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EXHIBIT 10.77bd
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of
____________, 2006, by and between Pinnacle West Capital
Corporation, an Arizona
corporation (hereinafter referred to as the "Company") and
__________________
(hereinafter referred to as the "Executive"):
W I T N E S S E T H
WHEREAS, the Executive is employed by the Company, in an
executive
capacity, possesses intimate knowledge of the business and affairs
of the
Company, and has acquired certain confidential information and data
with respect
to the Company;
WHEREAS, the Company desires to insure, insofar as possible, that
the
Company will continue to have the benefit of the Executive's
services and to
protect the confidential information and goodwill of the Company;
and
WHEREAS, the Company recognizes that circumstances may arise in
which a
change in the control of the Company or Arizona Public Service
Company, a
subsidiary of the Company, through acquisition or otherwise occurs
thereby
causing uncertainty of employment without regard to the Executive's
competence
or past contributions which uncertainty may result in the loss of
valuable
services of the Executive to the detriment of the Company and its
shareholders,
and the Company and the Executive wish to provide reasonable
security to the
Executive against changes in the Executive's relationship with the
Company in
the event of any such change in control; and
WHEREAS, both the Company and the Executive are desirous that a
proposal for any change of control or acquisition will be
considered by the
Executive objectively and with reference only to the business
interests of the
Company and its shareholders;
WHEREAS, the Executive will be in a better position to consider
the
best interests of the Company if the Executive is afforded
reasonable security,
as provided in this Agreement, against altered conditions of
employment which
could result from any such change in control or acquisition;
and
NOW, THEREFORE, in consideration of the foregoing and of the
mutual
covenants and agreements hereinafter set forth, the parties hereto
mutually
covenant and agree as follows:
1.
Definitions.
(a) "Accrued Benefits" shall mean the benefits payable to the
Executive
as described in Section 6(a).
(b) "Act" shall mean the Securities Exchange Act of 1934.
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(c) "Affiliate" shall mean (i) a corporation other than the
Company
that is a member of a "controlled group of corporations" (within
the meaning of
Section 414(b) of the Code as modified by Section 415(h) of the
Code) or (ii) a
group of trades or businesses under common control (within the
meaning of
Section 414(c) of the Code as modified by Section 415(h) of the
Code) that also
includes the Company as a member. For purposes of determining
whether a
transaction or event constitutes a Change of Control within the
meaning of
Section 1(g), "Affiliate" status shall be determined on the day
immediately
preceding the date of the transaction or event.
(d) "APS" shall mean Arizona Public Service Company, a subsidiary
of
the Company.
(e) "Beneficial Owner" shall have the same meaning as given to
that
term in Rule 13d-3 of the General Rules and Regulations of the Act,
provided
that any pledgee of the voting securities of the Company or APS
shall not be
deemed to be the Beneficial Owner thereof prior to its disposition
of, or
acquisition of voting rights with respect to, such securities.
(f) "Cause" shall be limited to (i) the engaging by the Executive
in
conduct which has caused demonstrable and serious injury to the
Employer,
monetary or otherwise, as evidenced by a determination in a binding
and final
judgment, order or decree of a court or administrative agency of
competent
jurisdiction, in effect after exhaustion or lapse of all rights of
appeal, in an
action, suit or proceeding, whether civil, criminal, administrative
or
investigative, other than an action, suit or proceeding, brought by
the Company
or an Affiliate, the purpose of which is to establish "Cause" under
this
Agreement; (ii) conviction of a felony, as evidenced by a binding
and final
judgment, order or decree of a court of competent jurisdiction, in
effect after
exhaustion or lapse of all rights of appeal, which the Employer
determines has a
significant adverse impact on it in the conduct of its business; or
(iii)
unreasonable neglect or refusal by the Executive to perform the
Executive's
duties or responsibilities (unless significantly changed without
the Executive's
consent).
