EXHIBIT 10.1
PERFORMANCE SHARE AGREEMENT
UNDER THE
PINNACLE WEST CAPITAL CORPORATION 2002
LONG-TERM INCENTIVE PLAN
THIS AWARD AGREEMENT is made and entered into as of ___________, 200__
(the "Date of Grant"), by and between Pinnacle West Capital Corporation (the
"Company"), and <> ("Employee").
BACKGROUND
A. The Board of Directors of the Company (the "Board of Directors") has
adopted, and the Company's shareholders have approved, the Pinnacle
West Capital Corporation 2002 Long-Term Incentive Plan (the "Plan"),
pursuant to which performance share incentive awards may be granted
to employees of the Company and its subsidiaries and certain other
individuals.
B. The Company desires to grant to Employee a performance share award
under the terms of the Plan.
C. Pursuant to the Plan, the Company and Employee agree as follows:
AGREEMENT
1. GRANT OF AWARD. Pursuant to action of the Committee (as
defined herein) which was taken on the Date of Grant, the
Company grants to Employee <> performance shares
("Performance Shares") subject to the terms, conditions, and
adjustments set forth in this Award Agreement. The Performance
Shares granted under this Section 1 are referred to in this
Award Agreement as the "Base Grant."
2. AWARD SUBJECT TO PLAN. This award is granted under and is
expressly subject to, all of the terms and provisions of the
Plan, which terms are incorporated herein by reference, and
this Award Agreement. The Committee described in Section 4 of
the Plan (the "Committee") has been appointed by the Board of
Directors, and designated by it, as the Committee to make
awards.
3. PERFORMANCE PERIOD. The performance period for this award
begins _________ __, 20___, and ends _____________ __, 20___
(the "Performance Period").
4. PAYMENT.
(a) PERFORMANCE SHARES PAYABLE IN COMMON STOCK. Subject to
early termination of this Award Agreement pursuant to
Section 7 below, as soon as practicable following the
end of the Performance Period and the determination of
the Company's Earnings Per Share Growth Rate (as defined
herein) as compared to the Earnings Per Share Growth
Rate of the Index set forth on Attachment A (the
"Index") over such Performance Period but in no event
later than December 31, 20___, the Company will deliver
to Employee one (1) share of the Company's Common Stock
for each then-outstanding Performance Share under this
Award Agreement. If the Employee terminates employment
after the end of the Performance
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Performance Share Agreement
Period but before distribution of any shares pursuant to
this Award Agreement, the distribution of the shares
will not be made until six (6) months following the
Employee's termination of employment if required by
Section 409A of the Code.
(b) DIVIDEND EQUIVALENTS. At the time of the Company's
delivery of Common Stock to Employee pursuant to
Subsection 4(a) above, the Company will also deliver to
Employee a cash payment equal to the amount of dividends
that Employee would have received if Employee had
directly owned all of such Common Stock during the
Performance Period, plus interest on such amount at the
rate of _____ percent, compounded quarterly.
(c) MAXIMUM AWARD. Employee may not receive more than
120,000 shares of Common Stock under this Award
Agreement.
5. PERFORMANCE CRITERIA AND ADJUSTMENTS.
ADJUSTMENT OF BASE GRANT. The Base Grant will increase or
decrease based upon the Company's "Earnings Per Share Growth
Rate" as compared to the Earnings Per Share Growth Rate of the
Index during the Performance Period, as follows:
IF THE COMPANY'S EARNINGS PER SHARE COMPOUND GROWTH RATE THE NUMBER OF
OVER THE PERFORMANCE PERIOD AS COMPARED TO THE INDEX IS: PERFORMANCE SHARES WILL BE:
---------------------------------------------------------- ---------------------------
___th Percentile or Greater ___ X Base Grant
___th Percentile ___ X Base Grant
___th Percentile Base Grant
___th Percentile ___ X Base Grant
Less than ___th Percentile [None / ___X Base Grant]
If intermediate percentiles are achieved, the number of
Performance Shares awarded will be prorated (partial shares
will be rounded down to the nearest whole share when
applicable). For example, if the Company's Earnings Per Share
Growth Rate during the Performance Period places the Company's
performance in the ___th percentile, then the number of
Performance Shares would be increased to ______ multiplied by
the Base Grant. In no event will Employee be entitled to
receive a number of Performance Shares greater than ___ times
the Base Grant, even if the Company's Earnings Per Share
Growth Rate during the Performance Period places the Company's
performance higher than the ____th percentile. Attachment B
provides a generic example of the operation of an award
granted under this Award Agreement.
