<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ARIZONA PUBLIC SERVICE COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
JEROME BENNETT
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
N/A
- --------------------------------------------------------------------------------
(3) Filing party:
N/A
- --------------------------------------------------------------------------------
(4) Date filed:
N/A
- --------------------------------------------------------------------------------
- ---------------
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
ARIZONA PUBLIC SERVICE COMPANY
P.O. BOX 53999
PHOENIX, ARIZONA 85072-3999
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON TUESDAY, APRIL 19, 1994
To the Shareholders:
The seventy-fourth annual meeting of shareholders of Arizona Public Service
Company (the "Company") will be held at the offices of the Company at 400 North
Fifth Street in Phoenix, Arizona, on Tuesday, April 19, 1994, at 10:00 a.m., for
the following purposes:
1. To elect a Board of Directors to serve for the ensuing year or until
their successors are elected and qualified; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
This Proxy Statement is furnished in connection with the solicitation by
the Company's Board of Directors of proxies in the accompanying form. The cost
of solicitation, which will be by mail, will be borne by the Company. It is also
anticipated that brokerage houses and others will be reimbursed for their
out-of-pocket expenses in forwarding documents to beneficial owners of stock
held in their names. Directors, officers, or employees of the Company may
possibly solicit proxies by telephone or in person without extra compensation
therefor.
So far as management is aware, the matters set out in this Proxy Statement
will be the only ones to be acted upon at the meeting. If any other matters
properly come before the meeting or any adjournment thereof, the Proxy Committee
named in the enclosed proxy will vote thereon in accordance with its judgment.
The management of the Company cordially invites you to attend the meeting.
By order of the Board of Directors
NANCY C. LOFTIN
Secretary
Approximate date of mailing to shareholders:
March 18, 1994
IMPORTANT!
SHAREHOLDERS ARE EARNESTLY REQUESTED TO DATE, SIGN AND MAIL PROMPTLY THE
ENCLOSED PROXY. A POSTAGE-PAID ENVELOPE IS PROVIDED FOR MAILING IN THE UNITED
STATES. YOU ARE ENTITLED TO REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED
AND VOTE YOUR SHARES IN PERSON IF YOU ATTEND THE MEETING.
<PAGE> 3
VOTING SECURITIES
Each of the 77,973,146 shares of the Company's capital stock (71,264,947
shares of common and 6,708,199 shares of preferred) outstanding at the close of
business on March 1, 1994 (the "Record Date") entitles the holder to notice of,
and to vote at, this meeting or any adjournment thereof, but shares can be voted
at the meeting only if the holder is present or represented by proxy. A majority
of the outstanding shares entitled to vote and to be represented in person or by
proxy at the meeting shall constitute a quorum for the conduct of business.
In voting for directors, the votes to which each shareholder is otherwise
entitled will be multiplied by the number of directors to be elected, and any
shareholder may cumulate his or her votes by casting them all in person or by
proxy for any one nominee or distribute them among two or more nominees. There
are no conditions precedent to the exercise of cumulative voting rights, nor is
any discretionary authority to cumulate being solicited hereby. An affirmative
vote of a majority of the shares present and entitled to vote at the meeting is
required for approval of the election of each director. Votes withheld are
included in the determination of the number of shares present and entitled to
vote and have the effect of a negative vote.
PRINCIPAL HOLDERS OF VOTING SECURITIES
All of the outstanding shares of the common stock of the Company are owned
by Pinnacle West Capital Corporation ("Pinnacle West"). Pursuant to a Pledge
Agreement, dated as of January 31, 1990 between Pinnacle West and Citibank,
N.A., as Collateral Agent (the "Pledge Agreement"), and as part of a
restructuring of substantially all of its outstanding indebtedness, Pinnacle
West granted certain of its lenders a security interest in all of the Company's
outstanding common stock. Until the Collateral Agent and Pinnacle West receive
notice of the occurrence and continuation of an Event of Default (as defined in
the Pledge Agreement), Pinnacle West is entitled to exercise or refrain from
exercising any and all voting and other consensual rights pertaining to the
common stock. As to matters other than the election of directors, Pinnacle West
agreed not to exercise or refrain from exercising any such right if, in the
Collateral Agent's judgment, such action would have a material adverse effect on
the value of the common stock. The pledgees under the Pledge Agreement do not
presently beneficially own (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) the Company's outstanding common stock.
No director-nominee is the beneficial owner of any of the outstanding
capital stock of the Company except for Mr. Thomas G. Woods, Jr. and his wife,
who beneficially own 700 shares of the Company's $2.625 Cumulative Preferred
Stock, Series C, which is less than 1% of the class.
1
<PAGE> 4
The following table shows each person who at the close of business on
December 31, 1993 was known by the Company to beneficially own (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) more than 5% of any class
of the capital stock of the Company:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
TITLE OF NAME AND ADDRESS OF OF BENEFICIAL OF
CLASS BENEFICIAL OWNER OWNERSHIP CLASS
- ---------- -------------------------------------- ----------------- --------
<S> <C> <C> <C>
Common Pinnacle West Capital Corporation 71,264,947 100.00%
400 East Van Buren, Suite 800 (Direct)
Phoenix, AZ 85004
Preferred Cargill Incorporated 350,000 5.1%
15407 McGinty Road West (Direct)
Wayzata, MN 55391
</TABLE>
2
<PAGE> 5
OWNERSHIP OF PINNACLE WEST SECURITIES
BY MANAGEMENT
The following table sets forth as of March 1, 1994 the number of shares of
common stock of Pinnacle West beneficially owned by each director and nominee,
each executive officer named in the summary compensation table and all directors
and officers as a group. Shares which may be acquired within 60 days by the
exercise of stock options are shown separately. Unless otherwise indicated, the
owners listed have sole voting and investment power.
