As filed with the Securities and Exchange Commission on March 22, 1995
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____________
UNISOURCE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Arizona 4911 86-0786732
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
225 West 34th Street
Suite 2110
New York, New York 10122
(212) 947-7200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
____________
Dennis R. Nelson, Esq. J. Anthony Terrell, Esq.
Tucson Electric Power Company John T. Hood, Esq.
220 West Sixth Street Reid & Priest LLP
Tucson, Arizona 85701 40 West 57th Street
(520) 571-4000 New York, New York 10019
(212) 603-2000
(Name, address, including zip code, and telephone number, including area
code, of agents for service)
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after this Registration Statement is
declared effective and all other conditions to the share exchange between
Tucson Electric Power Company ("TEP") and the Registrant (the "Share
Exchange"), as described in the enclosed Proxy Statement-Prospectus, have
been satisfied.
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. []
CALCULATION OF REGISTRATION FEE
Title of Proposed
Each Class of Amount Offering Maximum Amount of
Securities to to be Price Per Aggregate Offering Registration
be Registered Registered Unit(1) Price(1) Fee(2)
- ------------- ----------- --------- ------------------ ------------
Common Stock,
No Par Value 178,500,000 $3.4375 $613,593,750 $211,585.54
(1) Estimated pursuant to Rule 457(f)(1) under the Securities Act of 1933, as
amended ("Securities Act"), based upon the market value of the shares of TEP
Common Stock to be exchanged in the Share Exchange ($3.4375 per share, which
is the average of the high and low sales prices of a share of TEP Common
Stock on the consolidated transaction reporting system on March 20, 1995).
(2) The registration fee for the shares of Common Stock registered hereby has
been calculated pursuant to Rule 457(f)(1) under the Securities Act as
follows: 1/29th of one percent of $3.4375, the average of the reported
high and low sales prices of a share of TEP Common Stock on the consolidated
transaction reporting system on March 20, 1995, multiplied by 178,500,000,
the number of shares of TEP Common Stock expected to be exchanged in the
Share Exchange. Pursuant to Rule 457(b) under the Securities Act, $118,534
previously paid on February 6, 1995 upon filing with the Commission of
preliminary proxy material of TEP has been credited against the registration
fee payable in connection with this filing.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
UNISOURCE ENERGY CORPORATION
Cross Reference Sheet Pursuant to Rule 404(a) and Item 501(b) of Regulation S-K
Showing the Locations in the Proxy Statement-Prospectus of the Information
Required to be Included Therein in Response to Part I of Form S-4.
Location or Heading in
S-4 Item Number and Caption Proxy Statement-Prospectus
- --------------------------- ---------------------------
1.Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus Facing Sheet, Cross Reference
Sheet, Prospectus Front Cover
2.Inside Front and Outside Back Cover Pages
of Prospectus Prospectus Inside Front Cover,
Available Information,
Incorporation of Certain
Information By Reference,
Table of Contents
3.Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information Summary, Certain Risk Factors,
Holding Company Proposal
4.Terms of the Transaction Summary, Holding Company
Proposal
5.Pro Forma Financial Information Not Applicable
6.Material Contracts with the Company
Being Acquired Not Applicable
7.Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters Not Applicable
8.Interests of Named Experts and Counsel Not Applicable
9.Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Not Applicable
10.Information with Respect to S-3
Registrants Not Applicable
11.Incorporation of Certain Information
by Reference Not Applicable
12.Information with Respect to S-2 or
S-3 Registrants Not Applicable
13.Incorporation of Certain Information
by Reference Not Applicable
14.Information with Respect to Registrants
Other Than S-3 or S-2 Registrants Summary, Holding Company
Proposal
15.Information with Respect to S-3 Companies Incorporation of Certain
Information by Reference,
Summary, Annual Meeting,
Election of Directors,
Holding Company Proposal
16.Information with Respect S-2
or S-3 Companies Not Applicable
17.Information with Respect to Companies
Other Than S-3 or S-2 Companies Not Applicable
18.Information if Proxies, Consents or
Authorizations are to be Solicited Incorporation of Certain
Information by Reference,
Summary, Annual Meeting,
Election of Directors,
Holding Company Proposal
19.Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer Not Applicable
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 6, 1995
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Tucson Electric Power Company ("TEP" or the "Company") to be held on May
26, 1995. The Meeting will begin at 2:30 p.m., Tucson time, at The Hilton
East Hotel, 7600 E. Broadway Boulevard, Tucson, Arizona.
At the Annual Meeting you will be asked to elect a Board of Directors
for the ensuing year, to approve amendments to the Company's existing Omnibus
Stock and Incentive Plan, and to act on a proposed new corporate structure in
which TEP will be a subsidiary of a new holding company named UniSource
Energy Corporation ("UniSource").
TEP believes that it is in the best interests of its shareholders for
TEP to participate in various segments of the evolving and expanding electric
energy business. TEP also believes that such participation would be enhanced
by the holding company structure, which is commonly used in the electric and
other industries to conduct different lines of business.
UniSource has been organized to implement this new structure. It is
proposed that outstanding shares of TEP common stock be exchanged, on a
share-for-share basis, for shares of UniSource. As a result, the holders of
TEP common stock will become the owners of UniSource common stock, and
UniSource will become the owner of the TEP common stock.
If approved by the requisite vote of the shareholders and if all
required regulatory approvals are received, the exchange will occur on the
terms set forth in the Agreement and Plan of Exchange described in the
accompanying Proxy Statement-Prospectus and attached thereto as an exhibit.
Arizona corporation law has been amended, effective as of January 1, 1996, to
establish a procedure for statutory share exchanges which bind all of the
shareholders upon the approval of the plan of exchange by a majority of all
votes entitled to be cast. Therefore, approval of the proposed plan of share
exchange will require the affirmative vote of holders of shares of TEP common
stock representing not less than a majority of all votes entitled to be cast
by all holders of TEP common stock. If approved by the requisite vote of the
shareholders and if required regulatory approvals are satisfactorily
obtained, the share exchange would be effected on January 2, 1996, or as soon
thereafter as practicable.
If the new structure is effected, it will not be necessary for you to
turn in your TEP common stock certificates in exchange for UniSource common
stock certificates. The certificates for TEP common stock you now hold will
automatically represent shares of UniSource common stock. New certificates
bearing the name of UniSource will be issued in the future as certificates
for presently outstanding shares of TEP common stock are presented for
transfer.
The directors of TEP will also become the directors of UniSource when
the new structure becomes effective, and they will thereafter serve as the
directors of UniSource until the first annual meeting of UniSource
shareholders.
The Company's Board of Directors believes that Shareholder approval of
the plan of share exchange is important to the Company's long-term future.
The Board of Directors has concluded that the plan of share exchange is in
the best interests of the Company's shareholders.
The Board of Directors also recommends that the shareholders approve the
other proposals described in the accompanying Proxy Statement-Prospectus that
will be considered at the Meeting.
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.
The return by shareholders of proxies is indicative of their interest
in the Company's affairs. Your interest is very much appreciated.
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.
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 26, 1995
To the Shareholders of
TUCSON ELECTRIC POWER COMPANY
Notice is hereby given that the Annual Meeting of Shareholders of
Tucson Electric Power Company ("TEP") will be held on the 26th day of May,
1995, at the Hilton Hotel East, 7600 E. Broadway Boulevard, Tucson, Arizona,
at 2:30 p.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 an Agreement and
Plan of Exchange between TEP and UniSource Energy Corporation for
the purpose of forming a holding company;
(3)considering and taking action on a proposal for amendments to the
Tucson Electric Power Company 1994 Omnibus Stock and Incentive Plan;
and
(4)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
20, 1995, will be entitled to vote at the Meeting and at any adjournments
thereof. Proxy soliciting material is being mailed to shareholders commencing
on April 6, 1995.
By order of the Board of Directors,
Dennis R. Nelson
Secretary
Dated: April 6, 1995
IMPORTANT: Your presence at the Annual 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
FOR
TUCSON ELECTRIC POWER COMPANY
_____________________________
PROSPECTUS
FOR
UNISOURCE ENERGY CORPORATION
COMMON STOCK
This Proxy Statement-Prospectus contains both a Proxy Statement for the
Annual Meeting of Shareholders of Tucson Electric Power Company, an Arizona
corporation ("TEP" or the "Company"), to be held on May 26, 1995 (the
"Meeting") and a Prospectus of UniSource Energy Corporation, an Arizona
corporation ("UniSource"), relating to the issuance of up to 178,500,000
shares of common stock of UniSource, upon the effectiveness of and subsequent
to the proposed formation of a holding company structure for TEP described
herein.
TEP proposes to form a holding company structure pursuant to an
Agreement and Plan of Exchange, a copy of which is attached hereto as Exhibit
A (the "Plan of Exchange"). Under the terms of the Plan of Exchange, all of
the outstanding common stock of TEP will be exchanged on a share-for-share
basis for UniSource common stock (the "Share Exchange") and all shares of
UniSource common stock outstanding immediately prior to the Share Exchange
will be canceled. Upon the effectiveness of the Share Exchange, each person
that owned TEP common stock immediately prior to the Share Exchange will own
the same number of shares of UniSource common stock, and UniSource will own
all of the outstanding TEP common stock. See "HOLDING COMPANY PROPOSAL --
Agreement and Plan of Exchange."
If the Share Exchange is effected, it will not be necessary for holders of
TEP common stock to surrender their existing stock certificates for stock
certificates of UniSource. See "HOLDING COMPANY PROPOSAL -- Exchange of
Stock Certificates Not Required."
_
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "SUMMARY" AND "CERTAIN
RISK FACTORS."
_
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
_
The principal executive offices of TEP and, upon the consummation of
the Share Exchange, UniSource are located at 220 West Sixth Street, Tucson,
Arizona 85701, telephone number (520) 571-4000. Prior to the consummation of
the Share Exchange, the principal executive offices of UniSource are located
at 225 West 34th Street, Suite 2110, New York, New York 10122. This Proxy
Statement-Prospectus and the accompanying form of Proxy, solicited on behalf
of the Board of Directors of TEP, were first released to shareholders on or
about April 6, 1995.
The date of this Proxy Statement-Prospectus is March 24, 1995.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION....................................... 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... 4
SUMMARY..................................................... 5
GLOSSARY OF DEFINED TERMS................................... 9
INTRODUCTION................................................ 12
CERTAIN RISK FACTORS........................................ 12
ANNUAL MEETING.............................................. 13
Voting of Shares........................................... 14
Adjournments............................................... 15
Security Ownership of Certain Beneficial
Owners.................................................... 15
Security Ownership of Management........................... 16
PROPOSAL 1 - ELECTION OF DIRECTORS.......................... 17
General.................................................... 17
Committee Functions........................................ 19
Executive Compensation and Other Information............... 21
Director Compensation...................................... 25
Executive Employment Contracts............................. 25
Report of the Compensation Committee of
the Board of Directors on Executive
Compensation.............................................. 26
Comparison of Five Year
Cumulative Total Return.................................. 29
1994 Omnibus Stock and Incentive Plan...................... 30
1994 Outside Director Stock Option Plan.................... 33
PROPOSAL 2 - HOLDING COMPANY PROPOSAL....................... 36
General.................................................... 36
Corporate Organization..................................... 36
Current TEP Regulation..................................... 38
Reasons for the Holding Company Proposal................... 39
Agreement and Plan of Exchange............................. 40
Material Risk Factors...................................... 40
Required Shareholder Approval Under New Arizona Law........ 41
Required Regulatory Approvals.............................. 41
Regulation of UniSource.................................... 41
Business of UniSource...................................... 42
Allocation of Expense Among UniSource,
TEP and Sister Companies.................................. 42
Amendment or Termination................................... 43
No Rights of Dissent....................................... 43
Effective Date of the Share Exchange....................... 43
Notice of Exchange......................................... 43
Exchange of Stock Certificates Not Required................ 43
Certain Federal Income Tax Consequences.................... 44
Description of UniSource Capital Stock..................... 45
Increase in Authorized Shares of Common Stock.............. 45
Listing of UniSource Common Stock.......................... 46
Dividends.................................................. 46
Warrants................................................... 47
Directors and Management of UniSource...................... 48
Officer Employment Contracts............................... 48
Employee Benefit Plans..................................... 48
Transfer Agent and Registrar............................... 48
Financial Statements....................................... 49
PROPOSAL 3 - AMENDMENTS TO THE TUCSON ELECTRIC POWER COMPANY
1994 OMNIBUS STOCK AND INCENTIVE PLAN................. 49
EXPERTS..................................................... 50
LEGAL MATTERS............................................... 50
TRANSACTION OF OTHER BUSINESS............................... 50
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING............... 50
EXHIBIT A - Agreement and Plan of Exchange
EXHIBIT B - Restated Articles of Incorporation of UniSource Energy
Corporation
EXHIBIT C - Amended Bylaws of UniSource Energy Corporation
EXHIBIT D - Tucson Electric Power Company 1994 Omnibus Stock and Incentive
Plan
EXHIBIT E - Tucson Electric Power Company 1994 Outside Director Stock Option
Plan
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"),
and, in accordance therewith, files periodic reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC").
The Registration Statement, as well as such reports, proxy statements and
other information, can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Regional Offices of the SEC located at 500
West Madison Street, 14th Floor, Chicago, Illinois 60661-2511 and 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such documents
can be obtained from the Public Reference Section of the SEC at prescribed
rates by writing to it at 450 Fifth Street, N.W., Washington, D.C. 20549.
Reports, proxy statements and other information concerning the Company are
also available for inspection and copying at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and the
offices of the Pacific Stock Exchange Incorporated, 301 Pine Street, San
Francisco, California 94104.
This Proxy Statement-Prospectus is a prospectus of UniSource delivered
in compliance with the Securities Act of 1933, as amended (the "Securities
Act"). A registration statement (the "Registration Statement") has been
filed by UniSource with the SEC under the Securities Act with respect to the
shares of UniSource's common stock offered hereby. As permitted by the rules
and regulations of the SEC, this Proxy Statement-Prospectus omits certain
information contained in the Registration Statement on file with the SEC.
For further information pertaining to the securities offered hereby,
reference is made to the Registration Statement, including the exhibits filed
as a part thereof.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement-Prospectus in connection
with the matters referred to herein, and if given or made, any such
information or representation must not be relied upon. This Proxy Statement-
Prospectus does not constitute an offer to sell, or a solicitation of an
offer to purchase, any securities other than the securities covered by this
Proxy Statement-Prospectus, by UniSource or any other person or an offer or
solicitation of such securities, or the solicitation of a proxy, in any
jurisdiction, to or from any person to whom it is unlawful to make such offer
or solicitation of an offer or proxy solicitation in such jurisdiction.
Neither the delivery of this Proxy Statement-Prospectus nor any distribution
of the securities made under this Proxy Statement-Prospectus shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company or UniSource or in the information set forth herein
since the date of this Proxy Statement-Prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference its Annual Report on Form
10-K for the fiscal year ended December 31, 1994, which has been filed with
the SEC under the Securities Exchange Act. All reports and documents filed
by the Company with the SEC after the date of this Proxy Statement-Prospectus
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act,
prior to the effectiveness of the Share Exchange, shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of filing thereof. The documents incorporated herein by reference are
sometimes hereinafter called the "Incorporated Documents." Any statement
contained in an Incorporated Document shall be deemed to be modified or
superseded for all purposes to the extent that a statement contained in any
subsequently filed Incorporated Document modifies or replaces such statement.
Any such statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Proxy Statement-
Prospectus.
This Proxy Statement-Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. The Company will
provide without charge to each person, including any beneficial owner, to
whom this Proxy Statement-Prospectus is delivered, upon the written or oral
request of any such person, a copy of any or all of the Incorporated
Documents, excluding the exhibits thereto unless any such exhibit is
specifically incorporated by reference into an Incorporated Document.
Requests for such documents should be directed to Investor Relations, by
mail, at Tucson Electric Power Company, 220 West Sixth Street, Tucson,
Arizona 85701, or by telephone at (520) 571-4000. In order to ensure timely
delivery of the Incorporated Documents, any request should be made by May 19,
1995. The information relating to the Company contained in this Proxy
Statement-Prospectus does not purport to be comprehensive and should be read
together with the information contained in the Incorporated Documents.
SUMMARY
The following summary, which is presented herein solely to furnish
limited introductory information regarding the proposed share exchange and
the parties thereto, is based upon the more detailed information contained,
or incorporated by reference, in this Proxy Statement-Prospectus including
the Exhibits hereto, is qualified in its entirety by reference thereto and,
therefore, should be read together therewith. Certain capitalized terms used
in this summary are defined in the "Glossary of Defined Terms" herein or
elsewhere in this Proxy Statement-Prospectus.
TEP and UniSource
TEP was incorporated under the laws of the State of Arizona on
December 16, 1963. TEP is the successor by merger as of February 20, 1964,
to a Colorado corporation which was incorporated on January 25, 1902. TEP is
an operating public utility engaged in the generation, purchase,
transmission, distribution and sale of electricity for customers in the City
of Tucson and certain of the surrounding area and to wholesale customers.
TEP holds a franchise which expires in 2001 to provide electric service to
customers in the City of Tucson.
UniSource Energy Corporation ("UniSource") was incorporated under the
laws of the State of Arizona on March 8, 1995. UniSource was organized to
become the parent of TEP if the Holding Company Proposal (as defined herein)
described herein is approved and implemented.
The principal executive offices of TEP and UniSource (upon the
consummation of the Share Exchange) are located at 220 West Sixth Street,
Tucson, Arizona 85701, telephone number (520) 571-4000. Prior to the
consummation of the Share Exchange, the principal executive offices of
UniSource are located at 225 West 34th Street, Suite 2110, New York, New York
10122.
PROPOSAL 1
Election of Directors
Nine Directors have been nominated for election as directors of TEP to
serve for the ensuing year and until their successors shall have been elected
and shall have qualified:
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
If the Holding Company Proposal is adopted and consummated, each of the
persons elected as a director of TEP will also be a director of UniSource
during the period from the time the Share Exchange is effected to the first
annual meeting of shareholders of UniSource following the Share Exchange.
See "ELECTION OF DIRECTORS" and "HOLDING COMPANY PROPOSAL -- Directors and
Management of UniSource."
PROPOSAL 2
Holding Company Proposal
Proposed Share Exchange
Subject to shareholder and regulatory approvals, each share of TEP
common stock will be exchanged for one share of UniSource common stock. It
is anticipated that the Share Exchange will be effected in early January,
1996. See "HOLDING COMPANY PROPOSAL -- Effective Date of the Share
Exchange." The Share Exchange would be effected in accordance with a
procedure for statutory share exchanges established in the 1996 Corporation
Law. If the Holding Company Proposal is approved by holders of TEP common
stock as specified in "Required Vote" below, upon the effectiveness of the
Share Exchange each holder of outstanding shares of TEP common stock will be
deemed to have exchanged such shares for shares of UniSource common stock
whether or not such holder voted in favor of the Holding Company Proposal.
