exv10w04w10







Exhibit 10.4.10




SUPPLEMENTAL AGREEMENT




FOR RANDALL K. EDINGTON





 









 








Table of Contents




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	1. Definitions
	 	 	1	 
	 
	 	 	 	 
	2. Cash Bonuses
	 	 	3	 
	 
	 	 	 	 
	3. Compensation in lieu of Entergy Stock Options and Performance Shares
	 	 	3	 
	 
	 	 	 	 
	4. Deferred Compensation
	 	 	4	 
	 
	 	 	 	 
	5. Supplemental Pension Benefit
	 	 	5	 
	 
	 	 	 	 
	6. Specified Employee Rule
	 	 	6	 
	 
	 	 	 	 
	7. Special Medical Benefits in Certain Circumstances
	 	 	6	 
	 
	 	 	 	 
	8. Termination for Disability
	 	 	6	 
	 
	 	 	 	 
	9. Termination Not Giving Rise to Company Obligations
	 	 	7	 
	 
	 	 	 	 
	10. Termination Notice and Procedure
	 	 	7	 
	 
	 	 	 	 
	11. Obligations of Executive
	 	 	7	 
	 
	 	 	 	 
	12. Company Right of Offset
	 	 	8	 
	 
	 	 	 	 
	13. Amendment and Termination
	 	 	8	 
	 
	 	 	 	 
	14. Withholding
	 	 	8	 
	 
	 	 	 	 
	15. Venue; Governing Law
	 	 	8	 
	 
	 	 	 	 
	16. Notice
	 	 	8	 
	 
	 	 	 	 
	17. Funding
	 	 	8	 
	 
	 	 	 	 
	18. No Waiver
	 	 	9	 
	 
	 	 	 	 
	19. Claims Procedure
	 	 	9	 
	 
	 	 	 	 
	20. Administration and Interpretation of Agreement
	 	 	9	 
	 
	 	 	 	 
	21. Section 409A Compliance
	 	 	9	 






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SUPPLEMENTAL AGREEMENT

FOR RANDALL K. EDINGTON




     THIS AGREEMENT, made and entered into as of the 26th day of December, 2008 by and between
Arizona Public Service Company, an Arizona corporation (hereinafter referred to as the “Company”)
and Randall K. Edington (hereinafter referred to as “Executive”):



W I T N E S S E T H




     WHEREAS, the Company and Executive entered into two letter agreements (the “Letter
Agreements”), the first dated December 20, 2006, under which employment was offered to and accepted
by Executive, and the second dated July 18, 2008, under which additional compensation and benefits
were offered to and accepted by Executive; and



     WHEREAS, the Company and Executive deem it necessary and desirable to enter into this special
supplemental agreement (the “Agreement”) to formally memorialize certain provisions of the Letter
Agreements in accordance with the requirements of Code Section 409A.



     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
hereinafter set forth, the parties hereto mutually covenant and agree as follows:




	1.	 	Definitions.






	 	(a)	 	“Cause” shall mean (i) Executive’s unreasonable neglect in performing his
duties, including, but not limited to gross negligence, fraud, misappropriation or
embezzlement involving property of the Company or an affiliate of the Company, or
(ii) any other intentional act by Executive that may impair the goodwill or business
of the Company or an affiliate of the Company, or that may cause damage to any of
their businesses.
	 
	 	(b)	 	“Change of Control” shall have the same meaning as given to that term in
the KEESA.
	 
	 	(c)	 	“Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time.
	 
	 	(d)	 	“Deferred Compensation Account” shall mean an unfunded account established
by the Company for the benefit of Executive in accordance with Section 4.
	 
	 	(e)	 	“Disability” shall mean that Executive is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months.
	 
	 	(f)	 	“Employment Date” shall mean January 25, 2007.
	 
	 	(g)	 	“Entergy” shall mean Entergy Corporation, its successors and assigns.
	 
	 	(h)	 	“Final Average Pay” shall mean the average of the sum of:




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	 	(i)	 	Executive’s base salary payable during any 12-month
period, disregarding any deductions therefrom for benefits or taxes on
either a pre-tax or after-tax basis, plus
	 
	 	(ii)	 	Executive’s annual year-end bonus payable during such
period, disregarding any deductions therefrom for benefits or taxes on
either a pre-tax or after-tax basis,






	 	 	 	for three such periods within the ten years ending coincident with or next
preceding Executive’s Termination Date which produce the highest such average. In
calculating Final Average Pay, a consistent twelve-month period shall be used, and
only three year-end bonuses shall be counted. If more than three year-end bonuses
are included in the three periods used, only the three highest year-end bonuses
shall be counted.
	 
