SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PINNACLE WEST CAPITAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration No.
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<PAGE>
PINNACLE WEST CAPITAL CORPORATION
P.O. BOX 52132
PHOENIX, ARIZONA 85072-2132
NOTICE AND PROXY STATEMENT
For Annual Meeting of Shareholders to Be Held on
Wednesday, May 21, 1997
To Shareholders:
The 1997 annual meeting of shareholders of Pinnacle West Capital
Corporation will be held in the Ballroom of the Wigwam Resort at 300 East Indian
School Road in Litchfield Park, Arizona at 10:30 a.m. on Wednesday, May 21, 1997
for the following purposes:
1) To elect four Class III Directors; and
2) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Each of the 87,421,068 shares of the Company's common stock outstanding at
the close of business on March 12, 1997 entitles the holder to notice of and to
vote at this meeting or any adjournment thereof, but shares can be voted at the
meeting only if the holder is present or represented by proxy.
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Company's Board of Directors. So far as management is
aware, the matters described in this Proxy Statement will be the only ones to be
acted upon at the meeting. If any other matters properly come before the meeting
or any adjournment thereof, the proxy committee named in the enclosed proxy will
vote on those matters in accordance with its judgement.
Shareholders are requested to mark, date, sign and mail promptly the
enclosed proxy. A postage-paid envelope is provided for mailing in the United
States. You are entitled to revoke your proxy at any time before it is exercised
and vote your shares in person if you attend the meeting.
By order of the Board of Directors
FAYE WIDENMANN
Vice President and Secretary
Approximate date of mailing to shareholders:
April 1, 1997
<PAGE>
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for the division of the
Board of Directors into three classes of approximately equal size. The term of
each directorship is three years and the terms of the three classes are
staggered so that only one class is elected by the shareholders annually.
Four Class III directors are to be elected this year to serve as members of
the Board of Directors until the annual meeting of shareholders in 2000 or until
their successors are elected and qualified. Should one or more of the four
nominees listed below become unavailable to serve prior to the meeting date, the
proxy committee will vote the shares it represents for the election of such
other persons as the Board may recommend unless the Board reduces the number of
directors in Class III.
Directors in the other two classes are identified on the following pages.
Information given for all directors has been furnished by each of them as of
March 12, 1997. The term "APS" refers to Arizona Public Service Company, the
Company's largest subsidiary.
Nominees
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Nominees for Election as Class III Directors
(Term to expire at 2000 Annual Meeting)
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Pamela Grant, 58, has been a director since 1985. She is a civic leader and from
July 1989 through January 1995 was President of TableScapes, Inc. (party supply
rentals). Ms. Grant was President and Chief Executive Officer of Goldwaters, a
Division of May Department Stores, until April 1988.
Martha O. Hesse, 54, has been a director since 1991. She is President of Hesse
Gas Company. In 1990 Ms. Hesse served as Senior Vice President of First Chicago
Corporation (financial services) and from 1986 to 1989 she was Chairman of the
Federal Energy Regulatory Commission. She is also a director of Mutual Trust
Life Insurance Company, Laidlaw Inc. and APS.
William S. Jamieson, Jr., 53, has been a director since 1991. Since January 1996
he has been Vice President of the Institute for Servant Leadership of
Hendersonville, NC and an Adjunct Member of the Bishop's staff of the Episcopal
Diocese of Arizona. Prior to that he was Archdeacon of the Episcopal Diocese of
Arizona.
Richard Snell, 66, has been a director since 1985. He has been Chairman of the
Board and Chief Executive Officer of the Company and Chairman of the Board of
APS since February 1990. Until February 1997 he was also President of the
Company. He is also a director of Aztar Corporation, Banc One Arizona
Corporation and Central Newspapers, Inc.
2
<PAGE>
Directors Continuing in Office
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Class I Directors
(Term to expire at 1998 Annual Meeting)
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Roy A. Herberger, Jr., 54, has been a director since 1992. He has been President
of the American Graduate School of International Management, (Thunderbird,)
since 1989. Mr. Herberger is also a director of Express America Holdings
Corporation, BW/IP, Inc. and MicroAge, Inc.