Reasons for the Holding Company Proposal
The Electric Energy Business in general is changing and becoming
increasingly competitive, on both the wholesale and retail levels, due to a
variety of regulatory, economic and technological developments. The net
effect of these developments is a trend toward the "unbundling" of the
traditional electric utility business into different business segments. TEP
believes that it is in the best interests of TEP's shareholders for TEP to
participate in various segments of the evolving and expanding business. TEP
also believes that such participation would be enhanced by the holding
company structure, which is commonly used in the electric and other
industries to conduct different lines of business. See "HOLDING COMPANY
PROPOSAL -- Reasons for the Holding Company Proposal."
Certain Risk Factors
UniSource will have limited access to working capital and limited cash
flow, primarily as a result of the expected inability of TEP to pay dividends
on its common stock for the foreseeable future and restrictions on TEP's
ability to make investments in UniSource. Substantially all of the assets of
UniSource will initially consist of the common stock of TEP. Whether or not
the Holding Company Proposal is adopted, TEP's prospects remain subject to
significant economic, regulatory and other uncertainties, many of which are
beyond TEP's control. If TEP is unable to make sales at prices adequate to
recover its costs or if for other reasons TEP fails to maintain or improve
its cash flows, TEP's ability to meet its obligations may be jeopardized.
See "CERTAIN RISK FACTORS."
Regulatory Approvals
Consummation of the Share Exchange is predicated upon receiving approval
from the Arizona Corporation Commission ("ACC") and the Federal Energy
Regulatory Commission ("FERC"). Additionally, TEP will seek a "no action"
position from the Staff of the SEC under the Public Utility Holding Company
Act of 1935, as amended, or, in the alternative, will seek approval of the
SEC under such Act. See "HOLDING COMPANY PROPOSAL -- Required Regulatory
Approvals."
Effectiveness
The Share Exchange will be effective as soon as practicable after the
receipt of regulatory and shareholder approvals and the effectiveness of the
1996 Corporation Law. In no event will this date be earlier than January 2,
1996. See "HOLDING COMPANY PROPOSAL -- Effective Date of the Share
Exchange."
No Exchange of Certificates
If the Share Exchange is effected, it will not be necessary for holders
of TEP common stock to physically exchange their existing stock certificates
for stock certificates of UniSource. See "HOLDING COMPANY PROPOSAL --
Exchange of Stock Certificates Not Required."
Stock Exchange Listing
TEP common stock is currently listed on the New York and Pacific Stock
Exchanges. UniSource intends to apply to list its common stock on such stock
exchanges. It is expected that such listings will become effective on the
effective date of the Share Exchange, subject to the rules of such stock
exchanges. See "HOLDING COMPANY PROPOSAL -- Listing of UniSource Common
Stock."
Market Value of TEP Common Stock
The high and low sales prices of TEP common stock on March 20, 1995 were
$3.50 and $3.375, respectively, as reported in the consolidated transaction
reporting system.
Dividends
Upon the Share Exchange, substantially all of UniSource's assets will
consist of shares of TEP common stock. TEP is currently prohibited from
paying dividends on its common stock and does not expect to pay dividends
thereon for the foreseeable future. Therefore, UniSource does not expect to
receive dividends from TEP which could be utilized to pay dividends on
UniSource common stock. As a result, UniSource does not expect to pay
dividends on its common stock in the foreseeable future. See "HOLDING
COMPANY PROPOSAL -- Dividends."
Federal Income Tax Consequences
As more fully discussed herein, in the opinion of Reid & Priest LLP,
(i) no gain or loss will be recognized by the holders of TEP common stock as a
result of the Share Exchange, (ii) the tax basis of the UniSource common
stock deemed received by holders of TEP common stock in the Share Exchange
will be the same as their basis in the TEP common stock deemed surrendered in
the Share Exchange and (iii) the holding period of the UniSource common stock
deemed received by each holder of TEP common stock in the Share Exchange will
include the period during which such holder held the TEP common stock deemed
surrendered therefor, provided that the TEP common stock was held as a
capital asset on the effective date of the Share Exchange. Consummation of
the Share Exchange is conditioned upon, among other things, the receipt by
TEP on the effective date of a confirmatory opinion of Reid & Priest LLP.
See "HOLDING COMPANY PROPOSAL -- Certain Federal Income Tax Consequences."
Each shareholder of TEP's common stock should consult his/her own tax advisor
as to the specific tax consequences of the Plan to such shareholder.
Required Vote
Approval of the Holding Company Proposal will require the affirmative
vote of holders of shares of TEP common stock representing not less than a
majority of all votes entitled to be cast by all holders of shares of TEP
common stock. "Abstentions" and non-votes (i.e., shares held by brokers,
fiduciaries or other nominees which are not permitted to vote on the Holding
Company Proposal due to the absence of instructions from beneficial owners)
will have the same effect as negative votes. The failure to vote on the
Holding Company Proposal will have the same effect as a negative vote. See
"ANNUAL MEETING."
The vote of TEP shareholders in favor of the Holding Company Proposal
will be deemed to be ratification by such shareholders of the assumption by
UniSource of the Omnibus Plan (as defined herein), as amended, and the TEP
1994 Outside Director Stock Option Plan upon effectiveness of the Share
Exchange.
No Rights of Dissent
Under Arizona law, shareholders are not entitled to either dissenters'
or appraisal rights in connection with the matters being submitted for
shareholder vote at the Meeting. See "HOLDING COMPANY PROPOSAL -- No Rights
of Dissent."
Election of Directors
The Directors of TEP will also become the Directors of UniSource upon
the effectiveness of the Share Exchange, and they will serve as the Directors
of UniSource until the first annual meeting of UniSource shareholders. See
"HOLDING COMPANY PROPOSAL -- Directors and Management of UniSource."
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL AND ADOPTION OF THE HOLDING
COMPANY PROPOSAL AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE HOLDING COMPANY
PROPOSAL.
PROPOSAL 3
Amendments to The Tucson Electric Power Company
1994 Omnibus Stock and Incentive Plan
TEP proposes to amend the 1994 Omnibus Stock and Incentive Plan
("Omnibus Plan") to include employees who are members of the Union in the
Omnibus Plan's definition of "Employee," consistent with the Company's stated
intention at the time of the adoption of the Omnibus Plan, and to clarify the
ability of participants to exercise previously awarded options for a limited
period following termination of employment due to death, disability or
retirement.
Required Vote
Approval of the Omnibus Plan Proposal (as defined herein) will require
the affirmative vote of holders of a majority of the shares then represented
at the Meeting. "Abstentions" will have the same effect as negative votes.
Non-votes (i.e., shares held by brokers, fiduciaries or other nominees which
are not permitted to vote on the Omnibus Plan Proposal due to the absence of
instructions from beneficial owners) will not be counted as represented at
the Annual Meeting. See "ANNUAL MEETING."
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL AND ADOPTION OF THE OMNIBUS
PLAN PROPOSAL AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE OMNIBUS PLAN
PROPOSAL.
YOUR VOTE IS IMPORTANT, REGARDLESS OF HOW MANY SHARES YOU OWN.
GLOSSARY OF DEFINED TERMS
ACC.............................. The Arizona Corporation Commission.
Affiliated Interest Rules........ Rules promulgated by the ACC and set forth
under Title 14, Chapter 2, Article 8 of
the Arizona Administrative Code, which
apply to organization of public utility
holding companies and transactions between
public utilities and affiliates.
Code............................. The Internal Revenue Code of 1986, as
amended.
Company......................... Tucson Electric Power Company.
Compensation Committee.......... The Compensation Committee of the Board of
Directors of TEP.
Directors' Plan................. The 1994 Outside Director Stock Option Plan.
Electric Energy Business........ All segments of the electric energy
business, collectively, and, in particular,
the business of producing, developing,
generating, transmitting, distributing
and/or supplying electric energy for any
purpose, including the business of
purchasing and selling electric energy
and/or capacity (or arranging purchases
and/or sales thereof), the business of
providing electric energy services and any
other business or businesses incidental to,
or necessary in connection with, any of the
foregoing.
Employee......................... Any employee of TEP or its subsidiaries,
including officers and directors who are
also employees.
Energy Act....................... The Energy Policy Act of 1992.
FERC............................. The Federal Energy Regulatory Commission.
General First Mortgage........... The Indenture, dated as of April 1, 1941,
of Tucson Gas, Electric Light and Power
Company to The Chase National Bank of the
City of New York, as trustee, as
supplemented and amended.
Holding Company Act.............. The Public Utility Holding Company Act of
1935, as amended.
IRS.............................. The Internal Revenue Service.
ISOs............................. Incentive Stock Options.
kWh.............................. Kilowatt-hour(s).
Master Restructuring Agreement... The Master Restructuring Agreement, dated as
of June 30, 1992, as amended, among TEP,
Gallo Wash Development Company, Valencia
Energy Company and the banks party thereto.
Meeting.......................... The Annual Meeting of Shareholders of TEP
to be held on May 26, 1995 and any
adjournments thereof.
Named Executives................. The Executive Officers of TEP named in the
Summary Compensation Table.
1996 Corporation Law............. H.B. 2124 amending Arizona's General
Corporation Law effective as of January 1,
1996, passed by the Arizona Legislature and
signed by the Governor in 1994.
Omnibus Plan..................... 1994 Tucson Electric Power Company Omnibus
Stock and Incentive Plan.
Plan of Exchange................. The Agreement and Plan of Exchange between
TEP and UniSource.
PURPA............................ Public Utility Regulatory Policies Act of
1978, as amended.
Registration Statement........... The Registration Statement filed by
UniSource with the Securities and Exchange
Commission covering the common stock of
UniSource to be issued pursuant to the Plan
of Exchange.
SEC.............................. The Securities and Exchange Commission.
Securities Act................... The Securities Act of 1933, as amended.
Securities Exchange Act.......... The Securities Exchange Act of 1934, as
amended.
Share Exchange................... The exchange of each share of common stock
of TEP for one share of common stock of
UniSource in accordance with the terms of
the Plan of Exchange.
Sister Companies................. Direct or indirect subsidiaries of UniSource
other than TEP or TEP's direct or indirect
companies. It is anticipated that such
subsidiaries would be primarily engaged in
the Electric Energy Business.
SRI.............................. Sierrita Resources, Inc., a wholly-owned
investment subsidiary of TEP.
TEP.............................. Tucson Electric Power Company.
TRI.............................. Tucson Resources, Inc., a wholly-owned
investment subsidiary of TEP.
Union............................ International Brotherhood of Electrical
Workers, Local Union No. 1116.
UniSource........................ The proposed parent company of TEP.
UniSource Common Stock........... The outstanding shares of the common stock
of UniSource.
INTRODUCTION
This Proxy Statement-Prospectus is being furnished to shareholders of
TEP in connection with the solicitation of proxies by the Board of Directors
of TEP from holders of TEP's outstanding shares of common stock, no par
value, for use at the TEP Annual Meeting of Shareholders (the "Meeting"). At
the Meeting, the holders of TEP common stock will be asked to vote upon the
following proposals:
1) Election of Directors;
2)Share Exchange between TEP and UniSource in accordance with the Plan
of Exchange (the "Holding Company Proposal"); and
3)Amendments to the Tucson Electric Power Company 1994 Omnibus Stock
and Incentive Plan (the "Omnibus Plan Proposal").
CERTAIN RISK FACTORS
There are certain material risks associated with the adoption and
implementation of the Holding Company Proposal. Since substantially all of
the assets of UniSource will initially consist of the common stock of TEP,
these risks relate to UniSource's limited access to working capital and
limited cash flow resulting from the expected inability of TEP to pay
dividends on its common stock for the foreseeable future and TEP's financial
uncertainty.
Limited Access of UniSource to Working Capital/Limited Cash Flow.
Substantially all of the assets of UniSource initially following the Share
Exchange will consist of the common stock of TEP. TEP does not expect to be
able to resume payment of dividends on its common stock for the foreseeable
future. See "HOLDING COMPANY PROPOSAL -- Dividends." Initially following
the Share Exchange, UniSource will not conduct any direct business operations
from which it will derive revenues, other than revenues received from
providing administrative services to TEP and Sister Companies (as defined
herein). See "HOLDING COMPANY PROPOSAL -- Business of UniSource." Because
TEP will be the only direct subsidiary of UniSource immediately following the
Share Exchange, UniSource's ability to fund administrative and operational
expenses will initially be limited to cash received from TEP in exchange for
administrative services provided to TEP. To the extent TEP provides
administrative or operational services to UniSource, costs relating thereto
will be allocated to UniSource. See "HOLDING COMPANY PROPOSAL -- Allocation
of Expense Among UniSource, TEP and Sister Companies." In addition, under
covenants contained in the Master Restructuring Agreement, the General First
Mortgage and various lease transactions, TEP may be prohibited from making
certain loans to or other investments in UniSource. Finally, under the
Affiliated Interest Rules, TEP will be prohibited from making loans to
UniSource in excess of $100,000 or for periods of more than one year without
prior ACC approval. Accordingly, cash flow available to UniSource will be
very limited until the operations of Sister Companies produce cash available
for dividends to UniSource. In addition, the lack of cash flow available to
UniSource may limit the ability of UniSource to organize and capitalize
Sister Companies.
In the event UniSource incurs liabilities in excess of cash flow
available from TEP and the Sister Companies, UniSource may not have
sufficient cash available to meet such liabilities. UniSource would be
required to obtain outside financing, or TEP may be required to seek waivers
of the provisions of certain of its credit agreements and leases and the
Affiliated Interest Rules in order to permit TEP to provide interim financing
to UniSource. There can be no assurance that UniSource would be able to
obtain financing or that TEP would be able to obtain the necessary waivers.
(See "TEP Financial Uncertainty" below).
TEP Financial Uncertainty. Whether or not the Holding Company Proposal
is adopted, TEP's prospects remain subject to significant economic,
regulatory and other uncertainties, many of which are beyond TEP's control.
In December 1992, TEP consummated a comprehensive restructuring of
obligations to certain creditors and reclassified its preferred stock into
common stock. The Financial Restructuring was concluded following nearly two
years of negotiations with various creditors including, but not limited to,
bank lenders and lease participants. TEP initiated the Financial
Restructuring because it projected that it might have insufficient liquidity
to meet its cash obligations by the end of the first quarter of 1991.
Further, in 1989 and 1990, TEP had negative cash flow and anticipated
negative cash flow thereafter.
TEP believes that the Financial Restructuring provides the Company the
opportunity to return gradually to long-term financial viability. However,
the Financial Restructuring itself is not sufficient to assure TEP's long-
term financial viability.
TEP's capital structure remains highly leveraged and TEP financial
prospects and cash flows remain subject to significant economic, regulatory
and other uncertainties, some of which are beyond TEP's control. These
uncertainties include the degree of utilization of capacity through either
retail electric service or wholesale sales and the extent to which TEP can
alter operations and reduce costs in response to unanticipated economic
downturns or industry changes due to continued high financial and operating
leverage. TEP's ability to recover the costs of serving retail customers is
dependent upon pricing of TEP's services, which requires ACC approval, and
the level of sales to such customers. TEP anticipates continued growth in
sales over the next five years primarily as a result of anticipated
population and economic growth in the Tucson area. However, a number of
factors, such as changes in economic conditions and the increasingly
competitive electric markets, could affect TEP's sales.
If TEP is unable to make sales at prices adequate to recover its costs,
or if for other reasons TEP fails to maintain or improve its cash flows,
TEP's ability to meet its obligations may be jeopardized. TEP has
approximately $1.1 billion of long-term debt maturing, including
approximately $774 million in reimbursement agreements relating to letters of
credit which expire, during the 1997-2001 period. TEP intends to pay or
refinance maturing bonds and bank loans and to replace or extend such
reimbursement agreements. There can be no assurance, however, that TEP will
be able to pay such debt or replace or extend such reimbursement agreements.
In addition, TEP's ability to raise capital (through either public or
private financings) is limited. TEP's ability to obtain debt financing will
be limited by reason of limited free cash flow available to meet additional
interest expense and due to the restrictive covenants contained in its
obligations to creditors. Further, if TEP is required to refinance its debt
obligations in order to repay them when due, such refinancing may be made on
terms which are adverse to TEP. Access to equity capital may be limited
because of TEP's likely limited future profitability and its inability to pay
dividends for the foreseeable future. See "HOLDING COMPANY PROPOSAL --
Dividends."
ANNUAL MEETING
This Proxy Statement-Prospectus is being mailed to shareholders in
connection with the solicitation, by and on behalf of the Board of Directors
of TEP, of proxies to be voted at the Annual Meeting of Shareholders of the
Company to be held on May 26, 1995, 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 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 cost to the Company of approximately $5,000.00 plus
reasonable out-of-pocket expenses. If necessary to obtain reasonable
representation of shareholders at the Meeting, solicitations may also be made
by telephone, telegraph 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 20, 1995 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 20, 1995, the Company had outstanding 160,723,702 shares of
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, the
affirmative vote of a majority of the shares then represented at the Meeting
and entitled to vote on a particular subject matter will be the act of the
shareholders with respect to that subject matter; provided, however, that if
the shares then represented are less than required to constitute a quorum,
the affirmative vote must be such as would constitute a majority if a quorum
were present.
In the election of Directors, each holder of shares of TEP 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.
To be elected as a Director, a nominee must receive the affirmative vote of
the majority of the shares then represented at the Meeting (subject to the
proviso to the last sentence of the preceding paragraph) and, to give effect
to the cumulative voting rights described above, if there are more than nine
nominees who receive more than such a majority of the affirmative votes, the
nine nominees receiving the largest number of affirmative votes shall be
elected. "Withheld" votes will be counted as being represented at the
Meeting and, therefore, will have the same effect as negative votes.
Approval of the Holding Company Proposal requires the affirmative vote
of holders of shares of TEP common stock representing not less than a
majority of all votes entitled to be cast by all holders of TEP common stock.
"Abstentions" and non-votes (i.e., shares held by brokers, fiduciaries or
other nominees which are not permitted to vote on the Holding Company
Proposal due to the absence of instructions from beneficial owners) will have
the same effect as negative votes.
The vote of TEP shareholders in favor of the Holding Company Proposal
will be deemed to be ratification by such shareholders of the assumption by
UniSource of the Omnibus Plan, as amended, and the TEP 1994 Outside Director
Stock Option Plan upon effectiveness of the Share Exchange.
Approval of the Omnibus Plan Proposal requires the affirmative vote of
a majority of the shares of TEP common stock then represented at the Meeting.
"Abstentions" will be counted as being represented at the Meeting and,
therefore, will have the same effect as negative votes. Non-votes (i.e.,
shares held by brokers, fiduciaries or other nominees which are not permitted
to vote on the Omnibus Plan Proposal due to the absence of instructions from
beneficial owners) will not be counted as being represented at the Meeting.
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 Holding Company Proposal and/or the Omnibus Plan Proposal,
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"
both the Holding Company Proposal and the Omnibus Plan Proposal.