	 	(i)	 	“KEESA” shall mean that certain Key Employee Employment and Severance
Agreement entered into by and between the Company and Executive under date of
November 5, 2007, as amended from time to time.
	 
	 	(j)	 	“Qualified Plan” shall mean the Pinnacle West Capital Corporation
Retirement Plan, as amended from time to time.
	 
	 	(k)	 	“SEBRP” shall mean the Pinnacle West Capital Corporation Supplemental
Excess Benefit Retirement Plan, as amended from time to time.
	 
	 	(l)	 	“Section 409A” shall mean Section 409A of the Code and the regulations
thereunder, as amended from time to time.
	 
	 	(m)	 	“Spouse” shall mean the spouse to whom Executive was married on December
21, 2006. For the avoidance of doubt, if Executive and his Spouse divorce, such
divorce shall not terminate the Spouse’s rights under this Agreement, and any
subsequent spouse of Executive shall be entitled to no benefits under this Agreement.
	 
	 	(n)	 	“Termination Date” shall mean the earliest of the following:






	 	(i)	 	Executive’s date of death;
	 
	 	(ii)	 	sixty (60) days after the delivery of the Notice of
Termination terminating Executive’s employment on account of Disability,
unless Executive returns full-time to the performance of his duties prior
to the expiration of such period;
	 
	 	(iii)	 	the date of the Notice of Termination if Executive’s
employment is terminated by Executive voluntarily; and






	 	(iv)	 	fifteen (15) days after the delivery of the Notice of
Termination if Executive’s employment is terminated by the Company (other
than by reason of Disability).




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	 	(o)	 	“Year of Service” shall have the same meaning as given to that term in the
Qualified Plan.






	2	 	Cash Bonuses. If Executive has remained in continuous employment with the Company from his
Employment Date through January 25, 2009, the Company shall pay Executive bonus compensation
of $100,000 not later than March 15, 2009.
	 
	3	 	Compensation in lieu of Entergy Stock Options and Performance Shares.






	 	(a)	 	If, as of the date specified in Column 1 of the table below:






	 	(i)	 	Executive has remained continuously employed by the
Company since his Employment Date, and
	 
	 	(ii)	 	the fair market value of one share of Entergy common
stock on that date exceeds the amount shown in Column 2, the Company shall
pay Executive the difference between the amount shown in Column 2 and the
fair market value of one share of Entergy common stock on that date,
multiplied by the number in Column 3.





	 	 	 	 	 	 	 	 	 	 	 
	 	 	Column 1	 	Column 2	 	Column 3
	Description	 	(vesting date)	 	(strike price)	 	(number of shares)
	 
	(2006 grant)

	 	January 26, 2009
	 	$	68.89	 	 	 	2,668	 







	 	(b)	 	If, as of the date specified in Column 1 of the table below, Executive has
remained in continuous employment with the Company since his Employment Date, then
the Company shall pay Executive an amount determined by:






	 	(i)	 	adding






	 	(A)	 	the fair market value of one share of
Entergy common stock on that date; plus
	 
	 	(B)	 	the sum of all dividends paid on one share of Entergy common stock in
the 36 months ending on that date; and






	 	(ii)	 	multiplying the sum determined in subparagraph (i) by
the number in Column 2.





	 	 	 	 	 	 	 
	 	 	Column 1	 	Column 2
	Description	 	(day after end of period)	 	(number of shares)
	 
	(2006-2008 performance period)

	 	January 1, 2009
	 	 	1,100	 







	 	(c)	 	(i) The fair market value of a share of Entergy common stock as of any
date provided for in paragraph (a) or (b) shall be based on the closing price
therefor on that date, or if that date is a holiday for the New York Stock Exchange,
the next date on which the New York Stock Exchange is open for business, all as
published in the Wall Street Journal.




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	 	(ii)	 	If there shall occur any merger, consolidation, liquidation,
issuance of rights or warrants to purchase securities, recapitalization,
reclassification, stock dividend, spin-off, split-off, stock split, reverse
stock split or other distribution with respect to the shares of Entergy common
stock, or any similar corporate transaction or event in respect of Entergy
common stock between Executive’s Employment Date and any date specified in the
table set forth in paragraph (a) or (b), then a proportionate adjustment shall
be made in Columns 2 and 3 of the chart in paragraph (a) and in Column 2 of
the chart in paragraph (b), without change in the value represented therein.






