendar days before such
Tax Event Redemption Date, to each Holder of Notes to be redeemed at its
registered address.

         Upon the occurrence of a Tax Event Redemption after the successful
remarketing of the Notes, the Redemption Price will be payable in cash to the
holders of the Notes.

                                       31


SECTION 4.4 CONSENT TO TREATMENT FOR TAX PURPOSES

         Each Holder of a Normal Unit or a Stripped Unit, by its acceptance
thereof, covenants and agrees to treat itself as the owner, for federal, state
and local income and franchise tax purposes, of (i) the related Notes, the
appropriate Treasury Consideration or the Applicable Ownership Interest in the
Treasury Portfolio, in the case of the Normal Units, or (ii) the Treasury
Securities, in the case of the Stripped Units. Each Holder of a Normal Unit, by
its acceptance thereof, further covenants and agrees to treat the Notes as
indebtedness of the Company for federal, state and local income and franchise
tax purposes.

                                   ARTICLE V.

                     THE PURCHASE CONTRACTS; THE REMARKETING

SECTION 5.1 PURCHASE OF SHARES OF COMMON STOCK.

         (a) Each Purchase Contract shall, unless an Early Settlement has
occurred in accordance with Section 5.9, or a Merger Early Settlement has
occurred in accordance with Section 5.10, obligates the Holder of the related
Unit to purchase, and the Company to sell, on the Stock Purchase Date at a price
equal to $_____ (the "Purchase Price"), a number of newly issued shares of
Common Stock equal to the Settlement Rate unless, on or prior to the Stock
Purchase Date, there shall have occurred a Termination Event with respect to the
Unit of which such Purchase Contract is a part. The "Settlement Rate" is equal
to

                  (i) if the Applicable Market Value (as defined below) is equal
         to or greater than $____ (the "Threshold Appreciation Price"), ______
         shares of Common Stock per Purchase Contract,

                  (ii) if the Applicable Market Value is less than the Threshold
         Appreciation Price, but is greater than $____, the number of shares of
         Common Stock per Purchase Contract equal to the Stated Amount of the
         related Unit divided by the Applicable Market Value, and

                  (iii) if the Applicable Market Value is less than or equal to
         $____, ______ shares of Common Stock per Purchase Contract,

in each case subject to adjustment as provided in Section 5.6 (and in each case
rounded upward or downward to the nearest 1/10,000th of a share). As provided in
Section 5.12, no fractional shares of Common Stock will be issued upon
settlement of Purchase Contracts.

         (b) No fractional shares of Common Stock will be issued by the Company
with respect to the payment of Contract Adjustment Payments on the Stock
Purchase Date. In lieu of fractional shares otherwise issuable with respect to
such payment of Contract Adjustment Payments, the Holder will be entitled to
receive an amount in cash as provided in Section 5.12.

         (c) The "Applicable Market Value" means the average of the Closing
Price per share of Common Stock on each of the 20 consecutive Trading Days
ending on the third Trading Day immediately preceding the Stock Purchase Date
or, in the event of a Cash Merger contemplated

                                       32


by Section 5.10, the Cash Merger Date. The "Closing Price" of the Common Stock
on any date of determination means the closing sale price per share (or, if no
closing sale price is reported, the last reported sale price) of the Common
Stock on the New York Stock Exchange (the "NYSE") on such date or, if the Common
Stock is not listed for trading on the NYSE on any such date, as reported in the
composite transactions for the principal United States securities exchange on
which the Common Stock is so listed, or if the Common Stock is not so listed on
a United States securities exchange, as reported by The Nasdaq Stock Market, or
if the Common Stock is not so reported, the last quoted bid price for the Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, or if such bid price is not available, the
market value of the Common Stock on such date as determined by a nationally
recognized independent investment banking firm retained by the Company for this
purpose. A "Trading Day" means a day on which the Common Stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock at the close of business on such day.

         (d) Each Holder of a Unit, by its acceptance thereof, irrevocably
authorizes the Agent to enter into and perform the related Purchase Contract on
its behalf as its attorney-in-fact (including the execution of Certificates on
behalf of such Holder), agrees to be bound by the terms and provisions thereof,
covenants and agrees to perform its obligations under such Purchase Contract,
consents to the provisions hereof, irrevocably authorizes the Agent as its
attorney-in-fact to enter into and perform the Pledge Agreement on its behalf as
its attorney-in-fact, and consents to and agrees to be bound by the Pledge of
the Notes, the appropriate Treasury Consideration or Applicable Ownership
Interest in the Treasury Portfolio, or the Treasury Securities, as the case may
be, pursuant to the Pledge Agreement; provided that upon a Termination Event,
the rights of the Holder of such Unit under the Purchase Contract may be
enforced without regard to any other rights or obligations. Each Holder of a
Unit, by its acceptance thereof, further covenants and agrees, that, to the
extent and in the manner provided in Section 5.4 and the Pledge Agreement, but
subject to the terms thereof, payments in respect of the Pledged Notes, the
Pledged Treasury Consideration or Pledged Applicable Ownership Interest in the
Treasury Portfolio, or the Treasury Securities, as the case may be, to be paid
upon settlement of such Holder's obligations to purchase Common Stock under the
Purchase Contract, shall be paid on the Stock Purchase Date by the Collateral
Agent to the Company in satisfaction of such Holder's obligations under such
Purchase Contract and such Holder shall acquire no right, title or interest in
such payments.

         (e) Upon registration of transfer of a Certificate, the transferee
shall be bound (without the necessity of any other action on the part of such
transferee, except as may be required by the Agent pursuant hereto) under the
terms of this Agreement, the Purchase Contracts underlying such Certificate and
the Pledge Agreement and the transferor shall be released from the obligations
under this Agreement, the Purchase Contracts underlying the Certificates so
transferred and the Pledge Agreement. The Company covenants and agrees, and each
Holder of a Certificate, by its acceptance thereof, likewise covenants and
agrees, to be bound by the provisions of this paragraph.

                                       33


SECTION 5.2 CONTRACT ADJUSTMENT PAYMENTS.

         (a) Subject to Section 5.3 herein, the Company shall pay, on each
Payment Date, the Contract Adjustment Payments, if any, payable in respect of
each Purchase Contract to the Person in whose name a Certificate (or one or more
Predecessor Certificates) is registered on the Register at the close of business
on the Record Date next preceding such Payment Date in such coin or currency of
the United States as at the time of payment shall be legal tender for payments.
The Contract Adjustment Payments, if any, will be payable at the Corporate Trust
Office or, at the option of the Company, by check mailed to the address of the
Person entitled thereto at such Person's address as it appears on the Register
or by wire transfer to an account appropriately designated by a prior written
notice by such Person.

         (b) Upon the occurrence of a Termination Event, the Company's
obligation to pay Contract Adjustment Payments (including any accrued or
Deferred Contract Adjustment Payments), if any, shall cease.

         (c) Each Certificate delivered under this Agreement upon registration
of transfer of or in exchange for or in lieu of any other Certificate (including
as a result of a Collateral Substitution or the re-establishment of a Normal
Unit) shall carry the rights to Contract Adjustment Payments, if any, accrued
and unpaid, and to accrue Contract Adjustment Payments, if any, which is carried
by the Purchase Contracts underlying such other Certificates.

         (d) Subject to Sections 5.4, 5.9 and 5.10, in the case of any Unit with
respect to which Early Settlement or Merger Early Settlement of the underlying
Purchase Contract is effected on an Early Settlement Date or a Merger Early
Settlement Date, respectively, or in respect of which Cash Settlement of the
underlying Purchase Contract is effected on the Business Day immediately
preceding the Stock Purchase Date, or with respect to which a Collateral
Substitution or an establishment or re-establishment of a Normal Unit pursuant
to Section 3.14 is effected, in each case on a date that is after any Record
Date and on or prior to the next succeeding Payment Date, Contract Adjustment
Payments on the Purchase Contract underlying such Unit otherwise payable on such
Payment Date shall be payable on such Payment Date notwithstanding such Cash
Settlement, Early Settlement, Merger Early Settlement, Collateral Substitution
or establishment or re-establishment of Normal Units, and such Contract
Adjustment Payments shall, subject to the receipt thereof by the Agent, be paid
to the Person in whose name the Certificate evidencing such Unit (or one or more
Predecessor Certificates) was registered at the close of business on such Record
Date. Except as otherwise expressly provided in the immediately preceding
sentence, in the case of any Unit with respect to which Cash Settlement, Early
Settlement or Merger Early Settlement of the underlying Purchase Contract is
effected on the Business Day immediately preceding the Stock Purchase Date, an
Early Settlement Date or Merger Early Settlement Date, as the case may be, or
with respect to which a Collateral Substitution or an establishment or
re-establishment of a Normal Unit has been effected, Contract Adjustment
Payments, if any, that would otherwise be payable after the Early Settlement
Date, or Merger Early Settlement Date, Collateral Substitution or such
establishment or re-establishment with respect to such Purchase Contract shall
not be payable.

                                       34


         (e) The Company's obligations with respect to Contract Adjustment
Payments (including any accrued or Deferred Contract Adjustment Payments), will
be subordinate and junior in right of payment to the Company's obligations under
any Senior Indebtedness.

SECTION 5.3 DEFERRAL OF CONTRACT ADJUSTMENT PAYMENTS.

         (a) The Company shall have the right, at any time prior to the Stock
Purchase Date, to defer the payment of any or all of the Contract Adjustment
Payments otherwise payable on any Payment Date, but only if the Company shall
give the Holders and the Agent written notice of its election to defer each such
deferred Contract Adjustment Payment (specifying the amount to be deferred) at
least ten Business Days prior to the earlier of

                  (i) the next succeeding Payment Date or

                  (ii) the date the Company is required to give notice of the
         Record Date or Payment Date with respect to payment of such Contract
         Adjustment Payments to the NYSE or other applicable self-regulatory
         organization or to Holders of the Units, but in any event not less than
         one Business Day prior to such Record Date.

Any Contract Adjustment Payments so deferred shall, to the extent permitted by
law, accrue additional Contract Adjustment Payments thereon at the rate of ____%
per year (computed on the basis of a 360-day year of twelve 30-day months),
compounding on each succeeding Payment Date, until paid in full (such deferred
installments of Contract Adjustment Payments, if any, together with the
additional Contract Adjustment Payments, if any, accrued thereon, are referred
to herein as the "Deferred Contract Adjustment Payments"). Deferred Contract
Adjustment Payments, if any, shall be due on the next succeeding Payment Date
except to the extent that payment is deferred pursuant to this Section 5.3. No
Contract Adjustment Payments may be deferred to a date that is after the Stock
Purchase Date and no such deferral period may end other than on a Payment Date.
If the Purchase Contracts are terminated upon the occurrence of a Termination
Event, the Holder's right to receive Contract Adjustment Payments, if any, and
Deferred Contract Adjustment Payments will terminate.

         (b) In the event that the Company elects to defer the payment of
Contract Adjustment Payments on the Purchase Contracts until a Payment Date
prior to the Stock Purchase Date, then all Deferred Contract Adjustment
Payments, if any, shall be payable to the registered Holders as of the close of
business on the Record Date immediately preceding such Payment Date.

         (c) In the event that the Company elects to defer the payment of
Contract Adjustment Payments on the Purchase Contracts until the Stock Purchase
Date, each Holder will receive on the Stock Purchase Date in lieu of a cash
payment a number of shares of Common Stock (in addition to a number of shares of
Common Stock equal to the Settlement Rate) equal to (A) the aggregate amount of
Deferred Contract Adjustment Payments payable to such Holder divided by (B) the
Applicable Market Value.

         (d) No fractional shares of Common Stock will be issued by the Company
with respect to the payment of Deferred Contract Adjustment Payments on the
Stock Purchase Date. In lieu of fractional shares otherwise issuable with
respect to such payment of Deferred Contract

                                       35


Adjustment Payments, the Holder will be entitled to receive an amount in cash as
provided in Section 5.12.

         (e) In the event the Company exercises its option to defer the payment
of Contract Adjustment Payments, then until the Deferred Contract Adjustment
Payments have been paid, the Company shall not, and will not permit any
subsidiary of the Company to, declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of the Company's Capital Stock other than:

                  (i) purchases, redemptions or acquisitions of shares of the
         Company's Capital Stock in connection with any employment contract,
         benefit plan or other similar arrangement with or for the benefit of
         employees, officers, directors or agents or a stock purchase or
         dividend reinvestment plan, or the satisfaction by the Company of its
         obligations pursuant to any contract or security outstanding on the
         date the Company exercises its right to defer the payment of Contract
         Adjustment Payments;

                  (ii) as a result of a reclassification of the Company's
         Capital Stock or the exchange or conversion of one class or series of
         the Company's Capital Stock for another class or series of the
         Company's Capital Stock;

                  (iii) the purchase of fractional interests of the Company's
         Capital Stock pursuant to the conversion or exchange provisions of such
         Capital Stock or the security being converted or exchanged;

                  (iv) dividends or distributions in any series of the Company's
         Capital Stock (or rights to acquire the Company's Capital Stock) or
         repurchases, acquisitions or redemptions of the Company's Capital Stock
         in connection with the issuance or exchange of any series of the
         Company's Capital Stock (or securities convertible into or exchangeable
         for shares of the Company's Capital Stock); or

                  (v) redemptions, exchanges or repurchases of any rights
         outstanding under a shareholder rights plan or the declaration or
         payment thereunder of a dividend or distribution of or with respect to
         rights in the future.

SECTION 5.4 PAYMENT OF PURCHASE PRICE; REMARKETING.

         (a) Unless a Tax Event Redemption, successful remarketing of the Notes
pursuant to the provisions of this Section 5.4, Termination Event, Merger Early
Settlement or Early Settlement has occurred, each Holder of a Normal Unit may
pay in cash ("Cash Settlement") the Purchase Price for the shares of Common
Stock to be purchased pursuant to a Purchase Contract if such Holder notifies
the Agent by use of a notice in substantially the form of Exhibit E hereto of
its intention to make a Cash Settlement. Such notice shall be made at or prior
to 5:00 p.m., New York City time, on the seventh Business Day immediately
preceding the Stock Purchase Date. The Agent shall promptly notify the
Collateral Agent of the receipt of such a notice from a Holder intending to make
a Cash Settlement.

                  (i) A Holder of a Normal Unit who has so notified the Agent of
         its intention to make a Cash Settlement is required to pay the Purchase
         Price to the Collateral Agent

                                       36


         prior to 11:00 a.m., New York City time, on the Business Day
         immediately preceding the Stock Purchase Date in lawful money of the
         United States by certified or cashiers' check or wire transfer, in each
         case in immediately available funds payable to or upon the order of the
         Company. Any cash received by the Collateral Agent will be paid to the
         Company on the Stock Purchase Date in settlement of the Purchase
         Contract in accordance with the terms of this Agreement and the Pledge
         Agreement.

                  (ii) If a Holder of a Normal Unit fails to notify the Agent of
         its intention to make a Cash Settlement in accordance with paragraph
         (a)(i) above, such failure shall constitute an event of default and the
         Holder shall be deemed to have consented to the disposition of the
         Pledged Notes pursuant to the remarketing as described in paragraph (b)
         below. If a Holder of a Normal Units does notify the Agent as provided
         in paragraph (a)(i) above of its intention to pay the Purchase Price in
         cash, but fails to make such payment as required by paragraph (a)(i)
         above, such failure shall also constitute an event of default; however,
         the Notes of such a Holder will not be remarketed but instead the
         Collateral Agent, for the benefit of the Company, will exercise its
         rights as a secured party with respect to such Notes, including but not
         limited to those rights specified in subsection (b)(iii) below.

         (b) (i) The Company has engaged _______________ (or any successor
thereto, the "Remarketing Agent") pursuant to the Remarketing Agreement to
remarket the Notes of Holders of Normal Units, other than Holders that have
elected not to participate in the remarketing pursuant to the procedures set
forth in clause (iv) below, and holders of Separate Notes that have elected to
participate in the remarketing pursuant to the procedures set forth in Section
4.5(d) of the Pledge Agreement. On the seventh Business Day prior to the first
day of a Remarketing Period, the Agent shall give Holders of Normal Units and
holders of Separate Notes notice of the remarketing in a daily newspaper in the
English language of general circulation in The City of New York, which is
expected to be The Wall Street Journal, including the specific U.S. Treasury
security or securities (including the CUSIP number and/or the principal terms of
such Treasury security or securities) described in clause (iv) below, that must
be delivered by Holders of Normal Units that elect not to participate in the
remarketing pursuant to clause (iv) below, no later than 10:00 a.m., New York
City time, on the fourth Business Day preceding the first day of a Remarketing
Period. The Company or the Agent, at the Company's request, shall request not
later than seven nor more than 15 calendar days prior to any Remarketing Period,
that the Clearing Agency notify the Clearing Agency Participants of such
Remarketing Period. The Agent shall notify, by 10:00 a.m., New York City time,
on the third Business Day preceding the first day of a Remarketing Period, the
Remarketing Agent and the Collateral Agent of the aggregate number of Notes of
Normal Unit Holders to be remarketed. On the third Business Day preceding the
first day of a Remarketing Period, no later than by 10:00 a.m. New York City
time, pursuant to the terms of the Pledge Agreement, the Custodial Agent will
notify the Remarketing Agent of the aggregate number of Separate Notes to be
remarketed. No later than 10:00 a.m., New York City time, on the Business Day
immediately preceding the first day of a Remarketing Period, the Collateral
Agent and the Custodial Agent, pursuant to the terms of the Pledge Agreement,
will deliver for remarketing to the Remarketing Agent all Notes to be
remarketed. Upon receipt of such notice from the Agent and the Custodial Agent
and such Notes from the Collateral Agent and the Custodial Agent, the
Remarketing Agent will, on the Remarketing Date, use commercially reasonable
best efforts to sell such Notes on such date at a price equal to at

                                       37


least 100.__% of the Remarketing Value. The Remarketing Agent will use the
proceeds from a successful remarketing to purchase the appropriate U.S. Treasury
securities (the "Agent-purchased Treasury Consideration") with the CUSIP
numbers, if any, selected by the Remarketing Agent, described in clauses (i) and
(ii) of the definition of Remarketing Value related to the Notes of Holders of
Normal Units that were remarketed. On or prior to the third Business Day
following the Remarketing Date or any Subsequent Remarketing Date, the
Remarketing Agent shall deliver such Agent-purchased Treasury Consideration to
the Agent, which shall thereupon deliver such Agent-purchased Treasury
Consideration to the Collateral Agent. The Collateral Agent, for the benefit of
the Company, will thereupon apply such Agent-purchased Treasury Consideration,
in accordance with the Pledge Agreement, to secure such Holders' obligations
under the Purchase Contracts. In the event of a successful remarketing pursuant
to this Section 5.4, the Remarketing Agent will deduct as a remarketing fee an
amount not exceeding __ basis points (.__%) of the total proceeds from the
remarketing (the "Remarketing Fee"). The Remarketing Agent will remit (1) the
portion of the proceeds from the remarketing attributable to the Separate Notes
to the holders of Separate Notes that were remarketed and (2) the remaining
portion of the proceeds, less those proceeds used to purchase the
Agent-purchased Treasury Consideration, to the Holders of the Normal Units that
were remarketed, all determined on a pro rata basis, in each case, on or prior
to the third Business Day following the Remarketing Date or any Subsequent
Remarketing Date. Holders whose Notes are so remarketed will not otherwise be
responsible for the payment of any Remarketing Fee in connection therewith.

                  (i) If, in spite of using commercially reasonable best
efforts, the Remarketing Agent cannot remarket the Notes included in the
remarketing at a price equal to at least ____% of the Remarketing Value on the
Remarketing Date, the Remarketing Agent will use commercially reasonable best
efforts to establish a Remarketing Rate meeting these requirements on each of
the two immediately following Business Days. If the Remarketing Agent cannot
establish a Remarketing Rate meeting these requirements on either of those days,
it will use commercially reasonable efforts to establish such a Remarketing Rate
on each of the three Business Days immediately preceding _______________. If the
Remarketing Agent cannot establish such a Remarketing Rate either on any of the
two Business Days immediately following the Remarketing Date or on any of the
three Business Days immediately preceding _______________, the remarketing in
each such period will be deemed to have failed (each, a "Failed Remarketing").
If the Remarketing Agent cannot establish such a Remarketing Rate on any of the
three Business Days immediately preceding _______________, the Remarketing Agent
will further attempt to establish such a Remarketing Rate on the third Business
Day immediately preceding the Stock Purchase Date. If, in spite of using
commercially reasonable best efforts, the Remarketing Agent fails to remarket
the Notes underlying the Normal Units at a price equal to at least 100.__% of
the Remarketing Value in accordance with the terms of the Pledge Agreement by
4:00 p.m., New York City time, on the third Business Day immediately preceding
the Stock Purchase Date, the "Last Failed Remarketing" will be deemed to have
occurred. Within three Business Days following the date of a Failed Remarketing
or the Last Failed Remarketing, as the case may be, the Remarketing Agent shall
return any Notes delivered to it to the Collateral Agent and the Custodial
Agent, as applicable. The Collateral Agent, for the benefit of the Company, may
exercise its rights as a secured party with respect to such Notes, including
those actions specified in subsection (b)(iii) below; provided, that if upon the
Last Failed Remarketing, the Collateral Agent exercises such rights for the
benefit of the Company

                                       38


with respect to such Notes, any accumulated and unpaid interest on such Notes
will become payable by the Company to the Agent for payment to the Holder of the
Normal Units to which such Notes relate. Such payment will be made by the
Company on or prior to 11:00 a.m., New York City time, on the Stock Purchase
Date in lawful money of the United States by certified or cashier's check or
wire transfer in immediately available funds payable to or upon the order of the
Agent. The Company will cause a notice of any Failed Remarketing and of the Last
Failed Remarketing to be published on the fourth Business Day following each
Failed Remarketing and the Last Failed Remarketing, as the case may be, in a
daily newspaper in the English language of general circulation in The City of
New York, which is expected to be The Wall Street Journal. The Company will also
release this information by means of Bloomberg and Reuters newswire.

                  (ii) With respect to any Notes which constitute part of Normal
Units which are subject to the Last Failed Remarketing, the Collateral Agent for
the benefit of the Company reserves all of its rights as a secured party with
respect thereto and, subject to applicable law and Section 5.4(e) below, may,
among other things, retain such Notes in full satisfaction of the Holders'
obligations under the Purchase Contracts or sell such Notes in one or more
public or private sales or otherwise.

                  (iii) A Holder of Normal Units may elect not to participate in
the remarketing and retain the Notes underlying such Units by notifying the
Agent of such election and delivering the specific U.S. Treasury security or
securities (including the CUSIP number and/or the principal terms of such
security or securities) identified by the Agent that constitute the U.S.
Treasury securities described in clauses (i) and (ii) of the definition of
Remarketing Value relating to the retained Notes (as if only such Notes were
being remarketed) (the "Opt-out Treasury Consideration") to the Agent not later
than 10:00 a.m., New York City time, on the fourth Business Day prior to the
first day of a Remarketing Period. Upon receipt thereof by the Agent, the Agent
shall deliver such Opt-out Treasury Consideration to the Collateral Agent, which
will, for the benefit of the Company, thereupon apply such Opt-out Treasury
Consideration to secure such Holder's obligations under the Purchase Contracts.
On the first Business Day immediately preceding the first day of a Remarketing
Period, the Collateral Agent, pursuant to the terms of the Pledge Agreement,
will deliver the Pledged Notes of such Holder to the Agent. Within three
Business Days following the last day of a Remarketing Period, (A) if the
remarketing was successful, the Agent shall distribute such Notes to the Holders
thereof, and (B) if there was a Failed Remarketing, the Agent will deliver such
Notes to the Collateral Agent, which will, for the benefit of the Company,
thereupon apply such Notes to secure such Holders' obligations under the
Purchase Contract and return the Opt-out Treasury Consideration delivered by
such Holders to such Holders. A Holder that does not so deliver the Opt-out
Treasury Consideration or does not so notify the Agent of its election to not
participate in the remarketing pursuant to this clause (iv) shall be deemed to
have elected to participate in the remarketing.