Adjournments
It is the Company's present expectation that on the scheduled date of
the Meeting, votes will be taken and the polls closed on Proposal Nos. 1, 2
and 3. It is possible, however, that management may propose one or more
adjournments of the Meeting, either to allow the inspectors of election to
count and report on the votes cast after the polls have been closed, or,
without closing the polls, in order to permit further solicitation of proxies
with respect to any of Proposal Nos. 1, 2 and 3 or for other reasons. In
order for any such adjournment to be approved, the votes cast in favor
thereof must represent a majority of the total number of votes entitled to be
cast by the holders of the common stock present at the meeting in person or
by proxy. Proxies solicited by the Board of Directors will be voted at the
Meeting in favor of any adjournment proposed by management but will not be
considered a direction to vote for any adjournment proposed by others. If
any adjournment is properly proposed at the Meeting on behalf of any person
other than management, the persons named as proxies, acting in such capacity,
will have discretion to vote on such adjournment in accordance with their
best judgment.
Security Ownership of Certain Beneficial Owners
As of March 20, 1995, there was no person known by the Company to be
beneficial owner of more than five percent of the outstanding shares of the
common stock.
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 1, 1995, 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 1994 and Mr. Finney who retired
November 1, 1994, and all directors and executive officers as a group.
Amount and Allocable Amount
Nature of Percent of Shares under
Title of Name of Beneficial of Deferred Compensation
Class Beneficial Owner Ownership(1) Class Stock Plan(2)
- -------- ---------------------- ------------ ------- ---------------------
Common Elizabeth T. Alexander 0 -- --
Nominee
Common Charles E. Bayless 5,000 * 28,011
Chairman, President
and CEO
Common Jose L. Canchola 1,000 * 364
Director
Common Kathryn N. Dusenberry 369 * 700
Director
Common John A. Jeter 2,500 * --
Director
Common R. B. O'Rielly 1,400 * 455
Director
Common Martha R. Seger 200 * 658
Director
Common Donald G. Shropshire 1,500 * --
Director
Common H. Wilson Sundt 7,760 (3) * --
Director
Common J. Burgess Winter 1,000 * 1,652
Director
Common Ira R. Adler 1,853 (4) * --
Senior Vice President
and Chief Financial
Officer
Common Frederic N. Finney III 8,358 * --
Former Senior Vice
President and Chief
Administrative Officer
Common Dennis R. Nelson 1,500 * --
Vice President, General
Counsel and Corporate
Secretary
Common Thomas A. Delawder 2,585 (5) * 1,400
Vice President
Energy Resources
Common Gary L. Ellerd 6,611 (6) * --
Vice President
Operations
Common All directors and 50,112 (7) * 39,794
executive officers as
a group
___________________
*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 deferred compensation held in trust under the Deferred
Compensation Stock Plan which will be invested in the Company's common stock
on April 17, 1995. The indicated number of shares set forth under such
column is an approximation based on the closing price of the Company's common
stock on March 1, 1995. Such executive officers will not be the beneficial
owners of such shares.
(3)Includes 5,000 shares held by a corporation with which Mr. Sundt is
associated.
(4)Includes 1,353 shares subject to options exercisable within 60 days.
(5)Includes 2,029 shares subject to options exercisable within 60 days.
(6)Includes 6,311 shares subject to options exercisable within 60 days.
(7)Includes 11,046 shares subject to options exercisable within 60 days.
PROPOSAL 1
ELECTION OF DIRECTORS
General
Nine Directors are to be elected at the Annual 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, eight
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
----------------------------- --- --------
ELIZABETH T. ALEXANDER, President and Treasurer of 55 Nominee
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 of Directors 52 1990
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 Operating Officer 63 1992
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.
(2)JOHN A. JETER, independent business consultant since 64 1994
1991; partner in the accounting firm of Arthur Andersen
& Co. from 1967 to 1991.
(1)(2)(3)R. B. O'RIELLY, President and Chief Executive Officer of 65 1989
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 Professor of 63 1992
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 and Chief 67 1992
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 Chief 62 1976
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 Executive Officer 62 1992
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. In addition, prior to the Closing, Providian was a holder of
the Company's previously outstanding preferred stock. 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 such
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 1994.
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 seven meetings in 1994.
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 one meeting in 1994. 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 1994. For the year ended December 31, 1994, Mr. Shropshire and
Mr. Winter attended fewer than 75% of the aggregate of the total number of
meetings of the Board and committees upon which they 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, the four most highly compensated executive
officers and Mr. Finney who retired November 1, 1994 and who would have been
considered one of the four most highly compensated executive officers of the
Company except for the fact that he was not an executive officer of the
Company at December 31, 1994.
SUMMARY COMPENSATION TABLE
Long-Term
Compen-
sation
Awards All
Securities Other
Annual Compensation Underlying Compen-
Name and ---------------------- Options/ sation
Principal Position Year Salary($) Bonus($)(1) SARs (#) ($) (2)
- ---------------------- ---- --------- ----------- ---------- --------
Charles E. Bayless 1994 364,152 186,170 78,437 6,750
President and 1993 300,061 -- -- 8,994
Chief Executive Officer 1992 279,904 240,000 64,378 8,728
Ira R. Adler 1994 212,572 94,881 38,159 6,750
Senior Vice President 1993 180,045 -- -- 8,102
and Chief Financial 1992 173,916 108,000 30,901 8,728
Officer
Frederic N. Finney III 1994 158,268 68,258 30,890 601,123 (3)
Former Senior Vice 1993 170,040 -- -- 7,652
President and Chief 1992 147,723 42,500 29,185 8,580
Administrative Officer
Dennis R. Nelson 1994 146,426 53,910 22,714 6,750
Vice President, General 1993 120,016 -- -- 5,401
Counsel and Corporate 1992 117,020 60,000 12,876 7,978
Secretary
Thomas A. Delawder 1994 143,458 52,113 21,956 6,750
Vice President 1993 132,059 -- -- 5,943
Energy Resources 1992 127,936 66,000 14,163 8,727
Gary L. Ellerd 1994 138,046 53,910 20,139 6,166
Vice President 1993 133,016 -- -- 5,986
Operations 1992 130,458 33,250 14,292 7,367
___________________
(1)Represents amounts awarded under the 1994 Short-Term Incentive Plan for
services rendered in 1994. See Report of the Compensation Committee of the
Board of Directors on Executive Compensation.
(2)All Other Compensation for 1994 is comprised of the Company's
contributions to the Company's Triple Investment Plan for Salaried Employees
(401(k) Plan).
(3)Mr. Finney retired November 1, 1994. Mr. Finney's All Other Compensation
is comprised of a $591,902 early retirement payment and the Company's
matching contribution to the 401(k) Plan of $9,221.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value
at Assumed Annual
Rates of
Stock Price
Appreciation
Individual Grants for Option Term
- ----------------------------------------------------------- ----------------
Percent
Number of of Total
Securities Options/
Underlying SARs
Options/ Granted to
SARs Employees Exercise
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
- ------------ ---------- ---------- -------- ---------- ------- -------
Charles E.
Bayless 78,437 3.5% 3.25 6/13/04 160,318 406,277
Ira R. Adler 38,159 1.7% 3.25 6/13/04 77,993 197,651
Frederic N.
Finney III 30,890 1.4% 3.25 9/30/97(1) 17,298 36,450
Dennis R.
Nelson 22,714 1.0% 3.25 6/13/04 46,425 117,651
Thomas A.
Delawder 21,956 1.0% 3.25 6/13/04 44,876 113,725
Gary L.
Ellerd 20,139 0.9% 3.25 6/13/04 41,162 104,313
________________
(1)Mr. Finney retired November 1, 1994.
On May 20, 1994, the shareholders of the Company voted to approve the
Omnibus Plan. During 1994, the Compensation Committee granted stock options
intended to qualify as incentive stock options under the Internal Revenue
Code to all employees, with exercise prices equal to the market price of the
Company's common stock at the date of grant. The options vest ratably over a
three-year period, with the first one-third becoming exercisable in 1995.
The aggregate number of shares attributable to the 1994 grants is 2,214,205.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-money
Shares Options/SARs Options/SARs
Acquired at Fiscal at Fiscal
on Value Year-End (#) Year-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) (1) ($) Unexercisable Unexercisable
- ------------------ -------- -------- ------------- -------------
Charles E. Bayless 25,781 94,261 0/142,815 0/0
Ira R. Adler 13,717 50,151 1,353/69,060 0/0
Frederic N.
Finney III 5,877 21,488 0/30,890 0/0
Dennis R. Nelson 1,413 5,166 0/35,590 0/0
Thomas A. Delawder 2,912 10,646 2,029/36,119 0/0
Gary L. Ellerd 2,879 10,525 6,311/34,431 0/0
(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 54,850 58,278 61,706 65,134 68,563
150,000 65,820 69,934 74,048 78,161 82,275
175,000 76,790 81,589 86,389 91,188 95,988
200,000 87,760 93,245 98,730 104,215 109,700
225,000 98,730 104,901 111,071 117,242 123,413
250,000 109,700 116,556 123,413 130,269 137,125
300,000 131,640 139,868 148,095 156,323 164,550
400,000 175,520 186,490 197,460 208,430 219,400
450,000 197,460 209,801 222,143 234,484 246,825
500,000 219,400 233,113 246,825 260,538 274,250
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 and Mr. Finney follows:
Credited
Years of
Name Service
-------- --------
Charles E. Bayless.......................... 5
Ira R. Adler................................ 9
Frederic N. Finney III...................... 25
Dennis R. Nelson............................ 17
Thomas A. Delawder.......................... 20
Gary L. Ellerd.............................. 10
The amount of the pension benefit is equal to a base of 40% of the
compensation for 15 years of service, plus 9.7% of such calculated
amount. The base percentage increases 0.5% for each additional year of
service until a maximum of 35 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 in 1994 and $600 for
each Board and committee meeting attended. 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
Mr. Finney retired on November 1, 1994. Under the terms of his
release and settlement agreement with the Company, on January 3, 1995,
Mr. Finney received severance pay in the amount of $256,700, as well as
a "supplemental pension" payment in the amount of $335,202, which was
paid by the Company, and not by the Company's defined benefit pension
plan. In addition, Mr. Finney received an award under the Short-Term
Incentive Compensation Plan for the year 1994, pro-rated to reflect his
retirement on November 1.
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, 1994 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 $3,500,000.
For additional information regarding the effects of the proposed
Share Exchange with UniSource on officer contracts, see "HOLDING COMPANY
PROPOSAL -- Officer Employment Contracts."
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 1994,
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
determining its officer compensation strategy for 1994, the Compensation
Committee retained an external consultant to provide guidance and
recommendations. With the assistance of such consultant, the
Compensation Committee developed and implemented a compensation program
which is intended to provide competitive pay levels which are linked to
the achievement of the Company's strategic objectives.
The Company's 1994 compensation program consisted of three components:
base salary; short-term incentive compensation; and 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. 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, 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 February 1994, 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 23% increase in
base salary. The other Named Executives received increases ranging from
0% to 25%.
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
1994, 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 1994, 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, measured by earnings per share; and 3)
improving customer and community satisfaction, measured by a customer
satisfaction survey. The operational objectives consisted of: 1)
managing O&M costs within a specified growth rate, measured by total O&M
costs/total sales; 2) utilizing human resources effectively, measured by
a formula based on average number of retail customers and total full-
time equivalent employees; 3) achieving employee assimilation of
corporate values and culture, measured by an employee satisfaction
survey; 4) maintaining a safe working environment, measured by a formula
based on number of OSHA recordable injuries and illnesses; 5) improving
the success of affirmative action/EEO hiring opportunities, measured by
a formula based on number of successful candidates meeting affirmative
action qualifications; and 6) enhancing service reliability to meet
customer needs and expectations, measured by average forced outage rate
and average kWh outage duration.
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 1994. 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 144% of his or her
target award level. Incentive compensation earned in 1994 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 June 13, 1994, the Compensation Committee
issued Incentive Stock Options ("ISOs") to all employees 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 44% 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 29-36% of base
salary. The number of shares covered by the stock option grant to Mr.
Bayless was 78,437. 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 Internal Revenue Code.
Respectfully submitted,
THE COMPENSATION COMMITTEE
H. Wilson Sundt
Jose Canchola
Kathryn N. Dusenberry
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 1989 to 1994, and the Y-axis shows dollar values
from 0 to 160. 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:
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
Tucson Electric
Power Company $100 $33 $25 $14 $20 $17
S&P 500 Index $100 $97 $126 $136 $150 $152
EEI Index of 100
Investor-owned
Utilities $100 $99 $128 $141 $157 $137
Also, it assumes $100 invested on December 31, 1989 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.
1994 Omnibus Stock and Incentive Plan
The 1994 Omnibus Stock and Incentive Plan (the "Omnibus Plan") was
adopted by the Board of Directors as part of a comprehensive review of
compensation. The following is a summary of the material features of
the Omnibus Plan. For a description of the amendments to the Omnibus
Plan, see "OMNIBUS PLAN PROPOSAL." This summary of the Omnibus Plan is
qualified in its entirety by reference to the copy of the Omnibus Plan
attached as Exhibit D.
The vote of TEP shareholders in favor of the Holding Company
Proposal will be deemed to be ratification by such shareholders of the
assumption by UniSource of the Omnibus Plan, as amended upon
effectiveness of the Share Exchange.
Participation. All employees (approximately 1,630) are eligible to
participate in the Omnibus Plan, unless hired for a job of limited
duration or for a student internship. Participants are those employees
selected by the Compensation Committee in its sole discretion from those
eligible for awards. Non-employee directors are not eligible to
participate in the Omnibus Plan.
Administration. The Omnibus Plan is administered by the
Compensation Committee of the Board of Directors, which Committee is
composed entirely of non-employee directors. The Committee meets the
disinterested administration requirements of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Types of Awards. The Omnibus Plan provides for granting of any or
all of the following types of awards: stock options, including incentive
stock options, non-qualified stock options and discounted stock options;
stock appreciation rights; restricted stock; performance units; perfor-
mance shares; and dividend equivalents. The type and amount of awards,
the time when made, the term, the price, exercise provisions, vesting
provisions, performance criteria, if any, method of payment, and any
other terms of the award will be determined by the Compensation
Committee at the time of each grant, subject to the express provisions
of the Omnibus Plan.
Awards which are not yet exercisable will be accelerated upon any
"change in control" of the Company, as defined in the Omnibus Plan. The
formation of the holding company described in "HOLDING COMPANY PROPOSAL"
is not a "change of control" under the Omnibus Plan.
Term and Amendment. The Omnibus Plan was adopted by the Board of
Directors effective February 4, 1994, subject to shareholder approval
and the receipt of any necessary governmental approvals. The
shareholders approved the Omnibus Plan at the 1994 Annual Meeting of
Shareholders, and all necessary regulatory approvals have been received
from the ACC for the issuance of up to 2,214,205 shares of common stock
of TEP. To issue additional shares of TEP common stock under the
Omnibus Plan, additional ACC approval would be required. No awards may
be made under the Omnibus Plan on or after the 10th anniversary of its
effective date. The Omnibus Plan is subject to earlier termination by
the Board. The Board may amend the Omnibus Plan without further
approval of the shareholders except to the extent approval is required
by Rule 16b-3 under the Exchange Act or is otherwise required by law.
Shares Subject to the Omnibus Plan. The number of shares of common
stock of the Company, no par value, underlying awards under the Omnibus
Plan may not exceed 8 million shares in the aggregate (subject to anti-
dilution adjustments). Shares underlying awards that expire or
terminate unexercised or that are not settled in stock are thereafter
available for further grants to the maximum extent possible. The
closing price of Company common stock on the consolidated tape on March
1, 1995 was $3.50 per share. The shares of common stock to be delivered
under the Omnibus Plan may consist, in whole or in part, of authorized
but unissued stock or treasury stock, not reserved for any other
purpose.
Grant Information. It is not possible to determine awards that
will be made pursuant to the Omnibus Plan in the future or the number of
officers and employees who will be selected for awards under the Omnibus
Plan.
The exercise price for incentive and non-qualified stock options
granted under the Omnibus Plan may not be less than the fair market
value of the Company's common stock on the date of grant; provided,
however, that non-qualified stock options which are discounted stock
options are not subject to this restriction but must have an exercise
price not less than the greater of $1.00 or 25% of the fair market value
of the stock on the date of grant.
Other terms of option grants are determined by the Compensation
Committee on the date of grant.
During 1994, the Compensation Committee granted stock options
intended to qualify as incentive stock options under the Internal
Revenue Code to all employees, with exercise prices of $3.25 - $3.50.
The options vest ratably over a three-year period, with the first one-
third becoming exercisable in 1995, and expire in 2004. The aggregate
number of shares attributable to the 1994 grants is 2,214,205.
The following table reflects the 1994 option grants:
NEW PLAN BENEFITS
TUCSON ELECTRIC POWER COMPANY
1994 OMNIBUS STOCK AND INCENTIVE PLAN
Name and Position Dollar Value($)* Number of Units
- ----------------------------- ---------------- ---------------
Charles E. Bayless
Chairman, President and CEO 274,530 78,437
Ira R. Adler
Senior Vice President and
Chief Financial Officer 133,557 38,159
Frederic N. Finney III
Former Senior Vice President
and Chief Administrative Officer 108,115 30,890
Dennis R. Nelson
Vice President, General Counsel
and Corporate Secretary 79,499 22,714
Thomas A. Delawder
Vice President, Energy Resources 76,846 21,956
Gary L. Ellerd
Vice President, Operations 70,487 20,139
Executive Group 1,383,099 395,171
Non-Executive Director Group Not eligible
Non-Executive Officer
Employee Group 6,366,619 1,819,034
*Dollar value represents the value of stocks to be received upon the
exercise of the options (and payment of the exercise price of $3.25 per
share) by the recipient. For illustrative purposes, the value in this
table is based on $3.50 per share, the closing price of the Company's
common stock on March 1, 1995.
Stock Options Federal Income Tax Consequences: Consequences to the
Optionholder
Grant. There are no federal income tax consequences to the
optionholder solely by reason of the grant of incentive stock options
and non-qualified stock options under the Omnibus Plan.
Exercise. The exercise of incentive stock options is not a taxable
event for regular federal income tax purposes. However, such exercise
may give rise to an alternative minimum tax liability (see "Alternative
Minimum Tax" below).
Upon the exercise of a non-qualified stock option, the optionholder
will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the shares of Company common stock at
the time of exercise over the amount paid as the exercise price. The
ordinary income recognized in connection with the exercise by an
optionholder of a non-qualified stock option will be subject to both
wage and employment tax withholding.
The optionholder's tax basis in the shares acquired pursuant to the
exercise of a stock option will be the amount paid upon exercise plus,
in the case of a non-qualified stock option, the amount of ordinary
income recognized by the optionholder upon exercise.
Qualifying Disposition - Incentive Stock Option. If an
optionholder disposes of shares of Company common stock acquired upon
exercise of an incentive stock option in a taxable transaction, and such
disposition occurs more than two years from the date on which the option
is granted and more than one year after the date on which the shares are
transferred to the optionholder, the optionholder will recognize long-
term capital gain or loss equal to the difference between the amount
realized upon such disposition and the optionholder's adjusted basis in
such shares (generally the option exercise price).
