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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
Pinnacle West Capital Corporation
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] | No fee required. | |||||
[ ] | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||||
1 | ) | Title of each class of securities to which transaction applies: | ||||
2 | ) | Aggregate number of securities to which transaction applies: | ||||
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): | ||||
4 | ) | Proposed maximum aggregate value of transaction: | ||||
5 | ) | Total fee paid: | ||||
[ ] | 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: | ||||
2 | ) | Form, Schedule or Registration Statement No.: | ||||
3 | ) | Filing Party: | ||||
4 | ) | Date Filed: | ||||
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Post Office Box 53999
PHOENIX, ARIZONA 85072-3999
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
Wednesday, May 23, 2007
(1) | Approve an amendment to the Company’s Articles of Incorporation to declassify the Board of Directors that would result in directors being elected annually (Proposal 1); | ||
(2) | Elect eleven (11) directors to serve until the 2008 Annual Meeting of Shareholders if Proposal 1 is approved; if Proposal 1 is not approved, elect four (4) Class I directors to serve until the 2010 Annual Meeting of Shareholders (Proposal 2); | ||
(3) | Approve the Pinnacle West Capital Corporation 2007 Long-Term Incentive Plan (Proposal 3); and | ||
(4) | Ratify the appointment of the Company’s independent auditors for the fiscal year ending December 31, 2007 (Proposal 4). |
NANCY C. LOFTIN
Vice President, General Counsel and Secretary
April 10, 2007
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• | FORamending the Articles of Incorporation to declassify the Board of Directors and provide for the annual election of Directors (see Proposal 1); | ||
• | FORelection of the nominated slate of directors (see Proposal 2); | ||
• | FORapproval of the Pinnacle West Capital Corporation 2007 Long-Term Incentive Plan (see Proposal 3); and |
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• | FORratification of the appointment of Deloitte & Touche LLP as the Company’s independent auditors for the fiscal year ending December 31, 2007 (see Proposal 4). |
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Human | Corporate | Finance, Nuclear | ||||||||||||||
Resources | Governance | and Operating | ||||||||||||||
Director | Audit Committee | Committee | Committee | Committee | ||||||||||||
Edward N. Basha, Jr. | * | * | * | |||||||||||||
Jack E. Davis | * | |||||||||||||||
Michael L. Gallagher | * | * | ||||||||||||||
Pamela Grant | * | * | * | |||||||||||||
Roy A. Herberger, Jr. | * | * | * | * | ||||||||||||
Martha O. Hesse | * | * | ||||||||||||||
William S. Jamieson, Jr. | * | * | * | |||||||||||||
Humberto S. Lopez | * | * | * | |||||||||||||
Kathryn L. Munro | * | * | * | * | ||||||||||||
Bruce J. Nordstrom | * | * | * | * | ||||||||||||
William J. Post | * | |||||||||||||||
William L. Stewart | * | |||||||||||||||
* | Member | |
** | Chairman |
• | the integrity of the financial statements of the Company; | ||
• | the independent auditors’ qualifications, independence and performance; | ||
• | the performance of the Company’s internal audit function; and | ||
• | the compliance by the Company with legal and regulatory requirements. |
• | review management’s plans and programs for the attraction, retention, succession, motivation, and development of the human resources needed to achieve corporate objectives; | ||
• | review and approve policies on compensation, benefits, and perquisites, including incentive cash compensation plans, equity participation, and other forms of executive incentives; | ||
• | recommend persons to the full Board for election or appointment as officers; | ||
• | annually review the goals and performance of our elected officers, including review of compensation, benefits, and perquisites, to satisfy the Committee that there is equity in the compensation practices and general integrity in conforming to approved plans and policies; | ||
• | review and approve corporate goals and objectives relevant to compensation of our Chief Executive Officer (“CEO”), assess the CEO’s performance in light of these goals and objectives, and set the CEO’s compensation level based on this assessment; | ||
• | make recommendations to the Board with respect to non-CEO executive compensation, and incentive compensation and equity-based plans that are subject to Board approval; | ||