         (c) Upon the maturity of the Pledged Treasury Securities underlying the
Stripped Units and the Pledged Treasury Consideration or Pledged Applicable
Ownership Interest in the Treasury Portfolio, as the case may be, underlying the
Normal Units, on the Stock Purchase Date, the Collateral Agent shall remit to
the Company an amount equal to the aggregate Purchase Price applicable to such
Units, as payment for the Common Stock issuable upon settlement thereof without
receiving any instructions from the Holders of such Units. In the event the
payments in respect of the Pledged Treasury Securities, Pledged Treasury
Consideration or

                                       39


Pledged Applicable Ownership Interest in the Treasury Portfolio underlying a
Unit is in excess of the Purchase Price of the Purchase Contract being settled
thereby, the Collateral Agent will distribute such excess to the Agent for the
benefit of the Holder of such Unit when received.

         (d) Any distribution to Holders of excess funds and interest described
in Section 5.4 (b) and (c) above shall be payable at the Corporate Trust Office
or, at the option of the Holder or the holder of Separate Notes, as applicable,
by check mailed to the address of the Person entitled thereto at such address as
it appears on the Register or by wire transfer to an account appropriately
specified by the Holder or the holder of Separate Notes, as applicable.

         (e) The obligations of each Holder to pay the Purchase Price are
non-recourse obligations and except to the extent paid by Early Settlement or
Merger Early Settlement, are payable solely out of the proceeds of any
Collateral pledged to secure the obligations of the Holders and in no event will
Holders be liable for any deficiency between such proceeds and the Purchase
Price.

         (f) Notwithstanding anything to the contrary herein, the Company shall
not be obligated to issue any shares of Common Stock in respect of a Purchase
Contract or deliver any certificates therefor to the Holder of the related Unit
unless the Company shall have received payment in full of the aggregate Purchase
Price for the shares of Common Stock to be purchased thereunder by such Holder
in the manner herein set forth.

SECTION 5.5 ISSUANCE OF SHARES OF COMMON STOCK.

         Unless a Termination Event shall have occurred on or prior to the Stock
Purchase Date or an Early Settlement or a Merger Early Settlement shall have
occurred, on the Stock Purchase Date, upon the Company's receipt of payment in
full of the Purchase Price for the shares of Common Stock purchased by the
Holders pursuant to the foregoing provisions of this Article and subject to
Section 5.6(b), the Company shall issue and deposit with the Agent, for the
benefit of the Holders of the Outstanding Units, one or more certificates
representing the newly issued shares of Common Stock registered in the name of
the Agent (or its nominee) as custodian for the Holders (such certificates for
shares of Common Stock, together with any dividends or distributions for which
both a record date and payment date for such dividend or distribution has
occurred after the Stock Purchase Date, being hereinafter referred to as the
"Purchase Contract Settlement Fund") to which the Holders are entitled
hereunder. Subject to the foregoing, upon surrender of a Certificate to the
Agent on or after the Stock Purchase Date, together with settlement instructions
thereon duly completed and executed, the Holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Common Stock which such Holder is entitled to receive
pursuant to the provisions of this Article V (after taking into account all
Units then held by such Holder) together with cash in lieu of fractional shares
as provided in Section 5.12 and any dividends or distributions with respect to
such shares constituting part of the Purchase Contract Settlement Fund, but
without any interest thereon, and the Certificate so surrendered shall forthwith
be cancelled. Such shares shall be registered in the name of the Holder or the
Holder's designee as specified in the settlement instructions provided by the
Holder to the Agent. If any shares of Common Stock issued in respect of a
Purchase Contract are to be registered to a Person other than the Person in
whose name the Certificate evidencing such Purchase Contract is registered, no
such registration shall

                                       40


be made unless the Person requesting such registration has paid any transfer and
other taxes required by reason of such registration in a name other than that of
the registered Holder of such Certificate or has established to the satisfaction
of the Company that such tax either has been paid or is not payable.

SECTION 5.6 ADJUSTMENT OF SETTLEMENT RATE.

         (a) Adjustments for Dividends, Distributions, Stock Splits, Etc.

                  (1) Stock Dividends. In case the Company shall pay or make a
dividend or other distribution on the Common Stock in Common Stock, the
Settlement Rate, in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be increased by dividing such Settlement
Rate by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such increase to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purposes of
this paragraph (1), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but shall include
any shares issuable in respect of any scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not pay any dividend or
make any distribution on shares of Common Stock held in the treasury of the
Company.

                  (2) Stock Purchase Rights. In case the Company shall issue
rights, options or warrants to all holders of its Common Stock (that are not
available on an equivalent basis to Holders of the Units upon settlement of the
Purchase Contracts underlying such Units) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price per share of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights, options or
warrants (other than pursuant to any dividend reinvestment, share purchase or
similar plan), the Settlement Rate in effect at the opening of business on the
day following the date fixed for such determination shall be increased by
dividing such Settlement Rate by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
Current Market Price and the denominator of which shall be the number of shares
of Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such increase to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (2), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include any shares issuable in respect of any
scrip certificates issued in lieu of fractions of shares of Common Stock. The
Company shall not issue any such rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company.

                                       41


                  (3) Stock Splits; Reverse Splits. In case outstanding shares
of Common Stock shall be subdivided or split into a greater number of shares of
Common Stock, the Settlement Rate in effect at the opening of business on the
day following the day upon which such subdivision or split becomes effective
shall be proportionately increased, and, conversely, in case outstanding shares
of Common Stock shall each be combined into a smaller number of shares of Common
Stock, the Settlement Rate in effect at the opening of business on the day
following the day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision, split or combination becomes effective.

                  (4) Debt or Asset Distributions. (i) In case the Company
shall, by dividend or otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness or assets (including securities, but excluding any
rights or warrants referred to in paragraph (2) of this Section, any dividend or
distribution paid exclusively in cash and any dividend, shares of capital stock
of any class or series, or similar equity interests, of or relating to a
subsidiary or other business unit in the case of a Spin-Off referred to in the
next paragraph, or dividend or other distribution referred to in paragraph (1)
of this Section), the Settlement Rate shall be adjusted so that the same shall
equal the rate determined by dividing the Settlement Rate in effect immediately
prior to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by a fraction, the numerator
of which shall be the Current Market Price per share of the Common Stock on the
date fixed for such determination less the then fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and described
in a Board Resolution) of the portion of the assets or evidences of indebtedness
so distributed applicable to one share of Common Stock and the denominator of
which shall be such Current Market Price per share of the Common Stock, such
adjustment to become effective immediately prior to the opening of business on
the day following the date fixed for the determination of stockholders entitled
to receive such distribution. In any case in which this paragraph (4) is
applicable, paragraphs (1) and (2) of this Section shall not be applicable.

                  (ii) In the case of a Spin-Off, the Settlement Rate in effect
immediately before the close of business on the record date fixed for
determination of stockholders entitled to receive that distribution will be
increased by multiplying the Settlement Rate by a fraction, the numerator of
which is the Current Market Price per share of the Common Stock plus the Fair
Market Value of the portion of those shares of Capital Stock or similar equity
interests so distributed applicable to one share of Common Stock and the
denominator of which is the Current Market Price per share of the Common Stock.
Any adjustment to the settlement rate under this paragraph 4(ii) will occur on
the date that is the earlier of (1) the tenth Trading Day following the
effective date of the Spin-Off and (2) the date of the securities being offered
in the Initial Public Offering of the Spin-Off, if that Initial Public Offering
is effected simultaneously with the Spin-Off.

                  (5) Cash Distributions. In case the Company shall, (i) by
dividend or otherwise, distribute to all holders of its Common Stock cash
(excluding any cash that is distributed in a Reorganization Event to which
Section 5.6(b) applies or as part of a distribution referred to in paragraph (4)
of this Section) in an aggregate amount that, when combined together

                                       42


with (ii) the aggregate amount of any other distributions to all holders of its
Common Stock made exclusively in cash (other than regular quarterly cash
dividends) within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this paragraph
(5) or paragraph (6) of this Section has been made and (iii) the aggregate of
any cash plus the fair market value, as of the date of the expiration of the
tender or exchange offer referred to below (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution), of consideration payable in respect of any tender or exchange offer
(other than consideration payable in respect of any odd lot tender offer) by the
Company or any of its subsidiaries for all or any portion of the Common Stock
concluded within the 12 months preceding the date of payment of the distribution
described in clause (i) above and in respect of which no adjustment pursuant to
this paragraph (5) or paragraph (6) of this Section has been made, exceeds ___%
of the product of the Current Market Price per share of the Common Stock on the
date for the determination of holders of shares of Common Stock entitled to
receive such distribution times the number of shares of Common Stock outstanding
on such date, then, and in each such case, immediately after the close of
business on such date for determination, the Settlement Rate shall be increased
so that the same shall equal the rate determined by dividing the Settlement Rate
in effect immediately prior to the close of business on the date fixed for
determination of the stockholders entitled to receive such distribution by a
fraction (A) the numerator of which shall be equal to the Current Market Price
per share of the Common Stock on the date fixed for such determination less an
amount equal to the quotient of (x) the combined amount distributed or payable
in the transactions described in clauses (i), (ii) and (iii) above and (y) the
number of shares of Common Stock outstanding on such date for determination and
(B) the denominator of which shall be equal to the Current Market Price per
share of the Common Stock on such date for determination.

                  (6) Tender Offers. In case (i) a tender or exchange offer made
by the Company or any subsidiary of the Company for all or any portion of the
Common Stock shall expire and such tender or exchange offer (as amended upon the
expiration thereof) shall require the payment to stockholders (based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) that when
combined together with (ii) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration of such
tender or exchange offer (other than consideration payable in respect of any odd
lot tender offer), of consideration payable in respect of any other tender or
exchange offer, by the Company or any subsidiary of the Company for all or any
portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender or exchange offer and in respect of which no
adjustment pursuant to paragraph (5) of this Section or this paragraph (6) has
been made and (iii) the aggregate amount of any distributions to all holders of
the Company's Common Stock made exclusively in cash (other than regular
quarterly cash dividends) within the 12 months preceding the expiration of such
tender or exchange offer and in respect of which no adjustment pursuant to
paragraph (5) of this Section or this paragraph (6) has been made, exceeds ___%
of the product of the Current Market Price per share of the Common Stock as of
the last time (the "Expiration Time") tenders could have been made pursuant to
such tender or exchange offer (as it may be amended) times the number of shares
of Common Stock outstanding (including any tendered shares) on the Expiration
Time,

                                       43


then, and in each such case, immediately prior to the opening of business on the
day after the date of the Expiration Time, the Settlement Rate shall be adjusted
so that the same shall equal the rate determined by dividing the Settlement Rate
immediately prior to the close of business on the date of the Expiration Time by
a fraction (A) the numerator of which shall be equal to (x) the product of (I)
the Current Market Price per share of the Common Stock on the date of the
Expiration Time and (II) the number of shares of Common Stock outstanding
(including any tendered shares) on the Expiration Time less (y) the amount of
cash plus the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the transactions described in
clauses (i), (ii) and (iii) above (assuming in the case of clause (i) the
acceptance, up to any maximum specified in the terms of the tender or exchange
offer, of Purchased Shares), and (B) the denominator of which shall be equal to
the product of (x) the Current Market Price per share of the Common Stock as of
the Expiration Time and (y) the number of shares of Common Stock outstanding
(including any tendered shares) as of the Expiration Time less the number of all
shares validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares").

                  (7) Reclassification. The reclassification of Common Stock
into securities including securities other than Common Stock (other than any
reclassification upon a Reorganization Event to which Section 5.6(b) applies)
shall be deemed to involve (i) a distribution of such securities other than
Common Stock to all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the determination of
stockholders entitled to receive such distribution" and "the date fixed for such
determination" within the meaning of paragraph (4) of this Section), and (ii) a
subdivision, split or combination, as the case may be, of the number of shares
of Common Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision or split becomes effective" or "the day upon which such
combination becomes effective", as the case may be, and "the day upon which such
subdivision, split or combination becomes effective" within the meaning of
paragraph (3) of this Section).

                  (8) Current Market Price. The "Current Market Price" per share
of the Common Stock means (a) on any day the average of the Closing Prices for
the five consecutive Trading Days selected by the Company commencing not more
than 20 Trading Days before, and ending not later than, the earlier of the day
preceding the day in question and the day before the "ex date" with respect to
the issuance or distribution requiring such computation, (b) in the case of any
Spin-Off that is effected simultaneously with an Initial Public Offering of the
securities being distributed in the Spin-Off, the Closing Price of the Common
Stock on the Trading Day on which the initial public offering price of the
securities being distributed in the Spin-Off is determined, and (c) in the case
of any other Spin-Off, the average of the Closing Prices of the Common Stock
over the first 10 Trading Days after the effective date of such Spin-Off. For
purposes of this paragraph, the term "ex date," when used with respect to any
issuance or distribution, shall mean the first date on which the Common Stock
trades regular way on such exchange or in such market without the right to
receive such issuance or distribution.

                                       44


                  (9) Calculation of Adjustments. All adjustments to the
Settlement Rate shall be calculated to the nearest 1/10,000th of a share of
Common Stock (or if there is not a nearest 1/10,000th of a share to the next
lower 1/10,000th of a share). No adjustment in the Settlement Rate shall be
required unless such adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any adjustments which by
reason of this subparagraph are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. If an adjustment is made to
the Settlement Rate pursuant to paragraph (1), (2), (3), (4), (5), (6), (7) or
(10) of this Section 5.6(a), an adjustment shall also be made to the Applicable
Market Value solely to determine which of clauses (i), (ii) or (iii) of the
definition of Settlement Rate in Section 5.1(a) will apply on the Stock Purchase
Date. Such adjustment shall be made by multiplying the Applicable Market Value
by a fraction, the numerator of which shall be the Settlement Rate immediately
after such adjustment pursuant to paragraph (1), (2), (3), (4), (5), (6), (7) or
(10) of this Section 5.6(a) and the denominator of which shall be the Settlement
Rate immediately before such adjustment; provided, however, that if such
adjustment to the Settlement Rate is required to be made pursuant to the
occurrence of any of the events contemplated by paragraph (1), (2), (3), (4),
(5), (7) or (10) of this Section 5.6(a) during the period taken into
consideration for determining the Applicable Market Value, appropriate and
customary adjustments shall be made to the Settlement Rate.

                  (10) Increase of Settlement Rate. The Company may make such
increases in the Settlement Rate, in addition to those required by this Section,
as it considers to be advisable in order to avoid or diminish any income tax to
any holders of shares of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock or from any event treated as such for income tax purposes or for any
other reasons.

         (b) Adjustment for Consolidation, Merger or Other Reorganization Event.

         In the event of

                  (1) any consolidation or merger of the Company with or into
another Person (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Common Stock outstanding immediately
prior to the merger or consolidation is not exchanged for cash, securities or
other property of the Company or another corporation),

                  (2) any sale, transfer, lease or conveyance to another Person
of the property of the Company as an entirety or substantially as an entirety,

                  (3) any statutory exchange of securities of the Company with
another Person (other than in connection with a merger or acquisition), or

                  (4) any liquidation, dissolution or winding up of the Company
other than as a result of or after the occurrence of a Termination Event (any
such event, a "Reorganization Event"), each share of Common Stock covered by
each Purchase Contract forming a part of a Unit immediately prior to such
Reorganization Event shall, after such Reorganization Event, be converted for
purposes of the Purchase Contract into the kind and amount of securities, cash
and other property receivable in such Reorganization Event (without any interest
thereon, and

                                       45


without any right to dividends or distribution thereon which have a record date
that is prior to the Stock Purchase Date) per share of Common Stock by a holder
of Common Stock that (i) is not a Person with which the Company consolidated or
into which the Company merged or which merged into the Company or to which such
sale or transfer was made, as the case may be (any such Person, a "Constituent
Person"), or an Affiliate of a Constituent Person to the extent such
Reorganization Event provides for different treatment of Common Stock held by
Affiliates of the Company and non-Affiliates, and (ii) failed to exercise his
rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such Reorganization Event (provided that if the
kind or amount of securities, cash and other property receivable upon such
Reorganization Event is not the same for each share of Common Stock held
immediately prior to such Reorganization Event by other than a Constituent
Person or an Affiliate thereof and in respect of which such rights of election
shall not have been exercised ("Non-electing Share"), then for the purpose of
this Section the kind and amount of securities, cash and other property
receivable upon such Reorganization Event by each Non-electing Share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
Non-electing Shares). On the Stock Purchase Date, the Settlement Rate then in
effect will be applied to the value on the Stock Purchase Date of such
securities, cash or other property.

         In the event of such a Reorganization Event, the Person formed by such
consolidation, merger or exchange or the Person which acquires the assets of the
Company or, in the event of a liquidation or dissolution of the Company, the
Company or a liquidating trust created in connection therewith, shall execute
and deliver to the Agent an agreement supplemental hereto providing that the
Holder of each Outstanding Unit shall have the rights provided by this Section
5.6. Such supplemental agreement shall provide for adjustments which, for events
subsequent to the effective date of such supplemental agreement, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section. The above provisions of this Section shall similarly apply to
successive Reorganization Events.

SECTION 5.7 NOTICE OF ADJUSTMENTS AND CERTAIN OTHER EVENTS.

         (a) Whenever the Settlement Rate is adjusted as herein provided, the
Company shall:

                  (i) forthwith compute the Settlement Rate in accordance with
         Section 5.6 and prepare and transmit to the Agent a Company Certificate
         setting forth the Settlement Rate, the method of calculation thereof in
         reasonable detail, and the facts requiring such adjustment and upon
         which such adjustment is based; and

                  (ii) as soon as practicable following the occurrence of an
         event that requires or permits an adjustment to the Settlement Rate
         pursuant to Section 5.6 (or if the Company is not aware of such
         occurrence, as soon as practicable after becoming so aware), provide a
         written notice to the Agent of the occurrence of such event and a
         statement setting forth in reasonable detail the method by which the
         adjustment to the Settlement Rate was determined and setting forth the
         adjusted Settlement Rate.

         (b) The Agent shall not at any time be under any duty or responsibility
to any Holder of Units to determine whether any facts exist which may require
any adjustment of the Settlement Rate, or with respect to the nature or extent
or calculation of any such adjustment

                                       46


when made, or with respect to the method employed in making the same. The Agent
shall not be accountable with respect to the validity or value (or the kind or
amount) of any shares of Common Stock, or of any securities or property, which
may at the time be issued or delivered with respect to any Purchase Contract,
and the Agent makes no representation with respect thereto. The Agent shall not
be responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock pursuant to a Purchase Contract or to comply with any of
the duties, responsibilities or covenants of the Company contained in this
Article.

SECTION 5.8 TERMINATION EVENT; NOTICE.

         The Purchase Contracts and all obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights of Holders
to receive accumulated Contract Adjustment Payments, if any, or any Deferred
Contract Adjustment Payments and obligations of the Holders to purchase Common
Stock, will immediately and automatically terminate, without the necessity of
any notice or action by any Holder, the Agent or the Company, if, on or prior to
the Stock Purchase Date, a Termination Event shall have occurred. Upon and after
the occurrence of a Termination Event, the Normal Units shall thereafter
represent the right to receive the Notes or the appropriate Treasury
Consideration or Applicable Ownership Interest in the Treasury Portfolio, as the
case may be, forming a part of such Normal Units, and the Stripped Units shall
thereafter represent the right to receive the Treasury Securities forming a part
of such Stripped Units, in each case in accordance with the provisions of
Section 4.3 of the Pledge Agreement. Upon the occurrence of a Termination Event,
the Company shall promptly but in no event later than two Business Days
thereafter give written notice to the Agent, the Collateral Agent and to the
Holders, at their addresses as they appear in the Register.

SECTION 5.9 EARLY SETTLEMENT.

         (a) Subject to and upon compliance with the provisions of this Section
5.9, Purchase Contracts underlying Units having an aggregate Stated Amount equal
to $1,000 or an integral multiple thereof, may, at the option of the Holder
thereof, be settled early ("Early Settlement") on or prior to 10:00 a.m., New
York City time, on the seventh Business Day immediately preceding the Stock
Purchase Date. In order to exercise the right to effect Early Settlement with
respect to any Purchase Contracts, the Holder of the Certificate evidencing the
related Units shall deliver such Certificate to the Agent at the Corporate Trust
Office duly endorsed for transfer to the Company or in blank with the form of
"Election to Settle Early" on the reverse thereof duly completed and accompanied
by payment payable to the Company in immediately available funds in an amount
(the "Early Settlement Amount") equal to (A) the product of (i) the Stated
Amount of such Units multiplied by (ii) the number of Purchase Contracts with
respect to which the Holder has elected to effect Early Settlement, plus (B) if
such delivery is made with respect to any Purchase Contracts during the period
from close of business on any Record Date next preceding any Payment Date to the
opening of business on such Payment Date, an amount equal to the Contract
Adjustment Payments, if any, payable on such Payment Date with respect to such
Purchase Contracts; provided that no payment shall be required pursuant to
clause (B) of this sentence if the Company shall have elected to defer the
Contract Adjustment Payments which would otherwise be payable on such Payment
Date. Except as provided in the immediately preceding sentence and subject to
Section 5.2(d), no payment or adjustment shall be made upon Early Settlement of
any Purchase Contract on any Contract Adjustment Payments accrued on

                                       47


such Purchase Contract or on account of any dividends on the Common Stock issued
upon such Early Settlement. If the foregoing requirements are first satisfied
with respect to Purchase Contracts underlying any Unit at or prior to 5:00 p.m.,
New York City time, on a Business Day, such day shall be the "Early Settlement
Date" with respect to such Unit and if such requirements are first satisfied
after 5:00 p.m., New York City time, on a Business Day or on a day that is not a
Business Day, the "Early Settlement Date" with respect to such Units shall be
the next succeeding Business Day.

         (b) Upon Early Settlement of any Purchase Contract by the Holder of the
related Units, the Company shall issue, and the Holder shall be entitled to
receive, ______ shares of Common Stock on account of such Purchase Contract (the
"Early Settlement Rate"). The Early Settlement Rate shall be adjusted in the
same manner and at the same time as the Settlement Rate is adjusted. As promptly
as practicable after Early Settlement of Purchase Contracts in accordance with
the provisions of this Section 5.9, the Company shall issue and shall deliver to
the Agent at the Corporate Trust Office a certificate or certificates for the
full number of shares of Common Stock issuable upon such Early Settlement
together with payment in lieu of any fraction of a share, as provided in Section
5.12.

         (c) No later than the third Business Day after the applicable Early
Settlement Date the Company shall cause (i) the shares of Common Stock issuable
upon Early Settlement of Purchase Contracts to be issued and delivered, and (ii)
the related Pledged Notes, Pledged Treasury Consideration or Pledged Applicable
Ownership Interest in the Treasury Portfolio, in the case of Normal Units, or
the related Pledged Treasury Securities, in the case of Stripped Units, to be
released from the Pledge by the Collateral Agent and transferred, in each case,
to the Agent for delivery to the Holder thereof or the Holder's designee.

