SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
X Preliminary Proxy Statement
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Confidential, for the use of the Commission only (as permitted by Rule
14a-6(e)(2)
TUCSON ELECTRIC POWER COMPANY
- - - -------------------------------------------------------------------------------
(Name of the Registrant as Specified in its Charter)
- - - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2), or Item
22(a)(2) of Schedule 14A.
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
- - - -------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- - - -------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:*
------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------
5) Total fee paid:
------------------------------------------------------------
_ Fee paid previously with preliminary materials.
_ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and idenfity the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
-----------------------------------------------
2) Form, Schedule or Registration Statement No.
--------------------------
3) Filing party:
---------------------------------------------------------
4) Date filed:
-----------------------------------------------------------
- - - -----------------
*Set forth the amount on which the filing fee is calculated and state how it
was determined.
TUCSON ELECTRIC POWER COMPANY
220 West Sixth Street
P.O. Box 711
Tucson, Arizona 85702
Charles E. Bayless
Chairman of the Board (520) 571-4000
April , 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting (the "Meeting") of
Shareholders of Tucson Electric Power Company (the "Company") to be held on May
14, 1996. The Meeting will begin at 10:00 a.m., Tucson time, at The Hilton
Hotel East, 7600 E. Broadway Boulevard, Tucson, Arizona.
At the Meeting you will be asked to elect a Board of Directors for the
ensuing year, and to approve amendments to the Company's Restated Articles of
Incorporation to (a) effect a one-for-five reverse split of the Common Stock;
and (b) reduce the number of authorized shares of Common Stock from 200 million
to 75 million.
During the Meeting, a report will be given on the operations of the
Company. Directors and officers of the Company will be present to respond to
questions that shareholders may have.
Please fill out, sign, date and return the enclosed Proxy Card promptly.
If you attend the Meeting and wish to vote your shares personally, you may
revoke your proxy at that time. Your interest is very much appreciated.
Sincerely yours,
TUCSON ELECTRIC POWER COMPANY
Charles E. Bayless
Chairman of the Board, President and
Chief Executive Officer
TUCSON ELECTRIC POWER COMPANY
220 WEST SIXTH STREET
P.O. BOX 711
TUCSON, ARIZONA 85702 (520) 571-4000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS MAY 14, 1996
To the Shareholders of
TUCSON ELECTRIC POWER COMPANY
Notice is hereby given that the Annual Meeting (the "Meeting") of
Shareholders of Tucson Electric Power Company (the "Company") will be held on
the 14th day of May, 1996, at the Hilton Hotel East, 7600 E. Broadway Boulevard,
Tucson, Arizona, at 10:00 a.m., Tucson time, for the purposes of:
(1) electing a Board of Directors for the ensuing year;
(2) considering and taking action on a proposal for amendments to the
Restated Articles of Incorporation which would (i) reduce the number
of outstanding shares of Common Stock, no par value ("Common Stock")
of the Company through a one-for-five reverse split of the Common
Stock, and (ii) reduce the number of authorized shares of Common Stock
from 200 million to 75 million; and
(3) transacting such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
The holders of record of Common Stock at the close of business on March 18,
1996, will be entitled to vote at the Meeting and at any adjournments thereof.
Proxy soliciting material is first being sent or given to shareholders on April
, 1996.
By order of the Board of Directors,
Dennis R. Nelson
Secretary
Dated: April , 1996
IMPORTANT: Your presence at the Meeting is desired, but if you cannot be
present, please fill out, sign, date and return the enclosed form of proxy in
the envelope provided. Due to the number of shareholders, your cooperation in
returning your proxy promptly is essential and will be very much appreciated.
YOUR VOTE IS IMPORTANT, REGARDLESS OF HOW MANY SHARES YOU OWN.
TO VOTE YOUR SHARES, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND MAIL
IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
PROXY STATEMENT
GENERAL
This Proxy Statement is being mailed to shareholders in connection with the
solicitation, by and on behalf of the Board of Directors of Tucson Electric
Power Company (the "Company"), of proxies to be voted at the Annual Meeting of
Shareholders of the Company to be held on May 14, 1996, at the time and place
and for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders and at any and all adjournments of the Meeting.
An appropriate form of proxy for execution by shareholders is enclosed.
Any shareholder giving a proxy has the right to revoke the same by giving notice
to the Company in writing, directed to the Secretary, or in person at the
Meeting at any time before the proxy is exercised.
The entire cost of the solicitation of proxies will be borne by the
Company. Solicitations will be made by the Company primarily by use of the
mails. Additional solicitation of brokers, banks, nominees and institutional
investors may be made pursuant to a special engagement of Beacon Hill Partners,
Inc. at a cost to the Company of approximately $5,000 plus reasonable out-of-
pocket expenses. If necessary to obtain reasonable representation of
shareholders at the Meeting, solicitations may also be made by telephone,
facsimile or personal interview. The Company will request brokers or other
persons holding stock in their names, or in the names of their nominees, to
forward proxy material to the beneficial owners of such stock or request
authority for the execution of the proxies, and will reimburse such brokers or
other persons for their expense in so doing.
In accordance with the Company's Bylaws, the Board of Directors has fixed
March 18, 1996 as the record date for the determination of shareholders entitled
to vote at the Meeting and at any and all adjournments thereof. The stock
transfer books will not be closed.
Representatives of Deloitte & Touche LLP, the Company's independent
auditors, are expected to be present at the Meeting with the opportunity to make
a statement if they desire to do so, and to be available to respond to
appropriate questions.
VOTING OF SHARES
At March 18, 1996, the Company had outstanding shares of Common
Stock no par value ("Common Stock"). Holders of TEP Common Stock will be
entitled to one vote per share, subject to cumulative voting rights in the
election of Directors as described below.
Under Arizona General Corporation Law, a majority of the shares entitled to
vote on any single subject matter which may be brought before the Meeting will
constitute a quorum, and business may be conducted once a quorum is represented
at the Meeting. Except as otherwise specified by law if a quorum exists, action
on a matter other than the election of directors will be deemed approved if the
votes cast "For" such matter exceed votes cast "Against" it.
In the election of Directors, each holder of shares of Common Stock has the
right to cumulate his votes by casting as many votes in the aggregate as shall
equal the number of his shares of Common Stock multiplied by the number of
Directors to be elected, and he may cast the whole number of such votes for one
nominee or distribute such votes among two or more nominees. If a quorum is
present, directors are elected by a plurality of the votes cast by the shares
entitled to vote. Votes will be counted as being represented at the Meeting for
quorum purposes but will not have an effect on the vote.
