============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ----- TO -----
COMMISSION FILE NUMBER 1-4473
ARIZONA PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
ARIZONA 86-0011170
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
400 North Fifth Street, P.O. Box 53999
Phoenix, Arizona 85072-3999 (602) 250-1000
(Address of principal executive offices, (Registrant's telephone number,
including zip code) including area code)
- ------------------------------------------------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------------------------------------------------------------------
Adjustable Rate Cumulative Preferred Stock, ..... New York Stock Exchange
Series Q, $100 Par Value
$1.8125 Cumulative Preferred Stock,
Series W, $25 Par Value ................... New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Cumulative Preferred Stock
(Title of class)
(See Note 3 of Notes to Financial Statements in Item 8
for dividend rates, series designations (if any), and par values)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
AGGREGATE MARKET VALUE
OF VOTING STOCK HELD
BY
NON-AFFILIATES OF THE
TITLE OF EACH CLASS SHARES OUTSTANDING REGISTRANT AS OF
OF VOTING STOCK AS OF MARCH 22, 1994 MARCH 22, 1994
- ------------------------------------------------------------------------------
Cumulative Preferred Stock...... 6,708,199 $378,318,769(a)
- ------------------------------------------------------------------------------
(A) COMPUTED, WITH RESPECT TO SHARES LISTED ON THE NEW YORK STOCK EXCHANGE, BY
REFERENCE TO THE CLOSING PRICE ON THE COMPOSITE TAPE ON MARCH 22, 1994, AS
REPORTED BY THE WALL STREET JOURNAL, AND WITH RESPECT TO NON-LISTED SHARES, BY
DETERMINING THE YIELD ON LISTED SHARES AND ASSUMING A MARKET VALUE FOR NON-
LISTED SHARES WHICH WOULD RESULT IN THAT SAME YIELD.
As of March 29, 1994, there were issued and outstanding 71,264,947 shares
of the registrant's common stock, $2.50 par value, all of which were held
beneficially and of record by Pinnacle West Capital Corporation.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement relating to
its annual meeting of shareholders to be held on April 19, 1994, are
incorporated by reference into Part III hereof.
<PAGE>
TABLE OF CONTENTS
GLOSSARY................................................................ 1
PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 8
Item 3. Legal Proceedings........................................... 12
Item 4. Submission of Matters to a Vote of Security Holders......... 12
Supplemental Item.
Executive Officers of the Registrant........................ 12
PART II
Item 5. Market for Registrant's Common Stock and Related Security
Holder Matters.............................................. 14
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 16
Item 8. Financial Statements and Supplementary Data................. 19
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 47
PART III
Item 10. Directors and Executive Officers of the Registrant......... 47
Item 11. Executive Compensation..................................... 47
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 47
Item 13. Certain Relationships and Related Transactions............. 47
PART IV
Item 14. Exhibits, Financial Statements, Financial Statement
Schedules,
and Reports on Form 8-K.................................... 48
SIGNATURES.............................................................. 62
<PAGE>
GLOSSARY
ACC -- Arizona Corporation Commission
AFUDC -- Allowance for Funds Used During Construction
AMENDMENTS -- Clean Air Act Amendments of 1990
ANPP -- Arizona Nuclear Power Project, also known as Palo Verde
ANPP PARTICIPATION AGREEMENT -- Arizona Nuclear Power Project Participation
Agreement, dated as of August 23, 1973, as amended
APS -- Arizona Public Service Company
CHOLLA -- Cholla Power Plant
CHOLLA 4 -- Unit 4 of the Cholla Power Plant
COMPANY -- Arizona Public Service Company
DOE -- United States Department of Energy
EPA -- United States Environmental Protection Agency
ENERGY ACT -- National Energy Policy Act of 1992
EPEC -- El Paso Electric Company
FASB -- Financial Accounting Standards Board
FERC -- Federal Energy Regulatory Commission
FOUR CORNERS -- Four Corners Power Plant
ITC -- Investment Tax Credit
MORTGAGE -- Mortgage and Deed of Trust dated as of July 1, 1946, as
supplemented and amended
MWH -- Megawatt-hour
NGS -- Navajo Generating Station
NRC -- Nuclear Regulatory Commission
PACIFICORP -- An Oregon-based utility company
PALO VERDE -- Palo Verde Nuclear Generating Station
PINNACLE WEST -- Pinnacle West Capital Corporation, an Arizona corporation,
the Company's parent
SEC -- Securities and Exchange Commission
SFAS NO. 106 -- Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
SFAS NO. 109 -- Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes"
SFAS NO. 112 -- Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits"
SRP -- Salt River Project Agricultural Improvement and Power District
USEC -- United States Enrichment Corporation
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
The Company was incorporated in 1920 under the laws of Arizona and is
engaged principally in serving electricity in the State of Arizona. The
principal executive offices of the Company are located at 400 North Fifth
Street, Phoenix, Arizona 85004 (telephone 602-250-1000). The Company currently
employs approximately 7,050 persons, which includes employees assigned to
joint projects where the Company is project manager.
The Company serves approximately 654,000 customers in an area that
includes all or part of 11 of Arizona's 15 counties. During 1993, no single
purchaser or user of energy accounted for more than 3% of total electric
revenues.
Pinnacle West owns all of the outstanding shares of the Company's common
stock. 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 rights if, in the Collateral
Agent's judgment, such action would have a material adverse effect on the
value of the common stock. After notice of an Event of Default, the Collateral
Agent would have the right to vote the common stock.
INDUSTRY AND COMPANY ISSUES
The utility industry continues to experience a number of challenges.
Depending on the circumstances of a particular utility, these may include
(i) competition in general from numerous sources; (ii) effects of the National
Energy Policy Act of 1992 (the "Energy Act"); (iii) difficulties in meeting
government imposed environmental requirements; (iv) the necessity to make
substantial capital outlays for transmission and distribution facilities;
(v) uncertainty regarding projected electrical demand growth;
(vi) controversies over electromagnetic fields; (vii) controversies over the
safety and use of nuclear power; (viii) issues related to spent fuel and low
level waste (see "Generating Fuel" below); and (ix) increasing costs of wages
and materials.
The impact on the Company of other utility industry problems is discussed
in this Item under "Environmental Matters." Also see "Water Supply" in this
Item with respect to certain problems specific to the Company and other
utilities.
COMPETITION
Certain territory adjacent to or within areas served by the Company is
served by other investor-owned utilities (notably Tucson Electric Power
Company serving electricity in the Tucson area, Southwest Gas Corporation
serving gas throughout the state, and Citizens Utilities Company serving
electricity and gas in various locations throughout the state) and a number of
cooperatives, municipalities, electrical districts, and similar types of
governmental organizations (principally SRP serving electricity in various
areas in and around Phoenix).
The Company expects increased competition in the future, mostly with
respect to large customers, from entities offering alternative sources of
energy. In recent years, changing laws and governmental regulations, interest
in self-generation, competition from nonregulated energy suppliers, and
aggressive marketing from the gas industry are providing some utility
customers with alternative sources to satisfy their energy needs. This may be
increased as a result of the Energy Act which, among other things, removes
certain previously existing barriers to entry into electric generation. The
Energy Act also permits certain other parties to compete for resale customers
currently served by a particular utility and to use that utility's
transmission facilities in order to do so. The requirements with respect to
implementation of the Energy Act have not yet been completely determined, so
the Company cannot currently predict its impact on the Company's business and
operations.
In order to remain competitive in this changing environment, the Company
has determined that it must be a cost-effective supplier, provide excellent
service, and be knowledgeable about its customers' businesses. The Company is
concentrating on several areas which are key to the success of this strategy,
including effectively managing its operating and maintenance expenses;
reinforcing the importance of customer needs among Company employees; and
working with customers to evaluate, recommend, and provide services which will
optimize their efficiency.
CAPITAL STRUCTURE
The capital structure of the Company (which, for this purpose, includes
short-term borrowings and current maturities of long-term debt) as of December
31, 1993 is tabulated below.
Amount Percentage
---------- ----------
(Thousands
of
Dollars)
Long-Term Debt Less Current Maturities:
First mortgage bonds................................ $1,729,070
Other............................................... 395,584
----------
Total long-term debt less current maturities...... 2,124,654 50.7%
----------
Non-Redeemable Preferred Stock........................ 193,561 4.6
----------
Redeemable Preferred Stock............................ 197,610 4.7
----------
Common Stock Equity:
Common stock, $2.50 par value, 100,000,000 shares
authorized; 71,264,947 shares outstanding......... 178,162
Premiums and expenses............................... 1,037,681
Retained earnings................................... 307,098
----------
Total common stock equity......................... 1,522,941 36.4
----------
Total capitalization............................ 4,038,766
Current Maturities of Long-Term Debt.................. 3,179 .1
Short-Term Borrowings................................. 148,000 3.5
---------- --------
Total........................................... $4,189,945 100.0%
========== ========
See Notes 3, 4, and 5 of Notes to Financial Statements in Item 8.
On March 1, 1994 the Company redeemed all of the outstanding shares of its
$8.80 Cumulative Preferred Stock, Series K ($100 par value), in the amount of
$14.21 million. On March 2, 1994, the Company issued $100 million of its First
Mortgage Bonds, 65/8% Series due 2004 and applied the net proceeds to the
repayment of short-term debt that had been incurred for the redemption of
preferred stock and for general corporate purposes.
So long as any of the Company's first mortgage bonds are outstanding, the
Company is required for each calendar year to deposit with the trustee under
its Mortgage cash in a formularized amount related to net additions to the
Company's mortgaged utility plant; however, the Company may satisfy all or any
part of this "replacement fund" requirement by utilizing redeemed or retired
bonds, net property additions, or property retirements. For 1993, the
replacement fund requirement amounted to approximately $122 million. Many,
though not all, of the bonds issued by the Company under the Mortgage are
redeemable at their par value plus accrued interest with cash deposited by the
Company in the replacement fund, subject in many cases to a period of time
after the original issuance of the bonds during which they may not be so
redeemed and/or to other restrictions on any such redemption. The cash
deposited with the trustee by the Company in partial satisfaction of its 1993
replacement fund requirements will be used to redeem $60.264 million in
aggregate principal amount of the Company's First Mortgage Bonds, 103/4%
Series due 2019, at their principal amount plus accrued interest, on April 4,
1994.
RATES
STATE. The ACC has regulatory authority over the Company in matters
relating to retail electric rates and the issuance of securities. See "Rate
Case Settlement" in Note 2 of Notes to Financial Statements in Item 8 for a
discussion of the December 1991 settlement of the Company's most recent retail
rate case before the ACC.
FEDERAL. The Company's rates for wholesale power sales and transmission
services are subject to regulation by the FERC. During 1993, approximately 8%
of the Company's electric operating revenues resulted from such sales and
charges. For most wholesale transactions regulated by the FERC, a fuel
adjustment clause results in monthly adjustments for changes in the actual
cost of fuel for generation and in the fuel component of purchased power
expense.
ARIZONA CORPORATION COMMISSION PETITION
On May 1, 1990, the ACC approved the filing of a petition with the SEC
requesting the SEC to revoke or modify the exemption of Pinnacle West under
the Public Utility Holding Company Act of 1935 (the "Holding Company Act").
Pinnacle West and its subsidiaries, including the Company, are currently
exempt from registration under the Holding Company Act. The SEC has the power
to terminate Pinnacle West's exemption upon thirty days notice to Pinnacle
West if it determines that a question exists as to whether the exemption may
be detrimental to the public interest or the interests of investors or
consumers. In the event of the exercise of such power by the SEC, if Pinnacle
West were to file an application with the SEC during such thirty day period
requesting an exemption order, Pinnacle West's exemption would remain in place
until the SEC ruled on such application. If Pinnacle West ultimately were to
have its exemption modified, conditioned, or revoked, the Company could be
subject to SEC regulation in many aspects of its business, including those
relating to securities issuances, diversification, and transactions among
affiliates. In a series of responses to the ACC's petition and subsequent ACC
letters to the SEC, Pinnacle West has asked the SEC to refuse to take the
action requested by the ACC. The Company cannot predict what action, if any,
the SEC may take with respect to the ACC petition. The Company does not
believe that the revocation or modification of the Pinnacle West exemption
under the Holding Company Act, if acted on by the SEC, would have a material
adverse effect on the operations or financial position of the Company.
CONSTRUCTION PROGRAM
Although its plans are subject to change, the Company does not presently
intend to construct any new major baseload generating units for at least the
next ten years. Utility construction expenditures for the years 1994 through
1996 are therefore expected to be primarily for expanding transmission and
distribution capabilities to meet customer growth, upgrading existing
facilities, and environmental purposes. Construction expenditures, including
expenditures for environmental control facilities, for the years 1994 through
1996 have been estimated as follows:
(MILLIONS OF DOLLARS)
BY YEAR BY MAJOR FACILITIES
- ---------------------------- ----------------------------------------------
1994 $279 Electric generation $271
1995 302 Electric transmission 92
1996 293 Electric distribution 390
---- General facilities 121
$874 ----
==== $874
====
The amounts for 1994 through 1996 include expenditures for nuclear fuel
but exclude capitalized interest costs and capitalized property taxes. The
Company conducts a continuing review of its construction program. This program
and the above estimates are subject to periodic revisions based upon changes
in assumptions as to system reliability, system load growth, rates of
inflation, the availability and timing of environmental and other regulatory
approvals, the availability and costs of outside sources of capital, and
changes in project construction schedules. During the years 1991 through 1993,
the Company incurred approximately $641 million in construction expenditures
and approximately $31 million in additional capitalized items.
ENVIRONMENTAL MATTERS
Pursuant to the Clean Air Act, the EPA has adopted regulations, applicable
to certain federally-protected areas, that address visibility impairment that
can be reasonably attributed to specific sources. In September 1991, the EPA
issued a final rule that would limit sulfur dioxide emissions at NGS.
Compliance with the emission limitation becomes applicable to NGS Units 1, 2,
and 3 in 1997, 1998, and 1999, respectively. SRP, the NGS operating agent, has
estimated a capital cost of $530 million, most of which will be incurred from
1995 through 1998, and annual operations and maintenance costs of
approximately $10 million per unit, for NGS to meet these requirements. The
Company will be required to fund 14% of these expenditures.
The Clean Air Act Amendments of 1990 (the "Amendments") became effective
on November 15, 1990. The Amendments address, among other things, "acid rain,"
visibility in certain specified areas, toxic air pollutants, and the
nonattainment of national ambient air quality standards. With respect to "acid
rain," the Amendments establish a system of sulfur dioxide emissions
"allowances." Each existing utility unit is granted a certain number of
"allowances." On March 5, 1993, the EPA promulgated rules listing allowance
allocations applicable to Company-owned plants, which allocations will begin
in the year 2000. Based on those allocations, the Company will have sufficient
allowances to permit continued operation of its plants at current levels
without installing additional equipment. In addition, the Amendments require
the EPA to set nitrogen oxides emissions limitations which would require
certain plants to install additional pollution control equipment. On March 22,
1994, the EPA issued rules for nitrogen oxide emissions limitations which will
require the Company to install additional pollution control equipment at Four
Corners. In the year 2000 Four Corners must comply with either these or more
stringent requirements which might be promulgated by the EPA. The EPA has
until 1997 to set more stringent requirements. However, if Four Corners
accelerates to 1997 compliance with these March 22 requirements, it can delay
until 2008 compliance with any more stringent requirements which the EPA may
set. The Company has not yet determined how it will proceed; however, the
Company currently estimates the capital cost of complying by 1997 with the
specified requirements will be approximately $16 million.
With respect to protection of visibility in certain specified areas, the
Amendments require the EPA to complete a study by November 1995 concerning
visibility impairment in those areas and identification of sources
contributing to such impairment. Interim findings of this study have indicated
that any beneficial effect on visibility as a result of the Amendments would
be offset by expected population and industry growth. The EPA has established
a "Grand Canyon Visibility Transport Commission" to complete a study by
November 1995 on visibility impairment in the "Golden Circle of National
Parks" in the Colorado Plateau. NGS, Cholla, and Four Corners are located near
the "Golden Circle of National Parks." Based on the recommendations of the
Commission, the EPA may require additional emissions controls at various
sources causing visibility impairment in the "Golden Circle of National Parks"
and may limit economic development in several western states. The Company
cannot currently estimate the capital expenditures, if any, which may be
required as a result of the EPA studies and the Commission's recommendations.
With respect to hazardous air pollutants emitted by electric utility steam
generating units, the Amendments require two studies. First, there will be a
study to be completed by November 1994 of potential impacts of mercury
emissions from such units and various other sources on public health and on
the environment, including available control technologies. Second, the EPA
will complete a general study by November 1995 concerning the necessity of
regulating such units under the Amendments. Due to the lack of historical
data, and because the Company cannot speculate as to the ultimate requirements
by the EPA, the Company cannot currently estimate the capital expenditures, if
any, which may be required as a result of these studies.
Certain aspects of the Amendments may require related expenditures by the
Company, such as permit fees, none of which the Company expects to have a
material impact on its financial position.
GENERATING FUEL
Coal, nuclear, gas, and other contributions to total net generation of
electricity by the Company in 1993, 1992, and 1991, and the average cost to
the Company of those fuels (in dollars per MWh), were as follows:
<TABLE>
<CAPTION>
COAL NUCLEAR GAS OTHER ALL FUELS
------------------------ ------------------------- ------------------------ ------------------------ ------------
PERCENT OF AVERAGE PERCENT OF AVERAGE PERCENT OF AVERAGE PERCENT OF AVERAGE AVERAGE
GENERATION COST GENERATION COST GENERATION COST GENERATION COST COST
------------- --------- ------------- ---------- ------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
(estimate) 62.3% $12.95 32.4% $6.17 5.1% $31.53 0.2% $18.32 $11.70
1992........ 58.8 13.06 36.4 5.84 4.5 31.27 0.3 20.75 11.26
1991........ 59.0 13.62 37.3 7.03 3.4 21.11 0.3 28.69 11.45
</TABLE>
Other includes oil and hydro generation.
The Company believes that Cholla has sufficient reserves of low sulfur
coal committed to that plant for the next six years, the term of the existing
coal contract, and sufficient reserves of low sulfur coal available for use to
continue operating it for its useful life. The Company also believes that Four
Corners and NGS have sufficient reserves of low sulfur coal available for use
by those plants to continue operating them for at least thirty years. The
current sulfur content of coal being used at Four Corners, NGS, and Cholla is
0.8%, 0.6%, and 0.4%, respectively. In 1993, average prices paid for coal
supplied from reserves dedicated under the existing contracts were relatively
stable, although applicable contract clauses permit escalations under certain
conditions. In addition, major price adjustments can occur from time to time
as a result of contract renegotiation.
NGS and Four Corners are located on the Navajo Reservation and held under
easements granted by the federal government as well as leases from the Navajo
Tribe. See "Properties" in Item 2. The Company purchases all of the coal which
fuels Four Corners from a coal supplier with a long-term lease of coal
reserves owned by the Navajo Tribe and for NGS from a coal supplier with a
long-term lease with the Navajo and Hopi Tribes. The Company purchases all of
the coal which fuels Cholla from a coal supplier who obtains substantially all
of the coal under a long-term lease of coal reserves owned by the Navajo Tribe
and under a lease with the Bureau of Land Management.
The Company is a party to contracts with twenty-seven natural gas
operators and marketers which allow the Company to purchase natural gas in the
method it determines to be most economic. During 1993, the principal sources
of the Company's natural gas generating fuel were twelve of these companies.
The Company is currently purchasing the majority of its natural gas
requirements from six companies pursuant to contracts. The Company's natural
gas supply is transported pursuant to a firm transportation service contract
between the Company and El Paso Natural Gas Company. The Company continues to
analyze the market to determine the source and method of meeting its natural
gas requirements.
The fuel cycle for Palo Verde is comprised of the following stages:
(1) the mining and milling of uranium ore to produce uranium concentrates,
(2) the conversion of uranium concentrates to uranium hexafluoride, (3) the
enrichment of uranium hexafluoride, (4) the fabrication of fuel assemblies,
(5) the utilization of fuel assemblies in reactors, and (6) the storage of
spent fuel and the disposal thereof. The Palo Verde participants have made
arrangements through contract flexibilities to obtain quantities of uranium
concentrates anticipated to be sufficient to meet operational requirements
through 1996. Existing contracts and options could be utilized to meet
approximately 75% of requirements in 1997 and 50% of requirements from 1998
through 2000. Spot purchases in the uranium market will be made, as
appropriate, in lieu of any uranium that might be obtained through contract
flexibilities and options. The Palo Verde participants have contracted for all
conversion services required through 1994 and for up to 65% of conversion
services required through 1998, with options to continue through the year
2000. The Palo Verde participants, including the Company, have an enrichment
services contract with USEC which obligates USEC to furnish enrichment
services required for the operation of the three Palo Verde units over a term
expiring in November 2014, with annual options to terminate each year of the
contract with ten years prior notice. The participants have exercised this
option, terminating 30% of requirements for 1996 through 1998 and 100% of
requirements during the years 1999 through 2002. In addition, existing
contracts will provide fuel assembly fabrication services for at least ten
years from the date of operation of each Palo Verde unit, and through contract
options, approximately fifteen additional years are available. The Energy Act
includes an assessment for decontamination and decommissioning of DOE's
enrichment facilities. The total amount of this assessment has not yet been
finalized; however, based on preliminary indications, the Company expects that
the annual assessment for Palo Verde will be approximately $3 million, plus
escalation for inflation, for fifteen years. The Company will be required to
fund 29.1% of this assessment.
Existing spent fuel storage facilities at Palo Verde have sufficient
capacity with certain modifications to store all fuel expected to be
discharged from normal operation of all Palo Verde units through at least the
year 2005. Pursuant to the Nuclear Waste Policy Act of 1982, as amended in
1987 (the "Waste Act"), DOE is obligated to accept and dispose of all spent
nuclear fuel and other high-level radioactive wastes generated by all domestic
power reactors. The NRC, pursuant to the Waste Act, also requires operators of
nuclear power reactors to enter into spent fuel disposal contracts with DOE.
The Company, on its own behalf and on behalf of the other Palo Verde
participants, has executed a spent fuel disposal contract with DOE. The Act
also obligates DOE to develop the facilities necessary for the permanent
disposal of all spent fuel generated, and to be generated, by domestic power
reactors and to have the first such facility in operation by 1998 under
prescribed procedures. In November 1989, DOE reported that such permanent
disposal facility will not be in operation until 2010. As a result, under
DOE's current criteria for shipping allocation rights, Palo Verde's spent fuel
shipments to the DOE permanent disposal facility would begin in approximately
2025. In addition, the Company believes that on-site storage of spent fuel may
be required beyond the life of Palo Verde's generating units. The Company
currently believes that alternative interim spent fuel storage methods are or
will be available on-site or off-site for use by Palo Verde to allow its
continued operation beyond 2005 and to safely store spent fuel until DOE's
scheduled shipments from Palo Verde begin.
The off-site facilities for low level waste now being utilized for Palo
Verde may soon be closed to it. The Company is currently exploring means to
either ship the waste to an alternative site or to store it on-site until an
off-site location becomes available. The Company currently believes that
interim low level waste storage methods are or will be available for use
by Palo Verde to allow its continued operation and to safely store low level
waste until a permanent disposal facility is available.
While believing that scientific and financial aspects of the issues with
respect to spent fuel and low level waste can be resolved satisfactorily, the
Company acknowledges that their ultimate resolution in a timely fashion will
require political resolve and action on national and regional scales which it
is less able to predict.
PALO VERDE LIABILITY AND INSURANCE MATTERS
See "Nuclear Insurance" in Note 10 of Notes to Financial Statements in
Item 8 for a discussion of the insurance maintained by the Palo Verde
participants, including the Company, for Palo Verde.
PALO VERDE NUCLEAR GENERATING STATION
By letter dated July 7, 1993, the NRC advised the Company that, as a
result of a Recommended Decision and Order by a Department of Labor
Administrative Law Judge (the "ALJ") finding that the Company discriminated
against a former contract employee at Palo Verde because he engaged in
"protected activities" (as defined under federal regulations), the NRC
intended to schedule an enforcement conference with the Company. Following the
ALJ's finding, the Company investigated various elements of both the
substantive allegations and the manner in which the U.S. Department of Labor
(the "DOL") proceedings were conducted. As a result of that investigation, the
Company determined that one of its employees had falsely testified during the
proceedings, that there were inconsistencies in the testimony of another
employee, and that certain documents were requested in, but not provided
during, discovery. The two employees in question are no longer with the
Company. The Company provided the results of its investigation to the ALJ, who
referred matters relating to the conduct of two former employees of the
Company to the U.S. Attorney's office in Phoenix, Arizona. On December 15,
1993, the Company and the former contract employee who had raised the DOL
claim entered into a settlement agreement, a part of which remains subject to
approval by the Secretary of Labor. By letter dated August 10, 1993, the
Company also provided the results of its investigation to the NRC, and advised
the NRC that, as a result of the Company's investigation, the Company had
changed its position opposing the finding of discrimination. The NRC is
investigating this matter and the Company is fully cooperating with the NRC in
this regard.
See "Palo Verde Tube Cracks" in Note 10 of Notes to Financial Statements
in Item 8 for a discussion of issues relating to the Palo Verde steam
generators.
WATER SUPPLY
Assured supplies of water are important both to the Company (for its
generating plants) and to its customers. However, conflicting claims to
limited amounts of water in the southwestern United States have resulted in
numerous court actions in recent years.
Both groundwater and surface water in areas important to the Company's
operations have been the subject of inquiries, claims, and legal proceedings
which will require a number of years to resolve. The Company is one of a
number of parties in a proceeding before a state court in New Mexico to
adjudicate rights to a stream system from which water for Four Corners is
derived. (State of New Mexico, in the relation of S.E. Reynolds, State
Engineer vs. United States of America, City of Farmington, Utah International,
Inc., et al., San Juan County, New Mexico, District Court No. 75-184). An
agreement reached with the Navajo Tribe in 1985, however, provides that if
Four Corners loses a portion of its rights in the adjudication, the Tribe will
provide, for a then-agreed upon cost, sufficient water from its allocation to
offset the loss.
A summons served on the Company in early 1986 required all water claimants
in the Lower Gila River Watershed in Arizona to assert any claims to water on
or before January 20, 1987, in an action pending in Maricopa County Superior
Court. (In re The General Adjudication of All Rights to Use Water in the Gila
River System and Source, Supreme Court Nos. WC-79-0001 through WC 79-0004
(Consolidated) [WC-1, WC-2, WC-3 and WC-4 (Consolidated)], Maricopa County
Nos. W-1, W-2, W-3 and W-4 (Consolidated)). Palo Verde is located within the
geographic area subject to the summons, and the rights of the Palo Verde
participants, including the Company, to the use of groundwater and effluent at
Palo Verde is potentially at issue in this action. The Company, as project
manager of Palo Verde, filed claims that dispute the court's jurisdiction over
the Palo Verde participants' groundwater rights and their contractual rights
to effluent relating to Palo Verde and, alternatively, seek confirmation of
such rights. Three of the Company's less-utilized power plants are also
located within the geographic area subject to the summons. The Company's
claims dispute the court's jurisdiction over the Company's groundwater rights
with respect to these plants and, alternatively, seek confirmation of such
rights. On December 10, 1992, the Arizona Supreme Court heard oral argument on
certain issues in this matter which are pending on interlocutory appeal, and
as a result, issues important to the Company's claims have been remanded to
the trial court for further action. No trial date concerning the water rights
claims of the Company has been set in this matter.
The Company has also filed claims to water in the Little Colorado River
Watershed in Arizona in an action pending in the Apache County Superior Court.
(In re The General Adjudication of All Rights to Use Water in the Little
Colorado River System and Source, Supreme Court No. WC-79-0006 WC-6, Apache
County No. 6417). The Company's groundwater resource utilized at Cholla is
within the geographic area subject to the adjudication and is therefore
potentially at issue in the case. The Company's claims dispute the court's
jurisdiction over the Company's groundwater rights and, alternatively, seek
confirmation of such rights. The parties are in the process of settlement
negotiations with respect to this matter. No trial date concerning the water
rights claims of the Company has been set in this matter.
Although the foregoing matters remain subject to further evaluation, the
Company expects that the described litigation will not have a materially
adverse impact on its operations or financial position.
ITEM 2. PROPERTIES
The Company's present generating facilities have an accredited capacity
aggregating 4,022,410 kw, comprised as follows:
Capacity(kw)
------------
Coal:
Units 1, 2, and 3 at Four Corners, aggregating........... 560,000
15% owned Units 4 and 5 at Four Corners, representing.... 222,000
Units 1, 2, and 3 at Cholla Plant, aggregating........... 590,000
14% owned Units 1, 2, and 3 at the Navajo Plant,
representing........................................... 315,000
-----------
1,687,000
===========
Gas or Oil:
Two steam units at Ocotillo, two steam units at Saguaro,
and one steam unit at Yucca, aggregating............... 468,400(1)
Eleven combustion turbine units, aggregating............. 500,600
Three combined cycle units, aggregating.................. 253,500
-----------
1,222,500
===========
Nuclear:
29.1% owned or leased Units 1, 2, and 3 at Palo Verde,
representing........................................... 1,108,710
===========
Other........................................................ 4,200
===========
- ----------
(1) West Phoenix steam units (96,300 kw) are currently mothballed.
--------------
The Company's peak one-hour demand on its electric system was recorded on
August 2, 1993 at 3,802,300 kw, compared to the 1992 peak of 3,796,400 kw
recorded on August 17. Taking into account additional capacity then available
to it under purchase power contracts as well as its own generating capacity,
the Company's capability of meeting system demand on August 2, 1993, computed
in accordance with accepted industry practices, amounted to 4,505,000 kw, for
an installed reserve margin of 16.7%. The power actually available to the
Company from its resources fluctuates from time to time due in part to planned
outages and technical problems. The available capacity from sources actually
operable at the time of the 1993 peak amounted to 4,099,500 kw, for a margin
of 13.4%.
NGS and Four Corners are located on land held under easements from the
federal government and also under leases from the Navajo Tribe. The risk with
respect to enforcement of these easements and leases is not deemed by the
Company to be material. The Company is dependent, however, in some measure
upon the willingness and ability of the Navajo Tribe to honor its commitments.
Certain of the Company's transmission lines and almost all of its contracted
coal sources are also located on Indian reservations. See "Generating Fuel" in
Item 1.
Operation of each of the three Palo Verde units requires an operating
license from the NRC. Full power operating licenses for Units 1, 2, and 3 were
issued by the NRC in June 1985, April 1986, and November 1987, respectively.
The full power operating licenses, each valid for a period of approximately 40
years, authorize the Company, as operating agent for Palo Verde, to operate
the three Palo Verde units at full power.
On August 18, 1986 and December 19, 1986, the Company entered into a total
of three sale and leaseback transactions under which it sold and leased back
approximately 42% of its 29.1% ownership interest in Palo Verde Unit 2. The
leases under each of the sale and leaseback transactions have initial lease
terms expiring on December 31, 2015. Each of the leases also allows the
Company to extend the term of the lease and/or to repurchase the leased Unit 2
interest under certain circumstances at fair market value. The leases in the
aggregate require annual payments of approximately $40 million through 1999,
approximately $46 million in 2000, and approximately $49 million through 2015
(see Note 7 of Notes to Financial Statements in Item 8).
See "Water Supply" in Item 1 with respect to matters having possible
impact on the operation of certain of the Company's power plants, including
Palo Verde.
The Company's construction plans are susceptible to changes in forecasts
of future demand on its electric system and in its ability to finance its
construction program. Although its plans are subject to change, the Company
does not presently intend to construct any new major baseload generating units
for at least the next ten years. Important factors affecting the Company's
ability to delay the construction of new major generating units are continuing
efforts to upgrade and improve the reliability of existing generating
stations, system load diversity with other utilities, and continuing efforts
in customer demand-side conservation and load management programs.
In addition to that available from its own generating capacity, the
Company purchases electricity from other utilities under various arrangements.
One of the most important of these is a long-term contract with SRP which may
be canceled by SRP on three years' notice and which requires SRP to make
available, and the Company to pay for, certain amounts of electricity that are
based in large part on customer demand within certain areas now served by the
Company pursuant to a related territorial agreement. The Company believes that
the prices payable by it under the contract are fair to both parties. The
generating capacity available to the Company pursuant to the contract was
302,000 kw until May 1993, at which time the capacity increased to 304,000 kw.
In 1993, the Company received approximately 840,000 MWh of energy under the
contract and paid approximately $40 million for capacity availability and
energy received.
In September 1990, the Company and PacifiCorp entered into certain
agreements relating principally to sales and purchases of electric power and
electric utility assets, and in July 1991, after regulatory approvals, the
Company sold Cholla 4 to PacifiCorp for approximately $230 million. As part of
the transaction, PacifiCorp agreed to make a firm system sale to the Company
for thirty years during the Company's summer peak season in the amount of 175
megawatts for the first five years, increasing thereafter, at the Company's
option, up to a maximum amount equal to the rated capacity of Cholla 4. After
the first five years, all or part of the sale may be converted to a one-for-
one seasonal capacity exchange. PacifiCorp has the right to purchase from the
Company up to 125 average megawatts of energy per year for thirty years.
PacifiCorp and the Company also entered into a 100 megawatt one-for-one
seasonal capacity exchange to be effective upon the latter of January 1, 1996
or the completion of certain new transmission projects. In addition,
PacifiCorp agreed to pay the Company (i) $20 million upon commercial operation
of 150 megawatts of peaking capacity constructed by the Company and (ii) $19
million in connection with the construction of transmission lines and upgrades
that will afford PacifiCorp 150 megawatts of northbound transmission rights.
In addition, PacifiCorp secured additional firm transmission capacity of 30
megawatts over the Company's system. In 1993, the Company received 401,475 MWh
of energy from PacifiCorp under these transactions and paid approximately $19
million for capacity availability and the energy received, and PacifiCorp paid
approximately $2.7 million for 144,171 MWh.
See "El Paso Electric Company Bankruptcy" in Note 10 of Notes to
Financial Statements in Item 8 for a discussion of the filing by EPEC of a
voluntary petition to reorganize under Chapter 11 of the Bankruptcy Code. EPEC
has a joint ownership interest with the Company and others in Palo Verde and
Four Corners Units 4 and 5.
See Notes 4 and 7 of Notes to Financial Statements in Item 8 with respect
to property of the Company not held in fee or held subject to any major
encumbrance.
GRAPHIC
- -------
MAP OF THE STATE OF ARIZONA SHOWING THE COMPANY'S SERVICE AREA, THE LOCATION
OF ITS MAJOR POWER PLANTS AND PRINCIPAL TRANSMISSION LINES, AND THE LOCATION
OF TRANSMISSION LINES OPERATED BY THE COMPANY FOR OTHERS. SEE APPENDIX FOR
DETAILED DESCRIPTION.
ITEM 3. LEGAL PROCEEDINGS
PROPERTY TAXES
On June 29, 1990, a new Arizona state tax law was enacted, effective as of
December 31, 1989, which adversely impacted the Company's earnings in tax
years 1990 through 1993 by an aggregate amount of approximately $82 million,
before income taxes. On December 20, 1990, the Palo Verde participants,
including the Company, filed a lawsuit in the Arizona Tax Court, a division of
the Maricopa County Superior Court, against the Arizona Department of Revenue,
the Treasurer of the State of Arizona, and various Arizona counties, claiming,
among other things, that portions of the new tax law are unconstitutional.
(Arizona Public Service Company, et al. v. Apache County, et al., No. TX
90-01686 (Consol.), Maricopa County Superior Court). In December 1992, the
court granted summary judgment to the taxing authorities, holding that the law
is constitutional. The Company has appealed this decision to the Arizona Court
of Appeals. The Company cannot currently predict the ultimate outcome of this
matter.
See "Water Supply" and "Palo Verde Nuclear Generating Station" in Item 1
and "El Paso Electric Company Bankruptcy" in Note 10 of Notes to Financial
Statements in Item 8 in regard to pending or threatened litigation and other
disputes.
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report, through the solicitation of
proxies or otherwise.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS
OF THE REGISTRANT
The Company's executive officers are as follows:
AGE AT
NAME MARCH 1, 1994 POSITION(S) AT MARCH 1, 1994
- ---- ------------- ----------------------------
Richard Snell 63 Chairman of the Board of Directors
(1)
O. Mark De Michele 59 President and Chief Executive
Officer(1)
Jaron B. Norberg 56 Executive Vice President and Chief
Financial Officer(1)
William F. Conway 63 Executive Vice President, Nuclear
Shirley A. Richard 46 Executive Vice President, Customer
Service, Marketing and Corporate
Relations
William J. Post 43 Senior Vice President, Planning,
Information and Financial Services
Jan H. Bennett 46 Vice President, Customer Service
Jack E. Davis 47 Vice President, Generation and
Transmission
Armando B. Flores 50 Vice President, Human Resources
James M. Levine 44 Vice President, Nuclear Production
Richard W. MacLean 47 Vice President, Environmental,
Health and Safety
E. C. Simpson 45 Vice President, Nuclear Support
Jack A. Bailey 40 Assistant Vice President, Nuclear
Engineering and Projects
William J. Hemelt 40 Controller
Nancy C. Loftin 40 Secretary and Corporate Counsel
Nancy E. Newquist 42 Treasurer
- ----------
(1) Member of the Board of Directors.
----------------------------------------
The executive officers of the Company are elected no less often than
annually and may be removed by the Board of Directors at any time. The terms
served by the named officers in their current positions and the principal
occupations (in addition to those stated in the table and exclusive of
directorships) of such officers for the past five years have been as follows:
Mr. Snell was elected to his present position as of February 1990. He was
also elected Chairman of the Board, President, and Chief Executive Officer of
Pinnacle West at that time. Previously, he was Chairman of the Board (1989-
1992) and Chief Executive Officer (1989-1990) of Aztar Corporation and
Chairman of the Board, President, and Chief Executive Officer of Ramada Inc.
(1981-1989).
Mr. De Michele was elected President in September 1982 and became Chief
Executive Officer as of January 1988.
Mr. Norberg was elected to his present position in July 1986.
Mr. Conway was elected to his present position in May 1989. Prior to that
time he was Senior Vice President -- Nuclear of Florida Power & Light Company
(1988-1989).
Ms. Richard was elected to her present position in January 1989.
Mr. Post was elected to his present position in June 1993. Prior to that
time he was Vice President, Finance & Rates (since April 1987).
Mr. Bennett was elected to his present position in May 1991. Prior to that
time he was Director, Customer Service (September 1990 to May 1991), and
Manager, State Region -- Customer Service (January 1988 to September 1990).
Mr. Davis was elected to his present position in June 1993. Prior to that
time he was Director, Transmission Systems (January 1993-June 1993); Director,
Fossil Generation (June 1992-December 1992); Director, System Development and
Power Operations (May 1990-May 1992); and Manager, Power Contracts (March
1979-May 1990).
Mr. Flores was elected to his present position in December 1991. Prior to
that time, he was Director -- Human Resources (1990 to 1991) and Manager --
Employment (1989 to 1990) of GENCORP, Propulsion Division, Aerojet Group. He
had previously held the position of Vice President -- Human Resources, AMFAC
(1985 to 1988).
Mr. Levine was elected to his present position in September 1989. Prior to
that time he was Executive Director, Operations Support, System Energy
Resources, Inc. (June 1989-September 1989) and Executive Director, Nuclear
Operations (January 1988-June 1989) of Arkansas Nuclear One, Arkansas Power
and Light Company.
Mr. MacLean was elected to his present position in December 1991. Prior to
that time he held the following positions at General Electric (General
Electric's Corporate Environmental Programs): Manager, EHS Resource
Development (January to December 1991); and Manager, Environmental Protection
(February 1986 to January 1991).
Mr. Simpson was elected to his present position in February 1990. Prior to
that time he was Director, Nuclear Operations Engineering and Projects (1988-
1990) at Florida Power Corporation.
Mr. Bailey was elected to his present position in July 1993. Prior to that
time he was Director, Nuclear Engineering (1991-1993) and Assistant Plant
Manager (1989 to 1991) at Palo Verde. Mr. Bailey was Superintendent of
Operations of Virginia Electric and Power Company from 1986 to 1989.
Mr. Hemelt was elected to his present position in June 1993. Prior to that
time he was Treasurer and Assistant Secretary.
Ms. Loftin was elected Secretary in April 1987 and became Corporate
Counsel in February 1989.
Ms. Newquist was elected to her present position in June 1993. Prior to
that time she was Assistant Treasurer (since October 1992). She is also
Treasurer (since June 1990) and Vice President (since February 1994) of
Pinnacle West. From May 1987 to June 1990, Ms. Newquist served as Pinnacle
West's Director of Finance.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
STOCK AND RELATED SECURITY HOLDER MATTERS
The Company's common stock is wholly-owned by Pinnacle West and is not
listed for trading on any stock exchange. As a result, there is no established
public trading market for the Company's common stock. See "The Company" in
Part I, Item 1 for information regarding the Pledge Agreement to which the
common stock is subject.
The chart below sets forth the dividends declared on the Company's common
stock for each of the four quarters for 1993 and 1992.
COMMON STOCK DIVIDENDS
(THOUSANDS OF DOLLARS)
-------------------------------------------------
Quarter 1993 1992
-------------------------------------------------
1st Quarter $42,500 $42,500
2nd Quarter 42,500 42,500
3rd Quarter 42,500 42,500
4th Quarter 42,500 42,500
-------------------------------------------------
After payment or setting aside for payment of cumulative dividends and
mandatory sinking fund requirements, where applicable, on all outstanding
issues of preferred stock, the holders of common stock are entitled to
dividends when and as declared out of funds legally available therefor. See
Notes 3 and 4 of Notes to Financial Statements in Item 8 for restrictions on
retained earnings available for the payment of dividends.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
1993 1992 1991 (a) 1990 1989
-------------- --------------- --------------- --------------- ---------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Electric Operating Revenues..... $ 1,686,290 $1,669,679 $1,515,289 $1,508,325 $1,447,154
Refund Obligation............. -- -- (53,436) -- --
-------------- --------------- --------------- --------------- ---------------
Net Operating Revenues...... 1,686,290 1,669,679 1,461,853 1,508,325 1,447,154
-------------- --------------- --------------- --------------- ---------------
Electric Operating Expenses:
Fuel and purchased power...... 300,546 287,201 273,771 289,048 269,078
Operation and maintenance..... 401,216 390,512 401,736 408,347 372,624
Depreciation and amortization. 222,610 219,118 217,198 211,727 202,409
Taxes (b)..................... 389,430 380,590 310,778 303,694 296,887
Palo Verde cost deferral...... -- -- (70,886) (64,379) (68,989)
-------------- --------------- --------------- --------------- ---------------
Total....................... 1,313,802 1,277,421 1,132,597 1,148,437 1,072,009
-------------- --------------- --------------- --------------- ---------------
Operating Income................ 372,488 392,258 329,256 359,888 375,145
Other Income (Deductions) (b)... 54,220 48,801 (324,922) 56,713 56,965
Interest Deductions -- Net...... 176,322 194,254 226,983 236,589 219,756
-------------- --------------- --------------- --------------- ---------------
Net Income (Loss)............... 250,386 246,805 (222,649) 180,012 212,354
Preferred Stock Dividend
Requirements.................. 30,840 32,452 33,404 31,060 32,302
-------------- --------------- --------------- --------------- ---------------
Earnings (Loss) for Common Stock $ 219,546 $ 214,353 $ (256,053) $ 148,952 $ 180,052
============== =============== =============== =============== ===============
Total Assets.................... $ 6,357,262 $5,629,432 $5,620,692 $6,253,562 $6,165,187
Long-Term Debt and Redeemable
Preferred Stock............... $ 2,322,264 $2,278,398 $2,412,641 $2,496,406 $2,510,360
- ----------
(a) See Note 2 of Notes to Financial Statements in Item 8 for a discussion
of the Company's December 1991 rate case settlement and disallowances
of plant costs affecting 1991 financial results.
(b) Federal and state income taxes are included in Taxes and Other Income.
Total income tax expense (benefit) was as follows: 1993, $188,907,000;
1992, $181,355,000; 1991, $(94,750,000); 1990, $126,831,000; and 1989,
$145,678,000. Palo Verde cost deferral included in Other Income for
1991, 1990 and 1989 was $63,068,000, $71,404,000 and $72,861,000,
respectively.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 7 for a discussion of certain information in
the foregoing table.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital needs consist primarily of construction expenditures
and required repayments or redemptions of long-term debt and preferred stock.
The capital resources available to meet these requirements include funds
provided by operations and external financings.
Present construction plans exclude any major baseload generating plants
for at least the next ten years. In general, most of the construction
expenditures are for expanding transmission and distribution capabilities to
meet customer growth, upgrading existing facilities, and environmental
purposes. Construction expenditures are anticipated to be $279 million, $302
million, and $293 million for 1994, 1995, and 1996, respectively. These
amounts include nuclear fuel expenditures, but exclude capitalized property
taxes and capitalized interest costs.
In the 1991 through 1993 period, the Company funded all of its capital
expenditures (construction expenditures and capitalized property taxes) with
internally generated funds, after the payment of dividends. For the period
1994 through 1996, the Company currently estimates that it will fund
substantially all of its capital expenditures with internally generated funds,
after the payment of dividends.
During 1993, the Company redeemed or repurchased approximately $637
million of long-term debt and preferred stock, of which approximately $527
million was optional. Refunding obligations for preferred stock, long-term
debt, a capitalized lease obligation, and certain anticipated early
redemptions are expected to total approximately $187 million, $135 million,
and $4 million for the years 1994, 1995, and 1996, respectively.
The Company currently expects to issue in 1994 a total of approximately
$125 million of long-term debt (primarily first mortgage bonds) and
approximately $125 million of preferred stock. Of this, the Company issued on
March 2, 1994, $100 million of its First Mortgage Bonds, 65/8% Series due
2004, and applied the net proceeds to the repayment of short-term debt that
had been incurred for the redemption of preferred stock and for general
corporate purposes. The Company expects that substantially all of the net
proceeds of the balance of the securities to be issued during 1994 will be
used for the retirement of outstanding debt and preferred stock. On March 1,
1994, the Company redeemed all of the outstanding shares of its $8.80
Cumulative Preferred Stock, Series K ($100 Par Value) in the amount of $14.21
million. As of April 4, 1994, the Company will be redeeming all $60.264
million of its outstanding First Mortgage Bonds, 103/4% Series due 2019.