         (d) Upon Early Settlement of any Purchase Contracts, and subject to
receipt of shares of Common Stock from the Company and the Pledged Notes,
Pledged Treasury Consideration, Pledged Applicable Ownership Interest in the
Treasury Portfolio, or Pledged Treasury Securities, as the case may be, from the
Collateral Agent, as applicable, the Agent shall, in accordance with the
instructions provided by the Holder thereof on the applicable form of Election
to Settle Early on the reverse of the Certificate evidencing the related Units,
(i) transfer to the Holder the Pledged Notes, Pledged Treasury Consideration,
Pledged Applicable Ownership Interest in the Treasury Portfolio, or Pledged
Treasury Securities, as the case may be, forming a part of such Units, and (ii)
deliver to the Holder a certificate or certificates for the full number of
shares of Common Stock issuable upon such Early Settlement together with payment
in lieu of any fraction of a share, as provided in Section 5.12.

         (e) In the event that Early Settlement is effected with respect to
Purchase Contracts underlying less than all the Units evidenced by a
Certificate, upon such Early Settlement the Company shall execute and the Agent
shall authenticate, countersign and deliver to the Holder thereof, at the
expense of the Company, a Certificate evidencing the Units as to which Early
Settlement was not effected.

                                       48


SECTION 5.10 EARLY SETTLEMENT UPON CASH MERGER.

         (a) In the event of a merger or consolidation of the Company of the
type described in clause (1) of Section 5.6(b) in which the Common Stock
outstanding immediately prior to such merger or consolidation is exchanged for
consideration consisting of at least ___% cash or cash equivalents (any such
event a "Cash Merger"), then the Company (or the successor to the Company
hereunder) shall be required to offer the Holder of each Unit the right to
settle the Purchase Contract underlying such Unit prior to the Stock Purchase
Date ("Merger Early Settlement") as provided herein. On or before the fifth
Business Day after the consummation of a Cash Merger, the Company or, at the
request and expense of the Company, the Agent, shall give all Holders notice of
the occurrence of the Cash Merger and of the right of Merger Early Settlement
arising as a result thereof. The Company shall also deliver a copy of such
notice to the Agent and the Collateral Agent.

         Each such notice shall contain:

                  (i) the date, which shall be not less than 20 nor more than 30
         calendar days after the date of such notice, on which the Merger Early
         Settlement will be effected (the "Merger Early Settlement Date");

                  (ii) the date, which shall be on or one Business Day prior to
         the Merger Early Settlement Date, by which the Merger Early Settlement
         right must be exercised;

                  (iii) the Settlement Rate in effect as a result of such Cash
         Merger and the kind and amount of cash, securities and other property
         receivable by the Holder upon settlement of each Purchase Contract
         pursuant to Section 5.6(b);

                  (iv) a statement to the effect that all or a portion of the
         Purchase Price payable by the Holder to settle the Purchase Contract
         will be offset against the amount of cash so receivable upon exercise
         of Merger Early Settlement, as applicable; and

                  (v) the instructions a Holder must follow to exercise the
         Merger Early Settlement right.

         (b) To exercise a Merger Early Settlement right, a Holder shall deliver
to the Agent at the Corporate Trust Office at or before 5:00 p.m., New York City
time on the date specified in the notice, the Certificate(s) evidencing the
Units with respect to which the Merger Early Settlement right is being exercised
duly endorsed for transfer to the Company or in blank with the form of "Election
to Settle Early" on the reverse thereof duly completed and accompanied by
payment payable to the Company in immediately available funds in an amount equal
to the Early Settlement Amount less the amount of cash that otherwise would be
deliverable by the Company or its successor upon settlement of the Purchase
Contract in lieu of Common Stock pursuant to Section 5.6(b) and as described in
the notice to Holders (the "Merger Early Settlement Amount").

         (c) On the Merger Early Settlement Date, the Company shall deliver or
cause to be delivered (i) the net cash, securities and other property to be
received by such exercising Holder, equal to the Settlement Rate as adjusted
pursuant to Section 5.6, in respect of the number of

                                       49


Purchase Contracts for which such Merger Early Settlement right was exercised,
and (ii) the related Pledged Notes, Pledged Treasury Consideration or Pledged
Applicable Ownership Interest in the Treasury Portfolio, in the case of Normal
Units, or Pledged Treasury Securities, in the case of Stripped Units, to be
released from the Pledge by the Collateral Agent and transferred, in each case,
to the Agent for delivery to the Holder thereof or its designee. In the event a
Merger Early Settlement right shall be exercised by a Holder in accordance with
the terms hereof, all references herein to Stock Purchase Date shall be deemed
to refer to such Merger Early Settlement Date.

         (d) Upon Merger Early Settlement of any Purchase Contracts, and subject
to receipt of such net cash, securities or other property from the Company and
the Pledged Notes, Pledged Treasury Consideration, Pledged Applicable Ownership
Interest in the Treasury Portfolio or Pledged Treasury Securities, as the case
may be, from the Collateral Agent, as applicable, the Agent shall, in accordance
with the instructions provided by the Holder thereof on the applicable form of
Election to Settle Early on the reverse of the Certificate evidencing the
related Units, (i) transfer to the Holder the Pledged Notes, Pledged Treasury
Consideration, Pledged Applicable Ownership Interest in the Treasury Portfolio,
or Pledged Treasury Securities, as the case may be, forming a part of such
Units, and (ii) deliver to the Holder such net cash, securities or other
property issuable upon such Merger Early Settlement together with payment in
lieu of any fraction of a share, as provided in Section 5.12.

         (e) In the event that Merger Early Settlement is effected with respect
to Purchase Contracts underlying less than all the Units evidenced by a
Certificate, upon such Merger Early Settlement the Company (or the successor to
the Company hereunder) shall execute and the Agent shall authenticate,
countersign and deliver to the Holder thereof, at the expense of the Company, a
Certificate evidencing the Units as to which Merger Early Settlement was not
effected.

SECTION 5.11 CHARGES AND TAXES.

         The Company will pay all stock transfer and similar taxes attributable
to the initial issuance and delivery of the shares of Common Stock pursuant to
the Purchase Contracts and in payment of any Deferred Contract Adjustment
Payments; provided, that the Company shall not be required to pay any such tax
or taxes which may be payable in respect of any exchange of or substitution for
a Certificate evidencing a Unit or any issuance of a share of Common Stock in a
name other than that of the registered Holder of a Certificate surrendered in
respect of the Units evidenced thereby, other than in the name of the Agent, as
custodian for such Holder, and the Company shall not be required to issue or
deliver such share certificates or Certificates unless and until the Person or
Persons requesting the transfer or issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.

SECTION 5.12 NO FRACTIONAL SHARES.

         No fractional shares or scrip representing fractional shares of Common
Stock shall be issued or delivered upon settlement on the Stock Purchase Date or
upon Early Settlement or Merger Early Settlement of any Purchase Contracts. If
Certificates evidencing more than one

                                       50


Purchase Contract shall be surrendered for settlement at one time by the same
Holder, the number of full shares of Common Stock which shall be delivered upon
settlement shall be computed on the basis of the aggregate number of Purchase
Contracts evidenced by the Certificates so surrendered. Instead of any
fractional share of Common Stock which would otherwise be deliverable upon
settlement of any Purchase Contracts on the applicable Settlement Date or upon
Early Settlement or Merger Early Settlement, the Company, through the Agent,
shall make a cash payment in respect of such fractional shares in an amount
equal to the value of such fractional shares times the Applicable Market Value.
The Company shall provide the Agent from time to time with sufficient funds to
permit the Agent to make all cash payments required by this Section 5.12 in a
timely manner.

                                   ARTICLE VI.

                                    REMEDIES

SECTION 6.1 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PURCHASE CONTRACT
            ADJUSTMENT PAYMENTS AND PURCHASE COMMON STOCK.

         The Holder of any Unit shall have the right, which is absolute and
unconditional,

         (a) subject to the right of the Company to defer payment thereof
pursuant to Section 5.3, and to the forfeiture of any Deferred Contract
Adjustment Payments upon Early Settlement pursuant to Section 5.9 or upon Merger
Early Settlement pursuant to Section 5.10 or upon the occurrence of a
Termination Event, to receive payment of each installment of the Contract
Adjustment Payments, if any, with respect to the Purchase Contract constituting
a part of such Unit on the respective Payment Date for such Unit and to
institute suit for the enforcement of such right to receive Contract Adjustment
Payments, and

         (b) to purchase Common Stock pursuant to the Purchase Contract
constituting a part of such Unit and to institute suit for the enforcement of
any such right to purchase Common Stock, and such rights shall not be impaired
without the consent of such Holder.

SECTION 6.2 RESTORATION OF RIGHTS AND REMEDIES.

         If any Holder has instituted any proceeding to enforce any right or
remedy under this Agreement and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company and such Holder shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of such Holder
shall continue as though no such proceeding had been instituted.

SECTION 6.3 RIGHTS AND REMEDIES CUMULATIVE.

         Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Certificates in Section 3.10(f), no
right or remedy herein conferred upon or reserved to the Holders is intended to
be exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or

                                       51


otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

SECTION 6.4 DELAY OR OMISSION NOT WAIVER.

         No delay or omission of any Holder to exercise any right or remedy upon
a Default shall impair any such right or remedy or constitute a waiver of any
such right. Every right and remedy given by this Article or by law to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by such Holders.

SECTION 6.5 UNDERTAKING FOR COSTS.

         All parties to this Agreement agree, and each Holder of a Unit, by its
acceptance of such Unit shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Agreement, or in any suit against the Agent for any action taken,
suffered or omitted by it as Agent, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; provided that
the provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Agent, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than ___% of the
Outstanding Units, or to any suit instituted by any Holder for the enforcement
of distributions on any Notes on any Purchase Contract on or after the
respective Payment Date therefor in respect of any Unit held by such Holder, or
for enforcement of the right to purchase shares of Common Stock under the
Purchase Contract constituting part of any Unit held by such Holder.

SECTION 6.6 WAIVER OF STAY OR EXTENSION LAWS.

         The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, but will suffer and permit the execution of every such power as though no
such law had been enacted.

                                  ARTICLE VII.

                                   THE AGENT

SECTION 7.1 CERTAIN DUTIES AND RESPONSIBILITIES.

         (a) Prior to a Default and after the curing or waiving of all such
Defaults that may have occurred,

                  (1) the Agent undertakes to perform, with respect to the
Units, such duties and only such duties as are specifically set forth in this
Agreement and no implied covenants or obligations shall be read into this
Agreement against the Agent; and

                                       52


                  (2) the Agent may, with respect to the Units, conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, in the absence of bad faith on the part of the Agent, upon
certificates or opinions furnished to the Agent and conforming to the
requirements of this Agreement; but in the case of any certificates or opinions
which by any provision hereof are specifically required to be furnished to the
Agent, the Agent shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Agreement.

         (b) No provision of this Agreement shall be construed to relieve the
Agent from liability for its own negligent action, its own negligent failure to
act, or its own willful misconduct, except that

                  (1) this subsection shall not be construed to limit the effect
         of subsection (a) of this Section;

                  (2) the Agent shall not be liable for any error of judgment
         made in good faith by a Responsible Officer, unless it shall be proved
         that the Agent was negligent in ascertaining the pertinent facts; and

                  (3) no provision of this Agreement shall require the Agent to
         expend or risk its own funds or otherwise incur any financial liability
         in the performance of any of its duties hereunder, or in the exercise
         of any of its rights or powers.

         (c) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Agent shall be subject to the provisions of this
Section.

         (d) The Agent is authorized to execute, deliver and perform the Pledge
Agreement in its capacity as Agent and to grant the Pledge. The Agent shall be
entitled to all of the rights, privileges, immunities and indemnities contained
in this Agreement with respect to any duties of the Agent under, or actions
taken by the Agent pursuant to, such Pledge Agreement and any Remarketing
Agreement entered into by the Agent to effectuate Section 5.4 hereof or Section
6.3 of the Pledge Agreement.

         (e) In case a Default has occurred (that has not been cured or waived),
and is actually known by a Responsible Officer of the Agent, the Agent shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in its exercise thereof, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.

         (f) At the request of the Company, the Agent is authorized to execute
and deliver one or more Remarketing Agreements to, among other things,
effectuate Section 5.4

SECTION 7.2 NOTICE OF DEFAULT.

         Within 30 days after the occurrence of any Default by the Company
hereunder of which a Responsible Officer of the Agent has actual knowledge, the
Agent shall transmit by mail to the Company and the Holders of Units, as their
names and addresses appear in the Register, notice of

                                       53


such Default hereunder, unless such Default shall have been cured or waived;
provided that, except for a Default in any payment obligation hereunder, the
Agent shall be protected in withholding such notice if and so long as a
Responsible Officer of the Agent in good faith determines that the withholding
of such notice is in the interests of the Holders of the Units.

SECTION 7.3 CERTAIN RIGHTS OF AGENT.

         Subject to the provisions of Section 7.1:

         (a) the Agent may conclusively rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;

         (b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Certificate, Issuer Order or Issuer Request,
and any resolution of the Board of Directors of the Company may be sufficiently
evidenced by a Board Resolution;

         (c) whenever in the administration of this Agreement the Agent shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Agent (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon a Company Certificate;

         (d) the Agent may consult with counsel of its selection and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;

         (e) the Agent shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the Agent,
in its discretion, may make reasonable further inquiry or investigation into
such facts or matters related to the execution, delivery and performance of the
Purchase Contracts as it may see fit, and, if the Agent shall determine to make
such further inquiry or investigation, it shall be given a reasonable
opportunity to examine the books, records and premises of the Company,
personally or by agent or attorney;

         (f) the Agent may execute any of the powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys or an
Affiliate of the Agent and the Agent shall not be responsible for any misconduct
or negligence on the part of any agent or attorney or an Affiliate appointed
with due care by it hereunder;

         (g) the rights, privileges, protections, immunities and benefits given
to the Agent, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Agent in each of its capacities
hereunder;

         (h) the Agent shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction of
any of the Holders pursuant to this

                                       54


Agreement, unless such Holders shall have offered to the Agent security or
indemnity satisfactory to the Agent against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction; and

         (i) the Agent shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Agreement.

SECTION 7.4 NOT RESPONSIBLE FOR RECITALS, ETC.

         The recitals contained herein and in the Certificates shall be taken as
the statements of the Company and the Agent assumes no responsibility for their
accuracy. The Agent makes no representations as to the validity or sufficiency
of either this Agreement or of the Units, or of the Pledge Agreement or the
Pledge. The Agent shall not be accountable for the use or application by the
Company of the proceeds in respect of the Purchase Contracts.

SECTION 7.5 MAY HOLD UNITS AND OTHER DEALINGS.

         Any Registrar or any other agent of the Company, or the Agent and its
Affiliates, in their individual or any other capacity, may become the owner or
pledgee of Units and may otherwise deal with the Company, the Collateral Agent
or any other Person with the same rights it would have if it were not Registrar
or such other agent, or the Agent. The Agent and its Affiliates may (without
having to account therefor to the Company or any Holder of Units or holder of
Separate Notes) accept deposits from, lend money to, make their investments in
and generally engage in any kind of banking, trust or other business with the
Company, any Holder of Units and any holder of Separate Notes (and any of their
respective subsidiaries or Affiliates) as if it were not acting as the Agent and
the Agent and their Affiliates may accept fees and other consideration from the
Company, any Holder of Units or any holder of Separate Notes without having to
account for the same to any such Person.

SECTION 7.6 MONEY HELD IN CUSTODY.

         Money held by the Agent in custody hereunder need not be segregated
from the Agent's other funds except to the extent required by law or provided
herein. The Agent shall be under no obligation to invest or pay interest on any
money received by it hereunder except as otherwise agreed in writing with the
Company.

SECTION 7.7 COMPENSATION AND REIMBURSEMENT.

         The Company agrees:

         (a) to pay to the Agent from time to time compensation for all services
rendered by it hereunder as shall be agreed in writing between the Company and
the Agent;

         (b) except as otherwise expressly provided herein, to reimburse the
Agent upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Agent in accordance with any provision of this Agreement
(including the reasonable compensation and the reasonable expenses and
disbursements of its agents and counsel), except any such expense,

                                       55


disbursement or advance as may be attributable to its negligence, willful
misconduct or bad faith; and

         (c) to indemnify the Agent and any predecessor Agent for, and to hold
it harmless against, any loss, liability or reasonable out-of-pocket expense
incurred without negligence, willful misconduct or bad faith on its part,
arising out of or in connection with the acceptance or administration of its
duties hereunder, including the costs and expenses (including reasonable fees
and expenses of counsel) of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties under
this Agreement. The Agent shall each promptly notify the Company of any third
party claim which may give rise to the indemnity hereunder and give the Company
the opportunity to participate in the defense of such claim with counsel
reasonably satisfactory to the indemnified party, and no such claim shall be
settled without the written consent of the Company, which consent shall not be
unreasonably withheld.

         "Agent" for purposes of this Section 7.7 shall include any predecessor
Agent; provided, however, that the negligence or bad faith of any Agent
hereunder shall not affect the rights of any other Agent hereunder.

         When the Agent incurs expenses or renders services in an action or
proceeding commenced pursuant to Section 4.3 of the Pledge Agreement upon the
occurrence of a Termination Event, the expenses (including the reasonable
charges and expenses of its counsel) and the compensation for the services are
intended to constitute expenses of administration under any applicable federal
or state bankruptcy, insolvency or other similar law.

         The provisions of this Section 7.7 shall survive the termination of
this Agreement and the Pledge Agreement.

SECTION 7.8 CORPORATE AGENT REQUIRED; ELIGIBILITY.

         There shall at all times be an Agent hereunder which shall be (i) not
an Affiliate of the Company and (ii) a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to exercise corporate trust
powers, having (or being a member of a bank holding company having) a combined
capital and surplus of at least $50,000,000 and subject to supervision or
examination by federal or state authority and having a Corporate Trust Office in
the Borough of Manhattan, The City of New York, if there be such a corporation,
qualified and eligible under this Article and willing to act on reasonable
terms. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Agent shall cease to be eligible in accordance with the provisions
of this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.

                                       56


SECTION 7.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

         (a) No resignation or removal of the Agent and no appointment of a
successor Agent pursuant to this Article shall become effective until the
acceptance of appointment by the successor Agent in accordance with the
applicable requirements of Section 7.10.

         (b) The Agent may resign at any time by giving written notice thereof
to the Company 60 days prior to the effective date of such resignation. If the
instrument of acceptance by a successor Agent required by Section 7.10 shall not
have been delivered to the Agent within 30 days after the giving of such notice
of resignation, the resigning Agent may petition any court of competent
jurisdiction for the appointment of a successor Agent.

         (c) The Agent may be removed at any time by Act of the Holders of a
majority in number of the Outstanding Units delivered to the Agent and the
Company.

         (d) If at any time:

                  (1) the Agent fails to comply with Section 310(b) of the TIA,
after written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Unit for at least six months; or

                  (2) the Agent shall cease to be eligible under Section 7.8 and
shall fail to resign after written request therefor by the Company or by any
such Holder; or

                  (3) the Agent shall become incapable of acting or shall be
adjudged bankrupt or insolvent or a receiver of the Agent or of its property
shall be appointed or any public officer shall take charge or control of the
Agent or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;

then, in any such case, (x) the Company by a Board Resolution may remove the
Agent, or (y) any Holder who has been a bona fide Holder of a Unit for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Agent and the
appointment of a successor Agent.

         (e) If the Agent shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the Corporate Trust Office of the Agent
for any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Agent and shall comply with the applicable requirements of Section
7.10. If no successor Agent shall have been so appointed by the Company and
accepted appointment in the manner required by Section 7.10, the Agent or any
Holder who has been a bona fide Holder of a Unit for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Agent.

         (f) The Company shall give, or shall cause such successor Agent to
give, notice of each resignation and each removal of the Agent and each
appointment of a successor Agent by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders as their names and addresses
appear in the applicable Register. Each notice shall include the name of the
successor Agent and the address of its Corporate Trust Office.

                                       57


         (g) If the Agent has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the TIA, the Agent and the Company shall in all
respects comply with the provisions of Section 310(b) of the TIA.

SECTION 7.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

         (a) In case of the appointment hereunder of a successor Agent, every
such successor Agent so appointed shall execute, acknowledge and deliver to the
Company and to the retiring Agent an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Agent shall become
effective and such successor Agent, without any further act, deed or conveyance,
shall become vested with all the rights, powers, agencies and duties of the
retiring Agent; but, on the request of the Company or the successor Agent, such
retiring Agent shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Agent all the rights, powers and
trusts of the retiring Agent and shall duly assign, transfer and deliver to such
successor Agent all property and money held by such retiring Agent hereunder.

         (b) Upon request of any such successor Agent, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Agent all such rights, powers and agencies referred to in
paragraph (a) of this Section.

         (c) No successor Agent shall accept its appointment unless at the time
of such acceptance such successor Agent shall be qualified and eligible under
this Article.

SECTION 7.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

         Any Person into which the Agent may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Agent shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Agent, shall be the successor of the Agent hereunder, provided such Person shall
be otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
In case any Certificates shall have been authenticated and executed on behalf of
the Holders, but not delivered, by the Agent then in office, any successor by
merger, conversion or consolidation to such Agent shall adopt such
authentication and execution and deliver the Certificates so authenticated and
executed with the same effect as if such successor Agent had itself
authenticated and executed such Units.

SECTION 7.12 PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.

         (a) The Agent shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders received by the Agent in its
capacity as Registrar.

         (b) If three or more Holders (herein referred to as "Applicants") apply
in writing to the Agent, and furnish to the Agent reasonable proof that each
such applicant has owned a Unit for a period of at least six months preceding
the date of such application, and such application states that the applicants
desire to communicate with other Holders with respect to their rights under this
Agreement or under the Units and is accompanied by a copy of the form of proxy
or other communication which such applicants propose to transmit, then the Agent
shall mail to all

                                       58


the Holders copies of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Agent of the materials to be mailed and of payment, or provision for the
payment, of the reasonable expenses of such mailing.

SECTION 7.13 NO OBLIGATIONS OF AGENT.

         Except to the extent otherwise provided in this Agreement or the Pledge
Agreement, the Agent assumes no obligation and shall not be subject to any
liability under this Agreement, the Pledge Agreement or any Purchase Contract in
respect of the obligations of the Holder of any Unit thereunder. The Company
agrees, and each Holder of a Certificate, by such Holder's acceptance thereof,
shall be deemed to have agreed, that the Agent's execution of the Certificates
on behalf of the Holders shall be solely as agent and attorney-in-fact for the
Holders, and that the Agent shall have no obligation to perform such Purchase
Contracts on behalf of the Holders, except to the extent expressly provided in
Article V.

SECTION 7.14 TAX COMPLIANCE.

         (a) The Agent, on its own behalf and on behalf of the Company, will
comply with all applicable certification, information reporting and withholding
(including "backup" withholding) requirements imposed by applicable tax laws,
regulations or administrative practice with respect to (i) any payments made
with respect to the Units or (ii) the issuance, delivery, holding, transfer,
redemption or exercise of rights under the Units. Such compliance shall include,
without limitation, the preparation and timely filing of required returns and
the timely payment of all amounts required to be withheld to the appropriate
taxing authority or its designated agent.

         (b) The Agent shall comply with any written direction received from the
Company with respect to the application of such requirements to particular
payments or Holders or in other particular circumstances, and may for purposes
of this Agreement conclusively rely on any such direction in accordance with the
provisions of Section 7.1(a)(2).

         (c) The Agent shall maintain all appropriate records documenting
compliance with such requirements, and shall make such records available, on
written request, to the Company or its authorized representative within a
reasonable period of time after receipt of such request.

                                  ARTICLE VIII.

                             SUPPLEMENTAL AGREEMENTS

SECTION 8.1 SUPPLEMENTAL AGREEMENTS WITHOUT CONSENT OF HOLDERS.