<TABLE>
<CAPTION>
SHARES UNDER
SHARES OPTIONS TOTAL SHARES
BENEFICIALLY EXERCISABLE BENEFICIALLY
NAME OR GROUP OWNED(1) WITHIN 60 DAYS OWNED
- ----------------------------------------------------- ------------ -------------- ------------
<S> <C> <C> <C>
Kenneth M. Carr...................................... 10 -0- 10
William F. Conway.................................... 27,787 4,329 32,116
O. Mark De Michele................................... 76,020 69,970 145,990
Walter F. Ekstrom.................................... 35,192 7,319 42,711
Martha O. Hesse...................................... 1,200 14,000 15,200
Marianne Moody Jennings.............................. 110 -0- 110
Robert G. Matlock.................................... 500 -0- 500
Jack M. Morgan....................................... 277 -0- 277(3)
Marvin R. Morrison................................... 6,123 -0- 6,123(3)
Jaron B. Norberg..................................... 36,839 29,009 65,848
John R. Norton III................................... 10,000 17,500 27,500
Shirley A. Richard................................... 24,552 32,122 56,674
Donald M. Riley...................................... 2,500 -0- 2,500
Henry B. Sargent .................................... 59,027 58,797 117,824
Wilma W. Schwada..................................... 1,200 -0- 1,200
Verne D. Seidel...................................... 1,174 -0- 1,174
Richard Snell........................................ 41,248 312,475 353,723
Morrison F. Warren................................... 198 -0- 198(3)
Ben F. Williams, Jr.................................. 2,100 -0- 2,100
Thomas G. Woods, Jr. ................................ 2,400 -0- 2,400
All Directors and Officers as a Group................ 462,569 618,858 1,081,427(2)
</TABLE>
- ----------
(1) Includes shares subject to restrictions under the Pinnacle West stock option
plan and vested shares in the Company's employee savings plan. Shares as to
which voting or investment power is shared with others are as follows: Mr.
Carr -- 10; Mr. Conway -- 14,157; Mr. De Michele -- 6,827; Ms.
Jennings -- 110; Mr. Matlock -- 500; Mr. Morrison -- 6,123; Mr.
Norberg -- 1,054; Mr. Norton -- 3,000; Ms. Richard -- 10,555; Mr.
Sargent -- 26,560; Mr. Seidel -- 480; Mr. Williams -- 500 and Mr.
Woods -- 2,400.
(2) Includes 102,631 shares in which voting or investment power is shared with
others. Such total amount accounted for 1.2% of the total outstanding shares
of Pinnacle West, however no individual owns as much as 1%.
(3) Messrs. Morgan, Morrison and Warren are retiring as directors and are not
standing for re-election.
3
<PAGE> 6
ELECTION OF DIRECTORS
It is the intention of the persons named in the enclosed proxy to vote for
the nominees listed below to serve as members of the Board of Directors until
the next annual meeting of shareholders or until their successors are elected
and qualified. If, between the mailing of this Proxy Statement and the meeting
date, any such individual becomes unavailable to serve (which is not
anticipated), the proxies may be voted for a person properly nominated or the
number of directors to be elected will be reduced accordingly. The following
information has been furnished by the respective nominees as of March 1, 1994.
<TABLE>
<CAPTION>
DATE FIRST
NAME, AGE, BUSINESS EXPERIENCE, AND DIRECTORSHIPS(1) BECAME A DIRECTOR
<S> <C>
- -------------------------------------------------------------------------------------------
KENNETH M. CARR, 68, is retired. Between June 1991 and August 1991 December 1991
Mr. Carr acted as Special Assistant to the Nuclear Regulatory
Commission (NRC). From August 1986 to June 1991, he served as a
commissioner of the NRC, holding the position of Chairman during
the last two years of his term. Prior to serving as a commissioner,
Mr. Carr was a career naval officer retiring in 1985 as a Vice
Admiral.
O. MARK DE MICHELE, 59, is President and Chief Executive Officer of September 1982
the Company. Mr. De Michele was elected President and Chief
Operating Officer of the Company in 1982 and became Chief Executive
Officer in January 1988. Mr. De Michele is also a director of
America West Airlines, Inc.
MARTHA O. HESSE, 51, is President of Hesse Gas Company, Dolan December 1991
Energy Corporation and Sierra Blanca Gas Company, Houston, Texas
(marketing of gas and other fuels; energy investment). In 1990 Ms.
Hesse served as Senior Vice President of First Chicago Corporation
(financial services), and from 1986 to 1989, she was Chairman of
the Federal Energy Regulatory Commission. Ms. Hesse is also a
director of Sithe Energies, Inc.
MARIANNE MOODY JENNINGS, 40, is a Professor of Legal and Ethical March 1987
Studies in Business at the College of Business, Arizona State
University where she has worked for more than five years. In
addition, Ms. Jennings is a textbook author, and since 1977 she has
been a consultant for various firms.