6. EARNINGS PER SHARE GROWTH RATE. "Earnings Per Share Growth
Rate" for the Performance Period is the compounded
annual-growth rate (CAGR) of a company's earnings per share
from continuing operations, on a fully diluted basis, during
the Performance Period provided, however, that for purposes
of calculating the Company's Earnings Per Share Growth Rate,
SunCor Development Company's earnings from discontinued
operations will be considered earnings from continuing
operations for each fiscal year during the Performance
Period. Only those companies which were in the Index at both
the beginning and the ending of the Performance Period will be
considered. The
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Performance Share Agreement
Earnings Per Share Growth Rate of the companies in the Index
will be determined using an independent third party data
system. If the Index is discontinued, the Committee shall
select the most comparable index then in use for the sector
comparison. In addition, if the sector comparison is no longer
representative of the Company's industry or business, the
Committee shall replace the index with the most representative
index then in use. Once the CAGR of the Company and all
relevant companies in the Index have been determined, the
member companies will be ranked from greatest to least CAGR.
Percentiles will be calculated based on a company's relative
ranking. For example, company 1 out of 26 companies is given a
percentile of 96.2% (1.0 - 1/26). Percentiles will be carried
out to one (1) decimal place. If the Company is not in the
Index, then its percentile will be interpolated between the
companies listed in the relative ranking. These calculations
will be verified by the Company's internal auditors.
7. TERMINATION OF AWARD. This Award Agreement will terminate and
be of no further force or effect on the date that Employee is
no longer actively employed by the Company or any of its
subsidiaries, whether due to voluntary or involuntary
termination, death, retirement, disability, or otherwise.
Subject to Section 4, Employee will, however, be entitled to
receive any Common Stock and dividend equivalents payable
under Section 4 of this Award Agreement if Employee's
employment terminates after the Performance Period but before
Employee's receipt of such Common Stock and dividend
equivalents. For avoidance of doubt, no acceleration of
Performance Shares or the Performance Period will occur on a
change of control of the Company.
8. TAX WITHHOLDING. Employee must pay, or make arrangements
acceptable to the Company for the payment of any and all
federal, state, and local income and payroll tax withholding
that in the opinion of the Company is required by law. Unless
Employee satisfies any such tax withholding obligation by
paying the amount in cash or by check, the Company will
withhold shares of Common Stock having a Fair Market Value on
the date of withholding sufficient to cover the withholding
obligation.
9. NON-TRANSFERABILITY. Neither this award nor any rights under
this Award Agreement may be assigned, transferred, or in any
manner encumbered except by will or the laws of descent and
distribution, and any attempted assignment, transfer,
mortgage, pledge or encumbrance except as herein authorized,
will be void and of no effect.
10. DEFINITIONS: COPY OF PLAN AND PLAN PROSPECTUS. To the extent
not specifically defined in this Award Agreement, all
capitalized terms used in this Award Agreement will have the
same meanings ascribed to them in the Plan. By signing this
Award Agreement, Employee acknowledges receipt of a copy of
the Plan and the related Plan Prospectus.
11. CHOICE OF LAW. This Agreement will be governed by the laws of
the State of Arizona, excluding any conflicts or choice of law
rule or principle that might otherwise refer construction or
interpretation of this Agreement to another jurisdiction.
An authorized representative of the Company has signed this Award
Agreement, and Employee has signed this Award Agreement to evidence Employee's
acceptance of the award on the terms specified in this Award Agreement, all as
of the Date of Grant.
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Performance Share Agreement
PINNACLE WEST CAPITAL CORPORATION
By: ____________________________________________
Its: Vice President and Treasurer
________________________________________________
Employee
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Performance Share Agreement
ATTACHMENT A
The Index will be the S&P 1500 Super Composite Electric Utility Index
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Performance Share Agreement
ATTACHMENT B
GENERIC EXAMPLE
(PERFORMANCE SHARE AWARD)
ASSUMPTIONS:
- Employee is granted 500 Performance Shares, which constitutes
Employee's "Base Grant".
- During the Performance Period, the Company's Earnings Per Share
Growth Rate is in the 88.3 percentile compared to the Index.
CALCULATION OF EMPLOYEE'S COMMON STOCK PAYMENT:
- Based on the Company's achievement of the 88.3 Percentile during the
Performance Period, in April of the fiscal year immediately following the
end of the Performance Period, Employee will receive ____ shares of Common
Stock, calculated as follows:
- ___ shares of Common Stock as a result of the Company's Earnings Per
Share Growth Rate meeting at least the ___th Percentile (____ X Base
Grant) plus
- ___ shares of Common Stock as a result of the Company's Earnings Per
Share Growth Rate achieving ________ of the Percentile increase
between the ___th and ___th Percentiles (________ X _______ shares,
with the ___ shares representing the Common Stock opportunity
between the ___th and ___th Percentiles). (Note: __________ X
_________ shares = ______ shares and must be rounded down to ____
shares.)