(g) "Change of Control" shall mean one (1) or more of the
following
events:
(i) Any Person, other than an Affiliate, through a transaction
or series of transactions, is or becomes the Beneficial Owner,
directly
or indirectly, of securities of the Company or APS representing
twenty
percent (20%) or more of the combined voting power of the then
outstanding securities of the Company or APS, as the case may
be;
provided, however, that, for purposes of this Section 1(g), any
acquisition directly from the Company shall not constitute a Change
of
Control;
(ii) A merger or consolidation of (A) the Company with any
other corporation which would result in the voting securities of
the
Company out-
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standing immediately prior to such merger or consolidation
continuing
to represent (either by remaining outstanding or by being
converted
into voting securities of the surviving entity or any parent
thereof),
in combination with the ownership of any trustee or other
fiduciary
holding securities under an employee benefit plan of the Company or
an
Affiliate, less than sixty percent (60%) of the combined voting
power
of the securities of the Company or such surviving entity or any
parent
thereof outstanding immediately after such merger or consolidation,
or
(B) APS with any other corporation which would result in the
voting
securities of APS outstanding immediately prior to such merger
or
consolidation continuing to represent (either by remaining
outstanding
or by being converted into voting securities of the surviving
entity or
any parent thereof), in combination with the ownership of any
trustee
or other fiduciary holding securities under an employee benefit
plan of
the Company or an Affiliate, less than sixty percent (60%) of
the
combined voting power of the securities of APS or such surviving
entity
or any parent thereof outstanding immediately after such merger
or
consolidation; provided that, for purposes of this subparagraph
(ii), a
merger or consolidation effected to implement a recapitalization of
the
Company or of APS (or similar transaction) in which no Person is
or
becomes the Beneficial Owner, directly or indirectly, of securities
of
the Company or of APS representing twenty percent (20%) or more of
the
combined
voting power of the then outstanding securities of the Company
or of APS (excluding any securities acquired by that Person
directly
from the Company or an Affiliate) shall not result in a Change
of
Control; or
(iii) The sale, transfer or other disposition of all or
substantially all of the assets of either the Company or APS to
a
Person other than the Company or an Affiliate
(iv) Individuals who, as of July 31, 2005, constitute the
board of directors of the Company (the "Company Incumbent Board")
or of
APS (the "APS Incumbent Board") cease for any reason to constitute
at
least two-thirds (2/3) of the members of the Company or APS board
of
directors, as the case may be; provided, however, that for purposes
of
this subparagraph (iv), (A)(1) any person becoming a member of
the
Company board of directors after July 31, 2005 whose election,
or
nomination for election by the Company's shareholders, was approved
by
a vote of at least two-thirds (2/3) of the members then comprising
the
Company Incumbent Board will be, considered as though such person
were
a member of the Company Incumbent Board and (2) the Company
Incumbent
Board shall not include a director whose initial assumption of
office
as a director was in connection with an actual or threatened
election
contest relating to the election of directors, and (B)(1) any
person
becoming a member of the APS board of directors after July 31,
2005
whose election, or nomination for election by APS' shareholder(s),
was
approved by a vote of at least two-thirds (2/3) of the members
then
comprising the APS Incumbent Board or by the Company, as a
majority
shareholder of APS, considered
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as though such person were a member of the APS Incumbent Board and
(2)
the APS Incumbent Board shall not include a director whose
initial
assumption of office as a director was in connection with an actual
or
threatened election contest relating to the election of
directors.
(h) "Code" shall mean the Internal Revenue Code of 1986, as
amended
from time to time.
(i) "Disability" shall have the same meaning as given to that term
in
the applicable long-term disability plan maintained by the company
or the
Employer for employees.
(j) "Employer" shall mean the Company, and upon the transfer of
the
Executive to an Affiliate, "Employer" shall mean such
Affiliate.
(k) "Employment Period" shall mean the period commencing on the
date of
a Change of Control and ending on the second anniversary of such
date.
(l) "Excise Tax" shall mean the excise tax imposed by Section 4999
of
the Code, together with any interest or penalties imposed with
respect to such
excise tax.
