Document:

exv10w2

 

Exhibit
10.2

PERFORMANCE
SHARE AGREEMENT

UNDER THE

PINNACLE WEST CAPITAL CORPORATION

2007 LONG-TERM INCENTIVE PLAN

     THIS
AWARD AGREEMENT is made and entered into as of                     ,                     (the “Date of
Grant”), by and between Pinnacle West Capital Corporation (the “Company”), and                     
(“Employee”).

BACKGROUND

	 	A.	 	The Board of Directors of the Company has adopted, and the Company’s
shareholders have approved, the Pinnacle West Capital Corporation 2007 Long-Term
Incentive Plan (the “Plan”), pursuant to which Performance Share 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,
which was taken on the Date of Grant, the Company grants to Employee
                                        
(                    )
Performance Shares and Dividend Equivalents based on the dividends
declared on the Performance Shares. 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 Performance Share 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.
	 
	 	3.	 	Performance Period. The Performance Period for this
Award begins January 1,                      and ends December 31,                     .
	 
	 	4.	 	Payment.

	 	(a)	 	Performance Shares Payable In Stock. As
soon as practicable in the fiscal year immediately following the end of
the Performance Period, but in no event later than December 31 of such
fiscal year, the Company will determine 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 the Performance Period and will deliver to Employee one (1) share
of the Company’s Stock for each then-outstanding Performance Share under
this Award Agreement. For avoidance of doubt, no acceleration of
Performance Shares or the Performance Period will occur on a Change of
Control of the Company.
	 
	 	(b)	 	Retirement. In the case of Employee’s
Retirement (as defined herein) during the Performance Period, Employee
shall be deemed to have been

 

 

	 	 	 	employed by the Company through the end of the Performance Period and
Employee will receive the Stock and Dividend Equivalents, if any, to
which Employee is entitled at the time specified in this Section.
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. In satisfaction of
the Dividend Equivalent Award made pursuant to Section 1, at the time of the
Company’s delivery of Stock to Employee pursuant to Subsection 4(a)
above, the Company also will deliver to Employee a cash payment equal to
the amount of dividends, if any, declared on the number of shares of Stock equal to the number of shares of Stock
delivered to Employee from the Date of Grant to
the date of the payment, plus interest on such amount at the rate of ___
percent, compounded quarterly, as determined pursuant to the Plan.

	 	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	 	The Number of
	Compound Growth Rate Over The Performance 	 	Performance Shares will be:
	Period As Compared to the Index is:	 	 
	 	 	 
	90th Percentile or Greater
	 	2 X Base Grant
	75th Percentile
	 	1.5 X Base Grant
	50th Percentile
	 	Base Grant
	25th Percentile
	 	0.5 X Base Grant
	Less than 25th Percentile
	 	None

	 	 	     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 80th percentile, then the number of Performance Shares
would be increased to 1.667 multiplied by the Base Grant. In no event will
Employee be entitled to receive a number of Performance Shares greater than 2
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 90th 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 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. Employee will,
however, be entitled to receive any Stock and Dividend Equivalents payable
under Section 4 of this Award Agreement if Employee’s employment terminates
after the end of the Performance Period but before Employee’s receipt of such
Stock and Dividend Equivalents.
	 
	 	8.	 	Section 409A Compliance.

	 	(a)	 	Purpose of this Provision. Section 409A
of the Code imposes a number of requirements on “non-qualified deferred
compensation” plans and arrangements. Based on regulations issued by
the Internal Revenue Service, the Company has concluded that this
Performance Share Award is subject to Section 409A. As a result, unless
the Plan and this Award Agreement are administered to comply with the
new rules, Employee will be required to pay an additional 20% tax (in
addition to regular income taxes) on the compensation provided by this
Award Agreement. In addition, under Section 409A additional interest
will be payable.
	 
	 	(b)	 	Compliance with Section 409A. The
Company intends to comply with Section 409A by assuring that all amounts
to which Employee becomes entitled hereunder are payable at a specified
time or pursuant to a fixed schedule within the meaning of Treas. Reg. §
1.409A-3(a)(4). As a result, any payment or transfer to Employee shall
be made at the time specified in Section 4. The provisions of this
Subsection 8(b) apply to all amounts due pursuant to this Award
Agreement.
	 
	 	(c)	 	Miscellaneous Payment Provisions. If a
payment is not made due to a dispute in payments, payments can be
delayed in accordance with Treas. Reg. § 1.409A-3(g).
	 