Disqualifying Disposition - Incentive Stock Option. If the
optionholder disposes of shares of Company common stock acquired upon
exercise of an incentive stock option (other than in certain tax-free
transactions) within two years from the date on which the incentive
stock option is granted or within one year after the transfer of the
shares to the optionholder, then at the time of disposition the
optionholder will generally recognize ordinary income equal to the
lesser of (a) the excess of such shares' fair market value on the date
of exercise over the exercise price paid by the optionholder or (b) the
optionholder's actual gain (i.e., the excess, if any, of the amount
realized on the disposition over the exercise price paid by the
optionholder). If the amount realized on a taxable disposition exceeds
the fair market value on the date of exercise, then the optionholder
will recognize a capital gain in the amount of such excess. If the
optionholder incurs a loss on the disposition (i.e., if the amount
realized is less than the exercise price paid by the optionholder), then
the loss will be capital loss.
Disposition - Non-Qualified Stock Option. If an optionholder
disposes of shares of Company common stock acquired upon exercise of a
non-qualified stock option in a taxable transaction, the optionholder
will recognize capital gain or loss in an amount equal to the difference
between his basis (as discussed above) in the shares sold and the amount
realized upon disposition. Any such capital gain or loss (and any
capital gain or loss recognized on a disqualifying disposition of shares
of Company common stock acquired upon exercise of incentive stock
options as discussed above) will be long-term or short-term depending on
whether the shares of Company common stock were held for more than one
year from the date such shares were transferred to the optionholder.
Alternative Minimum Tax. Alternative minimum tax ("AMT") is
imposed in addition to, but only to the extent it exceeds, the
optionholder's regular tax for the taxable year. Generally, AMT is
computed at the rate of 24% on the excess of a taxpayer's alternative
minimum taxable income ("AMTI") over the exemption amount and does not
exceed $175,000 plus 28% of the taxpayer's AMTI over the exemption
amount in excess of $175,000. The exemption amount is $40,000 for joint
returns or returns of a surviving spouse ($30,000 for single taxpayers),
reduced by 25% of the excess of AMTI over $150,000 for joint returns or
returns of a surviving spouse ($112,000 for single taxpayers). A
taxpayer's AMTI is essentially the taxpayer's taxable income adjusted
pursuant to the AMT provisions and increased by items of tax preference.
The exercise of incentive stock options (except non-qualified stock
options) will generally result in an upward adjustment to the
optionholder's AMTI in the year of exercise by an amount equal to the
excess, if any, of the fair market value of the stock on the date of
exercise over the exercise price. The basis of the stock acquired, for
AMT purposes, will equal the exercise price increased by the prior
upward adjustment of the taxpayer's AMTI due to the exercise of the
option. Upon the disposition of the stock, the increased basis will
result in a smaller capital gains for AMTI than for ordinary income tax
purposes.
Stock Options Federal Income Tax Consequences: Consequences to the
Company
There are no federal income tax consequences to the Company by
reason of the grant of incentive stock options or non-qualified stock
options or the exercise of incentive stock options (other than
disqualifying dispositions).
At the time the optionholder recognizes ordinary income from the
exercise of non-qualified stock options, the Company will be entitled to
a federal income tax deduction in the amount of the ordinary income so
recognized (as described above), provided that the Company satisfies its
withholding obligations described below. To the extent the optionholder
recognizes ordinary income by reason of a disqualifying disposition of
the stock acquired upon exercise of incentive stock options, the Company
will be entitled to a corresponding deduction in the year in which the
disposition occurs.
The Company will be required to report to the Internal Revenue
Service any ordinary income recognized by any optionholder by reason of
the exercise of a non-qualified stock option. The Company will be
required to withhold income and employment taxes (and pay the employer's
share of employment taxes) with respect to ordinary income recognized by
the optionholder upon the exercise of non-qualified stock options.
Stock Options Federal Income Tax Consequences: Other Tax Consequences
The foregoing discussion is not a complete description of the
federal income tax aspects of incentive stock options and non-qualified
stock options under the Omnibus Plan. In addition, administrative and
judicial interpretations of the application of the federal income tax
laws are subject to change. Furthermore, the foregoing discussion does
not address state or local tax consequences.
1994 Outside Director Stock Option Plan
The Tucson Electric Power Company 1994 Outside Director Stock
Option Plan (the "Director Plan") is intended to attract and retain
highly qualified non-employee Directors by providing to them an equity
interest in the Company, more closely aligning their interests with the
Company's shareholders, and providing them with reasonable and fair
compensation. The following is a summary of the material features of
the Director Plan. This summary of the Director Plan is qualified in
its entirety by reference to the copy of the Director Plan attached as
Exhibit E.
The vote of TEP shareholders in favor of the Holding Company
Proposal will be deemed to be ratification by such shareholders of the
assumption by UniSource of the Director Plan upon effectiveness of the
Share Exchange.
Participation. Individuals eligible to participate in the Director
Plan are those members of the Board who are not common law employees of
the Company or emeritus directors of the Company ("Eligible Directors").
Administration. The Director Plan is administered by those non-
Emeritus Directors who are not eligible to participate in the Director
Plan (the "Ineligible Directors").
Types of Awards. The Director Plan provides for an annual grant of
6,000 non-qualified stock options to each Eligible Director. Each
option will have an exercise price equivalent to the fair market value
of one share of Company common stock on the day such option is granted.
Each grant vests ratably and becomes exercisable in one-third increments
on each anniversary of the date of the grant.
Awards which are not yet exercisable will be accelerated upon any
"change in control" of the Company, as defined in the Director Plan.
The formation of the holding company described in "HOLDING COMPANY
PROPOSAL" is not a "change of control" under the Omnibus Plan.
Term and Amendment. The Director Plan was adopted by the Board of
Directors effective February 4, 1994, subject to shareholder approval
and the receipt of any necessary governmental approvals. The
shareholders approved the Director Plan at the 1994 Annual Meeting of
Shareholders, and all necessary regulatory approvals have been obtained.
No awards may be made under the Director Plan on or after the 10th
anniversary of its effective date. The Director Plan is subject to
earlier termination by the Board. The Board may amend the Director Plan
without further approval of the shareholders except to the extent
approval is required under Rule 16b-3 under the Exchange Act or
otherwise required by law. The Director Plan may not be amended more
than once every six months other than to comply with the provisions of
the Internal Revenue Code of 1986, as amended, or the Employee
Retirement Income Security Act.
Shares Subject to the Director Plan. The number of shares of
common stock of the Company, no par value, underlying awards under the
Director Plan will be 6,000 shares per year per Eligible Director
(subject to anti-dilution adjustments). Shares underlying awards that
expire or terminate unexercised or that are not settled in stock are
thereafter available for further grants to the maximum extent possible.
The closing price of Company common stock on the consolidated tape on
March 1, 1995 was $3.50 per share. The shares of common stock to be
delivered under the Director Plan may consist, in whole or in part, of
authorized but unissued stock or treasury stock, not reserved for any
other purpose.
Grant Information. On January 3, 1995 each Eligible Director
received an initial award of options to purchase 6,000 shares of common
stock at an exercise price of $3.125 per share. The options expire on
January 3, 2005. If elected, Ms. Alexander will receive an award of
6,000 options on the date she becomes a director, at an exercise price
equal to the fair market value of the Company's common stock on such
date. Each Eligible Director shall receive an annual award of options
to purchase 6,000 shares of Common Stock on the anniversary date of the
initial award, for the life of the Director Plan.
NEW PLAN BENEFITS
TUCSON ELECTRIC POWER COMPANY
1994 OUTSIDE DIRECTOR STOCK OPTION PLAN
Name and Position Dollar Value($)* Number of Units
- ----------------------- ---------------- ---------------
CEO and Named Executive
Officers Not eligible
Executive Group Not eligible
Non-Executive Director
Group (eight persons) 168,000 48,000
Non-Executive Officer
Employee Group Not eligible
Nominees for Director
Elizabeth T. Alexander 21,000 6,000
Charles E. Bayless Not eligible
Jose L. Canchola 21,000 6,000
John A. Jeter 21,000 6,000
R.B. O'Rielly 21,000 6,000
Martha R. Seger 21,000 6,000
Donald G. Shropshire 21,000 6,000
H. Wilson Sundt 21,000 6,000
J. Burgess Winter 21,000 6,000
*Dollar value represents the value of stock to be received upon the
exercise of the options (and payment of the exercise price of $3.125 per
share) by the recipient. For purposes of the table, the dollar value of
Ms. Alexander's options, which will be granted after her election to the
Board, is assumed to be the same as that of the other options granted.
For illustrative purposes, the value in this table is based on $3.50 per
share, the closing price of the Company's common stock on March 1, 1995.
Stock Options Federal Income Tax Consequences: Consequences to the
Optionholder
Grant. There are no federal income tax consequences to the
optionholder solely by reason of the grant of non-qualified stock
options under the Director Plan.
Exercise. Upon the exercise of a non-qualified stock option, the
optionholder will generally recognize ordinary income in an amount equal
to the excess of the fair market value of the shares of Company common
stock at the time of exercise over the amount paid as the exercise
price.
The optionholder's tax basis in the shares acquired pursuant to the
exercise of a non-qualified stock option will be the amount paid upon
exercise plus the amount of ordinary income recognized by the
optionholder upon exercise.
Disposition. If an optionholder disposes of shares of Company
common stock acquired upon exercise of a non-qualified stock option in a
taxable transaction, the optionholder will recognize capital gain or
loss in an amount equal to the difference between his basis (as
discussed above) in the shares sold and the amount realized upon
disposition. Any such capital gain or loss will be long-term or short-
term depending on whether the shares of Company common stock were held
for more than one year from the date such shares were transferred to the
optionholder.
Stock Options Federal Income Tax Consequences: Consequences to the
Company
At the time the optionholder recognizes ordinary income from the
exercise of a non-qualified stock option, the Company will be entitled
to a federal income tax deduction in the amount of the ordinary income
so recognized (as described above).
Stock Options Federal Income Tax Consequences: Other Tax Consequences
The foregoing discussion is not a complete description of the
federal income tax aspects of non-qualified stock options under the
Director Plan. In addition, administrative and judicial interpretations
of the application of the federal income tax laws are subject to change.
Furthermore, the foregoing discussion does not address state or local
tax consequences.
PROPOSAL 2
HOLDING COMPANY PROPOSAL
General
The Board of Directors and management of TEP consider it to be in
the best interest of TEP, its shareholders and customers, to change the
corporate organization of TEP into a holding company structure. The
Holding Company Proposal will be accomplished through a statutory share
exchange whereby the outstanding shares of TEP common stock will be
exchanged, on a share-for-share basis, for shares of UniSource common
stock. This transaction will result in TEP becoming a subsidiary of
UniSource which will hold all of the common stock of TEP, and the
present holders of TEP common stock becoming the holders of UniSource
common stock.
To achieve this change in structure, UniSource was formed for the
purpose of becoming the holding company of TEP. The Board of Directors
of TEP approved the Plan of Exchange which is subject to shareholder and
regulatory approval. See "Required Shareholder Approval Under New
Arizona Law" and "Required Regulatory Approvals." A copy of the Plan of
Exchange is attached to this Proxy Statement-Prospectus as Exhibit A and
is incorporated herein by reference. The Share Exchange will not result
in the recognition of gain or loss by TEP shareholders for federal
income tax purposes. See "Certain Federal Income Tax Consequences."
The other securities of TEP, including its first mortgage bonds,
will not be changed by the Share Exchange and each will continue to be
outstanding securities of TEP.
The Board of Directors unanimously recommends a vote "FOR" the
approval of the Holding Company Proposal as proposed in the accompanying
Notice. See "Reasons for the Holding Company Proposal."
Corporate Organization
TEP was incorporated under the laws of the State of Arizona on
December 16, 1963. TEP is the successor by merger as of February 20,
1964, to a Colorado corporation which was incorporated on January 25,
1902. TEP is an operating public utility engaged in the generation,
purchase, transmission, distribution and sale of electricity for
customers in the City of Tucson and the surrounding area and to
wholesale customers. TEP holds a franchise which expires in 2001 to
provide electric service to customers in the City of Tucson.
UniSource was incorporated under the laws of the State of Arizona
on March 8, 1995. UniSource was organized to become the parent of TEP
and currently has only nominal equity capital and no debt. Prior to the
consummation of the Share Exchange, the only business of UniSource will
be the execution, delivery and the performance of the Plan of Exchange.
Prior to the effectiveness of the Share Exchange, the assets of
UniSource will consist of $1,000 in cash, representing the equity
capital contributed by its sole shareholder, NCR Holding, Inc. ("NCR
Holding"), which is a wholly-owned subsidiary of National Corporate
Research, Ltd. ("NCR"). Neither NCR nor NCR Holding is an affiliate of
TEP. NCR and NCR Holding are in the business of providing corporate
services to other companies. Prior to the effectiveness of the Share
Exchange, the officers and directors of UniSource will be employees of
NCR Holding or NCR's affiliates. Pursuant to the Plan of Exchange,
concurrently with the effectiveness of the Share Exchange, all shares of
UniSource held by NCR will be canceled and all existing officers and
directors of UniSource will resign.
It is anticipated that, following the effectiveness of the Share
Exchange, UniSource will be exempt from all of the provisions of the
Holding Company Act, except provisions thereof relating to the
acquisition of securities of other public utility companies, until
further action by the SEC, by virtue of an exemption under Section
3(a)(1) of the Holding Company Act and an annual exemption statement to be
filed by UniSource with the SEC pursuant to Rule 2 under the Holding
Company Act.
Following the Share Exchange, TEP will continue to own all the
outstanding shares of common stock of its current subsidiaries. After
the Share Exchange, UniSource will own the outstanding shares of common
stock of TEP. UniSource will also own all or part of the outstanding
shares of common stock of any subsidiaries that it may form after the
Share Exchange. Charts showing the corporate structure and ownership
before and after the Share Exchange are presented below.
PRESENT STRUCTURE
+------------------------+
| TUCSON ELECTRIC POWER |
| COMPANY |
+------------------------+
|
+-----------|------------+
| EXISTING TEP |
| SUBSIDIARIES |
+------------------------+
PROPOSED STRUCTURE
+-------------------+
| UNISOURCE ENERGY |
| CORPORATION |
+---------|---------+
|
|---------------|- - - - - - - - - - - - - |
+----|------------+ |
| TUCSON ELECTRIC| |
| POWER | + - - - -|- - - - +
| COMPANY | | FUTURE |
+----|------------+ | SISTER |
| | COMPANIES |
+----|----------+ + - - - - - - - - +
| EXISTING |
| TEP |
| SUBSIDIARIES |
+---------------+
Current TEP Regulation
TEP, as a public service corporation, is subject to regulation by
the Arizona Corporation Commission ("ACC") as to rates, territory,
service, accounts, issuance of securities, affiliated transactions, and
in other respects provided by Arizona law. The Federal Energy
Regulatory Commission ("FERC") has jurisdiction under the Federal Power
Act over certain of the electric utility facilities and operations,
accounting practices, issuance of certain securities and wholesale
electric rates of TEP. TEP owns all outstanding shares of San Carlos
Resources Inc. ("San Carlos") which is the holder of title to Unit 2 of
the Springerville Generating Station. To the extent that San Carlos is
an "electric utility company" within the meaning of the Holding Company
Act, TEP is a "holding company." TEP currently files an annual
exemption statement with the SEC, claiming exemption under Section 3(a),
and is therefore exempt from all the provisions of the Holding Company
Act except Section 9(a)(2) which requires any person to obtain SEC
approval prior to the direct or indirect acquisition of 5% or more of
the voting securities of more than one electric or gas utility company.
See "Required Regulatory Approvals."
Reasons for the Holding Company Proposal
General. The reason for organizing a holding company is to
establish a more appropriate corporate structure to explore and take
advantage of new opportunities arising out of the changing Electric
Energy Business (as defined below).
Evolution of the Electric Energy Business. The Electric Energy
Business in general is changing and becoming increasingly competitive,
on both the wholesale and retail levels, due to a variety of regulatory,
economic and technological developments.
The Energy Policy Act of 1992 (the "Energy Act") was designed,
among other things, to foster competition in the wholesale market (a)
through amendments to the Holding Company Act facilitating the ownership
and operation of generating facilities by "exempt wholesale generators"
(which may include independent power producers as well as affiliates of
electric utilities) and (b) through amendments to the Federal Power Act
authorizing the FERC under certain conditions to order utilities which
own transmission facilities to provide wholesale transmission services
to or for other utilities and other entities generating electric energy
for sale or resale. In addition, brokers and marketers have also
entered into the business of buying and selling electric capacity and
energy, or arranging sales thereof, without owning or operating any
generation or transmission facilities.
On the retail level, industrial and large commercial customers may
have the ability to own and operate facilities to generate their own
electric energy requirements and, if such facilities are Qualifying
Facilities, to require the displaced electric utility to purchase the
output of such facilities at "avoided costs" pursuant to the Public
Utility Regulatory Policies Act of 1978, as amended ("PURPA"). Such
facilities may be operated by the customers themselves or by other
entities engaged for such purpose.
Finally, the legislatures and/or the regulatory commissions in
several states have considered or are considering "retail wheeling"
which, in general terms, means the transmission by an electric utility
of energy produced by another entity over its transmission and
distribution system to a retail customer in such utility's service
territory. A requirement to transmit directly to retail customers could
have the result of permitting retail customers to purchase electric
capacity and energy from, at the election of such customers, the
electric utility in whose service area they are located or from other
electric utilities or independent power producers.
The changes in the Electric Energy Business described above
constitute, in TEP's view, a trend toward the "unbundling" of what once
was a vertically integrated industry into different business segments.
As used in this Proxy Statement-Prospectus, the term "Electric Energy
Business" means all of such segments, collectively, and, in particular,
the businesses of producing, developing, generating, transmitting,
distributing and/or supplying electric energy for any purpose, including
the businesses of purchasing and selling electric capacity and/or energy
(or arranging purchases and/or sales thereof), the business of providing
electric energy services and any other business or businesses incidental
to, or necessary in connection with, any of the foregoing.
TEP has no present intention of unbundling its business into
various segments. However, the Board of Directors of TEP believes that
it is in the best interests of TEP's shareholders for TEP to endeavor to
participate in the various segments of the evolving and expanding
Electric Energy Business. TEP and certain of its energy subsidiaries
are currently investigating a variety of opportunities in the Electric
Energy Business. Although TEP could continue to pursue such
opportunities through its energy subsidiaries, the Board believes that
TEP's participation in new segments of the business would be enhanced by
the holding company structure.
At the end of 1994, substantially all of the assets of TEP's
investment subsidiaries, TRI and SRI, had been liquidated. It is
expected that neither the exploration of opportunities by TEP and its
energy subsidiaries nor the establishment of the holding company
structure will affect the continuing liquidation of the remaining assets
of such investment subsidiaries. It is intended such investment
subsidiaries continue the process of liquidating their remaining assets
and dividend available proceeds from such sales to TEP.
Benefits of a Holding Company Structure. The holding company
structure is an established form of organization for companies
conducting multiple lines of business. It is a common form of
organization for unregulated companies and for those regulated
companies, such as telephone utilities and water utilities, which are
not subject to the Holding Company Act.