ROBERT G. MATLOCK, 60, has, since 1984, been an independent April 1993
management consultant to various governmental agencies involved
in developing nuclear energy resources and to utilities operating
nuclear facilities.
JARON B. NORBERG, 56, has, for over five years, served as Executive July 1986
Vice President and Chief Financial Officer of the Company.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DATE FIRST
NAME, AGE, BUSINESS EXPERIENCE, AND DIRECTORSHIPS(1) BECAME A DIRECTOR
<S> <C>
- -------------------------------------------------------------------------------------------
JOHN R. NORTON III, 64, has, for over five years, been Chairman and January 1984
Chief Executive Officer of J.R. Norton Company (agricultural
production). Mr. Norton is also a director of Aztar Corporation
(casino hotels), America West Airlines, Inc. and Terra Industries
Inc. (Agricultural Chemicals).
DONALD M. RILEY, 50, is President and General Manager of Gilpin's June 1987
Construction Company, Inc. (general contractor), Yuma, Arizona.
HENRY B. SARGENT, 59, has, for over five years, served as Executive January 1976
Vice President and Chief Financial Officer of Pinnacle West. Mr.
Sargent served as a director of the Company from January 1976 until
he resigned in July 1986. He was reelected as a director in May
1990. Mr. Sargent is also a director of Magma Copper Company.
WILMA W. SCHWADA, 67, is a civic leader and homemaker, Phoenix, September 1977
Arizona.
VERNE D. SEIDEL, 68, is a real estate broker and managing partner June 1987
of HMS Properties (property management), Flagstaff, Arizona.
RICHARD SNELL, 63, was elected, as of February 1990, Chairman of July 1975
the Board of the Company and Chairman of the Board, President,
and Chief Executive Officer of Pinnacle West. Mr. Snell was
Chairman of the Board, President and Chief Executive Officer of
Ramada Inc. from 1981 to 1989, and was the Chief Executive Officer
(from 1989 to February 1990) and Chairman of the Board (from 1989
to February 1992) of Aztar Corporation, successor to Ramada's
casino hotel business. He remains a director of Aztar Corporation.
BEN F. WILLIAMS, JR., 64, has been a partner since 1991 in the law December 1970
firm of Lesher and Williams, Tucson, Arizona. Prior to joining
the Lesher and Williams Law Firm, Mr. Williams practiced law in
Douglas, Arizona.
THOMAS G. WOODS, JR., 67, served as a consultant to the Company November 1977
between 1985 and 1992. He retired in February 1985 as Executive
Vice President of the Company.
</TABLE>
- ----------
(1) Ms. Hesse and Messrs. De Michele, Norton, Sargent, and Snell are also
currently directors of Pinnacle West.
THE BOARD AND ITS COMMITTEES
The full Board of Directors met twelve times in 1993. Certain required
information is provided below in regard to the Human Resources and the Audit
Review Committees of the Board. There are presently two other standing
committees of the Board that are important to its overall operations. Each
director then in office attended 75% or more of the meetings of the full Board
and of the committees on which he or she served.
5
<PAGE> 8
The Human Resources Committee is composed of Mmes. Hesse, Jennings and
Schwada and Messrs. Morgan, Norton, Riley and Williams. In addition to the
responsibilities mentioned in the Report of the Human Resources Committee which
is contained in this Proxy Statement, such Committee also recommends prospective
new Board members to the full Board. The Committee may consider shareholder
suggestions with respect to new nominees for the Board if the suggestion is sent
to the Secretary of the Company at the address on the cover page of this Proxy
Statement.
The Company's Audit Review Committee reviews the performance and
independence of the Company's independent accounting firm, makes an annual
recommendation to the full Board with respect to the appointment of the firm,
approves the general nature of the services to be performed by the firm, and
solicits and reviews the firm's recommendations. The Committee also consults
with the Company's internal audit group and periodically reviews the
relationships among that group, management of the Company, and its independent
accountants. The Committee met five times in 1993. Its members are Mmes. Hesse
and Jennings and Messrs. Morgan, Morrison, Riley, Seidel, Warren and Woods.
In 1993 each director, except directors who are also salaried officers of
the Company, received $15,000 plus $750 for each Board meeting attended and $500
for each committee meeting attended. Directors who are also salaried officers of
the Company received no directors fees.
During 1993 the Company paid R. G. Matlock & Associates, Inc. $32,599 in
fees and expenses for consulting services relating to the Company's nuclear
operations. Mr. Robert G. Matlock is President and Chief Executive Officer of R.
