PINNACLE WEST CAPITAL CORP
2002 LONG-TERM INCENTIVE PLAN
<DOCUMENT>
<TYPE>EX-10.5A
<SEQUENCE>10
<FILENAME>ex10-5a.txt
<DESCRIPTION>2002 LONG-TERM INCENTIVE PLAN
<TEXT>
                                                                   Exhibit 10.5a

                        PINNACLE WEST CAPITAL CORPORATION
                          2002 LONG-TERM INCENTIVE PLAN

1.   OBJECTIVES.

     The Pinnacle West Capital Corporation 2002 Long-Term Incentive Plan (the
     "Plan") is designed to attract, motivate and retain selected employees of
     the Company. These objectives are accomplished by making long-term
     incentive awards under the Plan, thereby providing Participants with a
     proprietary interest in the Company's growth and performance.

2.   DEFINITIONS.

     (A)  "AWARDS" -- The grant of any form of Stock Option, Performance Share,
          or Stock Ownership Incentive Award (whether granted singly, in
          combination or in tandem) to a Participant pursuant to such terms,
          conditions, performance requirements, limitations and restrictions as
          the Committee may establish in order to fulfill the objectives of the
          Plan.

     (B)  "AWARD AGREEMENT" -- An agreement between PNW and a Participant that
          sets forth the terms, conditions, performance requirements,
          limitations and restrictions applicable to an Award.

     (C)  "BOARD" -- The Board of Directors of Pinnacle West Capital Corporation
          ("PNW").

     (D)  "CAPITAL STOCK" OR "STOCK" -- PNW's common stock (no par value).

     (E)  "CODE" -- The Internal Revenue Code of 1986, as amended from time to
          time.

     (F)  "COMMITTEE" -- The Committee designated by the Board to administer the
          Plan and chosen from those of its members, each of whom qualify as:
          (i) a "Non-Employee Director" of PNW as defined in Rule 16b-3(b)(3)
          (or any successor provision) under the Securities Exchange Act of 1934
          and (ii) an "outside director" under section 162(m) (or any successor
          provision) of the Code and the regulations thereunder.

     (G)  "COMPANY" -- PNW or any of its subsidiaries (including subsidiaries of
          subsidiaries) or any other entity in which PNW or any of its
          subsidiaries has a significant equity or other interest, as determined
          by the Committee.

     (H)  "FAIR MARKET VALUE" -- The closing price of Capital Stock on the New
          York Stock Exchange for the date in question provided that if no sales
          of Capital Stock were made on said exchange on that date, the closing
          price of Capital Stock as reported for the most recent preceding day
          on which sales of Capital Stock were made on said exchange.

     (I)  "FISCAL YEAR" -- The Fiscal Year of PNW (may be changed from time to
          time).

     (J)  "PARTICIPANT" -- An individual to whom an Award has been made under
          the Plan. Awards may be made to employees of PNW or any of its
          subsidiaries (including subsidiaries of subsidiaries) or any other
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2002 Long-Term Incentive plan
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          entity in which PNW or any of its subsidiaries has a significant
          equity or other interest, as determined by the Committee.

     (K)  "PERFORMANCE PERIOD" -- A period of one or more consecutive Fiscal
          Years over which one or more of the performance criteria listed in
          Section 5(d) shall be measured pursuant to the grant of Awards
          (whether such Awards take the form of Stock Options, Performance Share
          Awards or Stock Ownership Incentive Awards). Performance Periods may
          overlap one another.

3.   CAPITAL STOCK AVAILABLE FOR AWARDS.

     Subject to adjustment pursuant to Section 12, the number of shares that may
     be issued under the Plan for Awards granted is six million (6,000,000).
     Shares of Capital Stock may be made available from the authorized but
     un-issued shares of PNW, from shares held in PNW's treasury and not
     reserved for some other purpose, or from shares purchased on the open
     market. For purposes of determining the number of shares of Capital Stock
     issued under the Plan, no shares shall be deemed issued until they are
     actually delivered to a Participant, or such other person in accordance
     with Section 9. Shares covered by Awards, that either wholly or in part are
     not earned or that expire or are forfeited, terminated, canceled, or
     exchanged or other Awards, shall be available for future issuance under
     Awards. Further, shares tendered to PNW in connection with the exercise of
     Stock Options, or withheld by PNW for the payment of tax withholding on any
     Award, shall also be available for future issuance under Awards.

