Exhibit 1.3
PINNACLE WEST CAPITAL CORPORATION
Common Stock
UNDERWRITING AGREEMENT
December 17, 2002
Credit Suisse First Boston Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
As Representatives of the Several Underwriters
c/o Credit Suisse First Boston Corporation
Eleven ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sir or Madam:
1. INTRODUCTION. Pinnacle West Capital Corporation, an Arizona corporation
(the "COMPANY"), proposes to issue and sell to the Underwriters named in
Schedule A hereto (the "UNDERWRITERS") an aggregate of 5,700,000 shares (the
"FIRM SHARES") and, at the election of the Underwriters, up to 855,000
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").
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. 333-52476 and
333-101457) 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"); such registration statements and any post-effective amendment
thereto, each in the form heretofore made available to Credit Suisse First
Boston Corporation and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc. (each a "REPRESENTATIVE"
and together the "REPRESENTATIVES"), have been declared effective by the
Commission under the Securities Act of 1933, as amended (the "ACT"); and no
stop order suspending the effectiveness of any such registration statement
has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in such
registration statements or filed with the Commission pursuant to Rule
424(a) or 424(b) under the Act, is hereinafter called a "PRELIMINARY
PROSPECTUS" (provided that such term shall include the preliminary
prospectus supplement dated December 13, 2002 and the prospectus dated
December 5, 2002); the various parts of such registration statements,
including all exhibits thereto and the documents incorporated by reference
in the prospectus contained in the registration statements, each as amended
from time to time, are hereinafter collectively called the "REGISTRATION
STATEMENT"; the prospectus relating to the Shares, in the form in which it
has most recently been filed, or prepared for filing, with the Commission
on or prior to the date of this Agreement, including the prospectus
supplement to be filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 4(a) hereof, is hereinafter called the
"PROSPECTUS"; any reference herein to any Preliminary Prospectus or the
Prospectus 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 or Prospectus, as the
case may be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary Prospectus
or Prospectus, 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 or Prospectus, 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 Act and the rules and regulations of the Commission
(the "RULES AND REGULATIONS"), and did not contain an untrue statement of
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and on
the date of this Agreement, the Registration Statement and the Prospectus
conform in all material respects to the requirements of the Act and the
Rules and Regulations and do not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED, HOWEVER,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by any Underwriter through the
Representatives specifically for use therein. The documents incorporated by
reference in the Prospectus, when they became effective or were filed with
the Commission, as the case may be, conformed in all material respects with
the requirements of the Act or the Exchange Act, as applicable, and the
Rules and Regulations.
(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").
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(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, 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, otherwise 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.
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(i) [Reserved.]
(j) 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.
(k) 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.
(l) 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.
(m) 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.
(n) 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 would
not have a Material Adverse Effect.
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(o) 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").
(p) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the Rules and Regulations.
(q) 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.
(r) 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.
(s) 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.
(t) 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 $30.397 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
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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 December 23, 2002 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".
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 the
several Underwriters that:
(a) The Company will file the Prospectus with the Commission pursuant
to and in accordance with Rule 424(b) 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
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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 the Act, 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 Second 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 Second Registration Statement for each Representative and for
the counsel for the Underwriters, which is signed and includes all
exhibits), any related preliminary prospectus supplements and the
Prospectus, including 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 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) During the period of five years after the date of this Agreement,
the Company will furnish to the Representatives and, upon request, each of
the other Underwriters, (i) as soon as practicable after the end of each
fiscal year, a balance sheet and statements of income and changes in common
stock equity of the Company as at the end of and for such year, all in
reasonable detail and certified by independent public accountants, and (ii)
(A) as soon as practicable after the end of each quarterly fiscal period
(except for the last quarterly fiscal period of each fiscal year), a
balance sheet and statement of income of the Company as at the end of and
for such period, all in reasonable detail and certified by a principal
financial or accounting officer of the Company, (B) as soon as available, a
copy of each report of the Company filed with the Commission, and (C) from
time to time, such other information concerning the Company as may
reasonably be requested. So long as the Company has active subsidiaries,
such financial statements will be on a consolidated basis to the extent the
accounts of the Company and its subsidiaries are consolidated.
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(h) 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, the
Prospectus, and each 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, the Prospectus, and
all amendments or supplements to any of them, 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) any filings required to be made with
the National Association of Securities Dealers, Inc. (including filing fees
and the reasonable fees and expenses of counsel for the Underwriters
relating to such filings); (viii) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Shares; (ix) 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 (x) all other
costs and expenses incident to the performance by the Company of its
obligations hereunder.
(i) 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 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.
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
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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. 71, 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
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compared with most 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 proceedings for
that purpose shall have been instituted 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, (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
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negative implications, by any recognized rating agency, (v) there shall not
have occurred any major disruption of settlements 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 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.