G. Matlock Associates, Inc.
EXECUTIVE COMPENSATION
The following table shows the annual and long-term compensation paid or
accrued during the three years ending December 31, 1993 for each of the five
most highly compensated executive officers of the Company for services rendered
in all capacities to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------------------
ANNUAL COMPENSATION (F) (G)
---------------------- (E) SECURITIES ALL
RESTRICTED UNDERLYING OTHER
(A) (B) (C) (D) STOCK OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS AWARDS(2) GRANTED SATION(3)
- ---------------------------- ----- --------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
William F. Conway 1993 $ 326,282 $130,543 $ -0- -0- $ 9,447
Executive Vice President, 1992 343,978 88,729 50,863 13,000 5,110
Nuclear 1991 299,738 116,500 40,950 13,000 2,543
O. Mark De Michele 1993 394,642 136,994 110,625 25,000 7,737
President, Chief Executive 1992 384,816 86,678 97,813 25,000 28,224
Officer and Director 1991 373,608 80,000 78,750 25,000 25,358
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------------------
ANNUAL COMPENSATION (F) (G)
---------------------- (E) SECURITIES ALL
RESTRICTED UNDERLYING OTHER
(A) (B) (C) (D) STOCK OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS AWARDS(2) GRANTED SATION(3)
- ---------------------------- ----- --------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Walter F. Ekstrom 1993 $ 228,122 $ 46,814 $ -0- -0- $11,074
Executive Vice President, 1992 188,269 44,121 39,125 10,000 3,746
Engineering, Operations and 1991 182,783 43,000 31,500 10,000 1,527
Construction
Jaron B. Norberg 1993 248,614 70,014 57,525 13,000 6,486
Executive Vice President, 1992 227,556 51,377 50,863 13,000 28,457
Chief Financial Officer and 1991 225,344 50,000 40,950 13,000 26,293
Director
Shirley A. Richard 1993 188,508 51,805 54,844 12,500 4,952
Executive Vice President, 1992 184,243 41,423 29,344 7,500 2,693
Customer Service, 1991 177,967 40,000 23,625 7,500 1,694
Marketing & Corporate
Relations
</TABLE>
- ----------
(1) Includes salaries, deferred cash compensation, and amounts paid to Mr.
Conway under a deferred compensation arrangement.
(2) The value of the restricted stock is based on the closing market price of
Pinnacle West common stock on the date the restricted shares were granted.
Restricted stock will not be distributed prior to three years from the date
of grant. Thereafter one share of such stock will be distributed to a
participant, from time to time for every five shares of unrestricted stock
that such participant holds for 24 consecutive months. Dividends that are
payable in cash or stock may be withheld until the restrictions lapse.
The aggregate number of restricted shares held and their value (in brackets)
as of December 31, 1993 are as follows: Mr. Conway -- 12,976 [$291,960]; Mr.
De Michele -- 21,016 [$472,860]; Mr. Ekstrom -- 0 [-0-]; Mr.
Norberg -- 11,686 [$262,935]; and Ms. Richard -- 5,500 [$123,750].
(3) This column includes (i) the above market portion of interest accrued in
1993 on funds deferred under a deferred compensation plan described on page
11 in the following amounts: Mr. Conway -- $4,871; Mr. De Michele -- $3,170;
Mr. Ekstrom -- $6,680; Mr. Norberg -- $1,372; and Ms. Richard -- $2,236;
(ii) Company contributions made during 1993 under the Company's Employee
Savings Plan in the following amounts: Mr. Conway -- $4,486; Mr. De
Michele -- $4,493; Mr. Ekstrom -- $4,373; Mr. Norberg -- $4,486; and Ms.
Richard -- $2,716; and (iii) premiums paid by the Company for group term
life insurance in the following amounts: Mr. Conway -- $90; Mr. De
Michele -- $74; Mr. Ekstrom -- $21; Mr. Norberg -- $228; and Ms.
Richard -- $0.
7
<PAGE> 10
STOCK OPTION GRANTS IN 1993 AND PRESENT VALUE. The following table sets
forth, for each of the individuals named in the summary compensation table, the
number of shares of Pinnacle West common stock covered by options granted during
1993, the percentage of options received of the total options granted, the
exercise price, the date the option expires and the present value of the options
as of the date of grant.
<TABLE>
<CAPTION>
PERCENTAGE
RECEIVED
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED PRESENT VALUE
OPTIONS TO ALL EXERCISE EXPIRATION ON DATE OF
NAME GRANTED EMPLOYEES PRICE(1) DATE GRANT(2)
- ------------------------ ----------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Mr. Conway -0- -0- -0- -0-
Mr. De Michele 25,000 6.2% $22.13 Dec. 2003 $85,000
Mr. Ekstrom -0- -0- -0- -0-
Mr. Norberg 13,000 3.2% 22.13 Dec. 2003 44,200
Ms. Richard 2,500 .6% 21.19 Mar. 2003 8,400
Ms. Richard 10,000 2.5% 22.13 Dec. 2003 34,000
</TABLE>
- ----------
(1) Options may be exercised by the payment of cash and/or shares of Pinnacle
West common stock. The plan permits "cashless" exercises of options under
which the exercise price may be paid by directing the Company to withhold
from the shares of stock that would otherwise be issued upon exercise of the
option, that number of shares having a fair market value on the exercise
date equal to the option price. Options vest annually in installments of
33 1/3% per year beginning on the first anniversary of the date of grant.
(2) The Black-Scholes option pricing model was used in determining the present
value of the options granted. The assumptions utilized in the Black-Scholes
equation model to determine the present value are as follows: 17.3% for
expected volatility; 5.23% for risk free rate of return; 3.62% for dividend
yield and 5 years for the time of exercise.
STOCK OPTIONS EXERCISED IN 1993 AND YEAR-END VALUE. The following table
sets forth as to the individuals named in the summary compensation table
information with respect to the exercise of options to purchase Pinnacle West
common stock during 1993, the value realized upon exercise of options, the
aggregate number of securities underlying unexercised options held at December
31, 1993 and their value on that date.
