Exhibit 10.10(a)
PINNACLE WEST CAPITAL CORPORATION
ARIZONA PUBLIC SERVICE COMPANY
SUNCOR DEVELOPMENT COMPANY
AND
EL DORADO INVESTMENT COMPANY
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
ARTICLE 1 - Definitions..................................................... 1
ARTICLE 2 - Selection, Enrollment, Eligibility.............................. 6
2.1 Selection by Committee........................... 6
2.2 Enrollment Requirements.......................... 6
2.3 Eligibility; Commencement of Participation....... 6
2.4 Loss of Eligibility to Participate............... 6
ARTICLE 3 - Deferral Commitments/Interest Crediting......................... 6
3.1 Deferral......................................... 6
3.2 Maximum Deferral................................. 7
3.3 Election to Defer; Effect of Election Form....... 7
3.4 Withholding of Deferral Amounts.................. 7
3.5 Interest Crediting Prior to Distribution......... 7
3.6 Installment Distribution......................... 7
3.7 FICA Taxes....................................... 8
ARTICLE 4 - Short-Term Payout and Unforeseeable Financial
Emergencies............................................. 8
4.1 Short-Term Payout................................ 8
4.2 Withdrawal Payout; Suspensions for
Unforeseeable Financial Emergencies.......................... 9
ARTICLE 5 - Retirement Benefit.............................................. 9
5.1 Retirement Benefit............................... 9
5.2 Payment of Retirement Benefits................... 9
5.3 Death Prior to Completion of Retirement
Benefits..................................................... 9
ARTICLE 6 - Pre-Retirement Survivor Benefit.................................10
6.1 Pre-Retirement Survivor Benefit..................10
6.2 Payment of Pre-Retirement Survivor Benefits......10
6.3 Restriction in the Event of Suicide or Falsely
Provided Information.........................................10
ARTICLE 7 - Termination Benefit.............................................10
7.1 Termination Benefits.............................10
7.2 Payment of Termination Benefit...................11
7.3 Death Prior to Pay Out...........................11
-i-
ARTICLE 8 - Disability Waiver and Benefit...................................12
8.1 Disability Waiver................................12
8.2 Disability Benefit...............................12
ARTICLE 9 - Beneficiary Designation.........................................13
9.1 Beneficiary......................................13
9.2 Beneficiary Designation and Change; Spousal
Consent..........................................13
9.3 Acknowledgment...................................13
9.4 No Beneficiary Designation.......................13
9.5 Doubt as to Beneficiary..........................13
9.6 Discharge of Obligations.........................14
ARTICLE 10 - Leave of Absence...............................................14
10.1 Paid Leave of Absence............................14
10.2 Unpaid Leave of Absence..........................14
ARTICLE 11 - Termination, Amendment or Modification.........................14
11.1 Termination......................................14
11.2 Amendment........................................15
11.3 Interest Rate in the Event of a Change in
Control..........................................15
11.4 Effect of Payment................................17
ARTICLE 12 - Administration.................................................17
12.1 Committee Duties.................................17
12.2 Agents...........................................17
12.3 Binding Effect of Decisions......................17
12.4 Indemnity of Committee...........................17
12.5 Employer Information.............................17
ARTICLE 13 - Other Benefits and Agreements..................................18
13.1 Coordination with Other Benefits.................18
13.2 Transfers to the Plan............................18
ARTICLE 14 - Claims Procedures..............................................19
14.1 Presentation of Claim............................19
14.2 Notification of Decision.........................19
14.3 Review of a Denied Claim.........................19
14.4 Decision on Review...............................20
14.5 Legal Action.....................................20
-ii-
ARTICLE 15 - Miscellaneous..................................................20
15.1 Unsecured General Creditor.......................20
15.2 Employer's Liability.............................20
15.3 Nonassignability.................................21
15.4 Not a Contract of Employment.....................21
15.5 Furnishing Information...........................21
15.6 Terms............................................21
15.7 Captions.........................................21
15.8 Governing Law....................................21
15.9 Validity.........................................21
15.10 Notice...........................................22
15.11 Successors.......................................22
15.12 Spouse's Interest................................22
15.13 Incompetent......................................22
-iii-
PINNACLE WEST CAPITAL CORPORATION
ARIZONA PUBLIC SERVICE COMPANY
SUNCOR DEVELOPMENT COMPANY
AND
EL DORADO INVESTMENT COMPANY
DEFERRED COMPENSATION PLAN
Effective January 1, 1992, Pinnacle West Capital Corporation, an
Arizona corporation (the "Company"), established the Pinnacle West Capital
Corporation, Arizona Public Service Company, SunCor Development Company and El
Dorado Investment Company Deferred Compensation Plan (the "Plan") for the
purpose of providing specified benefits to a select group of management, highly
compensated employees and Directors who contribute materially to the continued
growth, development and future business success of the Company, Arizona Public
Service Company, SunCor Development Company, El Dorado Investment Company, and
their subsidiaries. The Plan was thereafter amended several times. By this
amendment and restatement in the entirety, the Company intends to incorporate
all prior amendments and to make certain technical and clarifying revisions.
ARTICLE 1
Definitions
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Account Balance" shall mean the sum of (i) the Deferral Amount, plus
(ii) interest credited in accordance with all the applicable interest
crediting provisions of the Plan, reduced by all Short-Term Payouts,
if made. This account shall be a bookkeeping entry only and shall be
utilized solely as a device for the measurement and determination of
the amounts to be paid to the Participant pursuant to this Plan.
