Exhibit 10.5.4

 

KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT

 

THIS AGREEMENT, made and entered into as of the            day of
                        , 2013, 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;

 

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;

 

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

 

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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 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;

 

(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; or

 

(iv)          Individuals who, as of July 31, 2008, 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, 2008
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, 2008 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

 

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comprising the APS Incumbent Board or by the Company, as a majority shareholder
of APS, will be considered 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)            A material diminution in Executive’s compensation;

 

(ii)           A material diminution in Executive’s authority, duties, or
responsibilities;

 

(iii)          A material diminution in the authority, duties, or
responsibilities of the supervisor to whom Executive is required to report,
including a requirement that Executive report to a corporate officer or employee
instead of reporting directly to the Board;

 

(iv)          A material diminution in the budget over which Executive retains
authority;

 

(v)           A material change in the geographic location at which Executive
must perform the service; or

 

(vi)          Any other action or inaction that constitutes a material breach by
the Company of this Agreement.

 

(n)           “Parachute Value” of a Payment shall mean the Value of the portion
of such Payment that constitutes a “parachute payment” under Section 280G(b)(2),
as determined by the Accounting Firm (as defined in Section 26 of

 

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this Agreement) for purposes of determining whether and to what extent the
Excise Tax will apply to such Payment.

 

(o)           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.

 

(p)           “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.

 

(q)   “Safe Harbor Amount” means 2.99 times the Executive’s “base amount,”
within the meaning of Section 280G(b)(3) of the Code.

 

(r)            “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.

 

(s)            “Termination Payment” shall mean the amount described in
Section 6(b).

 

(t)            “Value” of a Payment shall mean the economic present value of a
Payment as of the date of the Change of Control for purposes of Section 280G of
the Code, as determined by the Accounting Firm using the discount rate required
by Section 280G(d)(4) of the Code.

 

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

 

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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 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.

 

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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 least annually, the Executive’s compensation.  In determining such
compensation, the Board of Directors, 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 and subject
to the limits set forth in Section 26 hereof, 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 2.99.

 

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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 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 expressly 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 on the
Termination Date on account of the Executive’s death.

 

8.             Retirement.  If, during the Employment Period, the Executive and
the Employer shall execute an agreement providing for the voluntary retirement
of the Executive from the Employer, the Executive shall receive only his or her
Accrued Benefits through the Termination Date.  Without limiting the generality
of the foregoing, the Executive’s resignation under this Agreement with or
without Good Reason, shall in no way affect the Executive’s ability to terminate
employment by reason of the Executive’s “retirement” under any of the Company’s
retirement or pension plans or to be eligible to receive benefits under any
retirement or pension plan of the Company and its affiliates or substitute plans
adopted by the Company or its successors, and any termination which otherwise
qualifies as Good Reason shall be treated as such even if it is also a
“retirement” for purposes of any such plan.

 

9.             Termination for Disability.  If the Executive has been absent
from his or her duties hereunder on a full-time basis for five (5) consecutive
months during the Employment Period on account of a Disability, the Employer may
provide a Notice of Termination, which satisfies the requirements of Section 12,
and the Executive’s employment shall, for purposes of this Agreement, terminate
sixty (60) days thereafter,  unless the Executive returns to the performance of
his or her duties on a full-time basis

 

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prior to the end of the sixty (60) day period.  During the term of the
Executive’s Disability prior to his or her Termination Date, the Executive shall
continue to participate in all compensation and benefit plans, programs and
arrangements in which the Executive was entitled to participate immediately
prior to his or her Disability in accordance with the terms and provisions of
such plans, programs and arrangements. If the Executive’s employment is
terminated on account of the Executive’s Disability, the Executive shall receive
his or her Accrued Benefits in accordance with Section 6(a) hereof, provided
that the Executive’s termination for purposes of this Agreement under this
Section 9 shall not affect his or her entitlement to benefits on account of his
or her Disability under any long-term disability programs of the Company or the
Employer in effect at the time of such termination and in which the Executive
participated immediately prior to his or her Disability.

 

10.          Termination Not Giving Rise to a Termination Payment.  If, during
the Employment Period, the Executive’s employment is terminated for Cause, or if
the Executive voluntarily terminates his or her employment other than for Good
Reason, subject to the procedures set forth in Section 12, the Executive shall
be entitled to receive only his or her Accrued Benefits in accordance with
Section 6(a).