8
<PAGE> 11
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED 12/31/93 12/31/93
ON EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME OF OPTION REALIZED(1) UNEXERCISABLE UNEXERCISABLE(2)
- ----------------------------- ----------- ----------- -------------- -----------------
<S> <C> <C> <C> <C>
Mr. Conway 40,000 $ 513,600 12,987/13,013 $ 71,157/$ 54,779
Mr. De Michele 75,000 890,625 47,198/50,025 136,841/ 114,719
Mr. Ekstrom 29,990 281,783 6,073/-0- -0-/-0-
Mr. Norberg 40,000 500,400 25,862/26,013 71,157/ 59,654
Ms. Richard -0- -0- 30,204/20,000 237,968/ 38,593
</TABLE>
- ----------
(1) Value of options exercised is the market value of the shares on the exercise
date minus the exercise price.
(2) Only includes options whose per-share exercise price is less than the market
value of a share of Pinnacle West common stock on December 31, 1993
("in-the-money options"). Value of the outstanding options is the value of
Pinnacle West common stock at year end minus the exercise price.
EMPLOYEES' RETIREMENT PLAN AND SUPPLEMENTAL EXCESS BENEFIT RETIREMENT
PLAN. The following table illustrates the annual benefits that would be
provided under the Company Employees' Retirement Plan and the Supplemental
Excess Benefit Retirement Plan to employees of the Company, including officers,
who retire at the indicated compensation and longevity levels and who elect to
receive such benefits (which are calculated on a straight-life annuity basis)
over their remaining lives.
<TABLE>
<CAPTION>
YEARS OF SERVICE WITH APS
AVERAGE ANNUAL ------------------------------------------------------------------
COMPENSATION(A) 5(B) 10 20 30 33 1/3(C)
--------------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 60,000 $ 4,875 $ 9,750 $ 19,500 $ 29,250 $ 32,400
100,000 8,125 16,250 32,500 48,750 54,000
150,000 12,188 24,375 48,750 73,125 81,000
200,000 16,250 32,500 65,000 97,500 108,000
250,000 20,313 40,625 81,250 121,875 135,000
300,000 24,375 48,750 97,500 146,250 162,000
350,000 28,438 56,875 113,750 170,625 189,000
400,000 32,500 65,000 130,000 195,000 216,000
450,000 36,563 73,125 146,250 219,375 243,000
500,000 40,625 81,250 162,500 243,750 270,000
550,000 44,688 89,375 178,750 268,125 297,000
</TABLE>
- ----------
(a) Compensation consists of base salaries and wages including any amounts
voluntarily deferred under The Savings Plan for Employees of Arizona Public
Service Company and The Savings Plan for Union Employees of Arizona Public
Service Company, and amounts which would have constituted base salaries or
wages but for the application of a salary reduction agreement under the
Flexible Benefits Plan for Employees of Arizona Public Service Company. The
Employees Retirement Plan does not
9
<PAGE> 12
include amounts voluntarily deferred under deferred compensation plans,
overtime pay, directors' fees, bonuses or incentive pay. The Supplemental
Excess Benefit Retirement Plan does include amounts deferred under deferred
compensation plans, bonuses and incentive pay, subject to certain
exceptions. For purposes of the Employees' Retirement Plan, compensation in
excess of $235,840 (as adjusted annually) is disregarded.
(b) Although years of service begin accumulating on the date of employment,
there is no vesting of interests under the plan until completion of five
years of service.
(c) The maximum number of years taken into account for purposes of calculating
benefits under the plan.
For employees whose annual benefits would exceed the maximum benefits
allowable under the basic Employees' Retirement Plan (which is a qualified
defined benefit pension plan), a Supplemental Excess Benefit Retirement Plan
provides for the payment, to those eligible, of such annual benefits in excess
of the maximum allowable under the basic plan, as well as pension benefits based
on certain types of deferred compensation, bonuses and incentive pay, from the
general assets of the Company. The number of credited years of service for each
of the individuals named in the summary compensation table and their 1993
remuneration covered by the Company's plans are as follows: Mr. Conway -- 5
years, $404,974; Mr. De Michele -- 16 years, $480,461; Mr. Ekstrom -- 33 years,
$316,772; Mr. Norberg -- 12 years, $299,557; and Ms. Richard -- 9 years,
$229,755. The amounts shown in the table are not expected to be subject to any
reduction or offset for social security benefits or other significant amounts.
Assuming retirement at age 65 the estimated annual benefit payable to those
individuals named in the summary compensation table under the Employees
Retirement Plan and the Supplemental Excess Benefit Retirement Plan are $59,227
for Mr. Conway; $250,325 for Mr. De Michele; $171,057 for Mr. Ekstrom; $97,356
for Mr. Norberg; and $104,539 for Ms. Richard.
EXECUTIVE SEVERANCE AND OTHER CONTRACTUAL ARRANGEMENTS. The Company has
entered into severance agreements with Ms. Richard and Messrs. Conway, De
Michele, Ekstrom and Norberg and with eight other executive officers. The
agreements are intended to provide stability of key management for the Company.