4.   ADMINISTRATION.

     The Plan shall be administered by the Committee, which shall have full
     power to select Participants, interpret the Plan and adopt such rules,
     regulations and guidelines for carrying out the Plan as it may deem
     necessary or proper. A majority of the Committee shall constitute a quorum.
     The acts of a majority of the members present at any meeting at which a
     quorum is present and acts approved in writing by a majority of the
     Committee in lieu of a meeting shall be deemed acts of the Committee. Each
     member of the Committee is entitled to rely in good faith upon any report
     or other information furnished to that member by any officer or other
     employee of PNW, any subsidiary, PNW's certified public accountants, any
     executive compensation consultant or other professional retained by PNW to
     assist in the administration of the Plan.

5.   AWARDS.

     The Committee shall determine the type(s) of Award(s) to be made to each
     Participant and shall set forth in the related Award Agreement the terms,
     conditions, performance requirements, limitations and restrictions
     applicable to each Award. Awards may be granted singly, in combination or
     in tandem. Awards may also be made in combination or in tandem with, in
     replacement or payment of, or as alternatives to, grants, rights or
     compensation earned under any other Plan of the Company, including the Plan
     of any acquired entity.

     (A)  STOCK OPTION -- A Stock Option is a grant of a right to purchase a
          specified number of shares of Capital Stock. The exercise price of
          said Grant shall be not less than 100% of Fair Market Value on the
          date of Grant of such right. No individual may be granted Options to
          purchase more than 600,000 shares during any Fiscal Year. No Stock

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2002 Long-Term Incentive plan
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          Option shall have a term of more than ten (10) years. No Stock Option
          may be repriced during its term. All Stock Options shall be
          non-qualified Stock Options.

     (B)  PERFORMANCE SHARE AWARD -- A Performance Share Award is an Award
          denominated in units of stock. The maximum number of shares of Capital
          Stock that may be issued under Performance Share Awards and Stock
          Ownership Incentive Awards shall not exceed 1,800,000. Performance
          Share Awards will provide for the payment of stock if performance
          goals are achieved over specified Performance Periods. The maximum
          possible Performance Share Grant to any single Participant is 120,000
          units in any Fiscal Year.

     (C)  STOCK OWNERSHIP INCENTIVE AWARD -- A Stock Ownership Incentive Award
          is an award of stock if certain performance goals and stock ownership
          requirements are achieved. The maximum possible Stock Ownership
          Incentive Award, which may be made to any single Participant in any
          Fiscal Year, is 15,000 shares.

     (D)  PERFORMANCE CRITERIA UNDER SECTION 162(M) OF THE CODE FOR PERFORMANCE
          SHARE AWARDS, AND STOCK OWNERSHIP INCENTIVE AWARDS -- The performance
          criteria for Performance Share Awards, and Stock Ownership Incentive
          Awards made to any "covered employee" (as defined in section 162(m) of
          the Code), and which are intended to qualify as "performance-based
          compensation" (as defined in section 162(m) of the Code), shall
          consist of objective tests based on one or more of the following:
          PNW's earnings per share growth compared to a comparative group of S&P
          Electric Utilities; earnings; cash flow; customer satisfaction;
          revenues; financial return ratios; market performance; shareholder
          return and/or value; operating profits (including earnings before
          income taxes, depreciation and amortization); net profits; earnings
          per share; earnings per share growth; profit returns and margins;
          stock price; working capital; business trends; production cost;
          project milestones; and plant and equipment performance, as well as
          one or more of the following operational measures: safety, environment
          and minimizing customer price per kilowatt-hour. Performance criteria
          may be measured solely on a corporate, subsidiary or business unit
          basis or a combination thereof. Satisfaction of Stock Ownership
          guidelines may also be a prerequisite to payment.

