Exhibit 10.4





Exhibit 10.4









	 	 	 	 	 	 	 
	 

	 	Donald E. Brandt
	 	Tel 602/250-5602
	 	Mail Station 9042
	 

	 	Chairman and Chief Executive Officer
	 	Fax 602/250-3303
	 	PO Box 53999
	 

	 	 	 	 	 	Phoenix, AZ 85072-3999






May 21, 2009




Mr. David P Falck

403 Shelbourne Terrace

Ridgewood, NJ 07450




Dear Dave,




I am delighted to extend to you this offer to become the Executive Vice President, General Counsel
and Secretary of both Pinnacle West Capital Corporation and Arizona Public Service Company. The
details of our proposal are included in Attachment A.



If you are in agreement with the terms of our offer of employment as described herein, please sign
as requested below.



Dave, I am confident that this will be a challenging and rewarding opportunity for you. I am
excited about the prospect of you joining our team and we will do all we can to ensure a smooth
transition for you and Sally. I look forward to your contributions to our organization.



If you have any questions, please do not hesitate to contact me.



Sincerely,




	 	 	 
	/s/ Donald E. Brandt
	 	 
	 

Donald E. Brandt

	 	 






Signing this letter indicates your acceptance of the terms of this offer.



	 	 	 	 	 
	Acceptance:

	 	/s/ David P. Falck
	 	Date: May 28, 2009
	 

	 	 

	 	 





 


 









 





Attachment A





	•	 	A starting annual base salary of $450,000.






	•	 	Initial hiring incentive of $200,000 payable during the first two weeks of your
employment. Second year hiring incentive of $150,000 payable within two weeks of your 1
year anniversary date (the “Second Year Incentive”). [If, within two years following the
payment to you of the Second Year Incentive, you resign for any reason or your employment
is terminated by the Company for Cause (as defined below), you shall immediately repay to
the Company the full amount of such Incentive.]






	•	 	5 weeks vacation annually






	•	 	Vehicle allowance of $10,000 per year






	•	 	Eligibility to participate in the officer annual incentive plan with a target payment
for 2009 of 50% and up to a maximum of 100% of annual base salary. Annual incentive
payments are dependent on company and business unit performance and are generally paid
during the first quarter of the subsequent year. Incentive for 2009 will be prorated based
on employment date.






	•	 	Long-Term Stock Based Compensation: The Human Resources Committee has approved a
Long-Term award to be granted to you effective upon your hire date.






	 	(1)	 	An award of 21,580 performance shares






	 	•	 	8,580 shares will vest in 2011






	 	•	 	13,000 shares will vest in 2012






	 	(2)	 	An award of 22,750 restricted stock units






	 	•	 	6,500 units will vest through 2/1/2010






	 	•	 	6,500 units will vest through 2/1/2011






	 	•	 	6,500 units will vest through 2/1/2012






	 	•	 	3,250 units will vest through 2/1/2013





The awards will vest subject to your continued employment through the applicable vesting date
and in all events will be subject to the terms and conditions of the plan and the applicable
award agreement.



APS • APS Energy Services • Pinnacle West Energy • SunCor • El Dorado




 


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	 	•	 	Eligibility to participate in the Supplemental Executive Benefit Retirement Plan. The
SEBRP is structured as a cash balance plan to which the company contributes 28 percent of
your base and annual incentive compensation.






	 	•	 	Eligibility to participate in the company’s 401(k) plan. You are eligible to contribute
between 1 percent and 50 percent of your eligible base compensation. After six months of
employment, you will become eligible for the company matching contribution of 75 cents for
every dollar you contribute, up to 6 percent of your compensation.






	 	•	 	Eligibility to participate in the Deferred Compensation Plan (DCP.) The DCP provides
you with the opportunity to defer part of your compensation on a pre-tax basis. The
deferred amount also earns interest. The company sets the interest amount each calendar
year.






	 	•	 	Special Deferred Compensation Retention Program. APS will establish a deferred
compensation arrangement and provide an initial credit of $350,000. The first $250,000
credit will vest upon the fifth anniversary of your hire date and the last $100,000 credit
will vest upon the seventh anniversary of your hire date, in each case, subject to your
continued employment through the applicable vesting date. The initial credit will earn
interest in accordance with the Pinnacle West Deferred Compensation Plan.






	 	•	 	You will receive a Key Executive Employment & Severance Agreements (“KEESA”) that
provide severance benefits in connection with a change of control on terms and conditions
generally applicable to other similarly situated executives of the Company, but modified to
comply with the policies set forth in the Form 8-K filed by the Company on May 4, 2009. In
the event of payment under this agreement, you would receive 2.99 times base salary and
annual incentive as described in the agreement.






	 	•	 	If you enroll in the company’s benefit program within the first 30 days of employment,
your medical, dental, and life insurance will be effective on your one-month anniversary
date of employment. Medical and dental plan premiums are on a pre-tax basis.






	 	•	 	You will be eligible for the relocation benefits provided generally to the Company’s
senior executives.





All items of compensation, and all benefits, that are provided pursuant to a compensation or
benefit plan or agreement will be subject to the terms and provisions of the relevant plan or
agreement and, in all cases, the Company reserves the right to modify, amend, suspend or terminate
the applicable plan or agreement.



APS • APS Energy Services • Pinnacle West Energy • SunCor • El Dorado



 


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In the event that, prior to the second anniversary of your hire date, your employment is terminated
by the Company without Cause and you are not entitled to severance benefits under the KEESA,
subject to your execution and non-revocation of a general release of claims against the Company and
its affiliates within 55 days after your termination, you will receive continuation of your annual
base salary at the rate in effect immediately preceding the date on which your employment
terminates for a period of twelve months commencing on the date that is 60 days following your
termination, such payments to be made in accordance with the Company’s normal payroll practices as
in effect on the date of termination. You will also be paid a target bonus. In addition, for a
period of 12 months following your termination, you will be paid a monthly amount equal to the
monthly employer-paid portion of the premiums for active senior executives’ health care coverage as
in effect from time to time during such 12-month period. Each payment under this paragraph will be
deemed a separate payment and, to the extent required to comply with Section 409A of the Code, will
be delayed until the date that is six months after your separation from service.



For purposes of this Agreement, “Cause” means (i) your engaging in conduct which has caused
demonstrable and serious injury to the Company, monetary or otherwise; (ii) commission of a felony;
(iii) your unreasonable neglect or refusal to perform your duties or responsibilities; (iv) an act
by you of gross or willful misconduct; or (v) a material breach of the Company’s policies that are
applicable to you.



Your employment is “at will” which means that either you or the Company may terminate your
employment at any time for any reason with or without notice.



You represent that you have full authority to execute this offer letter and that neither executing
this letter or providing services to the Company or its affiliates will constitute a breach of any
agreement that you may have with any other party.



This offer is contingent upon successful completion of a pre-employment medical screening and
background check.



APS • APS Energy Services • Pinnacle West Energy • SunCor • El Dorado





 


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