• | make recommendations to the Board for director compensation, equity participation, benefits and perquisites; | ||
• | act as the “committee” under our long-term incentive plans; and | ||
• | review and recommend changes to pension benefits. |
• | review and assess reports from the Palo Verde Nuclear Oversight Committee (the “NOC”), which formally reports to the Committee and the Chief Executive Officer of APS; | ||
• | review the Company’s historical and projected financial performance and annual budgets; | ||
• | review and recommend approval of short-term investments and borrowing guidelines; | ||
• | review the Company’s financing plan and recommend approval of the issuance of long-term debt, common equity, and other credit facilities; |
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• | review and recommend to the Board the Company’s dividend actions, including stock dividends and other distributions; | ||
• | review and monitor the performance of the Company’s environmental policies; and | ||
• | review and monitor the customer and power plant operations of the Company. |
Pinnacle West Capital Corporation
400 North 5th Street, Mail Station 9068
Phoenix, Arizona 85004
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PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS
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§ | A classified board provides for continuity and experience in the management of the unique demands of a company and enhances a company’s ability to engage in long-term strategic planning because a majority of directors will have prior experience as directors of the company and the stability of multi-year terms; | ||
§ | A classified board may enhance shareholder value by motivating a would-be-acquiror to initiate arms-length negotiations because the would-be-acquiror could not replace the entire board in a single election; and | ||
§ | A classified board structure helps to strengthen director independence by lessening the impact of outside influences, including the threat that a director who refuses to act in conformity with the wishes of management (or other directors) will not be re-nominated for office. |
§ | Because director elections are the primary means by which the shareholders can affect corporate management, a classified board structure means that shareholders are unable to evaluate and elect directors on an annual basis, which may diminish shareholder influence over company policy; | ||
§ | A classified board structure may negatively affect shareholder value by discouraging takeover proposals and proxy contests because a classified board structure denies shareholders the opportunity to vote for all directors at the same time; and | ||
§ | Shareholders may perceive classified boards as being self-serving. |
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OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS
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(TERM EXPIRING AT 2008 ANNUAL MEETING)
Director | ||||||||||
Name | Age | Occupation, Business & Directorships | Since | |||||||
Edward N. Basha, Jr. | 69 | Chairman of the Board of Bashas’ supermarket chain since 1968. Chief Executive Officer of Bashas’ and an Arizona civic leader dedicated to multiple Arizona community projects. | 1999 | |||||||
Jack E. Davis | 60 | Chief Operating Officer of the Company since September 2003 and President of the Company since February 2001. Chief Executive Officer of APS since September 2002 and President of APS from September 2002 until December 2006. From October 1998 until September 2002, Mr. Davis served as President, Energy Delivery and Sales of APS. Mr. Davis served as Executive Vice President and Chief Operating Officer of the Company from April 2000 to February 2001. Mr. Davis served in various APS positions as follows: Executive Vice President of Commercial Operations from September 1996 to October 1998; and Vice President, Generation and Transmission from June 1993 to September 1996. | 2001 | |||||||
Michael L. Gallagher | 62 | Attorney-at-law with Gallagher & Kennedy, P.A., Phoenix, Arizona. Chairman Emeritus of Gallagher & Kennedy since 2001. Mr. Gallagher served as President of Gallagher & Kennedy from 1978 through 2000. | 1999 | |||||||
