Document:

exv10w1w2h

 

Exhibit 10.1.2h

AMENDMENT NO. 8

Decommissioning Trust Agreement

(PVNGS Unit 2)

     This Amendment No. 8 dated as of April 1, 2007, to the Amended and Restated Decommissioning
Trust Agreement (PVNGS Unit 2), dated as of January 31, 1992, as amended by Amendment No. 1 thereto
dated as of November 1, 1992, Amendment No. 2 thereto dated as of November 1, 1994, Amendment No. 3
thereto dated as of June 20, 1996, Amendment No. 4 thereto dated as of December 16, 1996, Amendment
No. 5 thereto dated as of June 30, 2000, Amendment No. 6 thereto dated as of March 18, 2002, and
Amendment No. 7 thereto dated as of December 19, 2003 (the “Decommissioning Trust Agreement”,
terms used herein as therein defined), is entered into between Arizona Public Service Company
(“APS”), U.S. Bank National Association, as successor to State Street Bank and Trust Company, as
successor to The First National Bank of Boston, as Owner Trustee and as Lessor, and Mellon Bank,
N.A., as Decommissioning Trustee (“Decommissioning Trustee”).

R E C I T A L S:

     WHEREAS, the parties hereto wish to amend the Decommissioning Trust Agreement.

     NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration,
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     SECTION 1. Amendments.

	 	(a)	 	Clause (iii) of Paragraph (c) of Section 5 shall be restated as
follows:
	 
	 	 	 	APS shall cause or permit any of the assets of either Fund to be used for
any purpose other than as permitted by this Agreement or shall cause or
permit any assets of either Fund to be invested in any investment that is
not in accordance with Section 9 of this Agreement and shall fail to remedy
such non-permitted use or investment within 30 days following notice by a
Lessor or an Equity Participant to APS of such non-permitted use or
investment.
	 
	 	(b)	 	Clause (v) of Section 6 shall be restated as follows:
	 
	 	 	 	(v) the term “Decommissioning Fund Permitted Investments” (as such term is
defined in Section 10(b)(3)(viii) of each of the Participation Agreements)
shall mean those investments that are in accordance with Exhibit B.
	 
	 	(c)	 	Paragraph (c) of Section 7 shall be restated as follows:
	 
	 	 	 	to (i) hold assets, in a depository, in a clearing corporation, in book
entry form, or by any subcustodian or other entity or in any other manner
permitted by law; provided that the Decommissioning Trustee shall not be

 

 

	 	 	 	responsible for any losses resulting from the deposit or maintenance of
securities or other property (in accordance with market practice, custom, or
regulation) with any foreign or domestic clearing facility, book-entry
system, centralized custodial depository, or similar organization generally
used by professional custodians engaged in the banking or trust company
industry within the applicable market for the asset type in question and
(ii) settle transactions in futures and/or options contracts, foreign
exchange or foreign exchange contracts, swaps and other derivative
investments with third parties;
	 
	 	(d)	 	Paragraph (a) of Section 9 shall be restated as follows:
	 
	 	 	 	To hold, manage, invest, and reinvest the assets of the Funds; provided
however that notwithstanding the provisions of Section 9(c), Decommissioning
Trustee shall, at the close of business on each day, without prior approval
or direction from the Investment Manager(s), have the power, rights, and
responsibility to invest cash balances, including those held as part of an
account of the Investment Manager(s), in accordance with Exhibit B. Nothing
in this Section shall be construed as authorizing Decommissioning Trustee to
carry on any business or to divide the gains therefrom.
	 
	 	(e)	 	The first sentence of clause (ii) of Paragraph (c) of Section 9
shall be deleted.
	 
	 	(f)	 	The third sentence of clause (ii) of Paragraph (c) of Section 9
shall be restated as follows:
	 
	 	 	 	Upon proper notification from the Investment Manager(s), Decommissioning
Trustee shall execute and deliver instruments in accordance with the
appropriate trading authorizations; provided that the Decommissioning
Trustee shall not follow any direction that would result in assets of the
Second Fund being invested in investments not allowed for a qualified
nuclear decommissioning reserve fund under Section 468A of the Code and the
regulations thereunder.
	 
	 	(g)	 	Clause (ii) of Paragraph (d) of Section 9 shall be restated as
follows:
	 
	 	 	 	Decommissioning Trustee is required to supervise and review the securities
and other assets and investments authorized for purchase by the Investment
Managers(s) within two weeks of the end of the calendar month during which
such purchase was made to determine that such securities, assets and/or
investments are in accordance with Exhibit B. Upon the completion of such
review, the Decommissioning Trustee shall promptly notify APS, the Secured
Parties and the Equity Participants in writing if any securities, assets or
investments are not in accordance with Exhibit B.