Under the agreements, each officer will receive a payment and other severance
benefits having an aggregate value of not more than 2.99 times the officer's
"base income" (the average of the officer's annual compensation over the five
years preceding the year of the "change in control") if, during the two-year
period following a "change in control" of the Company, the officer's employment
is terminated or the terms and conditions of his employment are significantly
and detrimentally altered. "Change in control" includes any change in control
event required to be reported under the Securities Exchange Act of 1934, an
unrelated third party's acquisition of 20% or more of the Company's voting stock
or substantially all of the assets of the Company, a merger or acquisition of
the Company in which the Company is not the surviving corporation unless the
Company's shareholders have the same proportionate interest in the surviving
corporation, or a change in the majority of the members of the Company's Board
of Directors over a two-year period, which change is not approved by two-thirds
of the members of the Board then serving who were members immediately prior to
the change. No severance benefits will be payable to an officer who has attained
age 65 or whose termination is on account of retirement, voluntary termination,
disability or death,
10
<PAGE> 13
or "for cause," as defined in the agreements. An officer will not be deemed to
have voluntarily terminated his or her employment if the officer's termination
is due to a material adverse change in his or her duties, status, or
perquisites, failure to re-elect or redesignate the officer to a position held
prior to the "change in control," a significant relocation of the officer's job
without his or her consent, or a material breach by the Company of the officer's
severance agreement. Each of the executive severance agreements terminates on
December 31 of each year, upon six months' advance notice by the Company to the
officer; if such notice is not given, the agreement will continue for successive
one-year periods until the notice is given.
In April 1978, Mr. De Michele and the Company entered into an agreement
under which the Company in calculating Mr. De Michele's retirement benefits
agreed to allow Mr. De Michele credit for years of prior employment with another
Company. In May 1989 the Company entered into an agreement with Mr. Conway under
which he would receive credit for additional years of service upon completion of
five years of employment. The amount of the benefits to be received under the
two arrangements will be based on age and other factors existing at the time of
retirement and therefore cannot be presently determined. The agreement with Mr.
Conway also provided for the payment of deferred compensation of which the
following remains to be paid: $25,000 per year for three years and $13,340 to be
paid in 1996. Pursuant to a separate letter agreement entered into in April
1989, the Company agreed to compensate Mr. Conway in an amount up to $50,000 per
year based on the ratings of the Palo Verde Nuclear Generating Station by
certain regulatory agencies.
DEFERRED COMPENSATION PLAN. A deferred compensation plan (the "DCP") was
established in 1992 by the Company and Pinnacle West for certain directors and
key employees. The administration of the DCP including the selection of
participants is performed by a committee appointed by the Board of Directors of
Pinnacle West. The DCP allows participants to elect annually to defer any amount
of their director's fees, annual bonus and up to 50% of their base salary.
Amounts deferred are credited each year with interest at a rate based on a
factor of the rolling average of 10-year U.S. Treasury Notes. If a participant
terminates employment under conditions not involving a "change in control"
before having participated in the DCP for five years, the interest is
automatically adjusted to a rate equal to the rolling average of the 10-year
U.S. Treasury Note rate. A "change in control" as defined in the DCP is
substantially the same as the executive severance arrangements described above,
except that the DCP refers to Pinnacle West and not to the Company. In addition,
a sale of more than 80% of the Company's stock or a sale of substantially all of
its assets to an unaffiliated party also constitutes a change in control.
Amounts deferred under the DCP and earnings on such amounts cannot be
distributed to a participant until he or she terminates employment, except in
cases of financial hardship or after amounts have been deferred for five years
provided that the participant has elected to take such early distribution at the
time of the initial deferment. Distributions on account of retirement as defined
in the DCP are available in a lump sum or in equal monthly installments over a
period of up to 15 years. A participant's benefits under the DCP will be offset
and reduced by any amounts payable to that participant under the Supplemental
Executive Benefit Plan described below.
11
<PAGE> 14
SUPPLEMENTAL EXECUTIVE BENEFIT PLAN. Also in 1992, the Company, together
with Pinnacle West, established the Supplemental Executive Benefit Plan ("SEBP")
to provide benefits to certain directors and key employees in the event of a
"change in control." The administration of the SEBP, including the selection of
participants, is performed by a committee appointed by the Board of Directors of
Pinnacle West (the "Committee"). The Company and Pinnacle West have established
an irrevocable trust (the "SEBP Trust") to hold assets for purposes of funding
the plan. The SEBP provides two benefits, a change in control benefit for
participants and an employer's benefit. The change in control benefit to be
determined by the Committee annually will be paid in a lump sum to a participant
in January of the year following the date of a change in control, provided that
the participant meets certain conditions of employment. No change in control
benefit will be payable to a participant who voluntarily terminated employment
prior to the January distribution date. Under certain conditions, a distribution
will be made to a participant prior to the scheduled distribution date.
The employer benefit is the amount in the SEBP Trust that is not needed to
pay a participant's SEBP benefit. It will be paid in a lump sum to the Company
when one of the participants terminates employment for whatever reason under
circumstances which prevent him or her from qualifying for a change in control
benefit or when there is an asset balance remaining in the SEBP Trust after
payment of the benefit and such assets are not necessary to fund any other
participant's SEBP benefits. The SEBP generally defines "change in control" in
the same manner as described above in connection with the DCP, however, it also
includes situations involving bankruptcy, the appointment of a trustee, receiver
or liquidator or an assignment for the benefit of creditors by Pinnacle West.