Provisions in the Company's mortgage bond indenture and articles of
incorporation require certain coverage ratios to be met before the Company can
issue additional first mortgage bonds or preferred stock. In addition, the
mortgage bond indenture limits the amount of additional bonds which may be
issued to a percentage of net property additions, to property previously
pledged as security for certain bonds that have been redeemed or retired, and/
or to cash deposited with the mortgage bond trustee. After giving effect to
the transactions described in the preceding paragraph, as of December 31,
1993, the Company estimates that the mortgage bond indenture and the articles
of incorporation would have allowed it to issue up to approximately $1.20
billion and $986 million of additional first mortgage bonds and preferred
stock, respectively.
The ACC has authority over the Company with respect to the issuance of
long-term debt and equity securities. Existing ACC orders allow the Company to
have up to approximately $2.6 billion in long-term debt and approximately $501
million of preferred stock outstanding at any one time.
Management does not expect any of the foregoing restrictions to limit the
Company's ability to meet its capital requirements.
As of December 31, 1993, the Company had credit commitments from various
banks totalling approximately $302 million, which were available either to
support the issuance of commercial paper or to be used as bank borrowings.
Commercial paper borrowings totalling $148 million were outstanding at the end
of 1993.
OPERATING RESULTS
1993 Compared to 1992
Earnings in 1993 were $219.5 million compared to $214.3 million in 1992
for an increase of $5.2 million. The primary factor contributing to this
increase was lower interest expense. Interest costs in 1993 were $18.3 million
lower than 1992 due to the Company refinancing debt at lower rates, lower
average debt balances, and lower interest rates on variable-rate debt.
Partially offsetting the lower interest expense were increased taxes and
higher operating expenses.
Operating revenues were up $16.6 million in 1993 on sales volumes of 20.1
million MWh compared to 20.6 million MWh in 1992. Although revenues increased
$45.3 million due to customer growth in the residential and business classes,
these increases were largely offset by milder than normal weather and reduced
interchange sales to other utilities. Fuel and purchased power costs increased
$15.5 million in 1993 due to Palo Verde outages and reduced power operations
(see Note 10 of Notes to Financial Statements). Partially offsetting the $15.5
million increase were other miscellaneous items resulting in a net increase of
$13.3 million over 1992. These increases are reflected currently in earnings
because the Company does not have a fuel adjustment clause as part of its
retail rate structure. The net result of operating revenues less fuel and
purchased power expense was an increase of $3.3 million comparing 1993 to
1992.
Operations expense for 1993 increased $11.8 million over 1992 levels
primarily due to the implementation of SFAS No. 106 and SFAS No. 112, which
added $17.0 million to expense in 1993. Partially offsetting these factors
were lower power plant operating costs, lower rent expense, and lower costs
for an employee gainsharing plan.
1992 Compared to 1991
Earnings in 1992 were $214.3 million compared with a loss in 1991 of
$256.1 million. This was primarily due to the after-tax write-offs of $407
million in 1991 resulting from a rate case settlement with the ACC (see "Rate
Case Settlement" in Note 2 of Notes to Financial Statements). Excluding the
effects of the write-offs, earnings increased by $63.4 million over 1991
earnings as a result of several factors, including higher revenues, lower
interest costs, and lower operating expenses. Partially offsetting these
factors were higher fuel and purchased power costs and higher maintenance
expense.
Operating revenues were up $154.4 million during 1992 on sales volumes of
20.6 million MWh compared to 20.0 million MWh in 1991. The volume increase of
$48.6 million was largely due to customer growth in residential and business
customer classes and increased sales due to more normal weather as compared to
1991. A price-related increase of $85.9 million was largely due to an increase
in retail base rates effective December 6, 1991 and a higher average price for
interchange sales to other utilities. Also contributing to the increase in
1992 was $19.9 million reversal of a non-cash refund obligation recorded in
December, 1991 (see Note 2 of Notes to Financial Statements).
Interest costs were $34.9 million lower in 1992 as compared to 1991 due to
lower average debt balances resulting from the redemptions of outstanding debt
in 1991 with proceeds from the sale of Cholla 4 and lower interest rates on
both variable-rate debt and refinancings.
Fuel expenses increased in 1992 over 1991 by $13.4 million as a result of
increased generation due to increased retail and interchange sales, and
increased gas prices. These increases were partially offset by lower prices
for coal and uranium. The increase in the purchased power component of fuel
expenses was due to favorable market prices.
Operations expense was $15.3 million lower in 1992 as compared to 1991
primarily due to lower operating costs at Palo Verde, lower fossil plant
overhaul costs, and other miscellaneous cost reductions. Partially offsetting
these were an obligation recorded for an employee gainsharing plan and higher
nuclear refueling outage costs.
Other Income
Net income reflects accounting practices required for regulated public
utilities and represents a composite of cash and noncash items, including
AFUDC, accretion income on Palo Verde Unit 3, and the reversal of a refund
obligation related to the Palo Verde write-off, (see "Statement of Cash Flows"
and Note 2 of Notes to Financial Statements). The Company recorded after-tax
accretion income of $45.3 million, $40.7 million and $3.2 million in 1993,
1992 and 1991, respectively. The Company also recorded refund obligation
reversals in electric operating revenues of $12.9 million after tax in each of
the years 1993 and 1992, and $0.9 million in 1991. The Company will record the
remaining after-tax accretion income and refund obligation reversal of $20.3
million and $5.6 million, respectively, by June 5, 1994.
PALO VERDE NUCLEAR GENERATING STATION
As the Company continues its investigation and analysis of the Palo Verde
steam generators, certain corrective actions are being taken. These include
chemical cleaning, operating the units at reduced temperatures, and for some
periods, operating the units at 86% power. So long as three units are involved
in mid-cycle outages and are operated at 86%, the Company will incur an
average of approximately $2 million per month (before income taxes) for
additional fuel and purchased power costs. See "Palo Verde Tube Cracks" in
Note 10 of Notes to Financial Statements for a more detailed discussion.
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Page
--------
Report of Management................................................... 20
Independent Auditors' Report........................................... 21
Statements of Income for each of the three years in the period ended
December 31, 1993.................................................... 22
Balance Sheets -- December 31, 1993 and 1992........................... 23
Statements of Retained Earnings for each of the three years in the
period ended December 31, 1993........................................ 25
Statements of Cash Flows for each of the three years in the period ended
December 31, 1993...................................................... 26
Notes to Financial Statements............................................ 27
Financial Statement Schedules for each of the three years in the period
ended December 31, 1993
Schedule V -- Property, Plant and Equipment.......................... 41
Schedule VI -- Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment................................... 44
Schedule IX -- Short-Term Borrowings................................. 47
See Note 12 of Notes to Financial Statements for the selected quarterly
financial data required to be presented in this Item.
<PAGE>
REPORT OF MANAGEMENT
The primary responsibility for the integrity of the Company's financial
information rests with management, which has prepared the accompanying
financial statements and related information. Such information was prepared in
accordance with generally accepted accounting principles appropriate in the
circumstances, based on management's best estimates and judgments, and giving
due consideration to materiality. These financial statements have been audited
by independent auditors and their report is included.
Management maintains and relies upon systems of internal accounting
controls, which are periodically reviewed by both the Company's internal
auditors and its independent auditors to test for compliance. Reports issued
by the internal auditors are released to management, and such reports, or
summaries thereof, are transmitted to the Audit Committee of the Board of
Directors and the independent auditors on a timely basis.
The Audit Committee, composed solely of outside directors, meets
periodically with the internal auditors and independent auditors (as well as
management) to review the work of each. The internal auditors and independent
auditors have free access to the Audit Committee, without management present,
to discuss the results of their audit work.
Management believes that the Company's systems, policies and procedures
provide reasonable assurance that operations are conducted in conformity with
the law and with management's commitment to a high standard of business
conduct.
O. MARK DE MICHELE JARON B. NORBERG
O. Mark De Michele Jaron B. Norberg
President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
Arizona Public Service Company:
We have audited the accompanying balance sheets of Arizona Public Service
Company as of December 31, 1993 and 1992 and the related statements of income,
retained earnings and cash flows for each of the three years in the period
ended December 31, 1993. Our audits also included the financial statement
schedules listed in the Index at Item 8. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1993 and 1992
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
herein.
As discussed in Note 8 to the Financial Statements, the Company changed
its method of accounting for income taxes effective January 1, 1993 to conform
with Statement of Financial Accounting Standards No. 109.
Deloitte & Touche
Phoenix, Arizona
February 21, 1994
</AUDIT-REPORT>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
STATEMENTS OF INCOME
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1993 1992 1991
--------------- --------------- ---------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Electric Operating Revenues....................... $ 1,686,290 $ 1,669,679 $ 1,515,289
Refund obligation (Note 2)...................... -- -- (53,436)
--------------- --------------- ---------------
Net Operating Revenues........................ 1,686,290 1,669,679 1,461,853
--------------- --------------- ---------------
Fuel Expenses:
Fuel for electric generation.................... 231,434 230,194 223,983
Purchased power................................. 69,112 57,007 49,788
--------------- --------------- ---------------
Total......................................... 300,546 287,201 273,771
--------------- --------------- ---------------
Operating Revenues Less Fuel Expenses............. 1,385,744 1,382,478 1,188,082
--------------- --------------- ---------------
Other Operating Expenses:
Operations excluding fuel expenses.............. 282,660 270,838 286,167
Maintenance..................................... 118,556 119,674 115,569
Depreciation and amortization................... 222,610 219,118 217,198
Income taxes (Note 8)........................... 168,056 164,620 96,273
Other taxes (Note 11)........................... 221,374 215,970 214,505
Palo Verde cost deferral (Notes 1 and 2)........ -- -- (70,886)
--------------- --------------- ---------------
Total......................................... 1,013,256 990,220 858,826
--------------- --------------- ---------------
Operating Income.................................. 372,488 392,258 329,256
--------------- --------------- ---------------
Other Income (Deductions):
Allowance for equity funds used during
construction.................................. 2,326 3,103 3,902
Palo Verde cost deferral (Notes 1 and 2)........ -- -- 63,068
Income taxes (Note 8)........................... (20,851) (16,735) (11,393)
Disallowed Palo Verde costs (Note 2)............ -- -- (577,145)
Income taxes on disallowed Palo Verde costs
(Note 8)...................................... -- -- 202,416
Palo Verde accretion income (Note 2)............ 74,880 67,421 5,306
Other -- net.................................... (2,135) (4,988) (11,076)
--------------- --------------- ---------------
Total......................................... 54,220 48,801 (324,922)
--------------- --------------- ---------------
Income Before Interest Deductions................. 426,708 441,059 4,334
--------------- --------------- ---------------
Interest Deductions:
Interest on long-term debt...................... 164,610 186,915 217,261
Interest on short-term borrowings............... 6,662 3,831 10,363
Debt discount, premium and expense.............. 9,203 8,000 5,995
Allowance for borrowed funds used during
construction.................................. (4,153) (4,492) (6,636)
--------------- --------------- ---------------
Total......................................... 176,322 194,254 226,983
--------------- --------------- ---------------
Net Income (Loss)................................. 250,386 246,805 (222,649)
Preferred Stock Dividend Requirements............. 30,840 32,452 33,404
--------------- --------------- ---------------
Earnings (Loss) for Common Stock.................. $ 219,546 $ 214,353 $ (256,053)
=============== =============== ===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
BALANCE SHEETS
ASSETS
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1992
--------------- ---------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Utility Plant (Notes 4, 6 and 7):
Electric plant in service and held for future use........... $ 6,333,884 $ 6,197,459
Less accumulated depreciation and amortization.............. 1,991,143 1,897,433
--------------- ---------------
Total..................................................... 4,342,741 4,300,026
Construction work in progress............................... 197,556 162,168
Nuclear fuel, net of amortization of $67,752,000 and
$76,266,000............................................... 60,953 61,603
--------------- ---------------
Utility Plant -- net.................................... 4,601,250 4,523,797
--------------- ---------------
Investments and Other Assets (at cost)........................ 63,224 58,702
--------------- ---------------
Current Assets:
Cash and cash equivalents................................... 7,557 1,152
Accounts receivable:
Service customers......................................... 102,745 120,109
Other..................................................... 21,091 34,203
Allowance for doubtful accounts........................... (2,569) (2,156)
Accrued utility revenues (Note 1)........................... 60,356 51,517
Materials and supplies (at average cost).................... 96,174 95,978
Fossil fuel (at average cost)............................... 34,220 36,668
Deferred income tax (Note 8)................................ 29,117 37,902
Other....................................................... 12,653 6,037
--------------- ---------------
Total Current Assets...................................... 361,344 381,410
--------------- ---------------
Deferred Debits:
Regulatory asset for income taxes (Note 8).................. 585,294 --
Palo Verde Unit 3 cost deferral (Notes 1 and 2)............. 301,748 310,908
Palo Verde Unit 2 cost deferral (Note 1).................... 177,998 184,061
Unamortized costs of reacquired debt........................ 63,147 52,709
Unamortized debt issue costs................................ 17,999 17,107
Other....................................................... 185,258 100,738
--------------- ---------------
Total Deferred Debits..................................... 1,331,444 665,523
--------------- ---------------
Total..................................................... $ 6,357,262 $ 5,629,432
=============== ===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
BALANCE SHEETS
LIABILITIES
<CAPTION>
DECEMBER 31,
------------------------------
1993 1992
-------------- --------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capitalization (Notes 3 and 4):
Common stock.................................................. $ 178,162 $ 178,162
Premiums and expenses -- net.................................. 1,037,681 1,038,329
Retained earnings............................................. 307,098 259,899
-------------- --------------
Common stock equity......................................... 1,522,941 1,476,390
Non-redeemable preferred stock................................ 193,561 168,561
Redeemable preferred stock.................................... 197,610 225,635
Long-term debt less current maturities........................ 2,124,654 2,052,763
-------------- --------------
Total Capitalization...................................... 4,038,766 3,923,349
-------------- --------------
Current Liabilities:
Notes payable to banks (Note 5)............................... -- 130,000
Commercial paper (Note 5)..................................... 148,000 65,000
Current maturities of long-term debt (Note 4)................. 3,179 94,217
Accounts payable.............................................. 81,772 82,062
Accrued taxes................................................. 112,293 103,467
Accrued interest.............................................. 45,729 44,842
Other (Note 2)................................................ 60,737 75,089
-------------- --------------
Total Current Liabilities................................. 451,710 594,677
-------------- --------------
Deferred Credits and Other:
Deferred income taxes (Note 8)................................ 1,391,184 711,978
Deferred investment tax credit................................ 149,819 156,767
Unamortized gain -- sale of utility plant (Note 7)............ 107,344 116,167
Customer advances for construction............................ 15,578 13,665
Other......................................................... 202,861 112,829
-------------- --------------
Total Deferred Credits and Other.......................... 1,866,786 1,111,406
-------------- --------------
Commitments and Contingencies (Notes 2 and 10)
Total..................................................... $6,357,262 $5,629,432
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
STATEMENTS OF RETAINED EARNINGS
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1993 1992 1991
------------ ------------ --------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Retained earnings at beginning of year................... $ 259,899 $ 215,974 $ 647,587
Add: Net income (loss)................................... 250,386 246,805 (222,649)
------------ ------------ --------------
Total.............................................. 510,285 462,779 424,938
------------ ------------ --------------
Deduct:
Dividends:
Common stock (Notes 3 and 4)......................... 170,000 170,000 170,000
Preferred stock (see below).......................... 30,840 32,452 33,404
Premium paid on reacquisition of preferred stock....... 2,347 428 5,560
------------ ------------ --------------
Total deductions................................... 203,187 202,880 208,964
------------ ------------ --------------
Retained earnings at end of year......................... $ 307,098 $ 259,899 $ 215,974
============ ============ ==============
Dividends on preferred stock:
$1.10 preferred........................................ $ 172 $ 172 $ 172
$2.50 preferred........................................ 258 258 258
$2.36 preferred........................................ 94 94 94
$4.35 preferred........................................ 326 326 326
Serial preferred:
$2.40 Series A....................................... 576 576 576
$2.625 Series C...................................... 630 630 630
$2.275 Series D...................................... 455 455 455
$3.25 Series E....................................... 1,040 1,040 1,040
$10.00 Series H...................................... -- 58 193
$8.32 Series J....................................... 3,364 4,160 4,160
$8.80 Series K....................................... 1,454 1,654 1,794
$12.90 Series N...................................... -- 1,196 2,994
Adjustable Rate Series Q............................. 3,000 3,083 3,321
$11.50 Series R...................................... 3,630 4,081 4,720
$8.48 Series S....................................... 3,251 4,240 4,240
$8.50 Series T....................................... 4,250 4,250 4,250
$10.00 Series U...................................... 5,000 5,000 4,181
$7.875 Series V...................................... 1,966 1,179 --
$1.8125 Series W..................................... 1,374 -- --
------------ ------------ --------------
Total.............................................. $ 30,840 $ 32,452 $ 33,404
============ ============ ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1993 1992 1991
-------------- ---------------- --------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Cash Flows from Operations:
Net income (loss)................................... $ 250,386 $ 246,805 $ (222,649)
Items not requiring cash:
Depreciation and amortization..................... 222,610 219,118 217,198
Nuclear fuel amortization......................... 32,024 36,605 43,990
Allowance for equity funds used during
construction.................................... (2,326) (3,103) (3,902)
Deferred income taxes -- net...................... 102,697 84,097 (128,904)
Deferred investment tax credit -- net............. (6,948) (6,804) (15,393)
Palo Verde cost deferral.......................... -- -- (133,954)
Refund obligation -- net.......................... (21,374) (21,374) 52,057
Disallowed Palo Verde costs....................... -- -- 577,145
Palo Verde accretion income....................... (74,880) (67,421) (5,306)
Changes in certain current assets and liabilities:
Accounts receivable -- net........................ 30,889 (33,965) 19,757
Accrued utility revenues.......................... (8,839) (7,055) 1,004
Materials, supplies and fossil fuel............... 2,252 5,094 (8,490)
Other current assets.............................. (6,616) 3,795 (312)
Accounts payable.................................. (18,622) 7,172 10,317
Accrued taxes..................................... 8,826 18,284 (5,376)
Accrued interest.................................. 241 (16,131) (4,358)
Other current liabilities......................... 7,282 5,405 3,175
Other -- net........................................ 18,686 (2,386) 2,562
-------------- ---------------- --------------
Net cash provided............................... 536,288 468,136 398,561
-------------- ---------------- --------------
Cash Flows from Financing:
Preferred stock..................................... 72,644 24,781 49,375
Long-term debt...................................... 520,020 643,360 319,463
Short-term borrowings -- net........................ (47,000) 195,000 (159,000)
Dividends paid on common stock...................... (170,000) (170,000) (170,000)
Dividends paid on preferred stock................... (30,945) (32,574) (33,127)
Repayment of preferred stock........................ (78,663) (27,850) (15,175)
Repayment and reacquisition of long-term debt....... (558,799) (1,013,371) (314,457)
-------------- ---------------- --------------
Net cash used..................................... (292,743) (380,654) (322,921)
-------------- ---------------- --------------
Cash Flows from Investing:
Capital expenditures................................ (234,944) (224,419) (182,687)
Allowance for equity funds used during construction. 2,326 3,103 3,902
Sale of property (Note 2)........................... -- -- 233,504
Other............................................... (4,522) (4,099) (1,994)
-------------- ---------------- --------------
Net cash provided (used).......................... (237,140) (225,415) 52,725
-------------- ---------------- --------------
Net increase (decrease) in cash and cash equivalents.. 6,405 (137,933) 128,365
Cash and cash equivalents at beginning of period...... 1,152 139,085 10,720
-------------- ---------------- --------------
Cash and cash equivalents at end of period............ $ 7,557 $ 1,152 $ 139,085
============== ================ ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest (excluding capitalized interest)......... $ 161,843 $ 200,986 $ 220,908
Income taxes...................................... $ 88,239 $ 85,141 $ 63,104
See Notes to Financial Statements.
</TABLE>
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Records -- The accounting records are maintained in
accordance with generally accepted accounting principles applicable to rate-
regulated enterprises. The Company is regulated by the ACC and the FERC and
the accompanying financial statements reflect the rate-making policies of
these commissions.
b. Common Stock -- All of the outstanding shares of common stock of the
Company are owned by Pinnacle West.
c. Cash and Cash Equivalents -- For purposes of the statements of cash
flows, the Company considers all highly liquid debt instruments purchased with
an initial maturity of three months or less to be cash equivalents.
d. Utility Plant and Depreciation -- Utility plant represents the
buildings, equipment and other facilities used to provide electric service.
The cost of utility plant includes labor, materials, contract services, other
related items and an allowance for funds used during construction. The cost of
retired depreciable utility plant, plus costs of removal minus salvage
realized, is charged to accumulated depreciation.
Depreciation on utility property is recorded on a straight-line basis. The
applicable ACC approved rates for 1991 through 1993 ranged from 0.84% to
15.00% which resulted in annual composite rates of 3.37%.
e. Nuclear Decommissioning Costs -- In 1993, the Company recorded $6.5
million for decommissioning expense. Based on a more recent site-specific
study to completely remove all facilities, the Company expects to record $11.4
million for decommissioning expense in 1994. The Company estimates it will
cost approximately $2.1 billion ($407 million in 1993 dollars), over a
thirteen year period beginning in 2023, to decommission its 29.1% interest in
Palo Verde. Decommissioning costs are charged to expense over the respective
unit's operating license term and included in the accumulated depreciation
balance until Palo Verde is retired from service.
As required by the ACC, the Company has established external trust
accounts into which quarterly deposits are made for decommissioning. As of
December 31, 1993, the Company has deposited a total of $35.0 million. The
trust accounts are included in "Investments and Other Assets" on the Company's
balance sheet and have accumulated, with interest, a $44.7 million balance at
December 31, 1993.
f. Revenues -- Revenues are recognized on the accrual basis and include
estimated amounts for service rendered but unbilled at the end of each
accounting period.
g. Allowance for Funds Used During Construction -- AFUDC represents the
cost of debt and equity funds used to finance construction of utility plant.
Plant construction costs, including AFUDC, are recovered in authorized rates
through related depreciation when completed projects are placed into
commercial operation. AFUDC does not represent current cash earnings.
AFUDC has been calculated using composite rates of 7.20% for 1993; 10.00%
for 1992; and 10.15% for 1991. The Company compounds AFUDC semiannually and
ceases to accrue AFUDC when construction is completed and the property is
placed in service.
h. Reacquired Debt Costs -- Gains and losses on reacquired debt are
deferred and amortized over the remaining original life of the debt,
consistent with ratemaking.
i. Nuclear Fuel -- Nuclear fuel cost is amortized to fuel expense based on
the relationship of the quantity of heat produced in the current period to the
total quantity of heat expected to be produced over the remaining life of the
fuel.
Under Federal law, the DOE is responsible for the permanent disposal of
spent nuclear fuel. The DOE assesses $.001 per kilowatt-hour of nuclear
generation. This amount is charged to nuclear fuel expense and recovered
through rates.
j. Palo Verde Cost Deferrals -- As authorized by the ACC, the Company
deferred operating costs (excluding fuel) and financing costs for Palo Verde
Units 2 and 3 (including their share of facilities common to all units) from
the commercial operation date (September 1986 and January 1988, respectively)
until the date the units
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
were included in a rate order (April 1988 and
December 1991, respectively). The deferrals are being amortized and recovered
in rates over thirty-five year periods.
k. Reclassification -- certain prior year balances have been reclassified
to conform to the 1993 presentation.
2. REGULATORY MATTERS
RATE CASE SETTLEMENT
In December 1991, the Company and the ACC reached a settlement in a retail
rate case that had been pending before the ACC since January 1990. The ACC
authorized an annual net revenue increase of $66.5 million, or approximately
5.2%. In turn, the Company wrote off $577.1 million of costs associated with
Palo Verde and recorded a refund obligation of $53.4 million. The after-tax
impact of these adjustments reduced 1991 net income by $407 million. A
discussion of the components of the disallowance follows.
Prudence Audit
The ACC closed its prudence audit of Palo Verde and the Company wrote off
$142 million ($101.3 million after tax) of construction costs relating to Palo
Verde Units 1, 2, and 3 and $13.3 million ($8.6 million after tax) of deferred
costs relating to the prudence audit.
Interim or Temporary Revenues
The ACC removed the interim and temporary designation on $385 million of
revenues collected by the Company from 1986 through 1991 that had been
previously authorized for Palo Verde Units 1 and 2. The Company recorded a
refund obligation to customers of $53.4 million ($32.3 million after tax)
related to the Palo Verde write-off discussed above. The refund obligation has
been used to reduce the amount of annual rate increase granted rather than
require specific customer refunds and is being reversed over thirty months
beginning December 1991. The after-tax refund obligation reversals recorded as
electric operating revenue by the Company amounted to $0.9 million in 1991 and
$12.9 million in each of the years 1992 and 1993 and will amount to $5.6
million after tax in 1994.
Temporary Excess Capacity -- Palo Verde Unit 3
The ACC deemed a portion of Palo Verde Unit 3 to be excess capacity and,
accordingly, did not recognize the related Unit 3 costs for ratemaking
purposes. This action effectively disallows for thirty months a return on
approximately $475 million of the Company's investment in Unit 3. The Company
recognized a charge of $181.2 million ($109.5 million after tax), representing
the present value of the lost cash flow and to that extent temporarily
discounted the carrying value of Unit 3.
In accordance with generally accepted accounting principles, the Company
is recording over the thirty-month period accretion income on Unit 3 in the
aggregate amount of the discount. The Company recorded after-tax accretion
income of $3.2 million, $40.7 million, and $45.3 million in 1991, 1992, and
1993, respectively, and will record after-tax accretion income of $20.3
million in 1994.
In December 1991, the Company stopped deferring Unit 3 costs and recorded
a $240.6 million ($155.3 million after tax) write-off of Unit 3 cost deferrals
due to Unit 3 being deemed excess capacity. At that time the Company began
amortizing to expense and recovering in rates the remaining $320 million
balance of deferrals over a thirty-five year period as approved by the ACC.
Future Retail Rate Increase
The Company agreed not to file a new rate application before December 1993
and the ACC agreed to expedite the processing of a future rate application.
The Company and the ACC also agreed on an average unit sales price ceiling of
9.585 cents per kilowatt-hour in this future rate application, if filed prior
to January 1,
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1995. The Company's 1993 average unit sales price was
approximately 9 cents per kilowatt-hour. This ceiling may be adjusted for the
effects of significant changes in laws, regulatory requirements, or the
Company's cost of equity capital. Management believes that the unit sales
price ceiling will not adversely impact the Company's future earnings and has
not yet determined when a rate case may be filed.
Dividend Payments
The Company agreed to limit its annual common stock dividends to Pinnacle
West to $170 million through December 1993.
SALE OF CHOLLA UNIT 4
In July 1991, the Company sold Cholla 4 to PacifiCorp for approximately
$230 million. The resulting after-tax gain of approximately $20 million was
deferred and is being amortized as a reduction to operations expense over a
four year period in accordance with an ACC order. The transaction also
provides for transmission access and electrical energy sales and exchanges
between the Company and PacifiCorp.
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. COMMON AND PREFERRED STOCKS
<CAPTION>
Number of Shares Par Value
-------------------------------------------------- --------------------------------------- Call
Outstanding Outstanding Price
------------------------------ Per -------------------------- Per
Authorized 1993 1992 Share 1993 1992 Share(a)
------------------ -------------- -------------- ----------- ------------ ------------ -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCK.......... 100,000,000 71,264,947 71,264,947 $ 2.50 $ 178,162 $ 178,162 --
============== ============== ============ ============
PREFERRED STOCK (CUMULATIVE):
NON-REDEEMABLE:
$1.10............... 160,000 155,945 155,945 $ 25.00 $ 3,898 $ 3,898 $ 27.50
$2.50............... 105,000 103,254 103,254 50.00 5,163 5,163 51.00
$2.36............... 120,000 40,000 40,000 50.00 2,000 2,000 51.00
$4.35............... 150,000 75,000 75,000 100.00 7,500 7,500 102.00
Serial preferred.... 1,000,000
$2.40 Series A.... 240,000 240,000 50.00 12,000 12,000 50.50
$2.625 Series C... 240,000 240,000 50.00 12,000 12,000 51.00
$2.275 Series D... 200,000 200,000 50.00 10,000 10,000 50.50
$3.25 Series E.... 320,000 320,000 50.00 16,000 16,000 51.00
Serial preferred.... 4,000,000(b)
$8.32 Series J.... -- 500,000 100.00 -- 50,000
Adjustable rate --
Series Q........ 500,000 500,000 100.00 50,000 50,000 (c)
Serial preferred.... 10,000,000
$1.8125 Series W.. 3,000,000 -- 25.00 75,000 -- (d)
-------------- -------------- ------------ ------------
Total......... 4,874,199 2,374,199 $ 193,561 $ 168,561
============== ============== ============ ============
REDEEMABLE:
Serial preferred:
$8.80 Series K.... 142,100 187,100 $100.00 $ 14,210 $ 18,710 (e)
$11.50 Series R... 284,000 319,250 100.00 28,400 31,925 (f)
$8.48 Series S.... 300,000 500,000 100.00 30,000 50,000 (g)
$8.50 Series T.... 500,000 500,000 100.00 50,000 50,000
$10.00 Series U... 500,000 500,000 100.00 50,000 50,000
$7.875 Series V... 250,000 250,000 100.00 25,000 25,000 (h)
-------------- -------------- ------------ ------------
Total......... 1,976,100 2,256,350 $ 197,610 $ 225,635
============== ============== ============ ============
Non-redeemable preferred stock is not redeemable except at the option of
the Company. Redeemable preferred stock is redeemable through sinking fund
obligations in addition to being callable by the Company.
(a) In each case plus accrued dividends.
(b) This authorization covers both outstanding non-redeemable and all
redeemable preferred stock.
(c) Dividend rate adjusted quarterly to 2% below that of certain United
States Treasury securities, but in no event less than 6% or greater
than 12% per annum. Redeemable at par.
(d) Redeemable at par after December 1, 1998.
(e) Redeemable at $103.00 through February 28, 1994 and at $101.00
thereafter.
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(f) Redeemable after June 1, 1994 at $105.45, declining by a
predetermined amount each year to par after June 1, 2003.
(g) Redeemable at $102.12 through May 31, 1994, and at par thereafter.
(h) Redeemable at $107.09 through May 31, 1994, and thereafter declining
by a predetermined amount each year to par after May 31, 2002.
</TABLE>
If there were to be any arrearage in dividends on any of the Company's
preferred stock or in the sinking fund requirements applicable to any of its
redeemable preferred stock, the Company could not pay dividends on its common
stock or acquire any shares thereof for consideration.
The redemption requirements for the above issues for the next five years
are: 1994, $65,775,000; 1995, $13,525,000; 1996, $13,525,000; 1997,
$13,525,000; and 1998, $13,525,000.
<TABLE>
CHANGES IN REDEEMABLE PREFERRED STOCK
<CAPTION>
Number of Shares Par Value
Outstanding Outstanding
---------------------------------------------- -------------------------------------------
(Thousand of Dollars)
Description 1993 1992 1991 1993 1992 1991
- ----------------------- -------------- -------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1..... 2,256,350 2,272,782 1,924,532 $ 225,635 $ 227,278 $ 192,453
Issuance:
$10.00 Series U.... -- -- 500,000 -- -- 50,000
$7.875 Series V.... -- 250,000 -- -- 25,000 --
Retirements:
$10.00 Series H.... -- (8,677) (16,000) -- (868) (1,600)
$8.80 Series K..... (45,000) (4,725) (40,275) (4,500) (472) (4,027)
$12.90 Series N.... -- (213,280) (24,975) -- (21,328) (2,498)
$11.50 Series R.... (35,250) (39,750) (70,500) (3,525) (3,975) (7,050)
$8.48 Series S..... (200,000) -- -- (20,000) -- --
-------------- -------------- -------------- ------------- ------------- -------------
Balance, December 31... 1,976,100 2,256,350 2,272,782 $ 197,610 $ 225,635 $ 227,278
============== ============== ============== ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT
<CAPTION>
Year Ended December 31,
------------------------------
Maturity Dates Interest Rates 1993 1992
------------------ ----------------------------- -------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
First mortgage bonds 1997-2028 5.5%-13.25%(a) $ 1,729,070 $ 1,615,602
Pollution control
indebtedness 2009-2015 Adjustable(b) 369,130 424,330
Revolving Credit 1993 LIBOR + 0.30% to 0.45%(c) -- 75,000
Capitalized lease
obligation 1994-2001 7.48%(d) 29,633 32,048
-------------- --------------
Total long-term debt 2,127,833 2,146,980
Less current maturities 3,179 94,217
-------------- --------------
Total long-term debt less
current maturities $ 2,124,654 $ 2,052,763
============== ==============
(a) The weighted average rate on outstanding debt at year-end for 1993
and 1992 was 8.25% and 8.70%, respectively.
(b) The interest rates at year-end varied from 2.80% to 3.50% for 1993
and from 3.20% to 4.40% for 1992.
(c) The weighted average rate on outstanding borrowings at year-end 1992
was 4.41%.
(d) Represents the present value of future lease payments (discounted at
the interest rate of 7.48%) on a combined cycle plant sold and leased
back from the independent owner-trustee formed to own the facility.
See Note 7.
</TABLE>
Aggregate annual payments due on long-term debt and for sinking fund
requirements through 1998 are as follows: 1994, $3,179,000; 1995, $3,408,000;
1996, $3,512,000; 1997, $153,780,000; and 1998, $109,068,000.
The Company had approximately $370 million of variable-rate long-term debt
outstanding at December 31, 1993. Changes in interest rates would affect the
costs associated with this debt.
Substantially all utility plant (other than nuclear fuel, transportation
equipment, and the combined cycle plant) is subject to the lien of the first
mortgage bond indenture. The first mortgage bond indenture includes provisions
which would restrict the payment of common stock dividends under certain
conditions which did not exist at December 31, 1993.
5. LINES OF CREDIT
APS had committed lines of credit with various banks of $302 million at
December 31, 1993 and 1992 which were available either to support the issuance
of commercial paper or to be used for bank borrowings. The commitment fees on
these lines were 0.1875% per annum through April 29, 1992 and 0.25% thereafter
through December 31, 1993. The Company had commercial paper borrowings
outstanding of $148 million at December 31, 1993 and bank borrowings of $130
million at December 31, 1992.
In 1992, the Company also had a $70 million letter of credit commercial
paper program. Under this program, which expired in November, 1993, the
Company had $65 million of borrowings outstanding at December 31, 1992. The
commitment fees for this program were 0.30% per year.
By Arizona statute, the Company's short-term borrowings cannot exceed 7%
of total capitalization without the consent of the ACC.
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. JOINTLY-OWNED FACILITIES
At December 31, 1993, the Company owned interests in the following
jointly-owned electric generating and transmission facilities. The Company's
share of related operating and maintenance expenses is included in Operating
Expenses.
<TABLE>
<CAPTION>
Percent
Owned by Plant in Accumulated Construction
Company Service Depreciation Work in Progress
------------ -------------- --------------- ----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
GENERATING FACILITIES:
Palo Verde Nuclear
Generating Station --
Units 1 & 3.......................... 29.1% $ 1,825,842 $ 371,818 $ 17,995
Palo Verde Nuclear
Generating Station --
Unit 2............................... 17.0% 552,798 114,118 17,946
Four Corners Steam
Generating Station --
Units 4 & 5.......................... 15.0% 140,408 46,884 1,220
Navajo Steam
Generating Station --
Units 1, 2 & 3....................... 14.0% 135,073 70,397 11,865
Cholla Steam
Generating Station --
Common Facilities only(a)............ 62.8% 69,678 30,440 1,324
TRANSMISSION FACILITIES:
ANPP 500KV System...................... 35.8%(b) 62,619 13,849 910
Navajo Southern System................. 31.4%(b) 26,742 14,386 6
Palo Verde-Yuma 500KV System........... 23.9%(b) 11,411 3,006 --
Four Corners Switchyards............... 27.5%(b) 3,045 1,790 3
Phoenix-Mead System.................... 17.1%(b) -- -- 8,983
(a) The Company is the operating agent for Cholla 4, which is owned by
PacifiCorp. The common facilities at the Cholla Plant are jointly-owned.
(b) Weighted average of interests.
</TABLE>
7. LEASES
In 1986, the Company entered into sale and leaseback transactions under
which it sold approximately 42% of its share of Palo Verde Unit 2. The gain of
approximately $140,220,000 has been deferred and is being amortized to
operations expense over the original lease term. The leases are being
accounted for as operating leases. The amounts paid each year approximate
$40,134,000 through December 1999, $46,285,000 through December 2000 and
$48,982,000 through December 2015. The leases include options to renew for two
additional years and to purchase the property at fair market value at the end
of the lease terms. Consistent with the ratemaking treatment, an amount equal
to the annual lease payments is included in rent expense. A regulatory asset
(totalling approximately $49 million at December 31, 1993) has been
established for the difference between lease payments and rent expense
calculated on a straight-line basis. Lease expense for 1993, 1992 and 1991 was
$41,750,000, $45,838,000 and $45,633,000, respectively.
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Company has a capital lease on a combined cycle plant which it sold
and leased back. The lease requires semiannual payments of $2,582,000 through
June 2001 and includes renewal and purchase options based on fair market
value. This plant is included in plant in service at its original cost of
$54,405,000; accumulated depreciation at December 31, 1993 was $37,315,000.
In addition, the Company also leases certain land, buildings, equipment
and miscellaneous other items through operating rental agreements with varying
terms, provisions and expiration dates. Rent expense for 1993, 1992, and 1991
were approximately $11,096,000, $14,733,000 and $16,046,000, respectively.
Annual future minimum rental commitments, excluding the Palo Verde and
combined cycle leases, for the period 1994 through 1998 range between $11
million and $13 million. Total rental commitments after 1998 are estimated at
$129 million.
8. INCOME TAXES
The Company is included in the consolidated income tax returns of Pinnacle
West. Income taxes are allocated to the Company based on its separate company
taxable income or loss. Approximately $17.3 million of income taxes were
payable to Pinnacle West at December 31, 1993. Investment tax credits were
deferred and are being amortized to other income over the estimated life of
the related assets as directed by the ACC.
Effective January 1, 1993, the Company adopted the provisions of SFAS No.
109, which requires the use of the liability method in accounting for income
taxes. Upon adoption the Company recorded deferred income tax liabilities
related to the equity component of AFUDC, the debt component of AFUDC recorded
net of tax, and other temporary differences for which deferred income taxes
had not been provided. Deferred income tax balances were also adjusted for
changes in tax rates. The adoption of SFAS No. 109 had no material effect on
net income but increased deferred income tax liabilities by $585.3 million at
December 31, 1993. Historically the FERC and ACC have allowed revenues
sufficient to pay for these deferred tax liabilities, and, in accordance with
SFAS No. 109, a regulatory asset has been established in a corresponding
amount.
The components of income tax expense (benefit) are:
Year Ended December 31,
--------------------------------
1993 1992 1991
--------- --------- ----------
(Thousands of Dollars)
Current:
Federal................................... $ 69,243 $ 80,921 $ 39,446
State..................................... 23,915 23,141 11,010
--------- --------- ----------
Total current........................... 93,158 104,062 50,456
--------- --------- ----------
Deferred:
Depreciation -- net....................... 58,844 75,931 56,478
Palo Verde cost deferral.................. (5,015) (5,015) 46,004
Alternative minimum tax................... 13,661 7,732 (10,565)
Disallowed Palo Verde costs (including
ITC).................................... -- -- (202,416)
Refund obligation......................... 8,454 8,454 (20,591)
Palo Verde accretion income............... 29,618 26,668 2,099
Loss on reacquired debt................... 4,288 10,266 (1,032)
Palo Verde start-up costs................. (1,335) (28,976) (1,337)
Investment tax credit -- net.............. (6,948) (6,804) (11,117)
Other -- net.............................. (5,818) (10,963) (2,729)
--------- --------- ----------
Total deferred.......................... 95,749 77,293 (145,206)
--------- --------- ----------
Total................................. $ 188,907 $ 181,355 $ (94,750)
========= ========= ==========
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Total income tax expense (benefit) differed from the amount computed by
multiplying income before income taxes by the statutory federal income tax
rate due to the following:
Year Ended December 31,
--------------------------------
1993 1992 1991
--------- --------- ----------
(Thousands of Dollars)
Federal income tax expense (benefit) at
statutory rate (35% in 1993, 34% in 1992
and 1991)................................. $ 153,753 $ 145,574 $(107,916)
Increase (reductions) in tax expense
resulting from:
Tax under book depreciation............... 17,671 17,465 21,776
Palo Verde cost deferral.................. -- -- (4,063)
Disallowed Palo Verde costs (including
ITC).................................... -- -- 22,236
Investment tax credit amortization........ (6,922) (7,036) (11,117)
State income tax -- net of federal income
tax benefit............................. 27,005 27,036 (9,820)
Other..................................... (2,600) (1,684) (5,846)
--------- --------- ----------
Total................................. $ 188,907 $ 181,355 $ (94,750)
========= ========= ==========
The components of the net deferred income tax liability at December 31,
1993, were as follows (in thousands of dollars):
Deferred tax assets:
Deferred gain on Palo Verde Unit 2 sale/leaseback.............. $ 66,754
Alternative minimum tax (can be carried forward indefinitely).. 35,514
Other.......................................................... 86,745
Valuation allowance............................................ (15,413)
-----------
Total deferred tax assets.................................. 173,600
-----------
Deferred tax liabilities:
Plant related.................................................. 751,520
Income taxes recoverable through future rates -- net........... 585,294
Palo Verde deferrals........................................... 158,424
Other.......................................................... 40,429
-----------
Total deferred tax liabilities............................. 1,535,667
-----------
Accumulated deferred income taxes -- net......................... $1,362,067
===========
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. PENSION PLAN AND OTHER BENEFITS
Pension Plan
The Company has a defined benefit pension plan covering substantially all
employees. Benefits are based on years of service and compensation using a
final average pay plan benefit formula. The plan is funded on a current basis
to the extent deductible under existing tax regulation. Plan assets consist
primarily of domestic and international common stocks and bonds, and real
estate. Pension cost, including administrative cost, for 1993, 1992 and 1991
was approximately $13,950,000, $14,022,000 and $10,590,000, respectively, of
which approximately $6,516,000, $3,917,000 and $4,939,000, respectively, was
charged to expense; the remainder was either capitalized as a component of
construction costs or billed to owners of facilities for which the Company is
operating agent.
The components of net periodic pension costs are as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Service cost-benefits earned during the period....... $ 16,754 $ 16,903 $ 14,559
Interest cost on projected benefit obligation........ 34,724 33,333 30,964
Return on plan assets................................ (51,597) (23,058) (64,884)
Net amortization and deferral........................ 13,420 (15,002) 28,747
------------- ------------- -------------
Net periodic pension cost............................ $ 13,301 $ 12,176 $ 9,386
============= ============= =============
</TABLE>
A reconciliation of the funded status of the plan to the amounts
recognized in the balance sheet is presented below (in thousands of dollars):
1993 1992
--------- ---------
Plan assets at fair value............................... $ 417,938 $ 388,790
--------- ---------
Less actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $347,603 and $286,588................. 372,364 307,003
Effect of projected future compensation increases... 127,388 105,027
--------- ---------
Total projected benefit obligation.............. 499,752 412,030
--------- ---------
Plan assets less than projected benefit obligation...... (81,814) (23,240)
Plus: Unrecognized net loss from past experience
different from that assumed..................... 51,361 8,288
Unrecognized prior service cost................... 14,717 15,733
Unrecognized net transition asset................. (39,242) (42,458)
--------- ---------
Accrued pension liability included in other deferred
credits............................................... $ (54,978) $ (41,677)
========= =========
Principal actuarial assumptions used were:
Discount rate....................................... 7.50% 8.25%
Rate of increase in compensation levels............. 5.00% 5.00%
Expected long-term rate of return on assets......... 9.50%(a) 9.50%
(a) The Company will assume a 9% rate of return on plan assets for
computing the net periodic pension cost in 1994.
In addition to the defined benefit pension plan described above, the
Company also sponsors two qualified defined contribution plans. Substantially
all employees are eligible to participate in one or the other of these two
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
plans. Both plans provide for employee contributions and partial employer
matching contributions after certain eligibility requirements are met. The
cost of these plans for 1993, 1992 and 1991 was $6,283,000, $5,311,000 and
$2,708,000, of which $3,006,000, $2,514,000 and $1,344,000 was charged to
expense.
Postretirement Plans
The Company provides medical and life insurance benefits to its retired
employees. Employees may become eligible for these retirement benefits based
on years of service and age. The retiree medical insurance plan is
contributory; the retiree life insurance plan is noncontributory. In
accordance with the governing plan documents, the Company retains the right to
change or eliminate these benefits.
During 1993, the Company adopted SFAS No. 106, which requires that the
cost of postretirement benefits be accrued during the years that the employees
render service. Prior to 1993, the costs of retiree benefits were recognized
as expense when claims were paid. This change had the effect of increasing
1993 retiree benefit costs from approximately $6 million to $34 million; the
amount charged to expense increased from approximately $2 million to $17
million for an increase of $15 million, including the amortization (over 20
years) of the initial postretirement benefit obligation estimated at January
1, 1993 to be $183 million. Funding is based upon actuarially determined
contributions that take into account the tax consequences.
