exv10w4a



 





Exhibit 10.4


STOCK OWNERSHIP INCENTIVE AGREEMENT

UNDER

PINNACLE WEST CAPITAL CORPORATION

2002 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 «Name» (“Employee”).



BACKGROUND



	 	A.	 	The Board of Directors of the Company (the “Board of
Directors”) has adopted, and the Company’s shareholders have
approved, the Pinnacle West Capital Corporation 2002 Long-Term
Incentive Plan (the “Plan”), pursuant to which stock ownership
incentive awards may be granted to employees of the Company and its
subsidiaries and to certain other individuals.
	 
	 	B.	 	The Company desires to grant to Employee a stock ownership
incentive award under the terms of the Plan.
	 
	 	C.	 	Pursuant to the Plan, the Company and Employee agree as follows:





AGREEMENT





	 	1.	 	Definitions. For purposes of this Award Agreement,
the following terms have the meanings specified in this Section
1:






	 	(a)	 	“Award Period” means the period beginning
                       
 and ending             
           .
	 
	 	(b)	 	“Average Number of Shares Owned” means
(i) the sum of the number of shares of Common Stock owned
by Employee at the end of each month during the Award
Period divided by (ii) twelve (12), rounded down to the
next whole share.
	 
	 	(c)	 	“Average Share Price” means the average
daily closing price of the Common Stock on the New York
Stock Exchange during the Award Period.
	 
	 	(d)	 	“Base Salary” means the base salary
earned by Employee during the Award Period.
	 
	 	(e)	 	“Common Stock” means the common stock of
the Company.
	 
	 	(f)	 	“Ownership Level” means the Stock
Ownership Value divided by Employee’s Base Salary,
expressed as a ratio, carried out to two decimal places
and rounded down.
	 
	 	(g)	 	“Stock Ownership Value” means the Average
Number of Shares Owned multiplied by the Average Share
Price.






	 	2.	 	Grant of Award. Pursuant to action of the
Committee, which was taken on the Date of Grant, the Company
grants to Employee the stock ownership incentive award
described in this Award Agreement.
	 
	 	3.	 	Award Subject to Plan. This award is granted under
and is expressly subject to, all the terms and provisions of
the Plan, which terms are incorporated herein by reference, and




 









 











Page 2

Performance Share Agreement




	 	 	 	this Award Agreement. The Committee referred to in Section 4
of the Plan (“Committee”) has been appointed by the Board of
Directors, and designated by it, as the Committee to make
awards.
	 
	 	4.	 	Stock Ownership Incentive Award.






	 	(a)	 	General. Upon satisfaction of the
“Threshold Performance Goal” described in Section 4(b)
below and the Ownership Level described in Section 4(c)
below, the Company will deliver to Employee, as soon as
practicable after the end of the Award Period, a number of
shares of Common Stock equal to four percent (4%) of
Employee’s Average Number of Shares Owned. Partial shares
will be rounded down to the nearest whole share, when
applicable. Attachment A provides a generic example of
the operation of a Stock Ownership Incentive Award.
	 
	 	(b)	 	Threshold Performance Goal. For purposes
of this Award Agreement, the threshold performance goal
for the Award Period will have been met if, during the Award Period, the Company’s
earnings from continuing operations plus SunCor Development
Company’s earnings from discontinued operations are at least $       million.
	 
	 	(c)	 	Ownership Level. For purposes of this
Agreement, the Common Stock ownership requirement will
have been met if Employee’s Ownership Level is at least
«Shares» times.
	 
	 	(d)	 	Maximum Award. If Employee’s Ownership
Level exceeds five (5), the number of shares of Common
Stock awarded to Employee will be four percent (4%) of the
number of shares represented by an Ownership Level of five
(5) or 15,000 shares maximum.






	 	5.	 	Evidence of Ownership.






	 	(a)	 	Shares Held In Company Plans. Employee
is not required to provide ownership evidence of shares of
Common Stock owned by Employee and held in any
Company-sponsored stock-based plan, such as the Pinnacle
West Capital Corporation Investors Advantage Plan or the
Pinnacle West Capital Corporation Savings Plan.
	 