There are many benefits to be derived from a holding company
structure, which may be generally summarized as follows:
*The new structure would facilitate the separation of TEP's
traditional utility operations from its operations in other segments of
the Electric Energy Business. Such separation would avoid cross-
subsidization and the transfer of business risk from other segments of
the business to traditional operations.
*The new structure would provide additional legal protection against
the imposition on TEP of liabilities arising out of other segments of
the business.
*The new structure would facilitate the analysis and valuation of
individual lines of business.
*The new structure would enable Sister Companies to enter into new
segments of the Electric Energy Business in a more timely manner without
any requirement to obtain ACC approval (other than any approval required
under the Affiliated Interest Rules).
*The new structure would permit the use of financing techniques that
are more suited to the particular requirements, characteristics and
risks of other segments of the Electric Energy Business without
affecting the capital structure or creditworthiness of TEP and, further-
more, would increase financial flexibility by allowing the design and
implementation of capital structures appropriate for each Sister Company
standing alone.
Recommendation of TEP Board of Directors. The Board of Directors
of TEP has considered both the potential benefits of the Holding Company
Proposal and the potential risks discussed under "CERTAIN RISK FACTORS"
and has concluded that, on balance, the potential benefits outweigh the
potential risks. Accordingly, the Board of Directors unanimously
approved the Plan of Exchange and believes that it is in the best
interests of TEP's shareholders.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL AND ADOPTION OF THE
HOLDING COMPANY PROPOSAL AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE
HOLDING COMPANY PROPOSAL.
Agreement and Plan of Exchange
The Plan of Exchange in the form attached hereto as Exhibit A has
been unanimously approved by the Boards of Directors of TEP and
UniSource. In the Share Exchange, each share of TEP common stock would
be exchanged for one share of UniSource common stock. As a result, TEP
would become a wholly-owned subsidiary of UniSource, and all of the
UniSource common stock outstanding immediately after the Share Exchange
would be owned by the holders of the TEP common stock outstanding
immediately before the Share Exchange takes effect. The outstanding
first mortgage bonds, other long-term debt, and all other contracts and
agreements to which TEP is a party and the terms thereof will not be
altered by the Share Exchange. The Amended and Restated Articles of
Incorporation of TEP would not be changed in any way as a result of the
Share Exchange.
Material Risk Factors
There are certain material risks associated with the adoption and
implementation of the Holding Company Proposal. See "CERTAIN RISK
FACTORS."
Required Shareholder Approval Under New Arizona Law
In 1994, the Arizona Legislature passed, and the Governor signed,
H.B. 2124 which amended Arizona's General Corporation Law (as amended,
the "1996 Corporation Law") to become effective January 1, 1996. The
1996 Corporation Law provides for a statutory share exchange such as the
Share Exchange contemplated herein. Under the 1996 Corporation Law, the
share exchange must be approved by holders of shares of TEP common stock
representing not less than a majority of all votes entitled to be cast
by all holders of TEP common stock entitled to vote at a meeting of
shareholders. The Board of TEP decided to seek such approval at the
1995 Annual Meeting of TEP Shareholders and, subject to the receipt of
all required regulatory approvals, to consummate the Share Exchange
after January 1, 1996, the effective date of the 1996 Corporation Law.
See "Effective Date of the Share Exchange" and "Required Regulatory
Approvals."
Required Regulatory Approvals
An application is pending with the ACC for approval of the holding
company structure. The ACC may require a public hearing before granting
or denying the application. The ACC may deny the application if it
finds that establishment of a holding company will impair the financial
status of TEP, prevent TEP from attracting capital at fair and
reasonable terms, or impair the ability of TEP to provide safe,
reasonable and adequate service.
TEP believes that the Affiliated Interest Rules, described below
under "Regulation of UniSource," provide the safeguards required for the
ACC to reach the conclusions which are necessary for the approval of the
holding company structure. There may be other requirements imposed by
the ACC on UniSource as a condition for approval of the pending holding
company application. To the extent these other requirements, if any,
are deemed by the Board of Directors of TEP to negate the benefits of
having a holding company organization, the Board of Directors of TEP
could determine not to consummate the Share Exchange. See "Amendment or
Termination."
An application will be filed with the FERC under the Federal Power
Act for approval of the Share Exchange. In order to approve such
application, the FERC must determine that the Share Exchange is
consistent with the public interest.
TEP intends to request a "no action" position from the Staff of the
SEC asserting its view that San Carlos should not be considered an
electric utility company within the meaning of the Holding Company Act
and that, as a consequence, no approval of the Share Exchange by the SEC
is required to be obtained under Section 9(a)(2). See "Current TEP
Regulation." In the event that the Staff does not concur with TEP's
view, TEP will file an application under Section 9(a)(2) for approval of
the Share Exchange.
Consummation of the Share Exchange is predicated on receiving all
of the above approvals.
Regulation of UniSource
In the opinion of counsel for TEP, upon the effectiveness of the
Share Exchange, UniSource will be a holding company within the meaning
of the Holding Company Act. However, UniSource will be entitled to file
an annual exemption statement, claiming exemption under Section 3(a)(1),
and, therefore, will be exempt from all provisions of the 1935 Act
except Section 9(a)(2). Such exemption is subject to termination by the
SEC under Rule 2. See "Current TEP Regulation."
Under the Holding Company Act and current policies of the SEC,
there are limitations on the extent to which exempt holding companies
(such as UniSource) are permitted to diversify into businesses not
functionally related to the electric and gas utility businesses. On
February 7, 1989, the SEC announced a proposed rule setting the scope of
permissible diversification for exempt holding companies. Under the SEC
proposal, exempt holding companies would be permitted to diversify
without jeopardizing their exempt status if such diversification fell
within one of two safe harbor provisions outlined by the proposed rules.
Additionally, on November 2, 1994, the SEC issued a concept release
regarding possible modernization of the Holding Company Act. TEP and
UniSource cannot predict what action, if any, the SEC will take on the
proposed rule, whether any rules related to diversification will be
adopted by the SEC or whether the Holding Company Act will be amended or
repealed.
There are additional limitations under the Holding Company Act and
current SEC policies, on the extent to which UniSource could expand the
utility business of TEP or any other material utility subsidiary outside
of Arizona. If any limitations regarding diversification or location of
businesses were exceeded, UniSource's exempt status under the Holding
Company Act could be jeopardized. UniSource has no present intention to
engage in any activity which would require it to register as a holding
company and thereby subject it to regulation under the Holding Company
Act.
TEP and UniSource have been advised by counsel that so long as
UniSource is not a public utility, it will not be subject under present
Arizona or federal law to regulation by the ACC or by the FERC.
UniSource will, however, be an "affiliate" of TEP under the Affiliated
Interest Rules. As such, certain contracts and other transactions
between TEP and UniSource and loans from TEP to UniSource (other than
short-term and loans in an amount less than $100,000) must be approved
by the ACC. Additionally, UniSource will be required to file an annual
report with the ACC that outlines UniSource's diversification plans.
Business of UniSource
Upon the effectiveness of the Share Exchange, UniSource will be a
holding company owning the common stock of TEP and may engage, directly
or through subsidiaries, in other businesses. It is anticipated that
such subsidiaries would be primarily engaged in the Electric Energy
Business. See also "Reasons for Plan."
Allocation of Expense Among UniSource, TEP and Sister Companies
As a general policy, resource sharing and intercompany transactions
will be conducted in a manner intended to promote separation between TEP
and Sister Companies. The following guidelines have been established to
promote such separation:
1.To the extent practical, Sister Companies will acquire, operate
and maintain their own facilities and equipment and retain their own
administrative staffs.
2.Where corporate functions of one affiliate are performed by
another, the direct cost of such services will be allocated to the
affiliate receiving the benefit of such service. Indirect costs of
corporate functions which benefit more than one affiliate will be based
on benefits received, where the proportionate share of such benefits is
quantifiable. The costs of organizational expenses related to the
establishment of UniSource and the implementation of the Plan of
Exchange will be allocated to TEP.
Compensation and expenses of TEP corporate officers (including
their support personnel), including pension and other benefits and costs
associated with such personnel, will be allocated to UniSource and
Sister Companies based upon the actual cost which reflects the
executives' oversight provided.
For each year, it is expected that the consolidated federal income
tax liability of UniSource and its subsidiaries will be allocated among
the various consolidated group members pursuant to a procedure which, in
general, allocates the tax liability to those members producing taxable
income in proportion to the relative amount of taxable income produced.
Such an allocation is in accordance with the procedure described in
section 1552(a)(1) of the Code.
When subsidiaries file combined state income tax returns, it is
expected that state income taxes will be allocated under the same
methodology as federal income taxes. Otherwise, it is expected that
state income taxes will be allocated directly to the company generating
the income tax liability.
Amendment or Termination
By mutual consent of their respective Boards of Directors, TEP and
UniSource may amend, modify, or supplement the Plan of Exchange in such
manner as may be agreed upon by them at any time before or after
approval of the Plan of Exchange by the shareholders of TEP; provided,
however, that no amendment, modification or supplement shall be made
which would, in the judgment of the Board of Directors of TEP,
materially and adversely affect the shareholders of TEP.
The Plan of Exchange may be terminated, at any time before or after
its approval by the shareholders of TEP, by action of the Board of
Directors of TEP if the Board determines, in its sole discretion, that
the Share Exchange would be inadvisable or not in the best interests of
TEP or its shareholders. In making such determination, the Board of
Directors would consider, among other things, the nature of the ACC
approval and of any conditions imposed under the Affiliated Interest
Rules, the nature of the FERC approval under the Federal Power Act,
failure to receive a favorable confirming opinion of counsel as
described under "Certain Federal Income Tax Consequences," below, or the
nature of any further regulatory approval requirements not now
anticipated. TEP is unable to predict under what other circumstances
the Share Exchange might be terminated or abandoned.
No Rights of Dissent
Under Arizona law, upon approval of the Share Exchange by the
requisite vote of shareholders, dissenting shareholders are not entitled
to obtain payment of the fair value of their shares. See "Required
Shareholder Approval under new Arizona Law." TEP shareholders who do
not vote in favor of the Share Exchange will not be entitled to either
dissenters' or appraisal rights with respect to the Share Exchange.
Effective Date of the Share Exchange
The Share Exchange will become effective as of the date to be
selected by TEP and UniSource as provided in the Plan of Exchange, but
in no event earlier than January 2, 1996. Subject to the receipt of
required regulatory and shareholder approvals, it is expected that the
effective date will occur on January 2, 1996 or as soon thereafter as
practicable. TEP cannot predict when such regulatory approvals will be
obtained. See also "Required Shareholder Approval Under New Arizona
Law" and "Amendment or Termination."
Notice of Exchange
Promptly after the effective date of the Share Exchange, all TEP
shareholders of record as of the date of the Share Exchange will be
provided with notice that the Share Exchange has taken place.
Exchange of Stock Certificates Not Required
If the Share Exchange is effected, it will not be necessary for
holders of TEP's common stock to physically exchange their existing
stock certificates for stock certificates of UniSource. The holders of
TEP's common stock will become the owners of shares of UniSource common
stock on a share-for-share basis, and the present stock certificates of
TEP will automatically represent shares of common stock of UniSource.
After the Share Exchange, as presently outstanding certificates of TEP's
common stock are presented for transfer, new certificates bearing
UniSource's name "UniSource Energy Corporation" will be issued.
UniSource may elect to offer direct registration to holders of
UniSource common stock. Through the direct registration system,
investors may elect to have a statement-based account, rather than
having to keep track of a certificate. This would eliminate the risk of
loss, theft or destruction of certificates and provide convenience to
the Company, UniSource and shareholders.
Certain Federal Income Tax Consequences
General. The following general discussion summarizes certain
federal income tax considerations relating to the Plan of Exchange.
This summary is included for general information only. This summary
does not discuss all aspects of federal income taxation that may be
relevant to a particular holder of TEP common stock in light of the
personal tax circumstances of the holder or to certain types of holders
of TEP common stock subject to special treatment under the federal
income tax laws.
Except as otherwise indicated, statements of legal conclusion
regarding federal tax treatments, effects or consequences reflect the
opinion of Reid & Priest LLP. Consummation of the Plan of Exchange is
conditioned upon the receipt by TEP on the effective date of a
confirmatory opinion of Reid & Priest LLP. While such statements and
conclusions represent the legal judgment of Reid & Priest LLP, such
judgment is not binding in any manner upon the Internal Revenue Service
or the courts. Each holder of TEP common stock should consult such
holder's own tax advisor as to the specific income tax consequences to
such holder, including the application and effect of state or local
income and other tax laws.
The following discussion is based on existing statutory provisions,
existing and proposed regulations and existing administrative
interpretations and court decisions. Future legislation, regulations,
administrative interpretations, or court decisions could significantly
change such authorities, either prospectively or retroactively.
The Plan of Exchange will be treated as a transfer of all of the
outstanding TEP common stock by the holders thereof to UniSource solely
in exchange for all of the outstanding UniSource common stock, in an
exchange qualifying for nonrecognition under Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code").
Tax Implications to the Holders. For federal income tax purposes,
no gain or loss will be recognized by the holders of TEP common stock as
a result of the Share Exchange. The tax basis of the UniSource common
stock deemed received by the holders of TEP common stock in the Share
Exchange will be the same as their basis in the TEP common stock deemed
surrendered in the Share Exchange. The holding period of the UniSource
common stock deemed received by each holder of TEP common stock will
include the period during which such holder held the TEP common stock
deemed exchanged therefor, provided that the TEP common stock was held
as a capital asset on the date of the deemed exchange.
Tax Implications to UniSource. No gain or loss will be recognized
by UniSource for federal income tax purposes upon the deemed receipt of
the TEP common stock. The basis of the TEP common stock deemed received
by UniSource will be the same as TEP's net asset basis immediately after
the Plan of Exchange, subject to certain adjustments under Treasury
Regulations relating to consolidated groups. UniSource's holding period
in the TEP common stock deemed received in the Plan of Exchange should
include the period during which such stock was held by the holders of
TEP common stock.
Other Tax Aspects. Apart from the federal income tax aspects
discussed above, no attempt has been made to determine any tax that may
be imposed on a holder of TEP common stock by the country, state or
jurisdiction in which the holder resides or is a citizen. Holders of
TEP common stock may be subject to other taxes, such as state or local
income taxes that may be imposed by various jurisdictions. Holders of
TEP common stock may also be subject to intangible property, estate and
inheritance taxes in their state of domicile. Holders of TEP common
stock should consult their own tax advisors with regard to state and
local income, inheritance and estate taxes.
The federal income tax discussion set forth above is intended to
provide only a general summary, and does not address tax consequences
which may vary with, or are contingent on, individual circumstances.
Moreover, this discussion does not address any foreign, federal, state
or local tax consequences of the disposition of stock in TEP or
UniSource either before or after the Plan of Exchange. Accordingly,
each holder of TEP common stock is strongly urged to consult with such
holder's tax advisor to determine the particular tax consequences to
such holder of the Plan of Exchange or such disposition of stock.
Description of UniSource Capital Stock
General
The authorized capital stock of UniSource presently consists of
251,000,000 shares, consisting of 250,000,000 shares of common stock
without par value, and 1,000,000 shares of preferred stock without par
value. There are 1,000 shares of UniSource common stock outstanding and
no shares of preferred stock outstanding.
The following is a summary of certain rights and privileges of the
holders of UniSource capital stock. This summary does not purport to be
complete. Reference is made to UniSource's Restated Articles of
Incorporation and to the laws of the State of Arizona, the following
information being qualified in its entirety by such reference.
Unisource's Articles of Incorporation and Bylaws, as they will be
amended and restated immediately prior to the effectiveness of the Share
Exchange, are set forth as Exhibits B and C, respectively, to this Proxy
Statement -- Prospectus.
Common Stock
Dividend Rights. Subject to the limitations, if any, specified
with respect to the preferred stock, or any series thereof, dividends
may be paid on shares of UniSource common stock, out of any funds
legally available therefor, when and as declared by the UniSource Board
of Directors.
Liquidation Rights. Subject to the limitations, if any, specified
with respect to the preferred stock, or any series thereof, in the event
of any dissolution or other winding up of UniSource, whether voluntary
or involuntary, the assets of UniSource available for payment and
distribution to shareholders shall be distributed ratable in accordance
with their holders to the holders of shares of the common stock.
Voting Rights. All voting power shall vest exclusively as the
holders of shares of the common stock, except as any statute of the
State of Arizona shall expressly provide to the contrary, and except as
and to the extent otherwise specified with respect to the preferred
stock, or any series thereof. Each holder of the common stock shall, in
the election of directors and upon each other matter coming before any
meeting of shareholders, be entitled to one (1) vote for each share of
such stock standing in the name of such holder on the books of
UniSource.
Miscellaneous. The common stock has no preemptive or conversion
rights or redemption or sinking fund provisions and the outstanding
common stock is fully paid and non-assessable.
Preferred Stock
The Board of Directors of Unisource has authority to divide the
preferred stock into series and to determine the designation,
preferences, limitations and relative rights of the shares of each
series so established, all to the extent and in the manner provided by
law.
Increase in Authorized Shares of Common Stock
While TEP is authorized to issue 200,000,000 shares of common
stock, UniSource is authorized to issue 250,000,000 shares of common
stock. As of March 20, 1995, there were 160,723,702 shares of
outstanding TEP common stock. Under the Plan of Exchange, each
outstanding share of TEP common stock will be exchanged into one share
of UniSource common stock.
Shareholders of UniSource have no preemptive rights to receive or
purchase any of the unissued shares of UniSource common stock. After
the Share Exchange, the Board of Directors of UniSource will have the
authority to determine the terms of UniSource preferred stock and to
issue the authorized UniSource common stock and UniSource preferred
stock, or any part thereof, without further action by the shareholders
except as required by law or applicable stock exchange requirements.
For example, the NYSE currently specifies shareholder approval as a
prerequisite for listing shares in several instances, including
acquisition transactions where the present or potential issuance of
shares could result in an increase in the number of shares outstanding
by 20% or more.
Although UniSource has no current plans for the issuance of any of
the UniSource common stock or UniSource preferred stock (other than in
connection with the Share Exchange and pursuant to the warrants and
employee benefit plans described under "Warrants" and "Employee Benefit
Plans"), such shares could be useful either to UniSource or to provide
capital contributions to TEP or the Sister Companies in connection with
acquisitions of stock or assets of other companies, to provide funds for
construction of capital equipment and facilities and for other corporate
purposes.
Listing of UniSource Common Stock
UniSource intends to apply to list its common stock on the New York
and Pacific Stock Exchanges. It is expected that such listings will
become effective on the effective date of the Share Exchange, subject to
the rules of such exchanges. After the effective date of the Share
Exchange, the common stock of TEP will no longer be listed on any stock
exchange because all of TEP's common stock will be held by one
shareholder, UniSource.
Dividends
Following the effectiveness of the Share Exchange, UniSource will
not conduct directly any business operations from which it will derive
any revenues (other than revenues received from providing administrative
services to TEP and other subsidiaries of UniSource - see "Business of
UniSource"). UniSource plans to obtain funds for its operations from
dividends paid to UniSource on the stock of its subsidiaries, and from
sales of securities. Dividends on UniSource common stock will initially
depend upon the earnings, financial condition and capital requirements
of TEP, and its ability to pay dividends on the TEP common stock owned
by UniSource.