George A. Schreiber, Jr., 48, was appointed as a director effective February
1997. Mr. Schreiber was elected to the positions of Executive Vice President and
Chief Financial Officer of both the Company and APS as of February 1997. From
1990 to January 1997 he was Managing Director at PaineWebber, Inc. He is also a
director of APS.
Humberto S. Lopez, 51, has been a director since May 1995. He is President of
HSL Properties (real estate development and investment), Tucson, Arizona. Of
some 40 real estate concerns Mr. Lopez has been affiliated with, three filed
petitions for court protection from creditors under Chapter 11 of the Bankruptcy
Code between April 1991 and June 1992 in order to provide these entities the
opportunity to reorganize debt associated with the properties they held. Mr.
Lopez is also a director of Bank of Tucson.
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Class II Directors
(Term to expire at 1999 Annual Meeting)
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John R. Norton III, 67, is Chairman of the Board and Chief Executive Officer of
J.R. Norton Company (agricultural production), Phoenix, Arizona and was first
elected as a director in February 1985. Mr. Norton resigned as a director of the
Company in May 1985 to accept appointment as U.S. Deputy Secretary of
Agriculture, a position he held until February 1986. In February 1986 he was
reelected as a director of the Company. Mr. Norton is also a director of Aztar
Corporation, Terra Industries Inc. and APS.
William J. Post, 46, has been a director since February 1997. In February 1997
he assumed the position of President of Pinnacle West after having served as its
Executive Vice President since June 1995. He has also been the President and
Chief Executive Officer of APS since February 1997. He had been APS' Chief
Operating Officer since September 1994, as well as a Senior Vice President since
June 1993. Prior to that time, he had served as a Vice President and officer of
APS since 1982. Mr. Post is also a director of APS.
Douglas J. Wall, 69, has been a director since 1985. He is of counsel to the law
firm of Mangum, Wall, Stoops & Warden. Mr. Wall is past President of the Arizona
Board of Regents.
3
<PAGE>
CERTAIN SECURITIES OWNERSHIP
At March 12, 1997, shares of the Company's common stock beneficially owned
by the indicated persons or groups were as follows:
Shares
Beneficially Percent
Owned (1) of Class
--------- --------
Non-Employee Directors and Nominees
- -----------------------------------
Pamela Grant 26,800
Roy A. Herberger, Jr. 2,000
Martha O. Hesse 16,700
William S. Jamieson, Jr. (2) 4,115
Humberto S. Lopez (2) 4,004
John R. Norton III (2) 33,500
Douglas J. Wall 28,705
Employee Directors and Officers
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William J. Post 73,643
George A. Schreiber, Jr. 11,200
Richard Snell 447,023
Other Officers Named on Page 9
- ------------------------------
Michael S. Ash 14,838
Nancy E. Felker 19,901
Arlyn J. Larson (2) 17,506
All directors, nominees and executive
officers as a group (14 persons) (2) 726,533 0.83%
------------------------------------
5% Beneficial Owners (3)
- ------------------------
Wellington Management Company, LLP 6,898,070 7.89%
75 State Street
Boston, MA 02109
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(1) Includes shares which may be acquired by the exercise of stock options
within 60 days as follows: 24,500 each for Ms. Grant and Mr. Wall; 17,500
for Mr. Norton; 14,000 for Ms. Hesse; 46,179 for Mr. Post; 390,833 for Mr.
Snell; 7,560 for Ms. Felker; 5,790 for Mr. Larson; and 542,038 for all
directors and officers as a group. In the case of officers, also includes
shares of restricted stock and vested shares, as of December 31, 1996, in
the Company's employees' savings plan.
(2) Includes in the cases of: Mr. Jamieson, 615 shares held by his wife; Mr.
Norton, 500 shares
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<PAGE>
held by his wife and 2,000 shares held in a trust for Mr. Norton's late
mother for which he serves as trustee; Mr. Lopez, 4,004 shares held in a
family trust in which voting power is shared; Mr. Larson, 3,170 shares held
in joint tenancy with his wife; and the group, 10,289 shares as to which
voting or investment power is shared with others.
(3) A Schedule 13G filing with the Securities and Exchange Commission as of
December 31, 1996 reporting shared voting power as to 2,680,210 shares and
shared dispositive power as to 6,898,070 shares. The Company makes no
representations as to the accuracy or completeness of such information.