1.2 "Annual Deferral" shall mean that portion of a Participant's Base
Annual Salary, Year-End Bonus and/or Directors Fees that a Participant
elects to have and is deferred, in accordance with Article 3, for any
one Plan Year. In the event of Re- tirement, Disability, death or a
Termination of Employment prior to the end of a Plan Year, such year's
Annual Deferral shall be the actual amount withheld prior to such
event.
1
1.3 "Base Annual Salary" shall mean the annual compensation, excluding
bonuses, commissions, overtime, incentive payments, non-monetary
awards, Directors Fees and other fees, paid to a Participant for
employment services rendered to any Employer, before reduction for
compensation deferred pursuant to all qualified, non-qualified and
Code Section 125 compensation plans of any Employer.
1.4 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled
to receive benefits under this Plan upon the death of a Participant.
1.5 "Beneficiary Designation Form" shall mean the form established from
time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more Beneficiaries.
1.6 "Board" shall mean the Board of Directors of the Company.
1.7 "Bonus Rate" for a Plan Year shall mean an interest rate determined
for each Plan Year by the Committee, in its sole discretion, which
rate shall be determined on or before the first business day of the
month that precedes the beginning of the Plan Year for which the rate
applies.
1.8 "Change in Control" shall have the meaning set forth in Section 11.3.
1.9 "Claimant" shall have the meaning set forth in Section 14.1.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.11 "Committee" shall mean the administrative committee appointed to
manage and administer the Plan in accordance with its provisions
pursuant to Article 12.
1.12 "Company" shall mean Pinnacle West Capital Corporation, an Arizona
corporation.
1.13 "Crediting Rate" for a Plan Year shall mean a rate of interest equal
to the ten-year U.S. Treasury Note rate as published on the last
business day of the first week of October preceding a Plan Year.
1.14 "Deferral" shall mean the sum of all of a Participant's Annual
Deferrals.
1.15 "Director" shall mean any member of the board of directors of an
Employer.
2
1.16 "Directors Fees" shall mean the annual fees paid by an Employer,
including retainer fees and meetings fees, as compensation for serving
on a board of directors of an Employer.
1.17 "Disability" shall mean a period of disability during which a
Participant qualifies for benefits under the Participant's Employer's
long-term disability plan or, if a Participant does not participate in
such a plan, a period of disability during which the Participant would
have qualified for benefits under such a plan, as determined in the
sole discretion of the Committee, had the Participant been a
participant in such a plan.
1.18 "Disability Benefit" shall mean the benefit set forth in Article 8.
1.19 "Effective Date" shall mean January 1, 1996.
1.20 "Election Form" shall mean the form established from time to time by
the Committee that a Participant completes, signs and returns to the
Committee to make an election under the Plan.
1.21 "Employer" shall mean the Company, Arizona Public Service Company, an
Arizona corporation, SunCor Development Company, an Arizona
corporation, El Dorado Investment Company, an Arizona corporation,
and/or any subsidiaries of such corporations that have been selected
by the Board to participate in the Plan.
1.22 "Participant" shall mean any employee or Director of an Employer (i)
who is selected to participate in the Plan, (ii) who elects to
participate in the Plan, (iii) who signs a Plan Agreement, an Election
Form and a Beneficiary Designation Form, (iv) whose signed Plan
Agreement, Election Form and Beneficiary Designation Form are accepted
by the Committee, (v) who commences participation in the Plan on his
or her Plan Entry Date, and (vi) whose Plan Agreement has not
terminated.
1.23 "Plan" shall mean the Pinnacle West Capital Corporation, Arizona
Public Service Company, SunCor Development Company and El Dorado
Investment Company Deferred Compensation Plan, which shall be
evidenced by this instrument and by each Plan Agreement, as amended
from time to time.
1.24 "Plan Agreement" shall mean a written agreement, as amended from time
to time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant shall
provide for the entire benefit to which such Participant is entitled
to under the Plan, and the Plan Agreement bearing the latest date of
acceptance by the Committee shall govern such entitlement.
3
1.25 "Plan Entry Date" shall mean one of two dates in any Plan Year on
which an employee or Director selected by the Committee to participate
in the Plan is eligible to commence participation in the Plan in
accordance with Article 3. The two entry dates are January 1 and July
1.
1.26 "Plan Year" shall begin on January 1 of each year and continue through
December 31.
1.27 "Preferred Rate" for a Plan Year shall mean the Crediting Rate plus
the Bonus Rate for such Plan Year.
1.28 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.
1.29 "Retirement" and "Retires" shall mean, with respect to an employee,
severance from employment with all Employers for any reason other than
a leave of absence, death or Disability on or after the earlier of the
attainment of (a) age sixty-five (65) with five (5) Years of Service
or (b) age fifty-five (55) with ten (10) Years of Service; and shall
mean, with respect to a Director who is not an employee, severance of
his or her directorship(s) with all Employers on or after the earlier
of the attainment of (x) age sixty-five (65) with five (5) Years of
Service as a Director or (y) age fifty-five (55) with ten (10) Years
of Service as a Director. If a Participant is both an employee and a
Director, Retirement shall not occur until he or she Retires as both
an employee and a Director; provided, however, that such a
Participant may elect, in accordance with the policies and procedures
established by the Committee, to Retire for purposes of this Plan at
the time he or she Retires as an employee of all Employers.
1.30 "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.31 "SEBP" shall mean the Pinnacle West Capital Corporation, Arizona
Public Service Company, SunCor Development Company and El Dorado
Investment Company Supplemental Executive Benefit Plan, as the same
may be amended from time to time.