     (E)  DETERMINATIONS OF COMMITTEE -- Nothing herein shall preclude the
          Committee from making any payments or granting any Awards whether or
          not such payments or Awards qualify for tax deductibility under
          section 162(m) of the Code. No payments are to be made to a
          Participant if the applicable performance criteria are not achieved
          for a given Performance Period. If the applicable performance criteria
          are achieved for a given Performance Period, the Committee has full
          discretion to reduce or eliminate the amount otherwise payable for
          that Performance Period. Under no circumstances may the Committee use
          discretion to increase the amount payable to a Participant under a
          Performance Share Award, or a Stock Ownership Incentive Award.

6.   PAYMENT OF AWARDS.

     Payment of Awards shall be made in the form Stock and may include such
     restrictions as the Committee shall determine. Dividends or dividend
     equivalent rights may be extended to and made part of any Award denominated
     in Stock or units of Stock, subject to such terms, conditions and
     restrictions as the Committee may establish. At the discretion of the

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     Committee, a Participant may be offered an election to substitute an Award
     for another Award (or Awards) of the same or different type.

7.   STOCK OPTION EXERCISE.

     The price at which shares of Capital Stock may be purchased under a Stock
     Option shall be paid in full in cash at the time of the exercise or, if
     permitted by the Committee, by means of tendering Capital Stock or
     surrendering another Award or any combination thereof. The Committee shall
     determine acceptable methods of tendering Capital Stock or other Awards and
     may impose such conditions on the use of Capital Stock or other Awards to
     exercise a Stock Option, as it deems appropriate. In addition, the Optionee
     may effect a "cashless exercise" of a Stock Option in which the option
     shares are sold through a broker and a portion of the proceeds, to cover
     the exercise price, is paid to PNW or otherwise in accordance with the
     rules and procedures adopted by the Committee.

8.   TAX WITHHOLDING.

     Prior to the payment or settlement of any Award, the Participant must pay,
     or make arrangements acceptable to PNW for the payment of, any and all
     federal, state and local tax withholding that in the opinion of PNW is
     required by law. PNW shall have the right to deduct applicable taxes from
     any Award payment and withhold (at the time of delivery or vesting of
     shares of Stock under the Plan) an appropriate number of shares for payment
     of taxes required by law or to take such other action as may be necessary
     in the opinion of PNW to satisfy all obligations for withholding of such
     taxes.

9.   TRANSFERABILITY.

     No Award shall be transferable, assignable, payable to, or exercisable by
     anyone other than the Participant to whom it was granted, except: (a) by
     will or the laws of descent and distribution; or (b) that the Committee (in
     the form of an Award Agreement or otherwise) may permit transfers of Awards
     by gift or otherwise to a member of a Participant's immediate family and/or
     trusts whose beneficiaries are members of the Participant's immediate
     family, or to such other persons or entities as may be approved by the
     Committee.

10.  AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION OF THE PLAN.

     The Board may amend, modify, suspend or terminate the Plan for the purpose
     of meeting or addressing any changes in law or other legal requirements or
     for any other purpose permitted by law; provided, however, that no such
     amendment, modification, suspension or termination of the Plan shall
     adversely affect in any material way any Award previously granted under the
     Plan, without the written consent of the Participant. Subject to changes in
     law or other legal requirements that would permit otherwise, the Plan may
     not be amended without the approval of the shareholders of PNW, to: (a)
     increase the aggregate number of shares of Capital Stock that may be issued
     under the Plan (except for adjustments pursuant to Section 12); (b) permit
     the granting of Stock Options with exercise prices lower than those
     specified in Section 5(a); (c) modify the Plan's eligibility requirements,
     or (d) change the performance criteria applicable to Covered Employees.

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11.  TERMINATION OF EMPLOYMENT.

     If the employment of a Participant terminates, the status of the Award
     shall be as set forth in the Award Agreement, provided that if a
     Participant is covered by a Key Executive Employment and Severance
     Agreement ("KEESA"), which entitles the Participant's termination to be
     treated as a "Normal Termination", if such termination occurs within two
     years following a Change of Control (as defined in such KEESA), the Award
     Agreement shall give such Participant at least those rights provided for in
     such KEESA.

