Exhibit 10.1
RESTRICTED STOCK UNIT AGREEMENT
UNDER THE
PINNACLE WEST CAPITAL CORPORATION 2007
LONG-TERM INCENTIVE PLAN
     THIS AWARD AGREEMENT is made and entered into as of February 20, 2007 (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 are being asked to approve, the Pinnacle
West Capital Corporation 2007 Long-Term Incentive Plan (the “Plan”), pursuant to
which Restricted Stock Units may be granted to employees of the Company and its
Subsidiaries and certain other individuals.     B.   The Company desires to
grant to Employee Restricted Stock Units under the terms of the Plan. The grant
of Restricted Stock Units hereunder is contingent upon shareholder approval of
the Plan. The failure of the Company to obtain such shareholder approval will
render any Restricted Stock Units granted hereunder null and void from the Date
of Grant.     C.   Pursuant to the Plan, the Company and Employee agree as
follows:

AGREEMENT

  1.   Grant of Award. Pursuant to action of the Committee (defined herein),
which was taken on the Date of Grant, the Company grants to Employee «Units»
Restricted Stock Units.     2.   Award Subject to Plan. This Restricted Stock
Unit 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.   Vesting of Restricted Stock Units. The
Restricted Stock Units granted hereunder will vest and no longer be subject to
the restrictions of and forfeiture under this Award Agreement on four “Vesting
Dates” as follows:

  (a)   25% of the Restricted Stock Units will vest on February 20, 2008;    
(b)   An additional 25% of the Restricted Stock Units will vest on February 20,
2009;     (c)   An additional 25% of the Restricted Stock Units will vest on
February 20, 2010; and     (d)   The remaining 25% of the Restricted Stock Units
will vest on February 20, 2011.

 

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     In addition, the Restricted Stock Units will fully vest and no longer be
subject to the restrictions of and forfeiture under this Award Agreement 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.
     For avoidance of doubt, no acceleration of vesting of the Restricted Stock
Units will occur on a Change of Control of the Company.

  4.   Payment.

  (a)   Time and Form of Payment. Subject to the provisions of this Award
Agreement and the Plan, when a Restricted Stock Unit vests on one of the Vesting
Dates set forth in clauses (a), (b), (c) or (d) of Section 3 above, the Company
shall transfer to Employee in exchange for such Restricted Stock Unit either one
unrestricted, fully transferable share of Stock or a cash payment equal to the
Fair Market Value of one share of Stock determined as of the Vesting Date on
which such Restricted Stock Unit vests. If a Restricted Stock Unit vests prior
to the applicable Vesting Date due to Employee’s Retirement, the transfer or
payment will be deferred until the applicable Vesting Date. If no prices are
reported for a particular Vesting Date, the Fair Market Value shall be
determined as of the next preceding day for which prices were reported. The
transfer or payment shall be made within 90 days of the applicable Vesting Date.
    (b)   Election of Form of Payment. Within 30 days after the Date of Grant,
Employee must elect to receive payment for Employee’s vested Restricted Stock
Units in cash or in fully transferable shares of Stock by completing and
returning to the Company the election form attached to this Agreement. In the
absence of a timely election by Employee, Employee will receive payment for the
vested Restricted Stock Units in fully transferable shares of Stock.     (c)  
Dividend Equivalents. At the time of the Company’s delivery of any cash payment
or fully transferable shares of Stock to Employee pursuant to Section 4(a), the
Company also will 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 shares of Stock from the Date of Grant to the date of the payment, plus
interest on such amount at the rate of 5% compounded quarterly.

  5.   Termination of Award. Except as otherwise provided in Section 3 with
respect to Employee’s Retirement, 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 Stock Units under the
Plan, if any, will terminate. Any unvested Restricted Stock Units will be
forfeited effective as of the date that Employee terminates active employment
with the Company or any of its Subsidiaries.     6.   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 Award of Restricted Stock

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      Units 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, no payment or transfer shall be made to Employee
prior to the applicable Vesting Date. The provisions of this Section 6(b) apply
to all amounts due pursuant to this Award Agreement.     (c)   Miscellaneous
Payment Provisions. If the Company fails to make a payment (including a transfer
of Stock), either intentionally or unintentionally, within the period required
by Section 4, but the payment is made within the same calendar year, it will be
treated as made within the period required by Section 4 pursuant to Treas. Reg.
§ 1.409A-3(d). In addition, 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 other than the election described
in Section 4(b).     (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.

  7.   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, on the
election form described in Section 4(b), 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.     8.  
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

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      this Award Agreement shall be interpreted to confer upon Employee the
right to continue in the employ or service of the Company.     9.   Voting
Rights. Employee is not entitled to voting rights with respect to shares of
Stock by virtue of this Award. If the Committee, in its discretion, issues Stock
in settlement of Employee’s Restricted Stock Units, Employee will have voting
rights with respect to such shares of Stock.     10.   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.     11.
  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.     12.   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.     13.   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: Vice President and Treasurer

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(ELECTION FORM) [p74182p7418200.gif]

Pinnacle West Capital Corporation 2007 RESTRICTED STOCK UNIT AWARD ELECTION
FORM            INFORMATION ABOUT YOU Last            First            Middle
Initial            Employee ID# 1. PAYMENT ELECTION In accordance with the terms
of the Pinnacle West Capital Corporation 2007 Long-Term Incentive Plan and
pursuant to Section 4(b) of the Award Agreement, I hereby elect to receive
payment for the Restricted Stock Units that vest on the dates set forth below in
the following form (place an “X” in the “Cash” column or in the “Stock” column
for each of the years set forth below):: Vesting Date            Cash Stock
02/20/2008 02/20/2009 02/20/2010 02/20/2011 Note: If you elected to receive
payment in the form of Stock for any vested Restricted Stock Units, complete
Section 2. 2. TAX WITHHOLDING ELECTION If I elected above to receive payment in
the form of Stock for any vested Restricted Stock Units, I hereby elect to
satisfy any tax withholding obligation associated with my receipt of Stock in
exchange for my Restricted Stock Units in the following form (place an “X” in
the “Cash” column or in the “Stock” column): Cash            Stock (I will write
a check on the vesting date (The Company should withhold shares of my for my
taxes that are due) stock to cover my taxes) ___PARTICIPANT NAME (PLEASE PRINT)
___ ___PARTICIPANT SIGNATURE            DATE IMPORTANT NOTE: Please complete and
return this Election Form to Aaron Lynch at Mail Station 9996 by ___, ___.