Pamela Grant | 68 | Civic leader. President of TableScapes, Inc. (party supply rentals) from July 1989 through January 1995. Ms. Grant was President and CEO of Goldwaters Department Stores (general mercantile), a division of May Department Stores, from January 1987 to April 1988. From November 1978 to January 1987, Ms. Grant was President, Chair and CEO of Goldwaters Department Stores, a division of Associated Dry Goods. | 1985 | |||||||
Roy A. Herberger, Jr. | 64 | President Emeritus of Thunderbird School of Global Management, since November 2004. Mr. Herberger was President of Thunderbird from 1989 until August 2004. Mr. Herberger is also a director of MedAire, Inc. | 1992 | |||||||
William S. Jamieson, Jr. | 63 | President of Micah Institute of Asheville, North Carolina since January 2005. From January 1999 to December 2004, Mr. Jamieson was President of the Institute for Servant Leadership. | 1991 | |||||||
Humberto S. Lopez | 61 | President of HSL Properties, Inc. (real estate development and investment), Tucson, Arizona since 1975. | 1995 | |||||||
Kathryn L. Munro | 58 | Principal of BridgeWest, LLC (investment company) since July 2003. Ms. Munro was Chair of BridgeWest, LLC from February 1999 until July 2003. From 1996 to 1998, Ms. Munro served as CEO of Bank of America’s Southwest Banking Group and was President of Bank of America Arizona from 1994 to 1996. Ms. Munro is also a director of FLOW International Corporation and Knight Transportation, Inc. | 2000 | |||||||
Bruce J. Nordstrom | 57 | President of and certified public accountant at the firm of Nordstrom and Associates, PC, Flagstaff, Arizona, since 1988. | 2000 | |||||||
William J. Post | 56 | Chairman of the Board of the Company since February 2001 and CEO of the Company since February 1999. Mr. Post has served as an officer of the Company since 1995 in the following additional capacities: from August 1999 to February 2001 as President; from February 1997 to February 1999 as President; and from June 1995 to February 1997 as Executive Vice President. Mr. Post is also Chairman of the Board of APS and has held various officer positions at APS since 1982. Mr. Post is also a director of Phelps Dodge Corporation. | 1997 | |||||||
William L. Stewart | 63 | Mr. Stewart retired from the Company effective November 26, 2003. Mr. Stewart served as Chief Executive Officer of Pinnacle West Energy Corporation (“PWEC”) from October 2002 until January 2003 and President of PWEC from October 1999 until January 2003. Mr. Stewart served as President, Generation, of APS from October 1998 to October 2002. Mr. Stewart provided nuclear consulting services to APS in 2006. | 2001 |
THE NOMINATED SLATE OF DIRECTORS
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Number of Shares Beneficially | Shares Acquirable Within | |||||||||||
Name | Owned1 | 60 Days2 | Percent of Class | |||||||||
Directors and Nominees: | ||||||||||||
Edward N. Basha, Jr. | 10,535 | 0 | * | |||||||||
Jack E. Davis | 58,686 | 66,000 | * | |||||||||
Michael L. Gallagher | 11,667 | 0 | * | |||||||||
Pamela Grant | 21,956 | 0 | * | |||||||||
Roy A. Herberger, Jr. | 14,260 | 0 | * | |||||||||
Martha O. Hesse | 6,937 | 0 | * | |||||||||
William S. Jamieson, Jr. | 11,590 | 0 | * | |||||||||
Humberto S. Lopez | 33,065 | 0 | * | |||||||||
Kathryn L. Munro | 9,895 | 0 | * | |||||||||
Bruce J. Nordstrom | 12,191 | 0 | * | |||||||||
William J. Post | 70,819 | 467,750 | * | |||||||||
William L. Stewart | 32,463 | 0 | * | |||||||||
Other Named Executive Officers: | ||||||||||||
Donald E. Brandt | 4,283 | 0 | * | |||||||||
James M. Levine3 | 40,267 | 52,625 | * | |||||||||
Armando B. Flores4 | 20,363 | 0 | * | |||||||||
All Directors and Executive Officers as a Group (21 Persons): | 436,986 | 660,125 | 1.1 | % | ||||||||
5% Beneficial Owners5: | ||||||||||||
Barclays Global Investors, NA. and certain other entities | 7,734,321 | N/A | 7.8 | % | ||||||||
45 Fremont Street | ||||||||||||
San Francisco, CA 94105 |
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Number of Shares Beneficially | Shares Acquirable Within | |||||||||||
Name | Owned1 | 60 Days2 | Percent of Class | |||||||||
Franklin Resources, Inc. and certain other entities | 6,644,900 | N/A | 6.7 | % | ||||||||
One Franklin Parkway | ||||||||||||
San Mateo, CA 94403-1906 | ||||||||||||
T. Rowe Price Associates, Inc. | 5,987,590 | N/A | 5.9 | % | ||||||||
100 E. Pratt Street | ||||||||||||
Baltimore, MD 21202 | ||||||||||||
State Street Bank and Trust Company | 6,373,403 | N/A | 6.4 | % | ||||||||
225 Franklin Street | ||||||||||||
Boston, MA 02110 |