	 	(d)	 	The Company shall pay the amount based on the price of Entergy common stock
as of any date provided for in paragraph (a) or (b) not later than thirty (30) days
following that date.






	4.	 	Deferred Compensation. The Company shall establish a hypothetical Deferred Compensation
Account for the benefit of Executive in accordance with the following:






	 	(a)	 	The Deferred Compensation Account shall be credited with the following
amounts as of the following specified dates, provided that Executive remains in
continuous employment with the Company on the specified dates.





	 	 	 
	Specified Date
	 	Amount
	July 15, 2008
	 	$1,000,000
	June 1, 2009
	 	$1,000,000
	June 1, 2010
	 	$1,000,000
	June 1, 2011
	 	$1,000,000







	 	(b)	 	No interest, earnings or market value adjustments will be applied to the
amounts in the Deferred Compensation Account at any time.
	 
	 	(c)	 	Executive’s Deferred Compensation Account shall become 100% vested as of
the first to occur of the following dates (“Vesting Date”):






	 	(i)	 	June 1, 2012, provided that Executive is continuously
employed with the Company from the date of this Agreement through June 1,
2012, or
	 
	 	(ii)	 	Executive’s Termination Date by reason of his death,
Disability or involuntary termination without Cause.






	 	(d)	 	The amount payable to Executive under this Section 4 will be the amount of
the Deferred Compensation Account on his Vesting Date; provided, if vesting is caused
by Executive’s death, the amount payable shall be $4,000,000, regardless of the date
of death, and shall be paid to Executive’s Spouse, or if Executive is not survived by
his Spouse, to Executive’s estate.
	 
	 	(e)	 	The amount payable pursuant to this Section 4 shall be paid in the form of
single sum within 30 days after the Vesting Date.




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	 	(f)	 	The amount payable pursuant to this Section 4 shall not be taken into
account for purposes of determining the amount available for deferral by Executive or
the amount of the benefit accrued by Executive under any qualified or non-qualified,
funded or unfunded deferred compensation or retirement plan or welfare benefit plan
in which Executive is eligible to participate.
	 
	 	(g)	 	Upon Executive’s Termination Date for any reason other than death,
Disability or involuntary termination without Cause before occurrence of a Vesting
Date, the Deferred Compensation Account shall be forfeited in its entirety.






	5.	 	Supplemental Pension Benefit.






	 	(a)	 	Notwithstanding anything in the SEBRP to the contrary, the form, amount and
timing of payments of Executive’s SEBRP benefits shall be determined under this
Section 5, which shall be deemed to modify the SEBRP with respect to Executive.
	 
	 	(b)	 	If Executive’s Termination Date occurs for any reason after he has
completed at least five (5) Years of Service, Executive shall be entitled to a
supplemental pension valued on the basis of a single life annuity payable upon his
termination of employment equal to the greater of (i) 10% of Executive’s Final
Average Pay per Year of Service, to a maximum of 60% of Executive’s Final Average
Pay, reduced by the actuarially equivalent benefit payable under the Qualified Plan,
or (ii) the Executive’s benefit payable under the SEBRP (determined solely by
reference to the SEBRP document) converted to an actuarially equivalent life annuity
payable upon his termination of employment. In no event, however, shall Executive’s
monthly benefit be less than the amount determined in Section 5(c).
	 
	 	 	 	Executive’s benefit under this Section 5(b) shall be payable 50% in the
applicable annuity form described in the next sentence and 50% in an actuarially
equivalent single sum. If Executive’s Spouse is living on the Termination Date,
the applicable annuity form shall be an actuarially equivalent 100% joint and
survivor annuity measured by the remaining
lifetimes of Executive and his Spouse, and if Executive’s Spouse is not living on
the Termination Date, the applicable annuity form shall be a single life annuity
measured by Executive’s remaining lifetime.
	 
	 	 	 	If Executive’s employment terminates as a result of death, (i) the lump sum
benefit described above shall be payable upon his death to his surviving Spouse,
if she is then living, otherwise to his estate, and (ii) if Executive is survived
by his Spouse, she shall receive the survivor annuity portion of the 100% joint
and survivor annuity described above.
	 
	 	(c)	 	(i) If Executive’s Termination Date occurs before he has completed five (5)
Years of Service for any reason other than voluntary resignation or termination for
Cause, Executive shall be entitled to a supplemental pension equal to $24,226 per
month payable for the remaining lifetime of Executive, and if Executive is survived by
his Spouse, for the remaining lifetime of the Spouse after Executive’s death, reduced
as provided for in subparagraph (ii).