THE BOARD AND ITS COMMITTEES
The full Board of Directors met twelve times during 1996. No director
attended fewer than 75% of the meetings of the full Board and of the committees
on which he or she served.
The Audit Committee of the Board reviews the performance and independence
of the Company's independent accounting firm, makes an annual recommendation to
the full Board with respect to the appointment of the firm for the following
year, approves the scope of the work to be performed and solicits and reviews
the firm's recommendations. The Committee also consults with the Company's
internal audit group and periodically reviews the relationship among that group,
management of the Company and its subsidiaries and its independent accountants.
The Committee met three times in 1996; its members were Ms. Hesse and Messrs.
Herberger, Jamieson, Lopez and Wall (Chairman).
The Human Resources Committee makes recommendations to the full Board with
respect to prospective Board members and officers and with respect to executive
salaries, bonuses and benefits. (See page 14 for the procedures for proposing
nominations to the Board). The Committee also makes stock option and restricted
stock grants, and regularly reviews the Company's policies in all of the
foregoing areas. Its report on executive compensation policy follows, and its
members are identified at the end of that report. The Committee met four times
in 1996.
Non-employee directors receive an annual retainer consisting of $12,000
cash and 500 shares of Pinnacle West common stock; to receive the 500 shares a
director is required to already own 500 shares in his or her first year on the
board, and that ownership requirement increases by 500 shares annually until it
reaches 2,500 shares. With certain exceptions, non-employee directors also
receive $900 for each board meeting attended and $700 for each committee meeting
attended.
The Company has a directors' retirement plan which provides, with certain
exceptions, to non-employee directors over the age of 65, upon their retirement
from the Board, an annual payment of $12,000. The length of time to which a
non-employee director is entitled to receive this benefit is limited to the
number of years he or she served on the Board prior to age 65.
5
<PAGE>
HUMAN RESOURCES COMMITTEE REPORT
The Pinnacle West Human Resources Committee, composed solely of outside
directors, is responsible for making decisions regarding executive compensation
(although the APS human resources committee has salary and bonus
responsibilities with respect to Mr. Post as specifically discussed below, and
some of the general commentary regarding officer compensation does not fully
apply to him).
The Committee's overall compensation philosophy is to (i) attract and
retain qualified individuals critical to the Company's success, (ii) reinforce
enterprise objectives through the use of performance-based compensation programs
and (iii) promote long-term stock ownership by executives and directors.
The Committee applies its own compensation philosophy (and specifically its
bias toward rewarding performance) to comparative information provided by
independent consultants selected by the Committee. In 1996, information was
provided for a number of other organizations engaged primarily in the electric
utility business and having characteristics similar to the Company. In addition,
information was provided for a general industry group consisting of companies of
similar size.
The Committee formulates its own views as to the responsibilities, skills,
experience and performance of the respective executive officers, with input from
Mr. Snell as to performances other than his own, and applies these views to the
information provided by its consultants.
Base Salaries. Base salaries for Company officers who served throughout
1996 were at or below median salaries in the utility group and considerably
below those in the general industry group. Salary increases of 7% to Mr. Ash
(for a market adjustment) and 10% to Mr. Larson (for added responsibilities)
were the only changes made in 1996 to officer salaries.
Bonuses. Cash bonuses payable for any year are predicated on weighted,
targeted levels of corporate performance established by the Committee at the
beginning of the year. Performance is assessed by the Committee after the end of
the year; discretion is exercised in limited areas where the Committee's
judgement is called for by the bonus plan.
For 1996 the determinants of bonus levels, in order of importance, were
per-share earnings, 1997 budgeted per-share earnings, and matters related to
utility industry restructuring and management succession.
At the end of the year the Committee awarded an attainment factor to each
objective based upon the degree to which it was accomplished. The Committee then
totaled the weighted individual attainment factors to produce a composite
attainment factor common to all officers and multiplied that by a predetermined
percentage of salary (50% for Mr. Snell and 25% for all other officers) to
determine actual bonuses. The bonuses so arrived at and paid reflect a composite
attainment factor slightly below the maximum level in the 1996 plan.
