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, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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)
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Adjustable Rate Cumulative Preferred Stock, ......... New York Stock Exchange
Series Q, $100 Par Value
$1.8125 Cumulative Preferred Stock, ................. New York Stock Exchange
Series W, $25 Par Value
10% Junior Subordinated Deferrable Interest ......... New York Stock Exchange
Debentures, Series A, Due 2025
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. [ X ]
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, 1995 March 22, 1995
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Cumulative Preferred Stock..... 5,624,199 $228,811,223(a)
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(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, 1995, 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, 1995, 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 May 16, 1995, are incorporated by
reference into Part III hereof.
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.................................... 40
PART III
Item 10. Directors and Executive Officers of the Registrant......... 40
Item 11. Executive Compensation..................................... 40
Item 12. Security Ownership of Certain Beneficial Owners and
Management........................................................ 40
Item 13. Certain Relationships and Related Transactions............. 40
PART IV
Item 14. Exhibits, Financial Statements, Financial Statement
Schedules,
and Reports on Form 8-K.................................... 41
SIGNATURES.............................................................. 54
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
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
kW -- Kilowatt, one thousand watts
kWh -- Kilowatt-hour, one thousand watts per hour
Mortgage -- Mortgage and Deed of Trust, dated as of July 1, 1946, as
supplemented and amended
MWh -- Megawatt hours, one million watts per hour
1935 Act -- Public Utility Holding Company Act of 1935
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. 71 -- Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation"
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
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 6,535 people, which includes employees assigned to joint
projects where the Company is project manager.
The Company serves approximately 681,000 customers in an area that includes
all or part of 11 of Arizona's 15 counties. During 1994, 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 (see "Competition" below); (ii)
difficulties in meeting government imposed environmental requirements; (iii) the
necessity to make substantial capital outlays for transmission and distribution
facilities; (iv) uncertainty regarding projected electrical demand growth; (v)
controversies over electromagnetic fields; (vi) controversies over the safety
and use of nuclear power; (vii) issues related to spent fuel and low-level waste
(see "Generating Fuel" below); and (viii) increasing costs of wages and
materials.
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).
Electric utilities have historically operated in a highly-regulated
environment that provides limited opportunities for direct competition in
providing electric service to their customers. The National Energy Policy Act of
1992 (the "Energy Act") has far-reaching implications for the Company by moving
utilities toward a more competitive environment. The Energy Act is designed,
among other things, to promote competition among utility and non- utility
generators by amending the Public Utility Holding Company Act of 1935 (the "1935
Act") to exempt a new class of independent power producers that are not subject
to regulation under the 1935 Act. The Energy Act also amends the Federal Power
Act to allow the FERC to order electric utilities to transmit, or "wheel,"
wholesale power for others. The FERC is prohibited under the Energy Act from
requiring utilities to provide transmission access to retail customers, and
there remains uncertainty about a state's ability to authorize such transmission
access to and for retail electric customers.
One of the issues that must be addressed responsibly is the recovery in a
more competitive environment of the carrying value of assets (including those
referred to in Note 1a of Notes to Financial Statements) acquired or recorded
under the existing regulatory environment. Pursuant to a 1994 rate settlement
(see Note 2 of Notes to Financial Statements), the Company and the ACC staff
will develop certain procedures that are responsive to the competitive forces in
larger customer segments, with the objective of making joint recommendations to
the ACC in 1995. A separate ACC proceeding on competition was opened in mid-1994
and is expected to continue for some months.
As the forces of competition continue to impact the industry, it will become
clearer as to what customer sectors and what regions will be most affected and
what strategies are best to deal with those forces. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Competition" in
Item 7 for a discussion of some of the Company's strategies.
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, 1994 is tabulated below.
Amount Percentage
---------- ----------
(Thousands
of
Dollars)
Long-Term Debt Less Current Maturities:
First mortgage bonds................................ $1,740,071
Other............................................... 441,761
----------
Total long-term debt less current maturities...... 2,181,832 52.5%
----------
Non-Redeemable Preferred Stock........................ 193,561 4.7
----------
Redeemable Preferred Stock............................ 75,000 1.8
----------
Common Stock Equity:
Common stock, $2.50 par value, 100,000,000 shares
authorized; 71,264,947 shares outstanding......... 178,162
Premiums and expenses............................... 1,039,303
Retained earnings................................... 353,655
----------
Total common stock equity......................... 1,571,120 37.8
----------
Total capitalization............................ 4,021,513
Current Maturities of Long-Term Debt.................. 3,428 .1
Short-Term Borrowings................................. 131,500 3.1
---------- --------
Total........................................... $4,156,441 100.0%
---------- --------
---------- --------
See Notes 3, 4, and 5 of Notes to Financial Statements in Item 8.
On January 12, 1995, the Company issued $75 million of its 10% junior
subordinated deferrable interest debentures, Series A (MIDS), due 2025, and
applied the net proceeds to the repayment of short-term borrowings incurred for
the redemption of preferred stock in 1994. On March 2, 1995, the Company
redeemed $49.15 million in aggregate principal amount of the Company's First
Mortgage Bonds, 10.25% Series due 2000 (the "10.25% Bonds").
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 1994, the replacement fund
requirement amounted to approximately $125 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 1994 replacement fund requirements was used to
redeem the 10.25% Bonds at their principal amount plus accrued interest.
Rates
State. The ACC has regulatory authority over the Company in matters relating
to retail electric rates and the issuance of securities. See Note 2 of Notes to
Financial Statements in Item 8 for a discussion of the 1994 retail rate
settlement agreement between the Company and the ACC.
Federal. The Company's rates for wholesale power sales and transmission
services are subject to regulation by the FERC. During 1994, approximately 6% 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
Pinnacle West and its subsidiaries, including the Company, are currently
exempt from registration under the 1935 Act; however, the SEC has the authority
to revoke or condition an exemption if it appears that any question exists as to
whether the exemption may be detrimental to the public interest or the interest
of investors or consumers. In May 1990, the ACC filed a petition with the SEC
requesting the SEC to revoke or modify the Pinnacle West's exemption under the
1935 Act. To date, the SEC has not taken any action with respect to the ACC
petition. The Company cannot predict what action, if any, the SEC may take with
respect to such petition. The Company does not believe that the revocation or
modification of the Pinnacle West exemption under the 1935 Act, if acted on by
the SEC, would have a material adverse effect on the operations or financial
position of the Company.
Construction Program
Present construction plans exclude any major baseload generating plants.
Utility construction expenditures for the years 1995 through 1997 are therefore
expected to be primarily for expanding transmission and distribution
capabilities to meet customer growth, upgrading existing facilities and for
environmental purposes. Construction expenditures, including expenditures for
environmental control facilities, for the years 1995 through 1997 have been
estimated as follows:
(Millions of Dollars)
By Year By Major Facilities
----------------- ----------------------------------------------------
1995 $300 Electric generation $278
1996 257 Electric transmission 59
1997 236 Electric distribution 367
---- General facilities 89
$793 ----
==== $793
====
The amounts for 1995 through 1997 exclude capitalized interest costs and
capitalized property taxes. These amounts include about $27 million each year
for nuclear fuel expenditures. 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 projections 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 1992 through 1994, the Company incurred approximately $728
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 $500 million, most of which will be incurred from 1995 through
1998, and annual operations and maintenance costs of approximately $14 million
for all three units, 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 oxides emissions limitations; however, on November 29,
1994, the United States Court of Appeals for the District of Columbia Circuit
vacated the rules and remanded them to the EPA for further consideration. The
EPA has not yet proposed revised rules.
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. The results of the first
study indicated an impact from mercury emissions from such units in certain
unspecified areas; however, the EPA has not yet stated whether or not emissions
limitations will be imposed. Next, 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 1994, 1993, and 1992, 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>
1994
(estimate) 59.7% $13.84 33.8% $6.09 6.3% $24.64 0.2% $16.26 $11.90
1993........ 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
</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 five years, the term of the existing coal
contract. Sufficient reserves of low sulfur coal are available to continue
operating Cholla 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 their useful lives. The current
sulfur content of coal being used at Four Corners, NGS, and Cholla is
approximately 0.8%, 0.6%, and 0.4%, respectively. In 1994, 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 mines all of the coal under a
long-term lease of coal reserves owned by the Navajo Tribe, the federal
government, and private landholders.
The Company is a party to contracts with twenty-six natural gas operators
and marketers which allow the Company to purchase natural gas in the method it
determines to be most economic. During 1994, the principal sources of the
Company's natural gas generating fuel were 21 of these companies. The Company is
currently purchasing the majority of its natural gas requirements from twelve
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 1997.
Existing contracts and options could be utilized to meet approximately 80% of
requirements in 1998 and 1999 and 70% of requirements from 2000 through 2002.
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 2000 and with options for up to 70% through 2002. 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 September 2002,
with options to continue through September 2007. 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 that the Company expects for
Palo Verde will be approximately $3 million per year, plus escalation for
inflation, for fifteen years beginning in 1993. The Company is 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 Waste 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.
There are no existing off-site facilities for storage or disposal of
low-level waste available for Palo Verde, so the waste is currently being stored
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 Nuclear Generating Station
Regulatory. 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.
Steam Generators. See "Palo Verde Nuclear Generating Station" in Note 10 of
Notes to Financial Statements in Item 8 for a discussion of issues relating to
the Palo Verde steam generators.
Palo Verde Liability and Insurance Matters. See "Palo Verde Nuclear
Generating Station" 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.
Department of Labor Matter. 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, which was approved by the Secretary of Labor on March 21,
1994. On May 19, 1994, the Secretary of Labor rescinded the March 21 order and
remanded the matter to the responsible Administrative Law Judges for
clarification. On August 9, 1994 and September 20, 1994 the Administrative Law
Judges again recommended to the Secretary of Labor that the settlement be
approved. 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.
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. Issues important to the
Company's claims were remanded to the trial court for further action and the
trial court certified its decision for interlocutory appeal to the Arizona
Supreme Court. On September 28, 1994, the Arizona Supreme Court granted review
of the trial court decision. 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
June 29, 1994 at 4,214,000 kW, compared to the 1993 peak of 3,802,300 kW
recorded on August 2. 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 June 29, 1994, computed in
accordance with accepted industry practices, amounted to 4,514,300 kW, for an
installed reserve margin of 8.1%. 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 1994 peak amounted to 4,193,500 kW, for a margin of -0.5%. Firm
purchases from neighboring utilities totaling 550 MW were in place at the time
of the 1994 peak, ensuring the Company's ability to meet the load requirement.
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.
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, present
construction plans exclude any major baseload generating plants. 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 304,000 kW until
May, 1994, at which time the capacity increased to 313,000 kW. In 1994, the
Company received approximately 887,650 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 ($9.5 million
of which has been paid) 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, for which approximately $0.5 million was
paid during 1994. In 1994, the Company received 389,110 MWh of energy from
PacifiCorp under these transactions and paid approximately $18 million for
capacity availability and the energy received, and PacifiCorp paid approximately
$0.5 million for approximately 32,000 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
-------
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.
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 1994 by an aggregate amount of approximately $21 million per year,
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, 1995 Position(s) at March 1, 1995
---- ------------- ----------------------------
Richard Snell 64 Chairman of the Board of Directors
(1)
O. Mark DeMichele 60 President and Chief Executive
Officer(1)
William J. Post 44 Senior Vice President and Chief
Operating Officer(1)
Jaron B. Norberg 57 Executive Vice President and Chief
Financial Officer(1)
Shirley A. Richard 47 Executive Vice President, Customer
Service, Marketing and Corporate
Relations
William L. Stewart 51 Executive Vice President, Nuclear
Jan H. Bennett 47 Vice President, Customer Service
Jack E. Davis 48 Vice President, Generation and
Transmission
Armando B. Flores 51 Vice President, Human Resources
James M. Levine 45 Vice President, Nuclear Production
Richard W. MacLean 48 Vice President, Environmental,
Health and Safety
E. C. Simpson 46 Vice President, Nuclear Support
Jack A. Bailey 41 Vice President, Nuclear Engineering
and Projects
William J. Hemelt 41 Controller
Nancy C. Loftin 41 Secretary and Corporate Counsel
Nancy E. Newquist 43 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. DeMichele was elected President in September 1982 and became Chief
Executive Officer as of January 1988.
Mr. Post was elected to his present position in September 1994. Prior to
that time he was Senior Vice President, Planning, Information and Financial
Services (since June 1993), and Vice President, Finance & Rates (since April
1987).
Mr. Norberg was elected to his present position in July 1986.
Ms. Richard was elected to her present position in January 1989.
Mr. Stewart was elected to his present position in May 1994. Prior to that
time he was Senior Vice President -- Nuclear for Virginia Power (since 1989).
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.
Mr. Levine was elected to his present position in September 1989.
Mr. MacLean was elected to his present position in December 1991. Prior to
that time he held the following positions at General Electric (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.
Mr. Bailey was elected to his present position in April 1994. Prior to that
time he was Assistant Vice President, Nuclear Engineering and Projects (July
1993-April 1994); Director, Nuclear Engineering (1991-1993); and, Assistant
Plant Manager (1989 to 1991) at Palo Verde.
Mr. Hemelt was elected to his present position in June 1993. Prior to that
time he was Treasurer and Assistant Secretary (since April 1987).
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 1994 and 1993.
Common Stock Dividends
(Thousands of Dollars)
-------------------------------------------------
Quarter 1994 1993
-------------------------------------------------
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.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<CAPTION>
1994 1993 1992 1991 (a) 1990
-------------- -------------- -------------- --------------- --------------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Electric Operating
Revenues (b)..................... $1,626,168 $1,602,413 $1,587,582 $1,385,815 $1,434,750
Fuel and Purchased Power........... 300,689 300,546 287,201 273,771 289,048
Operating Expenses................. 957,046 929,379 908,123 782,788 785,814
-------------- -------------- -------------- --------------- --------------
Operating Income................. 368,433 372,488 392,258 329,256 359,888
Other Income (Deductions).......... 44,510 54,220 48,801 (324,922) 56,713
Interest Deductions -- Net......... 169,457 176,322 194,254 226,983 236,589
-------------- -------------- -------------- --------------- --------------
Net Income (Loss)................ 243,486 250,386 246,805 (222,649) 180,012
Preferred Dividends.............. 25,274 30,840 32,452 33,404 31,060
-------------- -------------- -------------- --------------- --------------
Earnings (Loss) for Common Stock. $ 218,212 $ 219,546 $ 214,353 $ (256,053) $ 148,952
============== ============== ============== =============== ==============
Total Assets....................... $ 6,348,261 $ 6,357,262 $ 5,629,432 $ 5,620,692 $ 6,253,562
============== ============== ============== =============== ==============
Capitalization:
Common Stock Equity.............. $ 1,571,120 $ 1,522,941 $ 1,476,390 $ 1,433,463 $ 1,860,110
Non-Redeemable Preferred Stock... 193,561 193,561 168,561 168,561 168,561
Redeemable Preferred Stock....... 75,000 197,610 225,635 227,278 192,453
Long-Term Debt................... 2,181,832 2,124,654 2,052,763 2,185,363 2,303,953
-------------- -------------- -------------- --------------- --------------
Total.......................... $ 4,021,513 $ 4,038,766 $ 3,923,349 $ 4,014,665 $ 4,525,077
============== ============== ============== =============== ==============
Capital Expenditures............... $ 255,308 $ 234,944 $ 224,419 $ 182,687 $ 259,280
============== ============== ============== =============== ==============
----------
(a) Financial results for 1991 include a $407 million after-tax write-off
related to a rate case settlement.
(b) Consistent with the 1994 presentation, prior years' electric operating
revenues and other taxes have been restated to exclude sales tax on electric
revenues.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1994 Compared with 1993
Earnings in 1994 were $218.2 million compared with $219.5 million in
1993. Electric operating revenues increased primarily due to strong customer
growth and significantly warmer weather in 1994, partially offset by lower
interchange sales and the 1994 rate reduction. Substantially offsetting the
earnings effect of the 1994 rate reduction was a one-time depreciation reversal,
also occasioned by the 1994 rate settlement. (See Note 2 of Notes to Financial
Statements for information regarding the 1994 rate settlement.) Interest expense
declined due to the Company's refinancing efforts in 1994 and 1993. The
Company's effort to refinance high-cost debt, started in 1992, was substantially
completed at the end of 1994.
Substantially offsetting these positive factors were the completion in
May 1994 of the recording of non-cash income related to a 1991 rate settlement
(see Note 1 of Notes to Financial Statements); increased operations and
maintenance expense due primarily to employee severance costs related to various
cost-reduction efforts; and increased nuclear decommissioning costs reflecting
the most recent site-specific study (see Note 1 of Notes to Financial
Statements).
Fuel and purchased power expenses remained relatively unchanged in 1994
compared with 1993. Higher costs to meet increased retail sales were about
offset by lower fuel costs for reduced interchange sales. The Company does not
have a fuel adjustment clause as part of its retail rate structure; therefore,
changes in fuel and purchased power expenses are reflected currently in
earnings.
1993 Compared with 1992
Earnings in 1993 were $219.5 million compared with $214.3 million in
1992. The primary factor that contributed to this increase was lower interest
expense due to refinancing debt at lower rates, lower average debt balances and
lower interest rates on the Company's variable-rate debt. Partially offsetting
the lower interest expense were increased taxes and higher operating expenses.
Operating revenue increased significantly due to customer growth.
Offsetting customer growth were the effects of milder weather and increased fuel
and purchased power costs due to Palo Verde outages and reduced power levels
related to steam generator tube problems (see Note 10 of Notes to Financial
Statements).
Operations and maintenance expense for 1993 increased over 1992 levels
primarily due to the implementation of new accounting standards for
postemployment benefits and postretirement benefits other than pensions, which
added $17.0 million to expense in 1993 (see Note 9 of Notes to Financial
Statements). Partially offsetting these factors were lower power plant operating
costs, lower rent expense and lower costs for an employee cost-saving incentive
plan.
Operating Revenues
Operating revenues reflect changes in both the volume of units sold and
price per kilowatt-hour of electric sales. An analysis of the changes in 1994
and 1993 electric operating revenues compared with the prior year follows (in
millions of dollars):
1994 1993
------ ------
Volume variance ................................. $ 86.7 $22.3
1994 rate reduction ............................. (27.4) --
Interchange sales ............................... (19.5) (7.2)
Reversal of refund obligation ................... (12.1) --
Other operating revenues ........................ (3.9) (.3)
------ ------
Total change ................................... $ 23.8 $14.8
====== ======
The volume increase in 1994 primarily reflects the effects on retail
sales of customer growth ($56 million) and warmer weather ($42 million). The
volume increase in 1993 was primarily due to customer growth ($41 million),
partially offset by milder weather ($20 million reduction). Other factors
affecting volumes include changes in usage, unbilled revenue and firm sales for
resale for a net total of $11 million reduction in 1994 and $1 million increase
in 1993.
Other Income/Rate Settlement Impacts
Net income reflects accounting practices required for regulated public
utilities and represents a composite of cash and non-cash items, including
AFUDC, accretion income on Palo Verde Unit 3 and the reversal of a refund
obligation arising out of the 1991 rate settlement (see Statements of Cash Flows
and Note 1 of Notes to Financial Statements). The accretion and refund
reversals, net of income taxes, totaled $25.9 million, $58.2 million and $53.6
million in 1994, 1993 and 1992, respectively. The Company has now recorded all
of the Palo Verde Unit 3 accretion income and refund obligation reversals
related to the 1991 settlement. Also in 1994 was a one-time Palo Verde
depreciation reversal of $15 million, net of income tax, which is included in
"Other -- net" in the Statements of Income (see Note 2 of Notes to Financial
Statements).
The retail rate settlement which was approved by the ACC in May 1994
did not significantly affect 1994 earnings as previously discussed, and is not
expected to significantly affect earnings for the years 1995 through 1999
because the rate reduction will be substantially offset by accelerated
amortization of deferred investment tax credits (see Note 2 of Notes to
Financial Statements).
CAPITAL NEEDS AND RESOURCES
The Company's capital needs consist primarily of construction
expenditures and optional and mandatory 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 do not include any major baseload generating
plants. In general, most of the construction expenditures are for expanding
transmission and distribution capabilities to meet customer growth, upgrading
existing facilities and for environmental purposes. Construction expenditures
are anticipated to be approximately $300 million, $257 million and $236 million
for 1995, 1996 and 1997, respectively. These amounts include about $27 million
each year for nuclear fuel expenditures.
In the period 1992 through 1994, the Company funded all of its
construction expenditures and capitalized property taxes with funds provided by
operations, after the payment of dividends. For the period 1995 through 1997,
the Company estimates that it will fund substantially all such expenditures in
the same manner.
During 1994, the Company repurchased or redeemed approximately $587
million of long-term debt and preferred stock, of which approximately $518
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 $106 million, $4 million and $164 million for
the years 1995, 1996 and 1997, respectively. On March 2, 1995, the Company
redeemed all of its outstanding first mortgage bonds, 10.25% Series due 2000
(the 10.25% Bonds) for approximately $50 million.