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	 	(ii)	 	The benefit payable pursuant to paragraph (i) shall be offset
by the corresponding actuarially equivalent benefits payable under the
Qualified Plan, if vested on the Termination Date.
	 
	 	(iii)	 	In the event Executive’s Termination Date occurs on or after
the date he has completed three (3) Years of Service but before he has
completed five (5) Years of Service on account of voluntary resignation or
termination for Cause, Executive shall receive his benefit payable under the
SEBRP determined solely by reference to the SEBRP document converted to an
actuarially equivalent joint and 100% survivor annuity for the lifetime of
Executive and his Spouse. If Executive’s Termination Date occurs before he
has completed five (5) Years of Service for any reason other than as described
in the preceding sentence, Executive shall not receive a benefit calculated
under the SEBRP document, but instead shall receive the benefit described in
Section 5(c)(i).






	 	(d)	 	Subject to Section 6, Executive’s benefits under this Section 5 shall
commence on the first day of the month following his Termination Date. For the
avoidance of doubt, Executive’s benefits under this Section 5 shall not be
actuarially reduced to reflect early commencement of benefits if he terminates
employment before age 65.
	 
	 	(e)	 	All determinations of actuarial equivalence provided for in this Section 5
shall be made on the basis of the actuarial assumptions in use as of the specified
dates under the Qualified Plan.






	6.	 	Specified Employee Rule. Notwithstanding any provision of Section 5, if Executive is a
specified employee as defined by the Company for purposes of Section 409A on his Termination
Date and his Termination Date is not caused by his death or
Disability, payments provided for in Section 5 shall not begin until 6 months after his
Termination Date, and all amounts otherwise payable earlier than 6 months following his
Termination Date shall be paid on the first day of the seventh full calendar month
following his Termination Date.






	7.	 	Special Medical Benefits in Certain Circumstances. If Executive’s Termination Date occurs
before January 25, 2012 by reason of involuntary termination without Cause, death, Disability
or following a Change of Control, or for any reason on or after January 25, 2012, Executive
and his Spouse, or if Executive’s Termination Date is caused by his death, his Spouse alone,
shall receive coverage available to retired Company executives of the same rank as Executive
as of his Termination Date or their widowed spouses, as the case may be, under the Company’s
retiree medical plan in effect from time to time or equivalent coverage funded by insurance,
as determined by the Company in its sole discretion, subject to Executive’s or his Spouse’s
payment of contributions at the same rate as contributions for equivalent coverage due from
such other executives who commenced employment with the Company before 2003 and have 25 or
more Years of Service (or their spouses), as determined from time to time.






	8.	 	Termination for Disability. If Executive has been absent from his duties hereunder on a
full-time basis for five (5) consecutive months on account of a Disability, the Company may




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	 	 	provide a Notice of Termination which satisfies the requirements of Section 10, and
Executive’s employment shall, for purposes of this Agreement, terminate sixty (60) days
thereafter, unless Executive returns to the performance of his duties on a full-time basis
prior to the end of the sixty (60) day period.






	9.	 	Termination Not Giving Rise to Company Obligations. If Executive’s employment is
terminated for Cause or if Executive voluntarily terminates his employment before January 25,
2012, subject to the procedures set forth in Section 10, Executive shall not be entitled to
receive any amount or benefit otherwise due under this Agreement after the Termination Date.






	10.	 	Termination Notice and Procedure. Any termination by the Company or Executive of
Executive’s employment shall be communicated by written Notice of Termination to Executive if
such Notice is delivered by the Company and to the Company if such Notice is delivered by
Executive, all in accordance with the following procedures:






	 	(a)	 	The Notice of Termination shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances alleged to provide a basis for termination.
	 
	 	(b)	 	Any Notice of Termination by the Company shall be approved in writing by
its Chief Executive Officer and Chief Operating Officer.
	 
	 	(c)	 	If the Company shall give a Notice of Termination for Cause and Executive
in good faith notifies the Company that a dispute exists concerning such termination
within the fifteen (15) day period following Executive’s receipt of such notice, then
if it is thereafter determined that:






	 	(i)	 	the reason given by the Company for termination did
exist, Executive’s Termination Date shall be the date set forth in the
Company’s Notice of Termination for Cause; or
	 
	 	(ii)	 	the reason given by the Company for termination did not
exist, the employment of Executive shall be deemed to have been terminated
involuntarily without Cause on the date set forth in the Company’s Notice
of Termination.






