APS 2013 Annual Report Download - page 233

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On December 17, 2013, the Human Resources Committee (the “Committee”) of the Pinnacle West Capital Corporation (“Pinnacle West”) Board of
Directors (the “Board”) approved the Pinnacle West 2014 Annual Incentive Award Plan (the “PNW Plan”), which provides an incentive award opportunity for
Donald E. Brandt, the Chairman of the Board, President, and Chief Executive Officer of Pinnacle West and the Chairman of the Board, President and Chief
Executive Officer of Arizona Public Service Company (“APS”). On December 18, 2013, the Board, acting on the recommendation of the Committee,
approved the APS 2014 Annual Incentive Award Plan (the “APS Plan”), which includes an incentive award opportunity for James R. Hatfield, Executive Vice
President and Chief Financial Officer, and David P. Falck, Executive Vice President and General Counsel, and the APS 2014 Annual Incentive Award Plan for
Palo Verde Employees (the “Palo Verde Plan”), which includes an incentive award opportunity for Randall K. Edington, Executive Vice President and Chief
Nuclear Officer. The PNW Plan, the APS Plan and the Palo Verde Plan are referred to collectively herein as the “2014 Plans.”
No incentive payments will be awarded under the PNW Plan or the APS Plan unless Pinnacle West, with respect to Mr. Brandt, and APS, with
respect to Messrs. Hatfield and Falck, each achieves a specified threshold earnings level. No incentive payment will be awarded under the earnings portion of
the Palo Verde Plan with respect to Mr. Edington unless the Palo Verde Nuclear Generating Station (“Palo Verde”) achieves specified business unit performance
goals. The Committee will evaluate the impacts of unusual or nonrecurring adjustments to earnings in determining whether any earnings level has been met for
purposes of the 2014 Plans. Arizona Corporation Commission rate-related impacts are excluded.
The award opportunity for Mr. Brandt is based on the achievement of specified 2014 Pinnacle West earnings levels. Mr. Brandt has an award
opportunity of up to 50% of his base salary if the threshold earnings level is met, up to 100% of his base salary if a target earnings level is met, and up to
200% of his base salary if a maximum earnings level is met, before potential adjustments for business results and individual performance; however, in no
event may Mr. Brandt’s award exceed 200% of his base salary. In considering Mr. Brandt’s individual performance, the Committee may also consider
shareholder value creation, customer service, financial strength, operating performance, safety performance, leadership effectiveness and other general
performance objectives.
The award opportunities for Messrs. Hatfield and Falck under the APS Plan and for Mr. Edington under the Palo Verde Plan are based on the
achievement of specified 2014 APS earnings levels and specified business unit performance goals. Messrs. Hatfield and Falck have a target award
opportunity of up to 60% of their base salary. Messrs. Hatfield and Falck may earn less than the target amount or more, up to a maximum award opportunity
of up to 120% of their base salary, depending on the