 

11.          Termination Giving Rise to a Termination Payment.  If, during the
Employment Period, the Executive’s employment is terminated by the Executive for
Good Reason within two years following the event giving rise to Good Reason or
by the Employer other than by reason of death, Disability pursuant to Section 9
or Cause, subject to the procedures set forth in Section 12,

 

(a)           the Executive shall be entitled to receive and the Company or the
Employer, as applicable, shall pay the Executive’s Accrued Benefits in
accordance with Section 6(a) and, in lieu of further salary payments for periods
following the Termination Date, as severance pay, a Termination Payment;

 

(b)           the Executive and his eligible dependents shall continue to be
covered until the end of the second calendar year following the year in which
the Termination Date occurs, under the same terms and conditions, by the medical
plan, dental plan and/or group life insurance plan maintained by the Company or
the Employer which covered that Executive and his eligible dependents prior to
the Executive’s Termination Date.  Notwithstanding the foregoing, if the
Company’s or Employer’s medical plan, dental plan and/or group life insurance
plan covering the Executive on his or her Termination Date was amended, replaced
or terminated on or after the Change of Control and such action would constitute
Good Reason within the meaning of Section 1(m), the Executive and his or her
eligible dependents shall be entitled to continued coverage for purposes of this
Section 11(b) under the terms of the medical plan, dental plan and/or group life
insurance plan which they participated in immediately prior to the Change of
Control.  If the affected plan is no longer available, the Company shall make
arrangements to provide equivalent coverage to the Executive and his or her
eligible dependents.  For this purpose, “equivalent coverage” shall mean
medical, dental and/or life insurance coverage, which, when added to the

 

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coverage provided to the Executive and his or her eligible dependents under the
Company’s or Employer’s medical plan, dental plan and/or group life insurance
plan in effect on the Executive’s Termination Date, equals or exceeds the level
of benefits provided under the medical plan, dental plan and/or group life
insurance plan to the Executive and his or her eligible dependents on the day
immediately preceding the Change of Control.  The Executive and the Employer
shall share the cost of the continued coverage under this Section 11(b) in the
same proportions as the Employer and similarly situated active employees shared
the cost of such coverage on the day preceding the Executive’s Termination
Date.  For purposes of satisfying the Company’s or Employer’s obligation under
the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) to continue group
health care coverage to the Executive and his eligible dependents as a result of
the Executive’s termination of employment, the period during which the Executive
is permitted to continue to participate in the Company’s or Employer’s medical
plans and/or dental plans under this Section 11(b) shall not be taken into
account and treated as part of the period during which the Executive and his
eligible dependents are entitled to continued coverage under the Company’s or
Employer’s group health plans under COBRA.  Following the end of the
continuation period specified in this Section 11(b), the Executive and his
eligible dependents shall be covered under such plans and arrangements only as
required under the provisions of COBRA;

 

(c)           the Executive shall be entitled to the acceleration of benefits,
if any, as may be set forth in or contemplated by the Pinnacle West Capital
Corporation Stock Option and Incentive Plan, as amended from time to time, the
Pinnacle West Capital Corporation 2002 Long-Term Incentive Plan, the Pinnacle
West Capital Corporation 2007 Long-Term Incentive Plan, the Pinnacle West
Capital Corporation 2012 Long-Term Incentive Plan or any successor or additional
long-term incentive plan of the Company or any related award agreement, as
applicable; and

 

(d)           “out-placement” services will be provided by the Company to the
Executive for a period beginning on the Executive’s Termination Date.  Such
services shall be provided for a period beginning on the Executive’s Termination
Date and ending on the earlier of the date on which the Executive becomes
employed in a position commensurate with his or her current salary and
responsibilities or the last day of the twelve (12) month period which began on
the Executive’s Termination Date.  The “out-placement” services shall be
provided by an out-placement company selected by the Company.

 

12.          Termination Notice and Procedure.  Any termination by the Employer
or the Executive of the Executive’s employment during the Employment Period
shall be communicated by written Notice of Termination to the Executive if such
Notice is delivered by the Company and to the Company if such Notice is
delivered by the Executive, all in accordance with the following procedures:

 

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(a)           The Notice of Termination shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances alleged to provide a basis for termination.

 

(b)           Any Notice of Termination by the Company shall be approved by a
resolution duly adopted by a majority of the members of the Company’s Board of
Directors then in office.