	11.	 	Obligations of Executive. Executive covenants and agrees, during Executive’s employment
with the Company and following his Termination Date, to hold in strict confidence any and all
information in Executive’s possession as a result of Executive’s employment with the Company;
provided that nothing in this Agreement shall be construed as prohibiting Executive from
reporting any suspected instance of illegal activity of any nature, any nuclear safety
concern, any workplace safety concern or any public safety concern to the United States
Nuclear Regulatory Commission, United States Department of Labor or any federal or state
governmental agency or prohibiting Executive from participating in any way in any state or
federal administrative, judicial or legislative proceeding or investigation with respect to
any such claims and matters.




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	12.	 	Company Right of Offset. In the event that the Company has paid Executive more than the
amount to which Executive is entitled under this Agreement, the Company shall have the right
to recover all or any part of such overpayment from Executive or from whomsoever has received
such amount.






	13.	 	Amendment and Termination. The term of this Agreement shall expire when all obligations of
the Company and Executive hereunder have been satisfied. This Agreement sets forth the entire
agreement between Executive and the Company with respect to the subject matter hereof, and
supersedes all prior oral or written negotiations, commitments, understandings and writings
with respect thereto. This Agreement may not be terminated, amended or modified during its
term as specified above except by written instrument executed by the Company and Executive.






	14.	 	Withholding. The Company shall be entitled to withhold from amounts to be paid to
Executive under this Agreement any federal, state or local withholding or other taxes or
charges which it is from time to time required to withhold.






	15.	 	Venue; Governing Law. This Agreement and Executive’s and Company’s respective rights and
obligations hereunder shall be governed by and construed in accordance with the laws of the
State of Arizona. Any action concerning this Agreement shall be brought in the Federal or
state courts located in the County of Maricopa, Arizona, and each party consents to the venue
and jurisdiction of such courts.






	16.	 	Notice. Notices given pursuant to this Agreement shall be in writing and (a) if hand
delivered, shall be deemed given when delivered, and (b) if mailed, shall be deemed delivered
when placed in the United States mail, postage prepaid, addressed,
	 
	 	 	if to the Company, to:




Board of Directors

Pinnacle West Capital Corporation

400 North Fifth Street

Phoenix, Arizona 85004

Attention: Law Department





or if to Executive, to:


Randall K. Edington

3853 North Sidney St.

Buckeye, Arizona 85396





or to such other addresses as the parties may provide written notice of to each other, from
time to time, in accordance with this Section 16.




	17.	 	Funding. Amounts payable under this Agreement shall constitute an unfunded general
obligation of the Company payable from its general assets, and the Company shall not be
required to establish any special fund or trust for purposes of paying benefits under this
Agreement. The Executive shall not have any vested right to any particular assets of the




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	   	 	Company as a result of execution of this Agreement and shall be a general creditor of the
Company.






	18.	 	No Waiver. No waiver by either party at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed by the other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same
time or any prior or subsequent time.






	19.	 	Claims Procedure Any claim for benefits under Sections 4 or 5 shall be processed under the
Qualified Plan claims procedure.






	20.	 	Administration and Interpretation of Agreement. The Company acting through the
Administrative Committee under the Qualified Plan shall be responsible for and shall control
and manage the operation and administration of this Agreement, except as otherwise
specifically provided for herein. The Company shall administer the provisions of this
Agreement in accordance with its terms and shall have all powers necessary to carry out the
provisions of this Agreement. The Administrative Committee shall interpret this Agreement and
shall have the discretionary authority to determine all questions arising in the
administration, interpretation, and application of this Agreement. Any such determination by
the Administrative Committee shall presumptively be conclusive and binding on all persons.






	21.	 	Section 409A Compliance. This Agreement is designed to comply with Section 409A.
Notwithstanding any other provision of this Agreement, all provisions of this Agreement shall
be construed in a manner consistent with Section 409A.





     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer, and Executive has executed this Agreement, on the date and year first above
written.



	 	 	 	 	 
	 	ARIZONA PUBLIC SERVICE COMPANY

 	 
	 	By  	     /s/ Donald Robinson
 	 
	 	 	Its      Sr VP Planning & Administration 	 
	 	 	 	 
	 
	 	 	 
	 	                                                   /s/ Randall K. Edington
 	 
	 	Randy Edington 	 
	 	 	 
	 








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