	 	(d)	 	Ban on Acceleration or Deferral. Under
no circumstances may the time or schedule of any payment made or benefit
provided pursuant to this Award Agreement be accelerated or subject to a
further deferral except as otherwise permitted or required pursuant to
regulations and other guidance issued pursuant to Section 409A of the
Code.
	 
	 	(e)	 	No Elections. Employee does not have any
right to make any election regarding the time or form of any payment due
under this Award Agreement.

 

 

	 	(f)	 	Compliant Operation and Interpretation.
The Plan and this Award Agreement shall be administered in compliance
with Section 409A and each provision of the Award Agreement and the Plan
shall be interpreted, to the extent possible, to comply with
Section 409A.

	 	9.	 	Tax Withholding. Any and all payments made pursuant to
this Award Agreement shall be subject to applicable tax withholding
requirements and employment taxes. Employee must pay, or make arrangements
acceptable to the Company for the payment of any and all required federal,
state, and local income and payroll tax withholding. Employee may satisfy any
such tax withholding obligation by paying the amount in cash or by check. In
the alternative, Employee may elect to have the Company withhold shares of
Stock having a Fair Market Value on the date of withholding sufficient to cover
the withholding obligation. Within 30 days after the Date of Grant, Employee
must elect, by providing written notice to the Company, to satisfy any tax
withholding obligation by paying the amount in cash or by check or by having
the Company withhold shares of Stock having a Fair Market Value on the date of
withholding sufficient to cover the withholding obligation. In the absence of
a timely election by Employee, Employee’s tax withholding obligation will be
satisfied through the Company’s withholding shares of Stock as set forth above.
	 
	 	10.	 	Continued Employment. Nothing in the Plan or this
Award Agreement shall be interpreted to interfere with or limit in any way the
right of the Company to terminate Employee’s employment or services at any
time. In addition, nothing in the Plan or this Award Agreement shall be
interpreted to confer upon Employee the right to continue in the employ or
service of the Company.
	 
	 	11.	 	Voting Rights. Employee is not entitled to voting
rights with respect to shares of Stock by virtue of this Award. Upon issuance
of Stock in settlement of Employee’s Performance Share Awards, Employee will
have voting rights with respect to such shares of Stock.
	 
	 	12.	 	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.
	 
	 	13.	 	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. Employee will receive a copy of the Plan and the related Plan
Prospectus. In the event of any conflict between the terms and conditions of
this Award Agreement and the Plan, the provisions of the Plan shall control.
	 
	 	14.	 	Amendment. Except as otherwise provided in the Plan,
this Award Agreement may be amended only by a written agreement executed by the
Company and Employee.
	 
	 	15.	 	Choice of Law. This Award 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 Award Agreement to another jurisdiction.

     An authorized representative of the Company has signed this Award Agreement as of the Date of
Grant.

 

 

	 	 	 	 	 
	 	 	PINNACLE WEST CAPITAL CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 
	 	 	 	 
	 

	 	Its:
	 
	 

	 	 	 

 

 

Attachment A

     The Index will be the S&P 1500 Super Composite Electric Utility Index.

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 STOCK PAYMENT:

	 	•	 	Based on the Company’s achievement of the 88.3 Percentile during the Performance Period,
to be determined as soon as practicable after the end of the fiscal year immediately
following the end of the Performance Period, Employee will receive 971 shares of Stock,
calculated as follows:

	 	o	 	750 shares of Stock as a result of the Company’s Earnings Per Share
Growth Rate meeting at least the 75th Percentile (1.5 X Base Grant) plus
	 
	 	o	 	221 shares of Stock as a result of the Company’s Earnings Per Share
Growth Rate achieving 13.3/15 of the Percentile increase between the 75th and 90th
Percentile (13.3/15 X 250) shares, with the 250 shares representing the Stock
opportunity between the 75th and 90th Percentiles). (Note: 13.3/15 X 250 shares =
221.67 shares and must be rounded down to 221 shares.)exv10w3

 

Exhibit 10.3

RESTRICTED STOCK AGREEMENT

UNDER THE

PINNACLE WEST CAPITAL CORPORATION

2007 LONG-TERM INCENTIVE PLAN

     THIS
AWARD AGREEMENT is made and entered into as of _______________, ______ (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
2007 Long-Term Incentive Plan (the “Plan”), pursuant to which awards of Restricted
Stock may be granted to employees of the Company and its Subsidiaries and certain other
individuals.
	 