1.32 "Short-Term Payout" shall mean the payout set forth in Section 4.1.
1.33 "Termination Benefit" shall mean the benefit set forth in Article 7.
1.34 "Termination of Employment" shall mean the ceasing of employment by an
employee with all Employers or ceasing service as a Director of all
Employers, voluntarily or involuntarily, for any reason other than
Retirement, Disability, leave of absence or death. If a Participant is
both an employee and a Direc-
4
tor, a Termination of Employment shall occur only upon the termination
of the last position held; provided, however, that such a Participant
may elect, in accordance with the policies and procedures established
by the Committee, to be treated for purposes of this Plan as having
experienced a Termination of Employment at the time he or she ceases
employment with all Employers as an employee.
1.35 "Unforeseeable Financial Emergency" shall mean an unanticipated
emergency that is caused by an event beyond the control of the
Participant that would cause severe financial hardship to the
Participant as a result of (i) a sudden and unexpected illness or
accident of the Participant or a dependent of the Participant, (ii) a
loss of the Participant's property due to casualty or (iii) such other
extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant, all as determined in the
sole discretion of the Committee.
1.36 "Year-End Bonus" shall mean compensation paid to a Participant who is
an employee as an annual bonus under any Employer's regular annual
bonus and incentive plans. Special bonuses or incentive payments made
to a Participant shall not constitute "Year-End Bonuses."
1.37 "Years of Plan Participation" shall mean the total number of full Plan
Years a Participant has been a participant in the Plan and has either
(i) made deferral elections or (ii) had an Account Balance. For
purposes of a Participant's first Plan Year of participation only, any
partial Plan Year of partici- pation shall be treated as a full Plan
Year. A single Plan Year of Plan participation described above shall
be referred to as a "Year of Plan Participation."
1.38 "Years of Service" shall mean the total number of years of employment
during which a Participant has been credited with at least 1,000 hours
of service in each of those years. For purposes of this definition
only, (i) Participants who are employees shall be credited with ten
(10) hours of service for each working day during which they are
employed by the Employer and Participants who are Directors shall be
credited with ten (10) hours of service for each day (other than
weekend days) during which they serve as a Director, provided that no
Participant shall be credited with more than 1,000 hours of service in
any one year of employment, and (ii) a year of employment shall be a
365 day period (or 366 day period in the case of a leap year) that,
for the first year of employment, commences on the employee's date of
hiring or the date the Director begins his service as a Director and
that, for any subsequent year, commences on an anniversary of that
date.
5
ARTICLE 2
Selection, Enrollment, Eligibility
2.1 Selection by Committee. Participation in the Plan shall be limited to
a select group of management, highly compensated employees and
Directors of the Employers. From that group, the Committee shall
select, in its sole discretion, employees and Directors of the
Employers to participate in the Plan.
2.2 Enrollment Requirements. As a condition to participation, each
selected employee or Director shall complete, execute and return to
the Committee a Plan Agreement, an Election Form and a Beneficiary
Designation Form. In addition, the Committee, in its sole discretion,
shall establish from time to time such other enrollment requirements
as it determines in its sole discretion are necessary.
2.3 Eligibility; Commencement of Participation. If an employee or Director
selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Committee,
that employee or Director shall commence participation in the Plan on
the Plan Entry Date that immediately follows his or her selection to
participate in the Plan. If a selected employee or Director fails to
meet all such requirements prior to that Plan Entry Date, that
employee or Director shall not be eligible to participate in the Plan
until the Plan Entry Date that follows his or her completion of those
requirements.
2.4 Loss of Eligibility to Participate. If the status of a Participant
changes, without Termination of Employment, so that he is no longer an
employee eligible to participate pursuant to Section 2.1 or if the
Committee fails to designate a Participant for continued participation
as required under Section 2.1, he shall become an inactive Participant
as of the last day of the Plan Year in which such change of status or
such failure by the Committee occurred. Inactive Participants shall
continue to participate in the Plan for all purposes other than for
purposes of making deferrals under Section 3.1 and 3.2.
ARTICLE 3
Deferral Commitments/Interest Crediting
3.1 Deferral. Subject to Section 3.2 below, a Participant may defer, for
each Plan Year starting with his or her commencement of participation
in the Plan and ending immediately prior to his or her Retirement,
death or Termination of Employment, none or any portion of his or her
Base Annual Salary, Year-End Bonus and/or Directors Fees.
6
3.2 Maximum Deferral. For each Plan Year, a Participant may defer up to
fifty percent (50%) of his or her Base Annual Salary, up to one
hundred percent (100%) of his or her Year-End Bonus and/or up to one
hundred percent (100%) of his or her Directors Fees.
3.3 Election to Defer; Effect of Election Form. In connection with a
Participant's commencement of participation in the Plan, the
Participant may elect to defer from his or her Base Annual Salary,
Year-End Bonus and/or Directors Fees an Annual Deferral by delivering
to the Committee a completed Election Form, which election and form
must be accepted by the Committee for a valid election to exist. For
each succeeding Plan Year, a new Election Form for a Plan Year must be
delivered to the Committee, in accordance with its rules and
procedures, before the end of the immediately preceding Plan Year. If
no Election Form is delivered and accepted for a Plan Year, no Annual
Deferral will be withheld for that Plan Year.
3.4 Withholding of Deferral Amounts. For each Plan Year, the Base Annual
Salary portion of the Annual Deferral shall be withheld each payroll
period from the Participant's Base Annual Salary in equal amounts. The
Year-End Bonus and/or Directors Fees portion of the Annual Deferral
shall be withheld at the time the Year-End Bonus and/or Director Fees
are or would otherwise be paid to the Participant.