The components of the postretirement benefit costs for 1993 are as follows
(in thousands of dollars):
Service cost -- benefits earned during the period........... $ 9,510
Interest cost on accumulated benefit obligation............. 15,630
Net amortization and deferral............................... 9,146
------------
Net periodic postretirement benefit cost.................... $ 34,286
============
A reconciliation of the funded status of the plan to the amounts
recognized in the balance sheet is presented below (in thousands of dollars):
Plan assets at fair value, funded at December 31, 1993........ $ 28,154
------------
Less accumulated postretirement benefit obligation:
Retirees.................................................. 49,296
Fully eligible plan participants.......................... 13,504
Other active plan participants............................ 137,113
------------
Total accumulated postretirement benefit obligation... 199,913
------------
Plan assets less than accumulated benefit obligation.......... (171,759)
Plus: Unrecognized transition obligation...................... 173,773
Unrecognized net gain from past experience different
from that assumed and from changes in assumptions..... (2,072)
------------
Accrued postretirement liability included in other deferred
credits................................................... $ (58)
============
Principal actuarial assumptions used were:
Discount rate............................................. 7.50%
Initial health care cost trend rate -- under age 65....... 12.00%
Initial health care cost trend rate -- age 65 and over.... 9.00%
Ultimate health care cost trend rate
(reached in the year 2003)........................... 5.50%
Annual Salary increase for life insurance obligation...... 5.00%
Assuming a one percent increase in the health care cost trend rate, the
Company's 1993 cost of postretirement benefits other than pensions would
increase by $6.8 million and the accumulated benefit obligation as of December
31, 1993 would increase by $40.6 million.
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In 1993, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The new standard requires a change from a cash
method to an accrual method in accounting for benefits (such as long-term
disability) provided to former or inactive employees after employment but
before retirement. The adoption of this new standard resulted in an increase
in 1993 postemployment benefit costs of approximately $2 million.
10. COMMITMENTS AND CONTINGENCIES
Nuclear Insurance
The Palo Verde participants have insurance for public liability payments
resulting from nuclear energy hazards to the full limit of liability under
federal law. This potential liability is covered by primary liability
insurance provided by commercial insurance carriers in the amount of $200
million and the balance by an industrywide retrospective assessment program.
The maximum assessment per reactor under the retrospective rating program for
each nuclear incident is approximately $79 million, subject to an annual limit
of $10 million per incident. Based upon the Company's 29.1% interest in the
three Palo Verde units, the Company's maximum potential assessment per
incident is approximately $69 million, with an annual payment limitation of
$8.73 million. The insureds under this liability insurance include the Palo
Verde participants and "any other person or organization with respect to his
legal responsibility for damage caused by the nuclear energy hazard."
The Palo Verde participants maintain "all risk" (including nuclear
hazards) insurance for property damage to, and decontamination of, property at
Palo Verde in the aggregate amount of $2.75 billion, a substantial portion of
which must first be applied to stabilization and decontamination. The Company
has also secured insurance against portions of any increased cost of
generation or purchased power and business interruption resulting from a
sudden and unforeseen outage of any of the three units. The insurance coverage
discussed in this and the previous paragraph is subject to certain policy
conditions and exclusions.
El Paso Electric Company Bankruptcy
The other joint owners in the Palo Verde and Four Corners facilities (see
Note 6) include El Paso Electric Company, which currently is operating under
Chapter 11 of the Bankruptcy Code. A plan whereby EPEC would become a wholly-
owned subsidiary of Central and South West Corporation would resolve certain
issues to which the Company could be exposed by the bankruptcy, including EPEC
allegations regarding the 1989-90 Palo Verde outages. The plan has been
confirmed by the bankruptcy court, but cannot become fully effective until
several additional or related approvals are obtained. If they are not
obtained, the plan could be withdrawn or terminate, thereby reintroducing the
Company's exposures.
Palo Verde Tube Cracks
Tube cracking in the Palo Verde steam generators adversely affected
operations in 1993, and will continue to do so in 1994 and probably into 1995,
because of the cost of replacement power and maintenance expense associated
with unit outages and corrective actions required to deal with the issue.
The operation of Palo Verde Unit 2 has been particularly affected by this
issue. The Company has encountered axial tube cracking in the upper regions of
the two steam generators in Unit 2. This form of tube degradation is uncommon
in the industry and, in March 1993, led to a tube rupture and an outage of the
unit that extended to September 1993, during which the unit was refueled. Unit
2 is currently completing a mid-cycle inspection outage which revealed further
tube degradation. Unit 2 will have another mid-cycle inspection outage later
in 1994.
The steam generators of Units 1 and 3 were inspected late in 1993, but did
not show signs of axial cracking in their upper regions. All three units have,
however, experienced cracking in the bottom of the steam generators of the
types which are common in the industry.
Although its analysis is not yet completed, the Company believes that the
axial cracking in Unit 2 is due to deposits on the tubes and to the relatively
high temperatures at which all three units are now designed to
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
operate. The
Company also believes that it can retard further tube degradation to
acceptable levels by remedial actions which include chemically cleaning the
generators and performing analyses and adjustments that will allow the units
to be operated at lower temperatures without appreciably reducing their
output. The temperature analyses should be concluded within the next several
months. In the meantime, the lower temperatures will be achieved by operating
the units at less than full power (86%).
Chemical cleaning was performed during Unit 2's current mid-cycle outage,
and will be performed in the next refueling outage of Unit 3 (which will begin
shortly) and of Unit 1 (which is scheduled for March 1995). The Company has
concluded that Unit 1 can be safely operated until the 1995 outage and has
submitted its supporting analysis to the NRC, but a mid-cycle inspection later
in 1994 is possible.
As a result of these corrective actions, all three units should be
returned to full power by mid-1995, and one or more of the units could be
returned to full power during 1994. So long as the three units are involved in
mid-cycle outages and are operated at 86%, the Company will incur additional
fuel and purchased power costs averaging approximately $2 million per month
(before income taxes).
Because of schedule changes associated with the tube issues and other
circumstances, it now appears that all three units will be down for refueling
outages at various times during 1995.
When significant cracks are detected during any outage, the affected tubes
are taken out of service by plugging. That has occurred in a number of tubes
in Unit 2, which is by far the most affected by cracking and plugging. The
Company expects that this will slow considerably because of the foregoing
remedial actions and that, while it may ultimately reach some limit on
plugging, it can operate the present steam generators over a number of years.
Litigation
The Company is a party to various claims, legal actions, and complaints
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect
on the operations or financial position of the Company.
Construction Program
Expenditures in 1994 for the Company's continuing construction program
have been estimated at $279 million, excluding capitalized property taxes and
capitalized interest.
Fuel and Purchased Power Commitments
The Company is a party to various fuel and purchased power contracts with
terms expiring from 1994 through 2020 that include required purchase
provisions. The Company estimates its contract requirements during 1994 to be
approximately $136 million. However, this amount may vary significantly
pursuant to certain provisions in such contracts which permit the Company to
decrease its required purchases under certain circumstances.
11. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Other taxes charged to operations during each of the three years in the
period ended December 31, 1993 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1992 1991
------------ ------------ ------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Property................................................... $ 123,659 $ 118,080 $ 120,900
Sales...................................................... 84,901 83,185 80,815
Other...................................................... 12,814 14,705 12,790
------------ ------------ ------------
Total other taxes........................................ $ 221,374 $ 215,970 $ 214,505
============= ============ ============
</TABLE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
ELECTRIC
OPERATING OPERATING NET EARNINGS FOR
QUARTER(a) REVENUES INCOME INCOME COMMON STOCK
- ---------------- ------------ ------------ ------------ ----------------
(THOUSANDS OF DOLLARS)
1993
First $371,303 $ 79,441 $ 47,166 $ 39,277
Second 407,375 92,264 61,364 53,716
Third 524,483 132,639 102,911 95,617
Fourth 383,129 68,144 38,945 30,936
1992
First $344,947 $ 70,867 $ 30,911 $ 22,587
Second 409,012 101,222 62,773 54,680
Third 516,960 138,947 108,158 100,048
Fourth 398,760 81,222 44,963 37,038
(a) The Company's operations are subject to seasonal fluctuations with
variations occurring in energy usage by customers from season to
season and from month to month within a season, primarily as a result
of weather conditions. For this and other reasons, the results of
operations for interim periods are not necessarily indicative of the
results to be expected for the full year.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates that the carrying amounts of its cash equivalents
and commercial paper are reasonable estimates of their fair values at December
31, 1993 and 1992 due to their short maturities. The December 31, 1993 and
1992 fair values of debt and equity investments, determined by using quoted
market values or by discounting cash flows at rates equal to its cost of
capital, approximate their carrying amounts.
On December 31, 1993 the carrying amount of long-term debt liabilities
(excluding $30 million of capital lease obligations) was $2.098 billion and
its estimated fair value was approximately $2.257 billion. On December 31,
1992 the carrying amount of long-term debt (excluding $32 million of capital
lease obligations) was $2.115 billion and its estimated fair value was
approximately $2.226 billion. The fair value estimates were determined by
independent sources using quoted market rates where available. Where market
prices were not available, the fair values were estimated by discounting
future cash flows using rates available for debt of similar terms and
remaining maturities. The carrying amounts of long-term debt bearing variable
interest rates approximate their fair values at December 31, 1993 and 1992,
respectively.
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993(a)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT OTHER CHANGES --
BEGINNING ADDITIONS ADD (DEDUCT) -- BALANCE AT
CLASSIFICATION OF PERIOD AT COST RETIREMENTS DESCRIBE END OF PERIOD
-------------- -------------- ------------ --------------- -------------------- -----------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Utility Plant:
Electric Plant In Service
Intangible.............. $ 110,831 $ 7,013 $ 6,743 $ 62 $ 111,163
Steam Production........ 1,026,924 8,261 1,307 (174) 1,033,704
Nuclear Production...... 2,305,746 17,290 10,447 1,818 2,314,407
Other Production........ 137,376 6,499 916 405 143,364
Transmission............ 703,900 3,865 3,703 (12) 704,050
Distribution............ 1,530,421 131,766 23,905 (2,890)(b) 1,635,392
General................. 347,735 14,274 6,613 (604) 354,792
-------------- ------------ ------------- -------------- ----------------
Total Electric Plant
In Service.......... 6,162,933 188,968 53,634 (1,395) 6,296,872
-------------- ------------ ------------- -------------- ----------------
Nuclear Fuel In Reactor... 137,802 31,623 40,538 (182) 128,705
-------------- ------------ ------------- -------------- ----------------
Nuclear Fuel In Stock..... 67 31,556 -- (31,623)(c) --
-------------- ------------ ------------- -------------- ----------------
Construction Work In
Progress:
Nuclear Fuel In Progress 27,582 30,913 -- (31,556)(d) 26,939
Other Work In Progress.. 134,586 229,385 -- (193,354)(e) 170,617
-------------- ------------ ------------- -------------- -----------------
Total Construction
Work in Progress.... 162,168 260,298 -- (224,910) 197,556
-------------- ------------ ------------- -------------- -----------------
Plant Held For Future Use. 34,526 2,682 -- (196) 37,012
-------------- ------------ ------------- -------------- -----------------
Total Utility Plant......... $ 6,497,496 $ 515,127 $ 94,172 $ (258,306) $ 6,660,145
============== ============ ============= ============== =================
Non-Utility Plant........... $ 12,915 $ 2,227 $ -- $ (2,209) $ 12,933
============== ============ ============= ============== =================
- ----------
(a) Depreciation is provided on a straight-line basis at rates authorized by the ACC; for 1993
those rates ranged from 0.84% to 15% which resulted in a composite rate of 3.37%.
(b) Includes the sale of certain streetlight and distribution facilities.
(c) To record the transfer to "Nuclear Fuel In Reactor."
(d) To record the transfer to "Nuclear Fuel In Stock" of completed nuclear fuel assemblies.
(e) Primarily transfers to "Plant In Service" and "Plant Held for Future Use."
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1992(a)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT OTHER CHANGES --
BEGINNING ADDITIONS ADD (DEDUCT) -- BALANCE AT
CLASSIFICATION OF PERIOD AT COST RETIREMENTS DESCRIBE END OF PERIOD
-------------- -------------- ------------ --------------- -------------------- -----------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Utility Plant:
Electric Plant In Service
Intangible.............. $ 107,198 $ 6,806 $ 3,492 $ 319 $ 110,831
Steam Production........ 1,018,712 12,317 4,105 -- 1,026,924
Nuclear Production...... 2,253,577 62,260 10,091 -- 2,305,746
Other Production........ 127,950 4,333 1,293 6,386 (b) 137,376
Transmission............ 695,790 11,804 3,564 (130) 703,900
Distribution............ 1,446,897 103,673 19,134 (1,015)(c) 1,530,421
General................. 355,711 15,951 23,879 (48) 347,735
-------------- ------------ -------------- -------------- ----------------
Total Electric Plant
In Service.......... 6,005,835 217,144 65,558 5,512 6,162,933
-------------- ------------ -------------- -------------- ----------------
Nuclear Fuel In Reactor... 160,204 45,332 67,734 -- 137,802
-------------- ------------ -------------- -------------- ----------------
Nuclear Fuel In Stock..... 14,663 30,736 -- (45,332)(d) 67
-------------- ------------ -------------- -------------- ----------------
Construction Work In
Progress:
Nuclear Fuel In Progress 30,364 27,954 -- (30,736)(e) 27,582
Other Work In Progress.. 167,279 198,447 -- (231,140)(f) 134,586
-------------- ------------ -------------- -------------- ----------------
Total Construction
Work in Progress.... 197,643 226,401 -- (261,876) 162,168
-------------- ------------ -------------- -------------- ----------------
Plant Held For Future Use. 31,547 9,553 -- (6,574)(b) 34,526
-------------- ------------ -------------- -------------- ----------------
Total Utility Plant......... $ 6,409,892 $ 529,166 $ 133,292 $ (308,270) $ 6,497,496
============== ============ ============== ============== ================
Non-Utility Plant........... $ 10,895 $ 2,193 $ -- $ (173) $ 12,915
============== ============ ============== ============== ================
- ----------
(a) Depreciation is provided on a straight-line basis at rates authorized by the ACC; for 1992
those rates ranged from 0.84% to 15% which resulted in a composite rate of 3.37%.
(b) Primarily the transfer of a gas turbine to "Plant In Service" from "Plant Held for Future
Use."
(c) Includes the sale of certain streetlight facilities.
(d) To record the transfer to "Nuclear Fuel In Reactor."
(e) To record the transfer to "Nuclear Fuel In Stock" of completed nuclear fuel assemblies.
(f) Primarily transfers to "Plant In Service" and "Plant Held for Future Use."
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1991(a)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT OTHER CHANGES --
BEGINNING ADDITIONS ADD (DEDUCT) -- BALANCE AT
CLASSIFICATION OF PERIOD AT COST RETIREMENTS DESCRIBE END OF PERIOD
-------------- -------------- ------------ --------------- -------------------- -----------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Utility Plant:
Electric Plant In Service:
Intangible.............. $ 102,597 $ 8,468 $ 6,850 $ 2,983 $ 107,198
Steam Production........ 1,339,817 16,426 3,036 (334,495)(b) 1,018,712
Nuclear Production...... 2,393,222 4,670 2,336 (141,979)(c) 2,253,577
Other Production........ 126,781 1,507 338 -- 127,950
Transmission............ 682,159 19,133 2,757 (2,745) 695,790
Distribution............ 1,374,690 86,809 13,911 (691) 1,446,897
General................. 349,941 12,926 6,448 (708) 355,711
------------- ------------ ------------- -------------- ----------------
Total Electric Plant
In Service.......... 6,369,207 149,939 35,676 (477,635) 6,005,835
------------- ------------ ------------- -------------- ----------------
Nuclear Fuel In Reactor... 169,679 15,741 23,946 (1,270) 160,204
------------- ------------ ------------- -------------- ----------------
Nuclear Fuel In Stock..... -- 30,404 -- (15,741)(d) 14,663
------------- ------------ ------------- -------------- ----------------
Construction Work In
Progress:
Nuclear Fuel In Process. 46,577 26,634 -- (42,847)(e) 30,364
Other Work In Progress.. 162,689 161,253 -- (156,663)(f) 167,279
------------- ------------ ------------- -------------- ----------------
Total Construction
Work in Progress.... 209,266 187,887 -- (199,510) 197,643
------------- ------------ ------------- -------------- ----------------
Plant Held For Future Use. 48,536 4,044 11 (21,022)(g) 31,547
------------- ------------ ------------- -------------- ----------------
Total Utility Plant......... $ 6,796,688 $ 388,015 $ 59,633 $ (715,178) $ 6,409,892
------------- ------------ ------------- -------------- ----------------
Non-Utility Plant........... $ 10,142 $ 373 $ -- $ 380 $ 10,895
============= ============ ============= ============== ================
- ----------
(a) Depreciation is provided on a straight-line basis at rates authorized by the ACC; for 1991
those rates ranged from 0.84% to 15.00% which resulted in a composited rate of 3.37%.
(b) Primarily the sale of Cholla Unit 4 and related common facilities to PacifiCorp. (See Note
2)
(c) To record the Palo Verde prudence disallowance. (See Note 2)
(d) To record the transfer to "Nuclear Fuel In Reactor."
(e) Primarily the transfer to "Nuclear Fuel In Stock" of completed nuclear fuel assemblies.
(f) Primarily transfers to "Plant In Service," and "Plant Held For Future Use."
(g) Primarily the transfer of Saguaro Steam Plant to "Plant In Service" and the write-off of
costs associated with a proposed generating unit.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to Other Changes -- Balance at
Beginning Cost and Add (Deduct) -- End of
Description Of Period Expense Retirements Describe(a) Period
----------- -------------- --------------- --------------- -------------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Accumulated Depreciation and
Amortization of Utility
Plant:
Electric Plant in
Service:
Steam Production...... $ 481,873 $ 35,281 $ 1,307 $ (88) $ 515,759
Nuclear Production.... 500,117 77,112(b) 10,447 (75,000)(c) 491,782
Other Production...... 85,660 4,389 916 2,896 92,029
Transmission.......... 254,434 20,139 3,703 (150) 270,720
Distribution.......... 355,006 47,764 23,905 (2,343) 376,522
General............... 206,188 37,772 13,356 (428) 230,176
-------------- ------------ ------------- -------------- --------------
Total Electric Plant
in Service........ 1,883,278 222,457 53,634 (75,113) 1,976,988
-------------- ------------ ------------- -------------- --------------
Nuclear Fuel in Reactor. 76,266 32,024 40,538 -- 67,752
-------------- ------------ ------------- -------------- --------------
Plant Held For Future
Use................... 14,155 -- -- -- 14,155
-------------- ------------ ------------- -------------- --------------
Total Utility Plant....... $ 1,973,699 $ 254,481 $ 94,172 $ (75,113) $ 2,058,895
============== ============ ============= ============== ==============
Accumulated Depreciation -- --
of Non-Utility Property. $ 314 $ 113 $ $ $ 427
============== ============ ============= ============== ==============
- ----------
(a) Includes removal and salvage-net.
(b) Includes decommissioning accrual and decommissioning fund income.
(c) Primarily the restoration of the carrying value of Palo Verde Unit 3. See "Rate Case
Settlement" in Note 2 of Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1992
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to Other Changes -- Balance at
Beginning Cost and Add (Deduct) -- End of
Description Of Period Expense Retirements Describe(a) Period
----------- -------------- --------------- --------------- -------------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Accumulated Depreciation and
Amortization of Utility
Plant:
Electric Plant in
Service:
Steam Production...... $ 451,324 $ 35,089 $ 4,105 $ (435) $ 481,873
Nuclear Production.... 504,269 74,042(b) 10,091 (68,103)(c) 500,117
Other Production...... 78,072 4,131 1,293 4,750 (d) 85,660
Transmission.......... 237,877 19,968 3,564 153 254,434
Distribution.......... 329,950 45,162 19,134 (972) 355,006
General............... 195,455 37,851 27,371 253 206,188
-------------- ------------ -------------- -------------- --------------
Total Electric Plant
in Service........ 1,796,947 216,243 65,558 (64,354) 1,883,278
-------------- ------------ -------------- -------------- --------------
Nuclear Fuel in Reactor. 107,395 36,605 67,734 -- 76,266
-------------- ------------ -------------- -------------- --------------
Plant Held For Future
Use................... 18,426 -- -- (4,271)(d) 14,155
-------------- ------------ -------------- -------------- --------------
Total Utility Plant....... $ 1,922,768 $ 252,848 $ 133,292 $ (68,625) $ 1,973,699
============== ============ ============== ============== ==============
Accumulated Depreciation
of Non-Utility Property. $ 235 $ 80 $ -- $ (1) $ 314
============== ============ ============== ============== ==============
- ----------
(a) Includes removal and salvage-net.
(b) Includes decommissioning accrual and decommissioning fund income.
(c) Primarily the restoration of the carrying value of Palo Verde Unit 3. See "Rate Case
Settlement" in Note 2 of Notes to Financial Statements.
(d) Primarily the Transfer of a Gas Turbine to "Plant in Service" from "Plant Held for Future
Use."
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE VI -- ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1991
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to Other Changes -- Balance at
Beginning Cost and Add (Deduct) -- End of
Description Of Period Expense Retirements Describe(a) Period
----------- -------------- --------------- --------------- -------------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Accumulated Depreciation and
Amortization of Utility
Plant:
Electric Plant in
Service:
Steam Production...... $ 512,915 $ 40,369 $ 3,036 $ (98,924)(b) $ 451,324
Nuclear Production.... 276,784 75,673(c) 2,336 154,148 (d) 504,269
Other Production...... 74,453 4,000 338 (43) 78,072
Transmission.......... 217,765 19,696 2,757 3,173 237,877
Distribution.......... 300,399 43,126 13,911 336 329,950
General............... 169,853 37,950 13,298 950 195,455
-------------- ------------ ------------- -------------- --------------
Total Electric Plant
in Service........ 1,552,169 220,814 35,676 59,640 1,796,947
-------------- ------------ ------------- -------------- --------------
Nuclear Fuel in Reactor. 87,699 43,642 23,946 -- 107,395
-------------- ------------ ------------- -------------- --------------
Plant Held For Future
Use................... 30,359 -- 11 (11,922)(e) 18,426
-------------- ------------ ------------- -------------- --------------
Total Utility Plant....... $ 1,670,227 $ 264,456 $ 59,633 $ 47,718 $ 1,922,768
============== ============ ============= ============== ==============
Accumulated Depreciation
of Non-Utility Property. $ 177 $ 58 $ -- $ -- $ 235
============== ============ ============= ============== ==============
- ----------
(a) Includes removal and salvage -- net.
(b) Includes the sale of Cholla Unit 4 and the transfer of Saguaro Steam Plant from "Plant Held
for Future Use" to "Plant in Service."
(c) Includes decommissioning accrual and decommissioning fund income.
(d) Primarily the adjustment for ACC deemed excess capacity. See "Rate Case Settlement" in Note
2 of Notes to Financial Statements.
(e) To transfer Saguaro Steam Plant to "Plant in Service."
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
SCHEDULE IX -- SHORT-TERM BORROWINGS
<CAPTION>
Column A Column B Column C (b) Column D Column E (a) Column F (b)
Weighted Maximum Average Weighted
Category of average amount amount average
aggregate Balance interest rate outstanding outstanding interest rate
short-term at end of at end of during the during the during the
borrowings period period period period period
----------- ------------ ---------------- --------------- ---------------- ----------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Bank Borrowings $ -- -- % $130,000 $63,616 3.97%
Commercial Paper 148,000 3.48 148,000 23,049 3.36
YEAR ENDED DECEMBER 31, 1992
Bank Borrowings $130,000 4.28% $175,000 $ 9,372 5.25%
Commercial Paper 65,000 3.73 70,000 12,682 3.75
YEAR ENDED DECEMBER 31, 1991
Bank Borrowings $ -- -- % $100,000 $26,973 7.44%
Commercial Paper -- -- 70,000 24,077 6.74
- ----------
(a) Average daily balance during the period.
(b) Total applicable interest in the period divided by average daily balance.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT
Reference is hereby made to "Election of Directors" in the Company's Proxy
Statement relating to the annual meeting of shareholders to be held on April
19, 1994 (the "1994 Proxy Statement") and to the Supplemental Item --
"Executive Officers of the Registrant" in Part I of this report. During 1993,
Mr. Woods, a Director of the Company, transferred shares of the Company's
$2.625 Series C Preferred Stock directly owned by him to a trust under which
he is a beneficiary and a trustee. This transfer technically required Mr.
Woods to file with the SEC an amended securities ownership report (reflecting
his indirect, rather than direct, ownership of the shares) and a new ownership
report in his capacity as trustee under the trust. These reports were filed,
but not within the required timeframe.
ITEM 11. EXECUTIVE COMPENSATION
Reference is hereby made to the fourth paragraph under the heading "The
Board and its Committees," and to "Executive Compensation," "Report of the
Human Resources Committee," and "Performance Graphs" in the 1994 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is hereby made to "Principal Holders of Voting Securities" and
"Ownership of Pinnacle West Securities by Management" in the 1994 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is hereby made to the last paragraph under the heading "The
Board and its Committees" in the 1994 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
See the Index to Financial Statements and Financial Statement Schedules in
Part II, Item 8 on page 19.
<TABLE>
EXHIBITS FILED
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.1 -- Agreement, dated March 21, 1994, relating to the filing of instruments defining the
rights of holders of long-term debt not in excess of 10% of the Company's total assets
4.2 -- Fiftieth Supplemental Indenture
10.1 -- Cure and Assumption Agreement dated as of November 19, 1993 among the Company, Salt
River Project Agricultural Improvement and Power District, Southern California Edison
Company, Public Service Company of New Mexico, Southern California Public Power
Authority, Department of Water and Power of the City of Los Angeles, and El Paso
Electric Company, and certain schedules thereto
10.2a -- Second Amendment to the Arizona Public Service Company Directors' Deferred Compensation
Plan, effective as of January 1, 1993
10.3a -- Third Amendment to the Arizona Public Service Company Deferred Compensation Plan,
effective as of January 1, 1993
10.4ac -- Revised form of Key Executive Employment and Severance Agreement between the Company and
certain key employees of the Company
10.5ac -- Revised form of Key Executive Employment and Severance Agreement between the Company and
certain executive officers of the Company
10.6a -- Amendment to Pinnacle West Capital Corporation, Arizona Public Service Company, SunCor
Development Company, and El Dorado Investment Company Deferred Compensation Plan,
effective as of December 4, 1992
10.7a -- Pinnacle West Capital Corporation, Arizona Public Service Company, SunCor Development
Company, and El Dorado Investment Company Supplemental Executive Benefit Plan as amended
and restated on December 31, 1992 effective as of January 1, 1992
10.8a -- Arizona Public Service Company Supplemental Excess Benefit Retirement Plan and the
First, Second, and Third Amendments thereto
10.9a -- 1994 Key Employees Variable Pay Plan
10.10a -- 1994 Officers Variable Pay Plan
23.1 -- Consent of Deloitte & Touche
In addition to those Exhibits shown above, the Company hereby incorporates
the following Exhibits pursuant to Exchange Act Rule 12b-32 and Regulation
Section 201.24 by reference to the filings set forth below:
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION ORIGINALLY FILED AS EXHIBIT: FILE NO. DATE EFFECTIVE
- ----------- ----------- ---------------------------- -------- --------------
<S> <C> <C> <C> <C>
3.1 Bylaws, amended as of November 19, 1991 3.1 to November 19, 1991 Form 8-K 1-4473 1-28-92
Report
3.2 Articles of Incorporation, restated as of 4.2 to Form S-3 Registration Nos. 1-4473 9-29-93
May 25, 1988 33-33910 and 33-55248 by means of
September 24, 1993 Form 8-K Report
3.3 Certificates pursuant to Sections 4.3 to Form S-3 Registration Nos. 1-4473 9-29-93
10-152.01 and 10-016, Arizona Revised 33-33910 and 33-55248 by means of
Statutes, establishing Series A through V September 24, 1993 Form 8-K Report
of the Company's Serial Preferred Stock
3.4 Certificate pursuant to Section 10-016, 4.4 to Form S-3 Registration Nos. 1-4473 9-29-93
Arizona Revised Statutes, establishing 33-33910 and 33-55248 by means of
Series W of the Company's Serial Preferred September 24, 1993 Form 8-K Report
Stock
4.3 Mortgage and Deed of Trust Relating to the 4.1 to September 1992 Form 10-Q Report 1-4473 11-9-92
Company's First Mortgage Bonds, together
with forty-eight indentures supplemental
thereto
4.4 Forty-ninth Supplemental Indenture 4.1 to 1992 Form 10-K Report 1-4473 3-30-93
4.5 Fifty-first Supplemental Indenture 4.1 to August 1, 1993 Form 8-K Report 1-4473 9-27-93
4.6 Fifty-second Supplemental Indenture 4.1 to September 30, 1993 Form 10-Q 1-4473 11-15-93
Report
4.7 Fifty-third Supplemental Indenture 4.5 to Registration Statement No. 1-4473 3-1-94
33-61228 by means of February 23, 1994
Form 8-K Report
10.11 Two separate Decommissioning Trust 10.2 to September 1991 Form 10-Q 1-4473 11-14-91
Agreements (relating to PVNGS Units 1 and Report
3, respectively), each dated July 1, 1991,
between the Company and Mellon Bank, N.A.,
as Decommissioning Trustee
10.12 Amended and Restated Decommissioning Trust 10.1 to Pinnacle West 1991 Form 10-K 1-8962 3-26-92
Agreement (PVNGS Unit 2) dated as of Report
January 31, 1992, among the Company,
Mellon Bank, N.A., as Decommissioning
Trustee, and the First National Bank of
Boston, as Owner Trustee under two
separate Trust Agreements, each with a
separate Equity Participant, and as Lessor
under two separate Facility Leases, each
relating to an undivided interest in PVNGS
Unit 2
10.13 First Amendment to Amended and Restated 10.2 to 1992 Form 10-K Report 1-4473 3-30-93
Decommissioning Trust Agreement (PVNGS
Unit 2), dated as of November 1, 1992
10.14 Asset Purchase and Power Exchange 10.1 to June 1991 Form 10-Q Report 1-4473 8-8-91
Agreement dated September 21, 1990 between
the Company and PacifiCorp, as amended as
of October 11, 1990 and as of July 18,
1991
10.15 Long-Term Power Transactions Agreement 10.2 to June 1991 Form 10-Q Report 1-4473 8-8-91
dated September 21, 1990 between the
Company and PacifiCorp, as amended as of
October 11, 1990, and as of July 8, 1991
10.16 Uranium Enrichment Services Contract, 10.33 to Pinnacle West's Form S-14 2-96386 3-13-85
dated November 15, 1984 with DOE, ANPP Registration Statement
10.17 Supplemental Agreements, Modification 10.2 to 1986 Form 10-K Report 1-4473 3-9-87
Numbers 1, 2, and 3, dated September 30,
1985, May 27, 1986, and April 7, 1986,
respectively, to Uranium Enrichment
Services Contract, dated November 15, 1984
with DOE, ANPP
10.18 Supplemental Agreements, Modification 19.1 to March 1987 Form 10-Q Report 1-4473 5-8-87
Numbers 4, 5, and 6, dated September 29,
1986, August 8, 1986, and February 20,
1987, respectively, to Uranium Enrichment
Services Contract dated November 15, 1984
with DOE, ANPP
10.19 Supplemental Agreements, Modification 10.3 to Pinnacle West Capital 1-8962 3-31-89
Numbers 7 and 8, dated September 29, 1988 Corporation 1988 Form 10-K Report
and September 22, 1988, respectively, to
Uranium Enrichment Services Contract dated
November 15, 1984 with DOE, ANPP
10.20 Supplemental Agreements, Modification 10.1 to March 1990 Form 10-Q Report 1-4473 5-9-90
Numbers 9, 10, and 11 dated April 12,
1989, April 16, 1990 and February 20,
1990, respectively, to Uranium Enrichment
Services Contract dated November 15, 1984
with DOE, ANPP
10.21 Supplemental Agreement, Modification No. 10.1 to September 1991 Form 10-Q 1-4473 11-14-91
12, dated August 16, 1991 to Uranium Report
Enrichment Services Contract, dated
November 15, 1984 with DOE, ANPP
10.22 Letter Supplement dated December 5, 1985 19.2 to March 1987 Form 10-Q Report 1-4473 5-8-87
to Uranium Enrichment Services Contract
dated November 15, 1984 with DOE, ANPP
10.23 Contract, dated July 21, 1984, with DOE 10.31 to Pinnacle West's Form S-14 2-96386 3-13-85
providing for the disposal of nuclear fuel Registration Statement
and/or high-level radioactive waste, ANPP
10.24 Indenture of Lease with Navajo Tribe of 5.01 to Form S-7 Registration 2-59644 9-1-77
Indians, Four Corners Plant Statement
10.25 Supplemental and Additional Indenture of 5.02 to Form S-7 Registration 2-59644 9-1-77
Lease, including amendments and Statement
supplements to original lease with Navajo
Tribe of Indians, Four Corners Plant
10.26 Amendment and Supplement No. 1 to 10.36 to Registration Statement on 1-8962 7-25-85
Supplemental and Additional Indenture of Form 8-B of Pinnacle West
Lease, Four Corners, dated April 25, 1985
10.27 Application and Grant of multi-party 5.04 to Form S-7 Registration 2-59644 9-1-77
rights-of-way and easements, Four Corners Statement
Plant Site
10.28 Application and Amendment No. 1 to Grant 10.37 to Registration Statement on 1-8962 7-25-85
of multi-party rights-of-way and Form 8-B of Pinnacle West
easements, Four Corners Power Plant Site,
dated April 25, 1985
10.29 Application and Grant of Arizona Public 5.05 to Form S-7 Registration 2-59644 9-1-77
Service Company rights-of-way and Statement
easements, Four Corners Plant Site
10.30 Application and Amendment No. 1 to Grant 10.38 to Registration Statement on 1-8962 7-25-85
of Arizona Public Service Company rights- Form 8-B of Pinnacle West
of-way and easements, Four Corners Power
Plant Site, dated April 25, 1985
10.31 Indenture of Lease, Navajo Units 1, 2, and 5(g) to Form S-7 Registration 2-36505 3-23-70
3 Statement
10.32 Application and Grant of rights-of-way and 5(h) to Form S-7 Registration 2-36505 3-23-70
easements, Navajo Plant Statement
10.33 Water Service Contract Assignment with the 5(l) to Form S-7 Registration 2-39442 3-16-71
United States Department of Interior, Statement
Bureau of Reclamation, Navajo Plant
10.34 Arizona Nuclear Power Project 10.1 to 1988 Form 10-K Report 1-4473 3-8-89
Participation Agreement, dated August 23,
1973, among the Company, Salt River
Project Agricultural Improvement and Power
District, Southern California Edison
Company, Public Service Company of New
Mexico, El Paso Electric Company, Southern
California Public Power Authority, and
Department of Water and Power of the City
of Los Angeles, and amendments 1-12
thereto
10.35 Amendment No. 13 dated as of April 22, 10.1 to March 1991 Form 10-Q Report 1-4473 5-15-91
1991, to Arizona Nuclear Power Project
Participation Agreement, dated August 23,
1973, among the Company, Salt River
Project Agricultural Improvement and Power
District, Southern California Edison
Company, Public Service Company of New
Mexico, El Paso Electric Company, Southern
California Public Power Authority, and
Department of Water and Power of the City
of Los Angeles
10.36b Facility Lease, dated as of August 1, 4.3 to Form S-3 Registration Statement 33-9480 10-24-86
1986, between The First National Bank of
Boston, in its capacity as Owner Trustee,
as Lessor, and the Company, as Lessee
10.37b Amendment No. 1, dated as of November 1, 10.5 to September 1986 Form 10-Q 1-4473 12-4-86
1986, to Facility Lease, dated as of Report by means of Amendment No. 1 on
August 1, 1986, between The First National December 3, 1986 Form 8
Bank of Boston, in its capacity as Owner
Trustee, as Lessor, and the Company, as
Lessee
10.38 Amendment No. 2 dated as of June 1, 1987 10.3 to 1988 Form 10-K Report 1-4473 3-8-89
to Facility Lease dated as of August 1,
1986 between The First National Bank of
Boston, as Lessor, and APS, as Lessee
10.39b Amendment No. 3, dated as of March 17, 10.3 to 1992 Form 10-K Report 1-4473 3-30-93
1993, to Facility Lease, dated as of
August 1, 1986, between The First National
Bank of Boston, as Lessor, and the
Company, as Lessee
10.40 Facility Lease, dated as of December 15, 10.1 to November 18, 1986 Form 8-K 1-4473 1-20-87
1986, between The First National Bank of Report
Boston, in its capacity as Owner Trustee,
as Lessor, and the Company, as Lessee
10.41 Amendment No. 1, dated as of August 1, 4.13 to Form S-3 Registration 1-4473 8-24-87
1987, to Facility Lease, dated as of Statement No. 33-9480 by means of
December 15, 1986, between The First August 1, 1987 Form 8-K Report
National Bank of Boston, as Lessor, and
the Company, as Lessee
10.42 Amendment No. 2, dated as of March 17, 10.4 to 1992 Form 10-K Report 1-4473 3-30-93
1993, to Facility Lease, dated as of
December 15, 1986, between The First
National Bank of Boston, as Lessor, and
the Company, as Lessee
10.43a Directors' Deferred Compensation Plan, as 10.1 to June 1986 Form 10-Q Report 1-4473 8-13-86
restated, effective January 1, 1986
10.44a Deferred Compensation Plan, as restated, 10.4 to 1988 Form 10-K Report 1-4473 3-8-89
effective January 1, 1984, and the second
and third amendments thereto, dated
December 22, 1986, and December 23, 1987,
respectively
10.45a Agreement for Utility Consulting Services, 10.6 to 1988 Form 10-K Report 1-4473 3-8-89
dated March 1, 1985, between the Company
and Thomas G. Woods, Jr., and Amendment
No. 1 thereto, dated January 6, 1986
10.46a Letter Agreement, dated April 3, 1978, 10.7 to 1988 Form 10-K Report 1-4473 3-8-89
between the Company and O. Mark De
Michele, regarding certain retirement
benefits granted to Mr. De Michele
10.47a Deferred Compensation Agreement dated May 10.2 to 1989 Form 10-K Report 1-4473 3-8-90
8, 1989, between the Company and William
Conway
10.48ac Key Executive Employment and Severance 10.3 to 1989 Form 10-K Report 1-4473 3-8-90
Agreement between the Company and certain
executive officers of the Company
10.49ac Key Executive Employment and Severance 10.4 to 1989 Form 10-K Report 1-4473 3-8-90
Agreement between the Company and certain
managers of the Company
10.50a Arizona Public Service Company Performance 10.5 to 1989 Form 10-K Report 1-4473 3-8-90
Review Severance Pay Plan, effective
January 1, 1990
10.51a Arizona Public Service Company Severance 10.1 to September 30, 1993 Form 10-Q 1-4473 11-15-93
Plan Report
10.52a Pinnacle West Capital Corporation Stock 10.1 to 1992 Form 10-K Report 1-4473 3-30-93
Option and Incentive Plan
10.53a Pinnacle West Capital Corporation, Arizona 10.1 to 1991 Form 10-K Report 1-4473 3-19-92
Public Service Company, SunCor Development
Company, and El Dorado Investment Company
Deferred Compensation Plan, effective
January 1, 1992
10.54 Agreement No. 13904 (Option and Purchase 10.3 to 1991 Form 10-K Report 1-4473 3-19-92
of Effluent) with Cities of Phoenix,
Glendale, Mesa, Scottsdale, Tempe, Town of
Youngtown, and Salt River Project
Agricultural Improvement and Power
District, dated April 23, 1973
10.55 Agreement for the Sale and Purchase of 10.4 to 1991 Form 10-K Report 1-4473 3-19-92
Wastewater Effluent with City of Tolleson
and Salt River Agricultural Improvement
and Power District, dated June 12, 1981,
including Amendment No. 1 dated as of
November 12, 1981 and Amendment No. 2
dated as of June 4, 1986
99.1 Collateral Trust Indenture among PVNGS II 4.2 to 1992 Form 10-K Report 1-4473 3-30-93
Funding Corp., Inc., the Company and
Chemical Bank, as Trustee
99.2 Supplemental Indenture to Collateral Trust 4.3 to 1993 Form 10-K Report 1-4473 3-30-93
Indenture among PVNGS II Funding Corp.,
Inc., the Company and Chemical Bank, as
Trustee
99.3 b Participation Agreement, dated as of 28.1 to September 1992 Form 10-Q 1-4473 11-9-92
August 1, 1986, among PVNGS Funding Corp., Report
Inc., Bank of America National Trust and
Savings Association, The First National
Bank of Boston, in its individual capacity
and as Owner Trustee, Chemical Bank, in
its individual capacity and as Indenture
Trustee, the Company, and the Equity
Participant named therein
99.4 b Amendment No. 1 dated as of November 1, 10.8 to September 1986 Form 10-Q 1-4473 12-4-86
1986, to Participation Agreement, dated as Report by means of Amendment No. 1, on
of August 1, 1986, among PVNGS Funding December 3, 1986 Form 8
Corp., Inc., Bank of America National
Trust and Savings Association, The First
National Bank of Boston, in its individual
capacity and as Owner Trustee, Chemical
Bank, in its individual capacity and as
Indenture Trustee, the Company, and the
Equity Participant named therein
99.5 b Amendment No. 2, dated as of March 17, 28.4 to 1992 Form 10-K Report 1-4473 3-30-93
1993, to Participation Agreement, dated as
of August 1, 1986, among PVNGS Funding
Corp., Inc., PVNGS II Funding Corp., Inc.,
The First National Bank of Boston, in its
individual capacity and as Owner Trustee,
Chemical Bank, in its individual capacity
and as Indenture Trustee, the Company, and
the Equity Participant named therein
99.6 b Trust Indenture, Mortgage, Security 4.5 to Form S-3 Registration Statement 33-9480 10-24-86
Agreement and Assignment of Facility
Lease, dated as of August 1, 1986, between
The First National Bank of Boston, as
Owner Trustee, and Chemical Bank, as
Indenture Trustee
99.7 b Supplemental Indenture No. 1, dated as of 10.6 to September 1986 Form 10-Q 1-4473 12-4-86
November 1, 1986 to Trust Indenture, Report by means of Amendment No. 1 on
Mortgage, Security Agreement and December 3, 1986 Form 8
Assignment of Facility Lease, dated as of
August 1, 1986, between The First National
Bank of Boston, as Owner Trustee, and
Chemical Bank, as Indenture Trustee
99.8 b Supplemental Indenture No. 2 to Trust 4.4 to 1992 Form 10-K Report 1-4473 3-30-93
Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease, dated as
of August 1, 1986, between The First
National Bank of Boston, as Owner Trustee,
and Chemical Bank, as Indenture Trustee
99.9 b Assignment, Assumption and Further 28.3 to Form S-3 Registration 33-9480 10-24-86
Agreement, dated as of August 1, 1986, Statement
between the Company and The First National
Bank of Boston, as Owner Trustee
99.10b Amendment No. 1, dated as of November 1, 10.10 to September 1986 Form 10-Q 1-4473 12-4-86
1986, to Assignment, Assumption and Report by means of Amendment No. 1 on
Further Agreement, dated as of August 1, December 3, 1986 Form 8
1986, between the Company and The First
National Bank of Boston, as Owner Trustee
99.11b Amendment No. 2, dated as of March 17, 28.6 to 1992 Form 10-K Report 1-4473 3-30-93
1993, to Assignment, Assumption and
Further Agreement, dated as of August 1,
1986, between the Company and The First
National Bank of Boston, as Owner Trustee
99.12 Participation Agreement, dated as of 28.2 to September 1992 Form 10-Q 1-4473 11-9-92
December 15, 1986, among PVNGS Funding Report
Corp., Inc., The First National Bank of
Boston, in its individual capacity and as
Owner Trustee, Chemical Bank, in its
individual capacity and as Indenture
Trustee under a Trust Indenture, the
Company, and the Owner Participant named
therein
99.13 Amendment No. 1, dated as of August 1, 28.20 to Form S-3 Registration 1-4473 8-10-87
1987, to Participation Agreement, dated as Statement No. 33-9480 by means of a
of December 15, 1986, among PVNGS Funding November 6, 1986 Form 8-K Report
Corp., Inc. as Funding Corporation, The
First National Bank of Boston, as Owner
Trustee, Chemical Bank, as Indenture
Trustee, the Company, and the Owner
Participant named therein
99.14 Amendment No. 2, dated as of March 17, 28.5 to 1992 Form 10-K Report 1-4473 3-30-93
1993, to Participation Agreement, dated as
of December 15, 1986, among PVNGS Funding
Corp., Inc., PVNGS II Funding Corp., Inc.,
The First National Bank of Boston, in its
individual capacity and as Owner Trustee,
Chemical Bank, in its individual capacity
and as Indenture Trustee, the Company, and
the Owner Participant named therein
99.15 Trust Indenture, Mortgage, Security 10.2 to November 18, 1986 Form 8-K 1-4473 1-20-87
Agreement and Assignment of Facility Report
Lease, dated as of December 15, 1986,
between The First National Bank of Boston,
as Owner Trustee, and Chemical Bank, as
Indenture Trustee
99.16 Supplemental Indenture No. 1, dated as of 4.13 to Form S-3 Registration 1-4473 8-24-87
August 1, 1987, to Trust Indenture, Statement No. 33-9480 by means of
Mortgage, Security Agreement and August 1, 1987 Form 8-K Report
Assignment of Facility Lease, dated as of
December 15, 1986, between The First
National Bank of Boston, as Owner Trustee,
and Chemical Bank, as Indenture Trustee
99.17 Supplemental Indenture No. 2 to Trust 4.5 to 1992 Form 10-K Report 1-4473 3-30-93
Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease, dated as
of December 15, 1986, between The First
National Bank of Boston, as Owner Trustee,
and Chemical Bank, as Indenture Trustee
99.18 Assignment, Assumption and Further 10.5 to November 18, 1986 Form 8-K 1-4473 1-20-87
Agreement, dated as of December 15, 1986, Report
between the Company and The First National
Bank of Boston, as Owner Trustee
99.19 Amendment No. 1, dated as of March 17, 28.7 to 1992 Form 10-K Report 1-4473 3-30-93
1993, to Assignment, Assumption and
Further Agreement, dated as of December
15, 1986, between the Company and The
First National Bank of Boston, as Owner
Trustee
99.20b Refinancing Agreement, as amended, 28.1 to 1992 Form 10-K Report 1-4473 3-30-93
including Exhibits thereto, among the
Equity Participant named therein, as
Equity Participant, PVNGS Funding Corp.,
Inc., as Old Funding Corporation, PVNGS II
Funding Corp., Inc., as Funding Corp.,
Chemical Bank, as Indenture Trustee, The
First National Bank of Boston, as Owner
Trustee, and the Company, as Lessee
99.21 Refinancing Agreement, as amended, 28.2 to 1992 Form 10-K Report 1-4473 3-30-93
including Exhibits thereto, among the
Owner Participant named therein, as Owner
Participant, PVNGS Funding Corp., Inc., as
Old Funding Corporation, PVNGS II Funding
Corp., Inc., as Funding Corp., Chemical
Bank, as Indenture Trustee, The First
National Bank of Boston, as Owner Trustee,
and the Company, as Lessee
99.22b Indemnity Agreement dated as of March 17, 28.3 to 1992 Form 10-K Report 1-4473 3-30-93
1993 by the Company
99.23b Amendment No. 2 dated as of July 18, 1991 28.5 to Form S-3 Registration 1-4473 2-10-93
to Reimbursement Agreement dated as of Statement No. 33-57822
August 1, 1986, between the Company and
Morgan Guaranty Trust Company of New York
99.24 Extension Letter, dated as of August 13, 28.20 to Form S-3 Registration 1-4473 8-10-87
1987, from the signatories of the Statement No. 33-9480 by means of a
Participation Agreement to Chemical Bank November 6, 1986 Form 8-K Report
99.25 Pledge Agreement dated as of January 31, 28.1 to January 21, 1990 Form 8-K 1-4473 2-15-90
1990, between Pinnacle West Capital Report
Corporation as Pledgor and Citibank, N.A.
as Collateral Agent
99.26 Arizona Corporation Commission Order dated 28.1 to 1991 Form 10-K Report 1-4473 3-19-92
December 6, 1991
- ----------
(a) Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) An additional document, substantially identical in all material
respects to this Exhibit, has been entered into, relating to an
additional Equity Participant. Although such additional document may
differ in other respects (such as dollar amounts, percentages, tax
indemnity matters, and dates of execution), there are no material
details in which such document differs from this Exhibit.