The Company currently expects to issue up to $175 million of debt in
1995. Of this amount, on January 12, 1995, the Company issued $75 million of 10%
junior subordinated deferrable interest debentures (MIDS) due 2025, and applied
the net proceeds to the repayment of short-term debt that had been incurred for
the redemption of preferred stock in 1994. The Company expects that
substantially all of the net proceeds of the remaining financing activity in
1995 will be used for the retirement of outstanding debt.
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 bond
indenture limits the amount of additional first mortgage bonds which may be
issued to a percentage of net property additions, to the amount of certain first
mortgage bonds that have been redeemed or retired, and/or to cash deposited with
the mortgage bond trustee. After giving proforma effect to the redemption of the
10.25% Bonds as of December 31, 1994, the Company estimates that the bond
indenture and the articles of incorporation would then have allowed it to issue
up to approximately $1.33 billion and $768 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, 1994, the Company had credit commitments from
various banks totaling approximately $300 million, which were available either
to support the issuance of commercial paper or to be used as bank borrowings.
There were no bank borrowings outstanding at the end of 1994. Commercial paper
borrowings totaling $131.5 million were then outstanding.
COMPETITION
A significant challenge for the Company will be how well it is able to
respond to increasingly competitive conditions in the electric utility industry,
while continuing to earn an acceptable return for its shareholders. Strategies
emphasize managing costs, stabilizing electric rates, negotiating long-term
contracts with large customers and capitalizing on the growth characteristics of
the Company's service territory.
One of the issues that must be addressed responsibly is the recovery in
a more competitive environment of the carrying value of assets (including those
referred to in Note 1a of Notes to Financial Statements) acquired or recorded
under the existing regulatory environment.
Pursuant to the 1994 rate settlement, APS and the ACC staff will
develop certain procedures that are responsive to the competitive forces in
larger customer segments, with the objective of making joint recommendations to
the ACC in 1995. A separate ACC proceeding on competition was opened in mid-1994
and is expected to continue for some months.
As the forces of competition continue to impact the industry, it will
become clearer as to what customer sectors and what regions will be most
affected and what strategies are best to deal with those forces.
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Management ...................................................... 20
Independent Auditors' Report .............................................. 21
Statements of Income for each of the three years
in the period ended December 31, 1994 .................................... 23
Balance Sheets -- December 31, 1994 and 1993 .............................. 24
Statements of Retained Earnings for each of the
three years in the period ended December 31, 1994 ........................ 26
Statements of Cash Flows for each of the three
years in the period ended December 31, 1994 .............................. 27
Notes to Financial Statements ............................................. 28
See Note 11 of Notes to Financial Statements for the selected quarterly
financial data required to be presented in this Item.
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. A limiting factor in all systems of internal accounting control is
that the cost of the system should not exceed the benefits to be derived.
Management believes that the Company's system provides the appropriate balance
between such costs and benefits.
Periodically the internal accounting control system is 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 DEMICHELE JARON B. NORBERG
O. Mark DeMichele Jaron B. Norberg
President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
WILLIAM J. POST
William J. Post
Senior Vice President and
Chief Operating Officer
INDEPENDENT AUDITORS' REPORT
Arizona Public Service Company:
We have audited the accompanying balance sheets of Arizona Public Service
Company as of December 31, 1994 and 1993 and the related statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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, 1994 and 1993
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1994 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 3, 1995
[This page intentionally left blank]
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992
----------- ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C>
Electric Operating Revenues (Note 1) .......................... $ 1,626,168 $ 1,602,413 $ 1,587,582
----------- ----------- -----------
Fuel Expenses:
Fuel for electric generation ................................ 237,103 231,434 230,194
Purchased power ............................................. 63,586 69,112 57,007
----------- ----------- -----------
Total ..................................................... 300,689 300,546 287,201
----------- ----------- -----------
Operating Revenues Less Fuel Expenses ......................... 1,325,479 1,301,867 1,300,381
----------- ----------- -----------
Other Operating Expenses:
Operations excluding fuel expenses .......................... 292,292 282,660 270,838
Maintenance ................................................. 119,629 118,556 119,674
Depreciation and amortization ............................... 236,108 222,610 219,118
Income taxes (Note 8) ....................................... 168,202 168,056 164,620
Other taxes ................................................. 140,815 137,497 133,873
----------- ----------- -----------
Total ..................................................... 957,046 929,379 908,123
----------- ----------- -----------
Operating Income .............................................. 368,433 372,488 392,258
----------- ----------- -----------
Other Income (Deductions):
Allowance for equity funds used during
construction .............................................. 3,941 2,326 3,103
Income taxes (Note 8) ....................................... (9,042) (20,851) (16,735)
Palo Verde accretion income (Note 1) ........................ 33,596 74,880 67,421
Other -- net ................................................ 16,015 (2,135) (4,988)
----------- ----------- -----------
Total ..................................................... 44,510 54,220 48,801
----------- ----------- -----------
Income Before Interest Deductions ............................. 412,943 426,708 441,059
----------- ----------- -----------
Interest Deductions:
Interest on long-term debt .................................. 159,840 164,610 186,915
Interest on short-term borrowings ........................... 6,205 6,662 3,831
Debt discount, premium and expense .......................... 8,854 9,203 8,000
Allowance for borrowed funds used during
construction .............................................. (5,442) (4,153) (4,492)
----------- ----------- -----------
Total ..................................................... 169,457 176,322 194,254
----------- ----------- -----------
Net Income .................................................... 243,486 250,386 246,805
Preferred Stock Dividend Requirements ......................... 25,274 30,840 32,452
----------- ----------- -----------
Earnings for Common Stock ..................................... $ 218,212 $ 219,546 $ 214,353
=========== =========== ===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
BALANCE SHEETS
ASSETS
<CAPTION>
December 31,
-------------------------------------
1994 1993
----------- -------------
(Thousands of Dollars)
<S> <C> <C>
Utility Plant (Notes 4, 6 and 7):
Electric plant in service and held for future use ................................ $ 6,475,249 $ 6,333,884
Less accumulated depreciation and amortization ........................... 2,122,439 1,991,143
----------- ------------
Total ............................................................ 4,352,810 4,342,741
Construction work in progress ............................................ 224,312 197,556
Nuclear fuel, net of amortization of $80,599,000
and $67,752,000 .................................................. 46,951 60,953
----------- ------------
Utility Plant -- net ..................................... 4,624,073 4,601,250
----------- ------------
Investments and Other Assets ..................................................... 90,105 63,224
----------- ------------
Current Assets:
Cash and cash equivalents ................................................ 6,532 7,557
Accounts receivable:
Service customers ................................................ 103,711 102,745
Other ............................................................ 27,008 21,091
Allowance for doubtful accounts .................................. (2,176) (2,569)
Accrued utility revenues (Note 1) ........................................ 55,432 60,356
Materials and supplies (at average cost) ................................. 89,864 96,174
Fossil fuel (at average cost) ............................................ 35,735 34,220
Deferred income taxes (Note 8) ........................................... 19,114 29,117
Other .................................................................... 14,162 12,653
----------- ------------
Total Current Assets ............................................. 349,382 361,344
----------- ------------
Deferred Debits:
Regulatory asset for income taxes (Note 8) ............................... 557,049 585,294
Palo Verde Unit 3 cost deferral (Note 1) ................................. 292,586 301,748
Palo Verde Unit 2 cost deferral (Note 1) ................................. 171,936 177,998
Unamortized costs of reacquired debt ..................................... 60,942 63,147
Unamortized debt issue costs ............................................. 17,673 17,999
Other .................................................................... 184,515 185,258
----------- ------------
Total Deferred Debits ............................................ 1,284,701 1,331,444
----------- ------------
Total ............................................................ $ 6,348,261 $ 6,357,262
=========== ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
BALANCE SHEETS
LIABILITIES
<CAPTION>
December 31,
---------------------------------
1994 1993
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Capitalization (Notes 3 and 4):
Common stock ................................................................. $ 178,162 $ 178,162
Premiums and expenses -- net ................................................. 1,039,303 1,037,681
Retained earnings ............................................................ 353,655 307,098
---------- ----------
Common stock equity .................................................. 1,571,120 1,522,941
Non-redeemable preferred stock ............................................... 193,561 193,561
Redeemable preferred stock ................................................... 75,000 197,610
Long-term debt less current maturities ....................................... 2,181,832 2,124,654
---------- ----------
Total Capitalization ......................................... 4,021,513 4,038,766
---------- ----------
Current Liabilities:
Commercial paper (Note 5) .................................................... 131,500 148,000
Current maturities of long-term debt (Note 4) ................................ 3,428 3,179
Accounts payable ............................................................. 110,854 81,772
Accrued taxes ................................................................ 89,412 112,293
Accrued interest ............................................................. 45,170 45,729
Other ........................................................................ 50,487 60,737
---------- ----------
Total Current Liabilities .................................... 430,851 451,710
---------- ----------
Deferred Credits and Other:
Deferred income taxes (Note 8) ............................................... 1,436,184 1,391,184
Deferred investment tax credit ............................................... 142,994 149,819
Unamortized gain -- sale of utility plant (Note 7) ........................... 98,551 107,344
Customer advances for construction ........................................... 16,564 15,578
Other ........................................................................ 201,604 202,861
---------- ----------
Total Deferred Credits and Other ............................. 1,895,897 1,866,786
---------- ----------
Commitments and Contingencies (Note 10)
Total ........................................................ $6,348,261 $6,357,262
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
STATEMENTS OF RETAINED EARNINGS
<CAPTION>
Year Ended December 31,
--------------------------------------------
1994 1993 1992
-------- -------- --------
(Thousands of Dollars)
<S> <C> <C> <C>
Retained earnings at beginning of year ....................................... $307,098 $259,899 $215,974
Add: Net income .............................................................. 243,486 250,386 246,805
-------- -------- --------
Total ........................................................ 550,584 510,285 462,779
-------- -------- --------
Deduct:
Dividends:
Common stock (Notes 3 and 4) ................................. 170,000 170,000 170,000
Preferred stock (see below) .................................. 25,274 30,840 32,452
Premium paid on reacquisition of preferred stock ..................... 1,655 2,347 428
-------- -------- --------
Total deductions ..................................... 196,929 203,187 202,880
-------- -------- --------
Retained earnings at end of year ............................................. $353,655 $307,098 $259,899
======== ======== ========
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
$8.32 Series J ............................................... -- 3,364 4,160
$8.80 Series K ............................................... 216 1,454 1,654
$12.90 Series N .............................................. -- -- 1,196
Adjustable Rate Series Q ..................................... 3,000 3,000 3,083
$11.50 Series R .............................................. 1,533 3,630 4,081
$8.48 Series S ............................................... 1,734 3,251 4,240
$8.50 Series T ............................................... 2,833 4,250 4,250
$10.00 Series U .............................................. 5,000 5,000 5,000
$7.875 Series V .............................................. 1,969 1,966 1,179
$1.8125 Series W ............................................. 5,438 1,374 --
-------- -------- --------
Total ................................................ $ 25,274 $ 30,840 $ 32,452
======== ======== ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ARIZONA PUBLIC SERVICE COMPANY
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1994 1993 1992
----------- ----------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
Cash Flows from Operations:
Net income ..................................................... $ 243,486 $ 250,386 $ 246,805
Items not requiring cash:
Depreciation and amortization .......................... 236,108 222,610 219,118
Nuclear fuel amortization .............................. 32,564 32,024 36,605
Allowance for equity funds used during
construction ................................... (3,941) (2,326) (3,103)
Deferred income taxes -- net ........................... 83,249 102,697 84,097
Deferred investment tax credit -- net .................. (6,825) (6,948) (6,804)
Rate refund reversal ................................... (9,308) (21,374) (21,374)
Palo Verde accretion income ............................ (33,596) (74,880) (67,421)
Changes in certain current assets and liabilities:
Accounts receivable -- net ............................. (7,276) 30,889 (33,965)
Accrued utility revenues ............................... 4,924 (8,839) (7,055)
Materials, supplies and fossil fuel .................... 4,795 2,252 5,094
Other current assets ................................... (1,509) (6,616) 3,795
Accounts payable ....................................... 21,666 (18,622) 7,172
Accrued taxes .......................................... (22,881) 8,826 18,284
Accrued interest ....................................... (577) 241 (16,131)
Other current liabilities .............................. (9) 7,282 5,405
Other -- net ................................................... (418) 18,686 (2,386)
----------- ----------- ----------
Net cash provided .............................. 540,452 536,288 468,136
----------- ----------- ----------
Cash Flows from Financing:
Preferred stock ................................................ -- 72,644 24,781
Long-term debt ................................................. 516,612 520,020 643,360
Short-term borrowings -- net ................................... (16,500) (47,000) 195,000
Dividends paid on common stock ................................. (170,000) (170,000) (170,000)
Dividends paid on preferred stock .............................. (26,232) (30,945) (32,574)
Repayment of preferred stock ................................... (124,096) (78,663) (27,850)
Repayment and reacquisition of long-term debt .................. (462,643) (558,799) (1,013,371)
----------- ----------- ----------
Net cash used .......................................... (282,859) (292,743) (380,654)
----------- ----------- ----------
Cash Flows from Investing:
Capital expenditures ........................................... (255,308) (234,944) (224,419)
Allowance for equity funds used during construction ............ 3,941 2,326 3,103
Other .......................................................... (7,251) (4,522) (4,099)
----------- ----------- ----------
Net cash used .......................................... (258,618) (237,140) (225,415)
----------- ----------- ----------
Net increase (decrease) in cash and cash equivalents ................... (1,025) 6,405 (137,933)
Cash and cash equivalents at beginning of year ......................... 7,557 1,152 139,085
----------- ----------- ----------
Cash and cash equivalents at end of year ............................... $ 6,532 $ 7,557 $ 1,152
=========== =========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest (excluding capitalized interest) .............. $ 161,294 $ 161,843 $ 200,986
Income taxes ........................................... $ 121,578 $ 88,239 $ 85,141
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.
The Company prepares its financial statements in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation". SFAS No. 71
requires a cost-based rate-regulated enterprise to reflect the impact of
regulatory decisions in its financial statements.
The Company's major regulatory assets are Palo Verde cost deferrals (see Note
1j) and deferred taxes (see Note 8). These items, combined with miscellaneous
other items and regulatory liabilities, amounted to approximately $1.1 billion
at December 31, 1994 and 1993, most of which are included in "Deferred Debits"
on the Balance Sheets.
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 removal costs less salvage realized, is charged
to accumulated depreciation.
Depreciation on utility property is recorded on a straight-line basis. The
applicable rates for 1992 through 1994 ranged from 0.84% to 15.00%, which
resulted in an annual composite rate of 3.43% for 1994.
e. Nuclear Decommissioning Costs -- In 1994, the Company recorded $11.9
million for decommissioning expense. The Company estimates it will cost
approximately $2.1 billion ($425 million in 1994 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 are included in the accumulated depreciation balance
until each Palo Verde unit is fully decommissioned. Nuclear decommissioning
costs are currently recovered in rates.
The Company is utilizing a 1992 site-specific study for Palo Verde, prepared
for the Company by an independent consultant, that assumes the prompt
removal/dismantlement method of decommissioning. The study is updated every
three years.
As required by the ACC, the Company has established external trust accounts
into which quarterly deposits are made for decommissioning. As of December 31,
1994, the Company had deposited a total of $45.0 million. The trust accounts are
included in "Investments and Other Assets" on the Balance Sheets at a market
value of $55.2 million on December 31, 1994. The trust funds are invested
primarily in fixed-income securities and domestic stock and are classified as
available for sale. Gains and losses are reflected in accumulated depreciation.
In 1994, FASB added a project to its agenda on accounting for nuclear
decommissioning obligations. Only preliminary views have been discussed at this
time; however, there is some indication the FASB may require the estimated
present value of the cost of decommissioning to be recorded as a liability along
with an offsetting plant asset. The Company is unable to determine what, if any,
impact these deliberations may have on its financial position or results of
operations.
f. Revenues -- Operating revenues are recognized on the accrual basis and
include estimated amounts for service rendered but unbilled at the end of each
accounting period.
In 1991 the Company recorded a refund obligation of $53.4 million ($32.3
million after tax) as a result of a 1991 rate settlement. The refund obligation
was used to reduce the amount of a 1991 rate increase granted rather than
require specific customer refunds and was reversed over the thirty months ended
May 1994. The after-tax refund
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
obligation reversals that were recorded as electric operating revenues by the
Company amounted to $5.6 million in 1994 and $12.9 million in each of the years
1993 and 1992.
Consistent with the 1994 presentation, prior years' electric operating
revenues and other taxes have been restated to exclude sales tax on electric
revenue.
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
depreciation when completed projects are placed into commercial operation. AFUDC
does not represent current cash earnings.
AFUDC has been calculated using composite rates of 7.70% for 1994; 7.20% for
1993; and 10.00% for 1992. 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 -- The Company amortizes gains and losses on
reacquired debt over the remaining life of the original debt, consistent with
ratemaking.
i. Nuclear Fuel -- Nuclear fuel is charged to fuel expense using the
unit-of-production method under which the number of units of thermal energy
produced in the current period is related to the total thermal units 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 kWh 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 from the commercial operation date (September 1986 and January
1988, respectively) until the date the units 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. Palo Verde Accretion Income -- In 1991, the Company discounted the
carrying value of Palo Verde Unit 3 to reflect the present value of lost cash
flows resulting from a 1991 rate settlement agreement deeming a portion of the
unit to temporarily be excess capacity. In accordance with generally accepted
accounting principles, the Company recorded accretion income over a thirty-month
period ended May 1994 in the aggregate amount of the original discount. The
after-tax accretion income recorded in 1994, 1993 and 1992 was $20.3 million,
$45.3 million and $40.7 million, respectively.
2. Regulatory Matters
In May 1994, the ACC approved a retail rate settlement agreement which was
jointly proposed by the Company and the ACC staff. The major provisions of the
settlement include:
* A net annual rate reduction of approximately $32.3 million ($19 million after
tax), or 2.2% on average, effective June 1, 1994.
* A moratorium on filing for permanent rate changes, except under certain
circumstances, prior to the end of 1996 for both the Company and the ACC
staff.
* A joint APS-ACC study to develop rate principles allowing the Company greater
flexibility to deal with market conditions and increasing competition in the
electric industry.
* All of Palo Verde Unit 3 included in rate base.
* An incentive rewarding reduction in fuel and operating and maintenance cost
per kWh below established targets.
As part of the settlement, the Company reversed approximately $20 million of
depreciation ($15 million after tax) which related to the portion of Palo Verde
which was written off as a result of a 1991 rate settlement. The settlement also
provided for the accelerated amortization of substantially all deferred ITCs
over a five-year period beginning in 1995. Overall, the settlement is not
expected to materially affect the Company's financial position or results of
operations for the years 1995-1999.
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
3. Common and Preferred Stocks
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. The balances at
December 31, 1994 and 1993 of common and preferred stock are shown below:
<CAPTION>
Number of Shares Par Value
----------------------------------------- ----------------------------------------- Call
Outstanding Outstanding Price
-------------------- Per -------------------------- Per
Authorized 1994 1993 Share 1994 1993 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:
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)
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 3,000,000 25.00 75,000 75,000 (d)
---------- ---------- ----------- -----------
Total .............. 4,874,199 4,874,199 $ 193,561 $ 193,561
========== ========== =========== ===========
Redeemable:
Serial preferred:
$8.80 Series K .............. -- 142,100 $ 100.00 -- $ 14,210
$11.50 Series R ............. -- 284,000 100.00 -- 28,400
$8.48 Series S .............. -- 300,000 100.00 -- 30,000
$8.50 Series T .............. -- 500,000 100.00 -- 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 (e)
========== ========== =========== ===========
Total .............. 750,000 1,976,100 $ 75,000 $ 197,610
========== ========== =========== ===========
(a) In each case plus accrued dividends.
(b) This authorization also covers all outstanding 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 $106.30 through May 31, 1995, and thereafter declining by a
predetermined amount each year to par after May 31, 2002.
</TABLE>
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
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:
$0 in 1995 and 1996, and $10.0 million in each of the years 1997 through 1999.
<TABLE>
Redeemable preferred stock transactions during each of the three years in the
period ended December 31, 1994 are as follows:
<CAPTION>
Number of Shares Par Value
Outstanding Outstanding
-------------------------------------------- --------------------------------------------
(Thousands of Dollars)
Description 1994 1993 1992 1994 1993 1992
------------------------------ ---------- --------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1 ........... 1,976,100 2,256,350 2,272,782 $ 197,610 $ 225,635 $ 227,278
Issuance:
$7.875 Series V ............ -- -- 250,000 -- -- 25,000
Retirements:
$10.00 Series H ............ -- -- (8,677) -- -- (868)
$8.80 Series K ............. (142,100) (45,000) (4,725) (14,210) (4,500) (472)
$12.90 Series N ............ -- -- (213,280) -- -- (21,328)
$11.50 Series R ............ (284,000) (35,250) (39,750) (28,400) (3,525) (3,975)
$8.48 Series S ............. (300,000) (200,000) -- (30,000) (20,000) --
$8.50 Series T ............. (500,000) -- -- (50,000) -- --
---------- --------- --------- ----------- ---------- ----------
Balance, December 31 ......... 750,000 1,976,100 2,256,350 $ 75,000 $ 197,610 $ 225,635
========== ========= ========= =========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
4. Long-Term Debt
The following table presents long-term debt outstanding as of December 31,
1994 and 1993.