 

(c)           If the Company shall give a Notice of Termination for Cause or by
reason of Disability and the Executive in good faith notifies the Company that a
dispute exists concerning such termination within the fifteen (15) day period
following the Executive’s receipt of such notice, the Executive may elect to
continue his or her employment during such dispute.  If it is thereafter
determined that (i) the reason given by the Company for termination did exist,
the Executive’s Termination Date shall be the earlier of (A) the date on which
the dispute is finally determined, either by mutual written agreement of the
parties or pursuant to Section 14, (B) the date of the Company’s Notice of
Termination for Cause, (C) the date of the Executive’s death, or (D) one day
prior to the end of the Employment Period, and the Executive shall not be
entitled to a Termination Payment based on events occurring after the Company
delivered its Notice of Termination; or (ii) the reason given by the Company for
termination did not exist, the employment of the Executive shall continue as if
the Company had not delivered its Notice of Termination and there shall be no
Termination Date arising out of such notice.

 

(d)           Executive must provide the Company with written notice of Good
Reason within a period not to exceed 90 days of the initial existence of the
condition alleged to give rise to Good Reason, upon the notice of which the
Company shall have a period of 30 days during which it may remedy the
condition.  If the Executive shall in good faith give a Notice of Termination
for Good Reason and the Company notifies the Executive that a dispute exists
concerning the termination within the fifteen (15) day period following the
Company’s receipt of such notice, the Executive may elect to continue his or her
employment during such dispute.  If it is thereafter determined that (i) Good
Reason did exist, the Executive’s Termination Date shall be the earlier of
(A) the date on which the dispute is finally determined, either by mutual
written agreement of the parties or pursuant to Section 14, (B) the date of the
Executive’s death, or (C) one day prior to the end of the Employment Period, and
the Executive’s Termination Payment shall reflect events occurring after the
Executive delivered his or her Notice of Termination; or (ii) Good Reason did
not exist, the employment of the Executive shall continue after such
determination as if the Executive had not delivered the Notice of Termination
asserting Good Reason.

 

(e)           If the Executive does not elect to continue employment pending
resolution of a dispute regarding a Notice of Termination under Sections
12(c) and (d), and it is finally determined that the reason for termination set
forth in

 

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such Notice of Termination did not exist, if such notice was delivered by the
Executive, the Executive will be deemed to have voluntarily terminated his or
her employment and if delivered by the Company, the Company will be deemed to
have terminated the Executive other than by reason of death, Disability or
Cause.

 

13.          Obligations of the Executive.  The Executive covenants and agrees,
during the Executive’s employment with the Employer and following his or her
Termination Date, to hold in strict confidence any and all information in the
Executive’s possession as a result of the Executive’s employment with the
Employer; provided that nothing in this Agreement shall be construed as
prohibiting the Executive from reporting any suspected instance of illegal
activity of any nature, any nuclear safety concern, any workplace safety concern
or any public safety concern to the United States Nuclear Regulatory Commission,
United States Department of Labor or any federal or state governmental agency or
prohibiting the Executive from participating in any way in any state or federal
administrative, judicial or legislative proceeding or investigation with respect
to any such claims and matters.

 

14.          Arbitration.  All claims, disputes and other matters in question
between the parties arising under this Agreement, other than Section 13, shall
be decided by arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association, unless the parties mutually agree
otherwise.  Any arbitration required under this Agreement shall be held in
Phoenix, Arizona, unless the parties mutually agree otherwise.  The Company
shall pay the costs of any such arbitration.  The award by the arbitrator shall
be final, and judgment may be entered upon it in accordance with applicable law
in any state or Federal court having jurisdiction thereof.

 

The Company shall not be required to arbitrate claims arising under Section 13. 
The Company shall have the right to judicial enforcement of its rights under
Section 13, including, but not limited to, injunctive relief.

 

15.          Expenses and Interest.  If, after a Change of Control a good faith
dispute arises with respect to the enforcement of the Executive’s rights under
this Agreement or if any arbitration or legal proceeding shall be brought in
good faith to enforce or interpret any provision contained herein, or to recover
damages for breach hereof and the Executive is the prevailing party, the
Executive shall recover from the Company any reasonable attorney’s fees and
necessary costs and disbursements incurred as a result of such dispute or legal
proceeding, and prejudgment interest on any money judgment obtained by the
Executive calculated at the rate of interest announced by JP Morgan Chase Bank
N.A. (or any successor thereto) from time to time as its prime rate from the
date that payments to the Executive should have been made under this Agreement. 
Any payment due under this section will be made on the fifth business day
following the date the dispute is final.