         Without the consent of any Holders, the Company and the Agent, at any
time and from time to time, may enter into one or more agreements supplemental
hereto, in form satisfactory to the Company and the Agent, for any of the
following purposes:

         (a) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company herein and
in the Certificates; or

                                       59


         (b) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Company;
or

         (c) to evidence and provide for the acceptance of appointment hereunder
by a successor Agent; or

         (d) to make provision with respect to the rights of Holders pursuant to
the requirements of Section 5.6(b) or 5.10; or

         (e) to cure any ambiguity, to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein, or to make
any other provisions with respect to such matters or questions arising under
this Agreement, provided such action shall not adversely affect the interests of
the Holders.

SECTION 8.2 SUPPLEMENTAL AGREEMENTS WITH CONSENT OF HOLDERS.

         (a) With the consent of the Holders of not less than a majority of the
outstanding Purchase Contracts voting together as one class, by Act of said
Holders delivered to the Company and the Agent, the Company, when authorized by
a Board Resolution, and the Agent may enter into an agreement or agreements
supplemental hereto for the purpose of modifying in any manner the terms of the
Purchase Contracts, or the provisions of this Agreement or the rights of the
Holders in respect of the Units; provided, however, that, except as contemplated
herein, no such supplemental agreement shall, without the consent of the Holder
of each Outstanding Unit affected thereby:

                  (1) change any Payment Date;

                  (2) change the amount or the type of Collateral required to be
Pledged to secure a Holder's obligations under the Purchase Contract, impair the
right of the Holder of any Purchase Contract to receive distributions on the
related Collateral (except for the rights of Holders of Normal Units to
substitute the Treasury Securities for the Pledged Notes, Pledged Treasury
Consideration or Pledged Applicable Ownership Interest in the Treasury
Portfolio, or the rights of holders of Stripped Units to substitute Notes or
appropriate Treasury Consideration or Applicable Ownership Interest in the
Treasury Portfolio for the Pledged Treasury Securities) or otherwise materially
adversely affect the Holder's rights in or to such Collateral;

                  (3) reduce any Contract Adjustment Payments, if any, or any
Deferred Contract Adjustment Payment, or change any place where, or the coin or
currency in which, any Contract Adjustment Payment is payable or increase any
amounts payable by Holders in respect of the Units or decrease any other amounts
receivable by Holders in respect of the Units;

                  (4) impair the right to institute suit for the enforcement of
any Purchase Contract, any Contract Adjustment Payment, if any, or any Deferred
Contract Adjustment Payment, if any;

                  (5) reduce the number of shares of Common Stock to be
purchased pursuant to any Purchase Contract, increase the price to purchase
shares of Common Stock upon

                                       60


settlement of any Purchase Contract, change the Stock Purchase Date or otherwise
materially adversely affect the Holder's rights under any Purchase Contract; or

                  (6) reduce the percentage of the outstanding Purchase
Contracts the consent of whose Holders is required for any such supplemental
agreement;

provided, that if any amendment or proposal referred to above would adversely
affect only the Normal Units or the Stripped Units, then only the affected class
of Holders as of the record date for the Holders entitled to vote thereon will
be entitled to vote on or consent to such amendment or proposal, and such
amendment or proposal shall not be effective except with the consent of Holders
of not less than a majority of such class; provided further, however, that no
such agreement, whether with or without the consent of Holders, shall affect
Section 3.16.

         (b) It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental agreement, but it
shall be sufficient if such Act shall approve the substance thereof.

SECTION 8.3 EXECUTION OF SUPPLEMENTAL AGREEMENTS.

         In executing, or accepting the additional agencies created by, any
supplemental agreement permitted by this Article or the modifications thereby of
the agencies created by this Agreement, the Agent shall be entitled to receive
and (subject to Section 7.1) shall be fully protected in relying upon, an
Officer's Certificate and Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this Agreement. The Agent
may, but shall not be obligated to, enter into any such supplemental agreement
which affects the Agent's own rights, duties or immunities under this Agreement
or otherwise.

SECTION 8.4 EFFECT OF SUPPLEMENTAL AGREEMENTS.

         Upon the execution of any supplemental agreement under this Article,
this Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Agreement for all purposes; and every Holder
of Certificates theretofore or thereafter authenticated, executed on behalf of
the Holders and delivered hereunder shall be bound thereby.

SECTION 8.5 REFERENCE TO SUPPLEMENTAL AGREEMENTS.

         Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any supplemental agreement pursuant to this
Article may, and shall if required by the Agent, bear a notation in form
approved by the Agent as to any matter provided for in such supplemental
agreement. If the Company shall so determine, new Certificates so modified as to
conform, in the opinion of the Agent and the Company, to any such supplemental
agreement may be prepared and executed by the Company and authenticated,
executed on behalf of the Holders and delivered by the Agent in exchange for
Outstanding Certificates.

                                       61


                                   ARTICLE IX.

                    CONSOLIDATION, MERGER, SALE OR CONVEYANCE

SECTION 9.1 COVENANT NOT TO MERGE, CONSOLIDATE, SELL OR CONVEY PROPERTY EXCEPT
            UNDER CERTAIN CONDITIONS.

         The Company covenants that it will not (a) merge with or into or
consolidate with any other Person or (b) sell, assign, transfer, lease or convey
all or substantially all of its properties and assets to any Person or group of
affiliated Persons in one transaction or a series of related transactions,
unless (i) either the Company shall be the continuing entity, or the successor
(if other than the Company) shall be a Person, other than an individual,
organized and existing under the laws of the United States of America or a State
thereof or the District of Columbia and such corporation shall expressly assume
all the obligations of the Company under this Agreement, the Purchase Contracts,
the Remarketing Agreement and the Pledge Agreement by one or more supplemental
agreements in form reasonably satisfactory to the Agent and the Collateral
Agent, executed and delivered to the Agent and the Collateral Agent by such
Person, and (ii) the Company or such successor, as the case may be, shall not,
immediately after such merger or consolidation, or such sale, assignment,
transfer, lease or conveyance, be in default in the performance of any covenant
or condition hereunder, under any of the Purchase Contracts, under the
Remarketing Agreement, or under the Pledge Agreement.

SECTION 9.2 RIGHTS AND DUTIES OF SUCCESSOR ENTITY.

         (a) In case of any such consolidation, merger, sale, assignment,
transfer, lease or conveyance and upon any such assumption by a successor entity
in accordance with Section 9.1, such successor corporation shall succeed to and
be substituted for the Company with the same effect as if it had been named
herein as the Company. Such successor Person thereupon may cause to be signed,
and may issue either in its own name or in the name of the Company, any or all
of the Certificates evidencing Units issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Agent; and, upon the
order of such successor corporation, instead of the Company, and subject to all
the terms, conditions and limitations in this Agreement prescribed, the Agent
shall authenticate and execute on behalf of the Holders and deliver any
Certificates which previously shall have been signed and delivered by the
officers of the Company to the Agent for authentication and execution, and any
Certificate evidencing Units which such successor entity thereafter shall cause
to be signed and delivered to the Agent for that purpose. All the Certificates
so issued shall in all respects have the same legal rank and benefit under this
Agreement as the Certificates theretofore or thereafter issued in accordance
with the terms of this Agreement as though all of such Certificates had been
issued at the date of the execution hereof.

         (b) In case of any such consolidation, merger, sale, assignment,
transfer, lease or conveyance such change in phraseology and form (but not in
substance) may be made in the Certificates evidencing Units thereafter to be
issued as may be appropriate.

                                       62


SECTION 9.3 OPINION OF COUNSEL GIVEN TO AGENT.

         The Agent, subject to Sections 7.1 and 7.3, shall receive an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale,
assignment, transfer, lease or conveyance, and any such assumption, complies
with the provisions of this Article and that all conditions precedent to the
consummation of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance have been met.

                                   ARTICLE X.

                                   COVENANTS

SECTION 10.1 PERFORMANCE UNDER PURCHASE CONTRACTS.

         The Company covenants and agrees for the benefit of the Holders from
time to time of the Units that it will duly and punctually perform its
obligations under the Purchase Contracts in accordance with the terms of the
Purchase Contracts and this Agreement.

SECTION 10.2 MAINTENANCE OF OFFICE OR AGENCY.

         (a) The Company will maintain in the Borough of Manhattan, The City of
New York an office or agency where Certificates may be presented or surrendered
for acquisition of shares of Common Stock upon settlement of the Purchase
Contracts on any Settlement Date and for transfer of Collateral upon occurrence
of a Termination Event, where Certificates may be surrendered for registration
of transfer or exchange, for a Collateral Substitution or re-establishment of
Normal Units and where notices and demands to or upon the Company in respect of
the Units and this Agreement may be served. The Company will give prompt written
notice to the Agent of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Agent with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office, and the Company hereby appoints the Agent
as its agent to receive all such presentations, surrenders, notices and demands.

         (b) The Company may also from time to time designate one or more other
offices or agencies where Certificates may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Agent of any such designation or rescission
and of any change in the location of any such other office or agency. The
Company hereby designates as the place of payment for the Units the Corporate
Trust Office and appoints the Agent at its Corporate Trust Office as paying
agent in such city.

SECTION 10.3 COMPANY TO RESERVE COMMON STOCK.

         The Company shall at all times prior to the Stock Purchase Date reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Stock the full

                                       63


number of shares of Common Stock issuable against tender of payment in respect
of all Purchase Contracts constituting a part of the Units evidenced by
Outstanding Certificates.

SECTION 10.4 COVENANTS AS TO COMMON STOCK.

         The Company covenants that all shares of Common Stock which may be
issued against tender of payment in respect of any Purchase Contract
constituting a part of the Outstanding Units will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable.

                                   ARTICLE XI.

                               TRUST INDENTURE ACT

SECTION 11.1 TRUST INDENTURE ACT; APPLICATION.

         (a) This Agreement is subject to the provisions of the TIA that are
required or deemed to be part of this Agreement and shall, to the extent
applicable, be governed by such provisions; and

         (b) if and to the extent that any provision of this Agreement limits,
qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive,
of the TIA, such imposed duties shall control.

SECTION 11.2 LISTS OF HOLDERS OF SECURITIES.

         (a) The Company shall furnish or cause to be furnished to the Agent (a)
semiannually, not later than __________ and __________ in each year, commencing
__________, a list, in such form as the Agent may reasonably require, of the
names and addresses of the Holders ("List of Holders") as of a date not more
than 15 days prior to the delivery thereof, and (b) at such other times as the
Agent may request in writing, within 30 days after the receipt by the Company of
any such request, a List of Holders as of a date not more than 15 days prior to
the time such list is furnished; provided that, the Company shall not be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Agent by the
Company. The Agent may destroy any List of Holders previously given to it on
receipt of a new List of Holders.

         (b) The Agent shall comply with its obligations under Section 311(a) of
the TIA, subject to the provisions of Section 311(b) and Section 312(b) of the
TIA.

SECTION 11.3 REPORTS BY THE AGENT.

         Not later than __________ of each year, commencing __________ , ____,
the Agent shall provide to the Holders such reports, if any, as are required by
Section 313(a) of the TIA in the form and in the manner provided by Section
313(a) of the TIA. Such reports shall be as of the preceding __________. The
Agent shall also comply with the requirements of Sections 313(b), (c) and (d) of
the TIA.

                                       64


SECTION 11.4 PERIODIC REPORTS TO AGENT.

         The Company shall provide to the Agent such documents, reports and
information as required by Section 314(a) (if any) and the compliance
certificate required by Section 314(a) of the TIA in the form, in the manner and
at the times required by Section 314(a) of the TIA.

SECTION 11.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

         The Company shall provide to the Agent such evidence of compliance with
any conditions precedent provided for in this Agreement as and to the extent
required by Section 314(c) of the TIA. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) of the TIA may be given in the
form of a Company Certificate. Any opinion required to be given pursuant to
Section 314(c)(2) of the TIA may be given in the form of an Opinion of Counsel.

SECTION 11.6 DEFAULTS; WAIVER.

         The Holders of a majority of the outstanding Purchase Contracts voting
together as one class may, by vote or consent, on behalf of all of the Holders,
waive any past Default and its consequences, except a Default

         (a) any payment on any Unit, or

         (b) in respect of a provision hereof which under Section 8.2 cannot be
modified or amended without the consent of the Holder of each Outstanding Unit
affected.

Upon such waiver, any such Default shall cease to exist, and any Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Agreement, but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.

SECTION 11.7 AGENT'S KNOWLEDGE OF DEFAULTS.

         The Agent shall not be deemed to have knowledge of any Default unless a
Responsible Officer shall have obtained written notice of such Default.

SECTION 11.8 CONFLICTING INTERESTS.

         The Indenture shall be deemed to be specifically described in this
Agreement for the purposes of clause (i) of the first proviso contained in
Section 310(b) of the TIA.

SECTION 11.9 DIRECTION OF AGENT.

         Sections 315(d)(3) and 316(a)(1)(A) of the TIA are hereby expressly
excluded from this Agreement, as permitted by the TIA.

                                       65


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

                                         PINNACLE WEST CAPITAL CORPORATION

                                         By:____________________________________
                                              Name:
                                              Title:

                                         _________________,
                                         as Purchase Contract Agent and Trustee

                                         By:____________________________________
                                              Name:
                                              Title:

                                       66

\
                                                                       EXHIBIT A

                        FORM OF NORMAL UNITS CERTIFICATE

                       (Form of Global Certificate Legend)

         [THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN THE
NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO TRANSFER OF
THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT.

         Unless this Certificate is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the
Company or its agent for registration of transfer, exchange or payment, and any
Certificate issued is registered in the name of Cede & Co., or such other name
as requested by an authorized representative of The Depository Trust Company,
and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.]

                        PINNACLE WEST CAPITAL CORPORATION

                   (Form of Face of Normal Units Certificate)
                               ____% Normal Units
                             ($_____ Stated Amount)

No._____
CUSIP No. __________

Number of Normal Units_____

         This Normal Units Certificate certifies that ________ is the registered
Holder of the number of Normal Units set forth above. Each Normal Unit
represents (i) either (a) beneficial ownership by the Holder of one Note due
_______________ (the "Note") of Pinnacle West Capital Corporation, an Arizona
corporation (the "Company"), having a principal amount of $_______, subject to
the Pledge of such Note by such Holder pursuant to the Pledge Agreement, (b) if
the Note has been remarketed by the Remarketing Agent (or if the Holder has
elected not to have the Note remarketed by delivering the appropriate Treasury
Consideration specified by the Remarketing Agent), the appropriate Treasury
Consideration, subject to the Pledge of such Treasury Consideration by such
Holder pursuant to the Pledge Agreement, or (c) if a Tax Event Redemption has
occurred, the appropriate Applicable Ownership Interest in the Treasury
Portfolio subject to the Pledge of such Applicable Ownership Interest in the
Treasury Portfolio pursuant to the Pledge Agreement, and (ii) the rights and
obligations of the Holder under one Purchase Contract with the Company. All
capitalized terms used herein which are defined in the Purchase Contract
Agreement have the meaning set forth therein.

                                      A-1


         Pursuant to the Pledge Agreement, the Note or the appropriate Treasury
Consideration or Applicable Ownership Interest in the Treasury Portfolio, as the
case may be, forming a part of each Normal Unit evidenced hereby has been
pledged to the Collateral Agent, for the benefit of the Company, to secure the
obligations of the Holder under the Purchase Contract comprising a part of such
Normal Unit to purchase the Common Stock of the Company. Prior to the purchase
of shares of Common Stock under each Purchase Contract, such Purchase Contracts
shall not entitle the Holders of Normal Units Certificates to any of the rights
of a holder of shares of Common Stock, including, without limitation, the right
to vote or receive any dividends or other payments or to consent or to receive
notice as stockholders in respect of the meetings of stockholders or for the
election of directors of the Company or for any other matter, or any other
rights whatsoever as stockholders of the Company.

         The Pledge Agreement provides that all payments in respect of the
Pledged Notes, Pledged Treasury Consideration or Pledged Applicable Ownership
Interest in the Treasury Portfolio received by the Collateral Agent shall be
paid by the Collateral Agent by wire transfer in same day funds (i) in the case
of (A) quarterly cash distributions on Normal Units which include Pledged Notes,
Pledged Treasury Consideration or any Pledged Applicable Ownership Interest in
the Treasury Portfolio and (B) any payments in respect of the Notes, Treasury
Consideration or Applicable Ownership Interest in the Treasury Portfolio, as the
case may be, that have been released from the Pledge pursuant to the Pledge
Agreement, to the Agent to the account designated by the Agent, no later than
10:00 a.m., New York City time, on the Business Day such payment is received by
the Collateral Agent (provided that in the event such payment is received by the
Collateral Agent on a day that is not a Business Day or after 9:00 a.m., New
York City time, on a Business Day, then such payment shall be made no later than
9:30 a.m., New York City time, on the next succeeding Business Day) and (ii) in
the case of payments in respect of any Pledged Notes, Pledged Treasury
Consideration or Pledged Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, to be paid upon settlement of such Holder's
obligations to purchase Common Stock under the Purchase Contract, to the Company
on the Stock Purchase Date (as defined herein) in accordance with the terms of
the Pledge Agreement, in full satisfaction of the respective obligations of the
Holders of the Normal Units of which such Pledged Notes, Pledged Treasury
Consideration or Pledged Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, are a part under the Purchase Contracts forming a
part of such Normal Units. Quarterly distributions on Normal Units which include
Pledged Notes, Pledged Treasury Consideration or Pledged Applicable Ownership
Interest in the Treasury Portfolio, as the case may be, which are payable
quarterly in arrears on ______, ______, ______, and ______ each year, commencing
_______________ (a "Payment Date"), shall, subject to receipt thereof by the
Agent from the Collateral Agent, be paid to the Person in whose name this Normal
Units Certificate (or a Predecessor Normal Units Certificate) is registered at
the close of business on the Record Date for such Payment Date.

         Each Purchase Contract evidenced hereby, unless an Early Settlement has
occurred or a Merger Early Settlement has occurred, obligates the Holder of this
Normal Units Certificate to purchase, and the Company to sell, on
_______________ (the "Stock Purchase Date"), at a price equal to $______ (the
"Stated Amount"), a number of newly issued shares of Common Stock, no par value
("Common Stock"), of the Company, equal to the Settlement Rate, unless, on or
prior to the Stock Purchase Date, there shall have occurred a Termination Event
with respect to the Normal Units of which such Purchase Contract is a part, all
as provided in the Purchase Contract

                                      A-2


Agreement and more fully described on the reverse hereof. The Purchase Price (as
defined herein) for the shares of Common Stock purchased pursuant to each
Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the
Stock Purchase Date by application of payments received in respect of the
Pledged Notes, Pledged Treasury Consideration or Pledged Applicable Ownership
Interest in the Treasury Portfolio, as the case may be, pledged to secure the
obligations of the Holder under such Purchase Contract in accordance with the
terms of the Pledge Agreement.

         Payments on the Notes or the appropriate Treasury Consideration or
Applicable Ownership Interest in the Treasury Portfolio, as the case may be,
will be payable at the office of the Agent in The City of New York, New York or,
at the option of the Company, by check mailed to the address of the Person
entitled thereto as such address appears on the Normal Units Register or by wire
transfer to an account specified by the Company.

         The Company shall pay on each Payment Date in respect of each Purchase
Contract forming part of a Normal Unit evidenced hereby an amount (the "Contract
Adjustment Payments") equal to ____% per year of the Stated Amount, computed on
the basis of a 360-day year of twelve 30-day months, subject to deferral at the
option of the Company as provided in the Purchase Contract Agreement and more
fully described on the reverse hereof (provided that if any date on which
Contract Adjustment Payments are to be made on the Purchase Contracts is not a
Business Day, then payment of such Contract Adjustment Payments payable on that
date will be made on the next succeeding day which is a Business Day, and no
interest or payment will be paid in respect of such delay, except that if such
next succeeding Business Day is in the next succeeding calendar year, then such
payment will be made on the immediately preceding Business Day). Such Contract
Adjustment Payments shall be payable to the Person in whose name this Normal
Units Certificate (or a Predecessor Normal Units Certificate) is registered at
the close of business on the Record Date for such Payment Date.

         Contract Adjustment Payments will be payable at the office of the Agent
in The City of New York, New York or, at the option of the Company, by check
mailed to the address of the Person entitled thereto as such address appears on
the Normal Units Register.

         Reference is hereby made to the further provisions 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 Agent by manual signature, this Normal Units Certificate shall not be
entitled to any benefit under the Pledge Agreement or the Purchase Contract
Agreement or be valid or obligatory for any purpose.

                                      A-3


         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

                                       PINNACLE WEST CAPITAL CORPORATION

                                       By:______________________________________
                                              Name:
                                              Title:

                                       HOLDER SPECIFIED ABOVE (as to obligations
                                       of such Holder under the Purchase
                                       Contracts evidenced hereby)

                                       By:_______________, not individually
                                          but solely as Attorney-in-Fact of such
                                          Holder

                                       By:______________________________________
                                              Name:
                                              Title:

                                      A-4


                      AGENT'S CERTIFICATE OF AUTHENTICATION

         This is one of the Normal Units Certificates referred to in the
within-mentioned Purchase Contract Agreement.

Dated:                                 __________________,
                                       as Purchase Contract Agent and Trustee

                                       By:______________________________________
                                                 Authorized Signatory

                                      A-5


                  (FORM OF REVERSE OF NORMAL UNITS CERTIFICATE)

         Each Purchase Contract evidenced hereby is governed by a Purchase
Contract Agreement, dated as of _______________ (as may be supplemented from
time to time, the "Purchase Contract Agreement"), between the Company and
_______________, as Purchase Contract Agent (including its successors
thereunder, herein called the "Agent"), to which the Purchase Contract Agreement
and supplemental agreements thereto reference is hereby made for a description
of the respective rights, limitations of rights, obligations, duties and
immunities thereunder of the Agent, the Company, and the Holders and of the
terms upon which the Normal Units Certificates are, and are to be, executed and
delivered.

         Each Purchase Contract evidenced hereby obligates the Holder of this
Normal Units Certificate to purchase, and the Company to sell, on the Stock
Purchase Date at a price equal to $__________ (the "Purchase Price"), a number
of shares of Common Stock of the Company equal to the Settlement Rate, unless,
on or prior to the Stock Purchase Date, there shall have occurred a Termination
Event or a Cash Settlement, Early Settlement or Merger Early Settlement with
respect to the Unit of which such Purchase Contract is a part. The "Settlement
Rate" is equal to (a) if the Applicable Market Value (as defined below) is equal
to or greater than $____ (the "Threshold Appreciation Price"), ______ shares of
Common Stock per Purchase Contract, (b) if the Applicable Market Value is less
than the Threshold Appreciation Price, but is greater than $____, the number of
shares of Common Stock per Purchase Contract equal to the Stated Amount divided
by the Applicable Market Value and (c) if the Applicable Market Value is less
than or equal to $____, ______ shares of Common Stock per Purchase Contract, in
each case subject to adjustment as provided in the Purchase Contract Agreement.
No fractional shares of Common Stock will be issued upon settlement of Purchase
Contracts, as provided in the Purchase Contract Agreement.

         The "Applicable Market Value" means the average of the Closing Price
per share of Common Stock on each of the 20 consecutive Trading Days ending on
the third Trading Day immediately preceding the Stock Purchase Date or, in the
event of a Cash Merger, the Cash Merger Date.

         The "Closing Price" of the Common Stock on any date of determination
means the closing sale price per share (or, if no closing sale price is
reported, the last reported sale price) of the Common Stock on the New York
Stock Exchange (the "NYSE") on such date or, if the Common Stock is not listed
for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by The Nasdaq Stock
Market, or if the Common Stock is not so reported, the last quoted bid price for
the Common Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if such bid price is not available,
the market value of the Common Stock on such date as determined by a nationally
recognized independent investment banking firm retained by the Company for this
purpose.