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	 	(h)	 	The following shall be added to Section 13:
	 
	 	 	 	Notwithstanding the foregoing, if the Decommissioning Trustee advances cash
or securities for any purpose or in the event that the Decommissioning
Trustee shall incur or be assessed taxes, interest, charges, expenses,
assessments, or other liabilities in connection with the performance of this
Agreement, except such as may arise from its failure to exercise due care,
any property at any time held for the Fund or under this Agreement shall be
security therefor and the Decommissioning Trustee shall be entitled to
collect from the Fund sufficient cash for reimbursement, and if such cash is
insufficient, dispose of the assets held under this Agreement to the extent
necessary to obtain reimbursement.
	 
	 	 	 	Notwithstanding the foregoing, nothing in this Agreement shall prohibit the
lending of the assets of the Fund in accordance with the terms and
conditions of a separate securities lending agreement.
	 
	 	(i)	 	The last sentence of Section 16 shall be restated as follows:
	 
	 	 	 	APS agrees to pay, be solely responsible for and to indemnify the Owner
Trustees and the Equity Participants against all costs and expenses relating
or allocable to, or incurred in connection with, Decommissioning regardless
of Fund performance or asset valuations of the Fund at the time of
Decommissioning.
	 
	 	(j)	 	The second sentence of the fourth paragraph of Section 24 shall
be restated as follows:
	 
	 	 	 	Within two weeks of the end of each calendar quarter, the Decommissioning
Trustee shall send a written statement to APS and the Secured Parties and
Equity Participants indicating whether during that previous quarter such
securities, assets and/or investments held in the Funds during that quarter
were in accordance with Exhibit B; provided however, the Decommissioning
Trustee shall promptly advise APS and the Secured Parties and Equity
Participants if it has actual knowledge that any of the investments were not
in accordance with Exhibit B .
	 
	 	(k)	 	The following shall be added to the first paragraph of Section
26.
	 
	 	 	 	The Decommissioning Trustee shall not be responsible or liable for any
losses or damages suffered by the Fund arising as a result of the insolvency
of any custodian, (other than the Decommissioning Trustee or any affiliate
of the Decommissioning Trustee) subtrustee or subcustodian, except to the
extent the Decommissioning Trustee failed to exercise due care in its
selection, monitoring or continued retention of such entity. Settlements of
transactions may be effected in trading and processing practices customary
in the jurisdiction or market where the transaction

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	 	 	 	occurs. APS acknowledges that this may, in certain circumstances, require
the delivery of cash or securities (or other property) without the
concurrent receipt of securities (or other property) or cash. In such
circumstances, provided the Trustee has exercised due care and used
reasonable efforts, the Decommissioning Trustee shall have no responsibility
for nonreceipt of payment (or late payment) or nondelivery of securities or
other property (or late delivery) by the counterparty.
	 
	 	(l)	 	The definition of the terms “Investment Grade” and “Permitted
Investments” in Exhibit A to the Decommissioning Trust Agreement is hereby
deleted.
	 
	 	(m)	 	Exhibit B to the Decommissioning Trust Agreement is hereby
deleted and replaced in its entirety by Exhibit B hereto.

     SECTION 2. Miscellaneous

	 	(a)	 	Full Force and Effect.

     Except as expressly provided herein, the Decommissioning Trust Agreement shall remain
unchanged and in full force and effect. Each reference in the Decommissioning Trust Agreement and
in any exhibit or schedule thereto to “this Agreement,” “hereto,” “hereof” and terms of similar
import shall be deemed to refer to the Decommissioning Trust Agreement as amended hereby.

	 	(b)	 	Counterparts/Representations.

     The Amendment No. 8 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument, and any of the parties hereto may execute this
Amendment No. 8 by signing any such counterpart. Each party represents and warrants to the other
that it has full authority to enter into this Amendment upon the terms and conditions hereof and
that the individual executing this Amendment on its behalf has the requisite authority to bind that
Party.

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 8 to the Decommissioning
Trust Agreement to be duly executed as of the day and year first above written.