1 | Does not include shares that could be purchased by the exercise of options available at March 26, 2007 or within 60 days thereof under the Company’s equity incentive plans. Those shares are shown in a separate column on this table. The following shares are held in joint tenancy: Directors and Nominees: Mr. Davis — 50,600; Mr. Gallagher — 11,667; Mr. Herberger - 7,810; Ms. Hesse — 3,955; Mr. Post — 22,192; and Mr. Stewart — 32,463; other Named Executive Officers: Mr. Flores — 17,436; and All Directors and Executive Officers as a Group: 162,507. The following shares are held in joint trusts: Directors and Nominees: Mr. Lopez — 33,065; and Ms. Munro — 8,885; and All Directors and Executive Officers as a Group: 79,666. Mr. Basha has donated 10,275 of his shares to a charitable foundation and 260 of his shares are held in a custodial account; however, he has shared voting rights with respect to such shares. | |
2 | Reflects the number of shares that could be purchased by the exercise of options available at March 26, 2007 or within 60 days thereafter under the Company’s equity incentive plans. | |
3 | Mr. Levine retired effective February 28, 2007. His ownership is shown as of the date of his retirement. | |
4 | As of March 26, 2007, Mr. Flores had pledged an aggregate of 5,918 shares of common stock in accordance with the terms and conditions of a brokerage firm’s line of credit. | |
5 | Barclays Global Investors, NA.; Barclays Global Fund Advisors; Barclays Global Investors, Ltd; Barclays Global Investors Japan Trust and Banking Company Limited; and Barclays Global Investors Japan Limited (collectively, “Barclays”); Schedule 13G filing, dated January 31, 2007 and filed with the SEC on January 23, 2007, reports beneficial ownership collectively of 7,734,321 shares, with sole voting power as to 1,898,796 shares and sole dispositive power as to 2,342,440 shares in Barclays Global Investors, NA., sole voting power and sole dispositive power as to 4,975,189 shares in Barclays Global Fund Advisors, sole voting power and sole dispositive power as to 309,185 shares in Barclays Global Investors, Ltd., sole voting power and sole dispositive power as to 98,577 shares in Barclays Global Investors Japan Trust and Banking Company Limited, and sole voting power and sole dispositive power as to 8,930 shares in Barclays Global Investors Japan Limited. Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr., Franklin Advisers, Inc. and Franklin Custodian Funds, Inc. on behalf of Franklin Income Fund (collectively, “Franklin”) Schedule 13G filing, dated January 31, 2007 and filed with the SEC on February 5, 2007, reports beneficial ownership collectively of 6,644,900 shares, with sole voting power as to 6,631,100 shares and sole dispositive power as to 6,642,800 shares in Franklin Advisers, Inc. T. Rowe Price Associates, Inc. Schedule 13G filing, dated February 14, 2007 and filed with the SEC on February 13, 2007, reports beneficial ownership of 5,987,590 shares with sole voting power as to 939,367 shares and sole dispositive power as to 5,987,590 shares. State Street Bank and Trust Company Schedule 13G filing, dated February 12, 2007 and filed with the SEC on February 12, 2007, reports beneficial ownership of 6,373,403 shares, with sole voting power as to 3,175,996 shares, shared voting power as to 3,197,437 and shared dispositive power as to 6,373,403 shares. The Company makes no representations as to the accuracy or completeness of such information and believes these filings represent share ownership as of December 31, 2006. |
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• | Transactions in which rates or charges are fixed in conformity with law or governmental authority (such as APS rates approved by the Arizona Corporation Commission) or the rates or charges are determined by competitive bid; | ||
• | Transactions with SunCor or its affiliates (such as home purchases) that are offered to the Related Party on terms comparable to those that could be obtained in arm’s length dealing with an unrelated party; | ||
• | Transactions involving charitable or non-profit organizations where the Related Party serves only as a director or chairman of the organization’s Board of Directors for no compensation; | ||
• | Transactions in which the Related Party’s interest arises only: (i) from such person’s position as a director of the entity involved in the transaction; (ii) from the direct or indirect ownership by such person, in the aggregate of less than a ten (10) percent equity interest in the entity involved in the transaction; or (iii) the interest arises under both (i) and (ii) above; and | ||