(c) Additional agreements, substantially identical in all material
respects to this Exhibit have been entered into with additional
officers and key employees of the Company. Although such additional
documents may differ in other respects (such as dollar amounts and
dates of execution), there are no material details in which such
agreements differ from this Exhibit.
<PAGE>
REPORTS ON FORM 8-K
During the quarter ended December 31, 1993, and the period ended March 29,
1994, the Company filed the following Reports on Form 8-K:
Report filed February 17, 1994, regarding (i) inspections of the steam
generators of the Palo Verde units and related issues, and (ii) the Company's
settlement agreement with a former contract employee.
Report filed March 1, 1994 comprised of exhibits to the Company's
Registration Statement (Registration No. 33-61228) relating to the Company's
offering of $100 million of its First Mortgage Bonds.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ARIZONA PUBLIC SERVICE COMPANY
(Registrant)
Date: March 29, 1994 O. MARK DE MICHELE
--------------------------------
(O. Mark De Michele, President
and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
O. MARK DE MICHELE Principal Executive Officer March 29, 1994
- ------------------------------- and Director
(O. Mark De Michele,
President
and Chief Executive Officer)
JARON B. NORBERG Principal Financial Officer March 29, 1994
- ------------------------------- and Director
(Jaron B. Norberg, Executive
Vice President
and Chief Financial Officer)
WILLIAM J. POST Principal Accounting Officer March 29, 1994
- -------------------------------
(William J. Post, Senior
Vice President)
KENNETH M. CARR Director March 29, 1994
- -------------------------------
(Kenneth M. Carr)
MARTHA O. HESSE Director March 29, 1994
- -------------------------------
(Martha O. Hesse)
MARIANNE MOODY JENNINGS Director March 29, 1994
- -------------------------------
(Marianne Moody Jennings)
JACK M. MORGAN Director March 29, 1994
- -------------------------------
(Jack M. Morgan)
ROBERT G. MATLOCK Director March 29, 1994
- -------------------------------
(Robert G. Matlock)
MARVIN R. MORRISON Director March 29, 1994
- -------------------------------
(Marvin R. Morrison)
JOHN R. NORTON III Director March 29, 1994
- -------------------------------
(John R. Norton III)
DONALD M. RILEY Director March 29, 1994
- -------------------------------
(Donald M. Riley)
HENRY B. SARGENT Director March 29, 1994
- -------------------------------
(Henry B. Sargent)
WILMA W. SCHWADA Director March 29, 1994
- -------------------------------
(Wilma W. Schwada)
VERNE D. SEIDEL Director March 29, 1994
- -------------------------------
(Verne D. Seidel)
RICHARD SNELL Director March 29, 1994
- -------------------------------
(Richard Snell)
MORRISON F. WARREN Director March 29, 1994
- -------------------------------
(Morrison F. Warren)
BEN F. WILLIAMS, JR. Director March 29, 1994
- -------------------------------
(Ben F. Williams, Jr.)
THOMAS G. WOODS, JR. Director March 29, 1994
- -------------------------------
(Thomas G. Woods, Jr.)
APPENDIX
In accordance with Item 304 of Regulation S-T of the Securities Exchange
Act of 1934, the Company's Service Territory map contained in this Form 10-K
is a map of the state of Arizona showing the Company's service area, the
location of its major power plants and principal transmission lines, and the
location of transmission lines operated by the Company for others. The major
power plants shown on such map are the Navajo Generating Station located in
Coconino County, Arizona; the Four Corners Power Plant located near
Farmington, New Mexico; the Cholla Power Plant, located in Navajo County,
Arizona; the Yucca Power Plant, located near Yuma, Arizona; and the Palo Verde
Nuclear Generating Station, located about 55 miles west of Phoenix, Arizona
(each of which plants is reflected on such map as being jointly owned with
other utilities), as well as the Ocotillo Power Plant and West Phoenix Power
Plant, each located near Phoenix, Arizona, and the Saguaro Power Plant,
located near Tucson, Arizona. The Company's major transmission lines shown on
such map are reflected as running between the power plants named above and
certain major cities in the state of Arizona. The transmission lines operated
for others shown on such map are reflected as running from the Four Corners
Plant through a portion of northern Arizona to the California border.
COMMISSION FILE NUMBER 1-4473
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
EXHIBITS TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
--------------
ARIZONA PUBLIC SERVICE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 -- Agreement, dated March 21, 1994,
relating to the filing of instruments
defining the rights of holders of long-
term debt not in excess of 10% of the
Company's total assets
4.2 -- Fiftieth Supplemental Indenture
10.1 -- Cure and Assumption Agreement dated as
of November 19, 1993 among the Company,
Salt River Project Agricultural
Improvement and Power District,
Southern California Edison Company,
Public Service Company of New Mexico,
Southern California Public Power
Authority, Department of Water and
Power of the City of Los Angeles, and
El Paso Electric Company, and certain
schedules thereto
10.2a -- Second Amendment to the Arizona Public
Service Company Directors' Deferred
Compensation Plan, effective as of
January 1, 1993
10.3a -- Third Amendment to the Arizona Public
Service Company Deferred Compensation
Plan, effective as of January 1, 1993
10.4ac -- Revised form of Key Executive
Employment and Severance Agreement
between the Company and certain
key employees of the Company
10.5ac -- Revised form of Key Executive
Employment and Severance Agreement
between the Company and certain
executive officers of the Company
10.6a -- Amendment to Pinnacle West Capital
Corporation, Arizona Public Service
Company, SunCor Development Company,
and El Dorado Investment Company
Deferred Compensation Plan, effective
as of December 4, 1992
10.7a -- Pinnacle West Capital Corporation,
Arizona Public Service Company, SunCor
Development Company, and El Dorado
Investment Company Supplemental
Executive Benefit Plan as amended and
restated on December 31, 1992 effective
as of January 1, 1992
10.8a -- Arizona Public Service Company
Supplemental Excess Benefit Retirement
Plan and the First, Second, and Third
Amendments thereto
10.9a -- 1994 Key Employees Variable Pay Plan
10.10a -- 1994 Officers Variable Pay Plan
23.1 -- Consent of Deloitte & Touche
- ----------
(a) Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) An additional document, substantially identical in all material
respects to this Exhibit, has been entered into, relating to an
additional Equity Participant. Although such additional document may
differ in other respects (such as dollar amounts, percentages, tax
indemnity matters, and dates of execution), there are no material
details in which such document differs from this Exhibit.
(c) Additional agreements, substantially identical in all material
respects to this Exhibit have been entered into with additional
officers and key employees of the Company. Although such additional
documents may differ in other respects (such as dollar amounts and
dates of execution), there are no material details in which such
agreements differ from this Exhibit.
For a description of the Exhibits incorporated in this filing by reference
see Part IV, Item 14.
</TABLE>
EXHIBIT 4.1
AGREEMENT
THIS AGREEMENT, executed this 21st day of March, 1994, on behalf of
ARIZONA PUBLIC SERVICE COMPANY (the "Company"), an entity which has
registered certain of its securities under the Securities Act of 1933 (the
"'33 Act") and the Securities Exchange Act of 1934 (the "'34 Act") and which
is required to file certain reports pursuant to the '34 Act,
WITNESSETH:
WHEREAS, the Company wishes to avail itself of Regulation Section
229.601(b)(4)(iii) promulgated by the Securities and Exchange Commission
(the "Commission") pursuant to its power under the '33 Act and the '34 Act,
which regulation provides that there need not be filed with the Commission
as an exhibit to certain registration statements and reports under the '33
Act or the '34 Act any instrument with respect to long-term debt not being
registered under the '33 Act and/or the '34 Act if (i) the total amount of
securities authorized thereunder does not exceed 10% of the total assets of
the registrant and its subsidiaries on a consolidated basis and (ii) there
is filed with the Commission an agreement to furnish a copy of such
instrument to the Commission upon request;
NOW, THEREFORE, the Company hereby agrees to file with the Commission,
upon the request of the Commission that it so do, any and all instruments
(including all amendments and modifications thereto) which:
(1) are now in effect or become effective hereafter;
(2) define the rights of holders of long-term debt of the Company and
of all subsidiaries for which consolidated or unconsolidated financial
statements are required to be filed with the Commission;
(3) relate to long-term debt not being registered under the '33 Act
and/or the '34 Act; and
(4) authorize securities not in excess of 10% of the total assets of
the Company and its subsidiaries on a consolidated basis.
IN WITNESS WHEREOF, the Company has duly caused this Agreement to be
signed on its behalf by the undersigned thereunto duly authorized.
ARIZONA PUBLIC SERVICE COMPANY
Nancy E. Newquist
----------------
Nancy E. Newquist
Treasurer
ATTEST:
Nancy C. Loftin
- ---------------
Nancy C. Loftin
Secretary
EXHIBIT 4.2
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ARIZONA PUBLIC SERVICE COMPANY
(formerly Central Arizona Light and Power Company)
TO
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
(successor to Security Pacific National Bank)
As trustee under Central Arizona Light and Power
Company's Mortgage and Deed of Trust, Dated as of
July 1, 1946.
--------------
Fiftieth Supplemental Indenture
--------------
Dated as of August 1, 1993
This Mortgage covers real property,
personal property and chattels.
This instrument and the above-mentioned Mortgage and
Deed of Trust contain after-acquired property provisions.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
FIFTIETH SUPPLEMENTAL INDENTURE
--------------
INDENTURE, dated as of the 1st day of August, 1993, made and entered into
by and between ARIZONA PUBLIC SERVICE COMPANY, a corporation of the State of
Arizona, the principal place of business and mailing address of which is 400
North Fifth Street, Phoenix, Arizona 85004 (hereinafter sometimes called the
Company), party of the first part, and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association, organized under the
banking laws of the United States of America, the mailing address of which is
600 Wilshire Boulevard, Los Angeles, California 90017 (hereinafter sometimes
called the Trustee), party of the second part, as Trustee under the Mortgage
and Deed of Trust, dated as of July 1, 1946 (hereinafter called the Mortgage),
which Mortgage was executed and delivered by the Company under its former
name, Central Arizona Light and Power Company, to secure the payment of bonds
issued or to be issued under and in accordance with the provisions of the
Mortgage, reference to which said Mortgage is hereby made, this Indenture
(hereinafter called the Fiftieth Supplemental Indenture) being supplemental
thereto;
WHEREAS, said Mortgage was recorded and filed in Counties in the State of
Arizona as follows:
<TABLE>
<CAPTION>
Filed and Abstracted
Recorded as Real Mortgage as Chattel Mortgage
----------------------------------- ----------------------
Chattel
Date Book or Mortgage
Recorded Docket Page Book Page
County ------------ ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Apache....................................... 7-28-50 16 1 9 154
Cochise...................................... 2-3-53 80 28 19 292
Coconino..................................... 1-20-53 39 1 10 286
Gila......................................... 1-17-53 32 84 17 --
Graham....................................... 12-3-63 92 87 15 223
Maricopa..................................... 8-6-46 408 163 92 204
Mohave....................................... 11-13-57 28 68 12 13
Navajo....................................... 10-14-49 31 483 16 521
Pima......................................... 1-24-53 558 351 14 --
Pinal........................................ 10-25-52 68 31 12 591
Yavapai...................................... 8-7-46 79 1 12 223
Yuma......................................... 8-1-47 58 173 21 265
<CAPTION>
and in Counties in the State of New Mexico as follows:
<C> <C> <C> <C> <C> <C>
McKinley..................................... 5-31-61 36 153 4 295
San Juan..................................... 1-31-61 472 140 (No. 72441)
</TABLE>
the copy recorded in Yuma County, Arizona also being effective for La Paz
County, Arizona, formed on December 31, 1982; and copies of said Mortgage were
filed with the office of the Bureau of Indian Affairs at Window Rock, Arizona,
and with the Navajo Tribe of Indians at Window Rock, Arizona, and in the
offices of the Secretary of State and the State Land Department of the State
of Arizona (all the said counties and the said offices above referred to being
herein referred to as "jurisdictions"); and
WHEREAS, by the Mortgage, the Company covenanted that it would execute and
deliver such supplemental indenture or indentures and such further instruments
and do such further acts as might be necessary or proper to carry out more
effectually the purposes of the Mortgage and to make subject to the Lien of
the Mortgage any property thereafter acquired, made or constructed and
intended to be subject to the Lien thereof; and
WHEREAS, the Company has executed and delivered to the Trustee forty-nine
indentures supplemental to the Mortgage (hereinafter respectively called the
First through the Forty-ninth Supplemental Indentures) dated as of December 1,
1947, April 1, 1949, February 1, 1950, December 1, 1950, February 1, 1953,
November 1, 1953, March 1, 1954, October 1, 1957, March 1, 1959, November 1,
1961, June 1, 1962, December 1, 1962, September 1, 1963, September 1, 1967,
April 1, 1970, March 15, 1972, April 1, 1974, February 15, 1975, June 1, 1975,
November 15, 1975, April 15, 1977, January 15, 1978, March 1, 1979, October
15, 1979, May 15, 1980, February 2, 1982, April 15, 1982, July 1, 1983,
October 15, 1983, June 15, 1984, January 15, 1985, May 1, 1985, June 1, 1985,
November 1, 1985, January 15, 1986, March 1, 1986, May 1, 1986, February 1,
1987, June 1, 1987, November 15, 1987, April 1, 1989, February 15, 1990, May
15, 1990, April 15, 1991, December 15, 1991, January 15, 1992, March 1, 1992,
June 15, 1992, and February 1, 1993, each of which has been or will be
recorded or filed in, or a recording or filing is or will be effective with
respect to, each jurisdiction referred to above; and
WHEREAS, in addition to the property described in the Mortgage, as
heretofore supplemented and amended, the Company has acquired certain other
property, rights and interests in property; and
WHEREAS, the Company has heretofore issued, in accordance with the
provisions of the Mortgage, as heretofore supplemented and amended, bonds of a
series entitled and designated First Mortgage Bonds, 23/4% Series due 1976
(hereinafter called the bonds of the First Series), in the aggregate principal
amount of Eight Million Five Hundred Thousand Dollars ($8,500,000); bonds of a
series entitled and designated First Mortgage Bonds, 31/8% Series due 1977
(hereinafter called the bonds of the Second Series), in the aggregate
principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000);
bonds of a series entitled and designated First Mortgage Bonds, 3% Series due
1979 (hereinafter called the bonds of the Third Series), in the aggregate
principal amount of Four Million Dollars ($4,000,000); bonds of a series
entitled and designated First Mortgage Bonds, 23/4% Series due 1980
(hereinafter called the bonds of the Fourth Series), in the aggregate
principal amount of Five Million Dollars ($5,000,000); bonds of a series
entitled and designated First Mortgage Bonds, 27/8% Series due 1980
(hereinafter called the bonds of the Fifth Series), in the aggregate principal
amount of Six Million Dollars ($6,000,000); bonds of a series entitled and
designated First Mortgage Bonds, 31/2% Series due 1983 (hereinafter called the
bonds of the Sixth Series), in the aggregate principal amount of Fourteen
Million Five Hundred Thousand Dollars ($14,500,000); bonds of a series
entitled and designated First Mortgage Bonds, 31/2% Series due November 1,
1983 (hereinafter called the bonds of the Seventh Series), in the aggregate
principal amount of Five Million Seven Hundred Twenty-three Thousand Dollars
($5,723,000); bonds of a series entitled and designated First Mortgage Bonds,
31/4% Series due 1984 (hereinafter called the bonds of the Eighth Series), in
the aggregate principal amount of Fifteen Million Dollars ($15,000,000); bonds
of a series entitled and designated First Mortgage Bonds, 51/8% Series due
1987 (hereinafter called the bonds of the Ninth Series), in the aggregate
principal amount of Fifteen Million Dollars ($15,000,000); bonds of a series
entitled and designated First Mortgage Bonds, 4.70% Series due 1989
(hereinafter called the bonds of the Tenth Series), in the aggregate principal
amount of Twenty Million Dollars ($20,000,000); bonds of a series entitled and
designated First Mortgage Bonds, 4.80% Series due 1991 (hereinafter called the
bonds of the Eleventh Series), in the aggregate principal amount of Thirty-
five Million Dollars ($35,000,000); bonds of a series entitled and designated
First Mortgage Bonds, 4.45% Series due 1992 ( hereinafter called the bonds of
the Twelfth Series), in the aggregate principal amount of Twenty-five Million
Dollars ($25,000,000); bonds of a series entitled and designated First
Mortgage Bonds, 4.40% Series due 1992 (hereinafter called the bonds of the
Thirteenth Series), in the aggregate principal amount of Twenty-five Million
Dollars ($25,000,000); bonds of a series entitled and designated First
Mortgage Bonds, 4.50% Series due 1993 (hereinafter called the bonds of the
Fourteenth Series), in the aggregate principal amount of Fifteen Million
Dollars ($15,000,000); bonds of a series entitled and designated First
Mortgage Bonds, 6.25% Series due 1997 (hereinafter called the bonds of the
Fifteenth Series), in the aggregate principal amount of Twenty-five Million
Dollars ($25,000,000); bonds of a series entitled and designated First
Mortgage Bonds, 8.50% Series due 1975 (hereinafter called the bonds of the
Sixteenth Series), in the aggregate principal amount of Thirty Million Dollars
($30,000,000); bonds of a series entitled and designated First Mortgage Bonds,
7.45% Series due 2002 (hereinafter called the bonds of the Seventeenth
Series), in the aggregate principal amount of Sixty Million Dollars
($60,000,000); bonds of a series entitled and designated First Mortgage Bonds,
6.20% Series due 2004 (hereinafter called the bonds of the Eighteenth Series),
in the aggregate principal amount of Fifty Million Dollars ($50,000,000);
bonds of a series entitled and designated First Mortgage Bonds, 9.50% Series
due 1982 (hereinafter called the bonds of the Nineteenth Series), in the
aggregate principal amount of One Hundred Million Dollars ($100,000,000);
bonds of a series entitled and designated First Mortgage Bonds, 9.80% Series
due 1980 (hereinafter called the bonds of the Twentieth Series), in the
aggregate principal amount of Seventy-five Million Dollars ($75,000,000);
bonds of a series entitled and designated First Mortgage Bonds, 10.625% Series
due 2000 (hereinafter called the bonds of the Twenty-first Series), in the
aggregate principal amount of Seventy-five Million Dollars ($75,000,000);
bonds of a series entitled and designated First Mortgage Bonds, 6.45% Series A
due 2007 (hereinafter called the bonds of the Twenty-second Series), in the
aggregate principal amount of Thirteen Million Dollars ($13,000,000); bonds of
a series entitled and designated First Mortgage Bonds, 6.45% Series B due 2007
(hereinafter called the bonds of the Twenty-third Series), in the aggregate
principal amount of Thirty Million Dollars ($30,000,000); bonds of a series
entitled and designated First Mortgage Bonds, 6% Series A due 2008
(hereinafter called the bonds of the Twenty-fourth Series), in the aggregate
principal amount of Thirty-four Million Dollars ($34,000,000); bonds of a
series entitled and designated First Mortgage Bonds, 9.95% Series due 2004
(hereinafter called the bonds of the Twenty-fifth Series), in the aggregate
principal amount of Seventy-five Million Dollars ($75,000,000); bonds of a
series entitled and designated First Mortgage Bonds, 121/8% Series due 2009
(hereinafter called the bonds of the Twenty-sixth Series), in the aggregate
principal amount of Seventy-five Million Dollars ($75,000,000); bonds of a
series entitled and designated First Mortgage Bonds, 127/8% Series due 2000
(hereinafter called the bonds of the Twenty-seventh Series), in the aggregate
principal amount of One Hundred Eighty-five Million Dollars ($185,000,000);
bonds of a series entitled and designated First Mortgage Bonds, 103/8% Series
due 1985 (hereinafter called the bonds of the Twenty-eighth Series), in the
aggregate principal amount of Sixty Million Two Hundred Fifty Thousand Dollars
($60,250,000); bonds of a series entitled and designated First Mortgage Bonds,
16% Series due 1992 (hereinafter called the bonds of the Twenty-ninth Series),
in the aggregate principal amount of One Hundred Million Dollars
($100,000,000); bonds of a series entitled and designated First Mortgage
Bonds, 123/4% Series due 2013 (hereinafter called the bonds of the Thirtieth
Series), in the aggregate principal amount of One Hundred Million Dollars
($100,000,000); bonds of a series entitled and designated First Mortgage
Bonds, 131/2% Series due 2013 (hereinafter called the bonds of the Thirty-
first Series), in the aggregate principal amount of One Hundred Million
Dollars ($100,000,000); bonds of a series entitled and designated First
Mortgage Bonds, 15% Series due 1994 (hereinafter called the bonds of the
Thirty-second Series), in the aggregate principal amount of One Hundred
Million Dollars ($100,000,000); bonds of a series entitled and designated
First Mortgage Bonds, 12% Series due 1995 (hereinafter called the bonds of the
Thirty-third Series), in the aggregate principal amount of One Hundred Twenty-
five Million Dollars ($125,000,000); bonds of a series entitled and designated
First Mortgage Bonds, 131/4% Series due 2007 (hereinafter called the bonds of
the Thirty-fourth Series), in the aggregate principal amount of Fifty Million
Dollars ($50,000,000); bonds of a series entitled and designated First
Mortgage Bonds, 111/2% Series due 2015 (hereinafter called the bonds of the
Thirty-fifth Series), in the aggregate principal amount of One Hundred Fifty
Million Dollars ($150,000,000); bonds of a series entitled and designated
First Mortgage Bonds, 111/2% Series due November 1, 2015 (hereinafter called
the bonds of the Thirty-sixth Series), in the aggregate principal amount of
One Hundred Million Dollars ($100,000,000); bonds of a series entitled and
designated First Mortgage Bonds, 11% Series due 2016 (hereinafter called the
bonds of the Thirty-seventh Series), in the aggregate principal amount of One
Hundred Million Dollars ($100,000,000); bonds of a series entitled and
designated First Mortgage Bonds, 91/4% Series due 1996 (hereinafter called the
bonds of the Thirty-eighth Series), in the aggregate principal amount of One
Hundred Million Dollars ($100,000,000); bonds of a series entitled and
designated First Mortgage Bonds, 9% Series due 1996 (hereinafter called the
bonds of the Thirty-ninth Series), in the aggregate principal amount of One
Hundred Twenty-five Million Dollars ($125,000,000); bonds of a series entitled
and designated First Mortgage Bonds, 9% Series due 2017 (hereinafter called
the bonds of the Fortieth Series), in the aggregate principal amount of One
Hundred Fifty Million Dollars ($150,000,000); bonds of a series entitled and
designated First Mortgage Bonds, 97/8% Series due 1997 (hereinafter called the
bonds of the Forty-first Series), in the aggregate principal amount of One
Hundred Twenty-five Million Dollars ($125,000,000); bonds of a series entitled
and designated First Mortgage Bonds, 103/4% Series due 2017 (hereinafter
called the bonds of the Forty-second Series), in the aggregate principal
amount of One Hundred Million Dollars ($100,000,000); bonds of a series
entitled and designated First Mortgage Bonds, 103/4% Series due 2019
(hereinafter called the bonds of the Forty-third Series), in the aggregate
principal amount of One Hundred Million Dollars ($100,000,000); bonds of a
series entitled and designated First Mortgage Bonds, 101/4% Series due 2000
(hereinafter called the bonds of the Forty-fourth Series), in the aggregate
principal amount of One Hundred Million Dollars ($100,000,000); bonds of a
series entitled and designated First Mortgage Bonds, 101/4% Series due 2020
(hereinafter called the bonds of the Forty-fifth Series), in the aggregate
principal amount of One Hundred Twenty-five Million Dollars ($125,000,000);
bonds of a series entitled and designated First Mortgage Bonds, 91/2% Series
due 2021 (hereinafter called the bonds of the Forty-sixth Series), in the
aggregate principal amount of One Hundred Million Dollars ($100,000,000);
bonds of a series entitled and designated First Mortgage Bonds, 9% Series due
2021 (hereinafter called the bonds of the Forty-seventh Series), in the
aggregate principal amount of One Hundred Fifty Million Dollars
($150,000,000); bonds of a series entitled and designated First Mortgage
Bonds, 71/8% Series due 1997, in the aggregate principal amount of One Hundred
Fifty Million Dollars ($150,000,000), and bonds of a series entitled and
designated First Mortgage Bonds, 83/4% Series due 2024, in the aggregate
principal amount of One Hundred Seventy-five Million Dollars ($175,000,000)
(hereinafter collectively called the bonds of the Forty-eighth Series); bonds
of a series entitled and designated First Mortgage Bonds, 75/8% Series due
1998, in the aggregate principal amount of One Hundred Million Dollars
($100,000,000), and bonds of a series entitled and designated First Mortgage
Bonds, 81/8% Series due 2002, in the aggregate principal amount of One Hundred
Twenty-five Million Dollars ($125,000,000) (hereinafter collectively called
the bonds of the Forty-ninth Series); bonds of a series entitled and
designated First Mortgage Bonds, 75/8% Series due 1999 (hereinafter called the
bonds of the Fiftieth Series), in the aggregate principal amount of One
Hundred Million Dollars ($100,000,000); and bonds of a series entitled and
designated First Mortgage Bonds, 8% Series due 2025 (hereinafter called the
bonds of the Fifty-first Series), in the aggregate principal amount of One
Hundred Fifty Million Dollars ($150,000,000); and
WHEREAS, Section 8 of the Mortgage provides that the form of each series
of bonds (other than bonds of the First Series) issued thereunder shall be
established by Resolution of the Board of Directors of the Company and that
the form of each series, as established by said Board of Directors, shall
specify the descriptive title of the bonds and various other terms thereof,
and may also contain such provisions not inconsistent with the provisions of
the Mortgage as the Board of Directors may, in its discretion, cause to be
inserted therein expressing or referring to the terms and conditions upon
which such bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other things, that
any power, privilege or right expressly or impliedly reserved to or in any way
conferred upon the Company by any provision of the Mortgage, whether such
power, privilege or right is in any way restricted or is unrestricted, may be
in whole or in part waived or surrendered or subjected to any restriction if
at the time unrestricted or to additional restriction if already restricted,
and the Company may enter into any further covenants, limitations or
restrictions for the benefit of any one or more series of bonds issued
thereunder, or the Company may cure any ambiguity contained therein, or in any
supplemental indenture, or may establish the terms and provisions of any
series of bonds other than said First Series, by an instrument in writing
executed and acknowledged by the Company in such manner as would be necessary
to entitle a conveyance of real estate to record in all of the states in which
any property at the time subject to the Lien of the Mortgage shall be
situated; and
WHEREAS, the Company now desires to create a new series of bonds to be
issued under and pursuant to the Mortgage in accordance with the provisions of
Article VI thereof, and to add to its covenants and agreements contained in
the Mortgage, as heretofore supplemented and amended, certain other covenants
and agreements to be observed by it and to alter and amend in certain respects
the covenants and provisions contained in the Mortgage, as heretofore
supplemented and amended; and
WHEREAS, the execution and delivery by the Company of this Fiftieth
Supplemental Indenture, and the terms of the bonds of the Fifty-second Series
hereinafter referred to, have been duly authorized by the Board of Directors
of the Company by appropriate Resolutions of said Board of Directors;
NOW THEREFORE, THIS INDENTURE WITNESSETH: That Arizona Public Service
Company, in consideration of the premises and of One Dollar to it duly paid by
the Trustee at or before the ensealing and delivery of these presents, the
receipt whereof is hereby acknowledged, and in further evidence of assurance
of the estate, title and rights of the Trustee and in order further to secure
the payment of both the principal of and interest and premium, if any, on the
bonds from time to time heretofore, herewith or hereafter issued under the
Mortgage, according to their tenor and effect, and the performance of all the
provisions of the Mortgage (including any instruments supplemental thereto and
any modifications made as in the Mortgage provided) and of said bonds, hereby
grants, bargains, sells, releases, conveys, assigns, transfers, mortgages,
pledges, sets over and confirms (subject, however, to Excepted Encumbrances as
defined in Section 6 of the Mortgage) unto Bank of America National Trust and
Savings Association, as Trustee under the Mortgage, and to its successor or
successors in said trust, and to said Trustee and its successors and assigns
forever, all the properties of the Company described in the Mortgage, as
heretofore supplemented and amended (except any properties which have been
released from the Lien of the Mortgage), and all the properties specifically
described in Article IV hereof.
Also all other property, real, personal and mixed, of the kind or nature
specifically mentioned in Article IV hereof or of any other kind or nature
(except any herein or in the Mortgage, as heretofore supplemented and amended,
expressly excepted and except any which may not lawfully be mortgaged or
pledged hereunder), now owned or, subject to the provisions of subsection (I)
of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase,
consolidation, merger, donation, construction, erection or in any other way)
and wheresoever situated, including (without in anywise limiting or impairing
by the enumeration of the same the scope and intent of the foregoing or of any
general description contained in this Fiftieth Supplemental Indenture) all
lands, power sites, flowage rights, water rights, water locations, water
appropriations, ditches, flumes, reservoirs, reservoir sites, canals,
raceways, dams, dam sites, aqueducts, and all other rights or means for
appropriating, conveying, storing and supplying water; all rights of way and
roads; all plants for the generation of electricity by steam, water and/or
other power; all power houses, gas plants, street lighting systems, standards
and other equipment incidental thereto, telephone, radio and television
systems, air-conditioning systems and equipment incidental thereto, water
works, water systems, steam heat and hot water plants, substations, lines,
service and supply systems, bridges, culverts, tracks, ice or refrigeration
plants and equipment, offices, buildings and other structures and equipment
thereof; all machinery, engines, boilers, dynamos, electric, gas and other
machines, regulators, meters, transformers, generators, motors, electrical,
gas and mechanical appliances, conduits, cables, water, steam heat, gas or
other pipes, gas mains and pipes, service pipes, fittings, valves and
connections, pole and transmission lines, wires, cables, tools, implements,
apparatus, furniture and chattels; all franchises, consents or permits; all
lines for the transmission and distribution of electric current, gas, steam
heat or water for any purpose including towers, poles, wires, cables, pipes,
conduits, ducts and all apparatus for use in connection therewith; all real
estate, lands, easements, servitudes, licenses, permits, franchises,
privileges, rights of way and other rights in or relating to public or private
property, real or personal, or the occupancy of such property and (except as
herein or in the Mortgage, as heretofore supplemented and amended, expressly
excepted) all the right, title and interest the Company may now have or
hereafter acquire in and to any and all property of any kind or nature
appertaining to and/or used and/or occupied and/or enjoyed in connection with
any property hereinbefore or in the Mortgage, as heretofore supplemented and
amended, described.
TOGETHER WITH all and singular the tenements, hereditaments,
prescriptions, servitudes and appurtenances belonging or in anywise
appertaining to the aforementioned property or any part thereof, with the
reversion and reversions, remainder and remainders and (subject to the
provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues,
earnings, income, product and profits thereof, and all the estate, right,
title, interest and claim whatsoever, at law as well as in equity, which the
Company now has or may hereafter acquire in and to the aforementioned property
and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of
subsection (I) of Section 87 of the Mortgage and to the extent permitted by
law, all the property, rights and franchises acquired by the Company (by
purchase, consolidation, merger, donation, construction, erection or in any
other way) after the date hereof, except any herein or in the Mortgage, as
heretofore supplemented and amended, expressly excepted, shall be and are as
fully granted and conveyed hereby and as fully embraced within the lien hereof
and the Lien of the Mortgage as if such property, rights and franchises were
now owned by the Company and were specifically described herein and conveyed
hereby.
PROVIDED that the following are not and are not intended to be now or
hereafter granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, pledged, set over or confirmed hereunder and are hereby expressly
excepted from the lien and operation of this Fiftieth Supplemental Indenture
and from the Lien and operation of the Mortgage, viz.: (1) cash, shares of
stock, bonds, notes and other obligations and other securities not hereafter
specifically pledged, paid, deposited, delivered or held under the Mortgage or
covenanted so to be; (2) merchandise, equipment, apparatus, materials or
supplies held for the purpose of sale or other disposition in the usual course
of business; fuel, oil and similar materials and supplies consumable in the
operation of any of the properties of the Company; construction equipment
acquired for temporary use; all aircraft, tractors, rolling stock, trolley
coaches, buses, motor coaches, automobiles, motor trucks and other vehicles
and materials and supplies held for the purpose of repairing or replacing (in
whole or part) any of the same; all timber, minerals, mineral rights and
royalties and all Natural Gas and Oil Production Property, as defined in
Section 4 of the Mortgage; (3) bills, notes and accounts receivable,
judgments, demands and choses in action, and all contracts, leases and
operating agreements not specifically pledged under the Mortgage or covenanted
so to be; (4) the last day of the term of any lease or leasehold which may be
or become subject to the Lien of the Mortgage; (5) electric energy, gas,
steam, ice and other materials or products generated, manufactured, produced,
purchased or acquired by the Company for sale, distribution or use in the
ordinary course of its business; and (6) the Company's franchise to be a
corporation; provided, however, that the property and rights expressly
excepted from the Lien and operation of the Mortgage in the above subdivisions
(2) and (3) shall (to the extent permitted by law) cease to be so excepted in
the event and as of the date that the Trustee or a receiver or trustee shall
enter upon and take possession of the Mortgaged and Pledged Property in the
manner provided in Article XIII of the Mortgage by reason of the occurrence of
a Default as defined in Section 65 thereof.
TO HAVE AND TO HOLD all such properties, real, personal and mixed,
granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, pledged, set over or confirmed by the Company as aforesaid, or
intended so to be, unto Bank of America National Trust and Savings
Association, the Trustee, and its successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms,
trusts and conditions and subject to and with the same provisos and covenants
as are set forth in the Mortgage, as supplemented and amended.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions,
provisos, covenants and provisions contained in the Mortgage, as supplemented
and amended, shall affect and apply to the property hereinbefore described and
conveyed and to the estate, rights, obligations and duties of the Company and
the Trustee and the beneficiaries of the trust with respect to said property,
and to the Trustee and its successors as Trustee of said property in the same
manner and with the same effect as if the said property had been owned by the
Company at the time of the execution of the Mortgage and had been specifically
and at length described in and conveyed to said Trustee by the Mortgage as a
part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustee and its
successors in said trust under the Mortgage, as follows:
ARTICLE I.
FIFTY-SECOND SERIES OF BONDS.
SECTION 1. There shall be a series of bonds designated "71/4% Series due
2023" (hereinafter sometimes referred to as the "Fifty-second Series"),
limited to the aggregate principal amount of $100,000,000, each of which shall
also bear the descriptive title First Mortgage Bond, and the form thereof,
which shall be established by Resolution of the Board of Directors of the
Company, shall contain suitable provisions with respect to the matters
hereinafter specified in this Supplemental Indenture. Bonds of the Fifty-
second Series shall be dated as provided in Section 10 of the Mortgage; shall
mature, subject to the provisions for prior redemption hereinafter set forth,
on August 1, 2023; shall be issued as fully registered bonds in denominations
of One Thousand Dollars or any integral multiple thereof; and shall bear
interest from August 1, 1993 or from the most recent Interest Payment Date (as
defined below) to which interest has been paid at the rate of 71/4% per annum
(calculated on the basis of twelve 30-day months), payable on February 1 and
August 1 of each year (each an "Interest Payment Date"), commencing February
1, 1994, to the holders thereof of record on the January 15 or July 15, as the
case may be, next preceding such Interest Payment Date (subject to the
provisions of Section 12 of the Mortgage concerning legal holidays and bank
closings), and the principal of and interest on, and premium or other amounts,
if any, payable upon redemption of, each said bond to be payable at the office
or agency of the Company in the City of Los Angeles, California, and at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, New York, in such coin or currency of the United States of America as,
at the time of payment, is legal tender for public and private debts;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the address of the person entitled thereto as such
address shall appear on the registration books of the Company.
SECTION 2. In the manner and with the effect provided in Article X of the
Mortgage, the bonds of the Fifty-second Series will be subject to redemption
prior to maturity, as follows:
(a) Bonds of the Fifty-second Series shall be redeemable, on or after
August 1, 2003, but not prior thereto, either at the option of the Company or
pursuant to the requirements of the Mortgage, in whole at any time, or in part
from time to time, prior to maturity, upon notice as provided in Section 52 of
the Mortgage at least thirty (30) days prior to the date fixed for redemption,
at the following general redemption prices, expressed in percentages of the
principal amount of the bonds to be redeemed:
<TABLE>
GENERAL REDEMPTION PRICES
<CAPTION>
IF REDEEMED DURING IF REDEEMED DURING
THE TWELVE MONTHS REDEMPTION THE TWELVE MONTHS REDEMPTION
BEGINNING AUGUST 1, PRICE BEGINNING AUGUST 1, PRICE
- ---------------------------------- ---------------- ------------------------------ ----------------
<S> <C> <S> <C>
2003.............................. 102.72% 2013.......................... 100.00%
2004.............................. 102.45 2014.......................... 100.00
2005.............................. 102.18 2015.......................... 100.00
2006.............................. 101.91 2016.......................... 100.00
2007.............................. 101.63 2017.......................... 100.00
2008.............................. 101.36 2018.......................... 100.00
2009.............................. 101.09 2019.......................... 100.00
2010.............................. 100.82 2020.......................... 100.00
2011.............................. 100.54 2021.......................... 100.00
2012.............................. 100.27 2022.......................... 100.00
</TABLE>
in each case, together with accrued interest to the date fixed for
redemption.
(b) Bonds of the Fifty-second Series shall also be redeemable on or after
August 1, 2003, but not prior thereto, in whole at any time, or (except as
otherwise provided in the Mortgage) in part from time to time, prior to
maturity, upon like notice, by the application (either at the option of the
Company or pursuant to the requirements of the Mortgage, as supplemented and
amended) of cash delivered to or deposited with the Trustee pursuant to the
provisions of Section 64 of the Mortgage or with the Proceeds of Released
Property (but only if and to the extent such Sections are properly applicable
to, and such Proceeds result from, bona fide transactions), at the principal
amount of the bonds to be redeemed together with accrued interest to the date
fixed for redemption.
(c) Bonds of the Fifty-second Series shall also be redeemable, on or after
August 1, 2003, but not prior thereto, in whole at any time, or in part from
time to time, prior to maturity, upon like notice, by the application (either
at the option of the Company or pursuant to the requirements of the Mortgage,
as supplemented and amended) of cash delivered to or deposited with the
Trustee pursuant to the provisions of Section 39 of the Mortgage at the
principal amount of the bonds to be redeemed together with accrued interest to
the date fixed for redemption.
(d) Bonds of the Fifty-second Series shall also be redeemable, in whole at
any time, prior to maturity, upon like notice, by the application of cash
delivered to or deposited with the Trustee pursuant to the provisions of
Section 87 of the Mortgage (but only if and to the extent such Section is
properly applicable to bona fide transactions), at the principal amount of the
bonds to be redeemed together with accrued interest to the date fixed for
redemption; provided, however, that, prior to August 1, 2003, the Bonds may
only be redeemed under this paragraph (d) at the following special redemption
prices, expressed in percentages of the principal amount of the bonds to be
redeemed:
<TABLE>
SPECIAL REDEMPTION PRICES
<CAPTION>
IF REDEEMED DURING IF REDEEMED DURING
THE TWELVE MONTHS REDEMPTION THE TWELVE MONTHS REDEMPTION
BEGINNING AUGUST 1, PRICE BEGINNING AUGUST 1, PRICE
- ---------------------------------- ---------------- ------------------------------ ----------------
<S> <C> <S> <C>
1993.............................. 105.45% 1998.......................... 104.09%
1994.............................. 105.18 1999.......................... 103.81
1995.............................. 104.90 2000.......................... 103.54
1996.............................. 104.63 2001.......................... 103.27
1997.............................. 104.36 2002.......................... 103.00
</TABLE>
in each case, together with accrued interest to the date fixed for
redemption.
SECTION 3. At the option of the registered owner, any bonds of the Fifty-
second Series, upon surrender thereof, for cancellation, at the office or
agency of the Company in the City of Los Angeles, California, or at the office
or agency of the Company in the Borough of Manhattan, The City of New York,
New York, together with a written instrument of transfer, if required by the
Company or by the Trustee, duly executed by the registered owner or by his
duly authorized attorney, shall (subject to the provisions of Section 12 of
the Mortgage) be exchangeable for a like aggregate principal amount of bonds
in registered form of the same series of other authorized denominations
without payment of any sum other than taxes or other governmental charges.
Bonds of the Fifty-second Series shall be transferable (subject to the
provisions of Section 12 of the Mortgage) at either of said offices or
agencies of the Company without payment of any sum other than taxes or other
governmental charges.
ARTICLE II.
REPLACEMENT FUND PROVISIONS -- OTHER RELATED PROVISIONS
OF THE MORTGAGE -- DIVIDEND COVENANT -- RECORD DATES --
AUTHENTICATING AGENT.
SECTION 4. The Company covenants that the provisions of Section 39 of the
Mortgage, which were to remain in effect so long as any bonds of the First
Series remained Outstanding, shall remain in full force and effect so long as
any bonds of the Fourteenth, Fifteenth, Seventeenth, Eighteenth, Twenty-
second, Twenty-third, Twenty-fourth, Thirty-fourth, Fortieth, Forty-third,
Forty-fourth, Forty-fifth, Forth-sixth, Forty-seventh, Forty-eighth, Forty-
ninth, Fiftieth, Fifty-first or Fifty-second Series are Outstanding.
Clause (d) of subsection (II) of Section 4 of the Mortgage, as heretofore
amended, clause (6) and clause (e) of Section 5 of the Mortgage, as heretofore
amended, and Section 29 of the Mortgage, as heretofore amended, are hereby
further amended by inserting therein the words "and Fifty-second Series" after
the words "bonds of the First Series and Second Series and Third Series and
Fourth Series and Fifth Series and Sixth Series and Seventh Series and Eighth
Series and Ninth Series and Tenth Series and Eleventh Series and Twelfth
Series and Thirteenth Series and Fourteenth Series and Fifteenth Series and
Sixteenth Series and Seventeenth Series and Eighteenth Series and Nineteenth
Series and Twentieth Series and Twenty-first Series and Twenty-second Series
and Twenty-third Series and Twenty-fourth Series and Twenty-fifth Series and
Twenty-sixth Series and Twenty-seventh Series and Twenty-eighth Series and
Twenty-ninth Series and Thirtieth Series and Thirty-first Series and Thirty-
second Series and Thirty-third Series and Thirty-fourth Series and Thirty-
fifth Series and Thirty-sixth Series and Thirty-seventh Series and Thirty-
eighth Series and Thirty-ninth Series and Fortieth Series and Forty-first
Series and Forty-second Series and Forty-third Series and Forty-fourth Series
and Forty-fifth Series and Forty-sixth Series and Forty-seventh Series and
Forty-eighth Series and Forty-ninth Series and Fiftieth Series and Fifty-first
Series" each time such words occur therein.
Clause (e) of subsection (II) of Section 4 of the Mortgage, as heretofore
amended, is hereby further amended by the insertion therein after the words
"Fifty-first" the words "and Fifty-second."
The last paragraph of Section 12 of the Mortgage, as heretofore amended,
the last paragraph of Section 17 of the Mortgage, as heretofore amended, and
the last paragraph of Section 110 of the Mortgage, as heretofore amended, are
hereby amended by inserting therein the words "or the Fifty-second Series"
after the words "Fifty-first Series" each time such words occur therein.
ARTICLE III.
MISCELLANEOUS PROVISIONS.
SECTION 5. The terms defined in the Mortgage, as supplemented and
amended, shall, for all purposes of this Fiftieth Supplemental Indenture, have
the meanings specified therein, except that the term "Mortgage" shall mean
only the original Mortgage and Deed of Trust, dated as of July 1, 1946; the
term "Mortgage, as heretofore supplemented and amended" shall mean the
Mortgage, as supplemented and amended by the First through Forty-ninth
Supplemental Indentures hereinabove referred to; and the term "Mortgage, as
supplemented and amended," shall mean the Mortgage, as supplemented and
amended by the First through Forty-ninth Supplemental Indentures hereinabove
referred to and as supplemented and amended by this Fiftieth Supplemental
Indenture and any future supplemental indentures.