The shares represented by an executed proxy (i) will be voted for the
election of Directors, or withheld if so specified, and (ii) will be voted for
or against the proposed amendments to the Restated Articles of Incorporation, or
will abstain with respect thereto, all in accordance with the specifications
made in said proxy. If no specification is made in said proxy, the proxy will
be voted "FOR" the nominees listed herein, and "FOR" the proposed amendments to
the Restated Articles of Incorporation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 18, 1996, the following person was known by the Company to be
beneficial owner of more than five percent of the outstanding shares of the
Common Stock:
Amount and
Name and address Nature of Percent of
Title of Class of Beneficial Owner Beneficial Ownership Class
- - - --------------- ------------------- -------------------- ----------
Common FMR Corp. ("FMR") 8,094,400 (1) 5.4%
82 Devonshire Street
Boston, MA 02109
(1) In a statement dated February 14, 1996, filed with the Securities and
Exchange Commission ("SEC") pursuant to Section 13(d) of the Securities
Exchange Act of 1934, FMR indicated that its wholly-owned subsidiary,
Fidelity Management & Research Company ("Fidelity"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940 (the
"Act"), is the beneficial owner of 8,094,400 shares of the Common Stock as
a result of acting as investment advisor to various investment companies
registered under Section 8 of the Act.
All but one of the owner participants in the Company's lease of Unit 1 of
the Springerville Generating Station submitted a "no-action" request to the
staff of the SEC regarding their status under the Public Utility Holding Company
Act of 1935, as amended ("Holding Company Act"). In connection with such "no-
action" request, each such owner participant entered into a separate voting
agreement with the Company (each, a "Voting Agreement") with respect to the
shares of Common Stock and warrants to purchase Common Stock ("Warrants") which
such owner participant received as part of the 1992 comprehensive restructuring
of the Company's obligations to certain of its creditors, major suppliers and
lease participants, as well as the reclassification of all shares of the
Company's previously outstanding preferred stock into Common Stock (the
"Financial Restructuring"). Under the Financial Restructuring, such owner
participants received, in the aggregate, approximately 8.9% of the total number
of shares of Common Stock outstanding at the date of the closing of the
Financial Restructuring on December 15, 1992 (the "Closing") (but before giving
effect to the exercise of the Warrants) and Warrants in an aggregate amount of
approximately 6.75% of the total number of shares of Common Stock at the date of
the Closing. Each Voting Agreement constitutes an irrevocable proxy of the
owner participant directing the Company to vote those shares issued to it under
the Financial Restructuring (including shares issuable upon the exercise of the
Warrants) in the same proportion as the votes cast for and against any
particular matter by the other holders of Common Stock voting on such matter.
However, an owner participant has the right to vote or direct the voting of the
shares of Common Stock held by it upon the occurrence of any of the following
events: (i) a default under the Springerville Unit 1 leases; (ii) a default by
the Company in respect of obligations with an aggregate amount in excess of
$500,000; or (iii) the institution of bankruptcy or similar proceedings by or
against the Company or any of its affiliates. In the event of any sale or
disposition of the shares that are subject to a Voting Agreement to a person who
is not an owner participant or an affiliate thereof, the shares sold would no
longer be subject to that Voting Agreement.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 18, 1996, the number and
percentage of shares beneficially owned, along with the nature of such
beneficial ownership, by each of the Company's Directors and nominees, the
Company's Chief Executive Officer, the four other most highly compensated
executive officers of the Company during 1995, and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount and Allocable Amount of
Nature of Shares under Deferred
Name of Beneficial Percent of Compensation
Title of Class Beneficial Owner Ownership (1) Class Stock Plan (2)
- - - --------------- ---------------- ------------- ---------- ---------------------
Common Elizabeth T. Alexander 2,500 (3) * _
Director
Common Charles E. Bayless 31,145 (4) * 28,107
Chairman, President
and CEO
Common Jose L. Canchola 5,018 (3) * 2,018
Director
Common John A. Jeter 4,500 (3) * _
Director
Common R. B. O'Rielly 3,400 (3) * 2,476
Director
Common Martha R. Seger 2,200 (3) * 3,854
Director
Common Donald G. Shropshire 3,500 (3) * _
Director
Common H. Wilson Sundt 9,760 (3)(5) * _
Director
Common J. Burgess Winter 10,070 (3) * _
Director
Common Ira R. Adler 16,172 (6) * _
Senior Vice President
and Chief Financial Officer
Common James S. Pignatelli 14,373 (7) * _
Senior Vice President
Common Dennis R. Nelson 7,776 (8) * 1,400
Vice President, General
Counsel and Corporate Secretary
Common Romano Salvatori _ * 2,763
Vice President, Independent Power
Common All directors and 142,117 (9) * 49,612
executive officers as a group
</TABLE>
* Represents less than l% of the outstanding Common Stock of the Company.
(1) Based on information furnished by executive officers and directors.
Includes shares subject to options exercisable within 60 days.
(2) Represents stock held in trust under the Deferred Compensation Plan. With
the cash compensation deferred, the trust purchases the Common Stock
quarterly. Such executive officers and directors are not the beneficial
owners of such shares. The next purchase will be on April 17, 1996. The
number of shares set forth under such column includes shares purchased
through the last quarterly purchase on January 17, 1996.
(3) Includes 2,000 shares subject to options exercisable within 60 days.
(4) Includes 26,145 shares subject to options exercisable within 60 days.
(5) Includes 5,000 shares held by a corporation with which Mr. Sundt is
associated.
(6) Includes 14,072 shares subject to options exercisable within 60 days.
(7) Includes 12,373 shares subject to options exercisable within 60 days.
(8) Includes 7,571 shares subject to options exercisable within 60 days.
(9) Includes 121,126 shares subject to options exercisable within 60 days.
PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
Nine Directors are to be elected at the Meeting, to serve for the ensuing
year and until their successors shall have been elected and shall have
qualified. The votes applicable to the shares represented by executed proxies
in the form enclosed, unless withheld, will be cast for the nine nominees listed
below, or, in the discretion of the persons acting as proxies, will be voted
cumulatively for one or more of such nominees, all of whom are present members
of the Board of Directors. All of the nominees have consented to serve if
elected. If any nominee becomes unavailable for any reason or a vacancy should
occur before the election (which events are not anticipated), it is the
intention of the persons designated as proxies to vote, in their discretion, for
other nominees.
Director
Name and Principal Occupation Age Since
----------------------------- --- ------
(1)(2) ELIZABETH T. ALEXANDER, President 56 1995
and Treasurer of L & C Gourmet Products, Inc.,
an agricultural product marketing company,
and Director of International Marketing of
Santa Cruz Valley Pecan Co., since 1982.
CHARLES E. BAYLESS, Chairman of the Board 53 1990
of Directors since January 1992, President
and Chief Executive Officer of the Company
since July 1990; Senior Vice President and
Chief Financial Officer of the Company
from December 1989 until July 1990;
Director of Trigen Energy Corporation.
(1)(2)(3) JOSE L. CANCHOLA, President and Chief 64 1992
Operating Officer of Canchola Foods Inc.,
holder of several restaurant franchises in
Tucson and Nogales, Arizona, since 1976;
Founder and Director of Azteca Corn
Products Corporation from 1969 to 1985;
National Foundation Coordinator, U.S.