         A "Trading Day" means a day on which the Common Stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market

                                      A-6


at the close of business and (B) has traded at least once on the national or
regional securities exchange or association or over-the-counter market that is
the primary market for the trading of the Common Stock at the close of business
on such day.

         Each Purchase Contract evidenced hereby may be settled prior to the
Stock Purchase Date through Cash Settlement, Early Settlement or Merger Early
Settlement, in accordance with the terms of the Purchase Contract Agreement.

         In accordance with the terms of the Purchase Contract Agreement, the
Holder of this Normal Units Certificate shall pay the Purchase Price for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced
hereby (i) by effecting a Cash Settlement, Early Settlement or Merger Early
Settlement, (ii) by application of payments received in respect of the Pledged
Treasury Consideration acquired from the proceeds of a remarketing of the
related Pledged Notes underlying the Normal Units represented by this Normal
Units Certificate as contemplated by Section 5.4 of the Purchase Contract
Agreement, (iii) if the Holder has elected not to participate in such
remarketing, by application of payments received in respect of the Pledged
Treasury Consideration deposited by such Holder in respect of such Purchase
Contract or (iv) if a Tax Event Redemption has occurred prior to the successful
remarketing of the Notes as contemplated by Section 5.4 of the Purchase Contract
Agreement, by application of payments received in respect of the Pledged
Applicable Ownership Interest in the Treasury Portfolio purchased by the
Collateral Agent on behalf of the Holder of this Normal Units Certificate. If,
as provided in the Purchase Contract Agreement, upon the occurrence of a Last
Failed Remarketing, the Collateral Agent, for the benefit of the Company,
exercises its rights as a secured creditor with respect to the Pledged Notes
related to this Normal Units Certificate, any accrued and unpaid interest on
such Pledged Notes will become payable by the Company to the Holder of this
Normal Units Certificate in the manner provided for in the Purchase Contract
Agreement.

         The Company shall not be obligated to issue any shares of Common Stock
in respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless the Company shall have received payment in full of the aggregate
Purchase Price for the shares of Common Stock to be purchased thereunder in the
manner herein set forth.

         Under and subject to the terms of the Pledge Agreement and the Purchase
Contract Agreement, the Agent will be entitled to exercise the voting and any
other consensual rights pertaining to the Pledged Notes, but only to the extent
instructed by the Holders as described below. Upon receipt of notice of any
meeting at which holders of Notes are entitled to vote or upon the solicitation
of consents, waivers or proxies of holders of Notes, the Agent shall, as soon as
practicable thereafter, mail to the Holders of Normal Units a notice (a)
containing such information as is contained in the notice or solicitation, (b)
stating that each such Holder on the record date set by the Agent therefor
(which, to the extent possible, shall be the same date as the record date for
determining the holders of Notes entitled to vote) shall be entitled to instruct
the Agent as to the exercise of the voting rights pertaining to the Pledged
Notes constituting a part of such Holder's Normal Units and (c) stating the
manner in which such instructions may be given. Upon the written request of the
Holders of Normal Units on such record date, the Agent shall endeavor insofar as
practicable to vote or cause to be voted, in accordance with the instructions
set forth in such requests, the maximum number of Pledged Notes as to which any
particular

                                      A-7


voting instructions are received. In the absence of specific instructions from
the Holder of a Normal Unit, the Agent shall abstain from voting the Pledged
Note evidenced by such Normal Unit.

         The Normal Units Certificates are issuable only in registered form and
only in denominations of a single Normal Unit and any integral multiple thereof.
The transfer of any Normal Units Certificate will be registered and Normal Units
Certificates may be exchanged as provided in the Purchase Contract Agreement.
The Normal Units Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents permitted by the Purchase
Contract Agreement. No service charge shall be made for any such registration of
transfer or exchange of a Normal Units Certificate, but the Company and the
Agent may require payment from the Holder of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Certificates, other than any exchanges
not involving any transfer as provided for in the Purchase Contract Agreement.
The Holder of a Normal Unit may substitute for the Pledged Notes, Pledged
Treasury Consideration or Pledged Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, securing its obligations under the related
Purchase Contract Treasury Securities in accordance with the terms of the
Purchase Contract Agreement and the Pledge Agreement. From and after such
Collateral Substitution, the Unit for which such Pledged Treasury Securities
secures the Holder's obligation under the Purchase Contract shall be referred to
as a "Stripped Unit." A Holder that elects to substitute a Treasury Security for
Pledged Notes, Pledged Treasury Consideration or Pledged Applicable Ownership
Interest in the Treasury Portfolio, as the case may be, thereby creating
Stripped Units, shall be responsible for any fees or expenses payable in
connection therewith. Except as provided in the Purchase Contract Agreement, for
so long as the Purchase Contract underlying a Normal Unit remains in effect,
such Normal Unit shall not be separable into its constituent parts, and the
rights and obligations of the Holder of such Normal Units in respect of the
Pledged Note, Pledged Treasury Consideration or Pledged Applicable Ownership
Interest in the Treasury Portfolio, as the case may be, and the Purchase
Contract comprising such Normal Unit may be acquired, and may be transferred and
exchanged, only as a Normal Unit.

         A Holder of Stripped Units may reestablish Normal Units at any time
from and after the date of the Purchase Contract Agreement and on or prior to
the second Business Day immediately preceding the Stock Purchase Date by
depositing with the Collateral Agent Notes or the appropriate Treasury
Consideration or Applicable Ownership Interest in the Treasury Portfolio, as the
case may be, in exchange for the release of the Pledged Treasury Securities in
accordance with the terms of the Purchase Contract Agreement and the Pledge
Agreement.

         Subject to the next succeeding paragraph, the Company shall pay, on
each Payment Date, the Contract Adjustment Payments, if any, payable in respect
of each Purchase Contract to the Person in whose name the Normal Units
Certificate (or one or more Predecessor Normal Units Certificates) evidencing
such Purchase Contract is registered on the Normal Units Register at the close
of business on the Record Date next preceding such Payment Date. The Contract
Adjustment Payments, if any, will be payable at the Corporate Trust Office or,
at the option of the Company, by check mailed to the address of the Person
entitled thereto at such Person's address as it appears on the Normal Units
Register or by wire transfer to an account appropriately designated by a prior
written notice to such Person.

                                      A-8


         The Company shall have the right, at any time prior to the Stock
Purchase Date, to defer the payment of any or all of the Contract Adjustment
Payments otherwise payable on any Payment Date, but only if the Company shall
give the Holders and the Agent written notice of its election to defer each such
Contract Adjustment Payments as provided in the Purchase Contract Agreement. Any
Contract Adjustment Payments so deferred shall, to the extent permitted by law,
accrue additional Contract Adjustment Payments thereon at the rate of ____% per
year (computed on the basis of a 360-day year of twelve 30-day months),
compounding on each succeeding Payment Date, until paid in full (such deferred
installments of Contract Adjustment Payments, if any, together with the
additional Contract Adjustment Payments, if any, accrued thereon, are referred
to herein as the "Deferred Contract Adjustment Payments"). Deferred Contract
Adjustment Payments, if any, shall be due on the next succeeding Payment Date
except to the extent that payment is deferred pursuant to the Purchase Contract
Agreement. No Contract Adjustment Payments may be deferred to a date that is
after the Stock Purchase Date and no such deferral period may end other than on
a Payment Date.

         In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until a Payment Date prior to the
Stock Purchase Date, then all Deferred Contract Adjustment Payments, if any,
shall be payable to the registered Holders as of the close of business on the
Record Date immediately preceding such Payment Date.

         The Company's obligations with respect to Contract Adjustment Payments
(including any accrued or Deferred Contract Adjustment Payments) will be
subordinate and junior in right of payment to the Company's obligations under
any Senior Indebtedness.

         In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Stock Purchase Date, the
Holder of this Normal Units Certificate will receive on the Stock Purchase Date
in lieu of a cash payment a number of shares of Common Stock (in addition to the
number of shares of Common Stock equal to the Settlement Rate) equal to (i) the
aggregate amount of Deferred Contract Adjustment Payments payable to the Holder
of this Normal Units Certificate divided by (ii) the Applicable Market Value.

         In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, then until the Deferred Contract Adjustment
Payments have been paid, the Company shall not, and will not permit any
subsidiary of the Company to, declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of the Company's Capital Stock other than (i) purchases,
redemptions or acquisitions of shares of the Company's Capital Stock in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors or agents
or a stock purchase or dividend reinvestment plan, or the satisfaction by the
Company of its obligations pursuant to any contract or security outstanding on
the date the Company exercises its rights to defer the Contract Adjustment
Payments; (ii) as a result of a reclassification of the Company's Capital Stock
or the exchange or conversion of one class or series of the Company's Capital
Stock for another class or series of the Company's Capital Stock; (iii) the
purchase of fractional interests in shares of the Company's Capital Stock
pursuant to the conversion or exchange provisions of such Capital Stock or the
security being converted or exchanged; (iv) dividends or distributions in any
series
                                      A-9


of the Company's Capital Stock (or rights to acquire Capital Stock) or
repurchases, acquisitions or redemptions of the Company's Capital Stock in
connection with the issuance or exchange of any series of the Company's Capital
Stock (or securities convertible into or exchangeable for shares of the
Company's Capital Stock); or (v) redemptions, exchanges or repurchases of any
rights outstanding under a shareholder rights plan or the declaration or payment
thereunder of a dividend or distribution of or with respect to rights in the
future.

         The Purchase Contracts and all obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights of Holders
to receive accumulated Contract Adjustment Payments, if any, or any Deferred
Contract Adjustment Payments and obligations of the Holders to purchase Common
Stock, will immediately and automatically terminate, without the necessity of
any notice or action by any Holder, the Agent or the Company, if, on or prior to
the Stock Purchase Date, a Termination Event shall have occurred. Upon and after
the occurrence of a Termination Event, the Collateral Agent shall release the
Pledged Notes, Pledged Treasury Consideration or Pledged Applicable Ownership
Interest in the Treasury Portfolio, as the case may be, from the Pledge in
accordance with the provisions of the Pledge Agreement. Upon the occurrence of a
Termination Event, the Company shall promptly but in no event later than two
Business Days thereafter give written notice to the Agent, the Collateral Agent
and to the Holders, at their addresses as they appear in the Normal Units
Register.

         Upon registration of transfer of this Normal Units Certificate, the
transferee shall be bound (without the necessity of any other action on the part
of such transferee, except as may be required by the Agent pursuant to the
Purchase Contract Agreement), under the terms of the Purchase Contract
Agreement, the Purchase Contracts evidenced hereby and the Pledge Agreement and
the transferor shall be released from the obligations under the Purchase
Contract Agreement, the Purchase Contracts evidenced by this Normal Units
Certificate and the Pledge Agreement. The Company covenants and agrees, and the
Holder, by its acceptance hereof, likewise covenants and agrees, to be bound by
the provisions of this paragraph.

         The Holder of this Normal Units Certificate, by its acceptance hereof,
irrevocably authorizes the Agent to enter into and perform the related Purchase
Contracts forming part of the Normal Units evidenced hereby on its behalf as its
attorney-in-fact (including the execution of Certificates on behalf of such
Holder), agrees to be bound by the terms and provisions thereof, covenants and
agrees to perform its obligations under such Purchase Contracts, consents to the
provisions of the Purchase Contract Agreement, irrevocably authorizes the Agent
to enter into and perform the Pledge Agreement on such Holder's behalf as
attorney-in-fact, and consents to and agrees to be bound by the Pledge of the
Notes, the appropriate Treasury Consideration or Applicable Ownership Interest
in the Treasury Portfolio, as the case may be, underlying this Normal Units
Certificate pursuant to the Pledge Agreement. The Holder further covenants and
agrees, that, to the extent and in the manner provided in the Purchase Contract
Agreement and the Pledge Agreement, but subject to the terms thereof, payments
in respect of the Pledged Notes, Pledged Treasury Consideration or Pledged
Applicable Ownership Interest in the Treasury Portfolio, as the case may be, to
be paid upon settlement of such Holder's obligations to purchase Common Stock
under the Purchase Contract, shall be paid on the Stock Purchase Date by the
Collateral Agent to the Company in satisfaction of such Holder's obligations
under such Purchase Contract and such Holder shall acquire no right, title or
interest in such payments. Each Holder of a Normal Unit, by acceptance thereof,
will be deemed expressly to have withheld

                                      A-10


any consent to the assumption (i.e., affirmance) under Section 365 of the
Bankruptcy Code or otherwise, of the Purchase Contract by the Company, its
trustee in bankruptcy, any receiver, liquidator or person or entity performing
similar functions in the event that the Company becomes a debtor under the
Bankruptcy Code or subject to other similar state or federal law providing for
reorganization or liquidation.

         Each Holder of any Unit, and each Beneficial Owner thereof, by its
acceptance thereof or of its interest therein, further covenants and agrees to
treat (i) itself as the owner of the related Notes, Treasury Consideration,
Applicable Ownership Interest in the Treasury Portfolio or Treasury Securities,
as the case may be, and (ii) the Notes as indebtedness of the Company, in each
case, for United States federal, state and local income and franchise tax
purposes.

         Subject to certain exceptions, the provisions of the Purchase Contract
Agreement may be amended with the consent of the Holders of a majority of the
Purchase Contracts.

         The Purchase Contracts shall for all purposes be governed by and deemed
to be a contract under, and construed in accordance with, the laws of the State
of New York, without regard to conflicts of laws principles thereof.

         The Company, the Agent and its Affiliates and any agent of the Company
or the Agent, may treat the Person in whose name this Normal Units Certificate
is registered on the Normal Units Register as the owner of the Normal Units
evidenced hereby for the purpose of receiving quarterly payments on the Notes,
the Treasury Consideration or the Applicable Ownership Interest in the Treasury
Portfolio, as the case may be, receiving payments of Contract Adjustment
Payments, if any, and any Deferred Contract Adjustment Payments, performance of
the Purchase Contracts and for all other purposes whatsoever, whether or not any
payments in respect thereof shall be overdue and notwithstanding any notice to
the contrary, and neither the Company, the Agent, such Affiliates nor any agent
of the Company, the Agent or such Affiliates shall be affected by notice to the
contrary.

         Prior to the purchase of shares of Common Stock under each Purchase
Contract, such Purchase Contracts shall not entitle the Holder to any of the
rights of a holder of shares of Common Stock.

         A copy of the Purchase Contract Agreement is available for inspection
at the offices of the Agent.

                                      A-11


                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM  --             as tenants in common

UNIF GIFT MIN ACT  --   _________________ Custodian _____________________(Minor)

                        under Uniform Gifts to Minors Act _______________(State)

TEN ENT  --             as tenants by the entireties

JT TEN --               as joint tenants with right of survivorship and not as
                        tenants in common

Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT

        FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
                                transfer(s) unto

________________________________________________________________________________
________________________________________________________________________________
      (Please insert Social Security or Taxpayer I.D. or other Identifying
                               Number of Assignee)

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)

the within Normal Units Certificates and all rights thereunder, hereby
irrevocably constituting and appointing

________________________________________________________________________________
attorney to transfer said Normal Units Certificates on the books of Pinnacle
West Capital Corporation with full power of substitution in the premises.

Dated: _________________               _________________________________________

                                                    Signature

                                       NOTICE: The signature to this assignment
                                       must correspond with the name as it
                                       appears upon the face of the within
                                       Normal Units Certificates in every
                                       particular, without alteration or
                                       enlargement or any change whatsoever.

Signature Guarantee:

_________________________

Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

                                      A-12


                             SETTLEMENT INSTRUCTIONS

         The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Stock Purchase Date of the
Purchase Contracts underlying the number of Normal Units evidenced by this
Normal Units Certificate (after taking into account all Units then held by such
Holder) be registered in the name of, and delivered, together with a check in
payment for any fractional share, to the undersigned at the address indicated
below unless a different name and address have been indicated below. If shares
are to be registered in the name of a Person other than the undersigned, the
undersigned will pay any transfer tax payable incident thereto.

Dated:_____________________            _________________________________________
                                                     Signature

Signature Guarantee:___________________

Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

If shares are to be registered in the                  REGISTERED HOLDER
name of and delivered to a Person
other than the Holder, please (i)
print such Person's name and
address and (ii) provide a guarantee
of your signature:

              PLEASE PRINT NAME AND ADDRESS OF REGISTERED HOLDER:

___________________________________    _________________________________________
              Name                                     Name

___________________________________    _________________________________________

___________________________________    _________________________________________

___________________________________    _________________________________________
              Address                                  Address

________________________________________________________________________________
         Social Security or other Taxpayer Identification Number, if any

                                      A-13


                            ELECTION TO SETTLE EARLY

         The undersigned Holder of this Normal Units Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance with
the terms of the Purchase Contract Agreement with respect to the Purchase
Contracts underlying the number of Normal Units evidenced by this Normal Units
Certificate specified below. The option to effect Early Settlement may be
exercised only with respect to Purchase Contracts underlying Normal Units with
an aggregate Stated Amount equal to $1,000 or an integral multiple thereof. The
undersigned Holder directs that a certificate for shares of Common Stock
deliverable upon such Early Settlement (after taking into account all Units then
held by such Holder) be registered in the name of, and delivered, together with
a check in payment for any fractional share and any Normal Units Certificate
representing any Normal Units evidenced hereby as to which Early Settlement of
the related Purchase Contracts is not effected, to the undersigned at the
address indicated below unless a different name and address have been indicated
below. Pledged Notes, Pledged Treasury Consideration or the Pledged Applicable
Ownership Interest in the Treasury Portfolio, as the case may be, deliverable
upon such Early Settlement will be transferred in accordance with the transfer
instructions set forth below. If shares are to be registered in the name of a
Person other than the undersigned, the undersigned will pay any transfer tax
payable incident thereto.

Dated:_____________________            _________________________________________
                                                     Signature

Signature Guarantee:___________________

Number of Units evidenced hereby as to which Early Settlement of the related
Purchase Contracts is being elected:

If shares of Common Stock or Normal Units            REGISTERED HOLDER
Certificates are to be registered in the
name of and delivered to and Pledged Notes,
Pledged Treasury Consideration or Pledged
Applicable Ownership Interest in the
Treasury Portfolio, as the case may be, are
to be transferred to a Person other than the
Holder, please print such Person's name and
address:

               PLEASE PRINT NAME AND ADDRESS OF REGISTERED HOLDER:

___________________________________    _________________________________________
              Name                                     Name

___________________________________    _________________________________________

___________________________________    _________________________________________

___________________________________    _________________________________________
              Address                                  Address
___________________________________    _________________________________________

________________________________________________________________________________
         Social Security or other Taxpayer Identification Number, if any

Transfer instructions for Pledged Notes, Pledged Treasury Consideration or the
Pledged Applicable Ownership Interest in the Treasury Portfolio, as the case may
be, transferable upon Early Settlement or a Termination Event:

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

                                      A-14


                    [TO BE ATTACHED TO GLOBAL CERTIFICATES]

            SCHEDULE OF INCREASES OR DECREASES IN GLOBAL CERTIFICATE

The following increases or decreases in this Global Certificate have been made:




                                                                         STATED AMOUNT OF THE
                           AMOUNT OF DECREASE                             GLOBAL CERTIFICATE
                           IN STATED AMOUNT OF   AMOUNT OF INCREASE IN         FOLLOWING            SIGNATURE OF
                               THE GLOBAL         STATED AMOUNT OF THE       SUCH DECREASE      AUTHORIZED OFFICER OF
          DATE                 CERTIFICATE         GLOBAL CERTIFICATE         OR INCREASE               AGENT
- -----------------------    -------------------   ---------------------   --------------------   ---------------------
                                                                                    

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

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

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

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

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

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

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

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

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

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

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


                                      A-15


                                                                       EXHIBIT B

                       FORM OF STRIPPED UNITS CERTIFICATE

                       (Form of Global Certificate Legend)

         [THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN THE
NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO TRANSFER OF
THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT.

         Unless this Certificate is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the
Company or its agent for registration of transfer, exchange or payment, and any
Certificate issued is registered in the name of Cede & Co., or such other name
as requested by an authorized representative of The Depository Trust Company,
and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.]

                        PINNACLE WEST CAPITAL CORPORATION

                  (Form of Face of Stripped Units Certificate)
                             ($_____ Stated Amount)

No.____
CUSIP No. __________
Number of Stripped Units_____

         This Stripped Units Certificate certifies that ________ is the
registered Holder of the number of Stripped Units set forth above. Each Stripped
Unit represents (i) a _____ undivided beneficial ownership interest in a
Treasury Security, subject to the Pledge of such interest in such Treasury
Security by the Holder pursuant to the Pledge Agreement, and (ii) the rights and
obligations of the Holder under one Purchase Contract with Pinnacle West Capital
Corporation, an Arizona corporation (the "Company"). All capitalized terms used
herein which are defined in the Purchase Contract Agreement have the meaning set
forth therein.

         Pursuant to the Pledge Agreement, the Treasury Security constituting
part of each Stripped Unit evidenced hereby has been pledged to the Collateral
Agent, for the benefit of the Company, to secure the obligations of the Holder
under the Purchase Contract comprising a part of such Stripped Unit to purchase
the Common Stock of the Company. Prior to the purchase of shares of Common Stock
under each Purchase Contract, such Purchase Contracts shall not entitle the
Holders of Normal Units Certificates to any of the rights of a holder of shares
of Common Stock, including, without limitation, the right to vote or receive any
dividends or other payments

                                      B-1


or to consent or to receive notice as stockholders in respect of the meetings of
stockholders or for the election of directors of the Company or for any other
matter, or any other rights whatsoever as stockholders of the Company.

         Each Purchase Contract evidenced hereby, unless an Early Settlement has
occurred or a Merger Early Settlement has occurred, obligates the Holder of this
Stripped Units Certificate to purchase, and the Company to sell, on
_______________ (the "Stock Purchase Date"), at a price equal to $_________ (the
"Stated Amount"), a number of newly issued shares of Common Stock, $0.01 par
value per share ("Common Stock"), of the Company, equal to the Settlement Rate,
unless on or prior to the Stock Purchase Date, there shall have occurred a
Termination Event with respect to the Stripped Units of which such Purchase
Contract is a part, all as provided in the Purchase Contract Agreement and more
fully described on the reverse hereof. The Purchase Price (as defined herein)
for the shares of Common Stock purchased pursuant to each Purchase Contract
evidenced hereby, if not paid earlier, shall be paid on the Stock Purchase Date
by application of payments received in respect of the Pledged Treasury
Securities pledged to secure the obligations of the Holder under such Purchase
Contract in accordance with the terms of the Pledge Agreement.

         The Company shall pay on each Payment Date in respect of each Purchase
Contract forming part of a Stripped Unit evidenced hereby an amount (the
"Contract Adjustment Payments") equal to ____% per year of the Stated Amount,
computed on the basis of a 360-day year of twelve 30-day months, subject to
deferral at the option of the Company as provided in the Purchase Contract
Agreement and more fully described on the reverse hereof (provided that if any
date on which Contract Adjustment Payments are to be made on the Purchase
Contracts is not a Business Day, then payment of such Contract Adjustment
Payments payable on that date will be made on the next succeeding day which is a
Business Day, and no interest or payment will be paid in respect of such delay,
except that if such next succeeding Business Day is in the next succeeding
calendar year, then such payment will be made on the immediately preceding
Business Day). Such Contract Adjustment Payments shall be payable to the Person
in whose name this Stripped Units Certificate (or a Predecessor Stripped Units
Certificate) is registered at the close of business on the Record Date for such
Payment Date.

         Contract Adjustment Payments will be payable at the office of the Agent
in The City of New York, New York or, at the option of the Company, by check
mailed to the address of the Person entitled thereto as such address appears on
the Normal Units Register. Reference is hereby made to the further provisions
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 Agent by manual signature, this Stripped Units Certificate shall not be
entitled to any benefit under the Pledge Agreement or the Purchase Contract
Agreement or be valid or obligatory for any purpose.