	 	 	 	 	 
	 	ARIZONA PUBLIC SERVICE COMPANY

 	 
	 	By:  	/s/ Janice Emery
 	 
	 	Title:	 Director, Trust Investments 	 
	 	 	 	 
	 
	 	MELLON BANK, N.A. as Decommissioning Trustee

 	 
	 	By:  	/s/ Thomas McNally
 	 
	 	Title:	 Vice President 	 
	 	 	 	 
	 
	 	U.S. BANK NATIONAL ASSOCIATION, as Owner Trustee
under a Trust Agreement with Security Pacific
Capital Leasing Corporation and as Lessor under a
Facility Lease with Arizona Public Service
Company

 	 
	 	By:  	/s/ Todd R. DiNezza
 	 
	 	Title:	 Assistant Vice President 	 
	 	 	 	 
	 
	 	U.S. BANK NATIONAL ASSOCIATION, as Owner Trustee
under a Trust Agreement with Emerson Finance Co.
and as Lessor under a Facility Lease with Arizona
Public Service Company

 	 
	 	By:  	/s/ Todd R. DiNezza
 	 
	 	Title:	 Assistant Vice President 	 
	 	 	 	 
	 

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	STATE OF ARIZONA

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	ss:
	 	 
	County of Maricopa

	 	 	)	 	 	 	 	 

     The foregoing instrument was acknowledged before me this 11th day of June, 2007, by Janice
Emery, the Dir., TI of ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation, on behalf of said
corporation.

	 	 	 	 	 
	 	 	 
	 	                  /s/ Linda G. Redman
 	 
	 	Notary Public 	 
	 	 	 
	 

	 	 	 	 	 	 	 	 	 
	My commission expires:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	February 8, 2011
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	COMMONWEALTH OF PENNSYLVANIA

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	ss:
	 	 
	County of Allegheny

	 	 	)	 	 	 	 	 

     The foregoing instrument was acknowledged before me this 20th day of December, 2007, by
Thomas J. McNally, a Vice President of Mellon Bank, N.A. a national banking association having
trust powers, as Decommissioning Trustee, on behalf of said national banking association.

	 	 	 	 	 
	 	 	 
	 	                                              /s/ Karesse M. Doss
 	 
	 	Notary Public 	 
	 	 	 
	 

My commission expires:

8-16-2011

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	[COMMONWEALTH OF MASSACHUSETTS]

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	ss:	 	 
	County of

	 	 	)	 	 	 	 	 

     The foregoing instrument was acknowledged before me this 24th day of July, 2007, by Todd R.
DiNezza, a Asst. Vice Pres. of U.S. Bank National Association, in its capacity as Owner Trustee
under a Trust Agreement with Security Pacific Capital Leasing Corporation and as Lessor under a
Facility Lease with Arizona Public Service Company, on behalf of said association in such
capacities.

	 	 	 	 	 
	 	 	 
	 	              /s/ Josh [surname illegible]
 	 
	 	Notary Public 	 
	 	 	 
	 

My commission expires:

2/7/08

	 	 	 	 	 	 	 	 	 
	[COMMONWEALTH OF MASSACHUSETTS]

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	ss:	 	 
	County of

	 	 	)	 	 	 	 	 

     The foregoing instrument was acknowledged before me this 24th day of July, 2007, by Todd R.
DiNezza, a Asst. Vice Pres. of U.S. Bank National Association, in its capacity as Owner Trustee
under a Trust Agreement with Emerson Finance Company and as Lessor under a Facility Lease with
Arizona Public Service Company, on behalf of said association in such capacities.

	 	 	 	 	 
	 	 	 
	 	                                              /s/ Josh [surname illegible]
 	 
	 	Notary Public 	 
	 	 	 
	 

My commission expires:

2/7/08

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Exhibit B

INVESTMENT GUIDELINES FOR THE

UNIT 2 DECOMMISSIONING TRUST FUND AND THE SECOND FUND

     The Unit 2 Decommissioning Trust Fund and the Second Fund (collectively, the “Funds”) shall be
invested in compliance with all applicable requirements of the Code, rules and regulations of the
Internal Revenue Service, and applicable State regulations. The Second Fund shall be invested in a
manner that does not jeopardize its tax-preferred status.

          Subject to the foregoing, the Funds shall adhere to the following restrictions and guidelines,
provided that a standard of care is exercised, whether in investing or otherwise, that a prudent
investor would use in the same circumstances. The term “prudent investor” shall have the same
meaning as set forth in the Federal Energy Regulatory Commission’s “Regulations Governing Nuclear
Plant Decommissioning Trust Funds” at 18 CFR 35.32(a)(3), or any successor regulation:

     l. Equity securities, including, but not limited to, investment of units of common or
collective trust funds or other private funds investing in corporate equity securities, shall not
exceed:

	 	a.	 	Fifty percent (50%) of the market value of the aggregate
assets of the Funds during the period from June 27, 1996 through December 31,
2003.
	 
	 	b.	 	Forty percent (40%) of the market value of the aggregate
assets of the Funds during the period from January 1, 2004 through December
31, 2006.
	 
	 	c.	 	Twenty percent (20%) of the market value of the aggregate
assets of the Funds during the period from January 1, 2007 through January 31,
2010.
	 
	 	d.	 	No investments shall be made in equity securities after
January 31, 2010.