Department of Commerce, Office of Minority
Business Enterprise from 1974 to 1976.
(1)(2)(3) JOHN A. JETER, independent business 65 1994
consultant since 1991; partner in the
accounting firm of Arthur Andersen & Co.
from 1967 to 1991.
(1)(2)(3) R. B. O'RIELLY, President and Chief 66 1989
Executive Officer of O'Rielly Motor
Company, an automobile dealership
management company, since 1955; Director
of Banc One Arizona Corporation and Bank
One Arizona, N.A.
(2) MARTHA R. SEGER, Distinguished Visiting 64 1992
Professor of Finance, American Graduate
School of International Management from
1993 to present; John M. Olin Distinguished
Fellow at the Karl Eller Center for the Study
of Private Market Economy at the University of
Arizona from 1991 to 1993; Financial Economist
and Governor of the Federal Reserve System
from 1984 until 1991; Director of Amoco
Corporation, Xerox Corporation, Kroger
Company, Fluor Corporation, Amerisure,
Johnson Controls Inc., and Providian
Corporation.
(2) DONALD G. SHROPSHIRE, retired President 68 1992
and Chief Executive Officer of TM Care,
consisting of Tucson Medical Center, TMC
Health Enterprises Inc. and TMC
Foundation, from 1982 to 1992, having
served as Administrator of Tucson Medical
Center from 1967 to 1982; Chairman of the
Board of Healthways, Inc. and Partners in
Health Maintenance, Inc. from 1985 to
September 1992; Director, First Interstate
Bank of Arizona, a subsidiary of First
Interstate Bancorp.
(1)(3) H. WILSON SUNDT, Chairman of the Board and 63 1976
Chief Executive Officer of Sundt Corp, a
general construction contracting firm,
since 1979, having served as President
from 1979 until July 1983; Director of
Magma Copper Company.
(1)(3) J. BURGESS WINTER, President and Chief 63 1992
Executive Officer of Magma Copper Company,
a copper mining company, since 1988;
Senior Vice President of Operations of BP
Minerals America from 1983 to 1988; Vice
President and General Manager of Inspiration
Copper from 1976 to 1983; Director of Magma
Copper Company since 1988.
(1) Member of Nominating Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
As noted above, Dr. Seger is a member of the Board of Directors of
Providian Corporation. Providian is a debt participant in the Company's leases
of Springerville Unit 1 and also holds certain of the Company's first mortgage
bonds. Dr. Seger has advised the Company that she does not intend to participate
in any deliberations, or actions, of either the Board of Directors of the
Company or of the Board of Directors of Providian, with respect to any matter
involving the other company.
COMMITTEE FUNCTIONS
The functions of the Audit Committee are to select and recommend to the
Board of Directors a firm of independent certified public accountants to audit
annually the financial statements of the Company; to review and discuss the
scope of such audit; to receive and review the audit reports and
recommendations; to transmit recommendations, if any, of the Audit Committee to
the Board of Directors; to review with the internal audit department of the
Company, from time to time, the accounting and internal control procedures of
the Company and make recommendations to the Board of Directors for any changes
deemed necessary in such procedures; and to perform such other functions as the
Board of Directors from time to time shall delegate to that Committee. The
Audit Committee held four meetings in 1995.
The functions of the Compensation Committee are to review the performance
of the Company's officers and to make recommendations to the Board of Directors
with respect to officers' compensation. The Compensation Committee held six
meetings in 1995.
The functions of the Nominating Committee are to interview potential
directors of the Company and to nominate and recommend to the shareholders and
directors, as the case may be, qualified persons to serve as directors. The
Nominating Committee held six meetings in 1995. At such times as director
vacancies occur, the Nominating Committee will consider written recommendations
for the Board of Directors which have been received from shareholders.
Recommendations must include detailed biographical material indicating the
candidate's qualifications and also a written statement from the candidate of
willingness and availability to serve. Recommendations should be directed to
the Corporate Secretary, Tucson Electric Power Company, P.O. Box 711, Tucson,
Arizona 85702.
The Board of Directors held a total of eleven regular and special meetings
in 1995. For the year ended December 31, 1995, Mr. Winter attended fewer than
75% of the aggregate of the total number of meetings of the Board and committees
upon which he served.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following tables set forth certain information concerning compensation
of, stock option grants to, and stock options/SARs held by the Company's Chief
Executive Officer and the four most highly compensated executive officers at
December 31, 1995.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
<S> <C> <C> <C> <C>
Long-Term
Compensation
Awards
Securities All Other
Name and Annual Compensation Underlying Compensation
Principal Position Year Salary($) Bonus($) Options/SARs(#) ($) (2)
- - - ------------------ ---- ------------------ --------------- -------------
Charles E. Bayless 1995 394,905 157,964 87,148 6,750
President and Chief 1994 364,152 186,170 78,437 6,750
Executive Officer 1993 300,061 _ _ 8,994
Ira R. Adler 1995 234,808 80,507 44,415 6,750
Senior Vice President 1994 212,572 94,881 38,159 6,750
and Chief Financial 1993 180,045 _ _ 8,102
Officer
James S. Pignatelli 1995 234,808 80,507 44,415 6,750
Senior Vice President 1994 65,154 94,881 37,120 2,285
- - - - Business Development
Romano Salvatori 1995 180,001 51,300 28,302 6,750
Vice President 1994 68,308 _ _ _
Independent Power
Dennis R. Nelson 1995 170,385 48,792 26,918 6,750
Vice President, 1994 146,426 53,910 22,714 6,750
General Counsel 1993 120,016 _ _ 5,401
and Corporate Secretary
</TABLE>
(1)Represents amounts awarded under the 1995 Short-Term Incentive Plan for
services rendered in 1995. See Report of the Compensation Committee of the
Board of Directors on Executive Compensation.
(2)All Other Compensation is comprised of the Company's contributions to the
Company's Triple Investment Plan for Salaried Employees (401(k) Plan).
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
<S> <C> <C> <C> <C> <C> Potential
Realizable Value at
Number of Assumed Annual
Securities Percent of Total Rates of Stock
Underlying Options/SARs Price Appreciation
Options/SARs Granted to Exercise for Option Term
Granted Employees Price Expiration
Name (#) in Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ------------- --------------- -------- ---------- ----- ------
Charles E. Bayless 87,148 21.0% 3.25 8/4/05 178,122 451,397
Ira R. Adler 44,415 10.7% 3.25 8/4/05 90,780 230,054
James S. Pignatelli 44,415 10.7% 3.25 8/4/05 90,780 230,054
Romano Salvatori 28,302 6.8% 3.25 8/4/05 57,847 146,595
Dennis R. Nelson 26,918 6.5% 3.25 8/4/05 55,018 139,427
</TABLE>
During 1995, the Compensation Committee granted stock options intended to
qualify as incentive stock options under the Internal Revenue Code of 1986, as
amended (the "Code"), to the executive officers of the Company with exercise
prices equal to the market price of the Common Stock at the date of grant. The
options vest ratably over a three year period. The aggregate number of shares
attributable to the 1995 grants is 414,579.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
<S> <C> <C> <C> <C>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End (#) Fiscal Year-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#)(1) Realized ($) Unexercisable Unexercisable
---- ------------------ ------------ ---------------------- --------------------
Charles E. Bayless 64,378 8,047 26,145/139,440 0/0
Ira R. Adler 30,901 3,863 14,072/69,855 0/0
James S. Pignatelli _ _ 12,373/69,162 0/0
Romano Salvatori _ _ 0/28,302 0/0
Dennis R. Nelson 12,876 1,610 7,571/42,061 0/0
</TABLE>
(1) The column indicates the number of securities as to which SARs were
exercised. All such SARs that were exercised were paid in cash.