	 	B.	 	The Company desires to grant Restricted Stock to Employee 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,
which was taken on the Date of Grant, the Company grants to Employee «Number»
shares of Restricted Stock (the “Restricted Shares”) and Dividend Equivalents
based on the dividends declared on the Restricted Shares.
	 
	 	2.	 	Award Subject to Plan. This Restricted Stock 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.
	 
	 	3.	 	Restrictions on Restricted Shares. Employee agrees to
not sell, transfer, pledge, exchange, hypothecate, grant any security interest
in, or otherwise dispose of, any Restricted Shares before the date on which the
restrictions lapse under Section 4, or enter into any agreement or make any
commitment to do so. Any attempted sale, transfer, pledge, exchange,
hypothecation or disposition of the Restricted Shares shall be null and void,
and the Company shall not recognize or give effect to such transaction on its
books and records (including the books and records of the Company’s transfer
agent) or recognize the person or persons to whom such sale, transfer, pledge,
exchange, hypothecation or disposition has been made as the legal or beneficial
owner of the Restricted Shares.
	 
	 	4.	 	Lapse of Restrictions. Subject to the other conditions
in this Agreement, the restrictions on the Restricted Shares described in
Section 3 will lapse and the Restricted Shares will vest and no longer be
subject to forfeiture under this Award Agreement on
____________ “Vesting Dates” as
follows:

[To be determined]

 

 

          For avoidance of doubt, no acceleration of vesting of the Restricted
Shares will occur on a Change of Control of the Company or upon Employee’s
Retirement. 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.

	 	5.	 	Acknowledgements and Representation of Employee. By
accepting the Restricted Shares, Employee hereby acknowledges the following:

          (a) Further Limitations on Disposition. Employee understands
and acknowledges that Employee may not make any sale, assignment, transfer or
other disposition (including transfer by gift or operation of law) of all or
any portion of the Restricted Shares except in accordance with this Award
Agreement.

          (b) Section 83(b) Election. Employee understands that Section
83 of the Code taxes as ordinary income the difference between the amount
paid for the Restricted Shares and the Fair Market Value of the Restricted
Shares as of the date any restrictions on the Restricted Shares lapse. In
this context, “restriction” means the restrictions set forth in Section 3
hereof. Employee understands that Employee may elect to be taxed at the time
the Restricted Shares are granted rather than when and as the restrictions on
the Restricted Shares lapse and the Restricted Shares vest by filing an
election under Section 83(b) of the Code with the Internal Revenue Service
within 30 days from the Date of Grant. Employee understands that failure to
make this filing timely shall result in the recognition of ordinary income by
Employee on the Fair Market Value of the Restricted Shares at the time such
restrictions lapse and the Restricted Shares vest.

          EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE’S SOLE RESPONSIBILITY, AND NOT
THE COMPANY’S, TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE,
EVEN IF EMPLOYEE REQUESTS THAT THE COMPANY OR ITS REPRESENTATIVES MAKE THIS
FILING ON EMPLOYEE’S BEHALF.

	 	6.	 	Transfer and Payment.

	 	(a)	 	Time and Form of Payment. As permitted
by the Plan, the Company will not deliver to Employee any certificates
or other evidence of ownership with respect to the Restricted Shares.
Subject to the provisions of this Award Agreement and the Plan, when the
restrictions on a Restricted Share lapse on the Vesting Date described
in Section 4 above, the Company shall transfer to Employee in exchange
for such Restricted Share one unrestricted, fully transferable share of
Stock. The transfer shall be made within 60 days of the applicable
Vesting Date.
	 
	 	(b)	 	Dividend Equivalents. In satisfaction of
the Dividend Equivalent Award made pursuant to Section 1, at the time of
the Company’s delivery of fully transferable shares of Stock to Employee
pursuant to Section 6(a), the Company also will deliver to Employee a
cash payment equal to the amount of dividends, if any, declared on the
number of shares of Stock equal to the number of fully transferable
shares of Stock delivered to Employee from the Date of Grant to the date
of the payment, plus interest on such amount at the rate of
___ percent
compounded quarterly, as determined pursuant to the Plan.

	 	7.	 	Termination of Award. In the event of the termination of
Employee’s active employment with the Company or any of its Subsidiaries,
whether due to voluntary or involuntary termination, death, disability or
otherwise, Employee’s right to receive

 

 

	 	 	 	and/or vest in any additional Restricted Shares under the Plan, if any, will
terminate. Any unvested Restricted Shares and the related Dividend
Equivalents will be forfeited effective as of the date that Employee
terminates active employment with the Company or any of its Subsidiaries.