Equity Participation. The Committee believes that the ultimate measure of
management's performance is its ability to deliver rewards to shareholders in
the form of share price appreciation and rising dividends over time. To those
ends, the Committee makes systematic grants of stock options and restricted
stock to officers and key management employees of Pinnacle West and its
subsidiaries in order that they may participate in those rewards through
6
<PAGE>
stock ownership. The value of the 1996 awards was higher than the median in the
utility group, but was substantially lower than the median level in the general
industry group. Given the changes in the utility industry, the Committee pays
increasing attention to trends within the general industry group.
The Committee believes that senior management personnel of the Company and
its subsidiaries should have a significant, ongoing personal investment in the
Company. To that end, restricted stock grants, besides being compensatory in
nature, are utilized by the Committee to encourage the attainment and retention
of targeted levels of individual stock ownership by conditioning their vesting
upon the ownership of certain numbers of shares for predetermined periods of
time.
The size of awards made to participants in the program is determined by
making assumptions as to how, generally, the stock should perform if the Company
achieves its longer-term goals, and individual grants were then determined by
bringing the recipient's total compensation to a target level relative to the
comparator groups, provided that the stock performs as assumed.
Tax Consideration. Publicly-traded corporations generally are not permitted
to deduct, for federal income tax purposes, annual compensation in excess of $1
million paid to any of certain top executives, except to the extent the
compensation qualifies as "performance-based." While the Committee is biased
toward rewarding performance through the bonus and equity participation
programs, certain features of these programs do not fit the law's definition of
"performance-based," and limited amounts of compensation could therefore not be
deductible.
Mr. Snell. Mr. Snell's salary has not been changed for several years.
Consistent with its compensation philosophy, the Committee has, instead,
emphasized reward-for-performance through the bonus plan and equity
participation grants to him.
Mr. Post. Although Mr. Post is an executive officer of the Company, his
compensation is paid by APS and his compensation has been based upon his
positions at APS. Mr. Post's salary (as shown in the compensation table) rose in
1996 because of an increase awarded in 1995 to reflect a change in his title and
concurrent, significant additions to his responsibilities. Salary and total cash
compensation comparisons are made, and bonus goals (which in Mr. Post's case
largely relate to APS' earnings) are established, for officers of APS, by its
board's human resources committee, which shares the compensation philosophies
described above. Mr. Post's equity participation is determined by the Pinnacle
West Human Resources Committee in the same manner as for other executive
officers of the Company and its subsidiaries.
The foregoing report of the Human Resources Committee is provided by its
members: Ms. Grant (Chairman), Ms. Hesse and Messrs. Lopez, Norton and Wall.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The law firm of Mangum, Wall, Stoops and Warden was retained by APS in 1996
and is expected to be retained in 1997. Mr. Wall is of counsel to that firm;
however, the amounts paid to them in 1996 are not material.
7
<PAGE>
STOCK PERFORMANCE COMPARISONS
The Company has elected to change its comparator index from the Dow Jones
Equity Market Index to the S&P 500 Index because the use of the latter index is
more prevalent in proxy statements. Comparisons shown this year include both
indices.
The annual changes for the five-year period shown in the following graph
are based on the assumption that $100 was invested on the last trading day in
1991 in Pinnacle West stock and in the market represented by each of three
indices (the S&P 500 Index, the Dow Jones Equity Market Index and the Edison
Electric Institute Index of 100 Investor-Owned Electrics), and that any
dividends were reinvested.