12
<PAGE> 15
REPORT OF THE HUMAN RESOURCES COMMITTEE
To Our Shareholders:
The Company's Human Resources Committee (the "Committee") is composed of
seven directors none of whom currently is, or has ever been, an officer or
employee of the Company or any of its subsidiaries. The responsibilities of the
Committee include reviewing annually and recommending to the full Board of
Directors the cash compensation paid to the Company's officers, establishing
annual goals for such officers and approving the payment of variable pay
incentives when such goals are met. In addition, the Committee reviews stock
option plans authorized by Pinnacle West shareholders under which stock options
may be awarded to the Company's officers and key employees by the Human
Resources Committee of Pinnacle West.
The Company's executive compensation policy, as developed and adopted by
the Committee, is designed to reward individual performance in critical areas of
the Company's operations including cost management, earnings performance,
customer service, safety and environmental concerns. Incentive goals are
developed annually to focus on the Company's profitability and its operational
results in the short and long term. The Committee sets compensation of Company
officers in accordance with comparable median industry levels and the
achievement of incentive goals. The Committee is presently reviewing the impact,
if any, of Section 162(m) of the Internal Revenue Code to ensure that the
Company's executive compensation will continue to be tax deductible. Section
162(m) of the Code limits the deductibility of compensation paid to certain
executive officers which is in excess of $1,000,000 unless such compensation is
based on preestablished criteria.
In 1992, the Committee retained Hewitt Associates, an international
benefits and compensation consulting firm, to report annually on how its
officers' compensation compared to the compensation paid to officers performing
similar functions at comparable utility companies. The comparable companies
consist of 24 electric, and gas and electric utilities all of whom are included
in the companies comprising the Edison Electric Institute Index used in the
performance graph on page 16. The 1993 reports of Hewitt indicated that the base
salaries paid to the Company's executive officers averaged generally 4% below
the median compensation paid to their counterparts at comparable companies.
Although the reports disclosed that Mr. Conway's compensation is significantly
above the median, the Committee feels that his compensation is reasonable given
his responsibility for operating the largest nuclear power plant in the United
States, a position unique within the nuclear energy industry. The report also
indicated that the cash incentive awards at target levels are below the market.
13
<PAGE> 16
COMPONENTS OF COMPENSATION
BASE SALARY
The Committee reviews each executive officer's base salary annually. To
determine an appropriate salary level, consideration is given to individual
performance, level of responsibility, prior experience and expertise, and base
pay of officers performing similar functions at comparable utility companies.
The 1993 reports from Hewitt Associates indicate that the base salary for Mr. De
Michele was 12% below the median base salary of Chief Executive Officers of
comparable utility companies. Except for two officers whose salary was in the
lower range of their respective pay grades, salary increases in 1993 for the
Company's officers, including its Chief Executive Officer, were not more than 2%
of their 1992 salary. The small percentage increase is in keeping with the
Company's policy to have a significant portion of compensation achieved through
incentives such as bonuses tied to Company performance and the attainment of
goals established by the Committee.
CASH INCENTIVES
Under the Company's variable pay plan for officers, the total compensation
of the CEO as well as the other executive officers is significantly impacted by
their degree of accomplishment in meeting certain critical success indicators
established by the Committee at the beginning of each year. The amount of
incentive compensation paid, if any, depends on the degree of success in meeting
these goals. However, the plan does not allow any cash incentive payments to be
made unless the Company experiences lower than budgeted capital and operations
and maintenance expenditures. The other indicators established by the Committee
related to earnings, the operating efficiency of the Company's coal and nuclear
facilities, customer satisfaction, safety and savings associated with fuel and
purchased power costs. Under the plan the incentive payment for 1993 could range
from 0% to 40% of Mr. De Michele's base salary and from 0% to 32% of the base
salary for the other officers named in the summary compensation table. These
incentive award opportunities at target performance levels are below the median
of comparable utility companies, both for the Chief Executive Officer and the
other Company officers as a group.
As a result of achieving a substantial portion of the indicators, Mr. De
Michele was granted a cash incentive payment equal to 33.75% of his base salary,
with the other officers named in the summary compensation table receiving a cash
incentive payment equal to 27% of their respective base salaries.
14
<PAGE> 17
LONG-TERM INCENTIVES
The Human Resources Committee of Pinnacle West, the Company's parent,
believes that the ultimate measure of management's performance is its ability to
deliver rewards to shareholders in the form of share price appreciation and
rising dividends over time. To those ends, it began in the Fall of 1990 to make
systematic grants of restricted stock and stock options to officers and key
management employees of Pinnacle West and its subsidiaries, including the
Company, in order that key management employees could participate in those
rewards (or lack thereof) through stock ownership.
The primary objective of Pinnacle West's stock option program is to
encourage stock ownership on a continuing basis. To receive awards of restricted
stock, participants must meet predetermined share ownership guidelines that
expose them to similar financial risks as other shareholders.
The size of awards made by The Human Resources Committee of Pinnacle West
to the Company's participants in the program is determined by making assumptions
as to how, generally, the stock should perform if Pinnacle West and its
subsidiaries achieve their longer term goals. The Pinnacle West Committee then
determines the size of each grant with the goal of bringing the recipient's
total compensation to a level approximately equal to or slightly ahead of the
competitive level provided the stock performs as assumed.