                                      B-2


         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

                                           PINNACLE WEST CAPITAL CORPORATION

                                           By:__________________________________
                                                Name:
                                                Title:

                                           HOLDER SPECIFIED ABOVE (as to
                                           obligations of such Holder under the
                                           Purchase Contracts evidenced hereby)

                                           By:  _______________, not
                                                individually but solely as
                                                Attorney-in-Fact of such Holder

                                           By:__________________________________
                                                Name:
                                                Title:

                                      B-3


                      AGENT'S CERTIFICATE OF AUTHENTICATION

         This is one of the Stripped Units Certificates referred to in the
within-mentioned Purchase Contract Agreement.

Dated:                                     ____________________,
                                           as Purchase Contract Agent and
                                           Trustee

                                           By:__________________________________
                                                    Authorized Signatory

                                      B-4


                 (FORM OF REVERSE OF STRIPPED UNITS CERTIFICATE)

         Each Purchase Contract evidenced hereby is governed by a Purchase
Contract Agreement, dated as of _______________ (as may be supplemented from
time to time, the "Purchase Contract Agreement"), between the Company and
_______________, as Purchase Contract Agent (including its successors
thereunder, herein called the "Agent"), to which the Purchase Contract Agreement
and supplemental agreements thereto reference is hereby made for a description
of the respective rights, limitations of rights, obligations, duties and
immunities thereunder of the Agent, the Company and the Holders and of the terms
upon which the Stripped Units Certificates are, and are to be, executed and
delivered.

         Each Purchase Contract evidenced hereby obligates the Holder of this
Stripped Units Certificate to purchase, and the Company to sell, on the Stock
Purchase Date at a price equal to $__________ (the "Purchase Price"), a number
of shares of Common Stock of the Company equal to the Settlement Rate, unless,
on or prior to the Stock Purchase Date, there shall have occurred a Termination
Event or a Cash Settlement, Early Settlement or Merger Early Settlement with
respect to the Unit of which such Purchase Contract is a part. The "Settlement
Rate" is equal to (a) if the Applicable Market Value (as defined below) is equal
to or greater than $____ (the "Threshold Appreciation Price"), ______ shares of
Common Stock per Purchase Contract, (b) if the Applicable Market Value is less
than the Threshold Appreciation Price, but is greater than $____, the number of
shares of Common Stock per Purchase Contract equal to the Stated Amount divided
by the Applicable Market Value and (c) if the Applicable Market Value is less
than or equal to $____, ______ shares of Common Stock per Purchase Contract, in
each case subject to adjustment as provided in the Purchase Contract Agreement.
No fractional shares of Common Stock will be issued upon settlement of Purchase
Contracts, as provided in the Purchase Contract Agreement.

         The "Applicable Market Value" means the average of the Closing Price
per share of Common Stock on each of the 20 consecutive Trading Days ending on
the third Trading Day immediately preceding the Stock Purchase Date or, in the
event of a Cash Merger, the Cash Merger Date.

         The "Closing Price" of the Common Stock on any date of determination
means the closing sale price per share (or, if no closing sale price is
reported, the last reported sale price) of the Common Stock on the New York
Stock Exchange (the "NYSE") on such date or, if the Common Stock is not listed
for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by The Nasdaq Stock
Market, or if the Common Stock is not so reported, the last quoted bid price for
the Common Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if such bid price is not available,
the market value of the Common Stock on such date as determined by a nationally
recognized independent investment banking firm retained by the Company for this
purpose.

         A "Trading Day" means a day on which the Common Stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market

                                      B-5


at the close of business and (B) has traded at least once on the national or
regional securities exchange or association or over-the-counter market that is
the primary market for the trading of the Common Stock at the close of business
on such day.

         Each Purchase Contract evidenced hereby may be settled prior to the
Stock Purchase Date through Cash Settlement, Early Settlement or Merger Early
Settlement, in accordance with the terms of the Purchase Contract Agreement.

         In accordance with the terms of the Purchase Contract Agreement, the
Holder of this Stripped Units Certificate shall pay the Purchase Price for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced
hereby (i) by effecting a Cash Settlement, Early Settlement or Merger Early
Settlement or (ii) by application of payments received in respect of the Pledged
Treasury Securities underlying the Stripped Units represented by this Stripped
Units Certificate.

         The Company shall not be obligated to issue any shares of Common Stock
in respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless the Company shall have received payment in full of the aggregate
Purchase Price for the shares of Common Stock to be purchased thereunder in the
manner herein set forth.

         The Stripped Units Certificates are issuable only in registered form
and only in denominations of a single Stripped Unit and any integral multiple
thereof. The transfer of any Stripped Units Certificate will be registered and
Stripped Units Certificates may be exchanged as provided in the Purchase
Contract Agreement. The Stripped Units Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents
permitted by the Purchase Contract Agreement. No service charge shall be made
for any such registration of transfer or exchange of a Stripped Units
Certificate, but the Company and the Agent may require payment from the Holder
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Certificates, other than any exchanges not involving any transfer as provided
for in the Purchase Contract Agreement. The Holder of a Stripped Unit may
substitute for the Pledged Treasury Securities securing its obligations under
the related Purchase Contract Notes or the appropriate Treasury Consideration or
Applicable Ownership Interest in the Treasury Portfolio in accordance with the
terms of the Purchase Contract Agreement and the Pledge Agreement. From and
after such Collateral Substitution, the Unit for which such Pledged Notes,
Pledged Treasury Consideration or Pledged Applicable Ownership Interest in the
Treasury Portfolio secures the Holder's obligation under the Purchase Contract
shall be referred to as a "Normal Unit." A Holder that elects to substitute
Notes or the appropriate Treasury Consideration or Applicable Ownership Interest
in the Treasury Portfolio, as the case may be, for Pledged Treasury Securities,
thereby reestablishing Normal Units, shall be responsible for any fees or
expenses payable in connection therewith. Except as provided in the Purchase
Contract Agreement, for so long as the Purchase Contract underlying a Stripped
Unit remains in effect, such Stripped Unit shall not be separable into its
constituent parts, and the rights and obligations of the Holder of such Stripped
Unit in respect of the Pledged Treasury Security and the Purchase Contract
comprising such Stripped Unit may be acquired, and may be transferred and
exchanged, only as a Stripped Unit.

                                      B-6


         A Holder of Normal Units may establish Stripped Units at any time from
and after the date of the Purchase Contract Agreement and on or prior to the
second Business Day immediately preceding the Stock Purchase Date by depositing
with the Collateral Agent Treasury Securities in exchange for the release of the
Pledged Notes or the appropriate Pledged Treasury Consideration or Pledged
Applicable Ownership Interest in the Treasury Portfolio, as the case may be, in
accordance with the terms of the Purchase Contract Agreement and the Pledge
Agreement.

         Subject to the next succeeding paragraph, the Company shall pay, on
each Payment Date, the Contract Adjustment Payments, if any, payable in respect
of each Purchase Contract to the Person in whose name the Stripped Units
Certificate (or one or more Predecessor Stripped Units Certificates) evidencing
such Purchase Contract is registered on the Stripped Units Register at the close
of business on the Record Date next preceding such Payment Date. The Contract
Adjustment Payments, if any, will be payable at the Corporate Trust Office or,
at the option of the Company, by check mailed to the address of the Person
entitled thereto at such Person's address as it appears on the Stripped Units
Register or by wire transfer to an account appropriately designated by a prior
written notice to such Person.

         The Company shall have the right, at any time prior to the Stock
Purchase Date, to defer the payment of any or all of the Contract Adjustment
Payments otherwise payable on any Payment Date, but only if the Company shall
give the Holders and the Agent written notice of its election to defer each such
Contract Adjustment Payments as provided in the Purchase Contract Agreement. Any
Contract Adjustment Payments so deferred shall, to the extent permitted by law,
accrue additional Contract Adjustment Payments thereon at the rate of ____% per
year (computed on the basis of a 360-day year of twelve 30-day months),
compounding on each succeeding Payment Date, until paid in full (such deferred
installments of Contract Adjustment Payments, if any, together with the
additional Contract Adjustment Payments, if any, accrued thereon, are referred
to herein as the "Deferred Contract Adjustment Payments"). Deferred Contract
Adjustment Payments, if any, shall be due on the next succeeding Payment Date
except to the extent that payment is deferred pursuant to the Purchase Contract
Agreement. No Contract Adjustment Payments may be deferred to a date that is
after the Stock Purchase Date and no such deferral period may end other than on
a Payment Date.

         In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until a Payment Date prior to the
Stock Purchase Date, then all Deferred Contract Adjustment Payments, if any,
shall be payable to the registered Holders as of the close of business on the
Record Date immediately preceding such Payment Date.

         The Company's obligations with respect to Contract Adjustment Payments
(including any accrued or Deferred Contract Adjustment Payments) will be
subordinate and junior in right of payment to the Company's obligations under
any Senior Indebtedness.

         In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Stock Purchase Date, the
Holder of this Stripped Units Certificate will receive on the Stock Purchase
Date in lieu of a cash payment a number of shares of Common Stock (in addition
to the number of shares of Common Stock equal to the Settlement Rate) equal to
(i) the aggregate amount of Deferred Contract Adjustment Payments

                                      B-7


payable to the Holder of this Stripped Units Certificate divided by (ii) the
Applicable Market Value.

         In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, then, until the Deferred Contract Adjustment
Payments have been paid, the Company shall not, and will not permit any
subsidiary of the Company to, declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of the Company's Capital Stock other than (i) purchases,
redemptions or acquisitions of shares of the Company's Capital Stock in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors or agents
or a stock purchase or dividend reinvestment plan, or the satisfaction by the
Company of its obligations pursuant to any contract or security outstanding on
the date the Company exercises its rights to defer the Contract Adjustment
Payments; (ii) as a result of a reclassification of the Company's Capital Stock
or the exchange or conversion of one class or series of the Company's Capital
Stock for another class or series of the Company's Capital Stock; (iii) the
purchase of fractional interests in shares of the Company's Capital Stock
pursuant to the conversion or exchange provisions of such Capital Stock or the
security being converted or exchanged; (iv) dividends or distributions in any
series of the Company's Capital Stock (or rights to acquire Capital Stock) or
repurchases, acquisitions or redemptions of the Company's Capital Stock in
connection with the issuance or exchange of any series of the Company's Capital
Stock (or securities convertible into or exchangeable for shares of the
Company's Capital Stock); or (v) redemptions, exchanges or repurchases of any
rights outstanding under a shareholder rights plan or the declaration or payment
thereunder of a dividend or distribution of or with respect to rights in the
future.

         The Purchase Contracts and all obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights of Holders
to receive accumulated Contract Adjustment Payments, if any, or any Deferred
Contract Adjustment Payments and obligations of the Holders to purchase Common
Stock, will immediately and automatically terminate, without the necessity of
any notice or action by any Holder, the Agent or the Company, if, on or prior to
the Stock Purchase Date, a Termination Event shall have occurred. Upon and after
the occurrence of a Termination Event, the Collateral Agent shall release the
Pledged Treasury Securities from the Pledge in accordance with the provisions of
the Pledge Agreement. Upon the occurrence of a Termination Event, the Company
shall promptly but in no event later than two Business Days thereafter give
written notice to the Agent, the Collateral Agent and to the Holders, at their
addresses as they appear in the Stripped Units Register.

         Upon registration of transfer of this Stripped Units Certificate, the
transferee shall be bound (without the necessity of any other action on the part
of such transferee, except as may be required by the Agent pursuant to the
Purchase Contract Agreement), under the terms of the Purchase Contract
Agreement, the Purchase Contracts evidenced hereby and the Pledge Agreement and
the transferor shall be released from the obligations under the Purchase
Contract Agreement, the Purchase Contracts evidenced by this Stripped Units
Certificate and the Pledge Agreement. The Company covenants and agrees, and the
Holder, by its acceptance hereof, likewise covenants and agrees, to be bound by
the provisions of this paragraph.

                                       B-8


         The Holder of this Stripped Units Certificate, by its acceptance
hereof, irrevocably authorizes the Agent to enter into and perform the related
Purchase Contracts forming part of the Stripped Units evidenced hereby on its
behalf as its attorney-in-fact (including the execution of Certificates on
behalf of such Holder), agrees to be bound by the terms and provisions thereof,
covenants and agrees to perform its obligations under such Purchase Contracts,
consents to the provisions of the Purchase Contract Agreement, irrevocably
authorizes the Agent to enter into and perform the Pledge Agreement on such
Holder's behalf as attorney-in-fact, and consents to and agrees to be bound by
the Pledge of the Treasury Securities underlying this Stripped Units Certificate
pursuant to the Pledge Agreement. The Holder further covenants and agrees, that,
to the extent and in the manner provided in the Purchase Contract Agreement and
the Pledge Agreement, but subject to the terms thereof, payments in respect of
the Pledged Treasury Securities, to be paid upon settlement of such Holder's
obligations to purchase Common Stock under the Purchase Contract, shall be paid
on the Stock Purchase Date by the Collateral Agent to the Company in
satisfaction of such Holder's obligations under such Purchase Contract and such
Holder shall acquire no right, title or interest in such payments. Each Holder
of a Stripped Unit, by acceptance thereof, will be deemed expressly to have
withheld any consent to the assumption (i.e., affirmance) under Section 365 of
the Bankruptcy Code or otherwise, of the Purchase Contract by the Company, its
trustee in bankruptcy, any receiver, liquidator or person or entity performing
similar functions in the event that the Company becomes a debtor under the
Bankruptcy Code or subject to other similar state or federal law providing for
reorganization or liquidation.

         Each Holder of any Unit, and each Beneficial Owner thereof, by its
acceptance thereof or of its interest therein, further covenants and agrees to
treat (i) itself as the owner of the related Notes, Treasury Consideration or
Treasury Securities, as the case may be, and (ii) the Notes as indebtedness of
the Company, in each case, for United States federal, state and local income and
franchise tax purposes.

         Subject to certain exceptions, the provisions of the Purchase Contract
Agreement may be amended with the consent of the Holders of a majority of the
Purchase Contracts.

         The Purchase Contracts shall for all purposes be governed by and deemed
to be a contract under, and construed in accordance with, the laws of the State
of New York, without regard to conflicts of laws principles thereof.

         The Company, the Agent and its Affiliates and any agent of the Company
or the Agent may treat the Person in whose name this Stripped Units Certificate
is registered as the owner of the Stripped Units evidenced hereby for the
purpose of receiving Contract Adjustment Payments, if any, and any Deferred
Contract Adjustment Payments performance of the Purchase Contracts and for all
other purposes whatsoever, whether or not any payments in respect thereof shall
be overdue and notwithstanding any notice to the contrary, and neither the
Company, the Agent, such Affiliates nor any agent of the Company, the Agent or
such Affiliates shall be affected by notice to the contrary.

         Prior to the purchase of shares of Common Stock under each Purchase
Contract, such Purchase Contracts shall not entitle the Holder to any of the
rights of a holder of shares of Common Stock.

                                       B-9


         A copy of the Purchase Contract Agreement is available for inspection
at the offices of the Agent.

                                      B-10


                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM --             as tenants in common

UNIF GIFT MIN ACT --   __________________________Custodian_______________(Minor)

                       under Uniform Gifts to Minors Act_________________(State)

TEN ENT --             as tenants by the entireties

JT TEN --              as joint tenants with right of survivorship and not as
                       tenants in common

Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT

       FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
                                transfer(s) unto
________________________________________________________________________________

________________________________________________________________________________
      (Please insert Social Security or Taxpayer I.D. or other Identifying
                               Number of Assignee)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)

the within Normal Units Certificates and all rights thereunder, hereby
irrevocably constituting and appointing

________________________________________________________________________________
attorney to transfer said Normal Units Certificates on the books of Pinnacle
West Capital Corporation with full power of substitution in the premises.

Dated: _________________            ____________________________________________

                                                     Signature

                                    NOTICE: The signature to this assignment
                                    must correspond with the name as it appears
                                    upon the face of the within Normal Units
                                    Certificates in every particular, without
                                    alteration or enlargement or any change
                                    whatsoever.

Signature Guarantee:
________________________

Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

                                      B-11


                             SETTLEMENT INSTRUCTIONS

         The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Stock Purchase Date of the
Purchase Contracts underlying the number of Stripped Units evidenced by this
Stripped Units Certificate (after taking into account all Units then held by
such Holder) be registered in the name of, and delivered, together with a check
in payment for any fractional share, to the undersigned at the address indicated
below unless a different name and address have been indicated below. If shares
are to be registered in the name of a Person other than the undersigned, the
undersigned will pay any transfer tax payable incident thereto.

Dated:_____________________                _____________________________________
                                                        Signature

Signature Guarantee:_______________________

Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

If shares are to be registered in the                  REGISTERED HOLDER
name of and delivered to a Person
please (i) other than the Holder,
print such Person's name and address
and (ii) provide a guarantee of
your signature:

               PLEASE PRINT NAME AND ADDRESS OF REGISTERED HOLDER:

___________________________________        _____________________________________
               Name                                        Name

___________________________________        _____________________________________

___________________________________        _____________________________________

___________________________________        _____________________________________
              Address                                    Address

________________________________________________________________________________
         Social Security or other Taxpayer Identification Number, if any

                                      B-12


                            ELECTION TO SETTLE EARLY

         The undersigned Holder of this Stripped Units Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance with
the terms of the Purchase Contract Agreement with respect to the Purchase
Contracts underlying the number of Stripped Units evidenced by this Stripped
Units Certificate specified below. The option to effect Early Settlement may be
exercised only with respect to Purchase Contracts underlying Stripped Units with
an aggregate Stated Amount equal to $1,000 or an integral multiple thereof. The
undersigned Holder directs that a certificate for shares of Common Stock
deliverable upon such Early Settlement (after taking into account all Units then
held by such Holder) be registered in the name of, and delivered, together with
a check in payment for any fractional share and any Stripped Units Certificate
representing any Stripped Units evidenced hereby as to which Early Settlement of
the related Purchase Contracts is not effected, to the undersigned at the
address indicated below unless a different name and address have been indicated
below. Pledged Treasury Securities deliverable upon such Early Settlement will
be transferred in accordance with the transfer instructions set forth below. If
shares are to be registered in the name of a Person other than the undersigned,
the undersigned will pay any transfer tax payable incident thereto.

Dated:_____________________________        _____________________________________
                                                        Signature

Signature Guarantee:_______________

Number of Units evidenced hereby as to which Early Settlement of the related
Purchase Contracts is being elected:

If shares of Common Stock or Stripped Units            REGISTERED HOLDER
Certificates are to be registered in the
name of and delivered to and Pledged Notes,
Pledged Treasury Consideration or Pledged
Applicable Ownership Interest in the
Treasury Portfolio, as the case may be, are
to be transferred to a Person other than the
Holder, please print such Person's name and
address:

               PLEASE PRINT NAME AND ADDRESS OF REGISTERED HOLDER:

___________________________________        _____________________________________
               Name                                        Name

___________________________________        _____________________________________

___________________________________        _____________________________________

___________________________________        _____________________________________
              Address                                    Address

___________________________________        _____________________________________

________________________________________________________________________________
         Social Security or other Taxpayer Identification Number, if any

Transfer instructions for Pledged Notes, Pledged Treasury Consideration or the
Pledged Applicable Ownership Interest in the Treasury Portfolio, as the case may
be, transferable upon Early Settlement or a Termination Event:

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

                                      B-13


                                      B-14


                    [TO BE ATTACHED TO GLOBAL CERTIFICATES]

            SCHEDULE OF INCREASES OR DECREASES IN GLOBAL CERTIFICATE

The following increases or decreases in this Global Certificate have been made:




                                                                         STATED AMOUNT OF THE
                           AMOUNT OF DECREASE                             GLOBAL CERTIFICATE
                           IN STATED AMOUNT OF   AMOUNT OF INCREASE IN         FOLLOWING            SIGNATURE OF
                               THE GLOBAL         STATED AMOUNT OF THE       SUCH DECREASE      AUTHORIZED OFFICER OF
          DATE                 CERTIFICATE         GLOBAL CERTIFICATE         OR INCREASE               AGENT
- ------------------------   -------------------   ---------------------   --------------------   ---------------------
                                                                                    

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                      B-15


                                                                       EXHIBIT C

          INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL AGENT

________________,
  as Collateral Agent
c/o _______________________
___________________________
___________________________
Attention:____________________
Telecopy:_____________________

         Re:      Equity Security Units of Pinnacle West Capital Corporation
                  (the "Company")

         We hereby notify you in accordance with Section 4.1 of the Pledge
Agreement, dated as of _______________, among the Company, you, as Collateral
Agent, Custodial Agent and Securities Intermediary, and us, as Purchase Contract
Agent and as attorney-in-fact for the holders of [Normal Units] [Stripped Units]
from time to time, that the holder of securities listed below (the Holder) has
elected to substitute [$_______ aggregate principal amount of Treasury
Securities (CUSIP No. __________)] [$_______ principal amount of Notes or the
appropriate Treasury Consideration or Applicable Ownership Interest in the
Treasury Portfolio, as the case may be,] in exchange for the related [Pledged
Notes, Pledged Treasury Consideration or Pledged Applicable Ownership Interest
in the Treasury Portfolio, as the case may be [Pledged Treasury Securities
(CUSIP No. __________)] held by you in accordance with the Pledge Agreement and
has delivered to us a notice stating that the Holder has transferred [Treasury
Securities] [Notes or the appropriate Treasury Consideration or Applicable
Ownership Interest in the Treasury Portfolio, as the case may be,] to you, as
Collateral Agent. We hereby instruct you, upon receipt of such [Treasury
Securities] [Notes, Treasury Consideration or Applicable Ownership Interest in
the Treasury Portfolio, as the case may be], and upon the payment by such Holder
of any applicable fees, to release the [Pledged Notes, Pledged Treasury
Consideration or Pledged Applicable Ownership Interest in the Treasury
Portfolio, as the case may be,] [Treasury Securities] related to such [Normal
Units] [Stripped Units] to us in accordance with the Holder's instructions.

Date:______________________                   __________________,
                                                 as Collateral Agent

                                              By:_______________________________
                                                 Name:
                                                 Title:

                                      C-1

\
Please print name and address of Registered Holder electing to substitute
[Treasury Securities] [Notes or Treasury Consideration or Applicable Ownership
Interest in the Treasury Portfolio, as the case may be,] for the [Pledged Notes,
Pledged Treasury Consideration or Pledged Applicable Ownership Interest in the
Treasury Portfolio, as the case may be,] [Pledged Treasury Securities]:

_____________________________________         __________________________________
               Name                                        Address

_____________________________________         __________________________________
               Name                                        Address

_____________________________________         __________________________________

_____________________________________         __________________________________

________________________________________________________________________________
         Social Security or other Taxpayer Identification Number, if any

                                      C-2


                                                                       EXHIBIT D

                     INSTRUCTION TO PURCHASE CONTRACT AGENT
__________________
__________________
__________________
Attention:_______________
Telecopy:________________

         Re:      Equity Security Units of Pinnacle West capital Corporation
                  (the "Company")

         The undersigned Holder hereby notifies you that it has delivered to
_______________, as Collateral Agent, Custodial Agent and Securities
Intermediary (the "Collateral Agent") [$_________ aggregate principal amount of
Treasury Securities] [$_________ principal amount of Notes or the appropriate
Treasury Consideration or Applicable Ownership Interest in the Treasury
Portfolio, as the case may be,] in exchange for the related [Pledged Notes,
Pledged Treasury Consideration or Pledged Applicable Ownership Interest in the
Treasury Portfolio, as the case may be,] [Pledged Treasury Securities] held by
the Collateral Agent, in accordance with Section 4.1 of the Pledge Agreement,
dated as of _______________ (the "Pledge Agreement"), among you, the Company and
the Collateral Agent. The undersigned Holder has paid the Collateral Agent all
applicable fees relating to such exchange. The undersigned Holder hereby
instructs you to instruct the Collateral Agent to release to you on behalf of
the undersigned Holder the [Pledged Notes, Pledged Treasury Consideration or
Pledged Applicable Ownership Interest in the Treasury Portfolio, as the case may
be,] [Pledged Treasury Securities] related to such [Normal Units] [Stripped
Units].