Date PNW S&P 500 DJ Equity EEI 100
12/31/97 100.00 100.00 100.00 100.00
12/31/92 117.27 107.61 108.61 107.59
12/31/93 129.93 118.39 119.41 119.58
12/31/94 119.16 119.99 120.33 105.74
12/31/95 181.15 164.92 166.50 138.55
12/31/96 206.94 202.69 205.57 140.22
8
<PAGE>
EXECUTIVE COMPENSATION
The following tables on compensation and stock options relate to the five
most highly compensated executive officers of the Company for services rendered
in all capacities to the Company and its subsidiaries.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards
- --------------------------------------------------------------------------------------------------------------
Name and Restricted
Principal Stock All Other
Position Year Salary Bonus Awards (1) Options Compensation (2)
- -------- ---- ------ ------ ---------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Ash 1996 $128,587 $47,125 $26,724 4,250 $4,651
Corporate Counsel 1995 120,278 44,582 23,324 4,250 5,865
1994 116,946 35,923 19,000 5,000 2,984
Nancy E. Felker 1996 $130,810 $47,419 $26,724 4,250 $5,531
VP & Treasurer 1995 130,224 48,269 27,440 5,000 5,659
1994 125,154 38,894 22,800 6,000 3,787
Arlyn J. Larson 1996 $147,774 $54,375 $31,440 5,000 $9,138
VP Corporate Planning 1995 134,921 50,010 27,440 5,000 9,754
1994 131,183 40,296 22,800 6,000 6,200
William J. Post (3) 1996 $325,000 $165,100 $106,896 17,000 $11,015
Exec. VP of Company and Sr. 1995 287,500 175,500 93,296 17,000 12,229
VP & COO of APS
Richard Snell (3) 1996 $515,000 $373,375 $314,400 25,000 $47,063
Chairman, President & CEO 1995 515,000 380,070 137,200 25,000 53,482
1994 515,000 252,350 114,000 30,000 29,560
</TABLE>
(1) The value of the restricted stock is based on the closing price of the
Company's common stock on the date the restricted stock was granted. The
restrictions lapse on most restricted stock awards upon (i) the passage of
three years from date of grant or upon retirement after the age of 60 and
(ii) the holding of certain numbers of unrestricted shares for certain
periods of time, as determined by the Human Resources Committee at the time
of grant. Any dividends paid on restricted stock will be held by the
Company until the restrictions lapse. The number and value (at market) of
aggregate restricted shareholdings as of the end of 1996 were: Mr. Ash -
2,700 shares, $85,725; Ms. Felker - 3,050 shares, $96,838; Mr. Larson -
3,200 shares, $101,600; Mr. Post - 10,200, $323,850 and Mr. Snell - 21,000
shares, $666,750.
(2) The figures given in this column for 1996 consist of Company matching
contributions to the Company's employees' savings plan: Mr. Ash - $2,799,
Ms. Felker - $3,871, Mr. Larson - $3,971, Mr. Post - $4,500 and Mr. Snell -
$0; the above-market portion of interest accrued under a deferred
compensation plan: Mr. Ash - $1,676, Ms. Felker - $1,267, Mr. Larson -
$2,850, Mr. Post - $5,261 and Mr. Snell - $9,683; premiums paid by the
Company for additional term life insurance: Mr. Ash - $176, Ms. Felker -
$393, Mr. Larson - $2,316, Mr. Post - $1,254 and Mr. Snell - $8,580; and
$28,800 paid to Mr. Snell for service as a director of APS.
(3) Mr. Post was elected President of the Company and President and CEO of APS
effective February 1997. He first became an officer of the Company in 1995.
Mr. Snell resigned as President of the Company in February 1997; he remains
Chairman of the Board and Chief Executive Officer.
9
<PAGE>
Option Grants in 1996
<TABLE>
<CAPTION>
Percentage of
Options Total Options
Granted Granted to All Exercise Grant Date
in 1996 Employees in Price Expiration Present
Name (Shares)(1) 1996 (per share) Date Value(2)
- ---- ----------- ------ ----------- ---- --------
<S> <C> <C> <C> <C> <C>
Michael S. Ash 4,250 1.63% $31.44 11/20/06 $18,488
Nancy E. Felker 4,250 1.63% $31.44 11/20/06 $18,488
Arlyn J. Larson 5,000 1.91% $31.44 11/20/06 $21,750
William J. Post 17,000 6.52% $31.44 11/20/06 $73,950
Richard Snell 25,000 9.59% $31.44 11/20/06 $81,250
</TABLE>
(1) All options were granted on November 20, 1996 and become exercisable at the
rate of one-third of the grant annually starting on November 20, 1997. All
options not already exercisable will become exercisable if an individual
retires on or after the age of 60. No SARs have been granted.
(2) The Black-Scholes option pricing model was chosen to estimate the options'
value. The basic assumptions used in the model were expected volatility of
17.1%; risk-free rate of return of 5.8%; dividend yield of 4.5%; and time
to exercise of five years, though in the case of Mr. Snell, the time to
exercise and corresponding risk-free rate of return were two and a half
years and 5.51% respectively.