3.5 Interest Crediting Prior to Distribution. Prior to any distribution of
benefits under Articles 4, 5, 6, 7 or 8, interest shall be credited
and compounded annually on a Participant's Account Balance as though
the Annual Deferral for that Plan Year was withheld at the beginning
of the Plan Year or, in the case of the first year of Plan
participation, was withheld on the Participant's Plan Entry Date. The
rate of interest for crediting shall be the Preferred Rate, unless
otherwise provided in this Plan. In the event of Retirement,
Disability, death or a Termination of Employment prior to the end of a
Plan Year, the basis for that year's interest crediting will be a
fraction of the full year's interest based on the amount actually
deferred for the Plan Year as of the date of the Participant's
Retirement, Disability, death or Termination of Employment and based
further on the number of full months that the Participant was employed
with or served as a Director of the Employer during the Plan Year
prior to the occurrence of such event. If a Short-Term Payout is made,
for purposes of crediting interest, the Account Balance shall be
reduced as of the first day of the Plan Year in which the Short-Term
Payout is made.
3.6 Installment Distribution. In the event a benefit is paid in
installments under Articles 5, 6, 7 or 8, installment payment amounts
shall be determined in the following manner:
7
(a) Interest Rate. The interest rate to be used to calculate
installment payment amounts shall be a fixed interest rate that is
determined by averaging the Preferred Rates for the Plan Year in which
a Participant becomes eligible to receive a benefit and the four (4)
preceding Plan Years. If a Participant has completed fewer than five
(5) Plan Years, this average shall be determined using the Crediting
Rates for the Plan Years during which the Participant participated in
the Plan. Notwithstanding the foregoing, if the terminated Participant
elects installment distributions at age fifty-five (55), the
applicable interest rate(s) to be used from the termination date until
age fifty-five (55) shall be determined in accordance with the table
set forth in Section 7.1, by using the Crediting Rates or Preferred
Rates, as the case may be.
(b) Installment Payments. For purposes of calculating installment
payment amounts, each annual installment payment, starting with the
first payment [which for this purpose is deemed to be paid as of the
date that the Participant becomes eligible to receive a benefit under
this Plan (the "Eligibility Date")] and continuing thereafter for each
additional year that starts on the anniversary of the Eligibility Date
until the Participant's Account Balance is paid in full, shall be
deemed to have been paid prior to the crediting of interest for that
year. (The result of this is that interest crediting shall be made
after taking into account the annual installment payment for that
year.)
(c) Amortization. Based on the interest rate determined in accordance
with Section 3.6(b) above, the Participant's Account Balance shall be
amortized in equal installment payments over the term of the specified
payment period. The resulting number shall be the installment payment
that is to be paid each year.
3.7 FICA Taxes. For each Plan Year in which an Annual Deferral is being
withheld, the Participant's Employer(s) shall ratably withhold from
that portion of the Participant's Base Annual Salary that is not being
deferred, the Participant's share of FICA taxes based on an amount
equal to the Base Annual Salary before reduction by the Annual
Deferral.
ARTICLE 4
Short-Term Payout and Unforeseeable Financial Emergencies
4.1 Short-Term Payout. In connection with each election to defer an Annual
Deferral, a Participant may elect to receive a future Short-Term
Payout from the Plan with respect to that Annual Deferral. The
Short-Term Payout shall be a lump sum payment in an amount that is
equal to the Annual Deferral plus interest credited at the Preferred
Rate, and it shall be paid
8
within sixty (60) days of the first day of the Plan Year that is five
(5) years after the first day of the Plan Year in which the Annual
Deferral is actually deferred. Notwithstanding the foregoing, amounts
transferred to this Plan pursuant to Section 13.2 shall not be
eligible for a Short-Term Payout.
4.2 Withdrawal Payout; Suspensions for Unforeseeable Financial
Emergencies. If the Participant experiences an Unforeseeable Financial
Emergency, the Participant may petition the Committee to (i) suspend
any deferrals required to be made by a Participant and/or (ii) receive
a partial or full payout from the Plan. The payout shall not exceed
the lesser of (i) the Participant's Account Balance, calculated as if
such Participant were receiving a Termination Benefit, or (ii) the
amount reasonably needed to satisfy the Unforeseeable Financial
Emergency. If, subject to the sole discretion of the Committee, the
petition for a suspension and/or payout is approved, suspension shall
take effect upon the date of approval and any payout shall be made
within sixty (60) days of the date of approval.
ARTICLE 5
Retirement Benefit
5.1 Retirement Benefit. A Participant who Retires shall receive, as a
Retirement Benefit, his or her Account Balance.
5.2 Payment of Retirement Benefits. A Participant, in connection with his
or her commencement of participation in the Plan, shall elect on an
Election Form to receive the Retirement Benefit in a lump sum or in
equal annual payments over a period of five (5), ten (10) or fifteen
(15) years (the latter determined in accordance with Section 3.6
above). The Partic- ipant may change this election to an allowable
alternative payout period by submitting a new Election Form to the
Commit- tee, provided that any such Election Form is submitted at
least two (2) years prior to the Participant's Retirement. Subject to
the foregoing, the Election Form most recently accepted by the
Committee shall govern the payout of the Retirement Benefit. The lump
sum payment shall be made, or installment payments shall commence, no
later than sixty (60) days from the date the Participant Retires.