	 	(b)	 	Shares Held Outside Company Plans.
Shares of Common Stock owned by Employee outside of
Company-sponsored stock-based plans (for example, shares
held in a brokerage account) will be included in
Employee’s Average Number of Shares Owned only if Employee
provides the Company with written evidence of such
ownership (for example, a copy of a brokerage account
statement). Employee must provide the Company with
evidence of such ownership no later than thirty (30) days
following the end of the Award Period.






	 	6.	 	Termination of Award. This Award Agreement will
terminate and be of no further force or effect as of the date
during the Award Period that Employee is no longer employed by
the Company or any of its subsidiaries, unless the termination
of active employment is due to Employee’s death or Disability.
In the case of Employee’s death or Disability, Employee will be
deemed to have been employed by the Company through the end of
the Award Period. No adjustment will be made to Employee’s
“Base Salary” calculation as a result of Employee’s death or
Disability (e.g., the base salary earned by Employee to the
date of Employee’s death or Disability will not be annualized
over the Award Period).




 









 











Page 3

Performance Share Agreement




	 	 	 	“Disability” shall mean a period of disability during which
Employee qualifies for benefits under Employee’s employer’s
long-term disability plan, or, if Employee does not participate
in such a plan, a period of disability during which Employee
would have qualified for benefits under such a plan, as
determined by the Committee, had Employee been a participant in
such a plan. The Committee may require such medical or other
evidence, as it deems necessary to judge the nature of
Employee’s condition.
	 
	 	7.	 	Tax Withholding. Employee must pay, or
make arrangements acceptable to the Company for the payment of,
any and all federal, state, and local tax withholding that in
the opinion of the Company is required by law. Unless Employee
satisfies any such tax withholding obligation by paying the
amount in cash or by check , the Company will withhold shares
of Common Stock having a Fair Market Value on the date of
withholding equal to the tax withholding obligation.
	 
	 	8.	 	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.
	 
	 	9.	 	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. By signing
this Award Agreement, Employee acknowledges receipt of a copy
of the Plan and the related Plan Prospectus.
	 
	 	10.	 	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
Agreement to another jurisdiction.





     An authorized representative of the Company has signed this Award
Agreement, and Employee has signed this Award Agreement to evidence Employee’s
acceptance of the award on the terms specified in this Award Agreement, all as
of the Date of Grant.


	 	 	 	 	 
	 	PINNACLE WEST CAPITAL CORPORATION

 	 
	 	By:  	 	 
	 	
Its: Treasurer 	 
	 	 
	 	
Employee	 




 









 






	 	 	 	 	 



Page 4

Performance Share Agreement



Attachment A

Generic Example





	 	 	 	Assumptions:
	 
	 	•	 	Earnings threshold is met.
	 
	 	•	 	Employee’s Base Salary is $100,000.
	 
	 	•	 	Employee’s Ownership Level must be at least two (2) (Employee’s
Ownership Level is based on Employee’s title).
	 
	 	•	 	Employee owns 5,800 shares of Common Stock at the end of each month
during 2004, resulting in the Average Number of Shares Owned equaling
5,800.
	 
	 	•	 	The Average Share Price for 2004 is $35.00 per share.
	 
	 	•	 	Employee’s Stock Ownership Value is $203,000 (5,800 shares X $35.00 per share)
	 
	 	•	 	Employee’s Ownership Level is $203,000 / $100,000, or 2.03.
	 
	 	•	 	Employee meets the required Ownership Level of at least 2.





Delivery of Common Stock to Employee:





	 	•	 	Employee would receive 232 shares of Common Stock (4% of 5,800 shares, rounded down, which represents Employee’s Average Number of
Shares Owned)





     Application of the maximum:




	 	•	 	Same assumptions, except Average Number of Shares Owned equals 15,000.
	 
	 	•	 	Employee’s Stock Ownership Value is $525,000 (15,000 shares X $35.00 per share)
	 
	 	•	 	Employee’s Ownership Level is 525,000 / 100,000, or 5.25.
	 
	 	•	 	Shares are not awarded for Ownership Levels above 5, so five times
Base Salary is $500,000 Stock Ownership Value, resulting in 14,285
shares ($500,000 / $35 per share). The 4% award would be based on
14,285 shares; as a result, Employee would receive 571 shares.