(m) "Good Reason" shall mean:
(i) the required relocation of the Executive, without the
Executive's consent, to an employment location which is more
than
seventy-five (75) miles from the Executive's employment location on
the
date of the Change of Control;
(ii) a significant reduction by the Employer in the
compensation and/or benefits provided to the Executive as in effect
on
the date of the Change of Control (as the same may have been
thereafter
adjusted during the Employment Period), which reduction is not
generally effective for all executives employed by the Employer (or
its
successor) in the Executive's class or category;
(iii) the removal of the Executive from or any failure to
re-elect the Executive to any of the positions held by the
Executive on
the date of the Change of Control or any other positions to which
the
Executive shall thereafter be elected or assigned except in the
event
that such removal or failure to re-elect relates to the termination
by
the Employer of the Executive's employment for Cause or by reason
of
death, Disability or voluntary retirement;
(iv) a significant adverse change, without the Executive's
written consent, in the nature or scope of the Executive's
authority,
powers, functions, duties or responsibilities, or a material
reduction
in the level of support services, staff, secretarial and other
assistance
and office space
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available to a level below that which was provided to the Executive
on
the date of the Change of Control and that which is necessary
to
perform any additional duties assigned to the Executive following
the
Change of Control, which change or reduction is not generally
effective
for all executives employed by the Employer (or its successor) in
the
Executive's class or category; or
(v) breach of any material provision of this Agreement by the
Company.
(n) A "Payment" shall mean any payment or distribution in the
nature of
compensation (within the meaning of Section 280G(b)(2) of the Code)
to or for
the benefit of the Executive, whether paid or payable pursuant to
this Agreement
or otherwise.
(o) "Person" shall mean any individual, partnership, joint
venture,
association, trust, corporation or other entity (including a
"group" as defined
in Section 13(d)(3) of the Act), other than an employee benefit
plan of the
Company or an Affiliate or an entity organized, appointed or
established
pursuant to the terms of any such benefit plan.
(p) "Termination Date" shall mean, except as otherwise provided
in
Section 12, (i) the Executive's date of death; (ii) the date of the
Executive's
voluntary early retirement as agreed upon in writing by the
Employer and the
Executive; (iii) sixty (60) days after the delivery of the Notice
of Termination
terminating the Executive's employment on account of Disability
pursuant to
Section 9, unless the Executive returns full-time to the
performance of his or
her duties prior to the expiration of such period; (iv) the date of
the Notice
of Termination if the Executive's employment is terminated by the
Executive
voluntarily other than for Good Reason; and (v) sixty (60) days
after the
delivery of the Notice of Termination if the Executive's employment
is
terminated by the Employer (other than by reason of Disability) or
by the
Executive for Good Reason.
(q) "Termination Payment" shall mean the amount described in
Section
6(b).
2. Impact on Employment. The Employer and the Executive shall
retain
the right to terminate the employment of the Executive at any time
and for any
reason prior to a Change of Control. If a Change of Control occurs
when the
Executive is employed by the Employer, the Employer will continue
thereafter to
employ the Executive during the Employment Period.
3. Duties.
During the Employment Period, the Executive shall, in the
same capacities and positions held by the Executive at the time of
such Change
of Control or in such other capacities and positions as may be
agreed to by the
Employer and the Executive in writing, devote the Executive's
reasonable best
efforts, attention and skill to the business and affairs of the
Company, as such
business and affairs now exist
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and as they may hereafter be conducted. The services which are to
be performed
by the Executive hereunder are to be rendered at an employment
location which is
not more than seventy-five (75) miles from the Executive's
employment location
on the date of the Change of Control, or in such other place or
places as shall
be mutually agreed upon in writing by the Executive and the
Employer from time
to time. The Executive shall not be required to be absent from such
employment
location for more than forty-five (45) consecutive days in any
fiscal year
without the Executive's consent.
4. Compensation. During the Employment Period, the Executive shall
be
compensated as follows:
(a) The Executive shall receive, at such intervals and in
accordance
with such standard policies as may be in effect on the date of the
Change of
Control, an annual salary not less than the Executive's annual
salary as in
effect as of the date of the Change of Control, subject to
adjustment as
provided in Section 5;
(b) The Executive shall be reimbursed, at such intervals and in
accordance with such standard policies as may be in effect on the
date of the
Change of Control, for any and all monies advanced in connection
with the
Executive's employment for reasonable and necessary expenses
incurred by the
Executive on behalf of the Employer, including travel expenses;
(c) The Executive shall be included to the extent eligible
thereunder
in any and all plans providing general benefits for the Employer's
employees,
including but not limited to, group life insurance, disability,
medical, dental,
pension, profit sharing, savings and stock bonus plans and be
provided any and
all other benefits and perquisites made available to other
employees of
comparable status and position, on the same terms and conditions as
generally
provided to employees of comparable status and position;
(d) The Executive shall receive annually not less than the amount
of
paid vacation and not fewer than the number of paid holidays
received annually
immediately prior to the Change of Control or such greater amount
of paid
vacation and number of paid holidays as may be made available
annually to other
employees of comparable status and position with the Employer;
and
(e) The Executive shall be included in all plans providing
special
benefits to corporate officers, including but not limited to bonus,
deferred
compensation, incentive compensation, supplemental pension, stock
option, stock
appreciation, stock bonus and similar or comparable plans extended
by the
Company or the Employer from time to time to corporate officers,
key employees
and other employees of comparable status.