     2. Securities of APS, APS’s parent corporation, Pinnacle West Capital Corporation, or its
affiliates, are not permitted.

     3. Securities issued in connection with the assets or operations of the Palo Verde Nuclear
Generation Station, Pinnacle West, or its affiliates, are not permitted.

     4. Securities issued by or on behalf of any participant in the Palo Verde Nuclear Generating
Station are not permitted.

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     5. There shall be no short-selling or use of economic leverage. Economic Leverage is defined
as exposing the Funds to risk and/or volatility in excess of what the Fund would experience by
making an un-financed investment in the underlying securities directly.

     6. Derivatives are permitted as long as derivatives are used to (i) hedge existing long
positions, (ii) manage aggregate portfolio durations, (iii) obtain security or market exposure, or
(iv) for other risk management. Derivatives used for the purpose of speculation, which expose the
Funds to Economic Leverage, or which cause the Funds to fall outside the parameters of this Exhibit
B are prohibited.

     7. The holding of any one issue (excluding direct or moral obligations of the United States
Government and the shares or units of any diversified investment vehicle), shall not exceed ten
percent (10%) of the market value of the Funds’ aggregate assets.

     8. The market value of unhedged non-U.S. dollar denominated equity securities shall not exceed
twenty percent (20%) of the aggregate market value of the Funds’ equity allocation.

     9. The market value of unhedged non-U.S. dollar denominated fixed income securities shall not
exceed thirty percent (30%) of the aggregate market value of the Funds’ fixed income allocation.

     10. The average credit quality of the Funds’ fixed income securities shall be rated
“Aa3/AA-/AA-” or higher by Moody’s Investors Service, Standard & Poor’s, or Fitch respectively.
The Lehman Brothers rating methodology shall be used to determine the Funds’ average credit
quality. Notwithstanding the forgoing, securities rated below Baa3/BBB-/BBB- shall not exceed
twenty percent (20%) of the aggregate market value of the Funds’ fixed income allocation.

     11. The Funds shall hold no more than three percent (3%) of the aggregate market value of the
Funds’ fixed income securities in issues not rated by either Moody’s Investors Service, Standard &
Poor’s or Fitch (“Unrated Issues”). Notwithstanding the forgoing, Unrated Issues may not be held
unless the investment manager has assigned its own credit rating to an Unrated Issue.

     12. In the event that a security fails to meet the credit quality criteria defined herein, the
security shall be sold within ninety (90) days unless the investment manager provides reasonable
written justification for continued holding of the security.

     13. Time or demand deposits are not permitted unless they are insured by the Federal Deposit
Insurance Corporation or other comparable entity.

     14. Derivative, swap or similar transactions involving counterparty risk shall be limited to
counterparties having a credit rating from Moody’s Investor Services and Standard & Poor’s of A or
better. A “Counterparty” is defined as any entity with whom
the Funds enter into an over-the-counter derivatives, swap or similar contract.

2exv10w6w5

 

Exhibit 10.6.5

Summary of 2008 Incentive Plans

     On January 23, 2008, the Company’s Board of Directors, acting on the recommendation of the
Board’s Human Resources Committee (the “Committee”), approved the 2008 Pinnacle West Employee
Variable Incentive Plan and the 2008 APS Employee Variable Incentive Plan (collectively, the “2008
Plans”). The 2008 Plans provide incentive award opportunities for Pinnacle West and APS employees,
including the following “named executive officers” from the Company’s proxy statement relating to
its 2008 Annual Meeting: William J. Post, the Company’s Chairman and CEO; Donald E. Brandt,
Pinnacle West’s Executive Vice President and Chief Financial Officer and APS’ President and Chief
Financial Officer; Randall K. Edington, APS’ Executive Vice President, Nuclear and Chief Nuclear
Officer; and Steven M. Wheeler, APS’ Executive Vice President Customer Service and Regulation (Mr.
Davis will be retiring this year and will not be participating in the 2008 Plans). As required by
the Committee’s Charter, the Committee, rather than the Board, approved Mr. Post’s award
opportunity.

     The Committee granted Messrs. Post and Brandt incentive opportunities up to 150% of base
salary and Messrs. Edington and Wheeler up to 50% of base salary. In assessing the award
opportunity for each of these officers, the Committee will first consider 2008 earnings (Pinnacle
West earnings in the case of Mr. Post, and APS earnings in the case of Messrs. Brandt, Edington and
Wheeler), excluding impacts from Arizona Corporation Commission rate decisions. In order for the
officers to be eligible for an incentive award, earnings must meet or exceed a specified threshold
level. However, because the payment of incentive awards is in the sole discretion of the
Committee, the Committee will then consider other factors in assessing award opportunities,
including customer value, financial strength, operational and environmental performance, and
safety.

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