Date:______________________                   By:_______________________________
                                                 Name:
                                                 Title:
Signature Guarantee:__________________________

Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

Please print name and address of Registered Holder:

Name_____________________________             Social Security or other Taxpayer
                                              Identification Number, if any
Address__________________________

_________________________________             __________________________________

_________________________________

                                      D-1


                                                                       EXHIBIT E

                        NOTICE TO SETTLE BY SEPARATE CASH
____________________
____________________
____________________
Attention:_______________
Telecopy:________________

         Re:      Equity Security Units of Pinnacle West Capital Corporation
                  (the "Company")

                  The undersigned Holder hereby irrevocably notifies you in
accordance with Section 5.4 of the Purchase Contract Agreement, dated as of
_______________ among the Company, yourselves, as Purchase Contract Agent,
Attorney-in-Fact and Trustee for the Holders of the Purchase Contracts, that
such Holder has elected to pay to the Collateral Agent, on or prior to 11:00
a.m. New York City time, on the Business Day immediately preceding the Stock
Purchase Date, (in lawful money of the United States by certified or cashiers
check or wire transfer, in each case in immediately available funds), $_________
as the Purchase Price for the shares of Common Stock issuable to such Holder by
the Company under the related Purchase Contract on the Stock Purchase Date. The
undersigned Holder hereby instructs you to notify promptly the Collateral Agent
of the undersigned Holder's election to make such cash settlement with respect
to the Purchase Contracts related to such Holder's [Normal Units].

Date:______________________                   By:_______________________________
                                                 Name:
                                                 Title:
Signature Guarantee:__________________________

Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

Please print name and address of Registered Holder:

Name_____________________________             Social Security or other Taxpayer
                                              Identification Number, if any
Address__________________________

_________________________________             __________________________________

_________________________________

                                      E-1

EX-5.1

EXHIBIT 5.1

December 21, 2004

Pinnacle West Capital Corporation
400 North Fifth Street
Phoenix, Arizona 85004

Ladies and Gentlemen:

     We have acted as counsel to Pinnacle West Capital Corporation, an Arizona corporation (the “Company”), in connection with the Company’s preparation and filing with the Securities and Exchange Commission (the “Commission”) of a registration statement on Form S-3 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), with respect to up to $272,000,000 maximum aggregate offering price of (a) debt securities (“Debt Securities”), which may consist of (i) senior debt securities to be issued under the indenture (the “Senior Indenture”) filed as Exhibit 4.17 to the Registration Statement; (ii) subordinated debt securities to be issued under the indenture (the “Subordinated Indenture”) filed as Exhibit 4.20 to the Registration Statement; (iii) convertible senior debt securities to be issued under an indenture (the “Senior Convertible Indenture”), the form of which is filed as Exhibit 4.3 to the Registration Statement; or (iv) convertible subordinated debt securities to be issued under an indenture (the “Subordinated Convertible Indenture”), the form of which is filed as Exhibit 4.5 to the Registration Statement; (b) preferred stock (“Preferred Stock”); (c) common stock (“Common Stock”); (d) contracts to purchase shares of Common Stock or Preferred Stock or a specified principal amount of Debt Securities (“Purchase Contracts”) pursuant to a Purchase Contract (the “Purchase Contract”), the form of which is filed as Exhibit 4.10 to the Registration Statement; and (e) units comprised of one or more of the other securities registered pursuant to the Registration Statement to be issued under a unit agreement (a “Unit Agreement”), the form of which will be filed with the Commission prior to the offering of such units (the “Units,” and, together with the foregoing securities, the “Securities”), in each case to be issued and sold from time to time by the Company under the Registration Statement pursuant to Rule 415 under the Securities Act. The Senior Indenture, the Subordinated Indenture, the Senior Convertible Indenture, and the Subordinated Convertible Indenture are sometimes hereinafter referred to individually as an “Indenture” and collectively as the “Indentures.”

     In our capacity as such counsel, we have either participated in the preparation of or have reviewed and are familiar with the Registration Statement and exhibits thereto, including the combined prospectus comprising a part thereof (the “Prospectus”), which also relates to an additional $228,000,000 maximum aggregate offering price of securities of the Company remaining unsold under Registration Statement No. 333-101457. We have also reviewed such other documents and have satisfied ourselves as to such other matters as we have deemed

Pinnacle West Capital Corporation
December 21, 2004
Page 2

necessary in order to render this opinion. As to any facts material to the opinions expressed herein which were not independently established or verified, we have relied upon oral or written statements and representations of officers and other representatives of the Company and others.

     Based upon the foregoing and in reliance thereon, and subject to the qualifications and limitations set forth herein, we are of the opinion that:

     1. With respect to the Debt Securities, after (a) the Company’s Board of Directors (the “Board”) has taken all necessary corporate action (whether directly or pursuant to a proper delegation of its authority) to approve the issuance and establish the terms of such Debt Securities, the terms of the offering of the Debt Securities and related matters, (b) the Registration Statement has become effective and the securities or “blue sky” laws of various states shall have been complied with, and (c) any other applicable regulatory approvals, including, without limitation, any required approval of the Commission pursuant to The Public Utility Holding Company Act of 1935 (“PUHCA”) or of the Federal Energy Regulatory Commission (the “FERC”) pursuant to the Federal Power Act, have been obtained, then when (i) the Indenture and any supplemental indenture or other instrument thereunder to be entered into, or otherwise executed or adopted, in connection with the issuance of the Debt Securities have been duly executed and delivered by the Company and the trustee named therein, (ii) the Debt Securities have been duly executed, authenticated and delivered in accordance with the terms of the Indenture, and (iii) the Debt Securities have been issued and sold, and the purchase price therefor has been paid to the Company, in the manner contemplated by the Registration Statement and in any relevant amendment thereto or in any supplement to the Prospectus and in accordance with the Indenture, the Debt Securities will be valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except as may be limited by (A) general principles of equity or by bankruptcy, insolvency, reorganization, arrangement, moratorium, or other laws or equitable principles relating to or affecting the enforcement of creditors’ rights generally and (B) the qualification that certain waivers, procedures, remedies, and other provisions of the Debt Securities may be unenforceable under or limited by the law of the State of Arizona; however, such law does not in our opinion substantially prevent the practical realization of the benefits thereof.

     2. With respect to the Preferred Stock, after (a) the Board has taken all necessary corporate action (whether directly or pursuant to a proper delegation of its authority) to approve the issuance and establish the terms of any particular series of Preferred Stock, the offering of the Preferred Stock and related matters, including the execution, acknowledgement, and filing with the Arizona Corporation Commission of an amendment to the Company’s Articles of Incorporation in the form of a statement pursuant to Arizona Revised Statutes Section 10-602, (b) the Registration Statement has become effective and the securities or “blue sky” laws of various states shall have been complied with, and (c) any other applicable regulatory approvals,

Pinnacle West Capital Corporation
December 21, 2004
Page 3

including, without limitation, any required approval of the Commission pursuant to PUHCA or of the FERC pursuant to the Federal Power Act, have been obtained, then when shares of such series of Preferred Stock have been issued and sold by the Company in the manner contemplated by the Registration Statement and in any relevant amendment thereto or in any supplement to the Prospectus and in accordance with such Board action, and the consideration therefor has been received by the Company, the shares of such series of Preferred Stock will be duly authorized, validly issued, fully paid and nonassessable.

     3. With respect to the Common Stock (including any Common Stock duly issued upon conversion, exchange or exercise of any other Securities), after (a) the Board has taken all necessary corporate action (whether directly or pursuant to a proper delegation of its authority) to approve the issuance and establish the terms of the offering of shares of the Common Stock and related matters, (b) the Registration Statement has become effective and the securities or “blue sky” laws of various states shall have been complied with, and (c) any other applicable regulatory approvals, including, without limitation, any required approval of the Commission pursuant to PUHCA or of the FERC pursuant to the Federal Power Act, have been obtained, then when such shares have been issued and sold by the Company in the manner contemplated by the Registration Statement and in any relevant amendment thereto or in any supplement to the Prospectus and in accordance with such Board action, and the consideration therefor has been received by the Company, the shares of Common Stock will be duly authorized, validly issued, fully paid and nonassessable.

     4. With respect to the Purchase Contracts and the Units, after (a) the Board has taken all necessary corporate action (whether directly or pursuant to a proper delegation of its authority) to approve the issuance and establish the terms of the Purchase Contracts or the Units, the terms of the offering of the Purchase Contracts or the Units, and related matters, (b) the Registration Statement has become effective and the securities or “blue sky” laws of various states shall have been complied with, and (c) any other applicable regulatory approvals, including, without limitation, any required approval of the Commission pursuant to PUHCA or of the FERC pursuant to the Federal Power Act, have been obtained, then when (i) the Purchase Contract Agreement and any related pledge agreement have been duly executed and delivered by the Company and the stock purchase contract agent named therein, (ii) the Purchase Contracts or the Units have been duly executed and authenticated, if required, in accordance with the terms of the Purchase Contract Agreement and (iii) the Purchase Contracts or the Units have been issued and sold, and the purchase price therefor has been paid to the Company, in the manner contemplated by the Registration Statement and in any relevant amendment thereto or in any supplement to the Prospectus and in accordance with the Purchase Contract Agreement, the Purchase Contracts or the Units will be valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except as may be limited by (A) general principles of equity or by bankruptcy, insolvency, reorganization, arrangement,

Pinnacle West Capital Corporation
December 21, 2004
Page 4

moratorium, or other laws or equitable principles relating to or affecting the enforcement of creditors’ rights generally and (B) the qualification that certain waivers, procedures, remedies, and other provisions of the Purchase Contracts or the Units may be unenforceable under or limited by the law of the State of Arizona; however, such law does not in our opinion substantially prevent the practical realization of the benefits thereof.

     We are members of the bar of the State of Arizona. The opinions expressed herein are limited solely to the laws of the State of Arizona and the Federal laws of the United States of America (except that we express no opinion as to Arizona securities or blue sky laws) and we express no opinion on the laws of any other jurisdiction. We note that certain documents referenced above, such as the Indentures and Purchase Contract Agreement, will be governed by and construed in accordance with the law of the State of New York, without regard to conflicts of laws principles thereof. In so far as this opinion relates to matters which are governed by the laws of the State of New York, we have relied upon the opinion of Pillsbury Winthrop LLP addressed to you of even date herewith, which is being filed as an exhibit to the Registration Statement.

     The Securities may be issued from time to time on a delayed or continuous basis, but this opinion is limited to the laws, including the rules and regulations thereunder, as in effect on the date hereof. We disclaim any obligation to advise you of any change in any of these sources of law or subsequent legal or factual developments which might affect any matters or opinions set forth herein.

     We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the heading “Legal Opinions” in the Registration Statement.

Very truly yours,

/s/ Snell & Wilmer L.L.P

EX-5.2

EXHIBIT 5.2

[Letterhead of Pillsbury Winthrop LLP]

December 21, 2004

Pinnacle West Capital Corporation
400 North Fifth Street
Phoenix, Arizona 85004

Ladies and Gentlemen:

     Pinnacle West Capital Corporation, an Arizona corporation (the “Company”), has filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), a Registration Statement on Form S-3 (the “Registration Statement”) with respect to up to $500,000,000 maximum aggregate offering price of (1) debt securities (the “Debt Securities”), which may consist of senior debt securities (the “Senior Debt Securities”) or subordinated debt securities (the “Subordinated Debt Securities”), (2) preferred stock (“Preferred Stock”), (3) common stock (“Common Stock”), (4) contracts to purchase shares of Common Stock or Preferred Stock or a specified principal amount of Debt Securities (the “Purchase Contracts”) and (5) units comprised of one or more of the other securities registered pursuant to the Registration Statement (the “Units” and, together with the foregoing securities, the “Securities”), in each case to be issued and sold from time to time by the Company under the Registration Statement pursuant to Rule 415 under the Securities Act.

     The Senior Debt Securities will be issued pursuant to an Indenture dated as of December 1, 2000, as amended, between the Company and The Bank of New York, as trustee (the “Senior Indenture”), the Subordinated Debt Securities will be issued pursuant to an Indenture dated as of December 1, 2000 between the Company and The Bank of New York, as trustee (the “Subordinated Indenture”), and, in the case of convertible Debt Securities, such convertible Debt Securities will be issued pursuant to one of two indentures between the Company and The Bank of New York, as trustee (the “Convertible Indentures”), in each case as filed or in the respective forms filed as exhibits to the Registration Statement.

     In so acting, we have reviewed originals (or copies certified or otherwise identified to our satisfaction) of the Registration Statement (including the exhibits thereto), the Restated Articles of Incorporation and By-Laws of the Company as in effect on the date hereof, corporate and other documents, records and papers and certificates of public officials. We are members of the Bar of the State of New York and, for purposes of this opinion, do not hold ourselves out as experts of the laws of any jurisdiction other than the State of New York.

Pinnacle West Capital Corporation
December 21, 2004

     On the basis of such review and assuming that (i) the applicable provisions of the Securities Act, the Trust Indenture Act of 1939, as amended, and the securities or “blue sky” laws of applicable states shall have been complied with, (ii) appropriate resolutions have been adopted by the Board of Directors of the Company (or a duly appointed committee or representative thereof) and remain effective authorizing the issuance and sale of the Debt Securities, the Purchase Contracts and the Units, as applicable, (iii) the Senior Indenture, the Subordinated Indenture and the Convertible Indentures, and any supplemental indenture or other instrument entered into or otherwise executed or adopted thereunder, and any applicable purchase contract agreement or pledge agreement, in each case, have been duly executed and delivered so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Company and (iv) the Debt Securities, the Purchase Contracts and the Units, as applicable, have been issued and sold upon the terms specified in such resolutions, we are of the opinion that:

     1. The Debt Securities will be legally issued and will constitute the valid and binding obligations of the Company, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally, to general equitable principles (whether considered in a proceeding in equity or at law) and to concepts of materiality, reasonableness, good faith and fair dealing and the discretion of the court before which any matter is brought.

     2. The Purchase Contracts and the Units will be legally issued and will constitute the valid and binding obligations of the Company, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’ rights generally, to general equitable principles (whether considered in a proceeding in equity or at law) and to concepts of materiality, reasonableness, good faith and fair dealing and the discretion of the court before which any matter is brought.

     We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to us under the heading “Legal Opinions” in the related prospectus. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.

Very truly yours,

/s/ Pillsbury Winthrop LLP

 2

EX-12.1

Exhibit 12.1

PINNACLE WEST CAPITAL CORPORATION
COMPUTATION OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)

	Nine Months Ended						Twelve Months Ended
	September 30,		December 31,
	2004		2003		2002		2001		2000		1999
Earnings:
Income from continuing Operations	$	205,900	$	225,803	$	236,563	$	327,367	$	302,332	$	269,772
Income Taxes		117,574		102,473		152,145		213,535		194,200		141,592
Fixed Charges		168,291		235,407		219,178		211,958		202,804		194,070
Total	$	491,765	$	563,683	$	607,886	$	752,860	$	699,336	$	605,434
Fixed Charges:
Interest Expense	$	144,645	$	204,339	$	187,039	$	175,822	$	166,447	$	157,142
Estimated Interest Portion of Annual Rents		23,646		31,068		32,139		36,136		36,357		36,928
Total Fixed Charges	$	168,291	$	235,407	$	219,178	$	211,958	$	202,804	$	194,070
Ratio of Earnings to Fixed Charges (rounded down)		2.92		2.39		2.77		3.55		3.44		3.11

EX-12.2

Exhibit 12.2

PINNACLE WEST CAPITAL CORPORATION
COMPUTATION OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(Thousands of Dollars)

	Nine Months Ended
	September 30,
	2004		2003		2002		2001		2000		1999
Earnings:
Income from continuing Operations	$	205,900	$	225,803	$	236,563	$	327,367	$	302,332	$	269,772
Income Taxes		117,574		102,473		152,145		213,535		194,200		141,592
Fixed Charges		168,291		235,407		219,178		211,958		202,804		194,070
Total	$	491,765	$	563,683	$	607,886	$	752,860	$	699,336	$	605,434
Fixed Charges:
Interest Expense		144,645		204,339		187,039		175,822		166,447		157,142
Estimated Interest Portion of Annual Rents		23,646		31,068		32,139		36,136		36,357		36,928
Total	$	168,291	$	235,407	$	219,178	$	211,958	$	202,804	$	194,070
Preferred Stock Dividend Requirements:
Income before income taxes	$	323,474	$	328,276	$	388,708	$	540,902	$	496,532	$	411,364
Net income from continuing operations		205,900		225,803		236,563		327,367		302,332		269,772
Ratio of income before income taxes to net income		1.571		1.453		1.643		1.652		1.642		1.525
Preferred stock dividends		—		—		—		—		—		1.016
Preferred stock dividend requirements – ratio (above) times preferred stock dividends		—		—		—		—		—		1.549
Fixed Charges and Preferred Stock Dividend Requirements:
Fixed Charges	$	168,291	$	235,407	$	219,178	$	211,958	$	202,804	$	194,070
Preferred stock dividend requirements		—		—		—		—		—		1.549
Total		168,291		235,407		219,178		211,958		202,804		195,619
Ratio of Earnings to combined fixed charges and preferred stock dividend requirements (rounded down)		2.92		2.39		2.77		3.55		3.44		3.09

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Registration Statement of Pinnacle West Capital Corporation on Form S-3, of our report dated March 11, 2004 (December 15, 2004, as to the effects of the discontinued operations of NAC described in Note 22) (which report expresses an unqualified opinion and includes explanatory paragraphs relating to the change in 2003 in the method of accounting for non-trading derivatives, the change in 2002 in the method of accounting for trading activities, and to the change in 2001 in the method of accounting for derivatives and hedging activities) appearing in the Current Report on Form 8-K of Pinnacle West Capital Corporation dated November 18, 2004 and to the reference to us under the heading “Experts” in the Prospectus, which is part of this Registration Statement.

/s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona
December 17, 2004

EX-25.1

                                                                    Exhibit 25.1

================================================================================
                                    FORM T-1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                              SECTION 305(b)(2) [__]

                              THE BANK OF NEW YORK
               (Exact name of trustee as specified in its charter)

New York                                                  13-5160382
(State of incorporation                                   (I.R.S. employer
if not a U.S. national bank)                              identification no.)

One Wall Street, New York, N.Y.                           10286
(Address of principal executive offices)                  (Zip code)

                        Pinnacle West Capital Corporation
               (Exact name of obligor as specified in its charter)

Arizona                                                   86-0011170
(State or other jurisdiction of                           (I.R.S. employer
incorporation or organization)                            identification no.)

400 North Fifth Street
Phoenix, Arizona                                          85004
(Address of principal executive offices)                  (Zip code)

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

                             Senior Debt Securities
                       (Title of the indenture securities)

================================================================================



1.    GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

      (a)   NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
            IT IS SUBJECT.



                 Name                                     Address
                 ----                                     -------
                                          
Superintendent of Banks of the State of      2 Rector Street, New York,
New York                                     N.Y. 10006, and Albany, N.Y. 12203

Federal Reserve Bank of New York             33 Liberty Plaza, New York,
                                             N.Y. 10045

Federal Deposit Insurance Corporation        Washington, D.C. 20429

New York Clearing House Association          New York, New York 10005


      (b)   WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

      Yes.

2.    AFFILIATIONS WITH OBLIGOR.

      IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
      AFFILIATION.

      None.

16.   LIST OF EXHIBITS.

      EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
      INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
      7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
      229.10(d).

      1.    A copy of the Organization Certificate of The Bank of New York
            (formerly Irving Trust Company) as now in effect, which contains the
            authority to commence business and a grant of powers to exercise
            corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
            filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
            Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
            1 to Form T-1 filed with Registration Statement No. 33-29637.)

      4.    A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
            T-1 filed with Registration Statement No. 33-31019.)

      6.    The consent of the Trustee required by Section 321(b) of the Act.
            (Exhibit 6 to Form T-1 filed with Registration Statement No.
            33-44051.)

      7.    A copy of the latest report of condition of the Trustee published
            pursuant to law or to the requirements of its supervising or
            examining authority.

                                      -2-


                                    SIGNATURE

      Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 30th day of November, 2004.

                                               THE BANK OF NEW YORK

                                               By:   /s/ ROBERT A. MASSIMILLO
                                                  ------------------------------
                                                  Name:  ROBERT A. MASSIMILLO
                                                  Title: VICE PRESIDENT


                                                                       EXHIBIT 7

                       Consolidated Report of Condition of

                              THE BANK OF NEW YORK

                    of One Wall Street, New York, N.Y. 10286
                     And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
2004, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.



                                                                           Dollar Amounts
                                                                            In Thousands
                                                                        
ASSETS
Cash and balances due from depository institutions:
   Noninterest-bearing balances and currency and coin....                   $  3,036,306
   Interest-bearing balances.............................                      9,034,655
Securities:
   Held-to-maturity securities...........................                      1,693,598
   Available-for-sale securities.........................                     20,325,634
Federal funds sold and securities purchased under
   agreements to resell..................................
   Federal funds sold in domestic offices................                         19,100
   Securities purchased under agreements to resell.......                      4,324,992
Loans and lease financing receivables:
   Loans and leases held for sale........................                          6,685
   Loans and leases, net of unearned income..............                     37,402,355
   LESS: Allowance for loan and lease losses.............                        594,211
   Loans and leases, net of unearned
     income and allowance................................                     36,808,144
Trading Assets...........................................                      3,420,107
Premises and fixed assets (including capitalized
   leases)...............................................                        969,419
Other real estate owned..................................                          1,253
Investments in unconsolidated subsidiaries and
   associated companies..................................                        253,729
Customers' liability to this bank on acceptances
   outstanding...........................................                        166,157
Intangible assets........................................
   Goodwill..............................................                      2,708,882
   Other intangible assets...............................                        748,171




                                                                         
Other assets...........................................                        6,998,625
                                                                            ------------
Total assets...........................................                     $ 90,515,457
                                                                            ============

LIABILITIES
Deposits:
   In domestic offices.................................                     $ 40,236,165
   Noninterest-bearing.................................                       15,201,748
   Interest-bearing....................................                       25,034,417
   In foreign offices, Edge and Agreement
     subsidiaries, and IBFs............................                       24,110,224
   Noninterest-bearing.................................                          300,559
   Interest-bearing....................................                       23,809,665
Federal funds purchased and securities sold under
     agreements to repurchase..........................
   Federal funds purchased in domestic offices.........                          717,565
   Securities sold under agreements to repurchase......                          812,853
Trading liabilities....................................                        2,598,442
Other borrowed money:
   (includes mortgage indebtedness and obligations
   under capitalized leases)...........................                        4,158,526
Not applicable
Bank's liability on acceptances executed and
   outstanding.........................................                          167,267
Subordinated notes and debentures......................                        2,389,088
Other liabilities......................................                        6,730,454
                                                                            ------------
Total liabilities......................................                     $ 81,920,584
                                                                            ============
Minority interest in consolidated subsidiaries.........                          142,058

EQUITY CAPITAL
Perpetual preferred stock and related surplus..........                                0
Common stock...........................................                        1,135,284
Surplus................................................                        2,087,205
Retained earnings......................................                        5,213,125
Accumulated other comprehensive income.................                           17,201
Other equity capital components........................                                0
                                                                            ------------
Total equity capital...................................                        8,452,815
                                                                            ------------
Total liabilities, minority interest, and equity
   capital.............................................                     $ 90,515,457
                                                                            ============





      I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition is true and
correct to the best of my knowledge and belief.