Option Exercises in 1996 and Year-End Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-The-Money Options
at Fiscal Year-End at Fiscal Year-End (1)
------------------ ----------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Ash 10,004 $75,248 4,750 8,751 $41,917 $32,062
Nancy E. Felker 7,000 $66,980 6,979 9,584 $55,597 $38,202
Arlyn J. Larson 5,667 $57,805 8,548 10,334 $64,425 $38,202
William J. Post 0 $0 44,436 34,001 $465,777 $115,790
Richard Snell 0 $0 390,833 51,667 $6,883,026 $191,001
</TABLE>
(1) The value of options equals the market value of Pinnacle West common stock
at December 31, 1996 ($31.75 per share), minus the exercise price of
options.
10
<PAGE>
EXECUTIVE BENEFIT PLANS
All of the plans described below relate to the Company. Mr. Post is covered
by executive benefit plans provided by APS; however, those plans are
substantially identical to the plans described for the Company, and the benefits
provided to him would be the same as if he were a participant in the Company's
plans.
Employees' Retirement Plan and Supplemental Excess Benefit Retirement Plan.
The following table illustrates the annual benefits, calculated on a
straight-life annuity basis, that would be provided under the Company Employees'
Retirement Plan and the Supplemental Excess Benefit Retirement Plan to the
Company's officers who retire at the indicated compensation and longevity
levels.
<TABLE>
<CAPTION>
Years of Service
Average Annual ----------------------------------------------------------------------
Compensation (a) 5(b) 10 20 25(c)
- --------------------------------- -------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 15,000 $ 30,000 $ 50,000 $ 60,000
150,000 22,500 45,000 75,000 90,000
200,000 30,000 60,000 100,000 120,000
300,000 45,000 90,000 150,000 180,000
400,000 60,000 120,000 200,000 240,000
500,000 75,000 150,000 250,000 300,000
600,000 90,000 180,000 300,000 360,000
700,000 105,000 210,000 350,000 420,000
800,000 120,000 240,000 400,000 480,000
900,000 135,000 270,000 450,000 540,000
1,000,000 150,000 300,000 500,000 600,000
</TABLE>
- -----------
(a) Compensation under the retirement plan consists solely of base salary up to
$150,000 (as adjusted for cost-of-living), including any amounts
voluntarily deferred under the Company's 401(k) plan. While the retirement
plan does not include amounts voluntarily deferred under other deferred
compensation plans, bonuses or incentive pay, the Supplemental Excess
Benefit Retirement Plan does include, subject to certain exceptions, these
additional components of compensation plus base salary beyond the $150,000
limit.
(b) Although years of service begin accumulating on the date of employment,
benefits do not vest until the completion of five years of service.
(c) Although the maximum number of years used in calculating benefits under the
Employees' Retirement Plan is generally 33 1/3, a greater maximum benefit
is achieved under the Supplemental Excess Benefit Retirement Plan after 25
years of service.
11
<PAGE>
For officers, the Company's Supplemental Excess Benefit Retirement Plan
provides enhanced benefits. Benefits payable under this plan that are in excess
of the benefits payable under the Company's retirement plan (which, as a
qualified defined benefit pension plan, is limited pursuant to the Internal
Revenue Code), are payable from the general assets of the Company. The number of
credited years of service for each of the individuals named on page 9 and their
1996 remuneration covered by the Company's plans are as follows: Mr. Ash - 12
years, $173,169; Ms. Felker - 10 years, $179,079; Mr. Larson - 16 years,
$197,784; Mr. Post - 24 years, $500,500; and Mr. Snell - 36 years (see
description of Mr. Snell's employment agreement below), $895,070. The amounts
shown in the table above are not expected to be subject to any reduction or
offset for Social Security benefits or other significant amounts.
Employment and Severance Arrangements. Mr. Snell and the Company are
parties to an employment agreement setting forth the terms of his employment as
Chief Executive Officer of the Company. The agreement was for a term of five
years, beginning on February 5, 1990, and was amended twice, each time to extend
his term of employment by two additional years. The agreement may be terminated
by Mr. Snell at any time upon 120 days' prior written notice to the Company.