TEP does not expect to be able to resume payment of cash dividends
on its common stock for the foreseeable future. TEP is currently
precluded by state statute and restrictive covenants in certain debt
agreements from declaring or paying dividends. Consequently, because
dividends from TEP would be the primary source of UniSource's ability to
pay dividends on UniSource common stock, UniSource does not expect to be
able to pay dividends on its common stock for the foreseeable future.
No dividends on TEP stock have been declared or paid since 1989.
Under current applicable provisions of the Arizona General
Corporation Law, TEP is permitted to declare and pay dividends on its
shares in cash, property, or its own shares, only out of unreserved and
unrestricted earned surplus or out of the unreserved and unrestricted
net earnings of the current fiscal year and the immediately preceding
fiscal year taken as a single period, except that TEP may not declare or
pay dividends when it is insolvent (unable to pay its debt as they
become due in the ordinary course of business) or when the payment of
the dividend would render it insolvent, or when the declaration or
payment of the dividend would be contrary to any restriction contained
in the Articles.
At December 31, 1994, TEP had no earned surplus (its accumulated
deficit on that date was $681.4 million), and it had no net earnings for
the two fiscal years then ended taken together. TEP expects to have no
earned surplus for the foreseeable future and minimal net earnings and
cash flow for several years.
Under applicable provisions of the 1996 Corporation Law, TEP and
UniSource are permitted to make distributions to shareholders unless,
after giving effect to such distribution, either (i) the company would
not be able to pay its debts as they come due in the usual course of
business, or (ii) the company's total assets would be less than the sum
of its total liabilities plus the amount necessary to satisfy any
liquidation preferences of shareholders with preferential rights. As of
December 31, 1994, TEP's common stock deficit was $42.2 million.
Although TEP expects to meet the requirements under the 1996
Corporation Law for making distributions to shareholders within several
years, restrictive covenants in certain existing debt agreements may
continue to preclude TEP from declaring or paying dividends.
The General First Mortgage contains covenants, applicable so long
as certain series of first mortgage bonds (aggregating $194 million in
principal amount) are outstanding, which restrict the payment of
dividends on common stock if certain cash flow coverage and retained
earnings tests are not met. The retained earnings test will prevent TEP
from paying dividends on its common stock until such time as it has
positive retained earnings rather than an accumulated deficit. Such
covenants will remain in effect until the first mortgage bonds of such
series have been paid or redeemed. The latest maturity of such first
mortgage bonds is in 2003. The Master Restructuring Agreement includes
a similar dividend restriction based on retained earnings. Existing
covenants will not be altered by the proposed holding company
transaction.
In the event that UniSource establishes Sister Companies and such
Sister Companies pay dividends to UniSource, such dividends may be
available for the payment of dividends to the holders of UniSource
common stock. However, there can be no assurance that UniSource will be
able to obtain financing to organize or capitalize any Sister Companies
or that, if any Sister Companies are organized, such Sister Companies
will pay dividends to UniSource. In addition, it is currently expected
that, for the foreseeable future, any available dividends paid to
UniSource by any Sister Company would be utilized to fund and develop
the operations of UniSource and the Sister Companies. See "CERTAIN RISK
FACTORS."
On the basis of the foregoing, UniSource does not expect to pay
cash dividends on its common stock for the foreseeable future.
Warrants
In December 1992, TEP consummated the Financial Restructuring.
Under the Financial Restructuring, TEP issued warrants for the purchase
of a total of 12,054,278 shares of TEP common stock to owner
participants in the Springerville Unit 1 Leases. Subject to adjustments
in certain circumstances, each warrant gives the registered holder of
such warrant (the "Registered Warrant Holder") the right to purchase one
share of TEP common stock at an exercise price of $3.20 per share at any
time prior to 4:00 p.m. (Tucson, Arizona time) on December 15, 2002.
Registered Warrant Holders are not entitled, by virtue of being holders,
to receive dividends or to consent or to receive notice as shareholders
in respect of any meeting of shareholders for the election of Directors
of TEP or any other matter, or to vote at any meeting, or to exercise
any rights whatsoever as shareholders.
The warrants grant rights to purchase shares of TEP common stock,
and the consummation of the Share Exchange would not convert such rights
into rights to purchase shares of UniSource common stock. Therefore,
the exercise, after the effective date of the Share Exchange, by one or
more Registered Warrant Holders of their rights under the related
warrants would result in UniSource not being the sole holder of TEP
common stock. If all warrants were so exercised after the effective
date, UniSource would be the holder of 93% of the outstanding shares of
TEP common stock (based on the number of shares outstanding at March 20,
1995).
UniSource may offer Registered Warrant Holders warrants for the
purchase of UniSource common stock in exchange for the existing warrants
for the purchase of TEP common stock. It is anticipated that the terms
of any such warrants would be similar, in all material respects, as the
existing warrants except that UniSource common stock would be delivered
instead of TEP common stock. Alternatively, the existing warrants
issued by TEP could be amended to provide that UniSource assumes all
rights and obligations of TEP and that references to TEP in such
warrants are deemed to refer to UniSource.
There can be no assurance that Registered Warrant Holders will
accept any such exchange offer or agree to so amend the existing
warrants. However, TEP believes that if TEP and UniSource offer to
exchange or amend the existing warrants, the Registered Warrant Holders
would have strong reasons to accept such an offer since TEP common stock
will no longer be listed on any stock exchange following the Share
Exchange and there would not be any established market for trading
shares of TEP common stock. TEP and UniSource do not expect that the
failure to so exchange or amend the warrants would have a material
effect on TEP or UniSource. Any such exchange or amendment would be
effected upon or after the effectiveness of the Share Exchange.
Directors and Management of UniSource
The Directors of the Company will also become the Directors of
UniSource at the effective time of the Share Exchange, and they will
serve as the directors of UniSource until the first annual meeting of
shareholders of UniSource following the effective date of the Share
Exchange.
The executive officers of UniSource will continue to be executive
officers of TEP. Upon the effectiveness of the Share Exchange,
UniSource's executive officers are expected to be:
Name Office
- ------------------ -------------------------------------------------
Charles E. Bayless President and Chief Executive Officer
Ira R. Adler Senior Vice President and Chief Financial Officer
James S. Pignatelli Senior Vice President
Karen G. Kissinger Vice President and Controller
Kevin P. Larson Treasurer
Dennis R. Nelson Vice President, General Counsel and Corporate
Secretary
Information concerning TEP executive officers and Directors is set
forth in TEP's 1994 Annual Report on Form 10-K, incorporated herein by
reference, and in "HOLDING COMPANY PROPOSAL" hereinabove.
Officer Employment Contracts
As noted previously, 13 of TEP's executive officers have an
employment agreement which becomes effective in the event of a change in
control of TEP. See "HOLDING COMPANY PROPOSAL -- ELECTION OF DIRECTORS
- -- Executive Employment Contracts." A change in control will not have
occurred under the terms of the employment agreements as a result of the
Share Exchange. It is anticipated that each of the officers will
execute an amended employment agreement, conditioned upon the occurrence
of the Share Exchange under which the change of control provisions will
apply prospectively to changes in control of UniSource or TEP. The
remaining provisions of the amended employment agreements are expected
to be identical in all material respects to the existing employment
agreements.
Employee Benefit Plans
If the Share Exchange is consummated, the Omnibus Plan and the
Tucson Electric Power Company 1994 Outside Director Stock Option Plan
shall be assumed by UniSource so that UniSource common stock will be
delivered instead of TEP common stock pursuant to such plans. By
approving the Holding Company Proposal, TEP shareholders shall be deemed
to have approved the adoption of those plans by UniSource. See
"ELECTION OF DIRECTORS -- 1994 Omnibus Stock and Incentive Plan" and
"ELECTION OF DIRECTORS -- 1994 Outside Director Stock Option Plan."
Transfer Agent and Registrar
UniSource will be the designated and appointed Transfer Agent and
Registrar for the capital stock of UniSource. The offices of UniSource,
located at 220 West Sixth Street, Tucson, Arizona upon the Share
Exchange is designated as a transfer and registrar office where the
capital stock of UniSource shall be directly transferable and
registered, respectively.
Financial Statements
TEP's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 contains TEP's financial statements and certain other financial
information. TEP's Annual Report has been incorporated in this Proxy
Statement-Prospectus by reference. Copies of such Annual Report were
mailed on or before March 31, 1995 to shareholders of record as of the
close of business on March 20, 1995. Additional copies of said report
may be obtained without charge upon request as provided under
"Information Incorporated by Reference."
Financial statements of UniSource are not presented in this Proxy
Statement-Prospectus because UniSource is an inactive company without
material assets or liabilities or operating history. Pro forma
financial effects of the Share Exchange are not set forth herein since,
on a consolidated basis, no change will result from the Share Exchange.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL AND ADOPTION OF THE
HOLDING COMPANY PROPOSAL AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE
HOLDING COMPANY PROPOSAL.
PROPOSAL 3
AMENDMENTS TO THE TUCSON ELECTRIC POWER COMPANY
1994 OMNIBUS STOCK AND INCENTIVE PLAN
At the TEP 1994 Annual Meeting of Shareholders held on May 20,
1994, the shareholders approved the Omnibus Plan. The Omnibus Plan is
designed to gradually return TEP to long-term financial viability by
providing salaried employees with equity interests in TEP and providing
incentives for superior performance. See Exhibit D for a copy of the
Omnibus Plan. The 1994 Proxy Statement indicated that approximately 885
Union employees were included as eligible participants under the Omnibus
Plan following the approval of the terms and conditions of such
inclusion by the Union. On April 8, 1994, the Union approved the terms
and conditions of the Omnibus Plan. Therefore, TEP proposes, subject to
shareholder approval, to amend the Omnibus Plan's definition of
"Employee" to include Union members as follows:
(h) "Employee" means any employee of the Company or its
subsidiaries (including officers and directors who are also
employees) that was not hired for a specific job of limited
duration, or for a position designated for students.
In addition, the Board of Directors approved certain amendments to
Section 7.8 of the Omnibus Plan, in order to clarify the ability of
participants to exercise outstanding options for a limited period of
time following termination of employment due to death, disability or
retirement. Therefore, TEP proposes, subject to shareholder approval,
to amend Section 7.8 of the Omnibus Plan as follows:
7.8 Termination of Employment Due to Death, Disability, or
Retirement. If a Participant holds any outstanding option upon a
termination of employment due to death, disability or retirement, such
option shall remain exercisable and shall continue to vest following
such termination of employment in accordance with its terms until the
earlier of (i) the expiration date of the term of the option, or (ii)
the last date on which such option is exercisable as specified below,
after which date such option shall terminate.
(a) Death or Disability. If the termination of employment is due
to the participant's death or disability, any outstanding Option then
held by such participant shall continue to be exercisable (subject to
clause (c) below) until twelve (12) months following the participant's
termination of employment.
(b) Retirement. If the participant's termination of employment is
due to retirement, any outstanding option then held by such participant
shall continue to be exercisable (subject to clause (c) below) for three
(3) years after such participant's termination of employment.
(c) ISO Limit. Notwithstanding the foregoing, in the case of an
incentive stock option, the favorable tax treatment described in Section
422 of the Code shall not be available if such option is exercised after
three (3) months following a termination of employment due to
retirement.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS
APPROVAL AND ADOPTION OF THE OMNIBUS PLAN PROPOSAL AND URGES EACH
SHAREHOLDER TO VOTE "FOR" THE OMNIBUS PLAN PROPOSAL.
EXPERTS
The consolidated financial statements incorporated in this Proxy
Statement-Prospectus by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their
report (which report expresses an unqualified opinion and includes an
explanatory paragraph relating to the timing of the recovery of the costs
associated with 37.5% of Springerville Unit 2 which cannot presently be
determined) which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of UniSource common stock to be issued
in connection with the Share Exchange will be passed upon by Dennis R.
Nelson, Esq., Vice President, Corporate Secretary and General Counsel of
TEP, and by Reid & Priest LLP, New York, New York, who may rely upon the
opinion of Mr. Nelson as to matters of Arizona law.
TRANSACTION OF OTHER BUSINESS
So far as TEP is aware, no matters other than those described in
this Proxy Statement-Prospectus 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 1996 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1996 Annual
Meeting of TEP must be received by TEP no later than December 8, 1995.
If the Share Exchange is consummated prior to the 1996 Annual Meeting,
shareholder proposals received for TEP's Annual Meeting shall be
considered for UniSource's Annual Meeting.
By order of the Board of Directors
DENNIS R. NELSON, Secretary
Dated: March 24, 1995
Shareholders are requested to fill out, date, sign, and promptly return
the accompanying form of proxy in the enclosed envelope.
EXHIBIT A
AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE (this "Agreement"), dated as of
March 20, 1995, is between Tucson Electric Power Company, an Arizona
corporation ("TEP"), the company whose shares will be acquired pursuant to
the Exchange described herein, UniSource Energy Corporation an Arizona
corporation ("UniSource"), the acquiring company, and NCR Holding, Inc., a
Delaware corporation, the sole shareholder of UniSource ("Shareholder"). TEP
and UniSource are hereinafter referred to, collectively, as the
("Companies").
WITNESSETH:
WHEREAS, the authorized capital stock of TEP consists of (a)
200,000,000 shares of Common Stock without par value ("Company Common Stock"),
of which 160,723,702 shares are issued and outstanding, and (b) 1,000,000
shares of Preferred Stock, without par value ("Company Preferred Stock"), of
which no shares are issued and outstanding;
WHEREAS, the authorized capital stock of UniSource consists of (a)
250,000,000 shares of Common Stock, without par value ("UniSource Common
Stock"), of which 1000 shares are issued and outstanding and owned of record
by Shareholder, and (b) 1,000,000 shares of Preferred Stock, without par
value ("UniSource Preferred Stock"), of which no shares are issued and
outstanding;
WHEREAS, the Boards of Directors of the respective Companies deem it
desirable and in the best interests of the Companies and their shareholders
that UniSource acquire each share of issued and outstanding Company Common
Stock and that each such share of Company Common Stock be exchanged for a
share of UniSource Common Stock with the result that UniSource becomes the
owner of all outstanding Company Common Stock and that each holder of Company
Common Stock becomes the owner of an equal number of shares of UniSource
Common Stock, all on the terms and conditions hereinafter set forth;
WHEREAS, Arizona corporation law has been amended, effective as of
January 1, 1996, to permit share exchanges which bind all of the shareholders
upon the approval of a plan of exchange by a majority of all votes entitled
to be cast;
WHEREAS, the Board of Directors of TEP and UniSource have recommended
that their respective shareholders approve the Share Exchange and this
Agreement, and this Agreement has been adopted by the requisite vote of the
Shareholder pursuant to the Arizona General Corporation Act, as amended by
H.B. 2124 (the "1996 Corporation Law").
NOW, THEREFORE, in consideration of the premises, and of the
agreements, covenants and conditions hereinafter contained, the parties hereto
agree with respect to the acquisition and exchange provided for herein (the
"Share Exchange") that at the Effective Time (as hereinafter defined) each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time will be exchanged for one share of UniSource Common Stock, and
that the terms and conditions of the Share Exchange and the method of carrying
the same into effect are as follows:
ARTICLE I
Subject to the satisfaction of the conditions and obligations of the
parties hereto, the Share Exchange will be effective upon the filing, with
the Arizona Corporation Commission, on or after January 2, 1996 in accordance
with the 1996 Corporation Law, of articles of share exchange ("Articles of
Exchange") with respect to the Share Exchange or at such later time as may be
stated in the Articles of Exchange (the time at which the Share Exchange
becomes effective being referred to herein as the "Effective Time").
ARTICLE II
At the Effective Time:
(1) each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall be acquired by UniSource and shall be
exchanged for one share of UniSource Common Stock, which shall thereupon be
fully paid and non-assessable;
(2) UniSource shall become the owner and holder of each issued and
outstanding share of Company Common stock so exchanged;
(3) each share of UniSource Common Stock issued and outstanding immediately
prior to the Effective Time shall be canceled and shall thereupon constitute
an authorized and unissued share of UniSource Common Stock; and
(4) the former owners of Company Common Stock shall be entitled only to
receive shares of UniSource Common Stock as provided herein.
Shares of outstanding Company Preferred Stock, if any, shall not be
exchanged or otherwise affected in connection with the Share Exchange.
ARTICLE III
The consummation of the Share Exchange is subject to the following
conditions precedent:
(1) the receipt of the requisite approval of shareholders of TEP;
(2) the satisfaction of the respective obligations of the parties hereto in
accordance with the terms and conditions herein contained;
(3) the execution and filing of appropriate Articles of Exchange with the
Arizona Corporation Commission pursuant to the 1996 Corporation Law;
(4) the receipt of such orders, authorizations, approvals or waivers from
all jurisdictive regulatory bodies, boards or agencies, which are required in
connection with the Share Exchange and related transactions.
ARTICLE IV
Shareholder and UniSource agree that UniSource will not engage in any
business following the execution of this Agreement until the consummation of
the Share Exchange, other than such business as is necessary to organize and
maintain the corporate status and good standing of UniSource in the State of
Arizona.
ARTICLE V
This Agreement may be amended, modified or supplemented, or compliance
with any provision or condition hereof may be waived, at any time, by the
mutual consent of the Boards of Directors of TEP and of UniSource; provided,
however, that no such amendment, modification, supplement or waiver shall be
made or effected, if such amendment, modification, supplement or waiver
would, in the judgment of the Board of Directors of TEP, materially and
adversely affect the shareholders of TEP.
This Agreement may be terminated and the Share Exchange and related
transactions abandoned at any time prior to the time the Articles of Exchange
are filed with the Arizona Corporation Commission, if the Board of Directors
of TEP determines, in its sole discretion, that consummation of the Share
Exchange would be inadvisable or not in the best interests of TEP or its
shareholders.
ARTICLE VI
This Agreement has been submitted to the Shareholder for approval as provided
by the 1996 Corporation Law. The affirmative vote of the Shareholder, as the
holder of all of the outstanding shares of UniSource Common Stock was
received constituting the adoption of this Agreement.
ARTICLE VII
Following the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of Company Common Stock may, but
shall not be required to, surrender the same to UniSource for cancellation
and reissuance of a new certificate or certificates in such holder's name or
for cancellation and transfer, and each such holder or transferee will be
entitled to receive a certificate or certificates representing the same
number of shares of UniSource Common Stock as the shares of Company Common
Stock previously represented by the certificate or certificates surrendered.
Until so surrendered or presented for transfer, each outstanding certificate
which, immediately prior to the Effective Time, represented Company Common
Stock shall be deemed and treated for all corporate purposes to represent the
ownership of the same number of shares of UniSource Common Stock as though
such surrender or transfer and Share Exchange had taken place. The holders
of Company Common Stock at the Effective Time shall have no right to have
their shares of Company Common Stock transferred on the stock transfer books
of TEP, and such stock transfer books shall be deemed to be closed for this
purpose at the Effective Time.