                                                               Thomas J. Mastro,
                                           Senior Vice President and Comptroller

      We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.

Thomas A. Renyi
Gerald L. Hassell                          Directors
Alan R. Griffith

EX-25.2

                                                                    Exhibit 25.2

================================================================================
                                    FORM T-1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                              SECTION 305(b)(2) [__]

                              THE BANK OF NEW YORK
               (Exact name of trustee as specified in its charter)

New York                                               13-5160382
(State of incorporation                                (I.R.S. employer
if not a U.S. national bank)                           identification no.)

One Wall Street, New York, N.Y.                        10286
(Address of principal executive offices)               (Zip code)

                        Pinnacle West Capital Corporation
               (Exact name of obligor as specified in its charter)

Arizona                                                 86-0011170
(State or other jurisdiction of                         (I.R.S. employer
incorporation or organization)                          identification no.)

400 North Fifth Street
Phoenix, Arizona                                        85004
(Address of principal executive offices)                (Zip code)

                                  -----------

                          Subordinated Debt Securities
                       (Title of the indenture securities)

================================================================================



1.    GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

      (a)   NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
            IT IS SUBJECT.



                 Name                                      Address
                 ----                                      -------
                                           
Superintendent of Banks of the State of       2 Rector Street, New York,
New York                                      N.Y. 10006, and Albany, N.Y. 12203

Federal Reserve Bank of New York              33 Liberty Plaza, New York,
                                              N.Y. 10045

Federal Deposit Insurance Corporation         Washington, D.C. 20429

New York Clearing House Association           New York, New York 10005


      (b)   WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

      Yes.

2.    AFFILIATIONS WITH OBLIGOR.

      IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
      AFFILIATION.

      None.

16.   LIST OF EXHIBITS.

      EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
      INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
      7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
      229.10(d).

      1.    A copy of the Organization Certificate of The Bank of New York
            (formerly Irving Trust Company) as now in effect, which contains the
            authority to commence business and a grant of powers to exercise
            corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
            filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
            Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
            1 to Form T-1 filed with Registration Statement No. 33-29637.)

      4.    A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
            T-1 filed with Registration Statement No. 33-31019.)

      6.    The consent of the Trustee required by Section 321(b) of the Act.
            (Exhibit 6 to Form T-1 filed with Registration Statement No.
            33-44051.)

      7.    A copy of the latest report of condition of the Trustee published
            pursuant to law or to the requirements of its supervising or
            examining authority.

                                      -2-


                                    SIGNATURE

      Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 30th day of November, 2004.

                                               THE BANK OF NEW YORK

                                               By:  /s/  ROBERT A. MASSIMILLO
                                                  ------------------------------
                                                  Name:  ROBERT A. MASSIMILLO
                                                  Title: VICE PRESIDENT


                                                                       EXHIBIT 7

                       Consolidated Report of Condition of

                              THE BANK OF NEW YORK

                    of One Wall Street, New York, N.Y. 10286
                     And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
2004, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.



                                                                           Dollar Amounts
                                                                            In Thousands
                                                                        
ASSETS
Cash and balances due from depository institutions:
   Noninterest-bearing balances and currency and coin....                   $  3,036,306
   Interest-bearing balances.............................                      9,034,655
Securities:
   Held-to-maturity securities...........................                      1,693,598
   Available-for-sale securities.........................                     20,325,634
Federal funds sold and securities purchased under
   agreements to resell..................................
   Federal funds sold in domestic offices................                         19,100
   Securities purchased under agreements to resell.......                      4,324,992
Loans and lease financing receivables:
   Loans and leases held for sale........................                          6,685
   Loans and leases, net of unearned income..............                     37,402,355
   LESS: Allowance for loan and lease losses.............                        594,211
   Loans and leases, net of unearned
     income and allowance................................                     36,808,144
Trading Assets...........................................                      3,420,107
Premises and fixed assets (including capitalized
   leases)...............................................                        969,419
Other real estate owned..................................                          1,253
Investments in unconsolidated subsidiaries and
   associated companies..................................                        253,729
Customers' liability to this bank on acceptances
   outstanding...........................................                        166,157
Intangible assets........................................
   Goodwill..............................................                      2,708,882
   Other intangible assets...............................                        748,171




                                                                         
Other assets...........................................                        6,998,625
                                                                            ------------
Total assets...........................................                     $ 90,515,457
                                                                            ============

LIABILITIES
Deposits:
   In domestic offices.................................                     $ 40,236,165
   Noninterest-bearing.................................                       15,201,748
   Interest-bearing....................................                       25,034,417
   In foreign offices, Edge and Agreement
     subsidiaries, and IBFs............................                       24,110,224
   Noninterest-bearing.................................                          300,559
   Interest-bearing....................................                       23,809,665
Federal funds purchased and securities sold under
     agreements to repurchase..........................
   Federal funds purchased in domestic offices.........                          717,565
   Securities sold under agreements to repurchase......                          812,853
Trading liabilities....................................                        2,598,442
Other borrowed money:
   (includes mortgage indebtedness and obligations
   under capitalized leases)...........................                        4,158,526
Not applicable
Bank's liability on acceptances executed and
   outstanding.........................................                          167,267
Subordinated notes and debentures......................                        2,389,088
Other liabilities......................................                        6,730,454
                                                                            ------------
Total liabilities......................................                     $ 81,920,584
                                                                            ============
Minority interest in consolidated subsidiaries.........                          142,058

EQUITY CAPITAL
Perpetual preferred stock and related surplus..........                                0
Common stock...........................................                        1,135,284
Surplus................................................                        2,087,205
Retained earnings......................................                        5,213,125
Accumulated other comprehensive income.................                           17,201
Other equity capital components........................                                0
                                                                            ------------
Total equity capital...................................                        8,452,815
                                                                            ------------
Total liabilities, minority interest, and equity
   capital.............................................                     $ 90,515,457
                                                                            ============





      I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition is true and
correct to the best of my knowledge and belief.

                                                               Thomas J. Mastro,
                                           Senior Vice President and Comptroller

      We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.

Thomas A. Renyi
Gerald L. Hassell                          Directors
Alan R. Griffith

EX-25.3

                                                                    Exhibit 25.3

================================================================================
                                    FORM T-1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                              SECTION 305(b)(2) [__]

                              THE BANK OF NEW YORK
               (Exact name of trustee as specified in its charter)

New York                                               13-5160382
(State of incorporation                                (I.R.S. employer
if not a U.S. national bank)                           identification no.)

One Wall Street, New York, N.Y.                        10286
(Address of principal executive offices)               (Zip code)


                        Pinnacle West Capital Corporation
               (Exact name of obligor as specified in its charter)

Arizona                                                86-0011170
(State or other jurisdiction of                        (I.R.S. employer
incorporation or organization)                         identification no.)

400 North Fifth Street
Phoenix, Arizona                                       85004
(Address of principal executive offices)               (Zip code)

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

                       Convertible Senior Debt Securities
                       (Title of the indenture securities)

=-==============================================================================



1.    GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

      (a)   NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
            IT IS SUBJECT.



                 Name                                       Address
                 ----                                       -------
                                            
Superintendent of Banks of the State of        2 Rector Street, New York,
New York                                       N.Y. 10006, and Albany, N.Y. 12203

Federal Reserve Bank of New York               33 Liberty Plaza, New York,
                                               N.Y. 10045

Federal Deposit Insurance Corporation          Washington, D.C. 20429

New York Clearing House Association            New York, New York 10005


      (b)   WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

      Yes.

2.    AFFILIATIONS WITH OBLIGOR.

      IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
      AFFILIATION.

      None.

16.   LIST OF EXHIBITS.

      EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
      INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
      7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
      229.10(d).

      1.    A copy of the Organization Certificate of The Bank of New York
            (formerly Irving Trust Company) as now in effect, which contains the
            authority to commence business and a grant of powers to exercise
            corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
            filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
            Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
            1 to Form T-1 filed with Registration Statement No. 33-29637.)

      4.    A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
            T-1 filed with Registration Statement No. 33-31019.)

      6.    The consent of the Trustee required by Section 321(b) of the Act.
            (Exhibit 6 to Form T-1 filed with Registration Statement No.
            33-44051.)

      7.    A copy of the latest report of condition of the Trustee published
            pursuant to law or to the requirements of its supervising or
            examining authority.

                                      -2-


                                    SIGNATURE

      Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 30th day of November, 2004.

                                               THE BANK OF NEW YORK

                                               By:   /s/ ROBERT A. MASSIMILLO
                                                  ------------------------------
                                                  Name:  ROBERT A. MASSIMILLO
                                                  Title: VICE PRESIDENT


                                                                       EXHIBIT 7

                       Consolidated Report of Condition of

                              THE BANK OF NEW YORK

                    of One Wall Street, New York, N.Y. 10286
                     And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
2004, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.



                                                                           Dollar Amounts
                                                                            In Thousands
                                                                        
ASSETS
Cash and balances due from depository institutions:
   Noninterest-bearing balances and currency and coin....                   $  3,036,306
   Interest-bearing balances.............................                      9,034,655
Securities:
   Held-to-maturity securities...........................                      1,693,598
   Available-for-sale securities.........................                     20,325,634
Federal funds sold and securities purchased under
   agreements to resell..................................
   Federal funds sold in domestic offices................                         19,100
   Securities purchased under agreements to resell.......                      4,324,992
Loans and lease financing receivables:
   Loans and leases held for sale........................                          6,685
   Loans and leases, net of unearned income..............                     37,402,355
   LESS: Allowance for loan and lease losses.............                        594,211
   Loans and leases, net of unearned
     income and allowance................................                     36,808,144
Trading Assets...........................................                      3,420,107
Premises and fixed assets (including capitalized
   leases)...............................................                        969,419
Other real estate owned..................................                          1,253
Investments in unconsolidated subsidiaries and
   associated companies..................................                        253,729
Customers' liability to this bank on acceptances
   outstanding...........................................                        166,157
Intangible assets........................................
   Goodwill..............................................                      2,708,882
   Other intangible assets...............................                        748,171




                                                                         
Other assets...........................................                        6,998,625
                                                                            ------------
Total assets...........................................                     $ 90,515,457
                                                                            ============

LIABILITIES
Deposits:
   In domestic offices.................................                     $ 40,236,165
   Noninterest-bearing.................................                       15,201,748
   Interest-bearing....................................                       25,034,417
   In foreign offices, Edge and Agreement
     subsidiaries, and IBFs............................                       24,110,224
   Noninterest-bearing.................................                          300,559
   Interest-bearing....................................                       23,809,665
Federal funds purchased and securities sold under
     agreements to repurchase..........................
   Federal funds purchased in domestic offices.........                          717,565
   Securities sold under agreements to repurchase......                          812,853
Trading liabilities....................................                        2,598,442
Other borrowed money:
   (includes mortgage indebtedness and obligations
   under capitalized leases)...........................                        4,158,526
Not applicable
Bank's liability on acceptances executed and
   outstanding.........................................                          167,267
Subordinated notes and debentures......................                        2,389,088
Other liabilities......................................                        6,730,454
                                                                            ------------
Total liabilities......................................                     $ 81,920,584
                                                                            ============
Minority interest in consolidated subsidiaries.........                          142,058

EQUITY CAPITAL
Perpetual preferred stock and related surplus..........                                0
Common stock...........................................                        1,135,284
Surplus................................................                        2,087,205
Retained earnings......................................                        5,213,125
Accumulated other comprehensive income.................                           17,201
Other equity capital components........................                                0
                                                                            ------------
Total equity capital...................................                        8,452,815
                                                                            ------------
Total liabilities, minority interest, and equity
   capital.............................................                     $ 90,515,457
                                                                            ============





      I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition is true and
correct to the best of my knowledge and belief.

                                                               Thomas J. Mastro,
                                           Senior Vice President and Comptroller

      We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.

Thomas A. Renyi
Gerald L. Hassell                          Directors
Alan R. Griffith

EX-25.4

                                                                    Exhibit 25.4

================================================================================
                                    FORM T-1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                              SECTION 305(b)(2) [__]

                              THE BANK OF NEW YORK
               (Exact name of trustee as specified in its charter)

New York                                               13-5160382
(State of incorporation                                (I.R.S. employer
if not a U.S. national bank)                           identification no.)

One Wall Street, New York, N.Y.                        10286
(Address of principal executive offices)               (Zip code)

                        Pinnacle West Capital Corporation
               (Exact name of obligor as specified in its charter)

Arizona                                                86-0011170
(State or other jurisdiction of                        (I.R.S. employer
incorporation or organization)                         identification no.)

400 North Fifth Street
Phoenix, Arizona                                       85004
(Address of principal executive offices)               (Zip code)

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

                    Convertible Subordinated Debt Securities
                       (Title of the indenture securities)

================================================================================



1.    GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

      (a)   NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
            IT IS SUBJECT.



                 Name                                       Address
                 ----                                       -------
                                            
Superintendent of Banks of the State of        2 Rector Street, New York,
New York                                       N.Y. 10006, and Albany, N.Y. 12203

Federal Reserve Bank of New York               33 Liberty Plaza, New York,
                                               N.Y. 10045

Federal Deposit Insurance Corporation          Washington, D.C. 20429

New York Clearing House Association            New York, New York 10005


      (b)   WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

      Yes.

2.    AFFILIATIONS WITH OBLIGOR.

      IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
      AFFILIATION.

      None.

16.   LIST OF EXHIBITS.

      EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
      INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
      7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
      229.10(d).

      1.    A copy of the Organization Certificate of The Bank of New York
            (formerly Irving Trust Company) as now in effect, which contains the
            authority to commence business and a grant of powers to exercise
            corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
            filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
            Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
            1 to Form T-1 filed with Registration Statement No. 33-29637.)

      4.    A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
            T-1 filed with Registration Statement No. 33-31019.)

      6.    The consent of the Trustee required by Section 321(b) of the Act.
            (Exhibit 6 to Form T-1 filed with Registration Statement No.
            33-44051.)

      7.    A copy of the latest report of condition of the Trustee published
            pursuant to law or to the requirements of its supervising or
            examining authority.

                                      -2-


                                    SIGNATURE

      Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 30th day of November, 2004.

                                       THE BANK OF NEW YORK

                                       By:   /s/ ROBERT A. MASSIMILLO
                                          ------------------------------------
                                          Name:  ROBERT A. MASSIMILLO
                                          Title: VICE PRESIDENT


                                                                       EXHIBIT 7

                       Consolidated Report of Condition of

                              THE BANK OF NEW YORK

                    of One Wall Street, New York, N.Y. 10286
                     And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
2004, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.



                                                                           Dollar Amounts
                                                                            In Thousands
                                                                        
ASSETS
Cash and balances due from depository institutions:
   Noninterest-bearing balances and currency and coin....                   $  3,036,306
   Interest-bearing balances.............................                      9,034,655
Securities:
   Held-to-maturity securities...........................                      1,693,598
   Available-for-sale securities.........................                     20,325,634
Federal funds sold and securities purchased under
   agreements to resell..................................
   Federal funds sold in domestic offices................                         19,100
   Securities purchased under agreements to resell.......                      4,324,992
Loans and lease financing receivables:
   Loans and leases held for sale........................                          6,685
   Loans and leases, net of unearned income..............                     37,402,355
   LESS: Allowance for loan and lease losses.............                        594,211
   Loans and leases, net of unearned
     income and allowance................................                     36,808,144
Trading Assets...........................................                      3,420,107
Premises and fixed assets (including capitalized
   leases)...............................................                        969,419
Other real estate owned..................................                          1,253
Investments in unconsolidated subsidiaries and
   associated companies..................................                        253,729
Customers' liability to this bank on acceptances
   outstanding...........................................                        166,157
Intangible assets........................................
   Goodwill..............................................                      2,708,882
   Other intangible assets...............................                        748,171




                                                                         
Other assets...........................................                        6,998,625
                                                                            ------------
Total assets...........................................                     $ 90,515,457
                                                                            ============

LIABILITIES
Deposits:
   In domestic offices.................................                     $ 40,236,165
   Noninterest-bearing.................................                       15,201,748
   Interest-bearing....................................                       25,034,417
   In foreign offices, Edge and Agreement
     subsidiaries, and IBFs............................                       24,110,224
   Noninterest-bearing.................................                          300,559
   Interest-bearing....................................                       23,809,665
Federal funds purchased and securities sold under
     agreements to repurchase..........................
   Federal funds purchased in domestic offices.........                          717,565
   Securities sold under agreements to repurchase......                          812,853
Trading liabilities....................................                        2,598,442
Other borrowed money:
   (includes mortgage indebtedness and obligations
   under capitalized leases)...........................                        4,158,526
Not applicable
Bank's liability on acceptances executed and
   outstanding.........................................                          167,267
Subordinated notes and debentures......................                        2,389,088
Other liabilities......................................                        6,730,454
                                                                            ------------
Total liabilities......................................                     $ 81,920,584
                                                                            ============
Minority interest in consolidated subsidiaries.........                          142,058

EQUITY CAPITAL
Perpetual preferred stock and related surplus..........                                0
Common stock...........................................                        1,135,284
Surplus................................................                        2,087,205
Retained earnings......................................                        5,213,125
Accumulated other comprehensive income.................                           17,201
Other equity capital components........................                                0
                                                                            ------------
Total equity capital...................................                        8,452,815
                                                                            ------------
Total liabilities, minority interest, and equity
   capital.............................................                     $ 90,515,457
                                                                            ============





      I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition is true and
correct to the best of my knowledge and belief.

                                                               Thomas J. Mastro,
                                           Senior Vice President and Comptroller

      We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.

Thomas A. Renyi
Gerald L. Hassell                          Directors
Alan R. Griffith

EX-25.5

                                                                    Exhibit 25.5

================================================================================
                                    FORM T-1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                              SECTION 305(b)(2) [__]

                              THE BANK OF NEW YORK
               (Exact name of trustee as specified in its charter)

New York                                       13-5160382
(State of incorporation                        (I.R.S. employer
if not a U.S. national bank)                   identification no.)

One Wall Street, New York, N.Y.                10286
(Address of principal executive offices)       (Zip code)

                        Pinnacle West Capital Corporation
               (Exact name of obligor as specified in its charter)

Arizona                                        86-0011170
(State or other jurisdiction of                (I.R.S. employer
incorporation or organization)                 identification no.)

400 North Fifth Street
Phoenix, Arizona                               85004
(Address of principal executive offices)       (Zip code)

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

                               Purchase Contracts
                       (Title of the indenture securities)

================================================================================



1.    GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

      (a)   NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
            IT IS SUBJECT.



                 Name                                       Address
                 ----                                       -------
                                            
Superintendent of Banks of the State of        2 Rector Street, New York,
New York                                       N.Y. 10006, and Albany, N.Y. 12203

Federal Reserve Bank of New York               33 Liberty Plaza, New York,
                                               N.Y. 10045

Federal Deposit Insurance Corporation          Washington, D.C. 20429

New York Clearing House Association            New York, New York 10005


      (b)   WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

      Yes.

2.    AFFILIATIONS WITH OBLIGOR.

      IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
      AFFILIATION.

      None.

16.   LIST OF EXHIBITS.

      EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
      INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
      7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
      229.10(d).

      1.    A copy of the Organization Certificate of The Bank of New York
            (formerly Irving Trust Company) as now in effect, which contains the
            authority to commence business and a grant of powers to exercise
            corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
            filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
            Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
            1 to Form T-1 filed with Registration Statement No. 33-29637.)

      4.    A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
            T-1 filed with Registration Statement No. 33-31019.)

      6.    The consent of the Trustee required by Section 321(b) of the Act.
            (Exhibit 6 to Form T-1 filed with Registration Statement No.
            33-44051.)

      7.    A copy of the latest report of condition of the Trustee published
            pursuant to law or to the requirements of its supervising or
            examining authority.

                                      -2-


                                    SIGNATURE

      Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 30th day of November, 2004.

                                       THE BANK OF NEW YORK

                                       By:    /s/ ROBERT A. MASSIMILLO
                                          -----------------------------------
                                          Name:  ROBERT A. MASSIMILLO
                                          Title: VICE PRESIDENT


                                                                       EXHIBIT 7

                       Consolidated Report of Condition of

                              THE BANK OF NEW YORK

                    of One Wall Street, New York, N.Y. 10286
                     And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business September 30,
2004, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.



                                                                           Dollar Amounts
                                                                            In Thousands
                                                                        
ASSETS
Cash and balances due from depository institutions:
   Noninterest-bearing balances and currency and coin....                   $  3,036,306
   Interest-bearing balances.............................                      9,034,655
Securities:
   Held-to-maturity securities...........................                      1,693,598
   Available-for-sale securities.........................                     20,325,634
Federal funds sold and securities purchased under
   agreements to resell..................................
   Federal funds sold in domestic offices................                         19,100
   Securities purchased under agreements to resell.......                      4,324,992
Loans and lease financing receivables:
   Loans and leases held for sale........................                          6,685
   Loans and leases, net of unearned income..............                     37,402,355
   LESS: Allowance for loan and lease losses.............                        594,211
   Loans and leases, net of unearned
     income and allowance................................                     36,808,144
Trading Assets...........................................                      3,420,107
Premises and fixed assets (including capitalized
   leases)...............................................                        969,419
Other real estate owned..................................                          1,253
Investments in unconsolidated subsidiaries and
   associated companies..................................                        253,729
Customers' liability to this bank on acceptances
   outstanding...........................................                        166,157
Intangible assets........................................
   Goodwill..............................................                      2,708,882
   Other intangible assets...............................                        748,171




                                                                         
Other assets...........................................                        6,998,625
                                                                            ------------
Total assets...........................................                     $ 90,515,457
                                                                            ============

LIABILITIES
Deposits:
   In domestic offices.................................                     $ 40,236,165
   Noninterest-bearing.................................                       15,201,748
   Interest-bearing....................................                       25,034,417
   In foreign offices, Edge and Agreement
     subsidiaries, and IBFs............................                       24,110,224
   Noninterest-bearing.................................                          300,559
   Interest-bearing....................................                       23,809,665
Federal funds purchased and securities sold under
     agreements to repurchase..........................
   Federal funds purchased in domestic offices.........                          717,565
   Securities sold under agreements to repurchase......                          812,853
Trading liabilities....................................                        2,598,442
Other borrowed money:
   (includes mortgage indebtedness and obligations
   under capitalized leases)...........................                        4,158,526
Not applicable
Bank's liability on acceptances executed and
   outstanding.........................................                          167,267
Subordinated notes and debentures......................                        2,389,088
Other liabilities......................................                        6,730,454
                                                                            ------------
Total liabilities......................................                     $ 81,920,584
                                                                            ============
Minority interest in consolidated subsidiaries.........                          142,058

EQUITY CAPITAL
Perpetual preferred stock and related surplus..........                                0
Common stock...........................................                        1,135,284
Surplus................................................                        2,087,205
Retained earnings......................................                        5,213,125
Accumulated other comprehensive income.................                           17,201
Other equity capital components........................                                0
                                                                            ------------
Total equity capital...................................                        8,452,815
                                                                            ------------
Total liabilities, minority interest, and equity
   capital.............................................                     $ 90,515,457
                                                                            ============





      I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition is true and
correct to the best of my knowledge and belief.

                                                               Thomas J. Mastro,
                                           Senior Vice President and Comptroller

      We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.

Thomas A. Renyi
Gerald L. Hassell                          Directors
Alan R. Griffith