HUMAN RESOURCES COMMITTEE:
Martha O. Hesse
Marianne Moody Jennings
Wilma W. Schwada
Jack M. Morgan
John R. Norton, III
Donald M. Riley
Ben F. Williams
The Report of the Human Resources Committee shall not be deemed to be
incorporated by reference in any filing made by the Company with the United
States Securities and Exchange Commission under the Securities Act of 1933 or
the Securities Exchange Act of 1934.
15
<PAGE> 18
PERFORMANCE GRAPHS
The following two graphs show the yearly change in the cumulative total
shareholder return on an investment of $100 in the common stock of Pinnacle West
as compared to a similar investment in the Dow Jones Equity Market Index and the
Edison Electric Institute Index of 100 Investor Owned Electric Utilities. The
first graph covers a five-year period beginning on the last trading day of 1988.
The second graph covers a four-year period beginning on the last trading day of
1989. The four-year graph is included to show the shareholder return subsequent
to the restructuring of senior management at Pinnacle West which occurred in the
spring of 1990. The common stock of Pinnacle West is used to measure the
performance of the Company inasmuch as the Company is the principal subsidiary
of Pinnacle West and its operations account for the preponderance of Pinnacle
West's operating revenues.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
EDISON ELEC-
TRIC
MEASUREMENT PERIOD DOW JONES INSTITUTE
(FISCAL YEAR COVERED) PINNACLE WEST EQUITY INDEX INDEX
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 75.71 130.94 129.92
1990 68.57 125.80 131.52
1991 115.40 166.61 169.39
1992 134.44 180.95 182.09
1993 148.41 198.94 202.82
</TABLE>
16
<PAGE> 19
COMPARISON OF FOUR-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
EDISON ELEC-
TRIC
MEASUREMENT PERIOD DOW JONES INSTITUTE
(FISCAL YEAR COVERED) PINNACLE WEST EQUITY INDEX INDEX
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 97.08 96.07 101.23
1991 163.37 127.24 130.38
1992 190.34 138.19 140.15
1993 210.11 151.93 156.11
</TABLE>
INDEPENDENT ACCOUNTANTS
It is contemplated that the Company's financial statements as of December
31, 1994, and for the year then ending, will be examined by Deloitte & Touche,
independent certified public accountants. Representatives of that firm are
expected to be present at the Annual Meeting and will be afforded the
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR NEXT MEETING
A shareholder who intends to submit a proposal for inclusion in the proxy
statement relating to next year's Annual Meeting of shareholders must submit
such proposal so that it is received by the Company at its principal executive
offices on or before November 18, 1994. The Company recommends that proponents
submit their proposals by certified mail -- return receipt requested.
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<PAGE> 20
ARIZONA PUBLIC SERVICE COMPANY
P.O. Box 53999 Phoenix, Arizona 85072-3999
ANNUAL MEETING DATE, APRIL 19, 1994
THIS PROXY SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
P
O. MARK DE MICHELE and NANCY C. LOFTIN, and each of them, are hereby
appointed proxies, with full power of substitution, to vote all shares of
stock which I am (we are) entitled to vote at the 1994 annual meeting of
stockholders, and at any adjournment thereof:
R
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY / /
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
INSTRUCTIONS: To withhold authority to vote for any individual nominee strike a
line through the nominee's name below
O
Mr. or Ms. Carr, De Michele, Hesse, Jennings, Matlock, Norberg, Norton,
Riley, Sargent, Schwada, Seidel, Snell Williams, Woods
2. In their discretion, upon such other business as may properly come
before the meeting or any adjournment thereof.
X
Any proxy heretofore given is hereby revoked.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IN THE ABSENCE OF
SPECIFICATION, IT WILL BE VOTED FOR
Y
THE ELECTION OF ALL NAMED DIRECTORS.
(PLEASE DATE AND SIGN ON REVERSE SIDE)
141-00VZ Rev. 2/94 PLEASE DATE, SIGN AND RETURN THIS PROXY
PROMPTLY
DATED 1994 SIGNATURE
Please sign as name(s) appear below. Joint
owners should both sign. Fiduciaries,
attorneys, corporate officers, etc., should
state their capacities.
C
O
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<PAGE> 21
Sta. 9820
-----------------------------
BUSINESS REPLY MAIL
FIRST CLASS PERMIT NO.
881 PHOENIX, ARIZONA
-----------------------------
POSTAGE WILL BE PAID BY
ADDRESSEE
ARIZONA PUBLIC SERVICE COMPANY
PO BOX 53999
PHOENIX, AZ 85072-9540
Dear Shareholder:
The 1994 Arizona Public Service Company Annual Meeting of Shareholders
which will be held April 19, 1994, will be held separately from the Annual
Meeting of Shareholders of the holding company.
So that we can make the appropriate accommodations for you at the APS
Annual Meeting, we would appreciate it if you would complete and return this
card no later than April 2, 1994, if you plan to attend. Return postage will be
paid for your convenience.
Thank you for your assistance.
Nancy C. Loftin, Secretary
Arizona Public Service Company
I PLAN TO ATTEND THE APS ANNUAL MEETING. A TOTAL OF WILL ATTEND.
Shareholder Name (Please Print)
The Annual Meeting of Pinnacle West Capital Corporation will be held May 19,
1994. Shareholders of Pinnacle West will receive appropriate notice of this
meeting separately.
X141-60BR Rev. 2-94