5. Annual Compensation Adjustments. During the Employment Period,
the
Board of Directors of the Employer, an appropriate committee of the
Board or the
President of the Employer, whichever is appropriate, shall consider
and
appraise, at
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least annually, the Executive's compensation. In determining such
compensation,
the Board, the appropriate committee thereof or the President,
whichever is
appropriate, shall consider the commensurate increases given to
other corporate
officers and key employees generally, the scope and success of the
Employer's
operations, the expansion of Executive's duties and the Executive's
performance
of his duties.
6. Payments Upon Termination.
(a) Accrued Benefits. For purposes of this Agreement, the
Executive's
Accrued Benefits shall include the following amounts: (i) all
salary earned or
accrued through the Termination Date; (ii) reimbursement for any
and all monies
advanced in connection with the Executive's employment for
reasonable and
necessary expenses incurred by the Executive through the
Termination Date; (iii)
a lump sum payment of the bonus or incentive compensation otherwise
payable to
the Executive under the terms of any bonus or incentive
compensation plan or
plans for the year in which termination occurs; and (iv) all other
payments and
benefits to which the Executive may be entitled under the terms of
any benefit
plan of the Company or the Employer. Payment of Accrued Benefits
shall be made
promptly in accordance with the Employer's prevailing practice and
the terms of
any applicable benefit plans, contracts or arrangements.
(b) Termination Payment. For purposes of this Agreement, the
Executive's Termination Payment shall be an amount equal to (i)
plus (ii),
multiplied by (iii), where
(i) Equals the Executive's rate of annual salary, as in effect
on the date of the Change of Control and as increased thereafter
from
time to time pursuant to Section 5;
(ii) Equals the amount of the average annual dollar award paid
(or payable but deferred by the Executive) to the Executive
pursuant to
the Employer's regular annual bonus plan or arrangement with
respect to
the four (4) years (or for such lesser number of years prior for
which
the Executive was eligible to earn such a bonus, and annualized in
the
case of any bonus earned and payable for a partial fiscal year)
preceding the Termination Date which shall be determined by
dividing
the total dollar amount paid (or payable but deferred by the
Executive)
to the Executive
under such plan or arrangement with respect to such
number of years by four (4) (or for such lesser number of years
prior
to which the Executive was eligible to earn such a bonus, and
annualized in the case of any bonus earned and payable for a
partial
fiscal year); and
(iii) Equals three (3).
The Termination Payment shall be payable in a lump sum on the
Executive's Termination Date. Such lump sum payment shall not be
reduced by any
present value or similar factor. The Executive shall not be
required to mitigate
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the amount of such payment by securing other employment or
otherwise and such
payment shall not be reduced by reason of the Executive securing
other
employment or for any other reason, except as provided in Section
16.
7. Death. If the Executive shall die during the Employment Period,
but
after delivery of a Notice of Termination by the Company for
reasons other than
Cause or Disability or by the Executive for Good Reason, the
Executive's
employment shall terminate on his or her date of death and the
Executive's
estate shall be entitled to receive the Executive's Accrued
Benefits as of the
Termination Date and, subject to the provisions of this Agreement,
to such
Termination Payment as the Executive would have been entitled to
had the
Executive survived. All benefits payable on account of the
Executive's
employment or death under the Company's or Employer's employee
benefits plans,
programs or arrangements shall be paid or distributed in accordance
with the
terms of such plans, programs or arrangements. The Executive's
death following
delivery of the Notice of Termination shall not affect his or her
Termination
Date which shall be determined without regard to the Executive's
death, subject
to the provisions of Section 12.
If the Executive shall die during the Employment Period, but prior
to
the delivery of a Notice of Termination, the Executive's employment
shall
terminate and the Executive's estate, heirs and beneficiaries shall
receive all
the Executive's Accrued Benefits through the Termination Date and
all benefits
available to them under the Company's benefit plans as in
effect