5.3 Death Prior to Completion of Retirement Benefits. If a Participant
dies after Retirement but before the Retirement Benefit is paid in
full, the Participant's unpaid Retirement Benefit payments shall
continue and shall be paid to the Participant's Beneficiary over the
remaining number of years and in the same amounts as that benefit
would have been paid to the Participant had the Participant survived.
9
ARTICLE 6
Pre-Retirement Survivor Benefit
6.1 Pre-Retirement Survivor Benefit. Except as provided in Section 6.3
below, if a Participant dies before he or she Retires, experiences a
Termination of Employment or suffers a Disability, the Participant's
Beneficiary shall receive a Pre- Retirement Survivor Benefit equal to
the Participant's Account Balance.
6.2 Payment of Pre-Retirement Survivor Benefits. The Pre-Retire- ment
Survivor Benefit shall be paid in a lump sum. However, if the
Pre-Retirement Survivor Benefit exceeds $25,000, payment may, at the
sole discretion of the Committee, be made in equal monthly payments
over a period of time. In no event, however, shall that period of time
exceed the payment period previously elected by the Participant for
the payment of the Retirement Benefit, or, if no election was made,
fifteen (15) years. The first (or only payment, if made in lump sum)
shall be made within sixty (60) days of the Committee's receiving
proof of the Participant's death.
6.3 Restriction in the Event of Suicide or Falsely Provided Information.
In the event of a Participant's suicide within two (2) years after the
Participant first becomes a Participant, or in the event the
Participant's death is determined to be from a bodily or mental cause
or causes, the information about which was withheld, knowingly
concealed, or falsely provided by the Participant if requested to
furnish evidence of good health, the Pre-Retirement Survivor Benefit
shall be equal to the Participant's Deferral, without interest, all
determined as of his or her date of death.
ARTICLE 7
Termination Benefit
7.1 Termination Benefits. If the Participant experiences a Termination of
Employment prior to his or her Retirement, death or Disability, the
Participant shall receive a Termination Benefit, which shall be
equal to the Participant's Account Balance as of the date of his or
her Termination of Employment, with interest credited in the manner
provided in Section 3.5 above, but using the applicable interest rate
set forth in the following schedule:
Completion of Years of Plan Participation
Prior to Termination of Employment Applicable Rate
----------------------------------------- ---------------
Less than five years Crediting Rate
Five or more years Preferred Rate
10
7.2 Payment of Termination Benefit.
(a) Lump Sum or Installments. In connection with his or her
commencement of participation in the Plan, a Participant shall elect
on an Election Form to receive the Termination Benefit in a lump sum
or in equal annual payments (the latter determined in accordance with
Section 3.6 above) over a period of five (5), ten (10) or fifteen (15)
years. If a Participant elects a lump sum payment, he or she shall
specify whether the lump sum will be paid within sixty (60) days of
(i) his or her Termination of Employment or (ii) his or her attainment
of age fifty-five (55) following Termination of Employment. If the
Participant elects installment payments, they will begin within sixty
(60) days of the Participant's 55th birthday (or his or her
Termination of Employment, if the Participant is over age fifty-five
(55) upon his or her Termination of Employment). The Participant may
change his or her election to an allowable alternative payout period
by submitting a new Election Form to the Committee, provided that any
such Election Form is submitted at least two (2) years prior to the
Participant's Termination of Employment and is accepted by the
Committee in its sole discretion. Notwithstanding the foregoing, each
Participant in the Plan shall be given an opportunity during 1995 to
make an election with respect to his or her Termination Benefit, and
such election, if accepted by the Committee, shall be treated, for
purposes of this Section 7.2(a), as the initial election for the
payment of the Termination Benefit. Failure to make an election will
result in the Termination Benefit paid in a lump sum at the time of
the Participant's Termination of Employment.
Subject to the foregoing, the Election Form most recently
accepted by the Committee shall govern the payout of the Termination
Benefit.
(b) Commencement of Payments. Payment of the Termination Benefit shall
commence within sixty (60) days of the date elected by the Participant
in accordance with Section 7.2(a) above.
7.3 Death Prior to Pay Out.
(a) Death Prior to Commencement of Payments. If a Participant dies
prior to the payout date that he or she elected for his or her
Termination Benefit, his or her Termination Benefit shall be paid in a
lump sum within sixty (60) days of the date that the Committee
receives proof of the Participant's death.
(b) Death After Commencement. If a Participant dies after the
commencement of the payment of his or her Termination
11
Benefit, but before the Termination Benefit is paid in full, the
Participant's unpaid Termination Benefit payments shall continue and
shall be paid to the Participant's Beneficiary over the remaining
number of years and in the same amounts as that benefit would have
been paid to the Participant had the Participant survived.
ARTICLE 8
Disability Waiver and Benefit
8.1 Disability Waiver.
(a) Eligibility. By participating in the Plan, all Participants are
eligible for this waiver.
(b) Waiver of Deferral; Credit for Plan Year of Disability. A
Participant who is determined by the Committee to be suffering from a
Disability shall be excused from fulfilling that portion of the Annual
Deferral commitment that would otherwise have been withheld from a
Participant's Base Annual Salary, Year-End Bonus and/or Directors Fees
for the Plan Year during which the Participant first suffers a
Disability. In addition, the Participant's Account Balance shall be
credited with that portion of the Annual Deferral commitment that is
excused in accordance with the preceding sentence, unless the
Disability ceases in the Plan Year that it commences, in which case,
the crediting shall apply only for the period of Disability.
(c) Return to Work. If a Participant returns to employment with an
Employer after a Disability ceases, the Participant may elect to defer
an Annual Deferral for the Plan Year following his or her return to
employment and for every Plan Year thereafter; provided such deferral
elections are otherwise allowed and an Election Form is delivered to
and accepted by the Committee for each such election in accordance
with Section 3.3 above.