Under the agreement Mr. Snell is entitled to a base salary of $500,000 per year,
subject to periodic appraisal by the Board or a committee thereof, as well as to
such bonus payments as may be declared from time to time by the Board. The
agreement entitles Mr. Snell to participate in the employee benefit plans
generally available to Company employees, and in the Company's deferred
compensation plan, supplemental excess benefit retirement plan, and stock option
plan. Mr. Snell is also entitled to a supplemental pension under the agreement.
For purposes of determining his supplemental pension benefits, Mr. Snell's years
of service on February 5, 1990 were assumed to be 29 years, and he was credited
with an additional year for each year of employment thereafter, up to 33 1/3
years. Mr. Snell's credited years of service disclosed above (36) include the 29
years of awarded service. The supplemental pension benefit is not payable,
however, if there is a final determination that he has breached the agreement.
The agreement also contains "change of control" benefit provisions which are in
all material respects identical to those contained in the severance agreements,
discussed below, between the Company and each of its other executive officers.
The Company has entered into severance agreements, which are identical in
content, with each of its executive officers except Mr. Snell (see the
discussion of his employment agreement above). These agreements are intended to
provide stability in key management of the Company. Under the agreements each
officer will receive a payment and other severance benefits having an aggregate
value of not more than 2.99 times the officer's "base income" (the average of
the officer's annual compensation over the five years preceding the year of a
"change of control") if, during the three-year period following a change of
control of the Company, the officer's employment is terminated or the terms and
conditions of his or her employment are significantly and detrimentally altered.
"Change of control" includes any change of control event required to be reported
under the Securities Exchange Act of 1934, an unrelated third party's
acquisition of 20% or more of the Company's voting stock or substantially all of
the assets of the Company, a merger or acquisition of the Company in which the
Company is not the surviving corporation, a change in the majority of the
members of the Company's Board of Directors over a two-year period, which change
is not approved by two-thirds of the members of the Board then serving who were
members immediately prior to the change, or the filing of a voluntary or
involuntary petition of bankruptcy (other than for liquidation or dissolution)
which is not dismissed within 30 days. No severance benefits will be payable to
an officer who has attained age 65 or whose termination is on account of
retirement, voluntary termination, disability or death or for "cause" as defined
in the agreements. Each of the agreements terminates on December 31st of each
12
<PAGE>
year upon six months' advance notice by the Company to the officer; if the six
months' advance notice is not given, the agreements will continue for successive
one-year periods until the notice is given.
Effective January 1, 1992, the Company established a deferred compensation
plan for directors and officers of the Company. Effective January 1, 1996, the
Company established a revocable trust for the purpose of funding the benefits
under the deferred compensation plan. Upon the occurrence of certain events,
which generally include the sale of substantially all the Company's assets, a
merger or consolidation in which the Company is not the surviving entity,
certain changes in the composition of the Board of Directors or someone
acquiring 20 percent or more of the Company's voting stock, the trust will
become irrevocable and the Company will be required to fully fund the benefits
earned under the deferred compensation plan within 60 days after the occurrence
of that event.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities Exchange Act of 1934 requires officers and directors to file
reports of ownership of the Company's equity securities with the Securities and
Exchange Commission and the New York Stock Exchange. To the best of the
Company's knowledge, during 1996 its officers and directors complied with these
filing requirements, except as follows: Mr. Norton filed one late Form 4,
Statement of Changes in Beneficial Ownership, with respect to the acquisition of
35 shares pursuant to the reinvestment of dividends on shares held in a
brokerage account.
GENERAL
Cost of Solicitation. The cost of the solicitation of proxies, which will
be by mail, will be borne by the Company. Brokerage houses and others will be
reimbursed for their out-of-pocket expenses in forwarding documents to
beneficial owners of stock.
Independent Public Accountants. It is anticipated that the Company's
financial statements as of December 31, 1997 and for the year then ended will be
examined by Deloitte & Touche LLP, independent certified public accountants.
Representatives of that firm are expected to be present at the annual meeting
with the opportunity to make a statement if they so desire and to be available
to respond to appropriate questions.
Voting Procedures. A majority of the outstanding shares entitled to vote in
person or by proxy at the meeting will constitute a quorum for the conduct of
business.