<CAPTION>
Year Ended December 31,
---------------------------
Maturity Dates Interest Rates 1994 1993
-------------- ---------------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
First mortgage bonds ........................................ 1997-2028 5.5%-13.25%(a) $1,740,071 $1,729,070
Pollution control indebtedness .............................. 2024-2029 Adjustable(b) 418,824 369,130
Capitalized lease obligation(c) ............................. 1995-2001 7.48% 26,365 29,633
---------- ----------
Total long-term debt ................................ 2,185,260 2,127,833
Less current maturities ..................................... 3,428 3,179
---------- ----------
Total long-term debt less current maturities ........ $2,181,832 $2,124,654
========== ==========
(a) The weighted-average rate at December 31, 1994, and 1993 was 8.04% and
8.25%, respectively. The weighted-average years to maturity at December 31,
1994 and 1993 was 19 years and 20 years, respectively.
(b) The weighted-average rate for the years ended December 31, 1994, and 1993
was 2.99% and 2.64%, respectively. Changes in short-term interest rates
would affect the costs associated with this debt.
(c) Represents the present value of future lease payments (discounted at an
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>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
Aggregate annual principal payments due on long-term debt and for sinking
fund requirements through 1999 are as follows: 1995, $3.4 million; 1996, $3.5
million; 1997, $153.8 million; 1998, $109.1 million; and 1999, $109.4 million.
See Note 3 for redemption and sinking fund requirements of redeemable preferred
stock of the Company.
On January 12, 1995, the Company issued $75 million of 10% junior
subordinated deferrable interest debentures (MIDS) due 2025.
Substantially all utility plant (other than nuclear fuel, transportation
equipment, and the combined cycle plant) is subject to the lien of the mortgage
bond indenture. The mortgage bond indenture includes provisions which would
restrict the payment of common stock dividends under certain conditions which
did not exist at December 31, 1994.
5. Lines of Credit
The Company had committed lines of credit with various banks of $300 million
at December 31, 1994, and $302 million at December 31, 1993, 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 0.25% per annum through
June 30, 1994, 0.20% per annum on $200 million and 0.15% per annum on $100
million thereafter, through December 31, 1994. The Company had commercial paper
borrowings outstanding of $131.5 million at December 31, 1994, and $148.0
million at December 31, 1993. The weighted average interest rate on commercial
paper borrowings was 6.25% on December 31, 1994, and 3.48% on December 31, 1993.
By Arizona statute, the Company's short-term borrowings cannot exceed 7% of its
total capitalization without the consent of the ACC.
<TABLE>
6. Jointly-Owned Facilities
At December 31, 1994, 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.
<CAPTION>
Percent Construction
Owned by Plant in Accumulated Work in
Company Service Depreciation Progress
-------- --------- -------------- ------------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Generating Facilities:
Palo Verde Nuclear Generating Station
Units 1 and 3 ......................................... 29.1% $1,832,522 $ 425,908 $ 14,181
Palo Verde Nuclear Generating Station
Unit 2 (see Note 7) ................................... 17.0% 563,115 131,764 13,415
Four Corners Steam Generating Station
Units 4 and 5 ......................................... 15.0% 142,297 50,414 497
Navajo Steam Generating Station
Units 1, 2 and 3 ...................................... 14.0% 139,648 74,513 17,035
Cholla Steam Generating Station
Common Facilities (a) ................................. 62.8%(b) 70,657 33,967 335
Transmission Facilities:
ANPP 500KV System ..................................... 35.8%(b) 62,607 15,313 1,013
Navajo Southern System ........................ 31.4%(b) 26,737 15,038 15
Palo Verde-Yuma 500KV System .................. 23.9%(b) 11,411 3,304 20
Four Corners Switchyards ...................... 27.5%(b) 2,796 1,635 53
Phoenix-Mead System ........................... 17.1%(b) -- -- 18,036
(a) The Company is the operating agent for Cholla Unit 4, which is owned by
PacifiCorp. The common facilities at the Cholla Plant are jointly-owned.
(b) Weighted average of interests.
</TABLE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
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 and certain common
facilities. The gain of approximately $140.2 million 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 $40.1 million through December 1999, $46.3 million through December
2000, and $49.0 million through December 2015. Options to renew for two
additional years and to purchase the property at fair market value at the end of
the lease terms are also included. Consistent with the ratemaking treatment, an
amount equal to the annual lease payments is included in rent expense. A
regulatory asset (totaling approximately $52.8 million at December 31, 1994) has
been established for the difference between lease payments and rent expense
calculated on a straight-line basis. Lease expense for 1994, 1993 and 1992 was
$42.2 million, $41.8 million and $45.8 million, respectively.
The Company has a capital lease on a combined cycle plant which it sold and
leased back. The lease requires semiannual payments of $2.6 million 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 $54.4 million;
accumulated amortization at December 31, 1994, was $40.3 million.
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 1994, 1993 and 1992 was
approximately $10.1 million, $11.1 million and $14.7 million, respectively.
Annual future minimum rental commitments, excluding the Palo Verde and combined
cycle leases, for the period 1995 through 1999 range between $11 million and $12
million. Total rental commitments after 1999 are estimated at $122 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 $1.8 million of income tax overpayments
were due from Pinnacle West at December 31, 1994. Investment tax credits were
deferred and are being amortized to other income over the estimated lives of the
related assets as directed by the ACC. Beginning in 1995, the ACC portion of the
unamortized investment tax credits will be amortized over a five-year period in
accordance with the 1994 rate settlement agreement (see Note 2).
Effective January 1, 1993, the Company adopted the provisions of SFAS No.
109, which requires the use of the liability method of accounting for income
taxes. Upon adoption the Company recorded deferred income taxes 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 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 net
deferred income tax liabilities by $585.3 million at December 31, 1993.
Historically the FERC and the ACC have allowed revenues sufficient to pay for
these deferred tax liabilities and, in accordance with SFAS No. 109, a
regulatory asset was established in a corresponding amount.
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
The components of income tax expense are as follows:
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1994 1993 1992
--------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C>
Current:
Federal .................................................. $ 74,272 $ 69,243 $ 80,921
State .................................................... 26,447 23,915 23,141
--------- --------- ---------
Total current .................................... 100,719 93,158 104,062
--------- --------- ---------
Deferred:
Depreciation -- net ...................................... 56,450 58,844 75,931
Alternative minimum tax .......................... 21,425 13,661 7,732
Palo Verde accretion income ...................... 13,288 29,618 26,668
Pension costs .................................... (9,302) (5,768) (4,622)
Loss on reacquired debt .......................... (903) 4,288 10,266
Palo Verde start-up costs ........................ (1,590) (1,335) (28,976)
Investment tax credit -- net ..................... (6,825) (6,948) (6,804)
Other -- net ..................................... 3,982 3,389 (2,902)
--------- --------- ---------
Total deferred ................................... 76,525 95,749 77,293
--------- --------- ---------
Total .................................... $ 177,244 $ 188,907 $ 181,355
========= ========= =========
</TABLE>
<TABLE>
Income tax expense differed from the amount computed by multiplying income
before income taxes by the statutory federal income tax rate due to the
following:
<CAPTION>
Year Ended December 31,
------------------------------------------------
1994 1993 1992
--------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C>
Federal income tax expense at statutory rate
(35% in 1994 and 1993, 34% in 1992) ............................... $ 147,256 $ 153,753 $ 145,574
Increase (reductions) in tax expense resulting from:
Tax under book depreciation ....................................... 17,236 17,671 17,465
Investment tax credit amortization ................................ (6,825) (6,922) (7,036)
State income tax -- net of federal income tax benefit ............. 24,947 27,005 27,036
Other ............................................................. (5,370) (2,600) (1,684)
--------- --------- ---------
Income tax expense ........................................ $ 177,244 $ 188,907 $ 181,355
========= ========= =========
</TABLE>
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
The components of the net deferred income tax liability were as follows:
<CAPTION>
December 31,
--------------------------------
1994 1993
----------- -----------
(Thousands of Dollars)
<S> <C> <C>
Deferred tax assets:
Deferred gain on Palo Verde Unit 2 sale/leaseback .............................. $ 63,720 $ 66,754
Alternative minimum tax (can be carried forward indefinitely) .................. 14,089 35,514
Other .......................................................................... 73,084 86,745
Valuation allowance ............................................................ (15,072) (15,413)
----------- -----------
Total deferred tax assets ...................................... 135,821 173,600
----------- -----------
Deferred tax liabilities:
Plant related .................................................................. 802,645 751,520
Income taxes recoverable through future rates -- net ........................... 557,049 585,294
Palo Verde deferrals ........................................................... 153,410 158,424
Other .......................................................................... 39,787 40,429
----------- -----------
Total deferred tax liabilities ................................. 1,552,891 1,535,667
----------- -----------
Accumulated deferred income taxes -- net ............................................... $ 1,417,070 $ 1,362,067
=========== ===========
</TABLE>
9. Pension Plan and Other Benefits
Pension Plan
The Company sponsors a defined benefit pension plan covering substantially
all employees. Benefits are based on years of service and compensation utilizing
a final average pay benefit formula. The plan is funded on a current basis to
the extent deductible under existing tax regulations. Plan assets consist
primarily of domestic and international common stocks and bonds and real estate.
Pension cost, including administrative cost, for 1994, 1993 and 1992 was
approximately $25.4 million, $14.0 million and $14.0 million, respectively, of
which approximately $11.9 million, $6.5 million and $3.9 million, respectively,
was charged to expense. The remainder was either capitalized or billed to
others.
<TABLE>
Excluding the costs of special termination benefits of $1.4 million in 1994,
the components of net periodic pension costs are as follows:
<CAPTION>
1994 1993 1992
-------- -------- --------
(Thousands of Dollars)
<S> <C> <C> <C>
Service cost-benefits earned during the period ...................... $ 20,345 $ 16,754 $ 16,903
Interest cost on projected benefit obligation ....................... 39,377 34,724 33,333
Return on plan assets ............................................... 6,105 (51,597) (23,058)
Net amortization and deferral ....................................... (44,000) 13,420 (15,002)
-------- -------- --------
Net periodic pension cost ........................................... $ 21,827 $ 13,301 $ 12,176
======== ======== ========
</TABLE>
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
A reconciliation of the funded status of the plan to the amounts recognized
in the balance sheet is presented below:
<CAPTION>
1994 1993
--------- ---------
(Thousands of Dollars)
<S> <C> <C>
Plan assets at fair value: ............................................................. $ 388,010 $ 417,938
--------- ---------
Less:
Accumulated benefit obligation, including vested benefits
of $308,474 and $347,603 in 1994 and 1993, respectively ................ 333,564 372,364
Effect of projected future compensation increases .............................. 112,780 127,388
--------- ---------
Total projected benefit obligation ..................................................... 446,344 499,752
--------- ---------
Plan assets less than projected benefit obligation ..................................... (58,334) (81,814)
Plus:
Unrecognized net loss (gain) from past experience
different from that assumed ............................................ (9,372) 51,361
Unrecognized prior service cost ................................................ 25,527 14,717
Unrecognized net transition asset .............................................. (36,025) (39,242)
--------- ---------
Accrued pension liability .............................................................. $ (78,204) $ (54,978)
========= =========
Principal actuarial assumptions used were:
Discount rate .................................................................. 8.75% 7.50%
Rate of increase in compensation levels ........................................ 5.00% 5.00%
Expected long-term rate of return on assets .................................... 9.00% 9.50%
</TABLE>
In addition to the defined benefit pension plan described above, the Company
also sponsors qualified defined contribution plans. Collectively, these plans
cover substantially all employees. The plans provide for employee contributions
and partial employer matching contributions after certain eligibility
requirements are met. The cost of these plans for 1994, 1993 and 1992 was $6.8
million, $6.3 million and $5.3 million, respectively, of which $3.2 million,
$3.0 million and $2.5 million, respectively, 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 plans are 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 the cost of
postretirement benefits be accrued during the years 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 1994 and 1993 retiree
benefit costs from approximately $6 million in each year to $28 million and $34
million, respectively. The amount charged to expense for 1994 increased from
about $3 million to $13 million, and for 1993 increased from about $2 million to
$17 million. The balance was either capitalized or billed to others. The above
amounts include 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 tax consequences into
account. Plan assets consist primarily of domestic stocks and bonds.
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
The components of the net periodic postretirement benefit costs are as follows:
1994 1993
-------- --------
(Thousands of Dollars)
Service cost -- benefits earned during the period ..... $ 8,785 $ 9,510
Interest cost on accumulated benefit obligation ....... 14,026 15,630
Return on plan assets ................................. (6,459) --
Net amortization and deferral ......................... 11,619 9,146
-------- --------
Net periodic postretirement benefit cost .............. $ 27,971 $ 34,286
======== ========
<TABLE>
A reconciliation of the funded status of the plan to the amounts recognized
in the balance sheet is presented below:
<CAPTION>
1994 1993
--------- ---------
(Thousands of Dollars)
<S> <C> <C>
Plan assets at fair value .................................................................. $ 49,666 $ 28,154
--------- ---------
Less accumulated postretirement benefit obligation:
Retirees ................................................................... 65,552 86,972
Fully eligible plan participants ........................................... 9,128 10,013
Other active plan participants ............................................. 87,201 102,928
--------- ---------
Total accumulated postretirement benefit obligation ................ 161,881 199,913
--------- ---------
Plan assets less than accumulated benefit obligation ....................................... (112,215) (171,759)
Plus:
Unrecognized transition obligation ......................................... 164,627 173,773
Unrecognized net gain from past experience different from that
assumed ............................................................ (52,470) (2,072)
--------- ---------
Accrued postretirement liability ........................................................... $ (58) $ (58)
========= =========
Principal actuarial assumptions used were:
Discount rate .............................................................. 8.75% 7.50%
Annual salary increases for life insurance obligation ...................... 5.00% 5.00%
Expected long-term rate of return on assets ................................ 9.00% --
Initial health care cost trend rate -- under age 65 ........................ 11.50% 12.00%
Initial health care cost trend rate -- age 65 and over ..................... 8.50% 9.00%
Ultimate health care cost trend rate (reached in the year 2003) ............ 5.50% 5.50%
</TABLE>
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
Assuming a one percent increase in the health care cost trend rate, the 1994
cost of postretirement benefits other than pensions would increase by
approximately $5 million and the accumulated benefit obligation as of December
31, 1994, would increase by approximately $31 million.
In 1993, the Company adopted SFAS No. 112. This standard required 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 standard resulted in an increase in
1993 postemployment benefit expense of approximately $2 million.
10. Commitments and Contingencies
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 resolution of these matters will not have a material adverse effect on
the operations or financial position of the Company.
Palo Verde Nuclear Generating Station
The Company has encountered tube cracking in steam generators and has taken,
and will continue to take, remedial actions that it believes have slowed further
tube problems to manageable levels. The Company believes that the Palo Verde
steam generators are capable of operating for their designed life of 40 years,
although at some point, long-term economic considerations may make steam
generator replacement desirable. All of the Palo Verde units were operating at
full power at December 31, 1994.
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 industry-wide 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 for all three
units is approximately $69 million, with an annual payment limitation of
approximately $9 million.
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 $2.78 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
El Paso Electric Company (EPEC), one of the joint owners of Palo Verde and
Four Corners, has been operating under Chapter 11 of the Bankruptcy Code since
1992. A plan whereby EPEC would become a wholly-owned subsidiary of Central and
South West Corporation (CSW) has been confirmed by the bankruptcy court, but
cannot become fully effective until several other approvals are obtained. Under
the plan, certain issues, including EPEC allegations regarding the 1989-90 Palo
Verde outages, would be resolved, and EPEC would assume the joint facilities
operating agreements. CSW has stated that several matters have arisen which may
impede completion of the merger. If the plan is not approved, the Company does
not expect that there would be a material adverse effect on its operations or
financial position.
<PAGE>
ARIZONA PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (continued)
Construction Program
Total construction expenditures in 1995 are estimated at $300 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 1995 through 2020 that include required purchase provisions.
The Company estimates its 1995 contract requirements to be approximately $127
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. Selected Quarterly Financial Data (Unaudited)
Quarterly financial information for 1994 and 1993 is as follows:
Electric
Operating Operating Net Earnings for
Quarter Revenues(a) Income(b) Income Common Stock
------- ----------- --------- -------- -------------
(Thousands of Dollars)
1994
First ........... $346,049 $ 67,147 $ 38,468 $ 30,958
Second .......... 397,156 83,607 65,851 58,879
Third ........... 540,883 155,115 116,267 110,359
Fourth .......... 342,080 62,564 22,900 18,016
1993
First ........... $353,891 $ 79,441 $ 47,166 $ 39,277
Second .......... 387,871 92,264 61,364 53,716
Third ........... 497,282 132,639 102,911 95,617
Fourth .......... 363,369 68,144 38,945 30,936
(a) Consistent with the presentation for the quarter ended December 31, 1994,
prior quarters' electric operating revenues and other taxes have been
restated to exclude sales tax on electric revenues.
(b) The Company's operations are subject to seasonal fluctuations primarily as a
result of weather conditions. The results of operations for interim periods
are not necessarily indicative of the results to be expected for the full
year.
12. 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,
1994 and 1993 due to their short maturities. The December 31, 1994 and 1993 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. Investments in debt and equity securities are held for
purposes other than trading.
On December 31, 1994, the carrying amount of long-term debt (excluding $26
million of capital lease obligations) was $2.16 billion and its estimated fair
value was approximately $1.99 billion. On December 31, 1993, the carrying amount
of long-term debt (excluding $30 million of capital lease obligations) was $2.10
billion and its estimated fair value was approximately $2.26 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
based on market values of comparable instruments.
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 May 16,
1995 (the "1995 Proxy Statement") and to the Supplemental Item -- "Executive
Officers of the Registrant" in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Reference is hereby made to the fourth paragraph under the heading "The
Board and its Committees," and to "Executive Compensation" in the 1995 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 1995 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 1995 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
Financial Statements
See the Index to Financial Statements in Part II, Item 8 on page 19.
