Document:

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Exhibit 10.1

Description of Annual Stock Grants to Non-Employee Directors

     From 2000 through 2006, Pinnacle West’s non-employee directors of Pinnacle West Capital
Corporation (“Pinnacle West”) received annual grants of Pinnacle West common stock under the
Pinnacle West Capital Corporation 2000 Director Equity Plan (the “2000 Plan”). As a result of
Pinnacle West shareholder approval of the Pinnacle West Capital Corporation 2007 Long-Term
Incentive Plan (the “2007 Plan”) at the 2007 Annual Meeting of Shareholders, shares are no longer
available for issuance under the 2000 Plan. Rather, as disclosed in Pinnacle West’s 2007 proxy
statement, annual common stock grants to non-employee directors will now be made under the 2007
Plan. The Human Resources Committee of Pinnacle West’s Board of Directors approved annual grants of
Pinnacle West common stock to non-employee directors under the 2007 Plan identical to the grants
previously made under the 2000 Plan, as follows:

     Each Pinnacle West non-employee director will annually receive 1,100 shares of Pinnacle West
common stock under the 2007 Plan on the first business day of July, beginning July 2, 2007, subject
to the following restrictions: In the first calendar year in which a non-employee director is
eligible to participate in the 2007 Plan, he or she must own at least 900 shares of Pinnacle West’s
common stock as of December 31 of the same calendar year to receive a grant of 1,100 shares of
Pinnacle West common stock. If the non-employee director owns 900 shares of common stock as of
June 30, he or she will receive a grant of 1,100 shares of common stock on the first business day
of July of the same calendar year. If the non-employee director does not own 900 shares of
Pinnacle West’s common stock as of June 30 in the first calendar year in which the non-employee
director is eligible to participate in the 2007 Plan, but acquires the necessary shares on or
before December 31 of the same year, he or she will receive a grant of 1,100 shares of common stock
within a reasonable time after Pinnacle West verifies that the requisite number of shares has been
acquired. In each subsequent year, the number of shares of Pinnacle West’s common stock the
non-employee director must own to receive a grant of 1,100 shares of common stock will increase by
900 shares, until reaching a maximum of 4,500 shares. In each of the subsequent years, the
non-employee director must own the requisite number of shares of Pinnacle West’s common stock as of
June 30 of the relevant calendar year.exv10w2

 

Exhibit 10.2

Description of Stock Grant to W. Douglas Parker

     On October 17, 2007, W. Douglas Parker was appointed as a director of Pinnacle West Capital
Corporation (“Pinnacle West”), effective November 1, 2007. Under the Pinnacle West Capital
Corporation 2007 Long-Term Incentive Plan (the “2007 Plan”), the Human Resources Committee of
Pinnacle West’s Board of Directors approved a grant of 1,100 shares of Pinnacle West common stock
to Mr. Parker, effective November 1, 2007. Pinnacle West’s non-employee directors are also
eligible to receive an annual common stock grant under the 2007 Plan. As a condition to Mr. Parker
being eligible to receive the 2008 annual common stock grant to non-employee directors, Mr. Parker
must own at least 900 shares of Pinnacle West common stock on June 30, 2008 (which may include
shares of Pinnacle West common stock to be received by Mr. Parker on November 1, 2007). Mr.
Parker’s annual stock ownership requirement in connection with the annual common stock grant will
increase by 900 shares per year thereafter (e.g., Mr. Parker must own at least 1,800 shares of
Pinnacle West common stock on June 30, 2009 to be eligible for the 2009 annual common stock grant).exv10w3

 

Exhibit 10.3

KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT

          THIS AGREEMENT, made and entered into as of the ___day of                     , 2007, 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; and

          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; and

          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.

 

 

     (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; or

     (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

     (iv) Individuals who, as of July 31, 2007, 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, 2007 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, 2007 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 comprising the APS Incumbent Board or by
the Company, as a majority shareholder of APS, considered

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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;

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

     (n) 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.

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     (o) “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.

     (p) “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.

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

          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 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

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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.

          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, 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

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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, 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.

     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 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
deliv-

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ery 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 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).