PENSION PLAN TABLE
Remuneration
($) Years of Service
- - - ------------ ----------------
15 20 25 30 35
-- -- -- -- --
125,000 32,910 43,880 54,850 54,850 54,850
150,000 39,492 52,656 65,820 65,820 65,820
175,000 46,074 61,432 76,790 76,790 76,790
200,000 52,656 70,208 87,760 87,760 87,760
225,000 59,238 78,984 98,730 98,730 98,730
250,000 65,820 87,760 109,700 109,700 109,700
300,000 78,984 105,312 131,640 131,640 131,640
400,000 105,312 140,416 175,520 175,520 175,520
450,000 118,476 157,968 197,460 197,460 197,460
500,000 131,640 175,520 219,400 219,400 219,400
Remuneration is comprised of the officers' average annual compensation
during the five consecutive years of employment with the highest compensation
within the last 15 years preceding retirement. Compensation is comprised of
salary only, shown on the Summary Compensation Table.
The estimated credited years of service for the Company's most highly
compensated executive officers follows:
Credited
Years of
Name Service
---- --------
Charles E. Bayless .................. 6
Ira R. Adler ........................ 10
James S. Pignatelli ................. 1
Romano Salvatori .................... 1
Dennis R. Nelson .................... 18
The amount of the pension benefit is equal to a base of 24% of the
compensation for 15 years of service, plus 9.7% of such calculated amount. The
base percentage increases 1.6% for each additional year of service until a
maximum of 25 years of credited service is attained. The estimated benefits
shown in the Pension Plan Table are straight life annuities not subject to a
reduction for any Social Security benefits. The table also reflects amounts
payable under the Excess Benefits Plan which will pay from the general funds of
the Company the difference, if any, between the benefits shown in the table
above and any benefit payments which may be limited by federal income tax
regulations.
DIRECTOR COMPENSATION
Each Director who is not a full-time salaried employee of the Company
received an annual cash retainer of $15,000, $800 for each Board meeting and
$600 for each committee meeting attended in 1995. Mr. J. Luther Davis, as
Director Emeritus, received monthly compensation in the amount of $2,000.
Directors who are salaried employees of the Company do not receive compensation
in their capacity as members of the Board of Directors.
EXECUTIVE EMPLOYMENT CONTRACTS
The Company has employment agreements with 13 officers (including the five
most highly compensated officers) which become effective in the event of a
change in control of the Company (which includes the acquisition of beneficial
ownership of 30% of the Common Stock, certain changes in the Board of Directors,
or approval by the shareholders of certain mergers or consolidations or of
certain transfers of the Company's assets). The agreements provide that each
officer shall be employed by the Company or one of its subsidiaries or
affiliates in a position comparable to his current position, with compensation
and benefits which, as set forth in each agreement, are at least equal to such
officer's then current compensation and benefits, for an employment period of
five years after a change in control occurs (subject to earlier termination due
to such officer's acceptance of a position with another company, or termination
by the Company for cause).
Following a change in control of the Company, in the event that the
officer's employment is terminated by the Company (with the exception of
termination due to the officer's acceptance of another position or for cause) or
if the officer terminates his employment because of a reduction in position,
responsibility, salary or for certain other good reasons, the officer is
entitled to severance benefits in the form of (i) a lump sum payment equal to
the present value of his salary for the next two years under the agreement, (ii)
the present value of the additional amount he would have received under the
Retirement Plan if he had continued to be employed for the five-year period
after a change in control occurs, (iii) the present value of contributions that
would have been made by the Company under the 401(k) Plan if he had continued to
be employed for such five-year period, and (iv) the spread on any Company stock
options which would have been granted to the officer if he had continued to be
employed for two years following such termination. Such officer is also
entitled to continue to participate for such five-year period in the Company's
health plans, death benefit plans and disability benefit plans. Notwithstanding
the above, any payment which is determined to be a parachute payment under the
Code shall be limited to the maximum amount permitted to be paid without the
imposition of an excess parachute payment excise tax, minus one dollar (and if
it shall be determined that the Company has made a payment in excess of this
limitation, such excess would become a loan and the officer would be required to
repay such amount). Assuming a change in control occurred on December 31, 1995
which resulted in the immediate termination of all five of the Company's most
highly compensated officers, the total payments made by the Company pursuant to
the said contracts would not be expected to exceed $4,000,000.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for developing and administering the Company's
executive compensation policies and programs and making recommendations to the
Board with respect thereto. In 1995, the Compensation Committee was comprised
of five of the Company's independent outside Directors. The Compensation
Committee determines the compensation of the Company's executive officers,
including Mr. Bayless and the other senior executives named in the Summary
Compensation Table (the "Named Executives"), and sets policies for and reviews
the compensation awarded to other key members of management. The Company
applies a consistent philosophy to compensation for all executive employees,
including the Named Executives.
COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS
The Company's executive compensation policies and programs generally are
intended to (i) relate the compensation of employees to the success of the
Company and the creation of shareholder value; and (ii) attract, motivate and
retain highly qualified executives. In 1995, the Company continued its
compensation program developed in 1994 with the assistance of an external
consultant. The program is intended to provide competitive pay levels which are
linked to the achievement of the Company's strategic objectives.
The Company's 1995 compensation program consisted of three components: (i)
base salary (ii) short-term incentive compensation and (iii) long-term incentive
compensation.
Base Salaries
The base salary component of compensation is intended to be competitive
with that paid by comparable companies in the electric industry. As noted
previously, in developing the compensation program, the Compensation Committee
retained an external consultant to conduct a competitive analysis of pay for the
Company's officer group. In conducting its analysis for 1995, the consultant
used a comparative survey of 15 electric utilities, chosen based on their
business and size, with revenues from $.04 billion to $1.6 billion. The
Compensation Committee believed the companies participating in the survey are a
more appropriate comparison for the Company than the Edison Electric 100
companies used in the Performance Graph set forth following this Report, because
the type of business and annual revenues of the companies included in the survey
are more closely related to those of the Company. The companies included in the
survey were Arizona Public Service Company; Boston Edison Company; Destec
Energy, Inc.; Duquesne Light Company; Iowa-Illinois Gas and Electric Company;
Louisville Gas and Electric Company; Minnesota Power; Mission Energy Company;
NIPSCO Industries, Inc.; PSI Resources, Inc.; Portland General Corporation;
SCANA Corporation; Wisconsin Energy Corporation; Wisconsin Power and Light
Company; and Wisconsin Public Service Corporation. The external data from that
survey was used to develop a market compensation for each executive position.