<TABLE>
Exhibits Filed
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
3.1 -- Bylaws, amended as of November 19, 1991
3.2 -- Resolution of Board of Directors temporarily suspending Bylaws in part
10.1 -- Amendment No. 1 to Decommissioning Trust Agreement (PVNGS Unit 1) dated as of December
1, 1994
10.2 -- Amendment No. 1 to Decommissioning Trust Agreement (PVNGS Unit 3) dated as of December
1, 1994
10.3 -- Amendment No. 2 to Amended and Restated Decommissioning Trust Agreement (PVNGS Unit 2)
dated as of November 1, 1994
10.4a -- 1995 Key Employee Variable Pay Plan
10.5a -- 1995 Officers Variable Pay Plan
10.6a -- Letter Agreement dated December 21, 1993, between the Company and William L. Stewart
10.7a -- Pinnacle West Capital Corporation and Arizona Public Service Company Directors'
Retirement Plan
10.8ac -- Second revised form of Key Executive Employment and Severance Agreement between the
Company and certain key employees of the Company
10.9ac -- Second revised form of Key Executive Employment and Severance Agreement between the
Company and certain executive officers of the Company
23.1 -- Consent of Deloitte & Touche LLP
27.1 -- Financial Data Schedule
</TABLE>
In addition to those Exhibits shown above, the Company hereby incorporates
the following Exhibits pursuant to Exchange Act Rule 12b-32 and Regulation
ss201.24 by reference to the filings set forth below:
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Originally Filed as Exhibit: File No. Date Effective
----------- ----------- ---------------------------- -------- --------------
<S> <C> <C> <C> <C>
3.3 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
3.4 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
3.5 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
4.1 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
4.2 Forty-ninth Supplemental Indenture 4.1 to 1992 Form 10-K Report 1-4473 3-30-93
4.3 Fiftieth Supplemental Indenture 4.2 to 1993 Form 10-K Report 1-4473 3-30-94
4.4 Fifty-first Supplemental Indenture 4.1 to August 1, 1993 Form 8-K Report 1-4473 9-27-93
4.5 Fifty-second Supplemental Indenture 4.1 to September 30, 1993 Form 10-Q 1-4473 11-15-93
Report
4.6 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
4.7 Agreement, dated March 21, 1994, relating 4.1 to 1993 Form 10-K Report 1-4473 3-30-94
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
10.10 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
10.11 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
10.12 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
10.13 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
10.14 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
10.15 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
10.16 Indenture of Lease with Navajo Tribe of 5.01 to Form S-7 Registration 2-59644 9-1-77
Indians, Four Corners Plant Statement
10.17 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
10.18 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
10.19 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
10.20 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
10.21 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
10.22 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
10.23 Indenture of Lease, Navajo Units 1, 2, and 5(g) to Form S-7 Registration 2-36505 3-23-70
3 Statement
10.24 Application and Grant of rights-of-way and 5(h) to Form S-7 Registration 2-36505 3-23-70
easements, Navajo Plant Statement
10.25 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
10.26 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
10.27 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
10.28b 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
10.29b 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
10.30b 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
10.31b 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
10.32 Cure and Assumption Agreement dated as of 10.1 to 1993 Form 10-K Report 1-4473 3-30-94
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
10.33 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
10.34 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
10.35 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
10.36a Directors' Deferred Compensation Plan, as 10.1 to June 1986 Form 10-Q Report 1-4473 8-13-86
restated, effective January 1, 1986
10.37a Second Amendment to the Arizona Public 10.2 to 1993 Form 10-K Report 1-4473 3-30-94
Service Company Directors' Deferred
Compensation Plan, effective as of January
1, 1993
10.38a Third Amendment to the Arizona Public 10.1 to September 1994 Form 10-Q 1-4473 11-10-94
Service Company Directors' Deferred
Compensation Plan
10.39a Arizona Public Service Company Deferred 10.4 to 1988 Form 10-K Report 1-4473 3-8-89
Compensation Plan, as restated, effective
January 1, 1984, and the second and third
amendments thereto, dated December 22,
1986, and December 23, 1987, respectively
10.40a Third Amendment to the Arizona Public 10.3 to 1993 Form 10-K Report 1-4473 3-30-94
Service Company Deferred Compensation
Plan, effective as of January 1, 1993
10.41a Fourth Amendment to the Arizona Public 10.2 to September 1994 Form 10-Q 1-4473 11-10-94
Service Company Deferred Compensation Plan Report
10.42a 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
10.43a 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 DeMichele,
regarding certain retirement benefits
granted to Mr. DeMichele
10.44ac 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
10.45ac Revised form of Key Executive Employment 10.5 to 1993 Form 10-K Report 1-4473 3-30-94
and Severance Agreement between the
Company and certain executive officers of
the Company
10.46ac 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
10.47ac Revised form of Key Executive Employment 10.4 to 1993 Form 10-K Report 1-4473 3-30-94
and Severance Agreement between the
Company and certain key employees of the
Company
10.48a 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
10.49a Arizona Public Service Company Severance 10.1 to September 30, 1993 Form 10-Q 1-4473 11-15-93
Plan Report
10.50a Pinnacle West Capital Corporation Stock 10.1 to 1992 Form 10-K Report 1-4473 3-30-93
Option and Incentive Plan
10.51a Pinnacle West Capital Corporation 1994 A to the Proxy Statement for the 1-8962 4-16-94
Long-Term Incentive Plan Pinnacle West 1994 Annual Meeting of
Shareholders
10.52a 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
10.53a Amendment to Pinnacle West Capital 10.6 to 1993 Form 10-K Report 1-4473 3-30-94
Corporation, Arizona Public Service
Company, SunCor Development Company, and
El Dorado Investment Company Deferred
Compensation Plan, effective as of
December 4, 1992
10.54a Pinnacle West Capital Corporation, Arizona 10.7 to 1993 Form 10-K Report 1-4473 3-30-94
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
10.55a Arizona Public Service Company 10.8 to 1993 Form 10-K Report 1-4473 3-30-94
Supplemental Excess Benefit Retirement
Plan and the First, Second, and Third
Amendments thereto
10.56 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
10.57 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 1992 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 Indemnity Agreement dated as of March 17, 28.3 to 1992 Form 10-K Report 1-4473 3-30-93
1993 by the Company
99.21 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
99.22 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
99.23 Arizona Corporation Commission Order dated 28.1 to 1991 Form 10-K Report 1-4473 3-19-92
December 6, 1991
99.24 Rate Settlement Agreement dated April 30, 10.1 to March 1994 Form 10-Q Report 1-4473 5-16-94
1994, between the Company and the Arizona
Corporation Commission staff
99.25 Arizona Corporation Commission Order dated 10.1 to June 1994 Form 10-Q Report 1-4473 8-12-94
June 1, 1994
----------
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.
</TABLE>
Reports on Form 8-K
During the quarter ended December 31, 1994, and the period ended March 29,
1995, the Company filed the following Reports on Form 8-K:
Report filed January 11, 1995 comprised of exhibits to the Company's
Registration Statements (Registration Nos. 33-61228 and 33-55473) relating to
the Company's offering of $75 million of its Junior Subordinated Deferrable
Interest Debentures.
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, 1995 O. MARK DEMICHELE
--------------------------------
(O. Mark DeMichele, 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 DEMICHELE Principal Executive Officer March 29, 1995
------------------------------- and Director
(O. Mark DeMichele,
President
and Chief Executive Officer)
WILLIAM J. POST Principal Accounting Officer March 29, 1995
------------------------------- and Director
(William J. Post, Senior
Vice President
and Chief Operating Officer)
JARON B. NORBERG Principal Financial Officer March 29, 1995
------------------------------- and Director
(Jaron B. Norberg, Executive
Vice President
and Chief Financial Officer)
KENNETH M. CARR Director March 29, 1995
-------------------------------
(Kenneth M. Carr)
MARTHA O. HESSE Director March 29, 1995
-------------------------------
(Martha O. Hesse)
MARIANNE MOODY JENNINGS Director March 29, 1995
-------------------------------
(Marianne Moody Jennings)
ROBERT G. MATLOCK Director March 29, 1995
-------------------------------
(Robert G. Matlock)
JOHN R. NORTON III Director March 29, 1995
-------------------------------
(John R. Norton III)
DONALD M. RILEY Director March 29, 1995
-------------------------------
(Donald M. Riley)
HENRY B. SARGENT Director March 29, 1995
-------------------------------
(Henry B. Sargent)
WILMA W. SCHWADA Director March 29, 1995
-------------------------------
(Wilma W. Schwada)
VERNE D. SEIDEL Director March 29, 1995
-------------------------------
(Verne D. Seidel)
RICHARD SNELL Director March 29, 1995
-------------------------------
(Richard Snell)
DIANNE C. WALKER Director March 29, 1995
-------------------------------
(Dianne C. Walker)
BEN F. WILLIAMS, JR. Director March 29, 1995
-------------------------------
(Ben F. Williams, Jr.)
THOMAS G. WOODS, JR. Director March 29, 1995
-------------------------------
(Thomas G. Woods, Jr.)
<PAGE>
Commission File Number 1-4473
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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, 1994
--------------
Arizona Public Service Company
(Exact name of registrant as specified in charter)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
3.1 -- Bylaws, amended as of November 19, 1991
3.2 -- Resolution of Board of Directors temporarily suspending Bylaws in
part
10.1 -- Amendment No. 1 to Decommissioning Trust Agreement (PVNGS Unit 1)
dated as of December 1, 1994
10.2 -- Amendment No. 1 to Decommissioning Trust Agreement (PVNGS Unit 3)
dated as of December 1, 1994
10.3 -- Amendment No. 2 to Amended and Restated Decommissioning Trust
Agreement (PVNGS Unit 2) dated as of November 1, 1994
10.4a -- 1995 Key Employee Variable Pay Plan
10.5a -- 1995 Officers Variable Pay Plan
10.6a -- Letter Agreement dated December 21, 1993, between the Company and
William L. Stewart
10.7a -- Pinnacle West Capital Corporation and Arizona Public Service
Company Directors' Retirement Plan
10.8ac -- Second revised form of Key Executive Employment and Severance
Agreement between the Company and certain key employees of the
Company
10.9ac -- Second revised form of Key Executive Employment and Severance
Agreement between the Company and certain executive officers of the
Company
23.1 -- Consent of Deloitte & Touche LLP
27.1 -- Financial Data Schedule
----------
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.
EXHIBIT 3.1
BYLAWS
OF
ARIZONA PUBLIC SERVICE COMPANY
(Amended as of November 19, 1991)
1.01. References. Any reference herein made to law will be deemed to
refer to the law of the State of Arizona, including the applicable provision or
provisions of Chapter 1 of Title 10, Arizona Revised Statues (or its successor),
as at any given time in effect. Any reference herein made to the Articles will
be deemed to refer to the applicable provision or provisions of the Articles of
Incorporation of the Company, and all amendments thereto, as at any given time
on file with the Arizona Corporation Commission (this reference to that
Commission being intended to include any successor to the incorporating and
related functions being performed by that Commission at the date of the initial
adoption of these Bylaws). Parenthetical references to section or article
numbers in the case of the law are to the indicated sections of Title 10,
Arizona Revised Statues, and in the case of the Articles are to the indicated
sections and articles thereof, as both the law and the Articles are in effect at
the date of the initial adoption of these Bylaws; such references are for
purposes of convenience only and are not to be considered as part of, or used in
construing, these Bylaws.
1.02. Seniority. Except as indicated in Part X of these Bylaws, the law
and the Articles (in that order of precedence) will in all respects be
considered senior and superior to these Bylaws, with any inconsistency to be
resolved in favor of the law and the Articles (in that order of precedence),
and with these Bylaws to be deemed automatically amended from time to time to
eliminate any such inconsistency which may then exist.
1.03. Shareholders of Record. The word "shareholder" as used herein
shall mean one who is a holder record of shares of the Company.
II. SHAREHOLDERS MEETINGS
2.01. Annual Meetings. An annual meeting of the shareholders will be
held within nine months after the end of the Company's fiscal year, at a time of
day and place as determined by the Board of Directors (or, in the absence of
action by the Board, as set forth in the notice given, or waiver signed, with
respect to such meeting as contemplated in Section 2.03 below). If any annual
meeting is for any reason not held within the period determined as aforesaid, a
special meeting may thereafter be called and held in lieu thereof pursuant to
the provisions of Section 2.02 below, and the same proceedings (including the
election of directors) may be conducted thereat as at a regular meeting. Any
director elected at any annual meeting, or special meeting in lieu of an annual
meeting, will continue in office until the election of his or her successor,
subject to his or her earlier resignation pursuant to Section 6.01 below or his
or her removal pursuant to Section 3.13 below.
2.02. Special Meetings.
(a) Special meetings of the shareholders may be held whenever
and wherever called for by the Chairman of the Board, the President, a majority
of the Board of Directors, or upon the delivery of proper written request of the
holders of not less than forty percent (40%) of all shares outstanding and
entitled to vote at any such meeting.
(b) For purposes of this Section, proper written request for
the call of a special meeting shall be made by a written request (i) specifying
the purposes for any special meeting requested and providing the information
required by Section 2.05 hereof, (ii) delivered either in person or by
registered or certified mail, return receipt requested, (iii) to the Chairman of
the Board, the President, or such other person as may be specifically authorized
by law to receive such request. Within thirty (30) days after receipt of proper
written request, a special meeting shall be called and notice given in the
manner required by these Bylaws, and the meeting shall be held at a time and
place selected by the Board of Directors, but not later than eighty (80) days
after receipt of such proper written request. The shareholder(s) requesting a
special meeting of shareholders must pay to the Company the Company's reasonably
estimated cost of preparing and mailing a notice of a meeting of shareholders
before such notice is prepared and mailed.
2.03. Notice. Notice of any meeting of the shareholders will be given
as provided by law to each shareholder of record entitled to vote at such
meeting (ss.029). Any such notice may be waived as provided by law (ss.144).
2.04. Right to Vote. For each meeting of the shareholders, the Board of
Directors will fix in advance a record date as contemplated by law (ss.030), and
the shares of stock and the shareholders "entitled to vote" (as that or any
similar term is herein used) at any meeting of the shareholders will be
determined as of the applicable record date. The Secretary (or in his or her
absence an Assistant Secretary) will see to the making and production of any
record of shareholders entitled to vote which is required by law (ss.031). Any
such entitlement may be exercised through proxy, or in such other manner as
specifically provided by law, in accordance with the applicable law (ss.ss.033
and 034). In the event of contest, the burden of proving the validity of any
undated or irrevocable proxy will rest with the person seeking to exercise the
same. A telegram or cablegram appearing to have been transmitted by a
shareholder (or by his duly authorized attorney-in-fact) may be accepted as a
sufficiently written and executed proxy.
2.05. Manner of Bringing Business Before Meetings.
(a) At any annual or special meeting of shareholders only such
business shall be conducted as shall have been properly brought before the
meeting. In order to be properly brought before the meeting, such business must
have been (i) specified in the written notice of the meeting (or any supplement
thereto) given to shareholders who were shareholders on the record date for such
meeting by or at the direction of the Board of Directors, (ii) brought before
the meeting at the direction of the Board of Directors or the Chairman of the
meeting, selected as provided in Section 2.09 hereof, or (iii) specified in a
written notice given by or on behalf of a shareholder on the record date for
such meeting entitled to vote thereat or a duly authorized proxy for such
shareholder, in accordance with Section 2.05(b) and (c) hereof.
(b) A shareholder notice referred to in Section 2.05(a)(iii)
hereof must be delivered personally to, or mailed to and received at, the
principal executive office of the Company, addressed to the attention of the
Secretary, not more than ten (10) days after the date of the initial notice
referred to in Section 2.05(a)(i) hereof, in the case of business to be brought
before a special meeting of shareholders, and not less than thirty (30) days
prior to the anniversary date of the initial notice referred to in Section
2.05(a)(i) hereof with respect to the previous year's annual meeting, in the
case of business to be brought before an annual meeting of shareholders.
(c) A shareholder notice referred to in Section 2.05(a)(iii)
hereof shall set forth:
(i) a full description of each item of business
proposed to be brought before the meeting and the reasons for
conducting such business at such meeting;
(ii) the name and address of the person proposing
to bring such business before the meeting;
(iii) the class and number of shares held of record,
held beneficially, and represented by proxy by such person as
of the record date for the for the meeting, if such date has
been made publicly available, or as of a date not later than
thirty (30) days prior to the delivery of the initial notice
referred to in Section 2.05(a)(i) hereof, if the record date
has not been made publicly available;
(iv) if any item of business involves a nomination
for director, all information regarding each such nominee that
would be required to be set forth in a definitive proxy
statement filed with the Securities and Exchange Commission
pursuant to Section 14 of the Securities Exchange Act of 1934,
as amended, or any successor thereto, and the written consent
of each such nominee to serve if elected;
(v) any material interest of such shareholder in the
specified business;
(vi) whether or not such shareholder is a member of
any partnership, limited partnership, syndicate, or other
group pursuant to any agreement, arrangement, relationship,
understanding, or otherwise, whether or not in writing,
organized in whole or in part for the purpose of acquiring,
owning, or voting shares of the Company; and
(vii) all other information that would be required to
be filed with the Securities and Exchange Commission, if, with
respect to the business proposed to be brought before the
meeting, the person proposing such business was a participant
in a solicitation subject to Section 14 of the Securities
Exchange Act of 1934, as amended, or any successor thereto.
No business shall be brought before any meeting of the shareholders of the
Company otherwise than as provided in this Section 2.05.
(d) Notwithstanding the provisions of this Section 2.05, the
Board of Directors shall not be obligated to include information as to any
shareholder nominee for director or any other shareholder proposal in any proxy
statements or other communication sent to shareholders.
(e) The Chairman of the meeting may, if the facts warrant,
determine that any proposed item of business was not brought before the meeting
in accordance with the provisions of this Section 2.05, and if he should so
determine, he shall so declare to the meeting and the defective item of business
shall be disregarded.
2.06. Right to Attend. Except only to the extent of persons designated
by the Board of Directors or the Chairman of the meeting to assist in the
conduct of the meeting (as referred to in Sections 2.08 and 2.09 below) and
except as otherwise permitted by the Board or such Chairman, the persons
entitled to attend any meeting of shareholders may be confined to (i)
shareholders entitled to vote thereat and (ii) the persons upon whom proxies
valid for purposes of the meeting have been conferred or their duly appointed
substitutes (if the related proxies confer a power of substitution); provided,
however, that the Board of Directors or the Chairman of the meeting may
establish rules limiting the number of persons referred to in clause (ii) as
being entitled to attend on behalf of any shareholder so as to preclude such an
excessively large representation of such shareholder at the meeting as, in the
judgment of the Board or such Chairman, would be unfair to other shareholders
represented at the meeting or be unduly disruptive of the orderly conduct of
business at such meeting (whether such representation would result from
fragmentation of the aggregate number of shares held by such shareholder for the
purpose of conferring proxies, from the naming of an excessively large proxy
delegation by such shareholder or from employment of any other device). A person
otherwise entitled to attend any such meeting will cease to be so entitled if,
in the judgment of the Chairman of the meeting, such person engages thereat in
disorderly conduct impeding the proper conduct of the meeting in the interests
of all shareholders as a group.
2.07. Quorum. Matters related to a quorum of the shareholders at any
meeting thereof will be determined in accordance with applicable law (ss.032)
and the Articles (ss.6 Art. Third), if applicable.
2.08. Election inspectors. The Board of Directors, in advance of any
shareholders meeting may appoint an election inspector or inspectors to act at
such meeting (and any adjournment thereof). If an election inspector or
inspectors are not so appointed, the Chairman of the meeting may or, upon
request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the Chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity and effect of proxies, the credentials of persons
purporting to be shareholders or persons named or referred to in proxies, and
the number of shares represented at the meeting in person and by proxy; they
will receive and count votes, ballots and consents and announce the results
thereof; they will hear and determine all challenges and questions pertaining to
proxies and voting; and, in general, they will perform such acts as may be
proper to conduct elections and voting with complete fairness to all
shareholders. No such election inspector need be a shareholder of the Company.
2.09. Organization and Conduct of Meetings. Each shareholders meeting
will be called to order and thereafter chaired by the Chairman of the Board; or
if the Chairman of the Board is absent or so requests, then by the President; or
if both the Chairman of the Board and the President are unavailable, then by
such other officer of the Company or such shareholder as may be appointed by the
Board of Directors. The Secretary (or in his or her absence an Assistant
Secretary) of the Company will act as secretary of each shareholders meeting; if
neither the Secretary nor an Assistant Secretary is in attendance, the Chairman
of the meeting may appoint any person (whether a shareholder or not) to act as
secretary thereat. After calling a meeting to order, the Chairman thereof may
require the registration of all shareholders intending to vote in person, and
the filing of all proxies with the election inspector or inspectors, if one or
more have been appointed (or, if not, with the secretary of the meeting). After
the announced time for such filing of proxies has ended, no further proxies or
changes, substitutions or revocations of proxies will be accepted. If directors
are to be elected, a tabulation of the proxies so filed will, if any person
entitled to vote in such election so requests, be announced at the meeting (or
adjournment thereof) prior to the closing of the election polls. Absent a
showing of bad faith on his or her part, the Chairman of a meeting will, among
other things, have absolute authority to determine the order of business to be
conducted at such meeting and to establish rules for, and appoint personnel to
assist in, preserving the orderly conduct of the business of the meeting
(including any informal, or question and answer, portions thereof.) Any
informational or other informal session of shareholders conducted under the
auspices of the Company after the conclusion of or otherwise in conjunction with
any formal business meeting of the shareholders will be chaired by the same
person who chairs the formal meeting, and the foregoing authority on his or her
part will extend to the conduct of such informal session.
2.10. Voting. The number of shares voted on any matter submitted to the
shareholders which is required to constitute their action thereon or approval
thereof will be determined in accordance with applicable law (ss.ss.032, 033,
059, 060, 143 and other applicable sections) and the Articles (Art. Third), and
these Bylaws, if applicable. No ballot or change of vote will be accepted after
the polls have been declared closed following the ending of the announced time
for voting.
2.11. Shareholder Approval or Ratification. The Board of Directors may
submit any contract or act for approval or ratification at any duly constituted
meeting of the shareholders, the notice of which either includes mention of the
proposed submittal or is waived as contemplated in Section 2.03 above. If any
contract or act so submitted is approved or ratified by a majority of the votes
cast thereon at such meeting, the same will be valid and as binding upon the
Company and all of its shareholders as it would be if approved and ratified by
each and every shareholder of the Company.
2.12. Informalities and Irregularities. All informalities or
irregularities in any call or notice of a meeting, or in the areas of
credentials, proxies, quorums, voting and similar matters, will be deemed waived
if no objection is made at the meeting.
III. BOARD OF DIRECTORS
3.01. Membership. The Board of Directors will have the power to
increase or decrease its size within the limits fixed in the Articles (Art.
Fifth). Any vacancy occurring in the Board, whether by reason of death,
resignation, disqualification or otherwise, may be filled by the directors as
contemplated by law (ss.038) and the Articles (Art. Fifth). Any such increase in
the size of the Board, and the filling of any vacancy created thereby, will
require action by a majority of the whole membership of the Board as comprised
immediately before such increase.
3.02. Qualifications. In order to qualify as a director, a person must
be the owner of one or more shares of the capital stock of the Company or of any
parent corporation thereof at the time of assuming office (except that it shall
not be a requirement that any member of the initial Board of Directors be a
shareholder of the Company or of any parent corporation thereof, and except as
may otherwise be provided in these Bylaws or in the Articles) and for so long
thereafter as such person remains in office. A person will cease to qualify as a
director if he or she (i) is in good faith determined by a majority of the other
directors then in office to be physically or mentally incapable of competent
performance as a director for a period, starting with inception of the
incapacity, that has extended or is likely to extend for more than six months or
(ii) has failed to attend six successive regular meetings of the Board (as
determined in accordance with Section 3.03 below) unless and to the extent such
failure is waived by a majority of the other directors then in office; however,
disqualification pursuant to clause (i) or (ii) of this sentence will not
preclude the subsequent election or appointment of such person as a director by
the shareholders or the Board if a majority of the directors in office
immediately prior to the submission of such person for election or appointment
shall determine that his or her prior incapacity or principal reason for prior
non-attendance no longer exists. A person will not qualify for election or
appointment as a director, whether initially or on re-election and whether by
the shareholders at their annual meeting or by the Board or Directors as
contemplated in Section 3.01 above, if such person's 70th birthday occurs on or
has occurred before the date of such election, appointment, or re-election. A
person who has been a full-time employee of the Company within twelve months
prior to the date of any election will not qualify for election as a director on
that date unless he then remains a full-time employee of the Company or unless
the Board of Directors specifically authorizes the election of such person (but
it is not intended that any such authorization will extend a person's service on
the Board beyond the age limitation set out in the preceding sentence). A person
who has qualified by age or employment status for his or her most recent
election as a director may serve throughout the term for which such person was
elected, notwithstanding the occurrence of his or her 70th birthday or cessation
of full-time employment by the Company between the date of such election and the
end of such term, subject however, to his or her otherwise remaining qualified
for such office.