SECTION 6. The Trustee hereby accepts the trusts herein declared,
provided, created, supplemented or amended and agrees to perform the same upon
the terms and conditions herein and in the Mortgage, as heretofore
supplemented and amended, set forth and upon the following terms and
conditions:
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Fiftieth Supplemental Indenture
or for or in respect of the recitals contained herein, all of which recitals
are made by the Company solely. In general, each and every term and condition
contained in Article XVII of the Mortgage shall apply to and form part of this
Fiftieth Supplemental Indenture with the same force and effect as if the same
were herein set forth in full with such omissions, variations and insertions,
if any, as may be appropriate to make the same conform to the provisions of
this Fiftieth Supplemental Indenture.
SECTION 7. Whenever in this Fiftieth Supplemental Indenture either of the
parties hereto is named or referred to, this shall, subject to the provisions
of Articles XVI and XVII of the Mortgage, be deemed to include the successors
and assigns of such party, and all the covenants and agreements in this
Fiftieth Supplemental Indenture contained by or on behalf of the Company or by
or on behalf of the Trustee shall, subject as aforesaid, bind and inure to the
respective benefits of the respective successors and assigns of such parties,
whether so expressed or not.
SECTION 8. Nothing in this Fiftieth Supplemental Indenture, expressed or
implied, is intended or shall be construed to confer upon, or to give to, any
person, firm or corporation, other than the parties hereto and the holders of
the bonds Outstanding under the Mortgage, any right, remedy or claim under or
by reason of this Fiftieth Supplemental Indenture or any covenant, condition,
stipulation, promise or agreement hereof, and all the covenants, conditions,
stipulations, promises and agreements in this Fiftieth Supplemental Indenture
contained by or on behalf of the Company shall be for the sole and exclusive
benefit of the parties hereto and of the holders of the bonds Outstanding
under the Mortgage.
SECTION 9. This Fiftieth Supplemental Indenture may be executed
simultaneously in several counterparts, each of which shall be an original and
all of which shall constitute but one and the same instrument.
ARTICLE IV.
SPECIFIC DESCRIPTION OF PROPERTY.
SECTION 10. CERTAIN REAL PROPERTY LOCATED IN:
YUMA COUNTY
RIVERSIDE SUBSTATION
The South 200 feet of Lot Three, Rio Colorado Industrial Park Unit 1, as
recorded in Book 12 of Plats, Page 55, on June 4, 1991, Official Records of
Yuma County, and is further identified as:
The North 200 feet of the South 565 feet of the East 295.55 feet of the
Northwest Quarter of the Northeast Quarter of Section 33, Township 16 South,
Range 22 East of the San Bernadino Meridian, Yuma County, Arizona, being more
particularly described as follows:
COMMENCING at the brass cap which marks the Northeast corner of Section
33, from whence a 3/4 inch iron pipe which marks the Southeast corner of
Section 33 bears South 0 degrees 05' 09" West, 1969.12 feet distant;
Thence South 0 degrees 05' 09" West, a distance of 1318.46 feet to a point
being the North 1/16 corner between Section 33 and Section 34;
Thence South 89 degrees 58' 28" West along the East-West 1/16 line a distance
of 1321.86 feet to the Northeast 1/16 corner of Section 33;
Thence North 0 degrees 13' 25" East along the 1/16 line between the Northeast
1/16 corner and the East 1/16 corner between Section 33 and Section 27
a distance of 365.01 feet to the TRUE POINT OF BEGINNING, said point
being the Southeast corner of that parcel conveyed in Docket 1587,
page 789;
Thence South 89 degrees 58' 28" West, (South 89 degrees 58' 54" West of
Record) a distance of 295.55 feet;
Thence North 0 degrees 13' 25" East, (North 0 degrees 07' 26" East of Record)
a distance of 200 feet;
Thence North 89 degrees 58' 28" East, (North 89 degrees 58' 54" East of
Record) a distance of 295.55 feet;
Thence South 0 degrees 13' 25" West, (South 0 degrees 07' 26" West of Record)
a distance of 200.00 feet to the TRUE POINT OF BEGINNING.
SECTION 11. THE ELECTRIC SUBSTATIONS OF THE COMPANY, including all buildings,
structures, towers, poles, all equipment, appliances and devices for
transforming, converting and distributing electric energy, and all land owned
by the Company upon which the same are situated, and all of the Company's
easements, rights of way, rights, machinery, equipment, appliances, devices,
licenses and supplies forming a part of said substations, or any of them,
including additions and improvements to any of the foregoing, or used or
enjoyed or capable of being used or enjoyed in conjunction with any thereof.
SECTION 12. Additions, extensions and improvements to THE ELECTRIC
TRANSMISSION SYSTEMS of the Company.
SECTION 13. Additions, extensions and improvements to THE ELECTRIC
DISTRIBUTION SYSTEMS of the Company, including the construction of additional
facilities throughout the Company's service area, as well as extension of
residential and downtown underground distribution facilities, including
associated distribution equipment such as voltage regulators, capacitor banks,
sectionalizing equipment, transformers, street lighting systems, meters and
services, including reconstruction and improvements to provide efficient
Company operation.
IN WITNESS WHEREOF, ARIZONA PUBLIC SERVICE COMPANY, party hereto of the
first part, has caused its corporate name to be hereunto affixed, and this
instrument to be signed and sealed by its President, one of its Vice
Presidents, or its Treasurer, and its corporate seal to be attested by its
Secretary or one of its Assistant Secretaries or Associate Secretaries for and
in its behalf, in the City of Phoenix, Arizona, and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, party hereto of the second part, has caused its
corporate name to be hereunto affixed, and this instrument to be signed and
sealed by one of its Trust Officers and its corporate seal to be attested by
its Vice President for and in its behalf, in the City of Los Angeles,
California, all as of the 1st day of August, 1993.
ARIZONA PUBLIC SERVICE COMPANY
Nancy E. Newquist
----------------------------------------------------
Treasurer
Attest:
Betsy A. Pregulman
- -----------------------------------------
Associate Secretary
Executed, sealed and delivered by
ARIZONA PUBLIC SERVICE COMPANY in the
presence of:
Florence J. Brown
- -----------------------------------------
Deborah E. Mason
- -----------------------------------------
[SEAL]
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, As Trustee
Fonda J. Hall
----------------------------------------------------
Trust Officer
Attest:
Sheri B. Ball
- -----------------------------------------
Vice President
Executed, sealed and delivered by
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
in the presence of:
Marissa Directo
- -----------------------------------------
Margaret Swindall
- -----------------------------------------
[SEAL]
STATE OF ARIZONA
COUNTY OF MARICOPA ss.:
On this 9th day of August, 1993, before me, Naomi Fyffe, the undersigned
officer, personally appeared Nancy E. Newquist, who acknowledged herself to be
the Treasurer of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, and
that she, as such Treasurer being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by herself as Treasurer.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
Naomi Fyffe
----------------------------------------------------
Notary Public
My Commission Expires May 18, 1996
[SEAL]
STATE OF ARIZONA
COUNTY OF MARICOPA ss.:
On this 9th day of August, 1993, before me, Naomi Fyffe, the undersigned
officer, personally came Nancy E. Newquist, to me known, who being by me duly
sworn, did depose and say that she resides in Phoenix, Arizona, that she is
the Treasurer of ARIZONA PUBLIC SERVICE COMPANY, the corporation described in
and which executed the above instrument; that she knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation,
and that she signed her name thereto by like order.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
Naomi Fyffe
----------------------------------------------------
Notary Public
My Commission Expires May 18, 1996
[SEAL]
STATE OF ARIZONA
COUNTY OF MARICOPA ss.:
This instrument was acknowledged before me on August 9, 1993 by Nancy E.
Newquist and Betsy A. Pregulman as Treasurer and Associate Secretary,
respectively, of ARIZONA PUBLIC SERVICE COMPANY.
Naomi Fyffe
----------------------------------------------------
Notary Public
My Commission Expires May 18, 1996
[SEAL]
[SEAL]
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES ss.:
On this 6th day of August 1, 1993, before me, John McIntire, Notary Public
in and for the County and State aforesaid, residing therein, duly commissioned
and sworn, personally appeared Fonda J. Hall, known to me to be a Trust
Officer of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, the
national banking association which executed the within instrument, and Sheri
B. Ball known to me to be a Vice President of said association, who being by
me duly sworn, acknowledged before me that the seal affixed to said instrument
is the corporate seal of said association, that they, being authorized so to
do, executed the within instrument on behalf of said association by authority
of its board of directors, and that said instrument is the free act and deed
of said association for the purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
John McIntire
----------------------------------------------------
Notary Public
My Commission Expires March 4, 1994
[SEAL]
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES ss.:
This instrument was acknowledged before me on August 6, 1993 by Fonda J.
Hall and Sheri B. Ball as Trust Officer and Vice President, respectively, of
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION.
John McIntire
----------------------------------------------------
Notary Public
My Commission Expires March 4, 1994
[SEAL]
EXHIBIT 10.1
CURE AND ASSUMPTION AGREEMENT
This CURE AND ASSUMPTION AGREEMENT ("Agreement"), by and among El Paso
Electric Company, a Texas corporation ("EPE"), Debtor and Debtor In
Possession in its proceedings under Chapter 11 of Title 11 of the United
States Code, 11 U.S.C. Sections 101-1330 (the "Code") currently pending in
the United States Bankruptcy Court for the Western District of Texas (the
"Court"), Case No. 92-10148 FM (the "Case"); each of Arizona Public Service
Company ("APS"), Salt River Project Agricultural Improvement and Power
District ("SRP"), Southern California Edison Company ("SCE"), Public Service
Company of New Mexico ("PNM"), Southern California Public Power Authority
("SCPPA"), and the Department of Water and Power of the City of Los Angeles
("LADWP"), as the other participants, along with EPE (the "Participants"),
in the Arizona Nuclear Power Project ("ANPP") pursuant to the ANPP
Participation Agreement, dated as of August 23, 1973, as amended by
Amendment Nos. 1 through 13 thereto (the "Participation Agreement"); each of
APS, SRP, SCE, PNM, SCPPA, and LADWP, as the other parties, along with EPE
(the "Switchyard Participants"), to the ANPP High Voltage Switchyard
Participation Agreement, dated as of August 20, 1981, as amended (the
"Switchyard Agreement"); and each of APS, SRP, and PNM, as the other
parties, along with EPE (the "Valley Transmission Participants"), to the
ANPP Valley Transmission System Participation Agreement, dated as of August
20, 1981, as amended (the "Valley Transmission Agreement"), is entered into
as of November 19, 1993.
Capitalized terms used in this Agreement, unless otherwise defined
herein, shall have the meanings assigned to such terms in the Participation
Agreement. When used herein, the term "Other Parties" shall mean each and
all of the parties to this Agreement other than EPE, and the term "Other
Participants" shall mean each and all of the Participants other than EPE.
Where used herein the term "Assume" shall mean "assume" as such term is used
in Section 365 of the Code. The terms "include" and "including" are not
limiting, regardless of whether accompanied by the additional words "but not
limited to," or words of similar impact.
R E C I T A L S:
a. On January 8, 1992 (the "Petition Date"), EPE filed its petition
for relief under Chapter 11 of the Code in the Court.
b. On February 13, 1992, the Court approved a stipulation (the
"Stipulation") between EPE and APS, as Operating Agent, which among other
things allocated $9,255,000 of the invoices previously rendered to EPE under
the Participation Agreement as pre-petition general unsecured claims of the
Other Participants.
c. On September 9, 1992, EPE filed a complaint which commenced
Adversary Proceeding No. 92-1285FM (including all related proceedings and
contested matters, if any, the "Lease Litigation") before the Court.
d. EPE has proposed its "Modified Third Amended Plan of
Reorganization," as corrected September 15, 1993 (together with any modified
or amended plan proposed by EPE providing for the acquisition of EPE by
Central and South West Corporation ("CSW") by means of a merger between EPE
and a wholly-owned, special purpose subsidiary of CSW, with EPE as the
surviving corporation ("Reorganized EPE"), generally referred to as the
"Plan"). For purposes of this Agreement, references to the "Effective Date"
shall mean the Effective Date as provided in the Plan, and references to EPE
will be deemed to refer also to Reorganized EPE with respect to any period
on or after the Effective Date, notwithstanding any separate references to
Reorganized EPE herein.
e. EPE and the Other Parties hereto desire to provide in this
Agreement for the terms and conditions under which EPE would cure its
defaults under and Assume the Participation Agreement, the Switchyard
Agreement, the Valley Transmission Agreement, and related contracts
described or scheduled herein.
f. The Other Participants believe that the Participation Agreement
and related agreements are contracts and/or agreements that are not capable
of being Assumed pursuant to Code Section 365 without the consent of the
Other Participants; EPE disagrees and believes that said agreements are
subject to assumption under Code Section 365; notwithstanding said
positions, the Parties have agreed to settle and provide that Assumption
will be allowed pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, and subject to the terms and conditions stated herein, the
parties hereto agree as follows:
1. EPE Assumption. Subject to all of the terms and conditions set
forth in this Agreement, EPE agrees to Assume, on the Effective Date,
the Participation Agreement, the Switchyard Agreement, the Valley
Transmission Agreement, and to the extent that EPE is not precluded
from such assumption, the following executory agreements and unexpired
leases relating to the ownership, operation, and maintenance of ANPP,
the ANPP High Voltage Switchyard, and/or the "Transmission System," as
such term is defined in the Valley Transmission Agreement (the "Valley
Transmission System"):
(a) all of the Project Agreements;
(b) all Nuclear Fuel Agreements, and all nuclear fuel agreements
relating to the purchase, sale, lease, transfer, disposition,
storage, transportation, mining, conversion, milling, enrichment,
processing, fabrication, and reprocessing of any Nuclear Fuel for
use in, used in or removed from a Reactor entered into by the
Project Manager or the Operating Agent on behalf of EPE or
pursuant to which EPE is a party, excluding the "RGRT Agreement"
(as such term is defined in the Plan);
(c) all agreements between EPE (or EPE and the Other
Participants or any of them) and any third party for land, land
rights, or water rights relating to ANPP;
(d) certain agreements listed on Schedule 1 hereto relating to
tax or other indemnification obligations between EPE and the Other
Participants, or any of them (the "Tax Agreements");
(e) certain agreements listed on Schedule 2 hereto entered into
pursuant to or relating to the Switchyard Agreement and/or the
Valley Transmission Agreement or relating to the ANPP High Voltage
Switchyard and/or the Valley Transmission System or pursuant to
which the ANPP High Voltage Switchyard and/or the Valley
Transmission System are constructed, operated, or owned by the
participants; and
(f) certain agreements listed on Schedule 3 hereto entered into
pursuant to or relating to the Participation Agreement or relating
to ANPP or pursuant to which ANPP is constructed, operated, or
owned by the Participants
(collectively, the "ANPP Assumed Agreements"). Notwithstanding any
provision of this Agreement to the contrary, EPE shall have no
obligation to assume the Palo Verde Leases, and the Palo Verde Leases
shall not constitute ANPP Assumed Agreements. EPE agrees that the Palo
Verde Leases do not include the Tax Agreements. After the Effective
Date, nothing in the Case, the Plan, or any order confirming the Plan
(the "Confirmation Order") shall entitle EPE to interfere with, oppose,
or deny prior operating procedures and actions taken, conducted, and
approved by the Participants prior to the Effective Date, except in
accordance with procedures provided under the ANPP Assumed Agreements.
Any cure and Assumption by EPE of the ANPP Assumed Agreements shall be
deemed to have occurred only upon the Effective Date.
2. EPE Payments under the ANPP Assumed Agreements. On, or promptly
following, the date of entry of the Confirmation Order (the
"Confirmation Date"), subject to all of the terms and conditions set
forth in this Agreement, as a condition of its Assumption of the ANPP
Assumed Agreements, EPE will pay the following amounts to the following
persons:
(a) the amount of $9,255,000.00 under the Participation Agreement
to the Operating Agent for the benefit of all of the Other
Participants;
(b) the amount of $38,658.50 under the Switchyard Agreement, to
SRP, as operating agent under the Switchyard Agreement, for the
benefit of all of the Switchyard Participants, other than EPE; and
(c) the amount of $12,933.47 under the Valley Transmission
Agreement to SRP, as operating agent under the Valley Transmission
Agreement, for the benefit of all of the Valley Transmission
Participants, other than EPE.
If this Agreement is terminated pursuant to Sections 8(c) or 11 hereof,
the amounts specified in subparagraphs (a) through (c) of this Section
2 shall be returned and repaid by the Operating Agent, SRP as operating
agent under the Switchyard Agreement, and SRP as operating agent under
the Valley Transmission Agreement, respectively, to EPE without
interest promptly upon receipt of a wire transfer number evidencing
transfer from EPE of the amounts described in Section 3(i) of this
Agreement.
3. Parties' Agreement To Actions. The parties agree to the following
actions and agreements:
(a) to the Assumption by EPE of the ANPP Assumed Agreements on
the Effective Date without further requirements or steps to comply
with Section 365 of the Code, and the Other Parties hereby waive
as of the Effective Date, any otherwise applicable issues as to
compliance with Section 365; provided, however, that EPE may not
so Assume unless it (i) has paid its participant-share of all
outstanding and due invoices and assessments presented by the
operating agents under or pursuant to the Participation Agreement,
the Switchyard Agreement, and the Valley Transmission Agreement;
(ii) is in compliance with all payment, funding, and any other
material obligations pursuant to Section 8A.7.2 of the
Participation Agreement; and (iii) otherwise has complied in all
material respects with the terms and conditions of this Agreement;
provided, however, that unless any of the Other Parties informs
EPE by written notice, on or before the Confirmation Date, that
EPE is not in compliance with this Agreement, and specifies the
nature of such noncompliance, EPE shall be deemed to be in
compliance with this Agreement as of the Confirmation Date;
(b) that EPE's payment of the amounts set forth in Section 2 of
this Agreement in compliance with said Section shall constitute a
complete and full accord, satisfaction, settlement, and cure of
all payment defaults of EPE (as to which EPE is the sole
defaulting Participant) existing and known by the Other Parties as
of the date of a Court order approving this Agreement (the "Court
Approval Date"), together with all interest thereon accruing
through and including the Confirmation Date, under the
Participation Agreement, the Switchyard Agreement, the Valley
Transmission Agreement and all other ANPP Assumed Agreements;
provided, however, that nothing contained in this Agreement or
pursuant to any discharge or release in or pursuant to the Plan,
the Confirmation Order, any order of the Court requiring the
filing of claims by a deadline (the "Bar Date"), or the Code shall
operate to relieve EPE of any other liability or obligation it may
have that is asserted under any of the ANPP Assumed Agreements for
liabilities and obligations which are assessed or asserted against
EPE in common with one or more of the Other Parties;
(c) that, on the Effective Date, except as to claims that may be
asserted and which are preserved under Section 12 hereof, (i) EPE
shall, by the terms of this Agreement, be released and discharged
from (A) any and all claims, causes of action, rights of
termination, and all other rights and remedies of any other kind
and nature at law or equity held by any of the Other Parties
arising from actions taken or failures to act by EPE in the Lease
Litigation prior to the Court Approval Date and (B) any other
defaults of EPE under the ANPP Assumed Agreements existing and
known by the Other Parties prior to the Court Approval Date, and
(ii) the Other Parties shall, by the terms of this Agreement, be
released and discharged from any and all claims, causes of action,
rights of termination and all other rights and remedies of any
other kind and nature at law or equity held by EPE arising from
any defaults of any of the Other Parties under the ANPP Assumed
Agreements existing and known by EPE prior to the Court Approval
Date; provided, however, that nothing in this Agreement, or
pursuant to the Plan, the Confirmation Order, the Bar Date, or the
Code shall operate to relieve EPE and/or any of the Other Parties
of any liability or obligation it or they may have that may be
assessed or asserted under any of the ANPP Assumed Agreements
against two or more of the participants in common, and further
provided, however, that nothing in this paragraph shall diminish
or impair the Release referred to in Section 5 hereof;
(d) that the release and discharge by EPE pursuant to Section
3(c)(ii) above shall be deemed to apply to claims and causes of
action against the Other Parties solely in their capacities as
participants, but not in their capacities as operating agents;
(e) that, on the Effective Date, except as to claims that may be
asserted and which are preserved under Section 12 hereof, EPE
shall, by the terms of this Agreement, be released by the Other
Parties from any liability for attorneys' fees and administrative
costs or claims incurred in connection with the Case at any time
prior to the Confirmation Date, not to include any such attorneys'
fees and administrative costs or claims (i) that might arise from
any of the Other Parties' transactions with EPE regarding the sale
of power or transmission other than pursuant to the ANPP Assumed
Agreements; or (ii) that may be asserted by any of the Other
Parties which are unrelated to the ANPP Assumed Agreements;
(f) that, notwithstanding any and all other provisions of this
Agreement, including without limitation subparagraphs 3(c), (d),
and (e) above, if EPE shall assert in writing any claims, causes
of action, rights of termination or other rights and remedies of
any kind or nature at law or equity existing and known by EPE
prior to the Court Approval Date and arising from any actual or
alleged act or failure to act prior to the Court Approval Date
("Claims") by APS or SRP, respectively, in their respective
capacities as operating agent under any of the ANPP Assumed
Agreements, any and all releases and discharges granted by APS or
SRP, respectively (whichever is the subject of such Claims), to
EPE pursuant to subparagraph 3(c)(i)(B), (d), or (e) above shall
forthwith become null, void and of no further force or effect; and
APS or SRP, respectively (whichever is the subject of such
Claims), shall be entitled to assert any and all claims, causes of
actions, rights of termination and other rights and remedies free
of the provisions of subparagraphs 3(c)(i)(B), (d), and (e) above
and of the releases and discharges to which reference is made
therein;
(g) that, immediately upon its receipt of the payments specified
in Section 2 of this Agreement, APS, as Operating Agent, shall pay
to EPE the amount of $3,818,409.62 representing amounts withheld
by APS, as of the date hereof, and not distributed to EPE under
the Participation Agreement;
(h) that, immediately upon its receipt of the payments specified
in Section 2 of this Agreement, SRP, as operating agent under the
Switchyard Agreement and the Valley Transmission Agreement, shall
pay to EPE the respective amounts of $8,047.92 and $12,708.88,
representing amounts withheld by SRP, as operating agent under
such agreements, as of the date hereof, and not distributed to EPE
under the Switchyard Agreement and the Valley Transmission
Agreement, respectively;
(i) that if this Agreement is terminated pursuant to Sections
8(c) or 11 hereof, the amounts specified in subparagraphs (g) and
(h) of this Section 3 shall be returned and repaid without
interest to the respective operating agents by EPE promptly and in
any event within five (5) business days of such termination; and
(j) that, on the Effective Date, solely for purposes of the Plan,
the Other Parties shall be deemed to have withdrawn any and all
proofs of claims filed in the Case by APS, as Operating Agent,
SRP, as operating agent under the Switchyard Agreement and the
Valley Transmission Agreement, and the Other Parties solely in
their capacities as parties to and/or participants under the ANPP
Assumed Agreements; provided, however, that such action by the
Other Parties shall have no effect on any liability or obligation
of EPE hereunder or under the ANPP Assumed Agreements.
The intent of this Agreement (including but not limited to this Section
3) is that if, for example and not by way of limitation, a claim such
as an environmental claim is made against any of the parties hereto for
damages commencing on the date of an act, event, or occurrence whether
before or after the Petition Date, then EPE, as a participant under the
Participation Agreement, the Switchyard Agreement, and/or the Valley
Transmission Agreement, as the case may be, shall be and remain liable
for its pro rata share, based upon its full participant interest
pursuant to such agreements, of any damages awarded on account of such
claim, notwithstanding any and all provisions or effect of this
Agreement, the Plan, the Confirmation Order, the Bar Date, or the Code.
To the extent this Agreement releases, waives, or limits claims of the
Other Parties against EPE or of EPE against the Other Parties, as the
case may be, such claims are limited to those which result solely from
breaches of EPE or the Other Parties but not to liabilities or
obligations which are assessed or asserted against EPE in common with
one or more of the Other Parties or which result, directly or
indirectly, from claims by entities other than the Other Parties
against EPE in common with one or more of the Other Parties.
4. Interim Agreements. Subject to all of the terms and conditions
set forth in this Agreement, during the period after the Confirmation
Date and until and including the earlier to occur of the Effective Date
and the date upon which this Agreement shall have been terminated in
accordance with Section 8(c) or 11 hereof:
(a) EPE and the Other Parties agree that, with respect to all
matters relating to the ANPP Assumed Agreements, EPE and the Other
Parties shall be governed by the provisions of such ANPP Assumed
Agreements and this Agreement; provided, however, that this
section (i) shall not impair EPE's right to assert, or prohibit
EPE from asserting, any argument or defense that the Court should
assume or exercise jurisdiction, and (ii) shall not impair the
Other Parties' right to assert, or prohibit the Other Parties from
asserting, any argument or defense that the Court should not
assume or exercise jurisdiction. Notwithstanding the preceding
sentence, none of the automatic stay of Section 362 of the Code,
the post-confirmation injunction of Sections 524 and 1141 under
the Code, or any stay or injunction under the Plan or the
Confirmation Order shall be applicable to any actions or remedies
taken by the Other Parties under the ANPP Assumed Agreements
(including the giving of notice of default and implementation of
appropriate remedies and enforcement procedures) to address any
action or inaction of EPE subsequent to the Confirmation Date.
(b) Except as expressly provided in Section 3 hereof, nothing
contained in this Agreement or pursuant to the Plan, the
Confirmation Order, the Bar Date, or including without limitation
any discharge, injunction, or release pursuant to the Plan or the
Confirmation Order shall operate to waive, affect, or restrict in
any manner whatsoever the rights of the Other Parties or of EPE
under any of the ANPP Assumed Agreements to enforce in accordance
therewith any and all rights thereunder with respect to any
default or breach of EPE or the Other Parties under such
agreements. No waiver or release contained herein with respect to
any default or breach of EPE or the Other Parties under any of the
ANPP Assumed Agreements will be deemed to have waived any
subsequent default or breach of EPE or the Other Parties under any
of the ANPP Assumed Agreements notwithstanding the similarity of
said subsequent default or breach to similar defaults or breaches
of EPE or the Other Parties waived or released herein; provided,
however, that the Other Parties agree that, except as provided in
Section 3(a) hereof, they will not assert any defaults or breaches
under the ANPP Assumed Agreements as a bar to EPE's assumption of
the ANPP Assumed Agreements.
(c) Nothing contained in this Agreement, the Case, the Plan, or
the Confirmation Order shall entitle EPE to interfere with,
oppose, or deny prior operating procedures and actions taken,
conducted, and approved by the ANPP Participants pursuant to the
ANPP Assumed Agreements, except in accordance with procedures
provided under the ANPP Assumed Agreements.
5. Limited Waiver and Release. Concurrently with the execution of
this Agreement, EPE and APS will execute the limited waiver of statute
of limitations attached hereto as Appendix A and made a part hereof by
reference (the "Limited Waiver"). On the Effective Date, EPE and each
of the Other Parties will execute and deliver the release attached
hereto as Appendix B and made a part hereof by reference (the
"Release").
6. Form of Payments. All payments required pursuant to Sections 2
and 3 of this Agreement shall be made by wire transfer of cash or
immediately available funds pursuant to written instructions from the
party to whom payment is to be made.
7. No Amendment or Change. Nothing in this Agreement shall
constitute or be deemed to constitute any amendment, change, or
modification of any type or nature of any of the ANPP Assumed
Agreements.
8. The Plan.
(a) It is the intent of the Parties to this Agreement that (i)
this Agreement be approved by the Court, become effective, and
continue to be effective and binding on EPE as a party hereto,
(ii) EPE's Assumption of the ANPP Assumed Agreements in accordance
with this Agreement is a condition precedent to the effectiveness
of the Plan, (iii) subject to the provisions of Section 11(d)
hereof, this Agreement will be the exclusive procedure by which
EPE can Assume the ANPP Assumed Agreements, and (iv)
notwithstanding anything to the contrary in the Plan, including
but not limited to Section 7.7 thereof, or in the Merger Agreement
(as such term is defined in the Plan), in the event of any
inconsistency between the Plan or the Merger Agreement and this
Agreement, this Agreement will control.
(b) EPE shall use all reasonable efforts, in good faith, to
obtain a Confirmation Order which provides that (i) EPE's
Assumption of the ANPP Assumed Agreements in accordance with this
Agreement is a condition precedent to the effectiveness of the
Plan, (ii) subject to the provisions of Section 11 hereof, this
Agreement will be the exclusive procedure by which EPE can Assume
the ANPP Assumed Agreements, and (iii) notwithstanding anything to
the contrary in the Plan, including but not limited to Section 7.7
thereof, or in the Merger Agreement (as such term is defined in
the Plan), in the event of any inconsistency between the Plan or
the Merger Agreement and this Agreement, this Agreement will
control.
(c) In the event that the Confirmation Order does not contain all
of the provisions of Section 8(b)(i), (ii) and (iii) set forth
above, then any of the Other Parties may terminate this Agreement,
in which case this Agreement shall be void and of no further
effect. Upon such a termination, any extensions provided under
Section 9 or provided under any separate stipulations of the
parties shall survive and control. If the Agreement is not
terminated by the Other Parties on or prior to the Confirmation
Date, then EPE shall be deemed to be in full compliance with this
Agreement on the Confirmation Date, and unless terminated in
accordance with Section 11 herein, this Agreement shall be the
exclusive procedure through which EPE may assume the ANPP Assumed
Agreements.
(d) The Other Parties, solely in their capacities as parties to,
and/or participants under, the ANPP Assumed Agreements,
acknowledge and agree that so long as this Agreement has been
approved by an Approval Order (as defined in Section 9(a) hereof)
in accordance with Section 9(a) hereof and has not been terminated
under Sections 8(c) or 11 hereof, the Other Parties, solely in
their capacities as parties to and/or participants under the ANPP
Assumed Agreements, will not object to or vote for or against the
Plan;
(e) APS, as Operating Agent, will reasonably cooperate in
required Nuclear Regulatory Commission proceedings and will assist
in providing information for other regulatory proceedings (if any)
required for the Assumption of the ANPP Assumed Agreements
pursuant to this Agreement; and
(f) If the Plan is amended, EPE will make all best efforts to
ensure that the Plan will be consistent with the terms of this
Agreement.
9. Procedures and Timing.
(a) Promptly following the execution of this Agreement by all of
the parties hereto, the parties hereto (and the Mediator, if he is
agreeable) shall jointly file motions for approval of this
Agreement. EPE shall use its best efforts to obtain an order of
the Court approving its entry into this Agreement as provided in
Section 10(b) hereof (the "Approval Order"). EPE agrees to the
extension, as to the Other Parties, of any deadline that may
otherwise be applicable to the Other Parties, to dates determined
by the Court, for (i) filing objections or casting ballots on the
Plan (which deadline as so extended shall not be prior to six (6)
days after the entry of any order denying the joint motion
referred to above); (ii) filing or completion of any pretrial
stipulation, order, or schedule regarding confirmation of the
Plan; (iii) completion of any discovery regarding confirmation of
the Plan; or (iv) presentation of any evidence or examination of
any witness in any hearing on confirmation of the Plan; and in the
event of any termination of this Agreement (x) EPE and the Other
Parties shall cooperate with each other in good faith to enable
the Other Parties and EPE to make a full presentation of their
positions during the confirmation proceedings, and (y) each of the
Other Parties shall have the right to object to the Plan and to
vote for or against confirmation of the Plan;
(b) if, prior to the entry of the Approval Order, any change of
circumstance occurs in the Case or under the Plan that is
materially adverse to the Other Parties under the terms of this
Agreement or under the ANPP Assumed Agreements, then, upon written
notice by any of the Other Parties, this Agreement shall be void
and without effect unless such change of circumstances is
expressly waived by all of the Other Parties; provided, however,
that the extensions granted or for which provision is made in
subparagraph (a) above shall remain applicable for at least seven
(7) days after the declaration by a Participant of a material
adverse change; and
(c) Subject to consent of the Mediator, EPE shall provide the
Other Parties access, on a confidential basis, to a draft of the
proposed settlement of issues relating to the Lease Litigation,
including any proposed revision of any agreements related to the
Palo Verde Leases (as such term is defined in the Plan). To the
extent that any settlement among EPE and the parties to the Lease
Litigation requires the consent of the Other Participants, the
Other Participants will review the settlement in good faith,
consistent with Section 15 of the Participation Agreement, and the
required consent, if any, will not be unreasonably withheld.
After the Court Approval Date, any agreement relating to the Lease
Litigation or modification of such agreement, either in the Case
or pursuant to the Plan, that violates any of the ANPP Assumed
Agreements shall be addressed pursuant to the procedures under the
ANPP Assumed Agreements. The Other Participants agree that, based
solely on the description of the consensual treatment of Class 6,
Class 12(a), and Class 12(b) (as such terms are defined in the
Modified Third Amended Plan of Reorganization, as corrected
September 15, 1993 (the "Current Plan")), as set forth in Section
3.8(A) and (C) and Section 3.14(A) and (B) of the Current Plan,
and on the representations and warranties of EPE set forth below
in this Section 9(c)(i) and (ii), the Other Participants agree to
waive the requirement under the Participation Agreement, if any,
for their consent to such consensual treatment. Assuming that
Classes 6, 12(a), and 12(b) accept the consensual treatment set
forth in Section 3.8(A) and (C) and Section 3.14(A) and (B) of the
Current Plan, EPE hereby represents and warrants as of the
Effective Date to the Other Participants that:
(i) Reorganized EPE will not seek to be treated or
classified as, and will not be deemed, a Transferee, as such
term is defined in Section 15.10 of the Participation
Agreement, and for all purposes of the Participation
Agreement, Reorganized EPE will be deemed to have succeeded
by operation of law to all of the rights and obligations of
Reorganized EPE under the Participation Agreement and to have
been previously a Participant thereunder; and
(ii) the liabilities or obligations of Reorganized EPE with
respect to its full 15.8 percent participant interest in the
ANPP shall not be affected, released, or waived as a result
of any release of Class 6 Claims, Class 12(a) Claims, and
Class 12(b) Claims, and to the extent not covered by such
Classes, any of the Lease Obligation Bondholders, Secured
Lease Obligation Bondholders, Palo Verde Indenture Trustees,
Funding Corporations, Owner Trustees, Owner Trusts, and Owner
Participants (as such terms are defined in the Plan) under
any provision of the Plan, the OP Settlement, or the
Settlement Agreements (as such terms are defined in the Plan)
or otherwise in the Case from any liability or obligation
with respect to ANPP or the Palo Verde Leases; and
Reorganized EPE agrees to indemnify the Other Participants
and hold them harmless to the extent that any of said
releases results in any of the Other Participants becoming
obligated for more than their respective participant
interests; provided, however, that Reorganized EPE's
obligation to indemnify the Other Participants hereunder
shall in no event result in payments by Reorganized EPE in
respect of any such liability or obligation which, in the
aggregate, per occurrence, exceed an amount equal to EPE's
proportionate Participant - share in ANPP.
A further condition to the Other Parties' waiver of consent
pursuant to this Section 9(c) is that, as of the Effective Date,
neither the "OP Settlement" (as defined in the Plan) or amendments
to the Plan shall materially and adversely affect the Other
Participants.
10. Conditions to Binding Effect; Persons Bound; Assignments. If,
between the date this Agreement is executed and the Court Approval
Date, the Other Parties have not terminated this Agreement in
accordance with Section 9(b) hereof, this Agreement will become binding
upon EPE and the Other Parties on the earliest date upon which all of
the following have occurred: (a) this Agreement has been executed and
delivered by EPE and each of the Other Parties; (b) an order of the
Court approving this Agreement has been entered; (c) at least ten (10)
days have elapsed since the date such order was entered by the Court,
and no stay of the order approving this Agreement is in effect; and (d)
EPE and APS have executed and delivered the Limited Waiver. This
Agreement shall be binding upon and inure to the benefit of EPE and
each of the Other Parties and their respective successors and assigns,
including Reorganized EPE; provided, however, that (i) the requirement
in subpart (c) of the preceding sentence can be waived by EPE and Other
Parties. None of the parties hereto may assign any of its rights or
obligations hereunder except to a party who, concurrently with such
assignment, becomes a Participant pursuant to and in accordance with
the Participation Agreement with respect to the assigning person's
interest in ANPP. Any person who becomes a Participant shall be bound
by this Agreement.
11. Termination. (a) During the period after the Court Approval Date
and on or prior to the Confirmation Date, this Agreement will terminate
and be of no further force or effect in the event that: (i)
confirmation of the Plan is denied by the Court; (ii) the Plan is
withdrawn by EPE; or (iii) there is any change in the Plan as on file
on the Court Approval Date or in the Case which materially and
adversely affects any of the Other Parties, in their reasonable
discretion, and any of the Other Parties so affected promptly shall
have notified EPE and each of the Other Parties of the same.
(b) In the event that, on or prior to the Confirmation Date, any of
the Other Parties notifies EPE that it is not in compliance with this
Agreement, EPE or any of the Other Parties shall have the right, on the
earlier to occur of (i) five business days after the date that such
notice was sent by facsimile transmission with receipt confirmed or
(ii) the Confirmation Date, to declare this Agreement to be terminated
and of no further force and effect. Upon such a termination, any
extensions provided under Section 9 or provided under any separate
stipulations of the parties shall survive and control.
(c) Notwithstanding that this Agreement shall have become binding and
shall not have been terminated prior to the Confirmation Date, EPE and
the Other Parties shall have the right to declare this Agreement to be
terminated and of no further force and effect subject to the provisions
of Section 11(d) hereof in the event that (i) the Plan is revoked in
accordance with its terms or (ii) the Confirmation Order is vacated.
(d) In the event that one or more of the conditions to binding effect
contained in Section 10 hereof are not satisfied or are not waived or
this Agreement shall have been terminated in accordance with its terms:
(i) the parties agree that the Stipulation shall continue to control
issues between EPE and the Other Parties pending any further order of
the Court; and (ii) this Agreement and the agreements and recitals set
forth herein will have no further force and effect and may not be
utilized in any subsequent proceeding or court; provided, however, in
the event of any termination of this Agreement, any extensions provided
under Section 9 or provided under any separate stipulations of the
parties shall survive and remain as a binding requirement and agreement
of EPE and the Other Parties.
12. Preservation of Certain EPE or PNM Rights, Claims and Remedies.
Nothing in this Agreement shall impair or modify any right, claim, or
remedy of EPE or PNM in connection with the issues described in
Appendix A of the Transition Agreement, dated September 2, 1993,
between PNM and EPE (the "Transition Agreement") or waive any default
of EPE or PNM that may exist pursuant to any agreement (collectively,
the "Preserved Claims"); provided, however:
(a) PNM and EPE agree that (i) PNM will not assert a non-monetary
default by EPE under the ANPP Assumed Agreements as a bar to
Assumption of the ANPP Assumed Agreements by EPE pursuant to this
Agreement, and (ii) PNM or EPE will not assert a non-monetary
default by either PNM or EPE under the ANPP Assumed Agreements at
any time prior to or on the Confirmation Date;
(b) If (i) the Transition Agreement terminates and EPE and PNM
are unable to reach the Amended Interim Agreement contemplated by
the Transition Agreement, and (ii) PNM or EPE determines that the
party contemplating the claim is itself materially and adversely
affected in its ability to import remote generation as a result of
EPE or PNM import of generation entitlement from PVNGS, then PNM
or EPE may pursue any and all Preserved Claims after the
Confirmation Date; and
(c) In no event shall PNM or EPE assert prior to the Confirmation
Date that a default under the Transition Agreement, the Interim
Transmission Agreement and Agreement to Arbitrate Between EPE and
PNM, or any other agreement may or shall constitute a default
under any of the ANPP Assumed Agreements.
Except as provided in this Section 12, PNM and EPE will be governed by
the terms of this Agreement, including the waivers and releases in
Section 3 and in the Release.
13. Governing Law. This Agreement will be governed by, and construed
in accordance with, the laws of the State of Arizona.
14. Execution in Counterparts. This Agreement may be executed in any
number of counterparts.
15. Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
16. Modification, Waiver, Etc. No amendment, modification,
supplement, waiver, or consent made hereunder shall be effective unless
in writing and signed, in the case of an amendment, modification, or
supplement, by all of the parties hereto, and, in the case of a waiver
or consent, by the party or parties making such waiver or consent.
17. Notices. Any and all notices with respect to this Agreement shall
be in writing, both by facsimile transmission and by first class mail,
directed as follows:
To EPE and Palo Verde Owners
Corporate Secretaries:
To EPE
Eduardo Rodriguez
303 Oregon Street
El Paso, Texas 79901
To APS
Nancy C. Loftin
400 N. 5th Street
Sta. 9068
Phoenix, Arizona 85004
To PNM
Patrick T. Ortiz
Alvarado Square
MS 0804
Albuquerque, New Mexico 87158
To SRP
William K. O'Neal
P.O. Box 52025
PAB 215
Phoenix, Arizona 85072
To SCE
Kenneth S. Stewart
2244 Walnut Grove Avenue
Room 330
Rosemead, California 91770
To LADWP
Judith K. Kasner
111 N. Hope Street
Room 1555
Los Angeles, California 90051
To SCPPA
Eldon A. Cotton
111 N. Hope Street
Room 1155
Los Angeles, California 90051
To Counsel:
To EPE
Bryan Krakauer
SIDLEY & AUSTIN
One First National Plaza
Chicago, IL 60603
To APS
Donald L. Gaffney
SNELL & WILMER
One Arizona Center
400 E. Van Buren
Phoenix, AZ 85004-0001
To SRP
Gary Keltner
JENNINGS, STROUSS & SALMON
2 North Central, Suite 1600
Phoenix, AZ 85004-2393
To CSW
Joris M. Hogan
MILBANK, TWEED, HADLEY & McCLOY
One Chase Manhattan Plaza
New York, NY 10005
Except as otherwise provided in this Agreement, Notices shall be deemed to
be received upon the earlier to occur of, (i) in the case of facsimile
transmission, receipt by the party to whom such notice is addressed, and
(ii) in the case of delivery by first class mail, on the third business day
following the date upon which the notice is mailed. During the confirmation
hearing, all notices hereunder to counsel attending the hearing shall also
be made by hand delivery.
EPE agrees that a representative of management from APS (the "APS
Representative") will receive all notices and/or documents that are provided
to the Oversight Committee, as that term is defined in the Plan.
EL PASO ELECTRIC COMPANY
By: David H. Wiggs
__________________________________
Its: Chairman and Chief Operating
Officer
_________________________________
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
By: William F. Conway
__________________________________
Its: Executive Vice President -
Nucleur
_________________________________
<PAGE>
SALT RIVER PROJECT AGRICULTURAL
Attest: IMPROVEMENT AND POWER DISTRICT
By: By: David G. Areghini
_______________________________ __________________________________
Its: Its: Associate General Manager,
Power, Construction &
Engineering Svcs
______________________________ _________________________________
<PAGE>
SOUTHERN CALIFORNIA EDISON COMPANY
By: Harold B. Ray
__________________________________
Its: Sr. Vice President
_________________________________
<PAGE>
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By: M. Phyllis Bourque
__________________________________
Its: Sr. Vice President
_________________________________
<PAGE>
SOUTHERN CALIFORNIA PUBLIC
Attest: POWER AUTHORITY
By: Glenda L. Robinson By: Eldon A. Cotton
______________________________ __________________________________
Its: Administrative Secretary Its: Agent
_____________________________ _________________________________
<PAGE>
DEPARTMENT OF WATER AND POWER OF
Attest: THE CITY OF LOS ANGELES
By: Glenda L. Robinson By: Eldon A. Cotton
______________________________ __________________________________
Its: Administrative Secretary Its: Assistant General Manager- Power
_____________________________ _________________________________
Schedule 1
TAX AGREEMENTS
1. That certain letter agreement, dated August 14, 1986, from
Arizona Public Service Company ("APS"), El Paso Electric Company ("EPE") and
Public Service Company of New Mexico ("PNM"), addressed to Southern
California Edison Company ("SCE"), Re: "Arizona Public Service Company, El
Paso Electric Company and Public Service Company of New Mexico: Refinancing
of Interests in Palo Verde Nuclear Generating Station" (the "Indemnity
Letter").
2. That certain Contribution Agreement, dated as of August 14,
1986, by and between APS, EPE and PNM, relating to the Indemnity Letter.
3. That certain letter agreement, dated August 21, 1986, from
APS, EPE and PNM, addressed to SCE, amending the Indemnity Letter.
4. That certain letter agreement, dated December 2, 1986, from
APS, EPE and PNM, addressed to SCE, further amending the Indemnity Letter.
5. Any similar agreement(s) entered into by EPE in connection
with EPE's 1987 sale/leaseback transactions.
6. Any indemnity agreements entered into between APS and EPE
whereby EPE indemnified APS for any liabilities arising out of APS
delivering Annual Reports of Operating Agent (relating to PVNGS insurance)
under EPE's sale/leaseback transactions.
7. Indemnity Agreement, effective as of December 29, 1983,
between APS and EPE relating to the issuance of $63,500,000 principal amount
of Annual Tender Pollution Control Revenue Bonds, 1983 Series A (El Paso
Electric Company Palo Verde Project), and other indemnity agreements, if
any, relating to other pollution control bond issuances on behalf of EPE.
Schedule 2
SWITCHYARD AND TRANSMISSION AGREEMENTS*
Those agreements, contracts, leases, purchase orders and other
documents shown on the attached Annex A.
_______________
* "Agreements, contracts, leases, purchase orders and other similar
documents" are referred to collectively herein as "Agreements." By
generating the attached Annex A, the Switchyard Participants and the
Valley Transmission Participants have made a good faith effort to list
all ongoing active Agreements currently in effect at or with respect to
the ANPP High Voltage Switchyard and the Valley Transmission System.
This list is subject to change at any time as old Agreements expire,
existing Agreements are amended or are extended, and new Agreements are
entered into. The parties to the Cure and Assumption Agreement to
which this Schedule 2 is attached agree that the listing of these
Agreements is not intended to, and will not, limit the liabilities and
obligations of EPE as a Switchyard Participant or as a Valley
Transmission Participant in common with the other such participants
with respect to any and all Agreements in effect or to be in effect at
or with respect to the ANPP High Voltage Switchyard and the Valley
Transmission System, whether or not listed hereon.