IN WITNESS WHEREOF, each of TEP, UniSource and Shareholder, pursuant to
authorization and approval given by its Board of Directors, has caused this
Agreement to be executed by its President and its corporate seal to be affixed
hereto and attested by its Secretary as of the date first above written.
TUCSON ELECTRIC POWER COMPANY
By ______________________________
President
ATTEST:
____________________________
Secretary
UNISOURCE ENERGY CORPORATION
By __________________________
President
ATTEST:
_____________________________
Secretary
NCR HOLDING, INC.
By __________________________
ATTEST:
______________________________
Secretary
EXHIBIT B
RESTATED ARTICLES OF INCORPORATION
OF
UNISOURCE ENERGY CORPORATION
KNOW ALL MEN BY THESE PRESENTS: That the incorporators, having
associated themselves together for the purpose of forming a corporation under
and by virtue of the laws of the State of Arizona did adopt Articles of
Incorporation, which are restated as follows:
FIRST: The name of the Corporation shall be UniSource Energy
Corporation.
SECOND: The address of the Corporation within the State of Arizona
shall be 220 West Sixth Street, Tucson, Arizona 85701, but the known place of
business may be established and maintained in or outside of the State of
Arizona at such places as the Board of Directors may designate.
THIRD: The purposes for which the Corporation is organized shall be
the transaction of any or all lawful business for which corporations may be
incorporated under Chapter 1 of Title 10, Arizona Revised Statutes.
The character of business which the Corporation initially intends
actually to conduct in the State of Arizona is the acquisition and holding of
securities of other corporations.
FOURTH: The total number of shares of Capital Stock of all classes
which the Corporation shall have authority to issue is Two Hundred Fifty-One
Million (251,000,000) shares, divided into:
One Million (1,000,000) shares of Preferred Stock without par value;
and
Two Hundred Fifty Million (250,000,000) shares of Common Stock without
par value.
Preferred Stock
The Board of Directors of the Corporation shall have the authority to
divide the Preferred Stock into series and determine the designation,
preferences, limitations and relative rights of the shares of each series so
established, all to the extent and in the manner provided by law.
Common Stock
Subject to the limitations, if any, specified with respect to the
Preferred Stock, or any series thereof, dividends may be paid on shares of
the Common Stock, out of any funds legally available therefor, when and as
declared by the Board of Directors.
Subject to the limitations, if any, specified with respect to the
Preferred Stock, or any series thereof, in the event of any dissolution or
other winding up of the Corporation, whether voluntary or involuntary, the
assets of the Corporation available for payment and distribution to
shareholders shall be distributed ratably in accordance with their holdings
to the holders of shares of the Common Stock.
All voting power shall vest exclusively as the holders of shares of
the Common Stock, except as any statute of the State of Arizona shall
expressly provide to the contrary, and except as and to the extent otherwise
specified with respect to the Preferred Stock, or any series thereof, and each
holder of the Common Stock shall, in the election of directors and upon each
other matter coming before any meeting of shareholders, be entitled to one vote
for each share of such stock standing in the name of such holder on the books
of the Corporation.
General Provisions
The Corporation may, subject to such limitations, if any, as may be
specified with respect to the Preferred Stock, or any series thereof, amend
these Articles of Incorporation from time to time, in as many respects as may
be desired and as now or hereafter permitted by law. The rights conferred
upon shareholders in these Articles of Incorporation are granted subject to
the foregoing right to amend.
A statutory merger of the Corporation shall not be deemed to be a
dissolution or other winding up of the Corporation within the meaning of any
provision of these Articles of Incorporation.
In consideration of the issuance by the Corporation of shares of the
Capital Stock of the Corporation, each and every present and future holder of
shares of the Capital Stock of the Corporation shall be conclusively deemed,
by acquiring or holding such shares, to have expressly consented to all and
singular the terms and provisions of these Articles of Incorporation and to
have agreed, among other things, that the voting rights of such holder shall
be as set forth in, or determined pursuant to, this Article.
FIFTH: The period of duration of the Corporation shall be perpetual.
SIXTH: (A) The corporate powers of the Corporation shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, a Board of Directors
consisting of a number of persons, not less than seven nor more than ten, as
fixed or changed from time to time by the Board of Directors. Directors
shall receive reasonable compensation for the services which they perform.
Directors shall be elected annually by the shareholders at the annual meeting
of shareholders and when so elected shall serve until the next annual meeting
of shareholders or until their successors have been duly elected and
qualified.
Any action required or permitted by these Articles of Incorporation to
be taken by the Board of Directors of the Corporation may be taken by a duly
authorized committee of the Board of Directors, except as otherwise required
by law.
(B) No director of the Corporation shall be personally liable to
the Corporation or its shareholders for money damages for any action taken or
any failure to take any action as a Director; provided, however, that nothing
herein shall be deemed to eliminate or limit any liability which may not be
so eliminated or limited under the laws of the State of Arizona, as in effect
at the effective date of this paragraph (B) of Article SIXTH or as thereafter
amended. No amendment, modification or repeal of this paragraph (B) shall
eliminate or limit the protection afforded by this paragraph (B) to a
director with respect to any act or omission occurring before the effective
date thereof.
(C)(1) The Corporation shall, to the maximum extent permitted by
applicable law, as from time to time in effect, indemnify any individual who
is or was a party to or otherwise involved in (or threatened to be made a
party to or otherwise involved in) any Proceeding (as hereinafter defined)
because such individual is or was a director or officer of the Corporation,
or, while a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee
or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against all
Liability (as hereinafter defined) incurred by such individual in connection
with such Proceeding.
As used in this paragraph (C) of Article SIXTH: (a) the term
"Expenses" includes attorneys' fees and all other costs and expenses
reasonably related to a Proceeding; (b) the term "Liability" means the
obligation to pay a judgment, settlement, penalty or fine (including any
excise tax assessed with respect to an employee benefit plan) and reasonable
Expenses incurred with respect to a Proceeding, and includes without
limitation obligations and Expenses that have not yet been paid but that have
been or may be incurred; and (c) the term "Proceeding" means any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal, including
without limitation any action, suit or proceeding by or in the right of the
Corporation and including, further, any appeal in connection with any such
action, suit or proceeding.
(2) The Corporation shall, to the maximum extent permitted by
applicable law, pay any Expenses incurred by a director or officer of the
Corporation in defending any such Proceeding in advance of the final
disposition thereof upon receipt of any undertaking by or on behalf of such
individual to repay such advances if it is ultimately determined that such
individual did not meet any standard of conduct prescribed by applicable law
and upon the satisfaction of such other conditions as may be imposed by
applicable law.
(3) The Corporation, by resolution of the Board of Directors, may
extend the benefits of this paragraph (C) of Article SIXTH to employees and
agents of the Corporation (each individual entitled to benefits under this
paragraph (C) being hereinafter sometimes called an "Indemnified Person").
(4) All rights to indemnification and to the advancement of
expenses granted under or pursuant to this paragraph (C) shall be deemed to
arise out of a contract between the Corporation and each person who is an
Indemnified Person at any time while this paragraph (C) is in effect and may
be evidenced by a separate contract between the Corporation and each
Indemnified Person; and such rights shall be effective in respect of all
Proceedings commenced after the effective date of this paragraph (C), whether
arising from acts or omissions occurring before or after such date. No
amendment, modification or repeal of this Article shall affect any rights or
obligations theretofore existing.
(5) The Corporation may purchase and maintain insurance on
behalf of, or insure or cause to be insured, any individual who is an
Indemnified Person against any Liability asserted against or incurred by him
in any capacity in respect of which he is an Indemnified Person, or arising
out of his status in such capacity, whether or not the Corporation would have
the power to indemnify him against such liability under this Article. The
Corporation's indemnity of any individual who is an Indemnified Person shall
be reduced by any amounts such individual may collect with respect to such
liability (a) under any policy of insurance purchased and maintained on his
behalf by the Corporation or (b) from any other entity or enterprise served
by such individual.
(6) The rights to indemnification and to the advancement of
Expenses and all other benefits provided by, or granted pursuant to, this
Article shall continue as to a person who has ceased to serve in the capacity
in respect of which such person was an Indemnified Person and shall inure to
the benefit of the heirs, executors and administrators of such person.
(7) The Board of Directors shall have the power and authority to
make, alter, amend and repeal such procedural rules and regulations relating
to indemnification and the advancement of Expenses as it, in its discretion,
may deem necessary or expedient in order to carry out the purposes of this
Article, such rules and regulations, if any, to be set forth in the Bylaws of
the Corporation or in a resolution of the Board of Directors.
SEVENTH: The name and address of each incorporator are as
follows:
Name Address
---- -------
EIGHTH: The name and street address of the Corporation's statutory
agent are as follows:
Name Street Address
---- --------------
EXHIBIT C
AMENDED BYLAWS OF
UNISOURCE ENERGY CORPORATION
ARTICLE I
Meetings of Shareholders
Section 1. Annual Meeting. The Annual Meeting of the Shareholders
shall be held at the known and principal place of business of the Company in
the City of Tucson, State of Arizona, or such other place as may be
designated by the Board of Directors on a day designated by the Board of
Directors, subject to applicable laws, for the election of directors and the
transaction of such other business as may properly come before the meeting.
Section 2. Special Meeting. Special Meetings of the Shareholders,
except as otherwise provided by law, shall be held at the known and principal
place of business of the Company in the City of Tucson, State of Arizona, or
such other place as may be designated by the Board of Directors and may be
called by the Chairman of the Board, the President, any two directors, or the
Executive Committee, if there be one, and shall be called by the Secretary
upon the request of the owners of 25% of the stock outstanding and entitled
to vote at such meeting. If at any time by reason of death or resignation or
other cause the Company has no directors in office, any officer or any
shareholder may call a Special Meeting of Shareholders. Only business with
the purpose or purposes described in the notice of meeting may be conducted
at a Special Meeting of Shareholders.
Section 3. Notice. The Company shall notify shareholders of the
date, time and place of each shareholders meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, at least 10
but not more than 60 days before the meeting date. Unless otherwise provided
for in the Articles of Incorporation or by law, and except as to any
shareholder duly waiving notice, the Company shall give notice only to
shareholders entitled to vote at the meeting. If mailed, such notice shall
be deemed to be delivered when mailed to the shareholder at his address as it
appears on the stock transfer books of the Company; provided, however, if any
shareholder shall fail to furnish the Secretary with his correct Post Office
address, he shall not be entitled to such separate notice. In the event of
the transfer of his stock by any shareholder after such service of such
notice and prior to the holding of the meeting, it shall not be necessary to
serve notice of the meeting on the transferee.
Section 4. Quorum. Unless otherwise provided in the Articles of
Incorporation or by law, at any meeting of the shareholders, a majority of
the holders of shares of any voting group entitled to vote on a matter shall
constitute a quorum of that voting group for action on that matter. Unless
otherwise provided in the Articles of Incorporation, once a share is
represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned
meeting.
Section 5. Adjournments. Whenever at any meeting of the
shareholders, notice of which shall have been duly given, a quorum shall not
be present, or whenever for any other reason it may be deemed desirable, a
majority in interest of the shareholders present in person or by proxy may
adjourn the meeting to another time or place. If more than one matter is to
be acted upon at any such meeting at which a quorum is present, action may be
taken, and the meeting concluded, with respect to one or more, but less than
all, such matters and the meeting may be adjourned, without action having
been taken, with respect to the remaining matters. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted
which might have been transacted at the original meeting. If any meeting of
shareholders is adjourned to a different date, time or place, notice need not
be given of the new date, time or place if the new date, time or place is
announced at the meeting before adjournment. However, if a new record date
for the adjourned meeting is or is required to be fixed under applicable law,
notice of the adjourned meeting shall be given to persons who are
shareholders as of the new record date.
Section 6. Organization. The Chairman of the Board or, in his
absence, the President or, in their absence, a Vice President shall call any
meeting of the shareholders to order and shall act as Presiding Officer of
such meeting. The shareholders may appoint any shareholder or the proxy of
any shareholder to act as Presiding Officer of any meeting of the
shareholders in the absence of the Chairman of the Board, the President and
the Vice Presidents. The Secretary or, in the Secretary's absence, an
Assistant Secretary, shall act as Secretary at all meetings of the
shareholders; or in the absence of the Secretary and Assistant Secretaries at
any meeting of the shareholders, the Presiding Officer may appoint any person
to act as Secretary of such meeting.
Section 7. Inspectors. At each meeting of the shareholders at which
a vote by ballot is taken, unless otherwise determined at such meeting, the
polls shall be opened and closed, the proxies and ballots shall be received
and be taken in charge, and the validity of proxies and the acceptance or
rejection of votes shall be decided by two inspectors. Such inspectors shall
be appointed by the Board of Directors before the meeting, or if no such
appointment shall have been made then by the Presiding Officer of the
meeting. If for any reason any of the inspectors previously appointed shall
fail to attend or refuse or be unable to serve, inspectors in place of any so
failing to attend or refusing or unable to serve shall be appointed in like
manner.
Section 8. Voting. Unless otherwise provided in the Articles of
Incorporation, directors are elected by a plurality of the votes cast by
holders of shares entitled to vote in the election at a meeting at which a
quorum is present. If a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the
action, unless the Articles of Incorporation or applicable law requires a
greater number of affirmative votes. Each shareholder shall have such voting
rights as are provided by the Articles of Incorporation and the laws of the
State of Arizona. A shareholder may vote his shares in person or by proxy.
Section 9. Proxies. At any meeting of shareholders, a shareholder
may appoint a proxy to vote or otherwise act for it by signing an appointment
form. Any designation of a proxy shall remain valid for the maximum length
of time permitted by applicable law, unless a different period is expressly
provided in the appointment form. An appointment of a proxy is effective
when received by the secretary or other officer or agent authorized to
tabulate votes.
ARTICLE II
Directors
Section 1. Election and Term. All corporate power shall be
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, a Board of Directors
consisting of not less than seven nor more than 10 members, as fixed or
changed from time to time by the Board of Directors. A director need not be
a resident of the State of Arizona or a shareholder of the Company. The
directors shall be elected annually by the shareholders at the annual meeting
thereof for a term which expires at the annual meeting of shareholders which
follows their election. A decrease in the number of directors does not
shorten the term of any incumbent directors. Despite the expiration of a
director's term, each director shall hold office until the director's
successor shall be elected and qualified, or until the director's resignation
or removal.
Section 2. Chairman of the Board. The Board of Directors shall
elect one of its members as the Chairman of the Board. During the absence or
incapacity of the President, he shall be the acting President. He shall have
such other powers and perform such other duties as from time to time the
Board of Directors may prescribe. If the Board of Directors shall create an
Executive Committee, the Chairman of the Board shall be a member and the
Chairman thereof.
Section 3. Vacancies. Any vacancies occurring in the Board of
Directors by reason of death, resignation or otherwise, may be filled by the
directors or by the shareholders at any meeting thereof, unless otherwise
provided in the Articles of Incorporation or by law. If the directors
remaining in office constitute fewer than a quorum of the board, they may
fill the vacancy by the affirmative vote of a majority of all of the
directors remaining in office. The term of a director elected to fill a
vacancy expires at the next shareholder's meeting at which directors are
elected.
Section 4. Meetings. The meetings of the Board of Directors shall
be held at such place or places within or without the State of Arizona as the
Board of Directors may from time to time designate.
The Chairman of the Board shall preside at all meetings of the Board
of Directors. In the absence of the Chairman of the Board, the President
shall preside or, in their absence, the directors present may elect a
Chairman of the meeting.
The Annual Meeting of the Board of Directors for the election of
officers, the designation of members of committees of the Board of Directors,
and the transaction of such other business as may properly come before the
meeting, shall be, unless otherwise noticed, the regular meeting in May of
each year. Regular meetings of the Board of Directors shall be held at such
date and time as may be determined by the Board of Directors.
Special meetings of the Board of Directors shall be held whenever
called by the direction of the Chairman of the Board, the President, any two
directors, or the Executive Committee.
Meetings of the Board of Directors, regular or special, may be held
by any means of communication by which all directors participating in the
meeting may simultaneously hear each other during the meeting, and
participation in such a meeting shall constitute presence in person at such
meeting.
Section 5. Notice. No notice shall be required of any annual or
regular meeting of the Board of Directors unless the place, day, or time
thereof shall be other than that last designated by the Board. Notice of any
annual or regular meeting, when required, or of any special meeting of the
Board of Directors shall be given to each director by letter, telegram,
telephone, or personally at least 24 hours before the time fixed for the
meeting. Such notice may be waived by any director. Unless otherwise
indicated in the notice thereof any and all business may be transacted at a
special meeting. A director's attendance at or participation in a meeting
shall constitute a waiver of any required notice of such meeting, unless the
directors at the beginning of the meeting or promptly on his arrival objects
to holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
Section 6. Quorum. A majority of the Board of Directors then
serving shall constitute a quorum for the transaction of business, and any
act receiving the affirmative vote of a majority of the directors present at
any meeting shall be the act of the Board of Directors, unless the Articles
of Incorporation require the vote of a greater number
of directors.
Section 7. Adjournments. Any annual, regular or special meeting of
the Board of Directors may be adjourned from time to time by the members
present whether or not a quorum shall be present, and no notice shall be
required of any adjourned meeting beyond the announcement of such adjournment
at the meeting.
Section 8. Director Emeritus. The Board of Directors may from time
to time elect one or more individuals to serve as a Director Emeritus whose
duty shall be to consult with and advise the Board of Directors of the
Company. The title of a Director Emeritus shall be honorary only and such
title shall carry with it the right to attend and participate in discussions
held during the meetings of the Board of Directors, to receive notice of such
meetings and to receive such compensation as is from time to time determined
appropriate by resolution passed by a majority vote of the Board of
Directors. The rights and privileges of a Director Emeritus are expressly
limited to those described in the preceding sentence and such title shall not
carry with it the right to vote at Board meetings, the right to participate
on any committees established by the Board of Directors, or any rights,
duties, privileges, liabilities or obligations otherwise associated with
being a member of the Board of Directors.
ARTICLE III
Committees
Section 1. Committees. The Board of Directors may by resolution
passed by a majority of all of the directors then in office designate two or
more of their members to constitute an Executive Committee, or any other
committee, which may have and exercise, subject to such limitations, if any,
as may be prescribed by law or by the Articles of Incorporation or by the
Board, the authority of the Board of Directors in the management of the
business and affairs of the Company; provided, such Executive Committee shall
only act at such times as the Board of Directors is not in session and in no
case to the exclusion of the Board of Directors at any time to act as a Board
upon any business of the Company; and further provided that the Executive
Committee shall not have the authority of the Board of Directors in reference
to the following matters:
(i) the authorization of distributions;
(ii) the approval or submission to shareholders of any action that
requires shareholders' approval;
(iii) the filling of vacancies on the Board of Directors or in any
committee of the Board of Directors;
(iv) the amendment of the Articles of Incorporation pursuant to the
Arizona Revised Statutes;
(v) the adoption, amendment or repeal of bylaws;
(vi) the approval of a plan of merger not requiring shareholder
approval;
(vii) the authorization or approval of the reacquisition of shares,
except according to a formula or method prescribed by the Board of Directors;
(viii) the authorization or approval or the issuance, sale or
contract for sale of shares or the determination of the designation and
relative rights, preferences and limitations of a class or series of shares
(except that the Board of Directors may authorize a committee or an executive
officer of the corporation to do so within limits specifically prescribed by
the Board of Directors); or
(ix) the fixing of compensation of directors for serving on the Board
or on any committee of the Board of Directors.