	 	8.	 	Section 409A Compliance.

	 	(a)	 	Purpose of this Provision. Section 409A
of the Code imposes a number of requirements on “non-qualified deferred
compensation” plans and arrangements. Based on regulations issued by
the Internal Revenue Service, the Company has concluded that the award
of Restricted Shares under this Award Agreement is not subject to
Section 409A. In addition, the Dividend Equivalent Award is exempt from
the requirements of Section 409A pursuant to the short-term deferral
exception.
	 
	 	(b)	 	Short-Term Deferral Exception to Section
409A. The Company intends that the Dividend Equivalents payable
pursuant to Section 6(b) will comply with the short-term deferral
exception to the requirements of Section 409A of the Code, as described
in Treas. Reg. § 1.409A-1(b)(4). In order to meet the requirements of
the short-term deferral exception, despite any other provision of this
Award Agreement to the contrary, the Dividend Equivalent payments due
pursuant to this Award Agreement shall be paid at the time stated in
Section 6(b). Payment of Dividend Equivalents under this Award
Agreement may be delayed only in accordance with regulations issued
pursuant to Section 409A.
	 
	 	(c)	 	Ban on Acceleration or Deferral. Under
no circumstances may the time or schedule of any Dividend Equivalent
payment provided under Section 6(b) of this Award Agreement be
accelerated or subject to a further deferral except as otherwise
permitted or required pursuant to regulations and other guidance issued
pursuant to Section 409A of the Code.
	 
	 	(d)	 	No Elections. Employee does not have any
right to make any election regarding the time or form of any Dividend
Equivalent payment due under this Award Agreement.
	 
	 	(e)	 	Compliant Operation and Interpretation.
The Plan and this Award Agreement shall be administered in compliance
with Section 409A and each provision of the Award Agreement and the Plan
shall be interpreted, to the extent possible, to comply with Section
409A or an exception thereto.

	 	9.	 	Tax Withholding. Any and all transfers of Stock and
payments of Dividend Equivalents made pursuant to this Award Agreement shall be
subject to applicable tax withholding requirements and employment taxes.
Employee’s tax withholding obligation with respect to Dividend Equivalents will
be satisfied through the Company’s withholding from the Dividend Equivalent
payment. Employee must pay, or make arrangements acceptable to the Company for
the payment of, any and all required federal, state, and local income and
payroll tax withholding attributable to any and all transfers of Stock.
Employee may satisfy any such tax withholding obligation attributable to any and
all transfers of Stock by paying the amount in cash or by check or by directing
the Company to withhold shares of Stock having a Fair Market Value on the date of
withholding sufficient to cover the withholding obligation attributable to any
and all transfers of Stock. Within 30 days after the Date of Grant, Employee
must elect, by providing written notice to the Company, to satisfy any tax

 

 

	 	 	 	withholding obligation attributable to any and all transfers of Stock by
paying the amount in cash, by check, or by having the Company
withhold shares of Stock having a Fair Market Value on the date of
withholding sufficient to cover the withholding obligation. In the absence of a timely election by Employee, Employee’s tax
withholding obligation with respect to transferred Stock will be satisfied
through the Company’s withholding shares of Stock as set forth above.

	 	10.	 	Continued Employment. Nothing in the Plan or this Award
Agreement shall be interpreted to interfere with or limit in any way the right
of the Company to terminate Employee’s employment or services at any time. In
addition, nothing in the Plan or this Award Agreement shall be interpreted to
confer upon Employee the right to continue in the employ or service of the
Company.
	 
	 	11.	 	Voting Rights. Employee is [not] entitled to voting
rights with respect to the Restricted Shares by virtue of this Award.
	 
	 	12.	 	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.
	 
	 	13.	 	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. Employee will receive a copy of the Plan and the related Plan Prospectus.
In the event of any conflict between the terms and conditions of this Award
Agreement and the Plan, the provisions of the Plan shall control.
	 
	 	14.	 	Amendment. Except as otherwise provided in the Plan,
this Award Agreement may be amended only by a written agreement executed by the
Company and Employee.
	 
	 	15.	 	Choice of Law. This Award 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
Award Agreement to another jurisdiction.

     An authorized representative of the Company has signed this Award Agreement as of the
Date of Grant.

	 	 	 	 	 
	 	 	PINNACLE WEST CAPITAL CORPORATION
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 
	 	 	 	 
	 

	 	Its:

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