(d) The Underwriters or the Representatives shall have received an
opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇ 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) [Reserved;]
(iv) APS and PWEC have been duly incorporated and are validly
existing as corporations in good standing under the laws of its
jurisdiction 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);
(v) To the actual knowledge of those persons in the Lawyer Group
(defined below), 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
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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 (▇▇▇.▇▇.
229.103) of Regulation S-K promulgated under the Securities Act of
1933, as amended. In giving the foregoing opinion, such counsel may
rely solely upon inquiry among the lawyer group (the "LAWYER GROUP")
consisting of those lawyers in the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
who (i) have recorded any time on the transaction to which this
opinion relates or (ii) have billed more than ten hours on any matter
involving the Company the twelve-month period preceding December __,
2002, the date as of which the list of such lawyers was compiled for
purposes of inquiry for this opinion. This opinion is limited to
matters which have been given substantive attention by the Lawyer
Group in the form of legal consultation as described in Paragraph 2 of
the ABA Statement of Policy Regarding Lawyers' Responses to Auditors'
Requests for Information (December 1975);
(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
(vii) 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;
(viii) 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;
(ix) 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;
12
(x) The Company is not an "investment company", as such term is
defined in the Investment Company Act;
(xi) 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
(xii) 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 or statistical
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 Paragraph
(ix) hereof, those persons in the Lawyer Group have 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 or statistical 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 the actual knowledge of those persons in the Lawyer
Group, 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.
In giving such opinion, ▇▇▇▇▇ & ▇▇▇▇▇▇ 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
13
York, and further may rely upon the opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & 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 or the Representatives shall have received from
counsel for the Underwriters such opinion or opinions, dated the relevant
Closing Date, with respect to the incorporation of the Company, the
validity of the Shares, the Registration Statement, the Prospectus, and
other related matters as may reasonably be required, 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 ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
(f) The Underwriters or the Representatives 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 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 or the Representatives 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 lock-up 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 or the Representatives
with such conformed copies of such opinions, certificates, letters, and
documents as may be reasonably requested.
14
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 or
preliminary prospectus supplement, 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, as incurred, by such
Underwriter or such controlling person 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
through the Representatives specifically for use therein. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter will severally and not jointly 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 or preliminary prospectus supplement,
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 any Underwriter
through the Representatives 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 the indemnifying party
under this Section, notify the indemnifying party of the commencement
15
thereof; but the failure to notify the indemnifying party shall not relieve
it from any liability that it may have under subsection (a) or (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 election so to assume 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. 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: (1) if such loss, claim, damage, liability, or action arises under
subsection (a) above, then (i) 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 (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) 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 (2) if such loss, claim, damage, liability, or action
arises under subsection (b) above, then in such proportion as is
16
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; PROVIDED, HOWEVER,
that in no case shall any Underwriter (except as may be provided in any
agreement among underwriters relating to the offering of the Shares) be
responsible for any amount in excess of the underwriting discount or
commission applicable to the Shares purchased by such Underwriter
hereunder. For the purposes of clause (1) 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 (1) and (2) 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 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). 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. 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 or the Representatives
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. 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.
17
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 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 Credit Suisse First
Boston Corporation, Eleven ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
Transactions Advisory Group (fax: ▇▇▇-▇▇▇-▇▇▇▇) and c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney
Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: Canem Arkan; 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 ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
or delivered, or telecopied and confirmed to the Company at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (fax: ▇▇▇-▇▇▇-▇▇▇▇).
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 jointly 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.
18
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: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: 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.
Credit Suisse First Boston Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
By: CREDIT SUISSE FIRST BOSTON CORPORATION, as Representative
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
(Credit Suisse First Boston Corporation)
19
SCHEDULE A
Underwriter Number of Firm Shares
----------- ---------------------
Credit Suisse First Boston Corporation ................. 1,425,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. .............................. 1,425,000
Barclays Capital, Inc. ................................. 1,425,000
▇.▇. ▇▇▇▇▇▇ Securities Inc. ............................ 555,750
UBS Warburg LLC ........................................ 555,750
BNY Capital Markets, Inc. .............................. 156,750
KBC Financial Products USA Inc. ........................ 156,750
---------
Total .................................................. 5,700,000
=========
20
EXHIBIT A
[FORM OF LOCK-UP]
21
December __, 2002
Credit Suisse First Boston Corporation
Eleven ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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 Credit Suisse First Boston Corporation and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc.
In addition, the undersigned agrees that, without the prior written consent of
Credit Suisse First Boston Corporation and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., 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 December 31, 2002.
Very truly yours,
----------------------------------------
[NAME]
22