exv10w1



 






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 «Name» (“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 «Shares» 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”).




 









 











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Performance Share Agreement





	 	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 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)	 	Retirement. In the case of Employee’s
Retirement (as defined herein) Employee shall have been deemed to have
been employed by the Company through the end of the Performance Period.
For purposes of this Award Agreement, “Retirement” means a termination
of employment which constitutes an “Early Retirement” or a “Normal
Retirement” under the Pinnacle West Capital Corporation Retirement
Plan.
	 
	 	(c)	 	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.
	 
	 	(d)	 	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:




 









 











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Performance Share Agreement




	 	 	 
	If the Company's Earnings Per Share	 	 
	Compound Growth Rate Over The Performance	 	The Number of
	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 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





 









 










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Performance Share Agreement





	 	 	 	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, except as specifically set forth in Section 4. 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.




 









 











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Performance Share Agreement




     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.



	 	 	 	 	 
	 

	 	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 Percentile (___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.)