• | Any transaction involving a director that was considered by the Board in assessing the director’s independence and which resulted in a determination that disclosure of the transaction was not required under Item 404(a) of SEC Regulation S-K. |
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COMMITTEE CHAIRMAN | COMMITTEE MEMBERS | |
Bruce J. Nordstrom | Edward N. Basha, Jr. | |
Pamela Grant | ||
William S. Jamieson, Jr. | ||
Humberto S. Lopez | ||
Kathryn L. Munro |
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Type of Service | 2005 | 2006 | ||||||
Audit Fees1 | $ | 3,145,077 | $ | 2,722,685 | ||||
Audit-Related Fees2 | 189,400 | 207,890 | ||||||
Tax Fees3 | 33,211 | 37,396 |
1 | The aggregate fees billed for services rendered for the audit of the Company’s annual financial statements, attestation procedures on internal controls over financial reporting, review of financial statements included in Forms 10-Q, services related to SEC matters and filings, and the financial statement audit of one of the Company’s subsidiaries. | |
2 | The aggregate fees billed for audit-related services, which primarily consist of fees for auditing of the Company’s benefit plans and, for 2005 only, Sarbanes-Oxley Section 404 readiness. | |
3 | The aggregate fees billed primarily for tax services and preparation of a tax return for one of the Company’s subsidiaries. |
Number of securities | ||||||||||||
Number of | remaining available for | |||||||||||
securities to be | Weighted-average | future issuance under | ||||||||||
issued upon exercise | exercise price of | equity compensation | ||||||||||
of outstanding | outstanding | plans (excluding | ||||||||||
options, warrants | options, warrants | securities reflected in | ||||||||||
and rights | and rights | column (a)) | ||||||||||
Plan category | (a)1 | (b)2 | (c) | |||||||||
Equity compensation plans approved by security holders | 2,019,488 | $ | 40.64 | 3,946,236 | ||||||||
Equity compensation plans not approved by security holders | — | — | 134,100 | |||||||||
Total | 2,019,488 | $ | 40.64 | 4,080,336 | ||||||||
1 | This amount includes shares subject to outstanding options as well as shares subject to outstanding performance share awards at the maximum amount issuable under such awards. However, payout of the performance share awards is contingent on the Company reaching certain levels of performance during a three-year performance period. If the performance criteria for these |
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awards are not fully satisfied, the award recipient will receive less than the maximum number of shares available under these grants and may receive nothing from these grants. | ||
2 | The weighted average exercise price in this column does not take performance share awards into account, as those awards have no exercise price. |
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INCENTIVE PLAN
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APPROVAL OF PROPOSAL 3.
INDEPENDENT AUDITORS OF THE COMPANY
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007.
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• | call the Company’s Shareholder Services at 1-602-250-5511; | ||
• | mail a request to receive separate copies to Shareholder Services at P.O. Box 53999, Mail Station 8602, Phoenix, AZ 85072-3999; or | ||
• | e-mail a request to:shareholderdept@pinnaclewest.com; |
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2007 LONG-TERM INCENTIVE PLAN
APPROVED BY SHAREHOLDERS: ___, 2007
TERMINATION DATE: ___, 2017
PURPOSE
EFFECTIVE AND EXPIRATION DATE
DEFINITIONS AND CONSTRUCTION
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ADMINISTRATION
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SHARES SUBJECT TO THE PLAN
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ELIGIBILITY AND PARTICIPATION
STOCK OPTIONS
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STOCK APPRECIATION RIGHTS
RESTRICTED STOCK AWARDS
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OTHER TYPES OF AWARDS
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PERFORMANCE-BASED AWARDS
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PROVISIONS APPLICABLE TO AWARDS
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CHANGES IN CAPITAL STRUCTURE
AMENDMENT, MODIFICATION, AND TERMINATION
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GENERAL PROVISIONS
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