exv10w5






Exhibit 10.5




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”).



BACKGROUND





	 	A.	 	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.
	 
	 	B.	 	The Company desires to grant to Employee a Performance Share Award under the
terms of the Plan.
	 
	 	C.	 	Pursuant to the Plan, the Company and Employee agree as follows:





AGREEMENT





	 	1.	 	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.”
	 
	 	2.	 	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.
	 
	 	3.	 	Performance Period. The Performance Period for this
Award begins January 1, ___ and ends December 31, ___.
	 
	 	4.	 	Payment.






	 	(a)	 	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.
	 
	 	(b)	 	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




 









 












	 	 	 	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.
	 
	 	(c)	 	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.






	 	5.	 	Performance Criteria and Adjustments.
	 
	 	 	 	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:





	 	 	 
	If the Company’s Earnings Per Share	 	 
	Compound Growth Rate Over The Performance	 	The Number of
	Period As Compared to the Index is:	 	Performance Shares will be:
	90th Percentile or Greater

	 	2 X Base Grant
	75th Percentile

	 	1.5 X Base Grant
	50th Percentile

	 	Base Grant
	25th Percentile

	 	0.5 X Base Grant
	Less than 25th Percentile

	 	None







     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.




	 	6.	 	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. In addition, if the sector comparison is no longer representative
of the Company’s industry or business, the Committee shall replace the Index with the most representative index then in
use. Once the CAGR of the Company and all relevant companies in the Index
have been 




 









 












	 	 	 	determined, the member companies will be ranked from greatest to
least CAGR. Percentiles will be calculated based on a company’s relative
ranking. For example, company 1 out of 26 companies is given a percentile of
96.2% (1.0 – 1/26). Percentiles will be carried out to one (1) decimal
place. If the Company is not in the Index, then its percentile will be
interpolated between the companies listed in the relative ranking. These
calculations will be verified by the Company’s internal auditors.
	 
	 	7.	 	Termination of Award. This Award Agreement will
terminate and be of no further force or effect on the date that Employee is no
longer actively employed by the Company or any of its Subsidiaries, whether due
to voluntary or involuntary termination, death, retirement, disability, or
otherwise, except as specifically set forth in Section 4. Employee will,
however, be entitled to receive any Stock and Dividend Equivalents payable
under Section 4 of this Award Agreement if Employee’s employment terminates
after the end of the Performance Period but before Employee’s receipt of such
Stock and Dividend Equivalents.
	 
	 	8.	 	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
Performance Share Award 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, any payment or transfer to Employee shall
be made at the time specified in Section 4. The provisions of this
Subsection 8(b) apply to all amounts due pursuant to this Award
Agreement.
	 
	 	(c)	 	Miscellaneous Payment Provisions. 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.




 









 












	 	(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.






	 	9.	 	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 ___ days after the Date of Grant, Employee
must elect, by providing written notice to the Company, 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.
	 
	 	10.	 	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 this Award Agreement shall be
interpreted to confer upon Employee the right to continue in the employ or
service of the Company.
	 
	 	11.	 	Voting Rights. Employee is not entitled to voting
rights with respect to shares of Stock by virtue of this Award. Upon issuance
of Stock in settlement of Employee’s Performance Share Awards, Employee will
have voting rights with respect to such shares of Stock.
	 
	 	12.	 	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.
	 
	 	13.	 	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.
	 
	 	14.	 	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.
	 
	 	15.	 	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: 	 	 
	 

	 	 	 





 









 





Attachment A



     The Index will be the S&P 1500 Super Composite Electric Utility Index.



Attachment B




Generic Example

(Performance Share Award)




ASSUMPTIONS:





	•	 	Employee is granted 500 Performance Shares, which constitutes Employee’s “Base Grant.”
	 
	•	 	During the Performance Period, the Company’s Earnings Per Share Growth Rate is in the
88.3 percentile compared to the Index.





CALCULATION OF EMPLOYEE’S STOCK PAYMENT:





	•	 	Based on the Company’s achievement of the 88.3 Percentile during the Performance Period,
to be determined as soon as practicable after the end of the fiscal year immediately
following the end of the Performance Period, Employee will receive 971 shares of Stock,
calculated as follows:






	 	o	 	750 shares of Stock as a result of the Company’s Earnings Per Share
Growth Rate meeting at least the 75th Percentile (1.5 X Base Grant) plus
	 
	 	o	 	221 shares of Stock as a result of the Company’s Earnings Per Share
Growth Rate achieving 13.3/15 of the Percentile increase between the 75th and 90th
Percentile (13.3/15 X 250) shares, with the 250 shares representing the Stock
opportunity between the 75th and 90th Percentiles). (Note: 13.3/15 X 250 shares =
221.67 shares and must be rounded down to 221 shares.)




 









 











Pinnacle West Capital Corporation




PERFORMANCE SHARE AWARD

ELECTION FORM








INFORMATION ABOUT YOU




	 	 	 	 	 	 	 
	Last

	 	First
	 	Middle Initial
	 	Employee ID#
	 




TAX WITHHOLDING ELECTION



 




I hereby elect to satisfy any tax withholding obligation associated with my receipt of Stock pursuant to my
Performance Share Agreement in the following form (place an “X” in the “Cash” column or in the “Stock”
column):



 





	 	 	 
	Cash
	 	Stock
	 	 	 
	(I will write a check 

for my taxes that are due)
	 	(The Company should withhold shares of my

stock to cover my taxes)
	o
	 	o





 





	 	 	 
	 	 	 
	 	 	 
	PARTICIPANT NAME (PLEASE PRINT)	 	 
	 	 	 
	 	 	 
	 
	 	 
	PARTICIPANT SIGNATURE
	 	DATE









IMPORTANT NOTE: Please complete and return this Election Form to                      at Mail Station