For the election of directors, the individuals receiving the highest number
of votes will be elected. The number of votes to which each shareholder will be
entitled is to be determined by multiplying the number of shares of common stock
owned as of the March 12, 1997 record date by the number of directors to be
elected, and any shareholder may cumulate his or her votes by casting them all
in person or by proxy for any one nominee, or by distributing them among two or
more nominees. Broker "non-votes" with respect to any matter are not considered
shares present and will not affect the outcome of the vote on such matter.
13
<PAGE>
Nominations to the Board. A shareholder wishing to propose the nomination
of an individual for election to the Company's Board of Directors must submit
his or her recommendation to the Company in writing, and in accordance with the
applicable provisions of the Company's Articles of Incorporation and Bylaws, so
as to be received by the Office of the Secretary no later than November 21,
1997. Copies of the Company's Articles of Incorporation and Bylaws are available
upon written request delivered to the Office of the Secretary.
Shareholder Proposals for Next Annual Meeting. In order to be considered
for inclusion in the proxy statement and form of proxy relating to the 1998
annual meeting of the Company's shareholders, a proposal intended by a
shareholder for presentation at that meeting must be submitted in accordance
with the applicable rules of the Securities and Exchange Commission and received
by the Company at its principal executive offices on or before December 2, 1997.
Proposals to be presented at the annual meeting which are not intended for
inclusion in the proxy statement and form of proxy must be submitted in
accordance with the applicable provisions of the Company's Bylaws, a copy of
which is available upon written request delivered to the Office of the
Secretary. The Company suggests that proponents submit their proposals to the
Office of the Secretary by Certified Mail -- Return Receipt Requested.
14
<PAGE>
Pinnacle West Capital Corporation
P.O. Box 52135
Phoenix, Arizona 85072
April 1, 1997
Dear Shareholders:
The 1997 Annual Meeting of Shareholders of Pinnacle West Capital Corporation
will be held at the Wigwam Resort, 300 East Indian School Road, Litchfield Park,
Arizona on May 21, 1997 at 10:30 a.m. Mountain Standard Time. At the meeting
shareholders will be asked to elect four Class III Directors to serve until the
2000 Annual Meeting.
Your vote is important. Whether or not you plan to attend the meeting, please
review the enclosed proxy statement, complete the proxy form below and return it
promptly in the envelope provided.
Sincerely,
Faye Widenmann
Vice President and Secretary
- --------------------------------------------------------------------------------
PROXY FORM Pinnacle West Capital Corporation PROXY FORM
- --------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors for the Annual
Meeting on May 21, 1997.
The undersigned hereby appoints Richard Snell and Faye Widenmann, and each of
them, proxies for the undersigned, each with full power of substitution, to
attend the Annual Meeting of Shareholders of Pinnacle West Capital Corporation,
to be held May 21, 1997 at ten-thirty a.m., Phoenix time, and at any adjournment
thereof, and to vote as specified in this Proxy all the shares of stock of the
Company which the undersigned would be entitled to vote if personally present.
The proxies of the undersigned may vote according to their discretion on any
other matter that may properly come before the meeting.
Voting with respect to the election of Directors may be indicated on the reverse
of this card. Nominees for Director are: Pamela Grant, Martha O. Hesse, William
S. Jamieson, Jr. and Richard Snell.
This proxy will be voted as specified on the reverse. If no specification is
made, this proxy will be voted FOR the election of Directors.
<PAGE>
Election of Directors
<TABLE>
<CAPTION>
The Board of Directors recommends a vote FOR the election of Directors.
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Election of Directors FOR* WITHHOLD ------------------------------------------
(see other side) Signature Date
*For all nominees, except vote withheld from the following: ------------------------------------------
Signature Date
----------------------------------------------------------
Please sign as your name(s) appears below.
Joint owners should both sign.
Fiduciaries, attorneys, corporate
officers, etc. should state their
capacities.
Any proxy given previously is hereby
revoked.
- ------------------------------------------------------------------------------------------------------------------------------------
Fold and detach Fold and detach
Attending the Meeting
For those shareholders wishing to attend the Annual Meeting, entrance to the Wigwam Resort is off Indian School Road,
where parking will be available.
[Street map showing location of hotel]
</TABLE>