 

16.          Payment Obligations Absolute.  The Company’s obligation during and
after the Employment Period to insure that the compensation and arrangements
provided herein are provided to the Executive shall be absolute and
unconditional and

 

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shall not be affected by any circumstances, provided that the Company may apply
amounts payable under this Agreement to any loan or other debts then owed to the
Company or an Affiliate by the Executive, the terms of which are reflected in a
written document signed by the Executive.  Nothing in this Agreement shall
prevent or limit the Executive’s continuing or future participation in any plan,
program, policy or practice provided by the Company or its Affiliates and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any other contract or
agreement with the Company or its Affiliates.  Amounts that are vested benefits
or that the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any other contract or agreement with the Company or
its Affiliates at or subsequent to the Termination Date shall be payable in
accordance with such plan, policy, practice or program or contract or agreement,
except as explicitly modified by this Agreement.  Notwithstanding the foregoing,
the amounts payable under this Agreement shall be in lieu of any amounts payable
to the Executive under a separate severance plan, agreement or arrangement
established by the Company.  All amounts payable by the Company under this
Agreement shall be paid without notice or demand.  Each and every payment made
under this Agreement by the Company shall be final.  Notwithstanding the
foregoing, in the event that the Company has paid an Executive more than the
amount to which the Executive is entitled under this Agreement, the Company
shall have the right to recover all or any part of such overpayment from the
Executive or from whomsoever has received such amount.

 

17.          Successors.

 

(a)           If all or substantially all of the Company’s business and assets
are sold, assigned or transferred to any Person, or if the Company merges into
or consolidates or otherwise combines with any Person which is a continuing or
successor entity, then the Company shall assign all of its right, title and
interest in this Agreement as of the date of such event to the Person which is
either the acquiring or successor corporation, and such Person shall assume and
perform from and after the date of such assignment the terms, conditions and,
provisions imposed by this Agreement upon the Company.  Failure of the Company
to obtain such assignment shall be a breach of this Agreement.  In case of such
assignment by the Company and of assumption and agreement by such Person, all
further rights as well as all other obligations of the Company under this
Agreement thenceforth shall cease and terminate and thereafter the expression
“the Company” wherever used herein shall be deemed to mean such Person(s).

 

(b)           This Agreement and all rights of the Executive shall inure to the
benefit of and be enforceable by the Executive’s personal or legal
representatives, estates, executors, administrators, heirs and beneficiaries. 
In the event of the Executive’s death, all amounts payable to the Executive
under this Agreement shall be paid to the Executive’s estate.  This Agreement
shall inure to the benefit of, be binding upon and be enforceable by, any
successor, surviving or resulting corporation or other entity to which all or
substantially all of the Company’s business and assets shall be transferred
whether by merger,

 

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consolidation, transfer or sale.  This Agreement shall not be terminated by the
voluntary or involuntary dissolution of the Company.

 

18.          Enforcement.  The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.

 

19.          Amendment or Termination.  The term of this Agreement shall run
until December 31, 2013, and shall continue for additional one (1) year periods
thereafter, unless the Company notifies the Executive in writing six (6) months
prior to December 31, 2013 (or the anniversary of that date in the event the
Agreement continues beyond that date pursuant to the provisions of this
Section 19) that it does not intend to continue the Agreement.  Notwithstanding
the foregoing, (i) if a Change of Control has occurred on or before the date on
which the Agreement would be terminated by the Company in accordance with this
Section 19, the Agreement shall not terminate with respect to that Change of
Control until the end of the Employment Period, and (ii) this Agreement shall
terminate if, prior to a Change in Control, the Executive ceases to be employed
by the Employer as a corporate officer.

 

This Agreement sets forth the entire agreement between the Executive and the
Company and its Affiliates with respect to the subject matter hereof, and
supersedes all prior oral or written negotiations, commitments, understandings
and writings with respect thereto.

 

This Agreement may not be terminated, amended or modified during its term as
specified above except by written instrument executed by the Company and the
Executive.

 

20.          Withholding.  The Company and the Employer shall be entitled to
withhold from amounts to be paid to the Executive under this Agreement any
federal, state or local withholding or other taxes or charges which it is from
time to time required to withhold.  The Company and the Employer shall be
entitled to rely on an opinion of counsel if any question as to the amount or
requirement of any such withholding shall arise.

