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”).
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A.
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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.
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B.
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The
Company desires to grant to Employee a Performance Share Award
under the terms of the Plan.
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C.
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Pursuant to the Plan, the Company
and Employee agree as follows:
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1.
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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.”
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2.
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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.
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3.
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Performance Period
. The Performance Period
for this Award begins January 1, ___ and ends
December 31, ___.
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4.
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Payment .
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(a)
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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.
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(b)
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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
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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.
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(c)
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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.
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5.
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Performance Criteria and
Adjustments .
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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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If the Company’s Earnings
Per Share
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Compound Growth Rate Over The
Performance
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The Number of
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Period As Compared to the Index
is:
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Performance Shares will
be:
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90 th Percentile or Greater
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2 X Base Grant
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1.5 X Base Grant
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Base Grant
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0.5 X Base Grant
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Less than 25
th Percentile
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None
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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.
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6.
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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.
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