3.03. Regular Meetings. A regular annual meeting of the directors is to
be held as soon as practicable after the adjournment of each annual shareholders
meeting, either at the place of the shareholders meeting or at such other place
as the directors elect at the shareholders meeting may have been informed of at
or before the time of their election. Regular meetings, other than the annual
ones, may be held at regular intervals at such times and places as the Board of
Directors may provide.
3.04. Special Meetings. Special meetings of the Board of Directors may
be held whenever and wherever called for by the Chairman of the Board, the
President or the number of directors which would be required to constitute a
quorum.
3.05. Notice. No notice need be given of regular meetings of the Board
of Directors. Notice of the time and place (but not necessarily the purpose or
all of the purposes) of any special meeting will be given to each director in
person or by telephone, or via mail, telegram or facsimile transmission
addressed in the manner then appearing on the Company's records. Notice to any
director of any such special meeting will be deemed given sufficiently in
advance when (i) if given by mail, the same is deposited in the United States
mail at least four days before the meeting date, with postage thereon prepaid,
(ii) if given by telegram, the same is delivered to the telegraph office for
fast transmittal at least 48 hours prior to the convening of the meeting, (iii)
if given by facsimile transmission, the same is received by the director or an
adult member of his or her staff or household, at least 24 hours prior to the
convening of the meeting, or (iv) if personally delivered or given by telephone,
the same is handed, or the substance thereof is communicated over the telephone,
to the director or to an adult member of his or her office staff or household,
at least 24 hours prior to the convening of the meeting. Any such notice may be
waived as provided by law (ss.ss.043 and 144). No call or notice of a meeting of
directors will be necessary if each of them waives the same in writing or by
attendance. Any meeting, once properly called and noticed (or as to which call
and notice have been waived as aforesaid) and at which a quorum is formed, may
be adjourned to another time and place by a majority of those in attendance.
3.06. Quorum; Voting. A quorum for the transaction of business at any
meeting or adjourned meeting of the directors will consist of a majority of
those then in office. Once a quorum has been formed at a meeting, the group of
directors from time to time remaining in attendance at such meeting prior to the
adjournment thereof will continue to be legally competent to transact business
properly brought before such meeting, notwithstanding the prior departure from
the meeting of enough directors to leave what otherwise would be less than a
quorum. Any matter submitted to a meeting of the directors will be resolved by a
majority of the votes cast thereon, except as otherwise required by these Bylaws
(Sections 3.01 and 3.02 above and Section 3.07 below), by law (ss.ss.038, 042
and any other applicable section) or by the Articles. However, in case of an
equality of votes, the Chairman of the meeting will have a second or deciding
vote. Where action by a majority of the whole membership is required, such
requirement will be deemed to relate to a majority of the directors in office at
the time the action is taken. In computing any such majority, whether for
purposes of determining the presence of a quorum or the adequacy of the vote on
any proposed action, any unfilled vacancies at the time existing in the
membership of the Board will be excluded from the computation.
3.07. Executive Committee. The Board of Directors may, by resolution
adopted by a majority of the whole Board, name three or more of its members as
an Executive Committee who will include the Chairman of the Board and, if he or
she is a director, the President of the Company as ex-officio members. The
Chairman and, to the extent the naming of one is considered appropriate by the
Board, the Vice Chairman of the Executive Committee will from time to time be
designated by the Board from the membership of the Executive Committee. Such
Executive Committee will have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Company while the
Board is not in session, except only as precluded by law or where action other
than by a majority of the votes cast is required by these Bylaws, or the law
(all as referred to in Section 3.06 above), and subject to such limitations as
may be included in any applicable resolution passed by a majority of the whole
membership of the Board. A majority of those named to the Executive Committee
will constitute a quorum, and the Committee may at any time act by the written
consent of a quorum thereof, although not formally convened.
3.08. Other Committees. Other standing or ad hoc committees (of such
respective sizes as may be considered appropriate by the Chairman of the Board),
their respective chairmen and (to the extent that the naming thereof is
considered appropriate by the Chairman of the Board) their respective vice
chairmen, may from time to time be appointed by the Chairman of the Board,
subject to the Board's approval or ratification, from the membership of the
Board to perform such functions as the Board may see fit. The committees so to
be appointed will include one or more to perform an audit review function. The
Chairman of the Board and the President of the Company may be ex-officio members
of all standing committees except any committee appointed to perform the audit
review function. Subject to the Board's approval or ratification, the Chairman
of the Board may at any time fill vacancies in, remove persons from,
consolidate, subdivide or dissolve any such standing or ad hoc committee.
3.09. Committee Functioning. Notice requirements (and related waiver
provisions) for meetings of the Executive Committee and other committees of the
Board will be the same as those set forth in Section 3.05 above for meetings of
the Board of Directors. Except as provided in the next two succeeding sentences,
a majority of those named to the Executive Committee or any other committee of
the Board will constitute a quorum at any meeting thereof (with the effect of
departure of committee members from a meeting and the computation of a majority
of committee members to be in accordance with the applicable policies of Section
3.06 above), and any matter submitted to a meeting of any such committee will be
resolved by a majority of the votes cast thereon. No distinction will be made
among ex-officio or other members of any such committee for quorum, voting or
other purposes, except that the membership of any committee (including the
Executive Committee), in performing any function vested in it as herein
contemplated, may be deemed to exclude any officer or employee of the Company,
or other person having a direct or indirect personal interest in any proposed
exercise of such function, whose exclusion for that purpose is deemed
appropriate by a majority of the other members of such committee proposing to
perform such function. If a quorum cannot otherwise be formed for any meeting of
any committee (excluding the Executive Committee), the members thereof present
and not excluded pursuant to the immediately preceding sentence may unanimously
appoint one or more directors to act at the meeting for quorum, voting and all
other purposes, the same as though he, she or they had been appointed and
approved or ratified pursuant to Section 3.08 above. All committees are to keep
regular minutes of the transactions of their meetings.
3.10. Action by Telephone or Consent. Any meeting of the Board or any
committee thereof may be held by conference telephone or similar communications
equipment as permitted by law (ss.043), in which case any required notice of
such meeting may generally describe the arrangements (rather than the place) for
the holding thereof, and all other provisions herein contained or referred to
will apply to such meeting as though it were physically held at a single place.
Action may also be taken by the Board or any committee thereof without a meeting
if the members thereof consent in writing thereto as contemplated by law
(ss.044).
3.11. Presumption of Assent. A director of the Company who is present
at a meeting of the Board of Directors or of any committee when action is taken
on any matter will be presumed to have assented to such action unless his
dissent is entered in the minutes of the meeting or unless he files his written
dissent to such action with the person acting as secretary of the meeting before
the adjournment thereof or forwards such dissent by certified or registered mail
to the Secretary of the Company before 5:00 P.M., Phoenix time, on the next day
which is not a holiday or a Saturday after the adjournment of the meeting, or by
such earlier time as may be prescribed by applicable law (ss.048). A right to
dissent will not be available to a director who voted in favor of the action.
3.12. Compensation. By resolution of the Board, the directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors or of any committee, and may be paid a fixed sum for attendance at
each such meeting and/or a stated fee as a director or committee member. No such
payment will preclude any director from serving the Company in any other
capacity and receiving compensation therefor.
3.13. Removal. Any director or the entire Board of Directors may be
removed with or without cause, only at a special meeting of shareholders called
for that purpose, by the affirmative vote of sixty-six and two-thirds percent
(66-2/3%) of the issued and outstanding shares of stock then entitled to vote on
the election of directors, except that if less than the entire Board of
Directors is to be removed, no one of the directors may be removed if the votes
cast against the director's removal would be sufficient to elect the director if
then cumulatively voted at an election for the class of directors of which the
director is a part.
3.14. Directors Emeriti. With the exception of each person designated
as a director emeritus of the Company prior to December 17, 1970, no director or
former director of the Company or any other person is to be appointed as a
director emeritus or honorary director or be given any similar title. The one
position of director emeritus remaining in effect at the date of the initial
adoption of these Bylaws will continue for one-year terms, subject to
confirmation at each regular annual meeting of the directors; so long as he
remains in such position, that director emeritus will be accorded those
privileges and rights, and have those duties and responsibilities, which are set
out in the applicable portion of the minutes of the meeting of the Board of
Directors held on December 17, 1970.
IV. OFFICERS - GENERAL
4.01. Elections and Appointments. The directors will elect or appoint
the officers of the Company contemplated in Part V below. Such election or
appointment will regularly take place at the annual meeting of the directors,
but elections of officers may be held at any other meeting of the Board. A
person elected or appointed to any office will continue to hold that office
until the election or appointment of his or her successor, subject to action
earlier taken pursuant to Section 4.04 or 6.01 below. Any person may hold more
than one office except those of both President and Secretary.
4.02. Additional Appointments. In addition to the offices contemplated
in Part V below, the Board of Directors may create other corporate positions,
and appoint persons thereto, with such authority to perform such duties as may
be prescribed from time to time by the Board of Directors, by the chief
executive officer or by the superior officer of any person so appointed.
Notwithstanding such additional appointments, only those persons whose offices
are described in Part V are to be considered an officer of the Company unless
the resolution or other Board action appointing such person expressly states
that such person is to be considered an officer of the Company. Each of such
persons (in the order designated by the Board, the chief executive officer or
the superior officer of such person) will be vested with all of the powers and
charged with all of the duties of his or her superior officer in the event of
such superior officer's absence or disability.
4.03. Bonds and Other Requirements. The Board of Directors may require
any officer or other appointee to give bond to the Company (with sufficient
surety, and conditioned upon the faithful performance of the duties of his or
her office or position) and to comply with any other conditions which may from
time to time be required of him or her by the Board.
4.04. Removal or Delegation. Provided that a majority of the whole
membership thereof concurs therein, the Board of Directors may remove any
officer of the Company as provided by law (ss.051) and declare his or her office
or offices vacant or abolished or, in the case of the absence or disability of
any officer or for any other reason considered sufficient, may temporarily
delegate his or her powers and duties to any other officer or to any director.
Similar action may be taken by the Board of Directors in regard to appointees
designated pursuant to Section 4.02 above.
4.05. Salaries. Salary levels and bonus arrangements pertaining to the
officers of the Company will from time to time be set or approved by the Board
of Directors. Salary levels and bonus arrangements pertaining to appointees
contemplated in Section 4.02 above, unless so set or approved by the Board of
Directors, will be left to the discretion of the chief executive officer, which
discretion may be delegated by the chief executive officer to any one or more
other officers. Any salary or bonus so set or approved may be paid on such
current or deferred basis as may be designated by the Board or the officer who
shall have set or approved the same. No officer or appointee will be prevented
from receiving a salary or fee by reason of the fact that he or she is also a
director of the Company.
V. SPECIFIC OFFICERS, FUNCTIONS AND POWERS
5.01. Chairman of the Board. The Chairman of the Board of Directors
will serve as a general executive officer, but not necessarily as a full-time
employee, of the Company. He or she will preside at all meetings of the
directors and be vested with such other powers and duties as the Board may from
time to time designate.
5.02. Chief Executive Officer. Subject to the control of the Board of
Directors exercised as hereinafter provided, the Chief Executive Officer of the
Company will supervise its business and affairs and the performance of their
respective duties by all other officers, by appointees designated pursuant to
Section 4.02 above, and by such additional appointees to such additional
positions corporate, divisional or otherwise) as the Chief Executive Officer may
designate, with authority on his or her part to delegate the foregoing duty of
supervision to such extent and to such person or persons as may be determined by
the Chief Executive Officer. Except as otherwise indicated from time to time by
resolution of the Board of Directors, its management of the business and affairs
of the Company will be implemented through the office of the Chief Executive
Officer.
5.03. President and Vice Presidents. Unless specified to the contrary
by resolution of the Board of Directors, the President will be the Chief
Executive Officer of the Company. In addition to the supervisory functions above
set forth on the part of the Chief Executive Officer (or in lieu thereof if a
contrary specification is made by the Board relative to the Chief Executive
Officer), the President will be vested with such powers and duties as the Board
may from time to time designate. Vice Presidents may be elected by the Board of
Directors to perform such duties as may be designated by the Board or be
assigned or delegated to them by their respective superior officers. The Board
may identify (i) one or more Vice Presidents as "Executive" or "Senior" Vice
Presidents, (ii) the President or any Vice President as "General Manager" of the
Company and (iii) any Vice President, the Treasurer, the Controller or the
General Auditor as having one or more of the capacities referred to in Section
5.05 below, and the title of any Vice President, the Treasurer, the Controller
or the General Auditor may include words indicative of his or her particular
function or area of responsibility and authority. Vice Presidents will succeed
to the responsibilities and authority of the President, in the event of his or
her absence or disability, in the order consistent with their respective titles
or regular duties or as specifically designated by the Board of Directors or,
pending action by the Board of Directors, by the Chairman of the Board.
5.04. Treasurer, Controller, General Auditor and Secretary. The
Treasurer, Controller, General Auditor and Secretary each will perform all such
duties normally associated with his or her office (including, in the case of the
Secretary, the giving of notice and the keeping of minutes of corporate
proceedings and the custody of corporate records and the seal of the Company) as
are not assigned to a Vice President of the Company, along with such other
duties as may be designated by the Board or be assigned or delegated to them by
their respective superior officers. The Board may appoint one or more Assistant
Treasurers, Assistant Controllers, Assistant General Auditors and Assistant
Secretaries, each of whom (in the order designated by the Board or their
respective superior officers) will be vested with all of the powers and charged
with all of the duties of the Treasurer, Controller, General Auditor or
Secretary (as the case may be) in the event of his or her absence or disability.
5.05. Specific Functions. One of the officers referred to in this Part
V will be designated the principal financial officer of the Company, one will be
designated its principal accounting officer and one will be designated to
supervise the performance of the internal audit function. Any one officer may
serve in more than one such capacity, except that the principal accounting and
internal audit functions will be performed or supervised by two different
officers.
5.06. Specific Powers. Except as may otherwise be specifically provided
in a resolution of the Board of Directors, any of the officers referred to in
this Part V will be a proper officer to sign on behalf of the Company any deed,
bill of sale, assignment, option, mortgage, pledge, note, bond, debenture,
evidence of indebtedness, application, consent (to service of process or
otherwise), agreement, indenture or other instrument of importance to the
Company. Any such officer may represent the Company at any meeting of the
shareholders or members of any corporation, association, partnership, joint
venture or other entity in which this Company then has an interest, and may vote
such interest in person or by proxy appointed by him or her, provided that the
Board of Directors may from time to time confer the foregoing authority upon any
other person or persons.
VI. RESIGNATIONS AND VACANCIES
6.01. Resignation. Any director, committee member, officer or other
appointee may resign from his or her office or position at any time by written
notice delivered or addressed to the Company at its principal place of business,
marked to the attention of the Office of the Secretary. Any such resignation
will be effective upon its receipt by the Company unless some later time is
therein fixed, and then from that time. The acceptance of a resignation will not
be required to make it effective.
6.02. Vacancies. If the office or position of any director, committee
member or officer, or any appointee designated pursuant to Section 4.02 above,
becomes vacant by reason of his or her death, resignation, disqualification,
removal or otherwise, the Board of Directors may choose a successor to hold
office for the unexpired term.
VII. INDEMNIFICATION AND RATIFICATION
7.01. Indemnification. In order to induce qualified persons to serve
the Company (and any other corporation, joint venture, partnership, trust or
other enterprise at the request of the Company) as directors and officers, the
Company will indemnify such persons to the fullest extent permitted by law
(ss.005) or by the Articles, if applicable. Insofar as applicable law requires a
determination as to the standard of conduct followed by a person seeking
indemnification, the Board of Directors or the disinterested members thereof
will consider the relevant facts, or cause them to be submitted for
consideration, as soon as practicable, but such consideration of any facts in
issue in pending legal proceedings will not be required before the final
adjudication thereof. A determination, whether favorable or adverse to the party
seeking indemnification, pursuant to any such consideration (which
determination, if the same is to be made by a court pursuant to law, will be
deemed made when contained in a final unappealed or unappealable decision) will
be binding on all parties concerned.
7.02. Ratification; Special Committee. Any transaction involving the
Company, any of its subsidiary corporations or any of its directors, officers,
employees or agents which at any time is questioned in any manner or context
(including a shareholder's derivative suit), on the ground of lack of authority,
conflict of interest, misleading or omitted statement of fact or law,
nondisclosure, miscomputation, improper principles or practices of accounting,
inadequate records, defective or irregular execution or any similar ground, may
be investigated and/or ratified (before or after judgment), or an election may
be made not to institute or pursue a claim or legal proceedings on account
thereof or to accept or approve a negotiated settlement with respect thereto
(before or after the institution of legal proceedings), by the Board of
Directors or by a special committee thereof comprised of one or more
disinterested directors (that is, a director or directors who did not
participate in the questioned transaction with actual knowledge of the
questioned aspect or aspects thereof). Such a special committee may be validly
formed and fully empowered to act, in accordance with the purposes and duties
assigned thereto, by resolution or resolutions of the Board of Directors,
notwithstanding (i) the inclusion of Board members who are not disinterested as
aforesaid among those who form a quorum at the meeting or meetings at which one
or more members of such special committee are elected or appointed to the Board
or to such special committee or at which such committee is formed or empowered,
or their inclusion among the directors who vote upon or otherwise participate in
taking any of the foregoing actions, or (ii) the taking of any of such actions
by the disinterested members of the Board (or a majority of such members) whose
number is not sufficient to constitute a quorum or a majority of the membership
of the full Board. Any such special committee so comprised will, to the full
extent consistent with its purposes and duties as expressed in such resolution
or resolutions, have all of the authority and powers of the full Board and its
Executive Committee (the same as though it were the full Board and/or its
Executive Committee in carrying out such purposes and duties) and will function
in accordance with Section 3.09 above. No other provisions of these Bylaws which
may at any time appear to conflict with any provision of this Section 7.02, and
no defect or irregularity in the formation, empowering or functioning of any
such special committee, will serve to impede, impair or bring into question any
action taken or purported to be taken by such committee or the validity of any
such action. Any ratification of a transaction pursuant to this Section 7.02
will have the same force and effect as if the transaction has been duly
authorized originally. Any such ratification, and any election made pursuant to
this Section 7.02 with respect to claims, legal proceedings or settlements, will
be binding upon the Company and its shareholders and will constitute a bar to
any claim or the execution of any judgment in respect of the transaction
involved in such ratification or election.
VIII. SEAL
8.01. Form Thereof. The seal of the Company will have inscribed thereon
the name of the Company, the year of its incorporation and the word "SEAL."
IX. STOCK CERTIFICATES
9.01. Form Thereof. Each certificate representing stock of the Company
will be in such form conforming to law (ss.023) as may from time to time be
approved by the Board of Directors, and will bear the manual or facsimile
signatures and seal of the Company as required or permitted by law (ss.023).
9.02. Ownership. The Company will be entitled to treat the registered
owner of any share as the absolute owner thereof and accordingly, will not be
bound to recognize any beneficial, equitable or other claim to, or interest in,
such share on the part of any other person, whether or not it has notice
thereof, except as may expressly be provided by Article 8 of Chapter 14 of Title
44, Arizona Revised Statutes (or its successor), as at the time in effect.
9.03. Transfers. Transfers of stock will be made on the books of the
Company only upon surrender of the certificate therefor, duly endorsed by an
appropriate person, with such assurance of the genuineness and effectiveness of
the endorsement as the Company may require, all as contemplated by Article 8 of
Chapter 14 of Title 44, Arizona Revised Statutes (or its successor), as at the
time in effect, and/or upon submission of any affidavit, other document or
notice which the Company considers necessary.
9.04. Lost Certificates. In the event of the loss, theft or destruction
of any certificate representing stock of this Company or of any predecessor
corporation, the Company may issue (or, in the case of any such stock as to
which a transfer agent and/or registrar have been appointed, may direct such
transfer agent and/or registrar to countersign, register and issue) a
replacement certificate in lieu of that alleged to be lost, stolen or destroyed,
and cause the same to be delivered to the owner of the stock represented
thereby, provided that the owner shall have submitted such evidence showing the
circumstances of the alleged loss, theft or destruction, and his or her
ownership of the certificate as the Company considers satisfactory, together
with any other facts which the Company considers pertinent, and further provided
that an indemnity agreement and/or indemnity bond shall have been provided in
form and amount satisfactory to the Company and to its transfer agents and/or
registrars, if applicable.