 

21.          Venue; Governing Law.  This Agreement and the Executive’s and
Company’s respective rights and obligations hereunder shall be governed by and
construed in accordance with the laws of the State of Arizona.  Any action
concerning this Agreement shall be brought in the Federal or state courts
located in the County of Maricopa, Arizona, and each party consents to the venue
and jurisdiction of such courts.

 

22.          Notice.  Notices given pursuant to this Agreement shall be in
writing and (a) if hand delivered, shall be deemed given when delivered, and
(b) if mailed, shall

 

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be deemed delivered when placed in the United States mail, postage prepaid,
addressed,

 

if to the Company, to

 

Board of Directors

Pinnacle West Capital Corporation

400 North Fifth Street

Phoenix, Arizona 85004

Attention: Law Department

 

or if to the Executive, to

 

 

or to such other addresses as the parties may provide written notice of to each
other, from time to time, in accordance with this Section 22.

 

23.          Funding.  Benefits payable under this Agreement shall constitute an
unfunded general obligation of the Company payable from its general assets, and
the Company shall not be required to establish any special fund or trust for
purposes of paying benefits under this Agreement.  The Executive shall not have
any vested right to any particular assets of the Company as a result of
execution of this Agreement and shall be a general creditor of the Company.

 

24.          No Waiver.  No waiver by either party at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same time or any prior or
subsequent time.

 

25.          Headings.  The headings contained are for reference only and shall
not affect the meaning or interpretation of any provision of this Agreement.

 

26.          Section 280G of the Code.

 

(a)           Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any Payment would cause the Executive to be
subject to an Excise Tax, then the amounts payable to the Executive hereunder
shall be reduced so that the Parachute Value of all Payments, in the aggregate,
equals the Safe Harbor Amount (the reduction of the amounts payable hereunder
shall be made first out of payments which are not subject to Code Section 409A;
and, if necessary, then out of the payments which are subject to Code
Section 409A, starting with the payments which are to be paid on the latest
future date).

 

(b)           All determinations required to be made under this Section 26,
shall be made by a nationally recognized accounting firm appointed by the
Company

 

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prior to a Change of Control (the “Accounting Firm”).  If the Accounting Firm
determines that the Parachute Value of all Payments, in the aggregate, should be
reduced to the Safe Harbor Amount, the Company shall promptly give the Executive
notice to that effect and a copy of the detailed calculation thereof.  In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive may
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall
be borne solely by the Company.  All determinations made by the Accounting Firm
under this Section 26 shall be binding upon the Company and the Executive and
shall be made within 60 days of termination of employment of the Executive. 
Within 5 days following receipt of the Accounting Firm’s determination, the
Company shall pay to or distribute for the benefit of the Executive such
Payments as are then due to the Executive under this Agreement and shall
promptly pay to or distribute for the benefit of the Executive in the future
such Payments as become due to the Executive under this Agreement.

 

(c)           As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed by the
Company to or for the benefit of the Executive pursuant to this Agreement which
should not have been so paid or distributed (“Overpayment”) or that additional
amounts which will have not been paid or distributed by the Company to or for
the benefit of the Executive pursuant to this Agreement could have been so paid
or distributed (“Underpayment”), in each case, consistent with the calculation
of the Safe Harbor Amount hereunder.  In the event that the Accounting Firm,
based upon the assertion of a deficiency by the Internal Revenue Service against
either the Company or the Executive which the Accounting Firm believes has a
high probability of success determines that an Overpayment has been made, any
such Overpayment paid or distributed by the Company to or for the benefit of the
Executive shall be treated for all purposes as a loan to the Executive which the
Executive shall repay to the Company together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code; provided, however,
that no such loan shall be deemed to have been made and no amount shall be
payable by the Executive to the Company if and to the extent such deemed loan
and payment would neither reduce the amount on which the Executive is subject to
tax under Section 1 and Section 4999 of the Code nor generate a refund of such
taxes.  In the event that the Accounting Firm, based upon controlling precedent
or substantial authority, determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and the Executive has executed this Agreement, on the
date and year first above written.

 

 

 

PINNACLE WEST CAPITAL CORPORATION

 

 

 

 

 

 

 

 

 

By

 

 

 

 

Its

 

 

 

 

 

 

ATTEST:

 

 

 

 

 

 

 

 

By

 

 

 

 

Its

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive

 

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