8.2 Disability Benefit. A Participant suffering a Disability shall, for
benefit purposes under this Plan, continue to be considered to be
employed and shall be eligible for the benefits provided for in
Articles 4, 5, 6 or 7 in accordance with the provisions of those
Articles. Notwithstanding the above, the Committee shall have the
right, in its sole and absolute discretion and for purposes of this
Plan only, to terminate a Participant's employment or service as a
Director at any time after such Participant is determined to be
permanently disabled under the Participant's Employer's long- term
disability plan or would have been determined to be permanently
disabled had he or she participated in that plan. In determining the
Participant's Account Balance for purposes
12
of the Disability Benefit described in the previous sentence, the
Preferred Rate shall be used in lieu of the rates specified in Section
7.1.
ARTICLE 9
Beneficiary Designation
9.1 Beneficiary. Each Participant shall have the right, at any time, to
designate his or her Beneficiary (both primary as well as contingent)
to receive any benefits payable under the Plan to a Beneficiary upon
the death of a Participant.
9.2 Beneficiary Designation and Change; Spousal Consent. A Participant
shall designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules
and procedures, as in effect from time to time. If the Participant
names, with respect to more than fifty percent (50%) of his or her
benefit under this Plan, someone other than his or her spouse as a
Beneficiary, a spousal consent, in the form designated by the
Committee, must be signed by that Participant's spouse and returned to
the Committee. Upon the acceptance by the Committee of a new
Beneficiary Designation Form, all Beneficiary designations previously
filed shall be cancelled. The Committee shall be entitled to rely on
the last Beneficiary Designation Form filed by the Participant and
accepted by the Committee prior to his or her death.
9.3 Acknowledgment. No designation or change in designation of a
Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Committee or its designated agent.
9.4 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the executor or personal representative of the
Participant's estate.
9.5 Doubt as to Beneficiary. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the
Committee shall have the right, exercisable in its discretion, to
cause the Participant's Employer to
13
withhold such payments until this matter is resolved to the
Committee's satisfaction.
9.6 Discharge of Obligations. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to
the Participant, and that Participant's Plan Agreement shall terminate
upon such full payment of benefits.
ARTICLE 10
Leave of Absence
10.1 Paid Leave of Absence. If a Participant is authorized by the
Participant's Employer for any reason to take a paid leave of absence
from the employment of the Employer, the Participant shall continue to
be considered employed by the Employer and the Annual Deferral shall
continue to be withheld during such paid leave of absence in
accordance with Section 3.3.
10.2 Unpaid Leave of Absence. If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of
absence from the employment of the Employer, the Participant shall
continue to be considered employed by the Employer and the Participant
shall be excused from making deferrals until the earlier of the date
the leave of absence expires or the Participant returns to a paid
employment status. Upon such expiration or return, deferrals shall
resume for the remaining portion of the Plan Year in which the
expiration or return occurs, based on the deferral election, if any,
made for that Plan Year prior to the leave of absence.
ARTICLE 11
Termination, Amendment or Modification
11.1 Termination. Any Employer reserves the right to terminate the Plan at
any time with respect to Participants whose services are retained by
that Employer. Upon the termination of the Plan, all Plan Agreements
shall terminate and a Participant's Account Balance shall be paid out
in accordance with the benefits that the Participant would have
received if the Participant had experienced a Termination of
Employment on the date of Plan termination or, if Plan termination
occurs after the date upon which the Participant was eligible to
Retire, the Participant had Retired on the date of Plan termination.
Prior to a Change in Control, the Employer shall have the right, in
its sole discretion, and notwithstanding any elections made by the
Participant, to pay such benefits in a lump sum or in monthly
installments for up to fifteen
14
(15) years, with interest credited during the installment period as
provided in Section 3.6 but utilizing an average of Crediting Rates
instead of an average of Preferred Rates. After a Change in Control,
the Employer shall be required to pay such benefits in a lump sum. The
termination of the Plan shall not adversely affect any Participant or
Beneficiary who has become entitled to the payment of any benefits
under the Plan as of the date of termination; provided however, that
the Employer shall have the right to accelerate installment payments
by paying the present value equivalent of such payments, using the
Crediting Rate for the Plan Year in which the termination occurs as
the discount rate, in a lump sum or pursuant to a different payment
schedule.
11.2 Amendment. The Company may, at any time, amend or modify the Plan in
whole or in part with respect to any Employer or all Employers,
provided, however, that no amendment or modifica- tion shall be
effective to decrease or restrict the present value equivalent, using
the Crediting Rate for the Plan Year of the amendment or modification
as the discount rate, of a Participant's Account Balance in existence
at the time the amendment or modification is made, calculated as if
the Participant had experienced a Termination of Employment as of the
effective date of the amendment or modification, or if the amendment
or modification occurs after the date upon which the Participant was
eligible to Retire, the Participant had Retired as of the effective
date of the amendment or modification. The amendment or modification
of the Plan shall not affect any Participant or Beneficiary who has
become entitled to the payment of benefits under the Plan as of the
date of the amendment or modification; provided however, that the
Employer effected by such amendment or modification shall have the
right to accelerate installment payments by paying the present value
equivalent of such payments, using the Crediting Rate for the Plan
Year of the amendment or modification as the discount rate, in a lump
sum or pursuant to a different payment schedule.