X. EMERGENCY BYLAWS
10.01. Emergency Conditions. The emergency Bylaws provided in this Part
X will be operative during any emergency in the conduct of the business of the
Company resulting from an attack on the United States or on the locality of the
Company's principal place of business or from the occurrence of any catastrophe
or during any similar emergency conditions, notwithstanding any different
provisions in these Bylaws or (insofar as legally permissible) in the Articles
or applicable statutes. To the extent not inconsistent with the provisions of
this Part X, these Bylaws will remain in effect during such emergency and upon
its termination these emergency Bylaws will cease to be operative.
10.02. Board Meetings. During any such emergency, a meeting of the
Board of Directors or any of its committees may be called by any officer or
director of the Company. Notice of the time and place of the meeting will be
given by the person calling the same to those of the directors whom it may be
feasible to reach by any available means of communication. Such notice will be
given so much in advance of the meeting as circumstances permit in the judgment
of the persons calling the same. At any Board or committee meeting held during
any such emergency, a quorum will consist of a majority of those who could
reasonably be expected to attend the meeting if they were able to do so, but in
no event more than a majority of those to whom notice of such meeting is
required to have been given as above provided.
10.03. Certain Actions. The Board of Directors, either before or during
any such emergency, may provide and from time to time modify lines of succession
in the event that during such an emergency any or all officers, appointees,
employees or agents of the Company are for any reason rendered incapable of
discharging their duties. The Board, either before or during any such emergency,
may, effective in the emergency, change the head office or designate several
alternative head offices of the Company, or authorize the officers to do so.
10.04. Liability. No director, officer, appointee, employee or agent
acting in accordance with these emergency Bylaws will be liable except for
willful misconduct.
10.05. Modifications. These emergency Bylaws will be subject to repeal
or change by further action of the Board of Directors, but no such repeal or
change will modify the provisions of Section 10.04 with respect to action taken
prior to the time of such repeal or change. Any amendment of these emergency
Bylaws may make any further or different provisions that may be practical and
necessary for the circumstances of the emergency.
XI. DIVIDENDS
11.01. Declaration. Subject to such restrictions or requirements as may
be imposed by law (ss.045) or the Company's Articles or as may otherwise be
binding upon the Company, the Board of Directors may from time to time declare
dividends on stock of the Company outstanding on the dates of record fixed by
the Board, to be paid in cash, in property or in shares of the Company's stock
on or as of such payment or distribution dates as the Board may prescribe.
XII. AMENDMENTS
12.01. Procedure. These Bylaws may be amended, supplemented, repealed
or temporarily or permanently suspended, in whole or in part, or new bylaws may
be adopted, at any duly constituted meeting of the Board of Directors, the
notice of which meeting either includes mention of the proposed action relative
to the Bylaws or is waived as provided in Section 3.05 above. If, however, the
chairman of any such meeting or a majority of directors in attendance thereat in
good faith determines that any such action has arisen as a matter of necessity
at the meeting and is otherwise proper, no notice of such action will be
required.
12.02. Amendment of Bylaws. Notwithstanding any other provision of
these Bylaws, Sections 2.02, 3.01, and 3.13 and Article XII of these Bylaws
shall not be altered, amended, supplemented, repealed, or temporarily or
permanently suspended, in whole or in part, or replacement Bylaw provisions
adopted without: (i) the affirmative vote of a majority of the directors then in
office; or (ii) the affirmative vote of seventy-five percent (75%) or more of
the outstanding shares of the Company entitled to vote generally.
-----------------------------------------------
CERTIFICATE
I, NANCY C. LOFTIN, the Secretary of ARIZONA PUBLIC SERVICE COMPANY, an
Arizona Corporation, do HEREBY CERTIFY that the foregoing is a true and correct
copy of the Company's Bylaws, as amended and that such Bylaws, as amended, are
in full force and effect as of the date hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
said corporation this l9th day of November, 1991.
NANCY C. LOFTIN
[SEAL] Secretary
EXHIBIT 3.2
Excerpt from the meeting of the Board of
Directors of APS held on January 17, 1995.
WHEREAS, the Bylaws (the "Bylaws") of Arizona Public Service
Company (the "Company"), Section 3.02, states that "[a] person will not
qualify for election or appointment as a director, whether initially or
on re-election and whether by the shareholders at their annual
meeting...if such person's 70th birthday occurs on or has occurred
before the date of such election, appointment, or re-election"; and
WHEREAS, the 70th birthdays of two of the current directors,
Kenneth M. Carr and Verne D. Seidel, will occur prior to May 16, 1995,
the date of the Annual Meeting of Shareholders at which the Company's
directors will be elected; and
WHEREAS, Sections 12.01 and 12.02 of the Bylaws provide that
the Bylaws may be temporarily suspended, in whole or in part, by the
affirmative vote of a majority of the directors then in office.
NOW, THEREFORE, BE IT RESOLVED, that the age requirement of
Section 3.02 of the Bylaws with respect to Kenneth M. Carr and Verne D.
Seidel shall be temporarily suspended until after the Company's 1995
Annual Meeting of Shareholders; and further
RESOLVED, that the proper officers of the Company be and they
hereby are, authorized and directed to execute and deliver any
documents and do any and all acts and things which, in their opinion,
are necessary or desirable to effectuate such temporary suspension,
including, but not limited to, filings with such governmental bodies or
other entities as may be deemed necessary or appropriate; and further
RESOLVED, that all of the actions taken previously by the
proper officers of the Company in furtherance of the intent and
purposes of the foregoing resolutions be, and are hereby, ratified and
approved as the actions of the Company, and that the proper officers of
the Company are authorized to take such actions and execute such
additional documents and instruments as may be necessary or proper to
implement such resolutions.
EXHIBIT 10.1
AMENDMENT NO. 1
Decommissioning Trust Agreement
(PVNGS Unit 1)
Dated as of July 1, 1991
between
Arizona Public Service Company
and
Mellon Bank, N.A.
as Decommissioning Trustee
This Amendment No. 1, dated as of December 1, 1994, to the
Decommissioning Trust Agreement (PVNGS Unit 1), dated as of July 1, 1991 (the
"Decommissioning Trust Agreement"; terms used herein as therein defined), is
entered into between Arizona Public Service Company ("APS") and Mellon Bank,
N.A., as Decommissioning Trustee ("Decommissioning Trustee").
R E C I T A L S:
WHEREAS, the parties hereto wish to amend the investment parameters
for the Decommissioning Trust Fund and the Second Fund contained in Exhibits B-1
and B-2 to the Decommissioning Trust Agreement and to clarify certain matters
regarding commingling of assets;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A G R E E M E N T S:
SECTION 1. Amendments.
(a) Section 8(a) of the Decommissioning Trust Agreement is hereby
amended by replacing the words "Exhibits B-1 and B-2, respectively" therein with
the words "Exhibit B."
(b) The definition of the term "Permitted Investments" in Exhibit A to
the Decommissioning Trust Agreement is hereby amended by replacing the words
"Exhibits B-1 and B-2 hereto, respectively" with the words "Exhibit B."
(c) Exhibits B-1 and B-2 to the Decommissioning Trust Agreement are
hereby deleted and are replaced in their entirety by Exhibit B hereto.
(d) Section 6 of the Decommissioning Trust Agreement is hereby amended
in its entirety to read in full as follows:
Section 6. Commingling of Funds. APS and the Decommissioning Trustee
recognize that the assets of the funds established under the Unit 2 Trust
Agreement, certain funds established under the Unit 3 Trust Agreement, and the
Funds established under this Agreement have in the past been commingled, and
that such practice as it relates to the funds established under the Unit 2 Trust
Agreement was discontinued with respect to investments made after January 31,
1992. Notwithstanding that there shall be no further commingling of the assets
of the funds established under the Unit 2 Trust Agreement with the assets of any
fund(s) or Fund(s) established under the Unit 3 Trust Agreement or this
Agreement, APS desires the Decommissioning Trustee to allow or continue to allow
commingling of the assets of the Second Fund hereunder with the assets of the
"Second Fund" established under the Unit 3 Trust Agreement (the "Unit 3 Second
Fund" and, together with the Second Fund hereunder, the "Second Funds"), with
expenses, fees, income, profits and losses being apportioned among such funds as
provided in Section 21, so long as and to the extent that (a) such commingling
is permitted under the Regulations and (b) APS has not given written
notification to the Decommissioning Trustee, as provided below.
APS further desires the Decommissioning Trustee to allow or continue
to allow commingling of the assets of the Decommissioning Trust Fund hereunder
with the assets of the "Decommissioning Trust Fund" established under the Unit 3
Trust Agreement (the "Unit 3 Decommissioning Trust Fund" and, together with the
Decommissioning Trust Fund hereunder, the "Decommissioning Trust Funds"), with
expenses, fees, income, profits and losses being apportioned among such funds as
provided in Section 21.
APS and the Decommissioning Trustee recognize that no assets of any of
the Decommissioning Trust Funds have in the past been commingled with the assets
of any of the Second Funds. However, APS and the Decommissioning Trustee agree
that in the event that APS determines (and gives written notification to the
Decommissioning Trustee of such determination) that such commingling (a) is
permitted under the Regulations and other regulations promulgated under the Code
and (b) is otherwise advisable, the Decommissioning Trustee will allow
commingling of the assets of any or all of the Decommissioning Trust Funds with
the assets of any or all of the Second Funds, as instructed by APS, with
expenses, fees, income profits and losses being apportioned among such funds as
provided in Section 21, so long as and to the extent that (a) such commingling
continues to be permitted under the Regulations and other regulations
promulgated under the Code and (b) APS has not given written notification to the
Decommissioning Trustee, as provided below.
APS and the Decommissioning Trustee further agree that in the event
that either (x) amendments to the Regulations (or regulations promulgated under
any other section of the Code) are adopted which prohibit the manner of
commingling hitherto practiced by the Second Funds or the manner of commingling
of assets of the Decommissioning Trust Fund(s) with assets of the Second Fund(s)
established under the previous paragraph, or (y) APS determines (and gives
written notification to the Decommissioning Trustee of such determination) that
it is advisable to prohibit or otherwise alter the manner of commingling
hitherto practiced by the Second Funds or the Decommissioning Trust Funds or the
manner of such commingling established under the previous paragraph, then the
Decommissioning Trustee shall as soon as possible after the adoption of such
amendments or receipt of such notification, cooperate with the Investment
Manager(s) in taking such steps, including the selling of assets and any other
actions the Decommissioning Trustee deems advisable in the circumstances, to
cease commingling of assets or otherwise modify the investment practices of the
Second Funds and the Decommissioning Trust Funds to conform to such amendments
or such written notification. Decommissioning Trustee shall not be liable for
any claims made against it on account of the disqualification or asserted
disqualification of the Second Fund for any actions of the Decommissioning
Trustee taken prior to the adoption of any such amendments as contemplated in
this Section 6 or its receipt of written notification from APS as contemplated
in this Section 6, if such actions were otherwise in conformance with the
provisions of this Agreement.
Notwithstanding any other provision of this Agreement, with respect to
the commingling of Funds authorized by this Section 6, no part of any interest
of a Fund (or any interest of a subsequent holder) in a commingled investment,
nor any right pertaining to such interest (including any right to substitute
another entity for a Fund or for any subsequent holder, as holder of investments
commingled pursuant to this Agreement) may be sold, assigned, transferred or
otherwise alienated or disposed of by any holder of an interest in the
commingled investment unless the written consent to the transfer of every other
holder of interests in such commingled investment is obtained in advance of any
such transfer; provided, however, that nothing herein shall prevent the
Decommissioning Trustee from selling any commingled investment in the normal
exercise of its powers under this Agreement.
Notwithstanding the preceding paragraph of this Section 6, a Fund's
interest in a commingled arrangement may be withdrawn from the commingled
investment (but not from the trusts hereunder, except as otherwise permitted by
this Agreement) at any time upon 7 days written notice to the Decommissioning
Trustee by such Fund (acting through APS or any successor duly appointed). If a
Fund withdraws its entire interest in a commingled investment, the commingled
arrangement shall terminate with respect to all holders of interests in the
commingled arrangement 30 days after notice of final withdrawal has been given.
Upon termination of the commingled arrangement, the assets of each of the Funds
will be segregated into a separate account under this Agreement and the Unit 3
Trust Agreement and no further commingling may occur except upon notice of the
Fund, which notice may not be effective for a period of at least one year after
such termination.
This Section 6 applies to transfers of interests within, and
withdrawals from, the commingled arrangement. Nothing within this Section 6
shall be interpreted to permit or to limit transfers of interests in, or
withdrawals from, a Fund, which transfers and withdrawals are governed by other
provisions of this Agreement.
SECTION 2. Effectiveness.
This Amendment No. 1 shall become effective as of the date hereof upon
the execution and delivery of a counterpart of this Amendment No. 1 by each of
the parties hereto.
SECTION 3. Miscellaneous
(a) Full Force and Effect.
Except as expressly provided herein, the Decommissioning Trust
Agreement shall remain unchanged and in full force and effect. Each reference in
the Decommissioning Trust Agreement and in any exhibit or schedule thereto to
"this Agreement," "hereto," "hereof" and terms of similar import shall be deemed
to refer to the Decommissioning Trust Agreement as amended hereby.
(b) Counterparts.
This Amendment No. 1 may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Amendment No. 1 by signing any such
counterpart.
(c) Arizona Law.
This Amendment No. 1 shall be construed in accordance with and
governed by the law of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to the Decommissioning Trust Agreement to be duly executed as of the day and
year first above written.
ARIZONA PUBLIC SERVICE COMPANY
By Nancy E. Newquist
---------------------------
Title Treasurer
---------------------------
MELLON BANK N.A., as
Decommissioning Trustee
By Earl Kleckner
--------------------------
Title Vice President
--------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 17th day of
November, 1994, by Nancy E. Newquist, the Treasurer of ARIZONA PUBLIC SERVICE
COMPANY, an Arizona corporation, on behalf of said corporation.
Maria R. Marrs
---------------------------------------
Notary Public
My commission expires:
July 21, 1998
--------------------------
STATE OF PENNSYLVANIA )
---------------------
) ss.
County of Allegheny )
---------
The foregoing instrument was acknowledged before me this 23rd day of
November, 1994, by Earl Kleckner, a Trust Officer of MELLON BANK, N.A., a
corporation having trust powers, as Decommissioning Trustee, on behalf of said
corporation.
Denise A. Fuhrer
--------------------------
Notary Public
My commission expires:
Notarial Seal
-------------
Denise A. Fuhrer, Notary Public
Pittsburgh, Allegheny County
My Commission Expires December 3, 1998
Member, Pennsylvania Association of Notaries
Exhibit B
PERMITTED INVESTMENTS FOR THE
DECOMMISSIONING TRUST FUND AND THE SECOND FUND
The Second Fund must meet all applicable requirements of the Code, and
applicable rules and regulations promulgated by the Internal Revenue Service
with respect to a Nuclear Decommissioning Reserve Fund.
Subject to the foregoing, the Decommissioning Trust Fund and the
Second Fund may invest in any of the following:
Securities
----------
Except as may be constrained elsewhere in these guidelines, the
following types of taxable or tax-exempt securities are eligible for investment,
including any investment in a common or collective trust fund (including but not
limited to, any such fund maintained by the Decommissioning Trustee or any of
its affiliates, including but not limited to, the Decommissioning Trustee's
Nuclear Decommissioning Trust Equity Index Fund) holding any securities listed
in items 1 through 3 below:
1. Debt Obligations of
- The U.S. Government and its agencies or instrumentalities
- States, U.S. possessions, District of Columbia, and any agency
or political subdivision thereof
- Domestic corporations
- Municipalities and municipal agencies
2. Asset-backed and mortgage-backed securities
3. Equities
4. FDIC Certificates of Deposit, including but not limited to,
those of the Decommissioning Trustee or any of its affiliates
5. Shares of regulated investment companies, including
but not limited to, mutual funds, including but not limited to,
those for which the Decommissioning Trustee performs advisory
management or other services for a fee
6. Cash equivalent securities, including but not limited
to, the Decommissioning Trustee's STIF accounts or those of
any of its affiliates
Quality
-------
1. Debt obligations other than U.S. Government and agency
securities must have a rating of at least A by both Moody's
Investors Services, Inc. ("Moody's") and Standard & Poor's
Ratings Group ("S & P") at time of purchase. This limitation
shall not apply to securities that have been pre-refunded
where a third party trustee holds direct U.S. Government or
agency obligations sufficient to pay debt service and the
specified call price to a specific call or maturity date.
2. Commercial paper must be rated at least A-1 by S&P and P-1
by Moody's.
3. Certificates of Deposit must be at a bank with a minimum
of one billion dollars in assets as of such bank's most recent
report of condition.
Diversification
---------------
No investment shall represent more than 10% of the aggregate assets held under
this Decommissioning Trust Agreement, the Unit 2 Trust Agreement, and the Unit 3
Trust Agreement combined, except for:
1. Positions in securities issued by the U.S. Government or
fully government backed securities or instruments fully
pre-refunded where a third party trustee holds direct U.S.
Government or agency obligations sufficient to pay debt service
and the specified call price to a specific call or maturity date.
2. Units of a common or collective trust fund.
Equity securities are limited to 60% of the aggregate assets held under this
Decommissioning Trust Agreement, the Unit 2 Trust Agreement, and the Unit 3
Trust Agreement combined.
Notwithstanding the foregoing, the following restrictions are placed
on the investment of the assets of the Funds:
1. Securities of APS, APS' parent corporation, Pinnacle West
Capital Corporation, or its affiliates, are not permitted.
2. Securities issued by Maricopa County, Arizona Pollution Control
Corporation in connection with the financing of certain facilities at the
Palo Verde Nuclear Generation Station are not permitted.
3. Securities issued by or on behalf of any participant in the Palo
Verde Nuclear Generating Station are not permitted.
4. The following securities and transactions are explicitly
prohibited unless engaged in in the ordinary course by a common
or collective trust fund described under the heading "Securities"
above:
(a) put and call options on securities, securities indices and
foreign currencies;
(b) financial futures contracts including bond, bond index,
foreign currency futures contracts and options thereon;
(c) spot and forward currency transactions both to effect
securities transactions and to manage currency;
(d) private placements;
(e) preferred stock;
(f) warrants;
(g) margin purchases or borrowing money; and
(h) short selling or securities lending.
EXHIBIT 10.2
AMENDMENT NO. 1
Decommissioning Trust Agreement
(PVNGS Unit 3)
Dated as of July 1, 1991
between
Arizona Public Service Company
and
Mellon Bank, N.A.
as Decommissioning Trustee
This Amendment No. 1, dated as of December 1, 1994, to the
Decommissioning Trust Agreement (PVNGS Unit 3), dated as of July 1, 1991 (the
"Decommissioning Trust Agreement"; terms used herein as therein defined), is
entered into between Arizona Public Service Company ("APS") and Mellon Bank,
N.A., as Decommissioning Trustee ("Decommissioning Trustee").
R E C I T A L S:
WHEREAS, the parties hereto wish to amend the investment
parameters for the Decommissioning Trust Fund and the Second Fund contained in
Exhibits B-1 and B-2 to the Decommissioning Trust Agreement and to clarify
certain matters regarding commingling of assets;
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A G R E E M E N T S:
SECTION 1. Amendments.
(a) Section 8(a) of the Decommissioning Trust Agreement is
hereby amended by replacing the words "Exhibits B-1 and B-2, respectively"
therein with the words "Exhibit B."
(b) The definition of the term "Permitted Investments" in
Exhibit A to the Decommissioning Trust Agreement is hereby amended by replacing
the words "Exhibits B-1 and B-2 hereto, respectively" with the words "Exhibit
B."
(c) Exhibits B-1 and B-2 to the Decommissioning Trust
Agreement are hereby deleted and are replaced in their entirety by Exhibit B
hereto.
(d) Section 6 of the Decommissioning Trust Agreement is
hereby amended in its entirety to read in full as follows:
Section 6. Commingling of Funds. APS and the Decommissioning
Trustee recognize that the assets of the funds established under the Unit 2
Trust Agreement, the funds established under the Unit 1 Trust Agreement, and
certain of the Funds established under this Agreement have in the past been
commingled, and that such practice as it relates to the funds established under
the Unit 2 Trust Agreement was discontinued with respect to investments made
after January 31, 1992. Notwithstanding that there shall be no further
commingling of the assets of the funds established under the Unit 2 Trust
Agreement with the assets of any fund(s) or Fund(s) established under the Unit 1
Trust Agreement or this Agreement, APS desires the Decommissioning Trustee to
allow or continue to allow commingling of the assets of the Second Fund
hereunder with the assets of the "Second Fund" established under the Unit 1
Trust Agreement (the "Unit 1 Second Fund" and, together with the Second Fund
hereunder, the "Second Funds"), with expenses, fees, income, profits and losses
being apportioned among such funds as provided in Section 21, so long as and to
the extent that (a) such commingling is permitted under the Regulations and (b)
APS has not given written notification to the Decommissioning Trustee, as
provided below.