"Market compensation" refers to the average total salary for utility executives
as shown in the survey. Base salaries for the Company's executive officers
(including Mr. Bayless and the other Named Executives) were set at market
compensation levels in January 1995, in recognition of the increasingly
competitive environment in the electric industry and the need to continue to
attract and retain highly qualified executives, as well as the fact that a
substantial portion of each executive's total compensation package is "at-risk,"
based on the achievement of certain corporate goals. See Short-Term Incentive
Compensation and Long-Term Incentive Compensation below. Mr. Bayless received a
6.8% increase in base salary. The other Named Executives received increases
ranging from 7% to 14%.
Short-Term Incentive Compensation
The Board adopted the Short-Term Incentive Plan to provide compensation for
meeting or exceeding specified corporate objectives designed to contribute to
the attainment of the Company's long-term strategic plan. Under the Short-Term
Incentive Plan, target award levels are set as a percentage of each
participant's base salary. In 1995, the percentage for Mr. Bayless was 35% and
for the other executive officers ranged from 25-30%. Actual awards can vary from
0 to 150% of the target award level, depending upon the Company's performance in
relation to pre-established goals. For 1995, pre-established goals for officers
(including Mr. Bayless and the other Named Executives) consisted of three
corporate objectives and six operational objectives. Seventy percent of target
award levels were based on performance in relation to the corporate objectives
and 30 percent of target award levels were based on performance in relation to
operational objectives. The corporate objectives consisted of: 1) increasing
the Company's intrinsic value, measured by cash flow return on investment; 2)
improving profitability and cost management, measured by Operations &
Maintenance expenses per kilowatt hour sold; and 3) improving customer and
community satisfaction, measured by a customer satisfaction survey. The
operational objectives consisted of: 1) utilizing human resources effectively,
measured by a formula based on average number of retail customers and total
full-time equivalent employees; 2) achieving employee assimilation of corporate
values and culture, measured by an employee satisfaction survey; 3) maintaining
a safe working environment, measured by a formula based on number of OSHA
recordable injuries and illnesses; 4) improving the success of affirmative
action/EEO hiring opportunities, measured by a formula based on number of
successful candidates meeting affirmative action qualifications; and 5)
enhancing service reliability to meet customer needs and expectations, measured
by a weighted average forced outage rate and average outage duration in minutes.
In calculating the percentage of target awards payable, the Compensation
Committee established target performance levels for each of the corporate and
operational objectives. Minimum performance levels (50%) and exceptional
performance levels (150%) were established as well. No credit was given for
performance below minimum levels. In order for any incentive compensation to be
paid, the Company was required to meet at least the minimum performance levels
on each of the corporate objectives. The Company exceeded the minimum
performance levels for each of the corporate objectives in 1995. In addition,
the Company exceeded the aggregate target levels for the corporate objectives
and for the operational objectives. Based upon such performance, incentive
compensation was awarded to each of the executive officers (including Mr.
Bayless) in the amount of 114% of his or her target award level. Incentive
compensation earned in 1995 by Mr. Bayless and the other Named Executives is set
forth in the preceding Summary Compensation Table.
Long-Term Incentive Compensation
At the recommendation of the Compensation Committee, the Board of Directors
unanimously adopted, and, at the 1994 Annual Meeting of Shareholders, the
shareholders approved the Tucson Electric Power Company 1994 Omnibus Stock and
Incentive Plan (the "Omnibus Plan"). The Omnibus Plan was designed to retain
and attract quality employees over the long term in a manner which directly
aligns their interests with shareholder interests. On August 4, 1995, the
Compensation Committee issued Incentive Stock Options ("ISOs") to all executive
officers of the Company including Mr. Bayless and the other Named Executives.
In calculating the level of awards to Mr. Bayless and the other executive
officers under the Omnibus Plan, the Compensation Committee considered the
aforementioned competitive analyses of executive compensation for comparable
positions at other companies. Based on such analyses, as well as Mr. Bayless'
continuing contribution to the Company's financial recovery and achievement of
its long-term strategic goals, the Compensation Committee awarded Mr. Bayless
incentive stock options with a total value equal to 35% of his base salary
(based on 5% projected appreciation over the term of the options). The total
value of stock options issued to other Named Executives ranged from 25% to 30%
of base salary. The number of shares covered by the stock option grant to Mr.
Bayless was 87,148. The Compensation Committee did not consider the number of
options previously granted or outstanding.
The Compensation Committee does not presently have a policy regarding
qualifying compensation paid to executive officers for deductibility under
Section 162(m) of the Code.
Respectfully submitted,
THE COMPENSATION COMMITTEE
H. Wilson Sundt
Jose Canchola
John A. Jeter
R. B. O'Rielly
J. Burgess Winter
TUCSON ELECTRIC POWER COMPANY
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
TUCSON ELECTRIC POWER COMPANY, S&P 500 INDEX, AND EEI INDEX
OF 100 INVESTOR-OWNED UTILITIES
The graph showing on the hard copy represents the comparison of five year
cumulative total return between Tucson Electric Power Company, the S&P
500 Index, and EEI index of 100 investor-owned utilities. The graph's
X-axis shows the years 1990 to 1995, and the Y-axis shows dollar values from
0 to 250. The data points are connected by lines with the following markers:
TEP - squares; S&P 500 Index - triangles; EEI index of 100 investor-
owned utilities - circles. The datapoints are as follows:
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Tucson Electric
Power Company $100 $ 75 $ 42 $ 60 $ 50 $ 54
S&P 500 Index $100 $130 $140 $155 $157 $215
EEI Index of 100
Investor-owned
Utilities $100 $129 $139 $154 $136 $179
Assumes $100 invested on December 31, 1990 in Tucson Electric Power Company
Common Stock, S&P Index and EEI Index. It is assumed that all dividends are
reinvested in stock at the frequency paid and the returns of each component
peer group issuer are weighted according to the issuer' stock market
capitalization at the beginning of the period.
PROPOSAL 2
RECAPITALIZATION
GENERAL
The Board of Directors of the Company has adopted resolutions approving and
recommending to the shareholders of the Company for their approval amendments to
the Restated Articles of Incorporation of the Company (the "Articles"), as set
forth in Exhibit A hereto (the "Amendments"), which would (i) reduce the number
of outstanding shares of Common Stock, through a one-for-five reverse split of
the Common Stock (the "Reverse Split") and (ii) reduce the number of authorized
shares of Common Stock from 200 million to 75 million (the "Authorized Share
Reduction" and together with the Reverse Split, the "Recapitalization").