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          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(l), 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 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

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under such plans and arrangements only as required under the provisions of COBRA;

     (c) the Executive’s termination shall be treated as a “Normal Termination” as defined
in 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, or any successor plan
thereto, which shall entitle the Executive to exercise any outstanding stock options during
the three (3) month period beginning on the Executive’s Termination Date, and any
restrictions remaining on any “Restricted Stock” (as defined in such plan) awarded to the
Executive shall lapse on his or her Termination Date; 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:

     (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

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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 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 re-

-11-

 

quired 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 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.

-12-

 

     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,
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,
2008, 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, 2008 (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 with
respect to the subject matter hereof, and supersedes all prior

-13-

 

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 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.

-14-

 

          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. Additional Payment.

     (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall
be determined that any Payment would be subject to the Excise Tax, then the Executive shall
be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such
that, after payment by the Executive of all taxes (and any interest or penalties imposed
with respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. The Company’s obligation to make Gross-Up Payments
under this Section 26 shall not be conditioned upon the Executive’s termination of
employment.

     (b) Subject to the provisions of Section 26(c), all determinations required to be made
under this Section 26, including whether and when a Gross-Up Payment is required, the amount
of such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally-recognized accounting firm appointed by the
Company prior to a Change of Control (the “Accounting Firm”). The Accounting Firm shall
provide detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a Payment or
such earlier time as is requested by the Company. 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. Any Gross-Up Payment, as determined pursuant to this Section 26,
shall be paid by the Company to the Executive within 5 days of the receipt of the Accounting
Firm’s determination, but in all events by the last day of the calendar year following the
calendar year in which the Executive remits the related taxes. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. 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 Gross-Up Payments that
will not have been made by the Company should have been made (the “Underpayment”),
consistent with the calculations required to be made hereunder. In the event the Company
exhausts its remedies pursuant to Section 26(c) and the Executive thereafter is required to

-15-

 

make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive; but in no event later than the last day of
the calendar year following the calendar year in which the Executive remits the related
taxes.

     (c) The Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as practicable, but no later
than 10 business days after the Executive is informed in writing of such claim. The
Executive shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Executive gives such notice
to the Company (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim, the Executive
shall:

     (i) give the Company any information reasonably requested by the Company
relating to such claim,

     (ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

     (iii) cooperate with the Company in good faith in order effectively to contest
such claim, and

     (iv) permit the Company to participate in any proceedings relating to such
claim;

provided, however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such contest, and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing provisions of this
Section 26(c), the Company shall control all proceedings taken in connection with such
contest, and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing authority in
respect of such claim and may, at its sole discretion, either pay the tax claimed to the
appropriate taxing authority on behalf of the Executive and direct the Executive to sue for
a refund or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administra-

-16-

 

tive tribunal, in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that, if the Company pays such claim and
directs the Executive to sue for a refund, the Company shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties) imposed with respect to such payment or with respect to any imputed
income in connection with such payment; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder, and the
Executive shall be entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority. In all events, any
reimbursement of the Executive shall be made no later than the last day of the calendar year
following the calendar year in which the taxes that are subject to audit or litigation are
remitted to the taxing authority or, where as a result of such audit or litigation no taxes
are remitted, the last day of the calendar year following the calendar year in which the
audit is completed or there is a final and nonappealable settlement or other resolution of
the litigation.

     (d) If, after the receipt by the Executive of a Gross-Up Payment or payment by the
Company of an amount on the Executive’s behalf pursuant to Section 26(c), the Executive
becomes entitled to receive any refund with respect to the Excise Tax to which such Gross-Up
Payment relates or with respect to such claim, the Executive shall (subject to the Company’s
complying with the requirements of Section 26(c), if applicable) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after payment by the Company of an amount on the Executive’s
behalf pursuant to Section 26(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then the amount of such payment shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.

     (e) Notwithstanding any other provision of this Section 26, the Company may, in its
sole discretion, withhold and pay over to the Internal Revenue Service or any other
applicable taxing authority, for the benefit of the Executive, all or any portion of any
Gross-Up Payment, and the Executive hereby consents to such withholding.

-17-

 

     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
	 	 

-18-

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