APS further desires the Decommissioning Trustee to allow or
continue to allow commingling of the assets of the Decommissioning Trust Fund
hereunder with the assets of the "Decommissioning Trust Fund" established under
the Unit 1 Trust Agreement (the "Unit 1 Decommissioning Trust Fund" and,
together with the Decommissioning Trust Fund hereunder, the "Decommissioning
Trust Funds"), with expenses, fees, income, profits and losses being apportioned
among such funds as provided in Section 21.
APS and the Decommissioning Trustee recognize that no assets
of any of the Decommissioning Trust Funds have in the past been commingled with
the assets of any of the Second Funds. However, APS and the Decommissioning
Trustee agree that in the event that APS determines (and gives written
notification to the Decommissioning Trustee of such determination) that such
commingling (a) is permitted under the Regulations and other regulations
promulgated under the Code and (b) is otherwise advisable, the Decommissioning
Trustee will allow commingling of the assets of any or all of the
Decommissioning Trust Funds with the assets of any or all of the Second Funds,
as instructed by APS, with expenses, fees, income profits and losses being
apportioned among such funds as provided in Section 21, so long as and to the
extent that (a) such commingling continues to be permitted under the Regulations
and other regulations promulgated under the Code and (b) APS has not given
written notification to the Decommissioning Trustee, as provided below.
APS and the Decommissioning Trustee further agree that in
the event that either (x) amendments to the Regulations (or regulations
promulgated under any other section of the Code) are adopted which prohibit the
manner of commingling hitherto practiced by the Second Funds or the manner of
commingling of assets of the Decommissioning Trust Fund(s) with assets of the
Second Fund(s) established under the previous paragraph, or (y) APS determines
(and gives written notification to the Decommissioning Trustee of such
determination) that it is advisable to prohibit or otherwise alter the manner of
commingling hitherto practiced by the Second Funds or the Decommissioning Trust
Funds or the manner of such commingling established under the previous
paragraph, then the Decommissioning Trustee shall as soon as possible after the
adoption of such amendments or receipt of such notification, cooperate with the
Investment Manager(s) in taking such steps, including the selling of assets and
any other actions the Decommissioning Trustee deems advisable in the
circumstances, to cease commingling of assets or otherwise modify the investment
practices of the Second Funds and the Decommissioning Trust Funds to conform to
such amendments or such written notification. Decommissioning Trustee shall not
be liable for any claims made against it on account of the disqualification or
asserted disqualification of the Second Fund for any actions of the
Decommissioning Trustee taken prior to the adoption of any such amendments as
contemplated in this Section 6 or its receipt of written notification from APS
as contemplated in this Section 6, if such actions were otherwise in conformance
with the provisions of this Agreement.
Notwithstanding any other provision of this Agreement, with
respect to the commingling of Funds authorized by this Section 6, no part of any
interest of a Fund (or any interest of a subsequent holder) in a commingled
investment, nor any right pertaining to such interest (including any right to
substitute another entity for a Fund or for any subsequent holder, as holder of
investments commingled pursuant to this Agreement) may be sold, assigned,
transferred or otherwise alienated or disposed of by any holder of an interest
in the commingled investment unless the written consent to the transfer of every
other holder of interests in such commingled investment is obtained in advance
of any such transfer; provided, however, that nothing herein shall prevent the
Decommissioning Trustee from selling any commingled investment in the normal
exercise of its powers under this Agreement.
Notwithstanding the preceding paragraph of this Section 6, a
Fund's interest in a commingled arrangement may be withdrawn from the commingled
investment (but not from the trusts hereunder, except as otherwise permitted by
this Agreement) at any time upon 7 days written notice to the Decommissioning
Trustee by such Fund (acting through APS or any successor duly appointed). If a
Fund withdraws its entire interest in a commingled investment, the commingled
arrangement shall terminate with respect to all holders of interests in the
commingled arrangement 30 days after notice of final withdrawal has been given.
Upon termination of the commingled arrangement, the assets of each of the Funds
will be segregated into a separate account under this Agreement and the Unit 1
Trust Agreement and no further commingling may occur except upon notice of the
Fund, which notice may not be effective for a period of at least one year after
such termination.
This Section 6 applies to transfers of interests within, and
withdrawals from, the commingled arrangement. Nothing within this Section 6
shall be interpreted to permit or to limit transfers of interests in, or
withdrawals from, a Fund, which transfers and withdrawals are governed by other
provisions of this Agreement.
SECTION 2. Effectiveness.
This Amendment No. 1 shall become effective as of the date
hereof upon the execution and delivery of a counterpart of this Amendment No. 1
by each of the parties hereto.
SECTION 3. Miscellaneous
(a) Full Force and Effect.
Except as expressly provided herein, the Decommissioning Trust
Agreement shall remain unchanged and in full force and effect. Each reference in
the Decommissioning Trust Agreement and in any exhibit or schedule thereto to
"this Agreement," "hereto," "hereof" and terms of similar import shall be deemed
to refer to the Decommissioning Trust Agreement as amended hereby.
(b) Counterparts.
This Amendment No. 1 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Amendment No. 1 by
signing any such counterpart.
(c) Arizona Law.
This Amendment No. 1 shall be construed in accordance with
and governed by the law of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to the Decommissioning Trust Agreement to be duly executed as of
the day and year first above written.
ARIZONA PUBLIC SERVICE COMPANY
By Nancy E. Newquist
----------------------------------
Title Treasurer
----------------------------------
MELLON BANK N.A., as
Decommissioning Trustee
By Earl Kleckner
----------------------------------
Title Vice President
----------------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 17th
day of November, 1994, by Nancy E. Newquist, the Treasurer of ARIZONA PUBLIC
SERVICE COMPANY, an Arizona corporation, on behalf of said corporation.
Maria R. Marrs
------------------------------------------
Notary Public
My commission expires:
July 21, 1998
---------------------
STATE OF Pennsylvania )
) ss.
County of Allegheny )
The foregoing instrument was acknowledged before me this 23rd
day of November, 1994, by Earl Kleckner, a Trust Officer of MELLON BANK, N.A.,
a corporation having trust powers, as Decommissioning Trustee, on behalf of
said corporation.
Denise A. Fuhrer
------------------------------------------
Notary Public
My commission expires:
Notarial Seal
Denise A. Fuhrer, Notary Public
Pittsburgh, Allegheny County
My Commission Expires December 3, 1998
Member, Pennsylvania Association of Notaries
--------------------------------------------
Exhibit B
PERMITTED INVESTMENTS FOR THE
DECOMMISSIONING TRUST FUND AND THE SECOND FUND
The Second Fund must meet all applicable requirements of the
Code, and applicable rules and regulations promulgated by the Internal Revenue
Service with respect to a Nuclear Decommissioning Reserve Fund.
Subject to the foregoing, the Decommissioning Trust Fund and
the Second Fund may invest in any of the following:
Securities
----------
Except as may be constrained elsewhere in these guidelines,
the following types of taxable or tax-exempt securities are eligible for
investment, including any investment in a common or collective trust fund
(including but not limited to, any such fund maintained by the Decommissioning
Trustee or any of its affiliates, including but not limited to, the
Decommissioning Trustee's Nuclear Decommissioning Trust Equity Index Fund)
holding any securities listed in items 1 through 3 below:
1. Debt Obligations of
- The U.S. Government and its agencies or
instrumentalities
- States, U.S. possessions, District of Columbia,
and any agency or political subdivision thereof
- Domestic corporations
- Municipalities and municipal agencies
2. Asset-backed and mortgage-backed securities
3. Equities
4. FDIC Certificates of Deposit, including but not
limited to, those of the Decommissioning Trustee or
any of its affiliates
5. Shares of regulated investment companies,
including but not limited to, mutual funds, including
but not limited to, those for which the
Decommissioning Trustee performs advisory management
or other services for a fee
6. Cash equivalent securities, including but not
limited to, the Decommissioning Trustee's STIF
accounts or those of any of its affiliates
Quality
-------
1. Debt obligations other than U.S. Government
and agency securities must have a rating of at least
A by both Moody's Investors Services, Inc.
("Moody's") and Standard & Poor's Ratings Group
("S & P") at time of purchase. This limitation
shall not apply to securities that have been pre-
refunded where a third party trustee holds direct
U.S. Government or agency obligations sufficient
to pay debt service and the specified call price
to a specific call or maturity date.
2. Commercial paper must be rated at least A-1 by
S&P and P-1 by Moody's.
3. Certificates of Deposit must be at a bank with
a minimum of one billion dollars in assets as of such
bank's most recent report of condition.
Diversification
---------------
No investment shall represent more than 10% of the aggregate assets held under
this Decommissioning Trust Agreement, the Unit 2 Trust Agreement, and the Unit 1
Trust Agreement combined, except for:
1. Positions in securities issued by the U.S. Government
or fully government backed securities or instruments
fully pre-refunded where a third party trustee holds
direct U.S. Government or agency obligations
sufficient to pay debt service and the specified call
price to a specific call or maturity date.
2. Units of a common or collective trust fund.
Equity securities are limited to 60% of the aggregate assets held under this
Decommissioning Trust Agreement, the Unit 2 Trust Agreement, and the Unit 1
Trust Agreement combined.
Notwithstanding the foregoing, the following restrictions are
placed on the investment of the assets of the Funds:
1. Securities of APS, APS' parent corporation, Pinnacle
West Capital Corporation, or its affiliates, are not permitted.
2. Securities issued by Maricopa County, Arizona
Pollution Control Corporation in connection with the financing of certain
facilities at the Palo Verde Nuclear Generation Station are not permitted.
3. Securities issued by or on behalf of any participant
in the Palo Verde Nuclear Generating Station are not permitted.
4. The following securities and transactions are
explicitly prohibited unless engaged in in the
ordinary course by a common or collective trust fund
described under the heading "Securities" above:
(a) put and call options on securities,
securities indices and foreign
currencies;
(b) financial futures contracts including bond,
bond index, foreign currency futures
contracts and options thereon;
(c) spot and forward currency transactions both
to effect securities transactions and to
manage currency;
(d) private placements;
(e) preferred stock;
(f) warrants;
(g) margin purchases or borrowing money; and
(h) short selling or securities lending.
EXHIBIT 10.3
This Amendment No. 2, dated as of November 1, 1994, to the Amended and
Restated Decommissioning Trust Agreement (PVNGS Unit 2), dated as of January 31,
1992, as amended by Amendment No. 1 thereto dated as of November 1, 1992 (the
"Decommissioning Trust Agreement"; terms used herein as therein defined), is
entered into between Arizona Public Service Company ("APS"), The First National
Bank of Boston, as Owner Trustee and as Lessor, and Mellon Bank, N.A., as
Decommissioning Trustee ("Decommissioning Trustee").
R E C I T A L S:
WHEREAS, the parties hereto wish to amend the investment parameters
for the Decommissioning Trust Fund and the Second Fund contained in Exhibits B-1
and B-2 to the Decommissioning Trust Agreement;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A G R E E M E N T S:
SECTION 1. Amendments.
(a) Section 9(a) of the Decommissioning Trust Agreement is hereby
amended by replacing the words "Exhibits B-1 and B-2, respectively" therein with
the words "Exhibit B."
(b) The definition of the term "Permitted Investments" in Exhibit A to
the Decommissioning Trust Agreement is hereby amended by replacing the words
"Exhibits B-1 and B-2 hereto, respectively" with the words "Exhibit B."
(c) Exhibits B-1 and B-2 to the Decommissioning Trust Agreement are
hereby deleted and are replaced in their entirety by Exhibit B hereto.
SECTION 2. Effectiveness.
This Amendment No. 2 shall become effective as of the date hereof upon
the execution and delivery of a counterpart of this Amendment No. 2 by each of
the parties hereto.
SECTION 3. Miscellaneous
(a) Full Force and Effect.
Except as expressly provided herein, the Decommissioning Trust
Agreement shall remain unchanged and in full force and effect. Each reference in
the Decommissioning Trust Agreement and in any exhibit or schedule thereto to
"this Agreement," "hereto," "hereof" and terms of similar import shall be deemed
to refer to the Decommissioning Trust Agreement as amended hereby.
(b) Counterparts.
This Amendment No. 2 may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Amendment No. 2 by signing any such
counterpart.
(c) Arizona Law.
This Amendment No. 2 shall be construed in accordance with and
governed by the law of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2 to the Decommissioning Trust Agreement to be duly executed as of the day and
year first above written.
ARIZONA PUBLIC SERVICE COMPANY
By Nancy E. Newquist
----------------------------------
Title Treasurer
----------------------------------
MELLON BANK N.A., as
Decommissioning Trustee
By Earl Kleckner
----------------------------------
Title Vice President
----------------------------------
THE FIRST NATIONAL BANK OF BOSTON, as Owner
Trustee under a Trust Agreement with Security
Pacific Capital Leasing Corporation and as
Lessor under a Facility Lease with Arizona
Public Service Company
By Donna Germano
----------------------------------
Title Account Manager
----------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
as Owner Trustee under a Trust Agreement
with Emerson Finance Co. and as Lessor
under a Facility Lease with Arizona Public
Service Company
By Donna Germano
----------------------------------
Title Account Manager
----------------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 17th day of
November, 1994, by Nancy E. Newquist, the Treasurer of ARIZONA PUBLIC SERVICE
COMPANY, an Arizona corporation, on behalf of said corporation.
Maria R. Marrs
------------------------------------------
Notary Public
My commission expires:
July 21, 1998
---------------------
STATE OF Pennsylvania )
) ss.
County of Allegheny )
The foregoing instrument was acknowledged before me this 23rd day of
November, 1994, by Earl Kleckner, a Trust Officer of MELLON BANK, N.A., a
corporation having trust powers, as Decommissioning Trustee, on behalf of said
corporation.
Denise A. Fuhrer
------------------------------------------
Notary Public
My commission expires:
Notarial Seal
Denise A. Fuhrer, Notary Public
Pittsburgh, Allegheny County
My Commission Expires December 3, 1998
Member, Pennsylvania Association of Notaries
--------------------------------------------
STATE OF Massachusetts )
) ss.
County of Suffolk )
The foregoing instrument was acknowledged before me this 22nd day of
November, 1994, by Donna Germano, the Account Manager of THE FIRST NATIONAL BANK
OF BOSTON, a national banking association, in its capacity as Owner Trustee
under a Trust Agreement with Security Pacific Capital Leasing Corporation, and
as Lessor under a Facility Lease with Arizona Public Service Company, on behalf
of said association in such capacities.
Shawn P. George
------------------------------------------
Notary Public
My commission expires:
September 2, 1999
---------------------
STATE OF ___________________ )
) ss.
County of __________________ )
The foregoing instrument was acknowledged before me this ____ day of
______________, 1994, by ______________________, the _____________________ of
THE FIRST NATIONAL BANK OF BOSTON, a national banking association, in its
capacity as Owner Trustee under a Trust Agreement with Emerson Finance Co., and
as Lessor under a Facility Lease with Arizona Public Service Company, on behalf
of said association in such capacities.
------------------------------------------
Notary Public
My commission expires:
---------------------
Exhibit B
PERMITTED INVESTMENTS FOR THE
DECOMMISSIONING TRUST FUND AND THE SECOND FUND
The Second Fund must meet all applicable requirements of the Code, and
applicable rules and regulations promulgated by the Internal Revenue Service
with respect to a Nuclear Decommissioning Reserve Fund.
Subject to the foregoing, the Decommissioning Trust Fund and the
Second Fund may invest in any of the following obligations or securities
maturing at such time or times as to enable payments or transfers to be made
from the Funds or which shall be readily marketable prior to the final maturity
thereof:
(a) bills, notes, bonds and savings bonds of the Treasury of the
United States of America;
(b) obligations of the United States of America not included in
clause (a) taken into consideration for purposes of determining
the public debt limit of the United States of America;
(c) time or demand deposits in a bank (as defined in Section 581 of
the Code) or an insured credit union (within the meaning of
Section 101(6) of the Federal Credit Union Act, 12 U.S.C. 1752(7)
(1982)) (for the purposes of this paragraph, "time or demand
deposits" shall include checking accounts, savings accounts,
certificates of deposit, and other time or demand deposits but
shall not include common or collective trust funds);
(d) obligations of the Federal National Mortgage Association and
Government National Mortgage Association;
(e) AAA rated collateralized mortgage obligations; interest only,
principal only, and inverse floaters are specifically prohibited;
(f) commercial paper maturing within 60 days and rated the highest
grade by Moody's Investors Services, Inc. ("Moody's") or Standard
& Poor's Corporation ("S & P"), or if one of such agencies does
not rate such paper, rated the highest grade by the other;
(g) deposit accounts (which may be represented by certificates of
deposit) payable on demand or maturing within 180 days, in
Federally insured national or state banks; provided, however, if
the aggregate amount of such deposit accounts in a bank is
$100,000 or more, such bank shall have combined capital and
surplus as of its last report of condition exceeding $250,000,000
and a senior unsecured debt rating of Investment Grade;
(h) the Decommissioning Trustee's Short Term Investment Fund ("STIF")
account; provided, however, that no more than fifteen percent
(15%) of the aggregate assets of the Funds may be invested in the
Decommissioning Trustee's STIF account at any one time, except
that the full amount of APS' quarterly contribution to the Funds
or any portion thereof may be invested in the Decommissioning
Trustee's STIF account for a period of up to seven (7) business
days after such contribution is made and, during such period, the
amount of such contribution or portion thereof that shall have
been so invested shall not count against the fifteen percent
(15%) limitation in this paragraph (h);
(i) repurchase agreements fully secured (and perfected) by any of the
foregoing obligations or securities maturing within 30 days with
any Federally insured national or state bank (including
Decommissioning Trustee) or any other financial institution that
is a nationally recognized dealer that reports to the Market
Reports Division of the Federal Reserve Bank of New York;
provided, however, if the aggregate face amount of such
repurchase agreements with an issuer is $1,000,000 or more, the
issuer shall have combined capital and surplus as of its last
report of condition exceeding $250,000,000 and a senior unsecured
debt rating of Investment Grade;
(j) obligations rated Investment Grade of a State, a possession of
the United States of America, the District of Columbia or any
political subdivision of the foregoing, the interest on which is
exempt from tax under Section 103(a) of the Code;
(k) corporate debt obligations rated Investment Grade; and
(l) (x) corporate equity securities, including, but not limited to,
investment in units of common or collective trust funds investing
in corporate equity securities; including, but not limited to,
the Decommissioning Trustee's Nuclear Decommissioning Trust
Equity Index Fund (the "NDT Equity Index Fund") and (y)
obligations not included in clauses (a) through (k) issued or
guaranteed by a person controlled or supervised by and acting as
an instrumentality of the United States of America pursuant to
authority granted by the Congress of the United States of
America, including Federal Intermediate Credit Bank, Banks for
Cooperatives, Federal Land Banks, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation; provided, that no more
than forty percent (40%) of the aggregate assets of the Funds may
be invested in securities described in (x) and (y) of this
subparagraph (l) during the period from January 31, 1992 through
January 31, 1998, no more than thirty percent (30%) during the
period from February 1, 1998 through January 31, 2004, and no
more than fifteen percent (15%) during the period from February
1, 2004 through January 31, 2010, and provided further that after
January 31, 2010, no investments shall be made in such
securities.
Notwithstanding the foregoing, the following restrictions are placed
on the investment of the assets of the Funds:
1. Securities of APS, APS' parent corporation, Pinnacle West Capital
Corporation, or its affiliates, are not permitted.
2. Securities issued by Maricopa County, Arizona Pollution Control
Corporation in connection with the financing of certain facilities at the Palo
Verde Nuclear Generation Station are not permitted.
3. Securities issued by or on behalf of any participant in the Palo
Verde Nuclear Generating Station are not permitted.
4. There shall be no short-selling, securities lending, options
trading, financial futures, over-the-counter derivative transactions, or other
specialized investment activity, except as specifically allowed in paragraphs
(a) through (l) hereof, or except as may be effected in the ordinary course of
operation of the Decommissioning Trustee's STIF account or its NDT Equity Index
Fund.
5. No investment shall be made which would cause the holding of any
one issue (excluding obligations of the United States Government and agencies of
or guaranteed by the United States Government and excluding units of a common or
collective trust fund), to exceed ten percent (10%) of the aggregate assets held
under this Decommissioning Trust Agreement, the Unit 1 Trust Agreement, and the
Unit 3 Trust Agreement, valued at cost.
6. Bank certificates of deposit must be at banks with a minimum of one
billion ($1,000,000,000) in assets as of such banks' most recent report of
condition.
7. Short-term taxable and non-taxable debt securities are not
permitted unless such securities have a rating of at least P-1 by Moody's or at
least A-1 by S & P.
8. Long-term taxable and non-taxable debt securities are not permitted
unless such securities have a rating of at least "A" by Moody's or S&P.
9. No investment shall be made which would cause sixty percent (60%)
or more of the aggregate assets held under this Decommissioning Trust Agreement
and the Unit 1 Trust Agreement and the Unit 3 Trust Agreement to be invested in
equity securities.