If the Recapitalization is approved by the requisite vote of the Company's
shareholders, it will become effective at the time (the "Effective Time") of the
filing of the Amendments with the Arizona Corporation Commission (the "ACC").
At and after the Effective Time, each share of the Common Stock without par
value issued and outstanding immediately prior to the Effective Time will be
reclassified and changed into one-fifth (1/5) of one (1) share of the Common
Stock without par value (shares of Common Stock issued and outstanding prior to
the Effective Time being hereinafter called "Old Shares" and shares of Common
Stock issued and outstanding at and after the Effective Time being hereinafter
called "New Shares"); provided, however, that, with respect to each holder of
Old Shares such reclassification will be effected on the basis of the total
number of Old Shares held by such shareholder and, if such reclassification
would result in any holder of Old Shares becoming the holder of a fractional
share interest in a New Share, the number of New Shares into which such holder's
Old Shares are reclassified will be rounded upward to the nearest whole share.
For example, the holder of 100 Old Shares prior to the Effective Time would be a
holder of 20 New Shares at the Effective Time. The holder of 101 Old Shares
prior to the Effective Time would be a holder of 21 New Shares at the Effective
Time.
Each holder of certificates representing Old Shares will be entitled, upon
surrender of such certificates to the Company or any transfer or exchange agent
for cancellation, to receive a new certificate or certificates representing the
number of fully paid and nonassessable New Shares into which such Old Shares
have been reclassified and changed. Until so presented and surrendered,
certificates for Old Shares will be deemed for all purposes to evidence the
ownership of a number of New Shares into which such Old Shares have been
reclassified.
After the Effective Time, shareholders will be asked to surrender all
certificates representing Old Shares in accordance with the procedures set forth
in a letter of transmittal to be sent by the Company. Upon such surrender,
certificates representing the appropriate number of New Shares will be issued
and forwarded to the shareholders. No certificates for New Shares will be
issued to a shareholder until such shareholder has surrendered his certificates
together with the properly completed and executed letter of transmittal to the
Company. Shareholders should not submit their certificates until requested to do
so.
In addition to the reclassification of the Common Stock resulting from the
Reverse Split, the Authorized Share Reduction will be effected at the Effective
Time. At and after the Effective Time, the number of authorized shares of
Common Stock will be reduced from 200 million to 75 million.
Each shareholder's percentage ownership interest in the Company and
proportional voting power will remain substantially unchanged after the
Effective Time, except for minor differences resulting from adjustments for
fractional interests. The rights and privileges of the shareholders will be
substantially unaffected by the Recapitalization.
REASONS FOR THE RECAPITALIZATION
Reverse Split
The Board believes that the Reverse Split should increase the marketability
and liquidity of the Common Stock. The Common Stock is listed for trading on
the New York Stock Exchange and the Pacific Stock Exchange. On the record date,
the reported closing price of the Common Stock on the New York Stock Exchange
was $ . The Board believes that a decrease in the number of shares of Common
Stock outstanding without any material alteration of the proportionate economic
interest in the Company represented by individual shareholdings may increase the
trading price of such shares to a price more appropriate for an exchange-listed
security. However, no assurance can be given that the market price of the
Common Stock will rise in proportion to the reduction in the number of
outstanding shares resulting from the Reverse Split.
Additionally, although the Company has not yet experienced identifiable
problems in the marketability and liquidity of its Common Stock, the Board
believes that the current per share price of the Common Stock may limit the
effective marketability of the Common Stock because of the reluctance of many
brokerage firms and institutional investors to deal in or follow lower-priced
stocks. Certain policies and practices of the securities industry may tend to
discourage individual brokers within those firms from dealing in lower-priced
stocks. Some of those policies and practices involve time-consuming procedures
that make the handling of lower-priced stocks economically unattractive. The
brokerage commission on a sale of lower-priced stock may also represent a higher
percentage of the sale price than the brokerage commission on a higher-priced
issue. Any reduction in brokerage commissions resulting from the Reverse Split
may be offset, however, in whole or in part, by increased brokerage commissions
required to be paid by shareholders selling "odd lots" created by the Reverse
Split.
The text of Article FOURTH of the Articles, as proposed to be amended to
effect the Reverse Split, is set forth in Part I of Exhibit A to this Proxy
Statement.
Authorized Share Reduction
As part of the Recapitalization, the Board of Directors has approved an
amendment to Article FOURTH of the Articles to decrease the number of shares of
Common Stock which the Company is authorized to issue from 200 million to 75
million so that the number of shares of authorized Common Stock will be
significantly reduced while providing for additional flexibility to issue shares
of Common Stock in the future. At the Effective Time the number of issued and
outstanding shares of Common Stock will be reduced from approximately 160
million to approximately 32 million and therefore it will no longer be necessary
for the Company to maintain 200 million authorized shares of Common Stock.
Giving effect to the exercise of the Warrants (hereinafter described) and the
shares subject to issuance under certain employee benefit plans, the total
number of shares of Common Stock issued or reserved for issuance would be
approximately million. The Board concluded, however, that the reduction in
the number of authorized shares of Common Stock resulting from the Authorized
Share Reduction should not be proportionate to the reduction in the number of
shares of Common Stock outstanding as a result of the Reverse Split. The Board
of Directors believes that the increased ratio of authorized shares to issued
and outstanding shares resulting from the Recapitalization will provide
additional flexibility for the Company to issue additional shares of Common
Stock, as the need may arise, in the raising of additional capital for the
reduction of debt, for necessary or desirable additions to the Company's
electric system and for other corporate purposes. The Board of Directors
considers it prudent to increase the relative number of shares which the Company
will have authority to issue to assure that the Company has the flexibility to
meet its financial needs in the future.
The Board of Directors considers it to be in the best interests of the
Company to have, after the Effective Time, shares of Common Stock of the Company
authorized and available for issuance without further action by the
shareholders, unless such shareholder action is required by applicable law or
the rules of any national securities exchange on which the Company's securities
may be listed. The Board of Directors believes it advisable to authorize
additional shares of Common Stock now so that if an issuance of such shares is
determined to be appropriate in the future, it could be accomplished without the
delay and expense involved in obtaining shareholder approval. However, the
Company would be required to obtain authorization of the ACC prior to the
issuance of any additional shares of Common Stock.
If the Authorized Share Reduction is approved, shareholders will have no
preemptive rights with respect to the additional shares of Common Stock. Such
shares will be issued on such terms, at such times and on such conditions as the
Board of Directors may determine without further action by the shareholders.
The Board of Directors has neither entered into any negotiations, agreements, or
understandings, nor made any other determinations, with respect to the issuance
of any shares of such Common Stock, except in connection with the Warrants and
certain employee benefit plans.
While not submitted for approval as such, the relative increase in the
amount of authorized Common Stock may be considered an "anti-takeover" device.