11.3 Interest Rate in the Event of a Change in Control.
(a) Change in Control. A "Change in Control" shall be deemed to occur
six (6) months prior to the occurrence of the first of any of the
following events:
(i) A change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities and Exchange
Act of 1934 (the "Act"), or any successor regulation of similar
import, regardless of whether the Company is subject to such
reporting requirement;
15
(ii) A change in control of ownership of the Company through a
transaction or series of transactions, such that any person (as
that term is used in Sections 13 and 14(d)(2) of the Act) is or
becomes the beneficial owner (as that term is used in Section
13(d) of the Act), directly or indirectly, of securities of the
Company representing twenty percent (20%) or more of the combined
voting power of the Company's then outstanding securities;
(iii) Any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of the common stock of the Company would
be converted into cash, securities or other property, other than
a merger of the Company in which the holders of the common stock
of the Company immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger;
(iv) The shareholders of the Company approve any plan or proposal
for the liquidation or dissolution of the Company;
(v) During any period of two (2) consecutive years, individuals
who, at the beginning of such period, constituted the Board
cease, for any reason, to constitute at least a majority thereof,
unless the election or nomination for election of each new
director was approved by the vote of at least two-thirds (2/3) of
the directors then still in office who were directors at the
beginning of the period;
(vi) Substantially all of the assets of the Company and its
subsidiaries, in the aggregate, are sold or otherwise transferred
to parties that are not within a "controlled group of
corporations" (as defined in Section 1563 of Code) in which the
Company is a member; or
(vii) More than eighty percent (80%) of the stock, or
substantially all of the assets of, any Employer, other than the
Company, are sold or otherwise transferred to parties that are
not within a "controlled group of corporations" (as defined in
Section 1563 of the Code) in which that Employer is a member,
provided that any such event shall constitute a Change in Control
only with respect to that Employer and its employees or Directors
who are Participants.
(b) Interest Rate. If a Change in Control occurs, the applicable
interest rate to be used in determining a Partici-
16
pant's benefit in connection with a Termination of Employment after
the Change in Control, or a Plan termination, amendment or
modification under Sections 11.1 and 11.2 after a Change in Control,
shall be the Preferred Rate. The Crediting Rate for the Plan Year in
which the Change in Control occurs, and not the Preferred Rate, shall
be used as the discount rate for determining present value.
11.4 Effect of Payment. The full payment of the applicable benefit under
Articles 5, 6, 7 or 8 of the Plan shall completely discharge all
obligations to a Participant under this Plan and the Participant's
Plan Agreement shall terminate.
ARTICLE 12
Administration
12.1 Committee Duties. This Plan shall be administered by a Committee which
shall consist of persons approved by the Board. Members of the
Committee may be Participants under this Plan. The Committee shall
also have the discretion and authority to make, amend, interpret, and
enforce all appropriate rules and regulations for the administration
of this Plan and decide or resolve any and all questions including
interpretations of this Plan, as may arise in connection with the
Plan.
12.2 Agents. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit and may from time to time consult with counsel
who may be counsel to any Employer.
12.3 Binding Effect of Decisions. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
12.4 Indemnity of Committee. All Employers shall indemnify and hold
harmless the members of the Committee against any and all claims,
losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Plan, except in the case of
willful misconduct by the Committee or any of its members.
12.5 Employer Information. To enable the Committee to perform its
functions, each Employer shall supply full and timely information to
the Committee on all matters relating to the compensation of its
Participants, the date and circumstances
17
of the Retirement, Disability, death or Termination of Employment of
its Participants, and such other pertinent information as the
Committee may reasonably require.
ARTICLE 13
Other Benefits and Agreements
13.1 Coordination with Other Benefits. Except as provided in this Section,
the benefits provided for a Participant and Participant's Beneficiary
under the Plan are in addition to any other benefits available to such
Participant under any other plan or program for employees or directors
of the Participant's Employer. The Plan shall supplement and shall not
supersede, modify or amend any other such plan or program except as
may otherwise be expressly provided.
In the event a Participant receives or becomes entitled to
receive a benefit under the SEBP, the benefits to be received under
this Plan shall be offset and reduced (but not below zero) by the
benefits paid under the SEBP. In determining the amount that should
offset and reduce benefits under this Plan, the amount paid under the
SEBP shall be translated into its future value by assuming it earned
interest from the date of payment to the Participant, in accordance
with the crediting provisions of Sections 3.5 and 3.6, to the date the
benefit under this Plan becomes due and payable.
13.2 Transfers to the Plan. Any Participant who was a participant in the
Arizona Public Service Company Deferred Compensation Plan, the
Pinnacle West Capital Corporation Deferred Compen- sation Plan, the
Arizona Public Service Company Directors' Deferred Compensation Plan
or the Pinnacle West Capital Corporation Directors' Deferred
Compensation Plan prior to becoming a Participant in this Plan shall
have the right to elect, upon the date upon which he or she first
becomes designated for participation in the Plan, to transfer his or
her Deferral Option I account balance in that plan to this Plan. This
election shall be made in accordance with the rules and on the forms
established from time to time by the Committee. If the election is
made, the Participant's Deferral Option I account balance under the
other plan shall be added to his or her Account Balance under this
Plan and any such transferred account balance shall become subject to
the terms and conditions of this Plan. Upon the completion of the
transfer of his or her account balance under the other plan to this
Plan, the Participant's participation in Deferral Option I of the
other plan shall terminate and he or she shall have no further
interest in Deferral Option I of that plan.
18
ARTICLE 14
Claims Procedures
14.1 Presentation of Claim. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below
as a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such
Claimant from the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within sixty
(60) days after such notice was received by the Claimant. All other
claims must be made within one hundred eighty (180) days of the date
on which the event that caused the claim to arise occurred. The claim
must state with particularity the determination desired by the
Claimant.