12.  ADJUSTMENTS.

     In the event of any change in the outstanding Capital Stock of PNW by
     reason of a stock split, stock dividend, combination or reclassification of
     shares, recapitalization, merger, or similar event, the Committee shall
     adjust appropriately: (a) the number of shares of Capital Stock: (i)
     available for issuance under the Plan; (ii) for which Awards may be granted
     to an individual Participant set forth in Section 5 and (iii) covered by
     outstanding Awards denominated in stock or units of stock; (b) the exercise
     and grant prices related to outstanding Awards, and (c) the appropriate
     Fair Market Value and other price determinations for such Awards. In the
     event of any other change affecting the Capital Stock or any distribution
     (other than normal cash dividends) to holders of Capital Stock such
     adjustments shall be made in the number and kind of shares and the
     exercise, grant and conversion prices of the affected Awards (including
     adjustments to avoid fractional shares) to give proper effect to such event
     as may be deemed equitable by the Committee. In the event of a corporate
     merger, consolidation, acquisition of property or stock, separation,
     reorganization or liquidation, the Committee shall be authorized to cause
     PNW to issue or assume Stock Options, whether or not in a transaction to
     which section 424(a) of the Code applies, by means of substitution of new
     Stock Options for previously issued Stock Options or an assumption of
     previously issued Stock Options. In such event, the aggregate number of
     shares of Capital Stock available for issuance under Awards under Section
     3, including the individual Participant maximums set forth in Section 5,
     will be adjusted to reflect such substitution or assumption.

13.  MISCELLANEOUS.

     (A)  Any notice to PNW required by any of the provisions of the Plan shall
          be addressed to the senior human resources officer of PNW in writing
          and shall become effective when it is received.

     (B)  The Plan shall be unfunded and the Company shall not be required to
          establish any special account or fund or to otherwise segregate or
          encumber assets to ensure payment of any Award.

     (C)  Nothing contained in the Plan shall prevent the Company from adopting
          other or additional compensation arrangements or plans, subject to
          shareholder approval (if such approval is required) and such
          arrangements or plans may be either generally applicable or applicable
          only in specific cases.

     (D)  No Participant shall have any claim or right to be granted an Award
          under the Plan and nothing contained in the Plan shall be deemed or
          construed to give any Participant the right to be retained in the
          employ of the Company or to interfere with the right of the Company to
          discharge any Participant at any time without regard to the effect
          such discharge may have upon the Participant under the Plan. Except to
          the extent otherwise provided in any plan or in an Award Agreement, no

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          Award under the Plan shall be deemed compensation for purposes of
          computing benefits or contributions under any other plan of the
          Company.

     (E)  The Plan and each Award Agreement shall 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
          the Plan to the substantive law of another jurisdiction. Unless
          otherwise provided in the Award Agreement recipients of an Award under
          the Plan are deemed to submit to the exclusive jurisdiction and venue
          of the federal or state courts of Arizona, County of Maricopa to
          resolve any and all issues that may arise out of or relate to the Plan
          or any related Award Agreement.

     (F)  The Committee shall have full power and authority to interpret the
          Plan and to make any determinations thereunder. The Committee's
          determinations shall be binding and conclusive. Determinations made by
          the Committee under the Plan need not be uniform and may be made
          selectively among individuals, whether or not such individuals are
          similarly situated.

     (G)  If any provision of the Plan is, or becomes, or is deemed invalid,
          illegal or unenforceable in any jurisdiction, or would disqualify the
          Plan or any Award under any law deemed applicable by the Committee,
          such provision shall be construed or deemed amended or limited in
          scope to conform to applicable laws or, in the discretion of the
          Committee, it shall be stricken and the remainder of the Plan shall
          remain in full force and effect.

     (H)  The Plan, as adopted by the Board on March 20, 2002, is subject to
          approval of the stockholders of PNW within 12 months of the date it
          was adopted. Awards may be granted prior to such approval but no such
          Award may be exercised, vested or settled prior to such approval. If
          such approval is not obtained, any such Award shall be void ab initio
          and of no force or effect. If such approval is obtained, no further
          Awards shall be granted under the Pinnacle West Capital Corporation
          1994 Long-Term Incentive Plan other than Awards providing for the
          issuance of up to 20,000 shares of Stock to be used under such plan to
          satisfy PNW's obligations to make Stock Awards to certain executives.

     (I)  Subject to earlier termination, pursuant to Section 10, the Plan will
          terminate on March 19, 2012. Awards outstanding at the termination of
          the Plan will not be affected by such termination.

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