In the event of any attempted takeover of the Company through tender offer,
merger, proxy contest or otherwise, the additional shares could be used to
dilute the stock ownership of the hostile takeover party or could be acquired by
purchasers who might assist the Board of Directors in opposing a hostile
takeover bid. Moreover, the availability of such additional shares in and of
itself might have the effect of discouraging an attempt to acquire control of
the Company other than through negotiations with the Board of Directors. Except
as described in this paragraph and the provisions of Arizona General Corporation
Law providing for cumulative voting in the election of directors, there are no
provisions of the Articles or Bylaws which would act to discourage a change in
control of the Company. The Company has no plans to adopt any measures other
than the Authorized Share Reduction which may be deemed "anti-takeover"
measures.
The Board of Directors is not aware of any present efforts by any person to
accumulate the Company's capital stock or to obtain control of the Company
through tender offer, merger or other business combination, proxy contest or
otherwise. The Board of Directors has not formulated any program, nor entered
into any agreement or understanding, and has no current intention, to issue any
unissued and unreserved shares of Common Stock for the purposes of impeding or
preventing any proposed takeover.
The text of Article FOURTH of the Articles, as proposed to be amended to
effect the Authorized Share Reduction, is set forth in Part II of Exhibit A to
this Proxy Statement.
WARRANTS
In 1992, as part of the Company's comprehensive financial restructuring,
the Company issued warrants (the "Warrants") for the purchase of approximately
12 million shares of Common Stock at an initial exercise price of $3.20 per
share to certain of its creditors. The Warrants are subject to adjustment in
the event of, among other things, a combination of the outstanding shares of
Common Stock into a lesser number of shares as will occur at the Effective Time
as a result of the Reverse Split. At and after the Effective Time, the number
of New Shares purchasable upon the exercise of the Warrants will be reduced to
approximately 2.4 million (assuming no Warrants are exercised prior to the
Effective Date) and the exercise price per New Share will be increased to
$16.00. The Warrants will continue to be exercisable at any time through
December 15, 2002.
NO DISSENTERS RIGHTS
Shareholders have no right under Arizona law or under the Articles or
Bylaws to dissent from the Recapitalization or to dissent from the rounding up
of any fractional interest in New Shares to the nearest whole New Share as a
result of the Reverse Split.
CHANGES AFFECTING CAPITAL
The Common Stock will continue to be without par value following the
Recapitalization. After the Effective Time, the number of outstanding shares of
Common Stock will be reduced from approximately 160 million to approximately 32
million (assuming that no additional shares of Common Stock are issued after the
record date and prior to the Effective Time) and the number of authorized shares
of Common Stock will be reduced from 200 million to 75 million.
The Common Stock is currently registered under Section 12(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, as a
result, the Company is subject to the periodic reporting and other requirements
of the Exchange Act. The Recapitalization will not affect the registration of
the Common Stock under the Exchange Act. After the Effective Time, trades of
New Shares will continue to be reported on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "TEP".
FEDERAL INCOME TAX CONSEQUENCES OF THE RECAPITALIZATION
The following description of Federal income tax consequences is based upon
the Code, the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices as in effect on the
date of this Proxy Statement. This discussion is for general information only
and does not discuss consequences which may apply to special classes of
taxpayers (e.g., non-resident aliens, broker-dealers or insurance companies).
Shareholders are urged to consult their own tax advisors to determine the
particular consequences to them of the Recapitalization.
The Company believes that because the Reverse Split is not part of a plan
to periodically increase a shareholder's proportionate interest in the assets or
earnings and profits of the Company, the Reverse Split will have the following
federal income tax effects:
1. A shareholder will not recognize gain or loss upon the reclassification
of the Common Stock. In the aggregate, a shareholder's basis in the
New Shares will equal such shareholder's basis in the Old Shares.
2. A shareholder's holding period for the New Shares will be the same as
the holding period of the Old Shares.
3. The Reverse Split will constitute a reorganization within the meaning
of Section 368(a)(1)(E) of the Code and the Company will not recognize
any gain or loss as a result of the Reverse Split.
MISCELLANEOUS
The Board of Directors may abandon the proposed Recapitalization at any
time before or after the Meeting and prior to the Effective Time if for any
reason the Board of Directors deems it advisable to abandon the proposal. The
Board of Directors may consider abandoning the proposed Recapitalization if it
determines, in its sole discretion, that the Recapitalization will adversely
affect the ability of the Company to raise capital or the liquidity of the
Common Stock, among other things. In addition, the Board of Directors may make
any and all changes to the Amendments that it deems necessary in order to file
the Amendments with the ACC and give effect to the Recapitalization.
VOTE AND RECOMMENDATION
If a quorum exists, the proposal to amend the Articles will be approved if
the votes cast "FOR" this proposal exceed the voters cast "AGAINST" it.
"Abstentions" and broker non-votes (i.e. shares held by brokers, fiduciaries or
other nominees which are not permitted to vote due to the absence of
instructions from beneficial owners) will be counted as being represented at the
meeting for quorum purposes but will not have an effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL AND ADOPTION OF THE
RECAPITALIZATION PROPOSAL AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE ADOPTION
OF THIS PROPOSAL.
TRANSACTION OF OTHER BUSINESS
So far as TEP is aware, no matters other than those described in this Proxy
Statement will be acted upon at the Meeting. If, however, any other matters
shall properly come before the Meeting, it is the intention of the persons named
in the enclosed proxy to vote the proxy in accordance with their judgment on
such matters.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1997 Annual Meeting
of TEP must be received by TEP no later than December , 1996 in order to be
eligible for inclusion in the Company's Proxy Statement and the form of proxy
relating to that meeting.
By order of the Board of Directors
DENNIS R. NELSON, Secretary
Dated: April , 1996
SHAREHOLDERS ARE REQUESTED TO FILL OUT, DATE, SIGN, AND PROMPTLY RETURN THE
ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE.
EXHIBIT A
TUCSON ELECTRIC POWER COMPANY
PART I
AMENDMENT TO ARTICLE FOURTH OF RESTATED ARTICLES
OF INCORPORATION TO ADD THE FOLLOWING PARAGRAPHS:
(1) Each share of the Corporation's Common Stock without par value issued
and outstanding immediately prior to the time of effectiveness of this Amendment
to the Restated Articles of Incorporation of the Corporation (the "Effective
Time") is hereby reclassified and changed into one-fifth (1/5) of one (1) share
of the Corporation's Common Stock without par value (shares of Common Stock
issued and outstanding immediately prior to the Effective Time being hereinafter
called "Old Shares" and shares of Common Stock issued and outstanding at and
after the Effective Time being hereinafter called "New Shares"); provided,
however, that, with respect to each holder of Old Shares such reclassification
shall be effected on the basis of the total number of Old Shares held by such
holder and, if such reclassification would result in any holder of Old Shares
becoming the holder of a fractional share interest in a New Share, then the
number of New Shares into which such holder's Old Shares are reclassified shall
be rounded upward to the nearest whole share.