ANNEX A
The following agreements as the same shall have been amended to
date:
1. ANPP Kyrene 500/230 KV Switchyard Interconnection Agreement,
effective on or about July 24, 1980.
2. Palo Verde-North Gila Line ANPP High Voltage Switchyard
Interconnection Agreement, effective on or about June 7, 1984.
3. ANPP Transmission Project-Westwing Switchyard Amended
Interconnection Agreement, effective on or about August 14, 1986.
4. All other agreements of any type or nature entered into by
SRP as operating agent relating to the ANPP High Voltage Switchyard and/or
the Valley Transmission System.
Schedule 3
ANPP AGREEMENTS*
Those agreements, contracts, leases, purchase orders and other
documents shown on the attached computer-generated Annex A and the attached
Annex B.
_______________
* "Agreements, contracts, leases, purchase orders and other similar
documents" are referred to collectively herein as "Agreements." By
generating the attached Annex A and Annex B, the Participants have made
a good faith effort to list all ongoing active Agreements currently in
effect at or with respect to ANPP. This list is subject to change at
any time as old Agreements expire, existing Agreements are amended or
are extended, and new Agreements are entered into. The parties to the
Cure and Assumption Agreement to which this Schedule 3 is attached
agree that the listing of these Agreements is not intended to, and will
not, limit the liabilities and obligations of EPE as a Participant in
ANPP in common with the Other Participants with respect to any and all
Agreements in effect or to be in effect at or with respect to ANPP,
whether or not listed hereon.
ANNEX A
[Omitted]
ANNEX B
The following agreements as the same shall have been amended to
date:
1. Agreement for Construction of Arizona Nuclear Power Project,
dated as of January 15, 1973, between APS, as Agent for all Participants in
Arizona Nuclear Power Project, and Bechtel Power Corporation.
2. Agreement for Engineering and Procurement Services, dated as
of January 15, 1973, between APS, as Project Manager of Arizona Nuclear
Power Project, and Bechtel Power Corporation.
3. Agreement No. 13904 - Option and Purchase of Effluent, dated
as of April 23, 1973, among APS and the Cities of Phoenix, Glendale, Mesa,
Scottsdale, and Tempe, the Town of Youngtown, and Salt River Project
Agricultural Improvement and Power District.
4. Nuclear Steam Supply System Contract, dated as of August 20,
1973, between APS as Project Manager of Arizona Nuclear Power Project and
Combustion Engineering, Inc.
5. Turbine Generator Contract, dated as of March 21, 1974,
between APS, as Project Manager and Operating Agent for Palo Verde Nuclear
Generating Station, and General Electric Company.
6. Supplemental Agreement of Settlement, dated June 2, 1980,
between APS, Salt River Project Agricultural Improvement and Power District,
Southern California Edison Company, Public Service Company of New Mexico, El
Paso Electric Company, Arizona Electric Power Corporation Inc., and The
Department of Energy, ANPP.
7. Agreement for Delivery of Natural UF6, dated June 2, 1980,
between APS, Salt River Agricultural Improvement and Power District,
Southern California Edison Company, Public Service Company of New Mexico, El
Paso Electric Company, Arizona Electric Power Cooperative, Inc., and the
Department of Energy, ANPP.
8. Agreement for the Sale and Purchase of Wastewater Effluent,
dated as of June 12, 1981, between APS, Salt River Project Agricultural
Improvement and Power District and the City of Tolleson, as amended by
Amendment No. 1 thereto dated as of November 12, 1981, and Amendment No. 2
thereto dated as of June 4, 1986.
9. Master Purchase and Sale Agreement for Renewal Parts and
Factory Repair Work for Palo Verde Nuclear Steam Supply Systems and Related
Equipment, dated as of August 14, 1981, between APS and Combustion
Engineering, Inc.
10. Master Purchase and Sale Agreement for Renewal Parts and
Factory Repair Work for Palo Verde Turbine Generators and Auxiliary Drive
Turbines, dated as of August 6, 1982, between APS as agent for all
Participants in Palo Verde Nuclear Generating Station and General Electric
Company.
11. Master Agreement between APS and Singer Link-Miles Simulation
Corporation - Agreement No. PV 89-20903, dated as of July 27, 1989.
12. Contract, dated July 17, 1991 Under Master Agreement Between
APS and Simulation, Systems & Services Technologies for the Procurement of a
Second Simulator for the Palo Verde Nuclear Generating Station.
13. All purchase orders entered into by the Project Manager or
the Operating Agent relating to ANPP.
14. All software and other licensing agreements relating to ANPP.
15. All agreements for legal services or support entered into by
the Operating Agent relating to ANPP.
16. All settlement agreements entered into by the Project Manager
or the Operating Agent relating to ANPP.
17. All agreements for confidentiality, indemnification or
waivers entered into by the Project Manager or the Operating Agent relating
to ANPP.
18. All other agreements of any type or nature entered into by
the Project Manager or the Operating Agent relating to ANPP.
Appendix A
AGREEMENT REGARDING ASSERTION OF CLAIMS
This AGREEMENT is by and between El Paso Electric Company, a Texas
corporation ("EPE") and Arizona Public Service Company, an Arizona
corporation ("APS"), individually and as Operating Agent (the "Operating
Agent") under the Arizona Nuclear Power Project ("ANPP") Participation
Agreement dated as of August 23, 1973, as amended by Amendment Nos. 1
through 13 thereto (the "Participation Agreement").
WHEREAS, EPE has commenced a voluntary case under Chapter 11 of
the United States Bankruptcy Code (11 U.S.C. Sections 101-1330) which is
currently pending in the United States Bankruptcy Court for the Western
District of Texas (the "Court"), Case No. 92-10148 FM (the "Bankruptcy
Action"); and
WHEREAS, this Agreement is being executed in connection with and
as an integral part of that certain Cure and Assumption Agreement dated as
of November __, 1993 among EPE, APS, and other parties (the "Assumption
Agreement");
WHEREAS, capitalized terms used herein and not otherwise defined
will have the meanings assigned to such terms in the Assumption Agreement;
WHEREAS, Section 5 of the Assumption Agreement contemplates
execution of this Agreement by EPE and APS, and execution of the Release by
EPE, APS and each of the Other Parties on the Effective Date;
WHEREAS, upon the Release becoming effective under Section 2 of
the Release, each Participant will release each other Participant from
certain claims (the "Released Claims"); and
WHEREAS, pursuant to the Plan, EPE and CSW have entered into an
Agreement and Plan of Merger dated as of May 3, 1993, as amended on May 18,
1993, and August 27, 1993, and as may hereafter be amended (the "Merger
Agreement") providing for the acquisition of EPE by CSW by means of a merger
(the "Merger") between EPE and a wholly-owned, special purpose subsidiary of
CSW.
WHEREAS, the Release shall be effective only upon the "Effective
Date" of the Merger (as that term is defined in the Plan of Reorganization
(the "Merger Effective Date"), but shall have absolutely no force and effect
and shall be null and void if the Merger Agreement is terminated, it being
the express intention of EPE and APS that if the Merger is not fully
consummated, the Release Claims can be pursued by EPE and APS in the same
manner and with the same effect as if these Released Claims were to be the
subject of litigation and/or arbitration instituted as of the day of the
signing of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties contained herein, the parties hereto agree as
follows:
A. EPE and APS acknowledge and stipulate that: (i) APS and EPE
are parties to the Bankruptcy Action pending before the Court; and (ii) as
of the date of the execution of this Agreement, APS and EPE each could
exercise whatever right that party has, if any, to commence litigation to
adjudicate the Released Claims and assert defenses against the other party.
Nothing herein will impair EPE's right to assert that the Released Claims
could, as of the date of execution of this Agreement, be litigated before
the Court and nothing herein will prohibit APS from asserting any contrary
position relating to the appropriate forum for any such litigation.
B. Consistent with part F below, in the event that the Merger
Agreement is terminated according to its terms and action is taken by filing
a claim or initiating an arbitration proceeding to adjudicate the Released
Claims on or before ninety (90) days from the date upon which the Assumption
Agreement is terminated:
(1) EPE and APS each agrees that the rights and protections
granted to them by the following two sentences of Section 21.5.2 of the
Arizona Nuclear Power Project Participation Agreement are hereby
relinquished and shall not apply to any litigation or dispute between
EPE and APS to adjudicate the Released Claims: "A claim based on
Willful Action must be perfected by filing suit in a court of competent
jurisdiction within three years after the Willful Action occurs. All
claims made thereafter relating to the same Willful Action shall be
barred by this Section 21.5.2."; and
(2) the party against which Released Claims are brought
shall not assert a defense to those claims based upon any period of
limitation, whether prescribed by regulation or applicable law or
contract provision.
C. EPE and APS each consent to the entry of an order by the
Court (the "Approval Order") incorporating the terms of this Agreement and
providing that: (i) the terms of this Agreement are binding upon EPE and
APS; (ii) subject to part F(i) below, any period of limitation that arises
from applicable law, regulation or contract provision that is applicable to
the Released Claims shall be suspended so that the period of limitation will
not expire prior to ninety (90) days after the date upon which the
Assumption Agreement is terminated; and (iii) the Court will retain
jurisdiction over EPE and APS to interpret and enforce the Approval Order
and this Agreement.
D. Upon the execution of this Agreement, EPE and APS shall
cooperate to secure prompt entry of the Approval Order. EPE and APS
stipulate that entry of any order approving and/or enforcing the terms of
this Agreement is necessary and appropriate (within the meaning of 11 U.S.C.
Section 105) to implement the Plan. APS and EPE reserve the right to
contest the content of such an order other than the Approval Order.
E. EPE and APS agree that each party will be deciding whether to
commence or to forgo commencing litigation to adjudicate the Released Claims
in reliance upon the provisions of this Agreement.
F. Except as provided in this Agreement, nothing herein shall be
deemed to: (i) revive or make actionable any claims that, as of the date of
execution of this Agreement and entry by the Court of the Approval Order,
are already time-barred by operation of any applicable limitation period,
including, but not limited to, Section 21.5.2 of the Participation
Agreement; or (ii) cause either APS (individually or as Operating Agent) or
EPE to waive any claim or defense available to either party, including, but
not limited to, those provided under Section 21.5.2 of the Participation
Agreement or other applicable statutes of limitation, other than as provided
in this Agreement, until release occurs pursuant to the terms of the
Assumption Agreement on the Effective Date.
G. If a court of competent jurisdiction determines that any
provision of this Agreement is not enforceable, that provision may be
severed from this Agreement and the remainder of this Agreement shall remain
in full force and effect.
H. This Agreement shall be binding upon the signatories, their
predecessors, successors, assigns, affiliated entities, parents,
subsidiaries and upon Reorganized EPE.
I. This Agreement may be executed in any number of counterparts.
EL PASO ELECTRIC COMPANY
By:___________________________
Its:__________________________
ARIZONA PUBLIC SERVICE COMPANY
By:___________________________
Its:__________________________
Appendix B
RELEASE
This RELEASE is made as of , 199 , by and among the
Participants who are parties to the Arizona Nuclear Power Project
Participation Agreement dated as of August 23, 1973, as amended by Amendment
Nos. 1 through 13 thereto (the "Participation Agreement"). Capitalized
terms used herein and not otherwise defined herein will have the meanings
assigned to such terms in the Cure and Assumption Agreement dated as of
, 199_ among El Paso Electric Company ("EPE") and the Other Parties
(the "Assumption Agreement").
WHEREAS, this Release is being executed in connection with and as an
integral part of the Assumption Agreement; and
WHEREAS, when used hereinafter, the terms "Participants" and "Other
Participants" will include the Project Manager and the Operating Agent.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein and in the Assumption Agreement, the parties
hereto agree as follows:
1. Release. Except as otherwise expressly stated herein, each of the
Participants hereby releases each other Participant and each of their
respective past and present subsidiaries, affiliates, agents, officers,
directors, and employees (collectively, the "Released Parties") of and from
all causes of action, suits, claims, and demands whatsoever, in law or in
equity, whether based on contract, tort, or otherwise, and whether or not
based on active or passive negligence or Wilful Action of any person, which
any such Participant or any of their respective subsidiaries or affiliates
ever had or now has on account of or by reason of any breach or default
under the Participation Agreement arising or existing on or prior to the
Petition Date, arising out of or relating to the outages at any Generating
Unit at ANPP commencing in 1989. Notwithstanding anything to the contrary
herein, nothing herein shall be interpreted or deemed to release any
Participant from any obligation to perform all of its duties and fulfill all
of its responsibilities under and in strict compliance with the
Participation Agreement, any of the ANPP Assumed Agreements, or otherwise
with respect to ANPP from and after the date of execution hereof.
2. Effective Date. This Release shall become effective only upon (a)
the execution and delivery hereof by all parties hereto and (b) satisfaction
of all conditions to effectiveness of the Assumption Agreement and the
effectiveness thereof as provided in paragraph 10 thereof, and, except as
provided below, thereafter this Release shall be binding upon and inure to
the benefit of each of the Participants and the other Released Parties and
their respective successors and assigns.
3. Governing Law. This Agreement will be governed by, and construed
in accordance with, the laws of the State of Arizona.
4. Execution in Counterparts. This Agreement may be executed in any
number of counterparts.
EL PASO ELECTRIC COMPANY
By:_________________________________
Its:________________________________
ARIZONA PUBLIC SERVICE COMPANY
By:_________________________________
Its:________________________________
SALT RIVER PROJECT AGRICULTURAL
Attest and Countersign IMPROVEMENT AND POWER DISTRICT
_________________________________ ____________________________________
Its:_____________________________ Its:________________________________
SOUTHERN CALIFORNIA EDISON COMPANY
By:_________________________________
Its:________________________________
PUBLIC SERVICE COMPANY OF
NEW MEXICO
By:_________________________________
Its:________________________________
SOUTHERN CALIFORNIA PUBLIC
Attest: POWER AUTHORITY
_________________________________ By:_________________________________
Its:_____________________________ Its:________________________________
DEPARTMENT OF WATER AND POWER OF
Attest: THE CITY OF LOS ANGELES
_________________________________ By:_________________________________
Its:_____________________________ Its:________________________________
Accepted and Agreed:
CENTRAL AND SOUTH WEST CORPORATION
By:______________________________
Its:_____________________________
EXHIBIT 10.2a
SECOND AMENDMENT TO
THE ARIZONA PUBLIC SERVICE COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
Effective January 1, 1982, ARIZONA PUBLIC SERVICE COMPANY (the
"Company") adopted the ARIZONA PUBLIC SERVICE COMPANY DIRECTORS' DEFERRED
COMPENSATION PLAN (the "Plan"). The Plan was subsequently amended and
restated in its entirety effective January 1, 1986. The Plan was thereafter
amended effective January 1, 1991. By this instrument, the Company desires
to amend the Plan to allow participants to make a onetime irrevocable
election to transfer their Deferral Option I accounts under the Plan to the
Pinnacle West Capital Corporation, Arizona Public Service Company, SunCor
Development Company and El Dorado Investment Company Deferred Compensation
Plan.
1. This Amendment shall amend only the provisions of the Plan as set
forth herein, and those provisions not expressly amended hereby shall be
considered in full force and effect.
2. Section V of the Plan is hereby amended by adding new Paragraph E
at the end thereof which shall read as follows:
E. One-Time Election to Transfer Amounts Under Deferral Option I.
Notwithstanding anything in this Section V or the Plan to the
contrary, each Participant who is dessignated to participate in the
Pinnacle West Capital Corporation, Arizona Public Service Company,
SunCor Development Company and El Dorado Investment Company Deferred
Compensation Plan (the "DCP") may elect to transfer all of the Deferral
Option I accounts established for him under the Plan to the DCP. Such
an election shall be irrevocable and must be made on forms acceptable
to the Committee no later than the later of (a) December 31, 1992, or
(b) December 31 of the calendar year preceding the calendar year for
which the Participant is first designated for participation in the DCP.
A Participant who elects to transfer his Deferral Option I accounts to
the DCP pursuant to this Paragraph E shall cease to be a Participant in
Deferral Option I of the Plan as of the effective date of such trans-
fer. All transfers under this Paragraph E shall be effective as of the
January 1 next following the Participant's election. Nothing in this
Paragraph E shall permit a Participant or the Beneficiary of a
Participant to receive a distribution of the Participant's Deferral
Option I accounts prior to the occurrence of a distribution event as
provided for in this Section V if such accounts are not transferred to
the DCP, or the occurrence of any distribution event as provided for in
the DCP with respect to Deferral Option I accounts which are
transferred to the DCP.
3. The provisions of this Amendment shall be effective as of
January 1, 1993.
Except as amended and supplemented by this instrument, the Company
hereby ratifies the Plan as restated effective January 1, 1986, and
thereafter amended.
DATED: April 4, 1993.
ARIZONA PUBLIC SERVICE COMPANY
By: Armando Flores
------------------------------------
Its: Vice President - HR
--------------------------------
EXHIBIT 10.3a
THIRD AMENDMENT TO
THE ARIZONA PUBLIC SERVICE COMPANY
DEFERRED COMPENSATION PLAN
Effective January 1, 1978, ARIZONA PUBLIC SERVICE COMPANY (the
"Company") adopted the ARIZONA PUBLIC SERVICE COMPANY DEFERRED COMPENSATION
PLAN (the "Plan"). The Plan was subsequently amended and restated several
times and was most recently amended and restated in its entirety on
December 15, 1983. The Plan was thereafter amended on December 22, 1986 and
on December 23, 1987. By this instrument, the Company desires to amend the
Plan to allow participants to make a one-time irrevocable election to
transfer their Deferral Option I accounts under the Plan to the Pinnacle
West Capital Corporation, Arizona Public Service Company, SunCor Development
Company and El Dorado Investment Company Deferred Compensation Plan.
1. This Amendment shall amend only the provisions of the Plan as set
forth herein, and those provisions not expressly amended hereby shall be
considered in full force and effect.
2. Section IV of the Plan is hereby amended by adding new Paragraph F
at the end thereof which shall read as follows:
F. One-Time Election to Transfer Amounts Under Deferral Option I.
Notwithstanding anything in this Section IV or the Plan to the
contrary, each Participant who is designated to participate in the
Pinnacle West Capital Corporation, Arizona Public Service Company,
SunCor Development Company and El Dorado Investment Company Deferred
Compensation Plan (the "DCP") may elect to transfer all of the Deferral
Option I accounts established for him under the Plan to the DCP. Such
an election shall be irrevocable and must be made on forms acceptable
to the Committee no later than the later of (a) December 31, 1992, or
(b) December 31 of the calendar year preceding the calendar year for
which the Participant is first designated for participation in the DCP.
A Participant who elects to transfer his Deferral Option I accounts to
the DCP pursuant to this Paragraph F shall cease to be a Participant in
Deferral Option I of the Plan as of the effective date of such trans-
fer. All transfers under this Paragraph F shall be effective as of the
January 1 next following the Participant's election. Nothing in this
Paragraph F shall permit a Participant or the Beneficiary of a
Participant to receive a distribution of the Participant's Deferral
Option I accounts prior to the occurrence of a distribution event as
provided for in this Section IV if such accounts are not transferred to
the DCP, or the occurrence of any distribution event as provided for in
the DCP with respect to Deferral Option I accounts which are trans-
ferred to the DCP.
3. The provisions of this Amendment shall be effective as of
January 1, 1993.
Except as amended and supplemented by this instrument, the Company
hereby ratifies the Plan as amended and restated effective January 1, 1984,
and thereafter amended.
DATED: April 4, 1993.
ARIZONA PUBLIC SERVICE COMPANY
By: Armando Flores
------------------------------
Its: Vice President - HR
--------------------------
EXHIBIT 10.4ac
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the ______ day of
______________, 199__, by and between Arizona Public Service Company, an
Arizona corporation (hereinafter referred to as the "Company") and
(hereinafter referred to as the "Executive"):
W I T N E S S E T H :
WHEREAS, the Executive has been employed by the Company in various
managerial capacities for a period of years, possesses intimate knowledge of
the business and affairs of the Company, and has acquired certain confiden-
tial information and data with respect to the Company; and
WHEREAS, the Company desires to insure, insofar as possible, that
it will continue to have the benefit of the Executive's services and to
protect its confidential information and goodwill; and
WHEREAS, the Company recognizes that circumstances may arise in
which a change in the control of the Company through acquisition or other-
wise occurs thereby causing uncertainty of employment without regard to the
Executive's competence or past contributions which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the
Company and its shareholders, and the Company and the Executive wish to
provide reasonable security to the Executive against changes in the
Executive's relationship with the Company in the event of any such change in
control; and
WHEREAS, both the Company and the Executive are desirous that a
proposal for any change of control or acquisition will be considered by the
Executive objectively and with reference only to the business interests of
the Company and its shareholders;
WHEREAS, the Executive will be in a better position to consider
the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisi-
tion; and
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
1. Definitions.
(a) "Accrued Benefits" shall mean the benefits payable to
the Executive as described in Section 6.
(b) "Act" shall mean the Securities Exchange Act of 1934.
(c) "Base Period Income" shall be an amount equal to the
Executive's "annualized includible compensation" for the "base period"
as defined in Section 280G(d)(1) and (2) of the Code.
(d) "Beneficial Owner" shall have the same meaning as given
to that term in Rule 13d-3 of the General Rules and Regulations of the
Act, provided that any pledgee of Company voting securities shall not
be deemed to be the Beneficial Owner thereof prior to its disposition
of, or acquisition of voting rights with respect to, such securities.
(e) "Cause" shall be limited to (i) the engaging by the
Executive in conduct which has caused demonstrable and serious injury
to the Company, monetary or otherwise, as evidenced by a determination
in a binding and final judgment, order or decree of a court or adminis-
trative agency of competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal, in an action, suit or proceeding,
whether civil, criminal, administrative or investigative; (ii) con-
viction of a felony, as evidenced by a binding and final judgment,
order or decree of a court of competent jurisdiction, in effect after
exhaustion or lapse of all rights of appeal, which the Company deter-
mines has a significant adverse impact on it in the conduct of its
business; (iii) unreasonable neglect or refusal by the Executive to
perform the Executive's duties or responsibilities (unless significant-
ly changed without the Executive's consent); or (iv) a significant
violation by the Executive of the Company's established policies and
procedures as in effect of the date of the Change of Control which
could subject the Executive to disciplinary action by the Company.
(f) "Change of Control" shall mean a change in ownership or
managerial control of the stock, assets or business of the Company
resulting from one (1) or more of the following circumstances:
(i) A change of control of the Company or Pinnacle West
Capital Corporation, the parent of the Company, of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Act, or any
successor regulation of similar import, regardless of whether the
Company or Pinnacle West Capital Corporation is subject to such
reporting requirement;
(ii) A change of control in ownership of the Company
through a transaction or series of transactions, such that any
Person (other than Pinnacle West Capital Corporation) is or
becomes the Beneficial Owner, directly or indirectly, of securi-
ties of the Company representing twenty percent (20%) or more of
the combined voting power of the Company's then outstanding
securities;
(iii) Any consolidation or merger of the Company or
Pinnacle West Capital Corporation in which neither the Company nor
Pinnacle West Capital Corporation is the continuing or surviving
corporation or pursuant to which shares of the common stock of the
Company or Pinnacle West Capital Corporation would be converted
into cash (other than cash attributable to dissenters' rights),
securities or other property provided by a Person other than the
Company or Pinnacle West Capital Corporation, other than a consol-
idation or merger of either the Company or Pinnacle West Capital
Corporation in which the holders of the common stock of either the
Company or Pinnacle West Capital Corporation immediately prior to
the consolidation or merger have approximately the same propor-
tionate ownership of common stock of the surviving corporation
immediately after the consolidation or merger;
(iv) The shareholders of either the Company or Pinnacle
West Capital Corporation approve a sale, transfer or other dispo-
sition of all or substantially all of the assets of either the
Company or Pinnacle West Capital Corporation to a Person other
than the Company or Pinnacle West Capital Corporation; or
(v) During any period of two (2) consecutive years,
individuals who, at the beginning of such period, constituted the
Board of Directors of the Company or Pinnacle West Capital Corpo-
ration cease, for any reason, to constitute at least a majority
thereof, unless the election or nomination for election of each
new director was approved by the vote of at least two-thirds (2/3)
of the directors then still in office who were directors at the
beginning of the period.
Notwithstanding any provision herein to the contrary, the filing of a
proceeding for the reorganization of the Company or Pinnacle West
Capital Corporation under Chapter 11 of the Federal Bankruptcy Code or
any successor or other statute of similar import shall not be deemed to
be a Change of Control for purposes of this Agreement.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(h) "Disability" shall have the same meaning as given to
that term in the Company's long-term disability plan for employees.
(i) "Employment Period" shall mean a period commencing on
the date of a Change of Control, and ending on the earlier (i) of the
second anniversary of such date, or (ii) the date on which the Execu-
tive attains the age of sixty-five (65) provided that the Executive
meets the criteria of the "bona fide executive" exception to the
requirements of the Age Discrimination in Employment Act, codified at
29 U.S.C. Section 631(c).
(j) "Good Reason" shall mean:
(i) the required relocation of the Executive, without
the Executive's consent, to an employment location which is more
than seventy-five (75) miles from the Executive's employment loca-
tion on the date of the Change of Control;
(ii) a significant reduction by the Company in the
compensation and/or benefits provided to the Executive as in
effect on the date of the Change of Control as the same may be
increased from time to time during the Employment Period which
reduction is not generally effective for all executives employed
by the Company (or its successor) in the Executive's class or
category;
(iii) the removal of the Executive from or any failure
to reelect the Executive to any of the positions held by the
Executive on the date of the Change of Control or any other
positions to which the Executive shall thereafter be elected or
assigned except in the event that such removal or failure to
reelect relates to the termination by the Company of the
Executive's employment for Cause or by reason of death, Disability
or voluntary retirement;
(iv) a significant adverse change, without the
Executive's written consent, in the nature or scope of the
Executive's authority, powers, functions, duties or responsibili-
ties, or a material reduction in the level of support services,
staff, secretarial and other assistance, office space and accou-
trements available to a level below that which was provided to the
Executive on the date of the Change of Control and that which is
necessary to perform any additional duties assigned to the Execu-
tive following the Change of Control, which change or reduction is
not generally effective for all executives employed by the Company
(or its successor) in the Executive's class or category; or
(v) breach of any material provision of this Agreement
by the Company.
(k) "Person" shall mean any individual, partnership, joint
venture, association, trust, corporation or other entity (including a
"group" as defined in Section 13(d)(3) of the Act), other than an
employee benefit plan of the Company or an entity organized, appointed
or established pursuant to the terms of any such benefit plan.
(l) "Termination Date" shall mean, except as otherwise
provided in Section 12, (i) the Executive's date of death; (ii) the
date of the Executive's voluntary early retirement as agreed upon in
writing by the Company and the Executive; (iii) sixty (60) days after
the delivery of the Notice of Termination terminating the Executive's
employment on account of Disability pursuant to Section 9, unless the
Executive returns full-time to the performance of his or her duties
prior to the expiration of such period; (iv) the date of the Notice of
Termination if the Executive's employment is terminated by the Execu-
tive voluntarily other than for Good Reason; and (v) sixty (60) days
after the delivery of the Notice of Termination if the Executive's
employment is terminated by the Company (other than by reason of
Disability) or by the Executive for Good Reason.
(m) "Termination Payment" shall mean the amount described in
Section 6(b)(i).
(n) "Total Payments" shall mean the sum of the Termination
Payment and any other payments to or for the benefit of the Executive
in the nature of compensation, receipt of which is contingent on the
Change of Control and to which Section 280G of the Code applies.
2. Employment Period. The Company and the Executive shall
retain the right to terminate the employment of the Executive at any time
and for any reason prior to a Change of Control. If a Change of Control
occurs when the Executive is employed by the Company, the Company will
continue thereafter to employ the Executive, and the Executive will remain
in the employ of the Company, in accordance with the terms and provisions of
this Agreement, during the Employment Period.
3. Duties. During the Employment Period, the Executive shall,
in the same capacities and positions held by the Executive at the time of
such Change of Control or in such other capacities and positions as may be
agreed to by the Company and the Executive in writing, devote the
Executive's best efforts, attention and skill to the business and affairs of
the Company, as such business and affairs now exist and as they may hereaf-
ter be conducted. The services which are to be performed by the Executive
hereunder are to be rendered at an employment location which is not more
than seventy-five (75) miles from the Executive's employment location of the
date of the Change of Control, or in such other place or places as shall be
mutually agreed upon in writing by the Executive and the Company from time
to time. The Executive shall not be required to be absent from such
employment location for more than forty-five (45) consecutive days in any
fiscal year without the Executive's consent.
4. Compensation. During the Employment Period, the Executive
shall be compensated as follows:
(a) The Executive shall receive, at such intervals and in
accordance with such standard policies as may be in effect on the date
of the Change of Control, an annual salary not less than the
Executive's annual salary as in effect as of the date of the Change of
Control, subject to adjustment as provided in Section 5;
(b) The Executive shall be reimbursed, at such intervals and
in accordance with such standard policies as may be in effect on the
date of the Change of Control, for any and all monies advanced in
connection with the Executive's employment for reasonable and necessary
expenses incurred by the Executive on behalf of the Company, including
travel expenses;
(c) The Executive shall be included to the extent eligible
thereunder in any and all plans providing general benefits for the
Company's employees, including but not limited to, group life insur-
ance, hospitalization, disability, medical, dental, pension, profit
sharing, savings and stock bonus plans and be provided any and all
other benefits and perquisites made available to other employees of
comparable status and position, on the same terms and conditions as
generally provided to employees of comparable status and position;
(d) The Executive shall receive annually not less than the
amount of paid vacation and not fewer than the number of paid holidays
received annually immediately prior to the Change of Control or such
greater amount of paid vacation and number of paid holidays as may be
made available annually to other employees of comparable status and
position with the Company; and
(e) The Executive shall be included in all plans providing
special benefits to other employees of comparable status, including but
not limited to bonus, deferred compensation, incentive compensation,
supplemental pension, stock option, stock appreciation, stock bonus and
similar or comparable plans extended by the Company from time to time
to managers and other employees of comparable status.
5. Annual Compensation Adjustments. During the Employment
Period, the Board of Directors of the Company, an appropriate committee of
the Board or the President of the Company, whichever is appropriate, shall
consider and appraise, at least annually, the Executive's compensation. In
determining such compensation, the Board, the appropriate committee thereof
or the President, whichever is appropriate, shall consider the commensurate
increases given to other corporate officers and key employees generally, the
scope and success of the Company's operations, the expansion of Executive's
duties and the Executive's performance of his duties.
6. Payments Upon Termination.
(a) Accrued Benefits. For purposes of this Agreement, the
Executive's Accrued Benefits shall include the following amounts: (i)
all salary earned or accrued through the Termination Date; (ii) reim-
bursement for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred
by the Executive through the Termination Date; (iii) any and all other
cash benefits previously earned through the Termination Date and
deferred at the election of the Executive or pursuant to any deferred
compensation plans then in effect; (iv) a lump sum payment of the bonus
or incentive compensation otherwise payable to the Executive with
respect to the year in which termination occurs under any bonus or
incentive compensation plan or plans in which the Executive is a
participant; and (v) all other payments and benefits to which the
Executive may be entitled under the terms of any benefit plan of the
Company. Payment of Accrued Benefits shall be made promptly in accor-
dance with the Company's prevailing practice and the terms of any
applicable benefit plans, contracts or arrangements.
(b) Termination Payment. (i) For purposes of this Agreement
and subject to the limits set forth in Section 6(b)(ii) hereof, the
Executive's Termination Payment shall be an amount equal to (A) plus
(B), multiplied by (C), where
(A) Equals the Executive's rate of annual salary, as in
effect on the date of the Change of Control and as adjusted
thereafter from time to time pursuant to Section 5;
(B) Equals the amount of the average annual dollar
award paid to the Executive pursuant to the Company's regular
bonus plan or arrangement with respect to the four (4) years
(or the number of years of the Executive's employment if less
than four (4) years) preceding the Termination Date which
shall be determined by dividing the total dollar amount paid
to the Executive under such plan or arrangement with respect
to such number of years by four (4) (or the number of years
of the Executive's employment if less than four (4) years);
and
(C) Equals one (1).
The Termination Payment shall be payable in a lump sum on the
Executive's Termination Date. Such lump sum payment shall not be reduced by
any present value or similar factor. The Executive shall not be required to
mitigate the amount of such payment by securing other employment or other-
wise and such payment shall not be reduced by reason of the Executive secur-
ing other employment or for any other reason.
(ii) It is the intention of the Company and the Executive
that no portion of the Termination Payment and any other payment under
this Agreement, or payments to or for the benefit of the Executive
under any other agreement, plan or arrangement be deemed to be an
"excess parachute payment" as defined in Section 280G of the Code. It
is agreed that the present value of the Total Payments shall not exceed
an amount equal to two and ninety-nine hundredths (2.99) times the
Executive's Base Period Income, which is the maximum amount which the
Executive may receive without becoming subject to the tax imposed by
Section 4999 of the Code or which the Company may pay without loss of
deduction under Section 280G(a) of the Code. Present value for purpos-
es of this Agreement shall be calculated in accordance with the regula-
tions issued under Section 280G of the Code. Within sixty (60) days
following delivery of the Notice of Termination or notice by the
Company to the Executive of its belief that there is a payment or bene-
fit due the Executive which will result in an excess parachute payment
as defined in Section 280G of the Code, the Executive and the Company
shall, at the Company's expense, obtain the opinions, which need not be
unqualified, of legal counsel and certified public accountants or a
firm of recognized executive compensation consultants. The Executive
shall select said legal counsel, certified public accountants and
executive compensation consultants; provided that if the Company does
not accept one (1) or more of the parties selected by the Executive,
the Company shall provide the Executive with the names of such legal
counsel, certified public accountants and/or executive compensation
consultants as the Company may select; if the Executive does not accept
the party or parties selected by the Company, the legal counsel,
certified public accountants and/or executive compensation consultants
selected by the Executive and the Company, respectively, shall select
the legal counsel, certified public accountants and/or executive
compensation consultants, whichever is applicable, who shall provide
the opinions required by this Section 6(b)(ii). The opinions required
hereunder shall set forth (a) the amount of the Base Period Income of
the Executive, (b) the present value of Total Payments and (c) the
amount and present value of any excess parachute payments. In the
event that such opinions determine that there would be an excess
parachute payment, the Termination Payment or any other payment deter-
mined by such counsel to be includible in Total Payments shall be
reduced or eliminated as specified by the Executive in writing deliv-
ered to the Company within thirty (30) days of his or her receipt of
such opinions or, if the Executive fails to so notify the Company, then
as the Company shall reasonably determine, so that under the bases of
calculation set forth in such opinions there will be no excess para-
chute payment. The provisions of this Section 6(b)(ii), including the
calculations, notices and opinions provided for herein shall be based
upon the conclusive presumption that the compensation and benefits
provided for in Section 4 hereof and any other compensation, including
but not limited to the Accrued Benefits, earned on or after the date of
Change of Control by the Executive pursuant to the Company's compensa-
tion programs if such payments would have been made in the future in
any event, even though the timing of such payment is triggered by the
Change of Control, are reasonable compensation for services rendered
prior to the Change of Control; provided, however, that in the event
legal counsel so requests in connection with the opinion required by
this Section 6(b)(ii), a firm of recognized executive compensation con-
sultants, selected by the Executive and the Company pursuant to the
procedures set forth above, shall provide an opinion, upon which such
legal counsel may rely, as to the reasonableness of any item of compen-
sation as reasonable compensation for services rendered prior to the
Change of Control by the Executive. In the event that the provisions
of Sections 280G and 4999 of the Code are repealed without succession,
this Section 6(b)(ii) shall be of no further force or effect.
7. Death. If the Executive shall die during the Employment
Period, but after delivery of a Notice of Termination by the Company for
reasons other than Cause or disability or by the Executive for Good Reason,
the Executive's employment shall terminate on his or her date of death and
the Executive's estate, heirs and beneficiaries shall be entitled to the
Executive's Accrued Benefits as of the Termination Date, all benefits avail-
able to them under the Company's benefits plans as in effect on the Termina-
tion Date on account of the Executive's death, and, subject to the provi-
sions of this Agreement, to such Termination Payment as the Executive would
have been entitled to had the Executive survived. In such event, the
Termination Date shall be sixty (60) days following delivery of the Notice
of Termination subject to the provisions of Section 12.
If the Executive shall die during the Employment Period, but prior
to the delivery of a Notice of Termination, the Executive's employment shall
terminate and the Executive's estate, heirs and beneficiaries shall receive
all the Executive's Accrued Benefits through the Termination Date and all
benefits available to them under the Company's benefit plans as in effect on
the Termination Date on account of the Executive's death.
8. Retirement. If, during the Employment Period, the Executive
and the Company shall execute an agreement providing for the voluntary
retirement of the Executive from the Company, the Executive shall receive
only his or her Accrued Benefits through the Termination Date.
9. Termination for Disability. If, as a result of the
Executive's Disability, the Executive shall have been absent from the
Executive's duties hereunder on a full-time basis for five (5) consecutive
months during the Employment Period, and within sixty (60) days after the
Company notifies the Executive in writing that it intends to terminate the
Executive's employment, the Executive shall not have returned to the per-
formance of his or her duties on a full-time basis, the Company may termi-
nate the Executive's employment, subject to Section 12. During the term of
the Executive's Disability prior to termination, the Executive shall
continue to receive all salary and benefits payable under Sections 4 and 5,
including participation in all employee benefit plans, programs and arrange-
ments in which the Executive was entitled to participate immediately prior
to the disability provided that the Executive's continued participation is
permitted under the terms and provisions of such plans, programs and
arrangements. In the event that the Executive's participation in any such
plan, program or arrangement is barred as the result of such Disability, the
Executive shall be entitled to receive an amount equal to the annual con-
tributions, payments, credits or allocations which would have been paid by
the Company to the Executive, to the Executive's account or on the Execu-
tive's behalf under such plans, programs and arrangements. In the event the
Executive's employment is terminated on account of the Executive's Disabili-
ty in accordance with this Section 9, the Executive shall receive his or her
Accrued Benefits in accordance with Section 6(a) hereof and shall remain
eligible for all benefits provided by any long-term disability programs of
the Company in effect at the time of such termination.
10. Termination Not Giving Rise to a Termination Payment. If,
during the Employment Period, the Executive's employment is terminated for
Cause, or if the Executive voluntarily terminates his or her employment
other than for Good Reason, subject to the procedures set forth in Section
12, the Executive shall be entitled to receive only his or her Accrued
Benefits in accordance with Section 6(a).
11. Termination Giving Rise to a Termination Payment. If, during
the Employment Period, the Executive's employment is terminated by the
Executive for Good Reason or by the Company other than by reason of death,
Disability pursuant to Section 9 or Cause, subject to the procedures set
forth in Section 12,
(a) the Executive shall be entitled to receive and the
Company shall pay the Executive's Accrued Benefits in accordance with
Section 6(a) and, in lieu of further salary payments for periods
following the Termination Date, as severance pay, a Termination Pay-
ment;
(b) the Executive and his or her dependents shall continue
to be covered for one (1) year, under the same terms and conditions, by
the medical plan and/or dental plan maintained by the Company which
covered that Executive and his or her dependents prior to the
Executive's Termination Date. The Executive and the Company shall
share the cost of such continued coverage in the same proportions as
they shared the cost of such coverage prior to the Executive's Termina-
tion Date. For purposes of satisfying the Company's obligation under
the Consolidated Omnibus Budget Reconciliation Act ("COBRA") to con-
tinue group health care coverage to the Executive and his or her
dependents as a result of the Executive's termination of employment,
the period during which the Executive is permitted to continue to
participate in the Company's medical plans and/ or dental plans under
this Section 11(b) shall be taken into account and treated as part of
the period during which the Executive and his or her dependents are
entitled to continued coverage under the Company's group health plans
under COBRA. Following the end of the continuation period specified in
this Section 11(b), the Executive and his or her dependents shall be
covered under such plans and arrangements only as required under the
provisions of COBRA;
(c) the Executive's termination shall be treated as a
"Normal Termination" as defined in the Pinnacle West Capital Corpora-
tion Stock Option and Incentive Plan, which shall entitle the Executive
to exercise any outstanding stock options during the three (3) month
period beginning on the Executive's Termination Date, and any restric-
tions remaining on any "Restricted Stock" (as defined in such Stock
Option and Incentive Plan) awarded to the Executive shall lapse on his
or her Termination Date; and
(d) "out-placement" services will be provided by the Company
to the Executive for a period beginning on the Executive's Termination
Date. Such services shall be provided for a period equal to one (1)
week per year of service with the Company or an affiliate, plus one (1)
week for each two (2) years by which the Executive's age exceeds age
forty (40), plus one (1) week for each Ten Thousand Dollars ($10,000)
of compensation, but in no event less than six (6) months. Notwith-
standing the foregoing, the Executive's right to out-placement services
shall terminate on the earlier of the date on which the Executive
becomes employed in a position commensurate with his or her current
salary and responsibilities or on the last day of the period determined
pursuant to the formula set forth in this Section 11(d). The "out-
placement" services shall be provided by an out-placement company
selected by the Company.
12. Termination Notice and Procedure. Any termination by the
Company or the Executive of the Executive's employment during the Employment
Period shall be communicated by written Notice of Termination to the
Executive if such Notice is delivered by the Company and to the Company if
such Notice is delivered by the Executive, all in accordance with the fol-
lowing procedures:
(a) The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances alleged to provide a
basis for termination.
(b) Any Notice of Termination by the Company shall be
approved by a resolution duly adopted by a majority of the directors of
the Company then in office, specifying in detail the basis for such
termination.
(c) If the Company shall give a Notice of Termination for
Cause or by reason of Disability and the Executive in good faith
notifies the Company that a dispute exists concerning such termination
within the fifteen (15) day period following the Executive's receipt of
such notice, the Executive may elect to continue his or her employment
during such dispute. If it is thereafter determined that (i) the
reason given by the Company for termination did exist, the Executive's
Termination Date shall be the earlier of (A) the date on which the
dispute is finally determined, either by mutual written agreement of
the parties or pursuant to Section 14, (B) the date of the Company's
Notice of Termination for Cause, (C) the date of the Executive's death,
or (D) one day prior to the end of the Employment Period, and the
Executive shall not be entitled to a Termination Payment based on
events occurring after the Company delivered its Notice of Termination;
or (ii) the reason given by the Company for termination did not exist,
the employment of the Executive shall continue as if the Company had
not delivered its Notice of Termination and there shall be no Termina-
tion Date arising out of such notice.
(d) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that
a dispute exists concerning the termination within the fifteen (15) day
period following the Company's receipt of such notice, the Executive
may elect to continue his or her employment during such dispute. If it
is thereafter determined that (i) Good Reason did exist, the
Executive's Termination Date shall be the earlier of (A) the date on
which the dispute is finally determined, either by mutual written
agreement of the parties or by a court of competent jurisdiction, (B)
the date of the Executive's death, or (C) one day prior to the end of
the Employment Period, and the Executive's Termination Payment shall
reflect events occurring after the Executive delivered his or her
Notice of Termination; or (ii) Good Reason did not exist, the employ-
ment of the Executive shall continue after such determination as if the
Executive had not delivered the Notice of Termination asserting Good
Reason.
(e) If the Executive does not elect to continue employment
pending resolution of a dispute regarding a Notice of Termination under
Sections 12(c) and (d), and it is finally determined that the reason
for termination set forth in such Notice of Termination did not exist,
if such notice was delivered by the Executive, the Executive will be
deemed to have voluntarily terminated his or her employment and if
delivered by the Company, the Company will be deemed to have terminated
the Executive other than by reason of death, disability or Cause.
(f) If the opinion required to be delivered pursuant to
Section 6(b)(ii) shall not have been delivered on or before the date
that would otherwise constitute the Termination Date, the Termination
Date shall be delayed to the earlier of the date on which such opinion
is delivered or one (1) day prior to the end of the Employment Period.
13. Obligations of the Executive.
(a) The Executive agrees that if, during the Employment
Period, the Executive's employment is terminated in a manner entitling
the Executive to a Termination Payment or the Executive has voluntarily
terminated his or her employment, the Executive shall not, for a period
commencing on the Termination Date and ending after one (1) year, (i)
act in a similar capacity for any electric utility company which
competes to a substantial degree with the Company in the State of
Arizona or (ii) engage in any activity involving substantial competi-
tion with the Company in the electric utility industry in the State of
Arizona, without the prior written approval of the Company's Board of
Directors; provided, however, that nothing in this Section 13(a) shall
prohibit the Executive from owning stock or other securities of a
competitor amounting to less than twenty percent (20%) of the stated
capital of such competitor.
(b) The Executive covenants and agrees, during the
Executive's employment by the Company and following his or her Termina-
tion Date, to hold in strict confidence any and all information in the
Executive's possession as a result of the Executive's employment with
the Company; provided that nothing in this Agreement shall be construed
as prohibiting the Executive from reporting any suspected instance of
illegal activity of any nature, any nuclear safety concern, any
workplace safety concern or any public safety concern to the United
States Nuclear Regulatory Commission, United States Department of Labor
or any federal or state governmental agency or prohibiting the Execu-
tive from participating in any way in any state or federal administra-
tive, judicial or legislative proceeding or investigation with respect
to any such claims and matters.
14. Arbitration. All claims, disputes and other matters in
question between the parties arising under this Agreement, other than
Section 13 which may be enforced by the Company through injunctive relief,
shall be decided by arbitration in accordance with the rules of the American
Arbitration Association, unless the parties mutually agree otherwise. Any
arbitration required under this Agreement shall be held in Phoenix, Arizona,
unless the parties mutually agree otherwise. The Company shall pay the
costs of any such arbitration. The award by the arbitrator shall be final,
and judgment may be entered upon it in accordance with applicable law in any
state or Federal court having jurisdiction thereof.
15. Expenses and Interest. If, after a Change of Control a good
faith dispute arises with respect to the enforcement of the Executive's
rights under this Agreement or if any arbitration or legal proceeding shall
be brought in good faith to enforce or interpret any provision contained
herein, or to recover damages for breach hereof and the Executive is the
prevailing party, the Executive shall recover from the Company any reason-
able attorney's fees and necessary costs and disbursements incurred as a
result of such dispute or legal proceeding, and prejudgment interest on any
money judgment obtained by the Executive calculated at the rate of interest
announced by The Valley National Bank of Arizona from time to time as its
prime rate from the date that payments to the Executive should have been
made under this Agreement.