14.2 Notification of Decision. The Committee shall consider a Claimant's
claim within a reasonable time, and shall notify the Claimant in
writing:
(a) that the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or
in part, to the Claimant's requested determination, and such notice
must set forth in a manner calculated to be understood by the
Claimant:
(i) the specific reason(s) for the denial of the claim, or any
part of it;
(ii) specific reference(s) to pertinent provisions of the Plan
upon which such denial was based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is necessary; and
(iv) an explanation of the claim review procedure set forth in
Section 14.3 below.
14.3 Review of a Denied Claim. Within sixty (60) days after receiving a
notice from the Committee that a claim has been denied, in whole or in
part, a Claimant (or the Claimant's duly authorized representative)
may file with the Committee a written request for a review of the
denial of the claim. Thereafter, but not later than thirty (30) days
after the review procedure began, the Claimant (or the Claimant's duly
authorized representative):
(a) may review pertinent documents;
19
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
14.4 Decision on Review. The Committee shall render its decision on review
promptly, and not later than sixty (60) days after the filing of a
written request for review of the denial, unless a hearing is held or
other special circumstances require additional time, in which case the
Committee's decision must be rendered within one hundred twenty (120)
days after such date. Such decision must be written in a manner
calculated to be understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
14.5 Legal Action. A Claimant's compliance with the foregoing provisions of
this Article 14 is a mandatory prerequisite to a Participant's right
to commence any legal action with respect to any claim for benefits
under this Plan.
ARTICLE 15
Miscellaneous
15.1 Unsecured General Creditor. Amounts payable to a Participant or his or
her Beneficiary under this Plan shall be paid from the general assets
of an Employer. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights,
interest or claims in any property or assets of an Employer. Any and
all of an Employer's assets shall be, and remain, the general,
unpledged unrestricted assets of the Employer. An Employer's
obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future and Participants and
their Beneficiaries shall be unsecured creditors of the Participant's
Employer.
15.2 Employer's Liability. An Employer's liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as
entered into between the Employer and a Participant. An Employer shall
have no obligation to a Participant under the Plan except as expressly
provided in the Plan.
20
15.3 Nonassignability. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are expressly
declared to be unassignable and non-transferable, except that the
foregoing shall not apply to any family support obligations set forth
in a court order. No part of the amounts payable shall, prior to
actual payment, be subject to seizure or sequestration for the payment
of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of
law in the event of a Participant's or any other person's bankruptcy
or insolvency.
15.4 Not a Contract of Employment. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between any
Employer and the Participant. Such employment is hereby acknowledged
to be an "at will" employment relationship that can be terminated at
any time for any reason, with or without cause, unless expressly
provided in a written employment agreement. Nothing in this Plan shall
be deemed to give a Participant the right to be retained in the
service of any Employer or to be retained as a Director, or to
interfere with the right of any Employer to discipline or discharge
the Participant at any time.
15.5 Furnishing Information. A Participant will cooperate with the
Committee by furnishing any and all information requested by the
Committee and take such other actions as may be requested in order to
facilitate the administration of the Plan and the payments of benefits
hereunder, including but not limited to taking such physical
examinations as the Committee may deem necessary.
15.6 Terms. Whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural
or the singular, as the case may be, in all cases where they would so
apply.
15.7 Captions. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
15.8 Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Arizona.
15.9 Validity. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or
21
invalidity shall not affect the remaining parts hereof, but this Plan
shall be construed and enforced as if such illegal and invalid
provision had never been inserted herein.
15.10 Notice. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the
addresses indicated below:
If a Participant's Employer is Pinnacle West Capital
Corporation or one of its subsidiaries other than Arizona
Public Service Company, then to:
Pinnacle West Capital Corporation
400 East Van Buren Street
Post Office Box 52132
Phoenix, Arizona 85072-2132
Attn: Human Resources Administrator
If a Participant's Employer is Arizona Public Service
Company or its subsidiaries, then to:
Arizona Public Service Company
400 North 5th Street
P.O. Box 53999
Phoenix, Arizona 85072-3999
Attn: Manager of Benefit Services
Station 8460
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the
Participant.
15.11 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns
and the Participant, the Participant's Beneficiaries, and their
permitted successors and assigns.
15.12 Spouse's Interest. The interest in the benefits hereunder of a spouse
of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable by
such spouse in any manner, including but not limited to such spouse's
will, nor shall such interest pass under the laws of intestate
succession.
15.13 Incompetent. If the Committee, in its discretion, determines that a
benefit under this Plan is to be paid to a minor, a
22
person declared incompetent or to a person incapable of handling the
disposition of that person's property, the Committee may direct
payment of such benefit to the guardian, legal representative or
person having the care and custody of such minor, incompetent or
incapable person. The Committee may require proof of minority,
incompetency, incapacity or guardianship, as it may deem appropriate
prior to distribution of the benefit. Any payment of a benefit shall
be a payment for the account of the Participant and the Participant's
Beneficiary, as the case may be, and shall be a complete discharge of
any liability under the Plan for such payment amount.
IN WITNESS WHEREOF the Company has caused this amended and
restated Plan to be executed by its duly authorized officers this 1 day of
December, 1995.
PINNACLE WEST CAPITAL CORPORATION
By: Faye Widenmann
------------------------------
Its: Vice President
ATTEST:
By: Michael Palmeri
-------------------------
Its: Assistant Treasurer
---------------------
328594/7816-0007
23