(2) Each holder of certificates representing Old Shares shall be entitled,
upon surrender of such certificates to the Corporation or any transfer or
exchange agent for cancellation, to receive a new certificate or certificates
representing the number of fully paid and nonassessable New Shares into which
such Old Shares have been reclassified and changed. Until so presented and
surrendered, certificates for Old Shares shall, except as provided in the
following sentence, be deemed for all purposes to evidence the ownership of the
number of New Shares into which such Old Shares have been reclassified pursuant
to paragraph 1 hereof. The holder of any certificate for Old Shares shall not
be paid any distributions payable on the Common Stock to which such holder shall
otherwise be entitled until such holder surrenders such certificate in exchange
for a certificate or certificates representing New Shares.
PART II
AMENDMENT TO FIRST PARAGRAPH OF ARTICLE FOURTH OF
RESTATED ARTICLES OF INCORPORATION TO READ AS FOLLOWS:
FOURTH: The total number of shares of Capital Stock of all classes which
the Corporation shall have authority to issue is Seventy-Six Million
(76,000,000) shares, divided into:
One Million (1,000,000) shares of Preferred Stock without par value;
and
Seventy-Five Million (75,000,000) shares of Common Stock without par
value.
(FORM OF PROXY CARD FOR REGISTERED SHAREHOLDERS)
Shareholder Name
Address
Address
You are cordially invited to join us at the 1996 Annual
Meeting of Shareholders of Tucson Electric Power Company.
This year's meeting will be held at the Hilton East Hotel
in Tucson, Arizona on Friday, May 14, 1996. Registration
and admittance will start at 9 a.m. and the Meeting will
begin promptly at 10 a.m. At the meeting we will elect
directors and vote on the Recapitalization Proposal.
It is important that your shares be voted whether or not
you plan to be present at the meeting. You should
specify your choices by marking the appropriate boxes on
the proxy form below, and date, sign and return your proxy
form in the enclosed, postpaid return envelope as
promptly as possible. If you date, sign and return your
proxy form without specifying your choices, your shares
will be voted in accordance with the recommendations of
your directors.
As in the past years, we will discuss the business of TEP
during the meeting. I welcome your comments and
suggestions, and we will provide time during the meeting
for questions from shareholders.
I am looking forward to having you with us on the 14th of
May. In the meantime, if you have questions
regarding the Meeting, please phone our Investor
Relations and Services Department at 520-884-3661.
Sincerely,
(Form of Proxy Card -- FRONT)
TEAR HERE TEAR HERE
TUCSON ELECTRIC POWER COMPANY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 & 2.
PROXY
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned. If no direction is made, this proxy will be voted
"FOR" Items 1 & 2.
1. ELECTION OF DIRECTORS:
NOMINEES FOR WITHHELD NOMINEES FOR WITHHELD
Elizabeth T. Alexander [] [] Martha R. Seger [] []
Charles E. Bayless [] [] Donald G. Shropshire [] []
Jose L. Canchola [] [] H. Wilson Sundt [] []
John A. Jeter [] [] J. Burgess Winter [] []
R. B. O'Rielly [] []
2. RECAPITALIZATION PROPOSAL
[] FOR [] AGAINST [] ABSTAIN
(continued, and to be signed, on other side)
(Shareholder Name)
(Shareholder Name)
(Shareholder Name)
(Form of Proxy Card -- BACK)
TUCSON ELECTRIC POWER COMPANY
This Proxy is solicited on behalf of the Board of Directors of
the Company for the Annual Meeting to be held on May 14, 1996
PROXY
The undersigned hereby appoints Chareles E. Bayless and Ira R.
Adler, and each of them, with the power of substitution, to
represent and to vote on behalf of the undersigned all shares
of Common Stock which the undersigned is entitled to vote at
the Annual Meeting of Shareholders scheduled to be held at the
Hilton East Hotel in Tucson, Arizona, on May 14, 1996, and at
any and all adjournments thereof, with all powers the
undersigned would possess if personally present and
particularly with respect to Items 1 & 2 and, in their
discretion, upon such other business as may properly come
before the meeting. This proxy, when properly executed, will
be voted in the manner directed herein by the undersigned
shareholder. If no direction is made, this proxy will be voted
"FOR" Items 1 & 2.
SHAREHOLDER(S)
SIGN HERE __________________
(DATE)
X X
SIGNED SIGNED
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. All joint owners of
shares should sign. State your full title when signing as
executor, administrator, trustee, guardian, etc. Please return
your proxy in the enclosed postage paid envelope. Receipt is
hereby acknowledged of Notice of Annual Meeting, Proxy
Statement and the 1995 Annual Report attached thereto.
(continued, and to be voted on other side)
(FORM OF PROXY FOR SHAREHOLDERS IN STREET NAME)
(Form of Proxy Card -- FRONT)
TUCSON ELECTRIC POWER COMPANY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 & 2.
This proxy, when properly executed will be voted in the manner
directed herein by the undersigned. If no direction is made,
this proxy will be voted "FOR" Items 1 & 2.
1. ELECTION OF DIRECTORS: FOR WITHHOLD AUTHORITY
ALEXANDER, BAYLESS, CANCHOLA, JETER, all nominees as to all nominees
O'RIELLY, SEGER, SHROPSHIRE, SUNDT, (except as
WINTER indicated below)
[] []
Withhold Authority to vote for the following nominees (write names):
___________________________________________________________________
2. RECAPITALIZATION PROPOSAL
[] FOR [] AGAINST [] ABSTAIN
Participant Number:__________________ Participant Name:________________
Depository: __________________ Shares: ________________
(Form of Proxy Card -- BACK)
TUCSON ELECTRIC POWER COMPANY
This Proxy is solicited on behalf of the Board of Directors of
the Company for the Annual Meeting to be held on May 14, 1996
PROXY
The undersigned hereby appoints Chareles E. Bayless and Ira R.
Adler, and each of them, with the power of substitution, to
represent and to vote on behalf of the undersigned all shares
of Common Stock which the undersigned is entitled to vote at
the Annual Meeting of Shareholders scheduled to be held at the
Hilton East Hotel in Tucson, Arizona, on May 14, 1996, and at
any and all adjournments thereof, with all powers the
undersigned would possess if personally present and
particularly with respect to Items 1 & 2 and, in their
discretion, upon such other business as may properly come
before the meeting. This proxy, when properly executed, will
be voted in the manner directed herein by the undersigned
shareholder. If no direction is made, this proxy will be voted
"FOR" Items 1 & 2.
SHAREHOLDER(S)
SIGN HERE __________________
(DATE)
X X
SIGNED SIGNED
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. All joint owners of
shares should sign. State your full title when signing as
executor, administrator, trustee, guardian, etc. Please return
your proxy in the enclosed postage paid envelope. Receipt is
hereby acknowledged of Notice of Annual Meeting, Proxy
Statement and the 1995 Annual Report attached thereto.
(continued, and to be voted on other side)