16. Payment Obligations Absolute. The Company's obligation
during and after the Employment Period to pay the Executive the compensation
and to make the arrangements provided herein shall be absolute and uncondi-
tional and shall not be affected by any circumstances, provided that the
Company may apply amounts payable under this Agreement to any debts owed to
the Company by the Executive on his or her Termination Date, and provided
further that the amount payable under this Agreement shall be offset by any
amounts payable to the Executive under a separate severance plan, agreement
or arrangement established by the Company so that in no event shall the
total amount received by the Executive be more than the amount permitted
under Section 6(b)(ii). All amounts payable by the Company under this
Agreement shall be paid without notice or demand. Each and every payment
made under this Agreement by the Company shall be final. Notwithstanding
the foregoing, in the event that the Company has paid an Executive more than
the amount to which the Executive is entitled under this Agreement, the
Company shall have the right to recover all or any part of such overpayment
from the Executive or from whomsoever has received such amount.
17. Successors. (a) If all or substantially all of the Company's
business and assets are sold, assigned or transferred to any Person, or if
the Company merges into or consolidates or otherwise combines with any
Person which is a continuing or successor entity, then the Company shall
assign all of its right, title and interest in this Agreement as of the date
of such event to the Person which is either the acquiring or successor
corporation, and such Person shall assume and perform from and after the
date of such assignment the terms, conditions and provisions imposed by this
Agreement upon the Company. Failure of the Company to obtain such assign-
ment shall be a breach of this Agreement. In case of such assignment by the
Company and of assumption and agreement by such Person, all further rights
as well as all other obligations of the Company under this Agreement
thenceforth shall cease and terminate and thereafter the expression "the
Company" wherever used herein shall be deemed to mean such Person(s).
(a) This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal
or legal representatives, estates, executors, administrators, heirs and
beneficiaries. In the event of the Executive's death, all amounts
payable to the Executive under this Agreement shall be paid to the
Executive's estate, heirs and representatives. This Agreement shall
inure to the benefit of, be binding upon and be enforceable by, any
successor, surviving or resulting corporation or other entity to which
all or substantially all of the Company's business and assets shall be
transferred whether by merger, consolidation, transfer or sale. This
Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company.
18. Enforcement. The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
19. Amendment or Termination. The term of this Agreement shall
run until December 31, 199__, and shall continue for additional one (1) year
periods thereafter, unless the Company notifies the Executive in writing six
(6) months prior to December 31, 199__ (or the anniversary of that date in
the event the Agreement continues beyond that date pursuant to the provi-
sions of this Section 19) that it does not intend to continue the Agreement.
Notwithstanding the foregoing, (i) if a Change of Control has occurred on or
before the date on which the Agreement has been terminated by the Company in
accordance with this Section 19, the Agreement shall not terminate with
respect to that Change of Control until the end of the Employment Period,
and (ii) this Agreement shall terminate if, prior to a Change in Control,
the Executive ceases to be employed by the Company as a manager or execu-
tive.
This Agreement sets forth the entire agreement between the
Executive and the Company with respect to the subject matter hereof, and
supersedes all prior oral or written negotiations, commitments, understand-
ing and writing with respect thereto.
This Agreement may not be terminated, amended or modified during
its term as specified above except by written instrument executed by the
Company and the Executive.
20. Withholding. The Company shall be entitled to withhold from
amounts to be paid to the Executive under this Agreement any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold. The Company shall be entitled to rely on an opinion
of counsel if any question as to the amount or requirement of any such with-
holding shall arise.
21. Venue; Governing Law. This Agreement and the Executive's and
Company's respective rights and obligations hereunder shall be governed by
and construed in accordance with the laws of the State of Arizona. Any
action concerning this Agreement shall be brought in the Federal or state
courts located in the County of Maricopa, Arizona, and each party consents
to the venue and jurisdiction of such courts.
22. Notice. Notices given pursuant to this Agreement shall be in
writing and shall be deemed given when received, and if mailed, shall be
mailed by United States registered or certified mail, return receipt
requested, addressee only, postage prepaid, if to the Company, to
Board of Directors
Arizona Public Service Company
400 North 5th Street
Phoenix, Arizona 85004
Attention: Corporate Secretary
or if to the Executive, to
or to such other address as the party to be notified shall have given to the
other.
23. Funding. Benefits payable under this Agreement shall
constitute an unfunded general obligation of the Company payable from its
general assets, and the Company shall not be required to establish any
special fund or trust for purposes of paying benefits under this Agreement.
The Executive shall not have any vested right to any particular assets of
the Company as a result of execution of this Agreement and shall be a gen-
eral creditor of the Company.
24. No Waiver. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision
of this Agreement to be performed by the other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same time or
any prior or subsequent time.
25. Headings. The headings herein contained are for reference
only and shall not affect the meaning or interpretation of any provision of
this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed this
Agreement, on the date and year first above written.
ARIZONA PUBLIC SERVICE COMPANY
By_______________________________________
Its____________________________________
ATTEST:
By________________________________
Its_____________________________
_________________________________________
Executive
EXHIBIT 10.5ac
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of
_______________, 1994, by and between Arizona Public Service Company, an
Arizona corporation (hereinafter referred to as the "Company") and
_______________ (hereinafter referred to as the "Executive"):
W I T N E S S E T H :
WHEREAS, the Executive has been employed by the Company in various
managerial and executive capacities for a period of years, possesses
intimate knowledge of the business and affairs of the Company, and has
acquired certain confidential information and data with respect to the
Company;
WHEREAS, the Company desires to insure, insofar as possible, that
it will continue to have the benefit of the Executive's services and to
protect its confidential information and goodwill; and
WHEREAS, the Company recognizes that circumstances may arise in
which a change in the control of the Company through acquisition or other-
wise occurs thereby causing uncertainty of employment without regard to the
Executive's competence or past contributions which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the
Company and its shareholders, and the Company and the Executive wish to
provide reasonable security to the Executive against changes in the
Executive's relationship with the Company in the event of any such change in
control; and
WHEREAS, both the Company and the Executive are desirous that a
proposal for any change of control or acquisition will be considered by the
Executive objectively and with reference only to the business interests of
the Company and its shareholders;
WHEREAS, the Executive will be in a better position to consider
the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisi-
tion; and
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
1. Definitions.
(a) "Accrued Benefits" shall mean the benefits payable to
the Executive as described in Section 6.
(b) "Act" shall mean the Securities Exchange Act of 1934.
(c) "Base Period Income" shall be an amount equal to the
Executive's "annualized includible compensation" for the "base
period" as defined in Section 280G(d)(l) and (2) of the Code.
(d) "Beneficial Owner" shall have the same meaning as given
to that term in Rule 13d-3 of the General Rules and Regulations of
the Act, provided that any pledgee of Company voting securities
shall not be deemed to be the Beneficial Owner thereof prior to
its disposition of, or acquisition of voting rights with respect
to, such securities.
(e) "Cause" shall be limited to (i) the engaging by the
Executive in conduct which has caused demonstrable and serious
injury to the Company, monetary or otherwise, as evidenced by a
determination in a binding and final judgment, order or decree of
a court or administrative agency of competent jurisdiction, in
effect after exhaustion or lapse of all rights of appeal, in an
action, suit or proceeding, whether civil, criminal, administra-
tive or investigative; (ii) conviction of a felony, as evidenced
by a binding and final judgment, order or decree of a court of
competent jurisdiction, in effect after exhaustion or lapse of all
rights of appeal, which the Company determines has a significant
adverse impact on it in the conduct of its business; (iii) unrea-
sonable neglect or refusal by the Executive to perform the
Executive's duties or responsibilities (unless significantly
changed without the Executive's consent); or (iv) a significant
violation by the Executive of the Company's established policies
and procedures as in effect of the date of the Change of Control
which could subject the Executive to disciplinary action by the
Company.
(f) "Change of Control" shall mean a change in ownership or
managerial control of the stock, assets or business of the Company
resulting from one (1) or more of the following circumstances:
(i) A change of control of the Company or Pinnacle West
Capital Corporation, the parent of the Company, of a nature
that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the
Act, or any successor regulation of similar import, regard-
less of whether the Company or Pinnacle West Capital Corpora-
tion is subject to such reporting requirement;
(ii) A change of control in ownership of the Company
through a transaction or series of transactions, such that
any Person (other than Pinnacle West Capital Corporation) is
or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing twenty percent (20%)
or more of the combined voting power of the Company's then
outstanding securities;
(iii) Any consolidation or merger of the Company or
Pinnacle West Capital Corporation in which neither the Compa-
ny nor Pinnacle West Capital Corporation is the continuing or
surviving corporation or pursuant to which shares of the
common stock of the Company or Pinnacle West Capital Corpora-
tion would be converted into cash (other than cash attribut-
able to dissenters' rights), securities or other property
provided by a Person other than the Company or Pinnacle West
Capital Corporation, other than a consolidation or merger of
either the Company or Pinnacle West Capital Corporation in
which the holders of the common stock of either the Company
or Pinnacle West Capital Corporation immediately prior to the
consolidation or merger have approximately the same propor-
tionate ownership of common stock of the surviving corpora-
tion immediately after the consolidation or merger;
(iv) The shareholders of either the Company or Pinnacle
West Capital Corporation approve a sale, transfer or other
disposition of all or substantially all of the assets of
either the Company or Pinnacle West Capital Corporation to a
Person other than the Company or Pinnacle West Capital Corpo-
ration; or
(v) During any period of two (2) consecutive years,
individuals who, at the beginning of such period, constituted
the Board of Directors of the Company or Pinnacle West Capi-
tal Corporation cease, for any reason, to constitute at least
a majority thereof, unless the election or nomination for
election of each new director was approved by the vote of at
least two-thirds (2/3) of the directors then still in office
who were directors at the beginning of the period.
Notwithstanding any provision herein to the contrary, the filing
of a proceeding for the reorganization of the Company or Pinnacle
West Capital Corporation under Chapter 11 of the Federal Bankrupt-
cy Code or any successor or other statute of similar import shall
not be deemed to be a Change of Control for purposes of this
Agreement.
(g) "Code" shall mean the Internal Revenue Code as amended
from time to time.
(h) "Disability" shall have the same meaning as given to
that term in the Company's long-term disability plan for employ-
ees.
(i) "Employment Period" shall mean a period commencing on
the date of a Change of Control, and ending on the earlier (i) of
the second anniversary of such date, or (ii) the date on which the
Executive attains the age of sixty-five (65) provided that the
Executive meets the criteria of the "bona fide executive" excep-
tion to the requirements of the Age Discrimination in Employment
Act, codified at 29 U.S.C. Section 631(c).
(j) "Good Reason" shall mean:
(i) the required relocation of the Executive, without
the Executive's consent, to an employment location which is
more than seventy-five (75) miles from the Executive's em-
ployment location on the date of the Change of Control;
(ii) a significant reduction by the Company in the
compensation and/or benefits provided to the Executive as in
effect on the date of the Change of Control as the same may
be increased from time to time during the Employment Period
which reduction is not generally effective for all executives
employed by the Company (or its successor) in the Executive's
class or category;
(iii) the removal of the Executive from or any failure to
reelect the Executive to any of the positions held by the
Executive on the date of the Change of Control or any other
positions to which the Executive shall thereafter be elected
or assigned except in the event that such removal or failure
to reelect relates to the termination by the Company of the
Executive's employment for Cause or by reason of death,
Disability or voluntary retirement;
(iv) a significant adverse change, without the
Executive's written consent, in the nature or scope of the
Executive's authority, powers, functions, duties or responsi-
bilities, or a material reduction in the level of support
services, staff, secretarial and other assistance, office
space and accoutrements available to a level below that which
was provided to the Executive on the date of the Change of
Control and that which is necessary to perform any additional
duties assigned to the Executive following the Change of
Control, which change or reduction is not generally effective
for all executives employed by the Company (or its successor)
in the Executive's class or category; or
(v) breach of any material provision of this Agreement
by the Company.
(k) "Person" shall mean any individual, partnership, joint
venture, association, trust, corporation or other entity (includ-
ing a "group" as defined in Section 13(d)(3) of the Act), other
than an employee benefit plan of the Company or an entity orga-
nized, appointed or established pursuant to the terms of any such
benefit plan.
(l) "Termination Date" shall mean, except as otherwise
provided in Section 12, (i) the Executive's date of death; (ii)
the date of the Executive's voluntary early retirement as agreed
upon in writing by the Company and the Executive; (iii) sixty (60)
days after the delivery of the Notice of Termination terminating
the Executive's employment on account of Disability pursuant to
Section 9, unless the Executive returns full-time to the perfor-
mance of his or her duties prior to the expiration of such period;
(iv) the date of the Notice of Termination if the Executive's
employment is terminated by the Executive voluntarily other than
for Good Reason; and (v) sixty (60) days after the delivery of the
Notice of Termination if the Executive's employment is terminated
by the Company (other than by reason of Disability) or by the
Executive for Good Reason.
(m) "Termination Payment" shall mean the amount described in
Section 6(b)(i).
(n) "Total Payments" shall mean the sum of the Termination
Payment and any other payments to or for the benefit of the
Executive in the nature of compensation, receipt of which is
contingent on the Change of Control and to which Section 280G of
the Code applies.
2. Employment Period. The Company and the Executive shall
retain the right to terminate the employment of the Executive at any time
and for any reason prior to a Change of Control. If a Change of Control
occurs when the Executive is employed by the Company, the Company will
continue thereafter to employ the Executive, and the Executive will remain
in the employ of the Company, in accordance with the terms and provisions of
this Agreement, during the Employment Period.
3. Duties. During the Employment Period, the Executive shall,
in the same capacities and positions held by the Executive at the time of
such Change of Control or in such other capacities and positions as may be
agreed to by the Company and the Executive in writing, devote the
Executive's best efforts, attention and skill to the business and affairs of
the Company, as such business and affairs now exist and as they may hereaf-
ter be conducted. The services which are to be performed by the Executive
hereunder are to be rendered at an employment location which is not more
than seventy-five (75) miles from the Executive's employment location of the
date of the Change of Control, or in such other place or places as shall be
mutually agreed upon in writing by the Executive and the Company from time
to time. The Executive shall not be required to be absent from such
employment location for more than forty-five (45) consecutive days in any
fiscal year without the Executive's consent.
4. Compensation. During the Employment Period, the Executive
shall be compensated as follows:
(a) The Executive shall receive, at such intervals and in
accordance with such standard policies as may be in effect on the date of
the Change of Control, an annual salary not less than the Executive's annual
salary as in effect as of the date of the Change of Control, subject to
adjustment as provided in Section 5;
(b) The Executive shall be reimbursed, at such intervals and in
accordance with such standard policies as may be in effect on the date of
the Change of Control, for any and all monies advanced in connection with
the Executive's employment for reasonable and necessary expenses incurred by
the Executive on behalf of the Company, including travel expenses;
(c) The Executive shall be included to the extent eligible
thereunder in any and all plans providing general benefits for the Company's
employees, including but not limited to, group life insurance, hospitaliza-
tion, disability, medical, dental, pension, profit sharing, savings and
stock bonus plans and be provided any and all other benefits and perquisites
made available to other employees of comparable status and position, on the
same terms and conditions as generally provided to employees of comparable
status and position;
(d) The Executive shall receive annually not less than the amount
of paid vacation and not fewer than the number of paid holidays received
annually immediately prior to the Change of Control or such greater amount
of paid vacation and number of paid holidays as may be made available
annually to other employees of comparable status and position with the Com-
pany; and
(e) The Executive shall be included in all plans providing
special benefits to senior executives, including but not limited to bonus,
deferred compensation, incentive compensation, supplemental pension, stock
option, stock appreciation, stock bonus and similar or comparable plans
extended by the Company from time to time to senior corporate officers, key
employees and other employees of comparable status.
5. Annual Compensation Adjustments. During the Employment
Period, the Board of Directors of the Company, an appropriate committee of
the Board or the President of the Company, whichever is appropriate, shall
consider and appraise, at least annually, the Executive's compensation. In
determining such compensation, the Board, the appropriate committee thereof
or the President, whichever is appropriate, shall consider the commensurate
increases given to other corporate officers and key employees generally, the
scope and success of the Company's operations, the expansion of Executive's
duties and the Executive's performance of his duties.
6. Payments Upon Termination.
(a) Accrued Benefits. For purposes of this Agreement, the
Executive's Accrued Benefits shall include the following amounts: (i) all
salary earned or accrued through the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive's employ-
ment for reasonable and necessary expenses incurred by the Executive through
the Termination Date; (iii) any and all other cash benefits previously
earned through the Termination Date and deferred at the election of the
Executive or pursuant to any deferred compensation plans then in effect;
(iv) a lump sum payment of the bonus or incentive compensation otherwise
payable to the Executive with respect to the year in which termination
occurs under any bonus or incentive compensation plan or plans in which the
Executive is a participant; and (v) all other payments and benefits to which
the Executive may be entitled under the terms of any benefit plan of the
Company. Payment of Accrued Benefits shall be made promptly in accordance
with the Company's prevailing practice and the terms of any applicable
benefit plans, contracts or arrangements.
(b) Termination Payment. (i) For purposes of this Agreement and
subject to the limits set forth in Section 6(b)(ii) hereof, the Executive's
Termination Payment shall be an amount equal to (A) plus (B), multiplied by
(C), where
(A) Equals the Executive's rate of annual salary, as in
effect on the date of the Change of Control and as adjusted
thereafter from time to time pursuant to Section 5;
(B) Equals the amount of the average annual dollar award
paid to the Executive pursuant to the Company's regular bonus plan
or arrangement with respect to the four (4) years (or the number
of years of the Executive's employment if less than four (4)
years) preceding the Termination Date which shall be determined by
dividing the total dollar amount paid to the Executive under such
plan or arrangement with respect to such number of years by four
(4) (or the number of years of the Executive's employment if less
than four (4) years); and
(C) Equals three (3).
The Termination Payment shall be payable in a lump sum on the
Executive's Termination Date. Such lump sum payment shall not be reduced by
any present value or similar factor. The Executive shall not be required to
mitigate the amount of such payment by securing other employment or other-
wise and such payment shall not be reduced by reason of the Executive secur-
ing other employment or for any other reason.
(ii) It is the intention of the Company and the Executive that no
portion of the Termination Payment and any other payment under this Agree-
ment, or payments to or for the benefit of the Executive under any other
agreement, plan or arrangement be deemed to be an "excess parachute payment"
as defined in Section 280G of the Code. It is agreed that the present value
of the Total Payments shall not exceed an amount equal to two and ninety-
nine hundredths (2.99) times the Executive's Base Period Income, which is
the maximum amount which the Executive may receive without becoming subject
to the tax imposed by Section 4999 of the Code or which the Company may pay
without loss of deduction under Section 280G(a) of the Code. Present value
for purposes of this Agreement shall be calculated in accordance with the
regulations issued under Section 280G of the Code. Within sixty (60) days
following delivery of the Notice of Termination or notice by the Company to
the Executive of its belief that there is a payment or benefit due the
Executive which will result in an excess parachute payment as defined in
Section 280G of the Code, the Executive and the Company shall, at the
Company's expense, obtain the opinions, which need not be unqualified, of
legal counsel and certified public accountants or a firm of recognized
executive compensation consultants. The Executive shall select said legal
counsel, certified public accountants and executive compensation consul-
tants; provided that if the Company does not accept one (1) or more of the
parties selected by the Executive, the Company shall provide the Executive
with the names of such legal counsel, certified public accountants and/or
executive compensation consultants as the Company may select; if the
Executive does not accept the party or parties selected by the Company, the
legal counsel, certified public accountants and/or executive compensation
consultants selected by the Executive and the Company, respectively, shall
select the legal counsel, certified public accountants and/or executive
compensation consultants, whichever is applicable, who shall provide the
opinions required by this Section 6(b)(ii). The opinions required hereunder
shall set forth (a) the amount of the Base Period Income of the Executive,
(b) the present value of Total Payments and (c) the amount and present value
of any excess parachute payments. In the event that such opinions determine
that there would be an excess parachute payment, the Termination Payment or
any other payment determined by such counsel to be includible in Total
Payments shall be reduced or eliminated as specified by the Executive in
writing delivered to the Company within thirty (30) days of his or her
receipt of such opinions or, if the Executive fails to so notify the
Company, then as the Company shall reasonably determine, so that under the
bases of calculation set forth in such opinions there will be no excess
parachute payment. The provisions of this Section 6(b)(ii), including the
calculations, notices and opinions provided for herein shall be based upon
the conclusive presumption that the compensation and benefits provided for
in Section 4 hereof and any other compensation, including but not limited to
the Accrued Benefits, earned on or after the date of Change of Control by
the Executive pursuant to the Company's compensation programs if such
payments would have been made in the future in any event, even though the
timing of such payment is triggered by the Change of Control, are reasonable
compensation for services rendered prior to the Change of Control; provided,
however, that in the event legal counsel so requests in connection with the
opinion required by this Section 6(b)(ii), a firm of recognized executive
compensation consultants, selected by the Executive and the Company pursuant
to the procedures set forth above, shall provide an opinion, upon which such
legal counsel may rely, as to the reasonableness of any item of compensation
as reasonable compensation for services rendered prior to the Change of
Control by the Executive. In the event that the provisions of Sections 280G
and 4999 of the Code are repealed without succession, this Section 6(b)(ii)
shall be of no further force or effect.
7. Death. If the Executive shall die during the Employment
Period, but after delivery of a Notice of Termination by the Company for
reasons other than Cause or disability or by the Executive for Good Reason,
the Executive's employment shall terminate on his or her date of death and
the Executive's estate, heirs and beneficiaries shall be entitled to the
Executive's Accrued Benefits as of the Termination Date, all benefits avail-
able to them under the Company's benefits plans as in effect on the Termina-
tion Date on account of the Executive's death, and, subject to the provi-
sions of this Agreement, to such Termination Payment as the Executive would
have been entitled to had the Executive survived. In such event, the Termi-
nation Date shall be sixty (60) days following delivery of the Notice of
Termination subject to the provisions of Section 12.
If the Executive shall die during the Employment Period, but prior
to the delivery of a Notice of Termination, the Executive's employment shall
terminate and the Executive's estate, heirs and beneficiaries shall receive
all the Executive's Accrued Benefits through the Termination Date and all
benefits available to them under the Company's benefit plans as in effect on
the Termination Date on account of the Executive's death.
8. Retirement. If, during the Employment Period, the Executive
and the Company shall execute an agreement providing for the voluntary
retirement of the Executive from the Company, the Executive shall receive
only his or her Accrued Benefits through the Termination Date.
9. Termination for Disability. If, as a result of the
Executive's Disability, the Executive shall have been absent from the
Executive's duties hereunder on a full-time basis for five (5) consecutive
months during the Employment Period, and within sixty (60) days after the
Company notifies the Executive in writing that it intends to terminate the
Executive's employment, the Executive shall not have returned to the
performance of his or her duties on a full-time basis, the Company may
terminate the Executive's employment, subject to Section 12. During the
term of the Executive's Disability prior to termination, the Executive shall
continue to receive all salary and benefits payable under Sections 4 and 5,
including participation in all employee benefit plans, programs and arrange-
ments in which the Executive was entitled to participate immediately prior
to the disability provided that the Executive's continued participation is
permitted under the terms and provisions of such plans, programs and
arrangements. In the event that the Executive's participation in any such
plan, program or arrangement is barred as the result of such Disability, the
Executive shall be entitled to receive an amount equal to the annual con-
tributions, payments, credits or allocations which would have been paid by
the Company to the Executive, to the Executive's account or on the Execu-
tive's behalf under such plans, programs and arrangements. In the event the
Executive's employment is terminated on account of the Executive's Disabili-
ty in accordance with this Section 9, the Executive shall receive his or her
Accrued Benefits in accordance with Section 6(a) hereof and shall remain
eligible for all benefits provided by any long-term disability programs of
the Company in effect at the time of such termination.
10. Termination Not Giving Rise to a Termination Payment. If,
during the Employment Period, the Executive's employment is terminated for
Cause, or if the Executive voluntarily terminates his or her employment
other than for Good Reason, subject to the procedures set forth in Section
12, the Executive shall be entitled to receive only his or her Accrued
Benefits in accordance with Section 6(a).
11. Termination Giving Rise to a Termination Payment. If, during
the Employment Period, the Executive's employment is terminated by the
Executive for Good Reason or by the Company other than by reason of death,
Disability pursuant to Section 9 or Cause, subject to the procedures set
forth in Section 12,
(a) the Executive shall be entitled to receive and the Company
shall pay the Executive's Accrued Benefits in accordance with Section 6(a)
and, in lieu of further salary payments for periods following the Termina-
tion Date, as severance pay, a Termination Payment;
(b) the Executive's termination shall be treated as a "Normal
Termination" as defined in the Pinnacle West Capital Corporation Stock
Option and Incentive Plan, which shall entitle the Executive to exercise any
outstanding stock options during the three (3) month period beginning on the
Executive's Termination Date, and any restrictions remaining on any "Re-
stricted Stock" (as defined in such Stock Option and Incentive Plan) awarded
to the Executive shall lapse on his or her Termination Date; and
(c) "out-placement" services will be provided by the Company to
the Executive for a period beginning on the Executive's Termination Date.
Such services shall be provided for a period equal to one (1) week per year
of service with the Company or an affiliate, plus one (1) week for each two
(2) years by which the Executive's age exceeds age forty (40), plus one (1)
week for each Ten Thousand Dollars ($10,000) of compensation, but in no
event less than six (6) months. Notwithstanding the foregoing, the
Executive's right to out-placement services shall terminate on the earlier
of the date on which the Executive becomes employed in a position commensu-
rate with his or her current salary and responsibilities or on the last day
of the period determined pursuant to the formula set forth in this Section
11(c). The "out-placement" services shall be provided by an out-placement
company selected by the Company.
12. Termination Notice and Procedure. Any termination by the
Company or the Executive of the Executive's employment during the Employment
Period shall be communicated by written Notice of Termination to the
Executive if such Notice is delivered by the Company and to the Company if
such Notice is delivered by the Executive, all in accordance with the fol-
lowing procedures:
(a) The Notice of Termination shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances alleged to provide a basis for
termination.
(b) Any Notice of Termination by the Company shall be approved by
a resolution duly adopted by a majority of the directors of the Company then
in office, specifying in detail the basis for such termination.
(c) If the Company shall give a Notice of Termination for Cause
or by reason of Disability and the Executive in good faith notifies the
Company that a dispute exists concerning such termination within the fifteen
(15) day period following the Executive's receipt of such notice, the
Executive may elect to continue his or her employment during such dispute.
If it is thereafter determined that (i) the reason given by the Company for
termination did exist, the Executive's Termination Date shall be the earlier
of (A) the date on which the dispute is finally determined, either by mutual
written agreement of the parties or pursuant to Section 14, (B) the date of
the Company's Notice of Termination for Cause, (C) the date of the
Executive's death, or (D) one day prior to the end of the Employment Period,
and the Executive shall not be entitled to a Termination Payment based on
events occurring after the Company delivered its Notice of Termination; or
(ii) the reason given by the Company for termination did not exist, the
employment of the Executive shall continue as if the Company had not deliv-
ered its Notice of Termination and there shall be no Termination Date
arising out of such notice.
(d) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen (15) day period
following the Company's receipt of such notice, the Executive may elect to
continue his or her employment during such dispute. If it is thereafter de-
termined that (i) Good Reason did exist, the Executive's Termination Date
shall be the earlier of (A) the date on which the dispute is finally
determined, either by mutual written agreement of the parties or by a court
of competent jurisdiction, (B) the date of the Executive's death, or (C) one
day prior to the end of the Employment Period, and the Executive's Termina-
tion Payment shall reflect events occurring after the Executive delivered
his or her Notice of Termination; or (ii) Good Reason did not exist, the
employment of the Executive shall continue after such determination as if
the Executive had not delivered the Notice of Termination asserting Good
Reason.
(e) If the Executive does not elect to continue employment
pending resolution of a dispute regarding a Notice of Termination under
Sections 12(c) and (d), and it is finally determined that the reason for
termination set forth in such Notice of Termination did not exist, if such
notice was delivered by the Executive, the Executive will be deemed to have
voluntarily terminated his or her employment and if delivered by the
Company, the Company will be deemed to have terminated the Executive other
than by reason of death, disability or Cause.
(f) If the opinion required to be delivered pursuant to Section
6(b)(ii) shall not have been delivered on or before the date that would
otherwise constitute the Termination Date, the Termination Date shall be
delayed to the earlier of the date on which such opinion is delivered or one
(1) day prior to the end of the Employment Period.
13. Obligations of the Executive.
(a) The Executive agrees that if, during the Employment Period,
the Executive's employment is terminated in a manner entitling the Executive
to a Termination Payment or the Executive has voluntarily terminated his or
her employment, the Executive shall not, for a period commencing on the
Termination Date and ending after one (1) year, (i) act in a similar capa-
city for any electric utility company which competes to a substantial degree
with the Company in the State of Arizona or (ii) engage in any activity
involving substantial competition with the Company in the electric utility
industry in the State of Arizona, without the prior written approval of the
Company's Board of Directors; provided, however, that nothing in this
Section 13(a) shall prohibit the Executive from owning stock or other
securities of a competitor amounting to less than twenty percent (20%) of
the stated capital of such competitor.
(b) The Executive covenants and agrees, during the Executive's
employment with the Company and following his or her Termination Date, to
hold in strict confidence any and all information in the Executive's
possession as a result of the Executive's employment with the Company;
provided that nothing in this Agreement shall be construed as prohibiting
the Executive from reporting any suspected instance of illegal activity of
any nature, any nuclear safety concern, any workplace safety concern or any
public safety concern to the United States Nuclear Regulatory Commission,
United States Department of Labor or any federal or state governmental
agency or prohibiting the Executive from participating in any way in any
state or federal administrative, judicial or legislative proceeding or
investigation with respect to any such claims and matters.
14. Arbitration. All claims, disputes and other matters in
question between the parties arising under this Agreement, other than
Section 13 which may be enforced by the Company through injunctive relief,
shall be decided by arbitration in accordance with the rules of the American
Arbitration Association, unless the parties mutually agree otherwise. Any
arbitration required under this Agreement shall be held in Phoenix, Arizona,
unless the parties mutually agree otherwise. The Company shall pay the
costs of any such arbitration. The award by the arbitrator shall be final,
and judgment may be entered upon it in accordance with applicable law in any
state or Federal court having jurisdiction thereof.
15. Expenses and Interest. If, after a Change of Control a good
faith dispute arises with respect to the enforcement of the Executive's
rights under this Agreement or if any arbitration or legal proceeding shall
be brought in good faith to enforce or interpret any provision contained
herein, or to recover damages for breach hereof and the Executive is the
prevailing party, the Executive shall recover from the Company any reason-
able attorney's fees and necessary costs and disbursements incurred as a
result of such dispute or legal proceeding, and prejudgment interest on any
money judgment obtained by the Executive calculated at the rate of interest
announced by The Valley National Bank of Arizona from time to time as its
prime rate from the date that payments to the Executive should have been
made under this Agreement.
16. Payment Obligations Absolute. The Company's obligation
during and after the Employment Period to pay the Executive the compensation
and to make the arrangements provided herein shall be absolute and uncondi-
tional and shall not be affected by any circumstances, provided that the
Company may apply amounts payable under this Agreement to any debts owed to
the Company by the Executive on his or her Termination Date, and provided
further that the amount payable under this Agreement shall be offset by any
amounts payable to the Executive under a separate severance plan, agreement
or arrangement established by the Company so that in no event shall the
total amount received by the Executive be more than the amount permitted
under Section 6(b)(ii). All amounts payable by the Company under this
Agreement shall be paid without notice or demand. Each and every payment
made under this Agreement by the Company shall be final. Notwithstanding
the foregoing, in the event that the Company has paid an Executive more than
the amount to which the Executive is entitled under this Agreement, the
Company shall have the right to recover all or any part of such overpayment
from the Executive or from whomsoever has received such amount.
17. Successors. (a) If all or substantially all of the Company's
business and assets are sold, assigned or transferred to any Person, or if
the Company merges into or consolidates or otherwise combines with any
Person which is a continuing or successor entity, then the Company shall
assign all of its right, title and interest in this Agreement as of the date
of such event to the Person which is either the acquiring or successor
corporation, and such Person shall assume and perform from and after the
date of such assignment the terms, conditions and provisions imposed by this
Agreement upon the Company. Failure of the Company to obtain such assign-
ment shall be a breach of this Agreement. In case of such assignment by the
Company and of assumption and agreement by such Person, all further rights
as well as all other obligations of the Company under this Agreement
thenceforth shall cease and terminate and thereafter the expression "the
Company" wherever used herein shall be deemed to mean such Person(s).
(b) This Agreement and all rights of the Executive shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, estates, executors, administrators, heirs and beneficia-
ries. In the event of the Executive's death, all amounts payable to the
Executive under this Agreement shall be paid to the Executive's estate,
heirs and representatives. This Agreement shall inure to the benefit of, be
binding upon and be enforceable by, any successor, surviving or resulting
corporation or other entity to which all or substantially all of the
Company's business and assets shall be transferred whether by merger,
consolidation, transfer or sale. This Agreement shall not be terminated by
the voluntary or involuntary dissolution of the Company.
18. Enforcement. The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
19. Amendment or Termination. Except as otherwise provided
herein, the term of this Agreement shall run until December 31, 1994, and
shall continue for additional one (1) year periods thereafter, unless the
Company notifies the Executive in writing six (6) months prior to December
31, 1994 (or the anniversary of that date in the event the Agreement
continues beyond that date pursuant to the provisions of this Section 19)
that it does not intend to continue the Agreement. Notwithstanding the
foregoing, (i) if a Change of Control has occurred on or before the date on
which the Agreement has been terminated by the Company in accordance with
this Section 19, the Agreement shall not terminate with respect to that
Change of Control until the end of the Employment Period, and (ii) this
Agreement shall terminate if, prior to a Change of Control, the Executive
ceases to be employed by the Company in an executive position.
This Agreement sets forth the entire agreement between the
Executive and the Company with respect to the subject matter hereof, and
supersedes all prior oral or written negotiations, commitments, understand-
ing and writing with respect thereto, including, but not limited to, the Key
Executive Employment and Severance Agreement by and between the Company and
the Executive executed on or about January 30, 1990.
This Agreement may not be terminated, amended or modified during
its term as specified above except by written instrument executed by the
Company and the Executive.
20. Withholding. The Company shall be entitled to withhold from
amounts to be paid to the Executive under this Agreement any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold. The Company shall be entitled to rely on an opinion
of counsel if any question as to the amount or requirement of any such with-
holding shall arise.
21. Venue; Governing Law. This Agreement and the Executive's and
Company's respective rights and obligations hereunder shall be governed by
and construed in accordance with the laws of the State of Arizona. Any
action concerning this Agreement shall be brought in the Federal or state
courts located in the County of Maricopa, Arizona, and each party consents
to the venue and jurisdiction of such courts.
22. Notice. Notices given pursuant to this Agreement shall be in
writing and shall be deemed given when received, and if mailed, shall be
mailed by United States registered or certified mail, return receipt
requested, addressee only, postage prepaid, if to the Company, to
Board of Directors
Arizona Public Service Company
400 North 5th Street
Phoenix, Arizona 85004
Attention: Corporate Secretary
or if to the Executive, to
or to such other address as the party to be notified shall have given to the
other.
23. Funding. Benefits payable under this Agreement shall
constitute an unfunded general obligation of the Company payable from its
general assets, and the Company shall not be required to establish any
special fund or trust for purposes of paying benefits under this Agreement.
The Executive shall not have any vested right to any particular assets of
the Company as a result of execution of this Agreement and shall be a gen-
eral creditor of the Company.
24. No Waiver. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision
of this Agreement to be performed by the other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same time or
any prior or subsequent time.
25. Headings. The headings herein contained are for reference
only and shall not affect the meaning or interpretation of any provision of
this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has executed this
Agreement, on the date and year first above written.
ARIZONA PUBLIC SERVICE COMPANY
By ___________________________
Its ________________________
ATTEST:
By ___________________________
Its ________________________
______________________________
Executive
EXHIBIT 10.6a
AMENDMENT TO
PINNACLE WEST CAPITAL CORPORATION
ARIZONA PUBLIC SERVICE COMPANY
SUNCOR DEVELOPMENT COMPANY
AND
EL DORADO INVESTMENT COMPANY
DEFERRED COMPENSATION PLAN
Pinnacle West Capital Corporation ("Pinnacle"), pursuant to the power
granted to it by Section 11.2 of the above-named plan (the "Plan"), hereby
amends the Plan, effective as of December 4, 1992, by making the following
deletions and additions:
I. Definition of "Unforeseeable Financial Emergency"
The definition of "Unforeseeable Financial Emergency" found at Section
1.34 is deleted and a new Section 1.34 is added that reads as follows:
"`Unforeseeable Financial Emergency' shall mean an unanticipated
emergency that is cause by an event beyond the control of the
Participant that would result in severe financial hardship to the
Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant or a dependent of the Participant, (ii) a
loss of the Participant's property due to casualty or (iii) such other
extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant, all as determined in the
sole discretion of the Committee."
II. Modification of Section 4.1
Section 4.1 is modified to add the following sentence at the end
thereof:
"Notwithstanding the foregoing, amounts transferred to this plan
pursuant to Section 13.2 shall not be eligible for a Short-Term
Payout."
III. Modification of Section 4.2
Section 4.2 is modified by deleting the second sentence of that Section
and adding the following second sentence:
"The payout shall not exceed the lesser of (i) the Participant's
Account Balance, calculated as if such Participant were receiving a
Termination Benefit, or (ii) the amount reasonably needed to satisfy
the Unforeseeable Financial Emergency."
IV. Addition of New Section 13.2
A new Section 13.2 is added that reads as follows:
"Any Participant who was a participant in the Arizona Public Service
Company Deferred Compensation Plan, the Pinnacle West Capital
Corporation Deferred Compensation Plan, the Arizona Public Service
Company Directors' Deferred Compensation Plan or the Pinnacle West
Capital Corporation Directors' Deferred Compensation Plan prior to
becoming a Participant in this Plan shall have the right to elect, upon
the later of the date upon which he or she first becomes designated for
participation in the Plan or the first Plan Entry Date following the
adoption of this amendment, to transfer his or her Deferral Option I
account balance in that plan to this Plan. This election shall be made
in accordance with the rules and on the forms established from time to
time by the Committee. If the election is made, the Participant's
Deferral Option I account balance under the other plan shall be added
to his or her Account Balance under this Plan and any such transferred
account balance shall become subject to the terms and conditions of
this Plan. Upon the completion of the transfer of his or her account
balance under the other plan to this Plan, the Participant's
participation in Deferral Option I of the other plan shall terminate
and he or she shall have no further interest in Deferral Option I of
that plan.
Pinnacle has caused this Amendment to be signed by its duly
authorized officer on December 31, 1992.
Pinnacle West Capital Corporation
By Faye Widenmann
------------------------------------
Its Vice President
--------------------------------
EXHIBIT 10.7a
PINNACLE WEST CAPITAL CORPORATION
ARIZONA PUBLIC SERVICE COMPANY
SUNCOR DEVELOPMENT COMPANY
AND
EL DORADO INVESTMENT COMPANY
SUPPLEMENTAL EXECUTIVE BENEFIT PLAN
Amended and Restated Effective as of January 1, 1992
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 Selection, Enrollment and Eligibility . . . . . . . . . . . . 5
2.1 Selection by Committee . . . . . . . . . . . . . . . . . . 5
2.2 Enrollment Requirements . . . . . . . . . . . . . . . . . . 6
2.3 Eligibility; Commencement of Participation . . . . . . . . 6
ARTICLE 3 Vesting; Account Balance Allocation . . . . . . . . . . . . . 6
3.1 Vesting in Change in Control Benefit . . . . . . . . . . . 6
3.2 Account Balance Allocations . . . . . . . . . . . . . . . . 7
ARTICLE 4 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Change in Control Benefit . . . . . . . . . . . . . . . . . 7
4.2 Employer Benefit . . . . . . . . . . . . . . . . . . . . . 7
4.3 Withholding and Payroll Taxes . . . . . . . . . . . . . . . 8
ARTICLE 5 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Beneficiary Designation; Change; Spousal Consent . . . . . 8
5.3 Acknowledgment . . . . . . . . . . . . . . . . . . . . . . 8
5.4 No Beneficiary Designation . . . . . . . . . . . . . . . . 8
5.5 Doubt as to Beneficiary . . . . . . . . . . . . . . . . . . 8
5.6 Discharge of Obligations . . . . . . . . . . . . . . . . . 9
ARTICLE 6 Termination, Amendment or Modification of the Plan . . . . . 9
6.1 Termination, Amendment or Modification Prior to One Year
Before Change in Control . . . . . . . . . . . . . . . . . 9
6.2 Termination, Amendment or Modification Within One Year
Before Change of Control or Following Change in Control . . 9
6.3 Termination of Plan Agreement . . . . . . . . . . . . . . . 10
ARTICLE 7 Other Benefits and Agreements . . . . . . . . . . . . . . . . 10
7.1 Coordination with Other Benefits . . . . . . . . . . . . . 10
ARTICLE 8 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1 Establishment of the Trust . . . . . . . . . . . . . . . . 11
8.2 Interrelationship of the Plan and the Trust . . . . . . . . 11
8.3 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 9 Insurance Policies . . . . . . . . . . . . . . . . . . . . . 12
9.1 Policies . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Documents Required By Insurer . . . . . . . . . . . . . . . 12
ARTICLE 10 Administration . . . . . . . . . . . . . . . . . . . . . . . 12
10.1 Committee Duties . . . . . . . . . . . . . . . . . . . . . 12
10.2 Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3 Binding Effect of Decisions . . . . . . . . . . . . . . . . 12
10.4 Indemnity of Committee . . . . . . . . . . . . . . . . . . 13
10.5 Employer Information . . . . . . . . . . . . . . . . . . . 13
ARTICLE 11 Claims Procedures . . . . . . . . . . . . . . . . . . . . . 13
11.1 Presentation of Claim . . . . . . . . . . . . . . . . . . . 13
11.2 Notification of Decision . . . . . . . . . . . . . . . . . 13
11.3 Review of a Denied Claim . . . . . . . . . . . . . . . . . 14
11.4 Decision on Review . . . . . . . . . . . . . . . . . . . . 14
11.5 Legal Action . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 14
12.1 Unsecured General Creditor . . . . . . . . . . . . . . . . 14
12.2 Employer's Liability . . . . . . . . . . . . . . . . . . . 15
12.3 Nonassignability . . . . . . . . . . . . . . . . . . . . . 15
12.4 Not a Contract of Employment . . . . . . . . . . . . . . . 15
12.5 Furnishing Information . . . . . . . . . . . . . . . . . . 15
12.6 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 15
12.9 Validity . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.10 Notice . . . . . . . . . . . . . . . . . . . . . . . . 16
12.11 Successors . . . . . . . . . . . . . . . . . . . . . . 16
12.12 Spouse's Interest . . . . . . . . . . . . . . . . . . 16
12.13 Incompetent . . . . . . . . . . . . . . . . . . . . . 16
12.14 Distribution in the Event of Taxation . . . . . . . . 17
<PAGE>
PINNACLE WEST CAPITAL CORPORATION
ARIZONA PUBLIC SERVICE COMPANY
SUNCOR DEVELOPMENT COMPANY
AND
EL DORADO INVESTMENT COMPANY
SUPPLEMENTAL EXECUTIVE BENEFIT PLAN
Amended and Restated Effective as of January 1, 1992
The purpose of this Plan is to provide specified benefits to a
select group of management, highly compensated employees and Directors who
contribute materially to the continued growth, development and future
business success of Pinnacle West Capital Corporation, an Arizona
corporation, Arizona Public Service Company, an Arizona corporation, SunCor
Development Company, an Arizona corporation, El Dorado Investment Company,
an Arizona corporation, and their subsidiaries. This Plan is amended and
restated effective as of January 1, 1992.
ARTICLE 1
Definitions
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meaning:
1.1 "Beneficiary" shall mean one or more persons, trusts, estates or
other entities, designated in accordance with Article 5 below, that
are entitled to receive benefits under this Plan upon the death of a
Participant.
1.2 "Beneficiary Designation Form" shall mean the form established from
time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more beneficiaries.
1.3 "Board" shall mean the Board of Directors of the Company.
1.4 "Change in Control" shall mean the date upon which the first of the
following events occurs:
(a) A change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the
Securities and Exchange Act of 1934 (the "Act"), or any
successor regulation of similar import, regardless of whether
the Company is subject to such reporting requirement;
(b) A change in control of ownership of the Company through a
transaction or series of transactions, such that any person
(as that term is used in Sections 13 and 14(d)(2) of the Act)
is or becomes the beneficial owner (as that term is used in
Section 13(d) of the Act), directly or indirectly, of
securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company's then
outstanding securities;
(c) Any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of the common stock of the Company
would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the
common stock of the Company immediately prior to the merger
have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger;
(d) The shareholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company;
(e) During any period of two (2) consecutive years, individuals
who, at the beginning of such period, constituted the Board
cease, for any reason, to constitute at least a majority
thereof, unless the election or nomination for election of
each new director was approved by the vote of at least two-
thirds (2/3) of the directors then still in office who were
directors at the beginning of the period;
(f) Substantially all of the assets of the Company and its
subsidiaries, in the aggregate, are sold or otherwise
transferred to parties that are not within a "controlled group
of corporations" (as defined in Section 1563 of the Code) in
which the Company is a member;
(g) More than eighty percent (80%) of the stock, or substantially
all of the assets of, any Employer, other than the Company,
are sold or otherwise transferred to a party or parties that
are not within a "controlled group of corporations" (as
defined in Section 1563 of the Code) in which that Employer is
a member, provided, that (i) with respect to any Employer that
is not a Significant Subsidiary (as defined in Regulation S-X
promulgated by the Securities and Exchange Commission, as in
effect on the date hereof) of the Company, any such event
shall constitute a Change in Control with respect to such
Employer only if the Board determines, within forty-five (45)
days of such event, that such event constitutes a Change in
Control, and (ii) any such event shall constitute a Change in
Control only with respect to that Employer and its employees
or Directors who are Participants;
(h) The Company voluntarily files a petition for bankruptcy under
federal bankruptcy law, or an involuntary bankruptcy petition
is filed against the Company under federal bankruptcy law,
which involuntary petition is not dismissed within 120 days of
the filing or such later date as agreed to by the Company and
the parties filing the involuntary petition or as may be
approved by a court;
(i) The Company makes a general assignment for the benefit of
creditors; or
(j) The Company seeks or consents to the appointment of a trustee,
receiver, liquidator or similar person.