EXHIBIT 10.4a
Under the Company's 1995 Key Employee 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 10.5a
Under the Company's 1995 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 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 10.6a
December 21, 1993
Mr. William L. Stewart
Route 1, Box 1338
Ashland, Virginia 23005
Dear Bill:
I'm delighted that you have made the decision to join APS between March and
April of 1994. This is both an exciting and challenging time in the Company and
your experience will have a direct impact on our efforts. The information
outlined below covers the major items we have discussed regarding our offer of
employment.
As you know, this offer is for the position of Executive Vice President, Nuclear
Generation with a base annual salary of $300,000, effective your first day of
employment which will be around March/April 1994, subsequent to retirement date
with Virginia Power. Our officer salary review program provides for a review of
base compensation on an anniversary date cycle.
In addition to base salary you will participate in the officer incentive program
with a target incentive opportunity equal to thirty-five percent of your base
salary per year. Incentive dollars are generally paid during the first quarter
of the subsequent year. As an additional incentive we will provide you with a
$25,000 cash bonus for attaining a target SALP rating and a target INPO rating
each year. The annual target will be based on an incremental approach to
achieving an ultimate rating of 1 in each area. As a point of clarification, the
$25,000 bonus is for each rating and, therefore, represents a total potential
for a $50,000 payout.
On your first day of employment you will also receive a $100,000 employment
incentive, ten thousand restricted shares of Pinnacle West stock, and options on
50,000 additional shares of Pinnacle West stock which can be exercised in
incremental time frames over a three year period.
The exercise price on the options will be $22.125.
In addition to the base and incentive compensation referenced above you will
also receive a semi-monthly auto allowance totaling $7,200 per year.
I have enclosed copies of our employee benefits and a schedule showing the
applicable premiums that we share with our employees on our plans. Further,
enclosed is a description of our Employee Savings Plan in which you will be
eligible to participate 31 days after employment. Please note that the Employee
Savings Plan is a pre-tax savings plan and takes advantage of Section 401(k) of
the Code. Also, please note that the premiums that apply to our medical and
dental plan are done on a pre-tax basis.
We will also provide you with a relocation service for the disposition of your
real estate. We have a contract with Western Relocation Management Company.
Briefly, the procedure is that Western will select two independent real estate
appraisers. The two appraisers will appraise the property based on the normal
resale period for your area. Provided that both appraisals are within five
percent of one another, the two will be averaged. That will form the fair market
value of the property. You will be given a written offer in the amount of the
fair value. You have sixty days within which to decide to accept or reject that
offer. If you sell the property to another buyer for a higher price during that
sixty day period, you can then assign the property over to Western. You will
receive a check in the amount of the equity of the fair market value assigned by
Western, and you will then receive a check after the closing of the property
with the buyer to whom you sold the property for the difference.
APS will pay all of the relocation company fees, as well as any maintenance of
the property during the period of time it is held for resale.
We will pay for normal closing costs and provide the relocation of all household
effects to Phoenix. We will also pay for two house hunting trips for you and
your wife. In the event it becomes necessary, APS will pay for up to six months
living expenses and up to six months storage of your household furniture; up to
twelve months if building a new home.
Regarding pension, your APS benefits at age 60 will be the same as it would have
been had you remained with your previous employer until age sixty. Our process
for providing you with this benefit will consist of subtracting the amount of
your accrued APS pension benefit at age 60 from the amount you would have
received from your previous employer. We will then make up any difference
through a supplemental program designed to make you whole. Should you elect to
separate from APS prior to age 60, the supplemental portion of your pension
benefit will be forfeited. Details on pension calculation method to be
determined and put in addition to this letter at later date.
During 1994 you will have four weeks vacation. For purposes of vacation accrual,
you will be eligible for five weeks vacation after five years.
On behalf of APS let me welcome you to our team. In the event you have any
questions, feel free to contact me or Armando Flores who will be coordinating
the details of your relocation.
Sincerely,
Mark
Acceptance signature W L Stewart
----------------
Date: 1/10/94
---------------------------------
Please return one signed copy,
keep original for your file.
OMD/ch
EXHIBIT 10.7a
PINNACLE WEST CAPITAL CORPORATION
AND ARIZONA PUBLIC SERVICE COMPANY
DIRECTORS' RETIREMENT PLAN
TABLE OF CONTENTS
Page
ARTICLE ONE - DEFINITIONS AND CONSTRUCTION ................................. 1
1.1. Definitions ........................................ 1
1.2. Construction ....................................... 2
ARTICLE TWO - PARTICIPATION AND SERVICE .................................... 3
2.1. Participation ...................................... 3
2.2. Limitation on Years of Service ..................... 3
ARTICLE THREE - REQUIREMENTS FOR BENEFITS .................................. 3
3.1. Pension Entitlement ................................ 3
3.2. Death of a Participant ............................. 3
3.3. Pension Forfeiture ................................. 3
3.4. Non-Duplication of Benefits ........................ 4
ARTICLE FOUR - DETERMINATION OF BENEFITS ................................... 4
4.1. Time of Commencement of Payment .................... 4
4.2. Amount and Form of Benefit Payment ................. 4
ARTICLE FIVE - INALIENABILITY OF BENEFITS .................................. 4
5.1. No Assignment Permitted ............................ 4
ARTICLE SIX - PLAN ADMINISTRATION .......................................... 5
6.1. Appointment ........................................ 5
6.2. Powers ............................................. 5
6.3. Indemnification .................................... 5
6.4. Claims Procedure ................................... 6
ARTICLE SEVEN - AMENDMENT AND TERMINATION .................................. 6
7.1. Amendment .......................................... 6
7.2. Right to Terminate ................................. 6
ARTICLE EIGHT - MISCELLANEOUS
8.1. Funding ............................................ 7
8.2. Duration ........................................... 7
8.3. Limitation on Participants' Rights ................. 7
8.4. Heirs and Successors ............................... 7
PINNACLE WEST CAPITAL CORPORATION
AND ARIZONA PUBLIC SERVICE COMPANY
DIRECTORS' RETIREMENT PLAN
PREAMBLE
Effective January 1, 1995, PINNACLE WEST CAPITAL CORPORATION
(the "Company") adopts the PINNACLE WEST CAPITAL CORPORATION AND ARIZONA PUBLIC
SERVICE COMPANY DIRECTORS' RETIREMENT PLAN (the "Plan") to provide retirement
benefits to those directors of the Boards of Directors of the Company and
Arizona Public Service Company ("APS") who are not employees of the Company, APS
or their subsidiaries.
ARTICLE ONE
DEFINITIONS AND CONSTRUCTION
1.1. Definitions. When a word or phrase shall appear in this
Plan with the initial letter capitalized, and the word or phrase does not
commence a sentence, the word or phrase shall generally be a term defined in
this Section 1.1. The following words and phrases with the initial letter
capitalized shall have the meanings set forth in this Section 1.1, unless a
clearly different meaning is required by the context in which the word or phrase
is used:
(a) "APS" - Arizona Public Service Company and each
corporation that succeeds to substantially all of its assets
and elects to continue its participation in this Plan.
(b) "Board" - The Boards of Directors of the Company
or APS.
(c) "Code" - The Internal Revenue Code of 1986, as
the same may hereafter be amended from time to time.
(d) "Company" - PINNACLE WEST CAPITAL CORPORATION and
each corporation that succeeds to substantially all of its
assets and elects to continue its participation in this Plan.
(e) "Director" - An individual serving on the Boards
of Directors of the Company or APS.
(f) "Effective Date" - January 1, 1995.
(g) "Participant" - A Director who, on or after the
Effective Date, has satisfied the eligibility requirements set
forth in Section 2.1.
(h) "Plan" - The PINNACLE WEST CAPITAL CORPORATION
AND ARIZONA PUBLIC SERVICE COMPANY DIRECTORS' RETIREMENT PLAN,
as set forth in this instrument, and as it may hereafter be
amended from time to time.
(i) "Plan Administrator" - The Company's Vice
President in charge of Human Resources or such other persons
as the Board of Directors of the Company may from time to time
appoint.
(j) "Retirement Plan" - The Pinnacle West Capital
Corporation Employees' Retirement Plan, the Arizona Public
Service Company Employees' Retirement Plan or any other
defined benefit pension plan within the meaning of Section
414(j) of the Code maintained by the Company, APS or their
subsidiaries.
(k) "Year of Service" - Each twelve (12) consecutive
month period during which the Director served as a member of
the Board, commencing on the date on which the Director is or
was first elected to the Board of either Pinnacle West or APS.
If a Director ceases to serve on the Board and is later
reelected as a member of the Board, for purposes of measuring
Years of Service following reelection, the twelve (12)
consecutive month period shall be measured from the date of
the Director's re-election to the Board and from each
anniversary thereof, and shall be aggregated with such
Director's prior Years of Service. In the event that a
Director's term on the Board ends, or the Director reaches age
sixty-five (65), other than on the date of the Director's
anniversary, Years of Service shall include the entirety of
such partial year, through the next anniversary date, only if
more than six (6) months have elapsed since the last
anniversary of the Director's election or reelection to the
Board; otherwise, no credit for partial years' service will be
given.
1.2. Construction. The masculine gender, where appearing in
this Plan, shall include the feminine gender, and vice-versa, and the singular
may include the plural, unless the context clearly indicates to the contrary.
Headings and subheadings are for the purpose of reference only and are not to be
considered in the construction of this Plan. The term "delivered to the Plan
Administrator," as used in this Plan, shall include delivery to a person or
persons designated by the Plan Administrator for the disbursement and receipt of
administrative forms. Delivery shall be deemed to have occurred only when the
form or other communication is actually received. If any provision of this Plan
is determined to be for any reason 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 law.
ARTICLE TWO
PARTICIPATION AND SERVICE
2.1. Participation. Each Director who is serving on the Board
of Directors of the Company or APS who is not at the same time an employee of
the Company or its subsidiaries on the Effective Date, shall be a Participant as
of the Effective Date. Each Director who is not a Participant as of the
Effective Date shall become a Participant as of the date he or she first becomes
a member of the Board of Directors of the Company or APS; provided, however,
that if such person is an employee of the Company, APS or their subsidiaries,
such person shall become a participant on the day that such employee status
ceases. Notwithstanding the foregoing, a Director who is receiving or entitled
to receive a pension from the Retirement Plan shall not be eligible to
participate in this Plan.
2.2. Limitation on Years of Service. The following Years of
Service shall be disregarded for purposes of this Plan: (a) Years of Service
completed by a Participant while he or she was an employee of the Company, APS
or their subsidiaries, and (b) subject to Section 1.1(k), Years of Service
completed by a Participant after attaining age sixty-five (65) (except for
Participants who are Directors as of the effective date of this Plan and who
first became Directors after attaining the age of sixty-five (65), in which case
Years of Service shall include such Participant's actual years of service as
otherwise provided in this Plan.
ARTICLE THREE
REQUIREMENTS FOR BENEFITS
3.1. Pension Entitlement. Subject to Sections 3.2 and 3.3, a
Participant shall have a non-forfeitable right to a pension benefit under this
Plan upon the completion of one (1) Year of Service.
3.2. Death of a Participant. No death benefits shall be paid
from this Plan on account of a Participant who dies prior to the commencement of
benefits or prior to receiving all of the benefits to which he or she would
otherwise be entitled under this Plan.
3.3. Pension Forfeiture. Notwithstanding any provision to the
contrary in the Plan, a Participant shall not receive any pension under this
Plan if he or she is receiving, or is entitled to receive, a pension from the
Retirement Plan, or if the Participant has been found by the full Board to have
acted in bad faith in the performance of his or her duties as a director.
3.4. Non-Duplication of Benefits. A Participant who serves on
the Board of Directors of both the Company and APS shall be entitled to only one
pension under the Plan, with such pension to be attributable to, and paid by,
the Company on whose board the Participant had accumulated the greatest number
of Years of Service.
ARTICLE FOUR
DETERMINATION OF BENEFITS
4.1. Time of Commencement of Payment. Payment of benefits
under the Plan shall be made on the first business day of each month, and shall
commence in the month following the later of (a) the month in which the
Participant is no longer serving as a member of the Board, or (b) the month in
which the Participant attains the age of sixty-five (65). The retirement
benefits of a Participant retiring from the Board shall be determined as of the
last day of the month in which he or she attains age sixty-five (65).
4.2. Amount and Form of Benefit Payment. A Participant
entitled to a pension under Section 3.1 shall receive an annual pension equal to
Twelve Thousand Dollars ($12,000.00). Subject to Sections 3.2 and 3.3, such
pension shall be paid to the Participant monthly on the dates specified in
Section 4.1 and monthly thereafter for a period equal to the number of Years of
Service. No interest shall be credited on such payments.
ARTICLE FIVE
INALIENABILITY OF BENEFITS
5.1. No Assignment Permitted. No Participant and no creditor
of a Participant shall have any right to assign, pledge, hypothecate, anticipate
or in any way create a lien upon the benefits payable under this Plan. All
payments to be made to Participants, excepting persons under legal disability,
shall be made only upon their personal receipts or endorsements, except as
provided in Section 4.3, and no interest in the Plan shall be subject to
assignment or transfer or otherwise be alienable, either by voluntary or
involuntary act or by operation of law or equity, or subject to attachment,
execution, garnishment, sequestration, levy or other seizure under any legal,
equitable or other process, or be liable in any way for the debts or defaults of
Participants. This Section 5.1 shall, however, not preclude assignments or
alterations pursuant to a court order for purposes of satisfying the
Participant's family support obligations.
ARTICLE SIX
PLAN ADMINISTRATION
6.1. Appointment. The Board of Directors of the Company shall
appoint the Plan Administrator. Members of the Board and officers and employees
of the Company and its subsidiaries may serve as the Plan Administrator.
6.2 Powers. The Plan Administrator shall have the
discretionary power and authority to perform the administrative duties of the
Plan Administrator as described in the Plan or required for proper
administration of the Plan, and shall have all powers necessary to enable it to
properly carry out such duties. Without limiting the generality of the
foregoing, the Plan Administrator shall have the power and discretion to
construe and interpret the Plan, to determine all questions of meaning or
interpretation that shall arise under the Plan, to hear and determine claims
relating to the Plan as provided in Section 6.4 of the Plan, and to decide all
questions relating to the eligibility to participate in the Plan, to decide all
questions relative to the determination of Years of Service, status, and rights
of a Participant, and to determine the manner and time of payment of benefits
under the Plan. All benefits disbursements shall be made upon the written
instructions of the Plan Administrator. The decisions of the Plan Administrator
shall be binding and conclusive upon all persons. The Plan Administrator shall
file all reports and forms lawfully required to be filed and shall distribute
any forms, reports, statements or plan descriptions lawfully required to be
distributed to Participants and others.
6.3. Indemnification. To the extent permitted by law, the
Company may, but shall not be required to, indemnify and agree to hold harmless
its employees, agents and the Plan Administrator from all loss, damage, or
liability, joint or several, including payment of expenses in connection with
defense against any such claim, for their acts, omissions and conduct, and for
the acts, omissions and conduct of their duly appointed agents, which acts,
omissions, or conduct constitutes or is alleged to constitute a breach of such
individual's fiduciary or other responsibilities under any law, except for those
acts, omissions, or conduct resulting from his or her own willful misconduct,
willful failure to act, or gross negligence; provided, however, that if any
party would otherwise be entitled to indemnification hereunder with respect to
any liability and such party shall be insured against loss as a result of such
liability by any insurance contract or contracts, such party shall be entitled
to indemnification hereunder only to the extent by which the amount of such
liability shall exceed the amount thereof payable under such insurance contract
or contracts. The Company may obtain insurance covering itself and others for
breaches of fiduciary obligations under the Plan to the extent permitted by law,
and nothing in this Plan shall restrict the right of any person to obtain such
insurance for himself in connection with the performance of his or her duties
under the Plan.
6.4. Claims Procedure. If a Participant disagrees with the
Plan Administrator's determination regarding his or her eligibility for a
pension or the amount of such pension, the affected Participant may, within
thirty (30) days after receiving the Plan Administrator's written notice of that
decision, request in writing a review of his or her claim by the Plan
Administrator. The written statement requesting that review should set forth the
Participant's reasons supporting the claim. If the claimant does not request a
review meeting within thirty (30) days after receiving written notice of the
Plan Administrator's decision, the Participant shall be deemed to have accepted
the Plan Administrator's decision. A decision on review shall be rendered in
writing by the Plan Administrator not later than sixty (60) days after review,
and a written copy of such decision shall be delivered to the Participant. To
the extent permitted by law, a decision on review by the Plan Administrator
shall be binding and conclusive upon all persons whomsoever. To the extent
permitted by law, the claims procedures described in this Section 6.4 shall be a
mandatory precondition that must be complied with prior to commencement of a
legal or equitable action in connection with the Plan by a Participant or a
person claiming rights through a Participant. The Plan Administrator may, in her
sole discretion, waive these procedures as a mandatory precondition to such an
action.
ARTICLE SEVEN
AMENDMENT AND TERMINATION
7.1. Amendment. The Company shall have the right at any time
to modify, alter or amend this Plan. An amendment shall be in writing, approved
by the Board of Directors of the Company, and executed by a duly authorized
officer of the Company. Any such modification, alteration or amendment may be in
whole or in part and may be prospective or retroactive; provided that no
amendment shall reduce any Participant's vested benefit determined as of the
date the amendment is adopted.
7.2. Right to Terminate. The Company shall have the right to
terminate the Plan, completely or partially, at any time. The termination of the
Plan shall not reduce the pension benefit of any Participant to the extent
vested as of the Plan's termination date.
ARTICLE EIGHT
MISCELLANEOUS
8.1. Funding. Benefits payable under the Plan shall be paid
from the general assets of the Company or APS as to each company's own
directors. Participants shall be unsecured creditors of the Company or APS and
shall have no legal or equitable rights, interest or claims in any property or
assets of the Company, APS or their subsidiaries.
8.2. Duration. The Plan shall continue in full force and
effect for the maximum period permitted under applicable law, subject to the
Company's right to amend the Plan and to terminate the Plan as provided in
ARTICLE SEVEN of the Plan.
8.3. Limitation on Participant's Rights. Nothing contained in
the Plan shall be deemed to give any individual the right to be retained as a
Director.
8.4. Heirs and Successors. All of the provisions of the Plan
shall be binding upon all persons who shall be entitled to any benefits under
the Plan, their heirs and legal successors.
IN WITNESS WHEREOF, PINNACLE WEST CAPITAL CORPORATION has caused this plan
to be executed by its duly authorized officers, this 18th day of February, 1995.
PINNACLE WEST CAPITAL CORPORATION
By Richard Snell
------------------------------
Its Chairman, President & CEO
------------------------------
ATTEST:
Faye Widenmann
----------------
Its Secretary
EXHIBIT 10.8ac
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 is employed by the Company in various
managerial capacities, possesses intimate knowledge of the business and affairs
of the Company, and has acquired certain confidential 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 otherwise
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 acquisition;
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
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, administrative 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) unreasonable 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,
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
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 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 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 proportionate 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 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
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 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 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
Executive 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. ss.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 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
responsibilities, 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
(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
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 hereafter 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, 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)
reimbursement 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
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 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 otherwise and such
payment shall not be reduced by reason of the Executive securing 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 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 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
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 available to them
under the Company's benefits plans as in effect on the Termination Date on
account of the Executive's death, and, subject to the provisions 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 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 arrangements 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 contributions, payments, credits or allocations which
would have been paid by the Company to the Executive, to the Executive's account
or on the Executive's behalf under such plans, programs and arrangements. In the
event the Executive's employment is terminated on account of the Executive's
Disability 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
Payment;
(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
Termination Date. For purposes of satisfying the Company's obligation
under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") to
continue 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
Corporation Stock Option and Incentive Plan, as amended from time to
time, and in any successor plan thereto, 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 "Restricted Stock" (as defined in such
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.
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 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 following 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
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 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
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 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
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 by 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 reasonable 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 Bank One 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 unconditional 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 assignment 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 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 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 would be 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 executive.
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, understanding
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 withholding
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 general
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
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Its
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ATTEST:
By
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Its
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Executive
EXHIBIT 10.9ac
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of
_______________, 19___, 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 is employed by the Company in an
executive capacity, 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 otherwise
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 acquisition;
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, administrative 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) unreasonable 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,
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 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 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 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 proportionate 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 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
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 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 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 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
Executive 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. ss.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 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
responsibilities, 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
(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
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 hereafter 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,
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 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 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 partici-
pant; 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 otherwise and such
payment shall not be reduced by reason of the Executive securing 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 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
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 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 available to them
under the Company's benefits plans as in effect on the Termination Date on
account of the Executive's death, and, subject to the provisions 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 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 arrangements 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 contributions, payments, credits or allocations which
would have been paid by the Company to the Executive, to the Executive's account
or on the Executive's behalf under such plans, programs and arrangements. In the
event the Executive's employment is terminated on account of the Executive's
Disability 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
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, as amended from time to
time, and in any successor plan thereto, 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 "Restricted Stock" (as defined in such
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 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(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 following 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
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 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
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 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
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 reasonable 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 Bank One 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 unconditional 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 assignment 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
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 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 would be 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 an executive.
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, understanding
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 withholding
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 general
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 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-51085, 33- 57822, 33-61228 and 33-55473 on Form S-3, of our report dated
March 3, 1995 appearing in this Annual Report on Form 10-K of Arizona Public
Service Company for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 28, 1995
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