1.5 "Change in Control Benefit" shall mean the benefit set forth in
Section 4.1 below.
1.6 "Claimant" shall have the meaning set forth in Section 11.1 below.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.8 "Committee" shall mean the administrative committee appointed to
manage and administer the Plan in accordance with the provisions of
Article 10 below.
1.9 "Company" shall mean Pinnacle West Capital Corporation, an Arizona
corporation.
1.10 "Director" shall mean any member of the board of directors of an
Employer.
1.11 "Disability" shall mean a period of disability during which a
Participant qualifies for benefits under the Participant's Employer's
long-term disability plan or, if a Participant does not participate
in such a plan, a period of disability during which the Participant
would have qualified for benefits under such a plan, as determined in
the sole discretion of the Committee, had the Participant been a
participant in such a plan.
1.12 "Employer" shall mean the Company, Arizona Public Service Company, an
Arizona corporation, SunCor Development Company, an Arizona
corporation, El Dorado Investment Company, an Arizona corporation,
and/or any subsidiaries of such corporations that have been selected
by the Board to participate in the Plan.
1.13 "Employer Benefit" shall mean the benefit set forth in Section 4.2
below.
1.14 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.15 "Insurer" shall mean the insurance company or companies that issue
one or more Policies.
1.16 "Participant" shall mean any employee or Director of an Employer
(a) who is selected to participate in the Plan, (b) who elects to
participate in the Plan, (c) who signs a Plan Agreement and a
Beneficiary Designation Form, (d) whose signed Plan Agreement and
Beneficiary Designation Form are accepted by the Committee, (e) who
commences participation in the Plan on his or her Plan Entry Date,
and (f) whose Plan Agreement has not terminated.
1.17 "Participant's Account" shall mean an account established in
accordance with Section 8.3 below.
1.18 "Plan" shall mean the Pinnacle West Capital Corporation, Arizona
Public Service Company, SunCor Development Company and El Dorado
Investment Company Supplemental Executive Benefit Plan, which is
defined by this instrument and by each Plan Agreement, all as amended
from time to time.
1.19 "Plan Agreement" shall mean a written agreement, as may be amended
from time to time, which is entered into by and between an Employer
and a Participant. Each Plan Agreement executed by a Participant
shall provide for the entire benefit to which such Participant is
entitled to under the Plan, and the Plan Agreement bearing the latest
date of acceptance by the Committee shall govern such entitlement.
1.20 "Plan Entry Date" shall mean one of two dates in any Plan Year on
which an employee or Director selected by the Committee to
participate in the Plan is eligible to commence participation in the
Plan in accordance with Article 2. The two entry dates are January 1
and July 1.
1.21 "Plan Year" shall, for the first Plan Year, begin on January 1, 1992,
and end on December 31, 1992. For each Plan Year thereafter, the
Plan Year shall begin on January 1 of each year and continue through
December 31 of that year.
1.22 "Policy" or "Policies" shall mean the policy or policies issued in
the name of the Trustee in accordance with the terms and conditions
of this Plan and each respective Plan Agreement.
1.23 "Retirement" and "Retires" shall mean, with respect to an employee,
severance from employment with all Employers for any reason other
than a leave of absence, death or Disability on or after the earlier
of the attainment of: (a) age sixty-five (65), (b) age sixty (60)
with ten (10) Years of Service, or (c) age fifty-five (55) with
twenty (20) Years of Service; and shall mean, with respect to a
Director who is not an employee, severance of his or her
directorship(s) with all Employers on or after the earlier of the
attainment of: (x) age sixty-five (65), (y) age sixty (60) with ten
(10) years of board service, or (z) age fifty-five (55) with twenty
(20) years of board service. If a Participant is both an employee
and a Director, Retirement shall not occur until he or she Retires as
both an employee and a Director; provided, however, that such a
Participant may elect, in accordance with the policies and procedures
established by the Committee, to Retire for purposes of this Plan at
the time he or she Retires as an employee of all Employers.
1.24 "Termination of Employment" shall mean the ceasing of employment with
or service as a Director of all Employers, voluntarily or involun-
tarily, for any reason other than Retirement, Disability, leave of
absence or death. If a Participant is both an employee and a
Director, a Termination of Employment shall occur only upon the
termination of the last position held; provided, however, that such a
Participant may elect, in accordance with the policies and procedures
established by the Committee, to be treated for purposes of this Plan
as having experienced a Termination of Employment at the time he or
she ceases employment with all Employers as an employee.
1.25 "Trust" shall mean the trust established pursuant to that certain
Trust Agreement dated as of January 1, 1992, between all Employers
and the Trustee, as the same may be amended or restated from time to
time.
1.26 "Trustee" shall mean the trustee named in the Trust and any successor
trustee.
1.27 "Vesting Date" shall mean the date upon which a Participant becomes
100% vested in his or her Change in Control Benefit in accordance
with Section 3.1 below.
1.28 "Years of Service" shall mean the total number of years in which a
Participant has been employed by one or more Employers and has
completed in each of those years 1,000 hours of service. For
purposes of this definition only, a year of employment shall be a 365
day period (or 366 day period in the case of a leap year) that, for
the first year of employment, commences on the employee's date of
hiring and that, for any subsequent year, commences on an anniversary
of that hiring date.
ARTICLE 2
Selection, Enrollment and Eligibility
2.1 Selection by Committee. Participation in the Plan shall be limited
to a select group of management, highly compensated employees and
Directors of the Employers. From that group, the Committee shall
select, in its sole discretion, employees and Directors of the
Employers to participate in the Plan.
2.2 Enrollment Requirements. As a condition to participation, each
selected employee or Director shall complete, execute and return to
the Committee a Plan Agreement and a Beneficiary Designation Form.
In addition, the Committee, in its sole discretion, shall establish
from time to time such other enrollment requirements as it determines
in its sole discretion are necessary.
2.3 Eligibility; Commencement of Participation. Provided an employee or
Director selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Committee,
that employee or Director shall commence participation in the Plan on
the Plan Entry Date that immediately follows his or her selection to
participate in the Plan. If a selected employee or Director fails to
meet all such requirements prior to that Plan Entry Date, that
employee or Director shall not be eligible to participate in the Plan
until the Plan Entry Date that follows his or her completion of those
requirements.
ARTICLE 3
Vesting; Account Balance Allocation
3.1 Vesting in Change in Control Benefit.
(a) General Rule. If a Participant has not Retired, died,
suffered a Disability or experienced a Termination of
Employment prior to 90 days prior to a Change in Control, the
Participant shall become 100% vested in his or her Change in
Control Benefit on January 1 of the Plan Year following the
Change in Control (the "Vesting Date"); provided, however,
that if a Participant voluntarily terminates his or her
employment with all Employers at any time on or after the date
of the Change in Control and prior to the Vesting Date, that
Participant shall forfeit his or her rights to benefits under
this Plan.
(b) Early Vesting. If at any time on or after 90 days prior to a
Change in Control and prior to the Vesting Date a Participant
Retires, dies, suffers a Disability or experiences an
involuntarily termination of employment with all Employers,
the Participant (or the Participant's Beneficiary in the event
of the Participant's death) shall become 100% vested in his or
her Change in Control Benefit on the later of (i) the date of
the Change in Control or (ii) the date of such Retirement,
death, Disability or involuntary termination of employment,
and such date (rather than January 1 of the following Plan
Year) shall be considered the "Vesting Date" for purposes of
this Plan.
3.2 Account Balance Allocations. Within 60 days of the end of each Plan
Year, each Participant with a balance in his or her Participant's
Account shall receive a statement of the dollar amount of his or her
balance.
ARTICLE 4
Benefits
4.1 Change in Control Benefit.
(a) Eligibility. On the Vesting Date, the Participant or the
Participant's Beneficiary shall become entitled to the Change
in Control Benefit described in this Section 4.1.
(b) Benefit and Payment. The "Change in Control Benefit" shall be
a dollar amount that is equal to the fair market value of the
assets allocated to and held in the Participant's Account as
of the Vesting Date, plus any earnings allocated to that
account from that date to the date of payment of the Change in
Control Benefit. This benefit shall be paid to the
Participant, or his or her Beneficiary, within 90 days of the
Vesting Date.
4.2 Employer Benefit.
(a) Eligibility. The Participant's Employer shall be entitled to
the Employer Benefit if:
(i) A Participant Retires, suffers a Disability or
experiences a Termination of Employment prior to
90 days prior to a Change in Control;
(ii) A Participant voluntarily terminates his or her
employment (other than by Retirement or
Disability) with all of his or her Employers at
any time on or after the date of a Change in
Control and prior to January 1 of the Plan Year
following a Change in Control; or
(iii) A Participant dies at any time.
(b) Benefit and Payment. The "Employer Benefit" shall be a
distribution of the assets allocated to and held in the
Participant's Account as of the date of the event described in
Section 4.2(a) above after taking in account any distributions
made or to be made in accordance with Section 4.1 above, plus
any earnings allocated to that account from that date to the
date of payment of the Employer Benefit. This benefit shall
be paid to the Participant's Employer within 120 days of
January 1 of the Plan Year following that event.
4.3 Withholding and Payroll Taxes. The Trustee shall withhold from any
and all benefit payments made under this Article 4, all federal,
state and local income, employment and other taxes required to be
withheld in connection with the payment of benefits hereunder, in
amounts to be determined in sole discretion of the Participant's
Employer.
ARTICLE 5
Beneficiary
5.1 Beneficiary. Each Participant shall have the right, at any time, to
designate his or her Beneficiary (both primary as well as contingent)
to receive any benefits payable under the Plan to a Beneficiary upon
the death of a Participant.
5.2 Beneficiary Designation; Change; Spousal Consent. A Participant
shall designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or
its designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules
and procedures, as in effect from time to time. If the Participant
names, with respect to more than 50% of his or her benefit under this
Plan, someone other than his or her spouse as a Beneficiary, a
spousal consent, in the form designated by the Committee, must be
signed by that Participant's spouse and returned to the Committee.
Upon the acceptance by the Committee of a new Beneficiary Designation
Form, all Beneficiary designations previously filed shall be
cancelled. The Committee shall be entitled to rely on the last
Beneficiary Designation Form filed by the Participant and accepted by
the Committee before his or her death.
5.3 Acknowledgment. No designation or change in designation of a
Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Committee or its designated agent.
5.4 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided in Sections 5.1, 5.2 and 5.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall
be payable to the executor or personal representative of the
Participant's estate.
5.5 Doubt as to Beneficiary. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the
Committee shall have the right, exercisable in its discretion, before
a Change in Control, to cause the Trustee to withhold such payments
until this matter is resolved to the Committee's satisfaction.
5.6 Discharge of Obligations. The payment of benefits under the Plan to
a Beneficiary shall fully and completely discharge all Employers and
the Committee from all further obligations under this Plan with
respect to the Participant, and that Participant's Plan Agreement
shall terminate upon such full payment of benefits.
ARTICLE 6
Termination, Amendment or
Modification of the Plan
6.1 Termination, Amendment or Modification Prior to One Year Before
Change in Control. Prior to one year before a Change in Control,
each Employer reserves the right to terminate the Plan or any related
Plan Agreement, in whole or in part, with respect to Participants
whose services are retained by that Employer, and the Company
reserves the right to amended or modify the Plan or any related Plan
Agreement, in whole or in part, with respect to all Participants.
Notwithstanding the foregoing, no termination, amendment or
modification shall be effective to decrease or reduce a Participant's
potential benefits under this Plan below the fair market value of the
assets in his or her Participant's Account as reflected on the last
statement provided under Section 3.2 above prior to the effective
date of the termination, amendment or modification.
6.2 Termination, Amendment or Modification Within One Year Before Change
of Control or Following Change in Control.
(a) General. Within one year before a Change in Control and
thereafter, neither the Company, any subsidiary of the Company
nor any corporation, trust or other person that succeeds to
all or any substantial portion of the assets of the Company
shall have the right to terminate, amend or modify the Plan
and/or any Plan Agreement in effect prior to such Change in
Control, and all benefits under the Plan and any such Plan
Agreement shall thereafter be paid in accordance with the
terms of the Plan and such Plan Agreement, as in effect
immediately prior to such Change in Control. If the Plan is
terminated, amended, or modified within one year before the
Change in Control, such termination, amendment or modification
shall be considered void as of the date of the termination,
amendment or modification. Subject to Section 6.2(b) below,
any provision of this Plan or any Plan Agreement to the
contrary shall be construed in accordance with this
Section 6.2(a).
(b) Compliance with ERISA and Code. Notwithstanding any other
provision of this Plan, if, at any time within one year before
a Change in Control or any time thereafter, counsel to the
Company advises the Company in writing that it is counsel's
opinion that the provisions of this Plan and/or any related
Plan Agreement are not in compliance with ERISA or the Code,
or any final or proposed regulation or ruling under ERISA or
the Code promulgated by the Internal Revenue Service or the
Department of Labor, the Company shall have the right, in its
sole discretion, to amend, modify or terminate this Plan
and/or any related Plan Agreement in order to comply with such
applicable law, to minimize the Plan's noncompliance with such
applicable law and/or to avoid the Plan from failing to comply
with such applicable law.
(c) Limitation. If the Company elects to amend, modify or
terminate the Plan and/or any Plan Agreement under
Section 6.2(b), the Company may do so only to the extent that
such amendment, modification or termination does not decrease
or reduce a Participant's potential benefit under this Plan
below the fair market value of the assets in his or her
Participant's Account as reflected on the last statement
provided under Section 3.2 above prior to the effective date
of the termination, amendment or modification.
6.3 Termination of Plan Agreement. Absent the earlier termination,
modification or amendment of the Plan, the Plan Agreement of any
Participant shall terminate upon the full payment of the applicable
benefit provided under Article 4.
ARTICLE 7
Other Benefits and Agreements
7.1 Coordination with Other Benefits. The benefits provided for a
Participant and Participant's Beneficiary under the Plan are in
addition to any other benefits available to such Participant under
any other plan or program for employees or directors of the
Participant's Employer. The Plan shall supplement and shall not
supersede, modify or amend any other such plan or program except as
may otherwise be expressly provided.
The benefit, if any, to be received under this Plan shall be offset,
but not below zero, by the benefits that a Participant has received
in the past as a "Short-Term Payout" or as a result of an
"Unforeseeable Financial Emergency" under the Pinnacle West Capital
Corporation, Arizona Public Service Company, Suncor Development
Company and El Dorado Investment Company 1992 Deferred Compensation
Plan, which was effective January 1, 1992.
ARTICLE 8
Trust
8.1 Establishment of the Trust; Premiums. The Employers shall establish
the Trust and shall at least annually transfer over to the Trust such
assets as the Committee determines, prior to a Change in Control, or
the Trustee determines, after a Change in Control, are necessary to
provide for the Employers' future liabilities created with respect to
the benefits provided under the Plan and the Plan Agreements,
including, without limitation, the payment of insurance premiums in
amounts sufficient to acquire and maintain all Policies held by the
Trustee. At the direction of the Committee, prior to a Change in
Control, or the Trustee, after a Change in Control, the Employers
shall pay any and all Policy premiums and other costs directly to the
Insurer. In addition, if the Trust incurs any tax liability, the
Employers, to the extent the administrative account is insufficient
to pay such taxes, shall contribute to the Trust sufficient funds to
allow the Trustee to pay any such tax liability.
8.2 Interrelationship of the Plan and the Trust. The provisions of the
Plan and the Plan Agreement shall govern the rights of a Participant
and the Employers to receive distributions pursuant to the Plan. The
provisions of the Trust shall govern the rights of the Trustee,
Employers, Participant and a Participant's Beneficiary as to the
assets of the Trust. The Employers shall at all times remain liable
to carry out their obligations under the Plan. The Employers and the
Trustee shall cooperate with each other as is necessary to minimize
the Trust's tax liability.
8.3 Accounts.
(a) The Trustee shall establish and maintain the following
separate accounts in the Trust:
(i) A "Participant's Account" for each Participant to which
the Employers' contributions, or a portion thereof, and
earnings thereon shall be allocated to, held, and
invested, the assets of which are to be used to pay the
Change in Control Benefit and/or Employer Benefit in
accordance with this Plan and the Trust; and
(ii) An "Administrative Account" for the administrative
expenses of the Trust to which a portion of the
Employers' contributions and earnings thereon may be
allocated to, held and invested, the assets of which
are to be used to pay the administrative expenses,
including all taxes, of the Trust in accordance with
the terms and provisions of this Plan and the Trust.
(b) Prior to a Change in Control, the Committee shall direct the
Trustee in writing as to (i) the allocation of the Employers'
contributions to the accounts described in Section 8.3(a)
above, and (ii) the allocations of the earnings on the
Employer's contributions held and invested in the accounts
described in Section 8.3(a) above. Thereafter, the Trustee
shall make such allocations in accordance with the terms and
provisions of this Plan and the Trust.
(c) Each of the accounts described in Section 8.3(a) above shall
qualify for and be treated as separate shares under Code
Section 663(c).
ARTICLE 9
Insurance Policies
9.1 Policies. The Committee may direct the Trustee in writing to acquire
one or more Policies in the Trustee's name. The Trustee shall be the
sole and absolute owner and beneficiary of each Policy, with all
rights of an owner and beneficiary, including without limitation, the
right to surrender Policies for their cash surrender values and to
take one or more loans against one or more Policies. Notwithstanding
the foregoing, the Trustee shall exercise its ownership rights in
each Policy only in accordance with the terms of this Plan, the
respective Plan Agreements and the Trust.
9.2 Documents Required By Insurer. The Trustee, the Participant's
Employer and the Participant shall sign such documents and provided
such information as may be required from time to time by the Insurer.
ARTICLE 10
Administration
10.1 Committee Duties. This Plan shall be administered by a Committee
which shall consist of persons approved by the Board of the Company.
Members of the Committee may be Participants under this Plan. The
Committee shall also have the discretion and authority to make,
amend, interpret, and enforce all appropriate rules and regulations
for the administration of this Plan and decide or resolve any and all
questions including interpretations of this Plan, as may arise in
connection with the Plan.
10.2 Agents. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit and may from time to time consult with counsel
who may be counsel to any Employer.
10.3 Binding Effect of Decisions. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
10.4 Indemnity of Committee. All Employers shall indemnify and hold
harmless the members of the Committee against any and all claims,
losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Plan, except in the case of
willful misconduct by the Committee or any of its members.
10.5 Employer Information. To enable the Committee to perform its
functions, each Employer shall supply full and timely information to
the Committee on all matters relating to the compensation of its
Participants, the date and circumstances of the Retirement,
Disability, death or Termination of Employment of its Participants,
and such other pertinent information as the Committee may reasonably
require.
ARTICLE 11
Claims Procedures
11.1 Presentation of Claim. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below
as a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such
Claimant from the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within
60 days after such notice was received by the Claimant. All other
claims must be made within 180 days of the date on which the event
that caused the claim to arise occurred. The claim must state with
particularity the determination desired by the Claimant.
11.2 Notification of Decision. The Committee shall consider a Claimant's
claim within a reasonable time, and shall notify the Claimant in
writing:
(a) that the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant:
(i) the specific reason(s) for the denial of the
claim, or any part of it;
(ii) the specific reference(s) to pertinent
provisions of the Plan upon which such denial
was based;
(iii) a description of any additional material or
information necessary for the Claimant to
perfect the claim, and an explanation of why
such material or information is necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 11.3 below.
11.3 Review of a Denied Claim. Within 60 days after receiving a notice
from the Committee that a claim has been denied, in whole or in part,
a Claimant (or the Claimant's duly authorized representative) may
file with the Committee a written request for a review of the denial
of the claim. Thereafter, but not later than 30 days after the
review procedure began, the Claimant (or the Claimant's duly
authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
11.4 Decision on Review. The Committee shall render its decision on
review promptly, and not later than 60 days after the filing of a
written request for review of the denial, unless a hearing is held or
other special circumstances require additional time, in which case
the Committee's decision must be rendered within 120 days after such
date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
11.5 Legal Action. A Claimant's compliance with the foregoing provisions
of this Article 11 is a mandatory prerequisite to a Claimant's right
to commence any legal action with respect to any claim for benefits
under this Plan.
ARTICLE 12
Miscellaneous
12.1 Unsecured General Creditor. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of an Employer.
Any and all of an Employer's assets shall be, and remain, the
general, unpledged unrestricted assets of the Employer. An
Employer's obligation under the Plan shall be merely that of an
unfunded and unsecured promise to pay money in the future. Amounts
payable to a Participant or his or her Beneficiary shall be paid from
the general assets of an Employer exclusively.
12.2 Employer's Liability. An Employer's liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as
entered into between the Employer and a Participant. An Employer
shall have no obligation to a Participant under the Plan except as
expressly provided in the Plan.
12.3 Nonassignability. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or
convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which
are expressly declared to be unassignable and non-transferable,
except that the foregoing shall not apply to any family support
obligations set forth in a court order. No part of the amounts
payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a Participant's
or any other person's bankruptcy or insolvency.
12.4 Not a Contract of Employment. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between
any Employer and the Participant. Such employment is hereby
acknowledged to be an "at will" employment relationship that can be
terminated at any time for any reason, with or without cause, unless
expressly provided in a written employment agreement. Nothing in
this Plan shall be deemed to give a Participant the right to be
retained in the service of any Employer or to be retained as a
director, or to interfere with the right of any Employer to
discipline or discharge the Participant at any time.
12.5 Furnishing Information. A Participant will cooperate with the
Committee by furnishing any and all information requested by the
Committee and take such other actions as may be requested in order to
facilitate the administration of the Plan and the payments of
benefits hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary.
12.6 Terms. Whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they
would so apply.
12.7 Captions. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.
12.8 Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Arizona.
12.9 Validity. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but this Plan shall be construed
and enforced as if such illegal and invalid provision had never been
inserted herein.
12.10 Notice. Any notice or filing required or permitted to be given to
the Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the
address indicated below:
If a Participant's Employer is Pinnacle West Capital Corporation or
any other Employer other than Arizona Public Service Company, then to
Pinnacle West Capital Corporation
400 East Van Buren Street
Post Office Box 52132
Phoenix, Arizona 85072-2132
Attn: Human Resources
If a Participant's Employer is Arizona Public Service Company, then
to:
Arizona Public Service Company
400 North 5th Street
P.O. Box 53999
Phoenix, Arizona 85072-3999
Attn: Manager, Compensation and Benefit
Station 8460
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the
Participant.
12.11 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns
and the Participant, the Participant's Beneficiaries, and their
permitted successors and assigns.
12.12 Spouse's Interest. The interest in the benefits hereunder of a
spouse of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable
by such spouse in any manner, including but not limited to such
spouse's will, nor shall such interest pass under the laws of
intestate succession.
12.13 Incompetent. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of
that person's property, the Committee may direct payment of such
benefit to the guardian, legal representative or person having the
care and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetency, incapacity or
guardianship, as it may deem appropriate prior to distribution of the
benefit. Any payment of a benefit shall be a payment for the account
of the Participant and the Participant's Beneficiary, as the case may
be, and shall be a complete discharge of any liability under the Plan
for such payment amount.
12.14 Distribution in the Event of Taxation. If, for any reason, all or
any portion of a Participant's benefit under this Plan becomes
taxable to the Participant prior to the Vesting Date, a Participant
may petition the Committee, if prior to a Change in Control, or the
Trustee, after a Change in Control, for a distribution of assets
sufficient to meet the Participant's tax liability (including
additions to tax, penalties and interest). Upon the grant of such a
petition, which grant shall not be unreasonably withheld, the Trustee
shall distribute to the Participant from the Trust, immediately
available funds in an amount equal to that Participant's federal,
state and local tax liability associated with such taxation, which
liability shall be measured by using that Participant's then current
highest federal, state and local marginal tax rate, plus the rates or
amounts for the applicable additions to tax, penalties and interest.
If the petition is granted, the tax liability distribution shall be
made within 90 days of the date when the Participant's petition is
granted.
IN WITNESS WHEREOF the Company and Arizona Public Service
Company have signed this amended and restated Supplemental Executive Benefit
Plan document on December 31, 1992.
Pinnacle West Capital Corporation,
an Arizona corporation
By: Faye Widenmann
________________________________________
Its: Vice President
_______________________________________
Arizona Public Service Company,
an Arizona corporation
By: John Heenan
________________________________________
Its: Manager, Compensation and Benefits
_______________________________________
EXHIBIT 10.8a
ARIZONA PUBLIC SERVICE COMPANY
SUPPLEMENTAL EXCESS BENEFIT
RETIREMENT PLAN
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE - PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO - CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE THREE - ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . 3
ARTICLE FOUR - BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE FIVE - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . 4
ARTICLE SIX - FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE SEVEN - ADMINISTRATION . . . . . . . . . . . . . . . . . . . . 5
ARTICLE EIGHT - AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . 6
ARTICLE NINE - ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE TEN - WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE ELEVEN - OTHER BENEFIT PLANS OF THE COMPANY . . . . . . . . . 7
ARTICLE TWELVE - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN
ARTICLE ONE
PREAMBLE
ARIZONA PUBLIC SERVICE COMPANY, hereinafter referred to as the
"Company", has previously adopted the ARIZONA PUBLIC SERVICE COMPANY
EMPLOYEES' RETIREMENT PLAN, hereinafter referred to as the "Retirement
Plan". Subsequent to adoption of the Retirement Plan, the Company adopted
THE SAVINGS PLAN FOR EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY,
hereinafter referred to as the "Savings Plan." The Retirement Plan and the
Savings Plan are subject to the benefit and contribution limitations of
Section 415 of the Internal Revenue Code, hereinafter referred to as the
"Code". By reason of the limitations of Section 415 of the Code, and
pursuant to the terms and provisions of the Retirement Plan and Savings
Plan, a Participant's benefits under the Retirement Plan may be reduced from
the benefits otherwise payable pursuant to the terms and provisions of the
Retirement Plan (operative in the absence of the benefit and contribution
limitations of Section 415). The Employee Retirement Income Security Act of
1974, hereinafter referred to as the "Act", permits establishment of an
"excess benefit plan" for the purpose of paying retirement benefits to
certain employees in excess of the benefits permitted to be paid under the
Retirement Plan by reason of Section 415 of the Code. Accordingly, the
Company hereby adopts the ARIZONA PUBLIC SERVICE COMPANY SUPPLEMENTAL EXCESS
BENEFIT RETIREMENT PLAN, hereinafter referred to as the "Plan", effective
January 1, 1982.
ARTICLE TWO
CONSTRUCTION
Terms capitalized in this Plan shall have the meaning given in
Article Two of the Retirement Plan, governing definitions and construction,
except where such terms are otherwise defined in this Plan. If any
provision of this Plan is determined for any reason to be invalid or
unenforceable, the remaining provisions shall continue in full force and
effect. All of the provisions of this Plan shall be construed and enforced
according to the laws of the State of Arizona, and shall be administered
according to the laws of such state, except as otherwise required by the
Act, the Code or other applicable federal law. It is the intention of the
Company that the Plan, as adopted by the Company, shall constitute an
"excess benefit plan", as defined in Section (3)(36) of the Act. Benefits
under this Plan shall be paid from the Company's general assets, and not
from any trust fund or other segregated fund. This Plan shall be construed
in a manner consistent with the Company's intention.
ARTICLE THREE
ELIGIBILITY AND PARTICIPATION
The Executive Committee of the Board of Directors of the Company
shall designate for participation in this Plan Employees of the Company who
are Participants in the Retirement Plan. Designation of participants in
this Plan may be made individually or by group designation, as determined by
the Executive Committee. A participant in this Plan shall commence
participation in this Plan as of the first day of the Plan Year in which his
participation is determined. Such participation shall continue until the
Executive Committee informs the participant in writing that he is no longer
eligible for participation in this Plan.
ARTICLE FOUR
BENEFITS
Any participant in this Plan who is a Participant in the
Retirement Plan and who receives a benefit under the Retirement Plan, or
such Retirement Plan Participant's surviving spouse or annuitant in the
event of the Retirement Plan Participant's death, shall be entitled to a
monthly benefit payable hereunder in accordance with this ARTICLE FOUR and
with ARTICLE FIVE of this Plan, equal to the excess, if any, of (a) the
amount of such participant's or surviving spouse's or annuitant's monthly
benefit under the Retirement Plan computed under the provisions of the
Retirement Plan without regard to the limitations of Section 5.8 of the
Retirement Plan and Section 415 of the Code, over (b) the amount of such
participant's or surviving spouse's or annuitant's monthly benefit actually
payable under the Retirement Plan, computed under the provisions of the
Retirement Plan and subject to Section 5.8 of the Retirement Plan and
Section 415 of the Code.
Benefits payable under this Plan shall be payable to a Plan
participant or his spouse or other annuitant in the same manner and subject
to all the same options, conditions, privileges and restrictions as are
applicable to the benefits payable to the Plan participant, spouse or other
annuitant of a Participant under the Retirement Plan, as though such
benefits were payable as a part of the benefits being paid under the
Retirement Plan, without, however, taking into account the limitations of
Section 5.8 of the Retirement Plan and Section 415 of the Internal Revenue
Code. An election of mode of payment under the Retirement Plan shall be a
similar election under this Plan.
ARTICLE FIVE
PAYMENT OF BENEFITS
Benefits under this Plan shall become payable when a Plan
participant (or his spouse or annuitant) begins to receive payments under
the Retirement Plan, and shall be payable by the Company in the same manner
and at the same time as the Plan participant's (or his spouse's or
annuitant's) benefits under the Retirement Plan are paid, as though such
benefits were otherwise payable as a part of the benefits being paid under
the Retirement Plan.
ARTICLE SIX
FUNDING
Benefits under this Plan shall be payable from the general assets
of the Company, and shall not be segregated in a trust fund or otherwise
funded in any manner prior to the time of payment. No Plan participant
shall have any vested rights hereunder nor any right hereunder to any
specific assets of the Company.
ARTICLE SEVEN
ADMINISTRATION
This Plan will be administered by the Committee which administers
the Retirement Plan. With respect to administration of this Plan, the
provisions of Article Eleven of the Retirement Plan, governing claims,
Section 10.4 of the Retirement Plan, governing powers of the Committee, and
Section 12.2 of the Retirement Plan, regarding scope of responsibility,
shall be fully applicable.
ARTICLE EIGHT
AMENDMENT AND TERMINATION OF THE PLAN
This Plan may be amended in whole or in part, prospectively or
retroactively, by action of the Company's Board of Directors, and may be
terminated at any time by action of the Company's Board of Directors;
provided, however, that no such amendment or termination shall reduce any
amount payable hereunder to the extent such amount accrued prior to the date
of amendment or termination.
ARTICLE NINE
ASSIGNMENT
No Plan participant or beneficiary of a Plan participant shall
have any right to assign, pledge, hypothecate, anticipate or any way create
a lien on any amounts payable hereunder. No amounts payable hereunder shall
be subject to assignment or transfer or otherwise be alienable, either by
voluntary or involuntary act, or by operation of law, or subject to
attachment, execution, garnishment, sequestration or other seizure under any
legal, equitable or other process, or be liable in any way for the debts or
defaults of Plan participants and their beneficiaries.
ARTICLE TEN
WITHHOLDING
Any taxes required to be withheld from payments to Plan
participants hereunder shall be deducted and withheld by the Company.
ARTICLE ELEVEN
OTHER BENEFIT PLANS OF THE COMPANY
Nothing contained in this Plan shall prevent a Plan participant
prior to his death, or his spouse or other annuitant after his death, from
receiving, in addition to any payments provided for under this Plan, any
payments provided for under the Retirement Plan or under the Savings Plan,
or which would otherwise be payable or distributable to him, his surviving
spouse or annuitant under any plan or policy of the Company or otherwise.
Nothing in this Plan shall be construed as preventing the Company or any of
its subsidiaries from establishing any other or different plans providing
for current or deferred compensation for employees.
ARTICLE TWELVE
MISCELLANEOUS
Nothing contained in this Plan shall be construed as a contract of
employment between the Company and an employee, or as a right of any
employee to be continued in the employment of the Company, or as a
limitation of the right of the Company to discharge any of its employees,
with or without cause.
All of the provisions of this Plan shall be binding upon all
persons who shall be entitled to any benefit hereunder, their heirs and
personal representatives.
IN WITNESS WHEREOF, ARIZONA PUBLIC SERVICE COMPANY has signed and
sealed this instrument the 17th day of DECEMBER, 1982.
ARIZONA PUBLIC SERVICE
COMPANY
By Keith L. Turley
--------------------------------------------
Its Chairman of the Board
----------------------------------
"Company"
Attest:
By William T. Quinsler
-----------------------------
Its Secretary
-------------------------
<PAGE>
FIRST AMENDMENT TO
THE ARIZONA PUBLIC SERVICE COMPANY
SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN
ARIZONA PUBLIC SERVICE COMPANY, hereinafter referred to as the
"Company," has previously adopted the ARIZONA PUBLIC SERVICE COMPANY
EMPLOYEES' RETIREMENT PLAN, hereinafter referred to as the "Retirement
Plan." Subsequent to adoption of the Retirement Plan, the Company adopted
THE SAVINGS PLAN FOR EMPLOYEES OF ARIZONA PUBLIC SERVICE COMPANY,
hereinafter referred to as the "Savings Plan." The Company previously
adopted the ARIZONA PUBLIC SERVICE COMPANY SUPPLEMENTAL EXCESS BENEFIT
RETIREMENT PLAN, hereinafter referred to as the "Plan," effective January 1,
1982. By this First Amendment, the Company intends to amend the Plan to
include bonuses in pensionable compensation under the Plan.
1. This First Amendment to the Plan shall be effective January 1,
1986. Any provision of the Plan not amended by this First Amendment to the
Plan shall be considered to remain in full force and effect.
2. This First Amendment shall affect the benefits under this Plan for
employees becoming entitled to benefits under this Plan on and after January
1, 1986. The benefits of any employees for whom benefits have commenced
under this Plan prior to such date shall be determined in accordance with
the terms and provisions of the Plan in effect before this First Amendment.
3. Article Four of the plan is hereby amended and restated in its
entirety to provide as follows:
"ARTICLE FOUR
BENEFITS
Any participant in this Plan who is a participant in the Retirement
Plan and who receives a benefit under the Retirement Plan, or such
Retirement Plan Participant's surviving spouse or annuitant in the event of
the Retirement Plan Participant's death, shall be entitled to a monthly
benefit payable hereunder in accordance with this ARTICLE FOUR and with
ARTICLE FIVE of this Plan, equal to the excess, if any, of (a) the amount of
such Participant's or surviving spouse's or annuitant's monthly benefit
under the Retirement Plan (1) computed under the provisions of the
Retirement Plan without regard to the limitations of Section 415 of the Code
and the corresponding provisions of the Retirement Plan (as of January 1,
1986, set forth in Section 5.10 of the Retirement Plan) and (2) computed as
though bonuses and incentive payments payable to salaried Employees are
taken into account under the Retirement Plan in determining Average Monthly
Compensation and Compensation and are not excluded from consideration in
such determination, over (b) the amount of such Participant's or surviving
spouse's or annuitant's monthly benefit actually payable under the
Retirement Plan, computed under the provisions of the Retirement Plan and
subject to Section 415 of the Code and Section 5.10 of the Retirement Plan.
Benefits payable under this Plan shall be payable to a Plan participant
or his spouse or other annuitant in the same manner and subject to all the
same options, conditions, privileges and restrictions as are applicable to
the benefits payable to the Plan participant, spouse or other annuitant of a
Participant under the Retirement Plan, as though such benefits were payable
as a part of the benefits being paid under the Retirement Plan; provided
that such payment shall be separate from payment under the Retirement Plan
and may be paid on a different day of the month than the day on which
Retirement Plan benefit payments are made. An election of mode of payment
under the Retirement Plan shall be a similar election under this Plan."
4. Except as amended by this First Amendment, the Company hereby
ratifies the Plan in its entirety.
IN WITNESS WHEREOF, ARIZONA PUBLIC SERVICE COMPANY has signed and
sealed this instrument the 20th day of September, 1986.
ARIZONA PUBLIC SERVICE COMPANY
By Keith L. Turley
-------------------------------
Its Chairman & CEO
------------------------------
"Company"
ATTEST:
By Faye Widenmann
-------------------------------
Its Secretary
---------------------------
SECOND AMENDMENT TO
THE ARIZONA PUBLIC SERVICE COMPANY
SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN
Effective January 1, 1982, ARIZONA PUBLIC SERVICE COMPANY (the
"Company") adopted the ARIZONA PUBLIC SERVICE COMPANY SUPPLEMENTAL EXCESS
BENEFIT RETIREMENT PLAN (the "Plan"). The Plan was thereafter amended on
September 30, 1986. By this instrument, the Company intends to amend the
Plan to provide eligible employees with the benefits attributable to
compensation in excess of $200,000.00, which may not be taken into account
for purposes of the qualified pension and profit sharing plans maintained by
the Company as a result of recent amendments to the Internal Revenue Code of
1986, as amended.
1. This amendment shall amend only those provisions set forth herein,
and those provisions not amended hereby shall remain in full force and
effect.
2. Article Four of the Plan is hereby amended and restated in its
entirety to provide as follows:
ARTICLE FOUR
BENEFITS
Subject to ARTICLE SIX, any participant in the Plan who is a
Participant in the Retirement Plan and who receives a benefit
under the Retirement Plan, or such participant's surviving spouse
or annuitant in the event of the participant's death, shall be
entitled to a monthly benefit payable hereunder in accordance with
this ARTICLE FOUR and with ARTICLE FIVE of the Plan, equal to the
excess, if any, of (a) the amount of such participant's or
surviving spouse's or annuitant's monthly benefit under the
Retirement Plan computed (i) under the provisions of the
Retirement Plan without regard to that plan's exclusion of bonuses
or incentive payments payable to the participant or to the
limitations on the amount of "Compensation" that may be taken into
account under the Retirement Plan under Section 401(a)(17) of the
Code and without regard to the provisions of Section 5.9 of the
Retirement Plan and Section 415 of the Code, over (b) the amount
of such participant's or surviving spouse's or annuitant's monthly
benefit actually payable under the Retirement Plan, as determined
under the provisions of the Retirement Plan, including the
exclusion of bonuses and incentive payments payable to the
participant and the limitations on the amount of "Compensation"
that may be taken into account under the Retirement Plan under
Code Section 401(a)(17) and the provisions of Section 5.9 of the
Retirement Plan and Section 415 of the Code.
Benefits payable under the Plan shall be payable to a Plan
participant or his spouse or other annuitant in the same manner
and subject to all the same options, conditions, privileges and
restrictions as are applicable to the benefits payable to the Plan
participant, spouse or other annuitant of a Participant under the
Retirement Plan, as though such benefits were payable as a part of
the benefits being paid under the Retirement Plan, without,
however, taking into account the Retirement Plan's exclusion of
bonuses and incentive payments payable to the participant, the
limitation on the "Compensation" that may be taken into account
under the Retirement Plan under Code Section 401(a)(17) and the
provisions of Section 5.9 of the Retirement Plan and Section 415
of the Code. An election of mode of payment under the Retirement
Plan shall constitute an election of a similar mode of payment
under this Plan.
3. This Amendment shall be effective as of January 1, 1989.
Except as amended hereby, the Company hereby ratifies the Plan as
adopted and thereafter amended.
Dated: July 24, 1990.
ARIZONA PUBLIC SERVICE COMPANY
By Leslie N. Brockhurst
--------------------------------------
Its VP - Human Resources
----------------------------------
"Company"
THIRD AMENDMENT TO
THE ARIZONA PUBLIC SERVICE COMPANY
SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN
Effective January 1, 1982, ARIZONA PUBLIC SERVICE COMPANY (the
"Company") adopted the ARIZONA PUBLIC SERVICE COMPANY SUPPLEMENTAL EXCESS
BENEFIT RETIREMENT PLAN (the "Plan"). The Plan was thereafter amended on
September 30, 1986 and July 24, 1990. By this instrument, the Company
intends to amend the Plan to include deferred compensation as pension
earnings for purposes of calculating the participant's benefit under the
Plan and to clarify the inclusion of bonuses and incentive payments as
pension earnings.
1. This Amendment shall amend only those provisions set forth herein,
and those provisions not amended hereby shall remain in full force and
effect.
2. Article Four of the Plan is hereby amended and restated in its
entirety to provide as follows:
ARTICLE FOUR
BENEFITS
Subject to ARTICLE SIX, any participant in the Plan who is a
participant in the Retirement Plan and who receives a benefit
under the Retirement Plan, or such participant's surviving spouse
or annuitant in the event of the participant's death, shall be
entitled to a monthly benefit payable hereunder in accordance with
this ARTICLE FOUR and with ARTICLE FIVE of the Plan, equal to the
excess, if any, of (a) the amount of such participant's or
surviving spouse's or annuitant's monthly benefit under the
Retirement Plan computed under the provisions of the Retirement
Plan but (i) including "Compensation" deferred by the participant
under the Company's deferred compensation plan; (ii) subject to
the limitations set forth below, including as "Compensation" cash
payments made to the participant pursuant to bonus or incentive
plans maintained by the Company for employees generally; and
(iii) including "Compensation" in excess of the amount allowed to
be taken into account under Section 401(a)(17) of the Code and
(iv) without regard to the provisions of Section 5.9 of the
Retirement Plan and Section 415 of the Code, over (b) the amount
of such participant's or surviving spouse's or annuitant's monthly
benefit actually payable under the Retirement Plan, as determined
under the provisions of the Retirement Plan, including the
exclusion of the participant's deferred compensation, the
exclusion of bonus and incentive payments payable to the
participant, the limitation on the amount of "Compensation" that
may be taken into account under the Retirement Plan under Code
Section 401(a)(17) and the provisions of Section 5.9 of the
Retirement Plan and Section 415 of the Code. For purposes of the
foregoing determination, non-cash bonus or incentive payments,
bonus or incentive payments which are not "year-end" bonus or
incentive payments, and bonuses or incentive payments under
individual agreements between the Company and a participant shall
be disregarded. In addition, cash payments made under bonus or
incentive plans maintained by the Company for employees generally
shall be disregarded to the extent that such payments exceed the
maximum amount that the Human Resources Committee of the Board, as
successor hereunder to the Executive Committee, determines, in its
discretion, from time to time, may be taken into account under the
Plan as "Compensation." The Human Resources Committee may
differentiate among various groups of employees in establishing
the maximum bonus or incentive payments that may be taken into
account under the Plan.
Benefits payable under the Plan shall be payable to a Plan
participant or his spouse or other annuitant in the same manner
and subject to all the same options, conditions, privileges and
restrictions as are applicable to the benefits payable to the Plan
participant, spouse or other annuitant of a Participant under the
Retirement Plan, as though such benefits were payable as a part of
the benefits being paid under the Retirement Plan. An election of
mode of payment under the Retirement Plan shall constitute an
election of a similar mode of payment under this Plan.
3. ARTICLE SEVEN is hereby amended in its entirety
to read as follows:
ARTICLE SEVEN
ADMINISTRATION
The Plan will be administered by the Administrative Committee
that administers the Retirement Plan. With respect to
administration of the Plan, except as otherwise provided in this
ARTICLE SEVEN, the provisions of Article Eleven of the Retirement
Plan governing claims, Section 10.4 of the Retirement Plan
governing powers of the Administrative Committee, and Section 12.2
of the Retirement Plan regarding scope of responsibility, shall be
fully applicable. Notwithstanding any provision to the contrary
herein, the Human Resources Committee shall have the sole and
absolute discretion to determine whether a bonus or incentive
payment made to a participant constitutes "Compensation" for
purposes of ARTICLE FOUR of the Plan.
4. This Amendment shall be effective as of January 1, 1992.
Except as amended hereby, the Company hereby ratifies the Plan as
adopted and thereafter amended.
DATED: February 13, 1992.
ARIZONA PUBLIC SERVICE COMPANY
By: J.B. Norberg
--------------------------------------
Its Executive Vice President and
---------------------------------
Chief Financial Officer
---------------------------------
EXHIBIT 10.9a
Under the Company's 1994 Key Employees Variable Pay Plan, the President
of the Company, with the approval of the Human Resources Committee of the
Board of Directors, annually designates employees to participate in the
program, establishes their participation level and establishes certain
financial and operational goals for the Company which must be satisfied
in order for variable pay awards to be made. The impact, if any, of each
employee's performance on his or her variable pay award is determined by the
President of the Company, with the approval of the Human Resources
Committee. Subject to final approval by the Human Resources Committee of
the Board of Directors, the President of the Company also determines at
year-end the degree to which those goals have been satisfied and the amount
of variable pay to be awarded to participating employees, if any.
EXHIBIT 10.10a
Under the Company's 1994 Officers Variable Pay Plan, the President of
the Company, with the approval of the Human Resources Committee of the
Board of Directors, annually designates the officers who will
participate in the program, establishes their participation level,
and establishes certain financial and operational goals for the Company
which must be satisfied in order for variable pay awards to be made. The
impact, if any, of each officer's performance on his or her variable pay
award is determined by the President of the Company, with the approval of
the Human Resources Committee. Subject to the final approval by the Human
Resources Committee of the Board of Directors, the President also
determines at year-end the degree to which those goals have been satisfied
and the amount of variable pay to be awarded to participating officers, if
any.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-51085, 33-57822 and 33-61228 on Form S-3, of our report dated February
21, 1994 (which expresses an unqualified opinion and includes an explanatory
paragraph relating to the Company's change in method of accounting for
income taxes discussed in Note 8 to those financial statements) appearing in
this Annual Report on Form 10-K of Arizona Public Service Company for the
year ended December 31, 1993.
Deloitte & Touche
Deloitte & Touche
Phoenix, Arizona
March 28, 1994