ARTICLE IV
Officers
Section 1. Number, Election and Term. The officers of the Company
shall be a President, one or more Vice Presidents, a Secretary and a
Treasurer, who shall be elected annually by the Board of Directors at the
Annual Meeting thereof, and who shall hold their respective offices until
their successors shall be elected and qualified. One or more of the Vice
Presidents may be designated as Executive Vice President or Senior Vice
President. The President shall be elected from the members of the Board.
The Board of Directors may elect or appoint from time to time Assistant
Secretaries and Assistant Treasurers who shall hold such offices subject to
the pleasure of the Board. The Board of Directors may also elect or appoint
from time to time such other officers or assistant officers as the interest
of the Company may require, and fix their duties and terms of office. Any
person may hold more than one office. Any vacancy occurring in any office
may be filled by the Board of Directors. All officers or assistant officers
shall be subject to removal with or without cause at any time by the Board of
Directors.
Section 2. President. The President shall be the chief executive
officer of the Company; and subject to the control and direction of the
Chairman of the Board and the Board of Directors, he shall have general
control and management of the business and affairs of the Company, and shall
perform such other duties as may from time to time be assigned to him by the
Board of Directors or which he may be authorized or required to do by reason
of any provisions of law or the Bylaws of the Company.
Section 3. Vice Presidents. The Vice Presidents shall perform such
duties as the Board of Directors shall require, and one or more as designated
by the Board shall, during the extended absence or incapacity of the Chairman
of the Board and the President, assume and perform all functions and duties
which the Chairman of the Board or President might lawfully do if present and
not under any incapacity.
Section 4. Secretary. The Secretary shall keep a record in the
proper books provided for that purpose of meetings and proceedings of the
Board of Directors, committees of directors and the shareholders and shall
record all votes of the directors, committees of directors and shareholders
in a book to be kept for that purpose and shall authenticate records of the
Company. The Secretary shall notify the directors and shareholders of their
respective meetings as required by law or the Bylaws of the Company and shall
perform such other duties as may be required by law or the Bylaws of the
Company, or which may be assigned from time to time by the Chairman of the
Board, the Board of Directors or committees of directors.
Section 5. Assistant Secretaries. The Assistant Secretaries, if and
when appointed as aforesaid, shall perform such duties as the Secretary, the
Board of Directors or committees of directors shall require, and shall,
during the absence or incapacity of the Secretary, assume and perform all
functions and duties which the Secretary might lawfully do if present and not
under any incapacity.
Section 6. Treasurer. The Treasurer shall have charge of the funds
of the Company. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Company, and shall deposit all moneys
and other valuable effects in the name and to the credit of the Company in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Company as may be ordered by the Board, and shall
render to the President or the Board whenever he or it may require it,
account of all his transactions as Treasurer and of the financial condition
of the Company. In addition, when authorized and empowered by the Board of
Directors, the Treasurer may execute in the name and on behalf of the Company
any loan agreements, credit agreements and other contracts or arrangements
relating to the borrowing of funds by the Company and any contracts, purchase
agreements, underwriting agreements and other agreements or arrangements
relating to securities to be issued and sold, guaranteed or funded by the
Company, and any and all indemnification agreements, certificates, financial
statements, letters or other papers and documents (other than instruments
evidencing securities of the Company, unless execution of such instruments is
permitted under other provisions of these Bylaws and authorized by the Board
of Directors) required in connection with any of the foregoing.
Section 7. Assistant Treasurers. The Assistant Treasurers, if and
when appointed as aforesaid, shall perform such duties as the Treasurer,
Board of Directors or committees of directors shall require, and shall,
during the absence or incapacity of the Treasurer, assume and perform all
functions and duties which the Treasurer might lawfully do if present and not
under any incapacity.
ARTICLE V
Negotiable Instruments
Except as otherwise specially provided by the Board of Directors, all
checks, drafts, bills of exchange, promissory notes and other negotiable
instruments shall be signed by the Treasurer or an Assistant Treasurer and
countersigned by the President or a Vice President of the Company; but in no
case shall any one person sign and countersign in the capacity of two
officers.
ARTICLE VI
Capital Stock
Section 1. Certificates of Stock. Certificates for shares of the
capital stock of the Company shall be in such form, not inconsistent with the
Articles of Incorporation, as shall be approved by the Board of Directors.
The certificates shall be signed by the President or a Vice President and by
the Secretary or an Assistant Secretary and may be sealed with the seal of
the Company or a facsimile thereof. The signatures of such President, Vice
President, Secretary or Assistant Secretary of the Company may be facsimiles,
engraved, lithographed, printed or otherwise imprinted or reproduced on such
certificates. If the person who signed the certificate for shares of capital
stock no longer holds office when the certificate is issued, the certificate
is nevertheless valid. No certificate shall be issued for any share of
capital stock until such share is fully paid.
Each certificate representing shares issued by the Company shall
state upon the face thereof: the name of the Company and that the Company is
organized under the laws of Arizona, the name of the person to whom issued,
the number and class of shares, and the designation of the series, if any,
which such certificate represents. If the Company is authorized to issue
different classes of shares or different series within a class, the
designations, relative rights, preferences and limitations applicable to each
class and variations in rights, preferences and limitations determined for
each series, and the authority of the Board of Directors to determine
variations for future series, shall be summarized on the front or back of
each certificate. Alternatively, each certificate may state conspicuously on
its front or back that the Company will furnish this information to the
shareholders on request in writing and without charge.
The Company may issue a new certificate for shares of stock in the
place of any certificate theretofore issued and alleged to have been lost,
stolen or destroyed, but the Board of Directors may require the owner of such
lost, stolen or destroyed certificate, or his legal representative, to
furnish an affidavit as to such loss, theft, or destruction and to give a
bond in such form and substance, and with such surety or sureties, with fixed
or open penalty, as it may direct, to indemnify the Company, the Transfer
Agent or Agents and Registrar or Registrars against any claim that may be
made on account of the alleged loss, theft or destruction of such
certificate. The Board of Directors may adopt from time to time rules and
regulations relating to lost, stolen or destroyed certificates of the capital
stock of the Company or bonds or other evidences of indebtedness of the
Company.
Section 2. Transfers of Stock. All transfers of shares must be made
on the books of the Company and be duly signed by the shareholder in person
or by a duly authorized attorney of such shareholder, subject to the rules
and regulations of the Company relating to transfers in force at the time.
In all cases of transfers, the certificate or certificates representing the
shares to be transferred, or any part thereof, must be surrendered for
cancellation simultaneously with the making of the transfer. No new
certificate shall be issued until the prior certificate has been cancelled.
Section 3. Closing of Transfer Books. The Board of Directors shall
have power to close the transfer books of the Company for a period not
exceeding 60 days preceding the date of any meeting of shareholders, or
adjournment thereof or the payment of any dividend or other distribution or
allotment of any rights or the entitlement of any shareholder to exercise any
rights in respect of any change, conversion or exchange of shares or for the
purpose of any other lawful action; provided, however, that in lieu of
closing the transfer books as aforesaid, the Board of Directors may fix a
record date pursuant to the provisions of Article VII hereof.
Section 4. Transfer Agents and Registrars. The Company shall, if
and whenever the Board of Directors shall so determine, maintain one or more
transfer offices or agencies, each in charge of a transfer agent designated
by the Board of Directors, where the shares of the capital stock of the
Company shall be directly transferable, and also one or more registry
offices, each in charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered, and no certificate for shares
of the capital stock of the Company, in respect of which one or more transfer
agents and registrars shall have been designated, shall be valid unless
countersigned by manual or facsimile signature by one of such transfer agents
and registered by one of such registrars. The same corporation may at the
direction of the Board of Directors, be both transfer agent and registrar.
The Board of Directors may also make such additional rules and regulations as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the Company.
ARTICLE VII
Record Date
In order that the Company may determine the shareholders entitled to
notice of any meeting of shareholders or any adjournment thereof, or to
demand a special meeting, to vote or take any other action, the Board of
Directors may fix, in advance, a record date, which shall not be more than 70
days before the date of such meeting, or action requiring a determination of
shareholders. Only such shareholders of record on the record date shall be
entitled to such notice of such meeting to demand a special meeting, to vote
or take any other action, as the case may be, notwithstanding any transfer of
any stock on the books of the Company after any such record date fixed as
aforesaid.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the
meeting unless the Board of Directors fixes a new record date for the
adjourned meeting, which it shall do if the meeting is adjourned to date more
than 120 days after the date fixed for the original meeting.
ARTICLE VIII
Distributions
Pursuant to and upon the conditions of the Restated Articles of
Incorporation, as amended, and applicable law, the Board of Directors may
authorize and the Company may make distributions to its shareholders. A
distribution shall not be made if, after giving it effect, either: (i) the
Company would not be able to pay its debts as they become due in the usual
course of business, or (ii) the Company's total assets would be less than the
sum of its total liabilities plus, unless the Articles of Incorporation
permit otherwise, the amount that would be needed, if the Company were to be
dissolved at the time of distribution, to satisfy the preferential rights or
dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
ARTICLE IX
Corporate Seal
The common corporate seal is, and until otherwise ordered by the
Board of Directors shall be, an impression circular in form upon paper
bearing the words, "UniSource Energy Corporation, Seal."
The seal shall be in the charge of the Secretary, and a duplicate of
the seal may be kept and be used by the Treasurer or by an Assistant
Secretary or Assistant Treasurer.
ARTICLE X
Offices
The known and principal place of business of the Company within the
State of Arizona shall be 220 West Sixth Street, Tucson, Arizona, but the
known place of business may be changed and other offices may be established
and maintained in or outside of the State of Arizona at such places as the
Board of Directors may designate.
ARTICLE XI
Amendments
These Bylaws may be amended or repealed from time to time by the
Board of Directors at any regular, special or annual meeting in any manner
not inconsistent with the Articles of Incorporation or applicable law.
EXHIBIT D
TUCSON ELECTRIC POWER COMPANY
1994 OMNIBUS STOCK AND INCENTIVE PLAN
TUCSON ELECTRIC POWER COMPANY
1994 Omnibus Stock and Incentive Plan
Table of Contents Page
- ----------------- ----
Section 1
Establishment, Purpose, and Effective Date of Plan
1.1 Establishment......................................... 1
1.2 Purpose............................................... 1
1.3 Effective Date........................................ 1
Section 2
Definitions
2.1 Definitions........................................... 1
2.2 Gender and Number..................................... 3
Section 3
Eligibility and Participation
3.1 Eligibility and Participation......................... 3
Section 4
Administration
4.1 Administration........................................ 3
Section 5
Stock Subject to Plan
5.1 Number................................................ 4
5.2 Lapsed Awards......................................... 4
5.3 Adjustment in Capitalization.......................... 4
Section 6
Duration of Plan
6.1 Duration of Plan...................................... 4
Section 7
Stock Options
7.1 Grant of Options...................................... 5
7.2 Option Agreement...................................... 5
7.3 Exercise Price........................................ 5
7.4 Duration of Options................................... 5
7.5 Exercise of Options................................... 5
7.6 Payment............................................... 6
7.7 Restrictions on Stock Transferability................. 6
7.8 Termination of Employment Due to Death,
Disability, or Retirement.................................... 6
7.9 Termination of Employment Other than for
Death, Disability, or Retirement............................. 7
7.10 Non-Transferability of Options........................ 7
Section 8
Stock Appreciation Rights
8.1 Grant of Stock Appreciation Rights.................... 7
8.2 Payment of SAR Amount................................. 8
8.3 Form and Timing of Payment............................ 8
8.4 Rule 16b-3 Requirements............................... 8
8.5 Term of SAR........................................... 8
8.6 Termination of Employment............................. 8
8.7 Non-Transferability of SARs........................... 8
Section 9
Restricted Stock
9.1 Grant of Restricted Stock............................. 8
9.2 Transferability....................................... 8
9.3 Other Restrictions.................................... 9
9.4 Voting Rights......................................... 9
9.5 Dividends and Other Distributions..................... 9
9.6 Termination of Employment Due to Retirement........... 9
9.7 Termination of Employment Due to Death or
Disability................................................... 9
9.8 Termination of Employment for Reasons Other
Than Death, Disability, or Retirement........................ 10
Section 10
Performance Units and Performance Shares
10.1 Grant of Performance Units or Performance Shares...... 10
10.2 Value of Performance Units and Performance Shares..... 10
10.3 Form and Timing of Payment............................ 10
10.4 Termination of Employment Due to Death,
Disability, or Retirement.................................... 11
10.5 Termination of Employment for Other Reasons........... 11
10.6 Non-Transferability................................... 11
Section 11
Discounted Stock Options
11.1 Grant of Discounted Stock Options..................... 11
11.2 Pricing of Discounted Stock Options................... 11
Section 12
Beneficiary Designation
12.1 Beneficiary Designation............................... 12
Section 13
Rights of Employees
13.1 Employment............................................ 12
13.2 Participant........................................... 12
Section 14
Change in Control
14.1 In General............................................ 12
14.2 Definition............................................ 12
Section 15
Amendment, Modification, and Termination of Plan
15.1 Amendment, Modification, and Termination of Plan...... 13
Section 16
Tax Withholding
16.1 Tax Withholding....................................... 13
16.2 Disposition of Shares................................. 14
Section 17
Indemnification
17.1 Indemnification....................................... 14
Section 18
Requirements of Law
18.1 Requirements of Law................................... 14
18.2 Governing Law......................................... 15
Section 19
Funding
19.1 Funding of Plan....................................... 15
TUCSON ELECTRIC POWER COMPANY
1994 Omnibus Stock and Incentive Plan
Section 1
Establishment, Purpose, and Effective Date of Plan
1.1 Establishment. Tucson Electric Power Company, an Arizona
corporation, hereby establishes the "Tucson Electric Power Company 1994
OMNIBUS STOCK AND INCENTIVE PLAN" (the "Plan") for Employees. The Plan
permits the grant of stock options, dividend equivalents, stock appreciation
rights, restricted stock, performance units, and performance shares.
1.2 Purpose. The purpose of the Plan is to advance the interests of
the Company, by encouraging and providing for the acquisition of an equity
interest in the success of the Company by Employees, by providing additional
incentives and motivation toward superior performance of the Company, and by
enabling the Company to attract and retain the services of Employees upon
whose judgment, interest, and special effort and successful conduct of its
operations is largely dependent.
1.3 Effective Date. The Plan shall become effective immediately
upon its adoption by the Board of Directors of the Company subject to its
ratification by the shareholders of the Company and the receipt of any
necessary governmental approvals.
Section 2
Definitions
2.1 Definitions. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock, Performance Unit or Performance Share granted under this Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the non-Employee independent directors of the
Company serving on the Compensation Committee of the Board of Directors. No
person, while a member of the Committee, shall be eligible for participation
in the Plan, and no person shall become a member of the Committee unless such
person meets the requirements for disinterested administration set forth in
Rule 16b-3 of the Securities Exchange Act of 1934, as amended.
(e) "Company" means Tucson Electric Power Company, an Arizona
Corporation.
(f) "Discounted Stock Option" means an Option granted pursuant to
Section 11 of the Plan.
(g) "Disability" means a condition of total and permanent disability
whereby one is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous
period of not less than 12 months, as defined by Section 22(e) of the
Internal Revenue Code of 1986, as amended.
(h) "Employee" means any full-time or part-time employee of the Company
or one of its subsidiaries (including any officer or director who is also an
employee) that was not hired for a specific job of limited duration, or for a
position designated for students.
(i) "Fair Market Value" means the average of the highest and lowest
sales prices of the Stock as reported on the consolidated tape for securities
listed on the New York Stock Exchange on a particular date. In the event that
there are no Stock transactions on such date, the Fair Market Value shall be
determined by utilization of the above formula as of the immediately
preceding date on which there were Stock transactions.
(j) "Option" means the right to purchase Stock at a stated price for a
specified period of time. For purposes of the Plan an Option may be either
(i) an "incentive stock option" within the meaning of Section 422 of the
Code, (ii) a "nonstatutory stock option" (an option which is not an incentive
stock option) including a Discounted Stock Option, or (iii) any other type of
option encompassed by the Code.
(k) "Participant" means any Employee designated by the Committee to
participate in the Plan.
(l) "Performance Unit" means a right to receive a payment equal to the
value of a Performance Unit as determined by the Committee.
(m) "Performance Share" means a right to receive a payment equal to the
value of a Performance Share as determined by the Committee.
(n) "Period of Restriction" means the period during which shares of
Restricted Stock are subject to restrictions pursuant to Section 9 of the
Plan.
(o) "Restricted Stock" means Stock granted to a Participant pursuant to
Section 9 of the Plan.
(p) "Retirement" (including "Early Retirement" and "Normal Retirement")
means termination of employment on or after such Employee's early, normal or
late retirement date or age as applicable under the terms of the Company's
Salaried Employees Retirement Plan or the Pension Trust Plan for Employees of
Tucson Electric Power Company represented by IBEW Local 1116.
(q) "Stock" means the Common Stock of the Company, no par value.
(r) "Stock Appreciation Right" and "SAR" mean the right to receive a
payment from the Company equal to the excess of the Fair Market Value of the
share of Stock at the date of exercise over a specified price fixed by the
Committee, which shall not be less than 100% of the Fair Market Value of the
Stock on the date of grant. In the case of a Stock Appreciation Right which
is granted in conjunction with an Option, the specified price shall be the
Option exercise price.
2.2 Gender and Number. Except when otherwise indicated by the
context, words in the masculine gender when used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
Section 3
Eligibility and Participation
3.1 Eligibility and Participation. All Employees are eligible to
participate in the Plan. The Committee shall select and determine, in its
sole discretion, those Employees who will participate in the Plan and the
extent of their participation.
Section 4
Administration
4.1 Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, to provide for conditions and assurances
deemed necessary or advisable to protect the interests of the Company, and to
make all other determinations necessary or advisable for the administration
of the Plan, but only to the extent not contrary to the express provisions of
the Plan. Determinations, interpretations, or other actions made or taken by
the Committee in good faith pursuant to the provisions of the Plan shall be
final, binding and conclusive for all purposes and upon all persons
whomsoever.
The Committee shall have the authority, in its discretion, to determine
the Employees to whom Awards shall be granted, the times when such Awards
shall be granted, the number of Awards, the purchase price or exercise price,
the period(s) during which such Awards shall be exercisable (whether in whole
or in part), the restrictions applicable to Awards, and the other terms and
provisions thereof (which need not be identical). The Committee shall have
the authority to modify existing Awards, subject to Section 15.1.
Section 5
Stock Subject to Plan
5.1 Number. The total number of shares of Stock subject to Awards
under the Plan may not exceed eight million, subject to adjustment upon
occurrence of any of the events indicated in Section 5.3. The shares to be
delivered under the Plan may consist, in whole or in part, of authorized but
unissued Stock or treasury Stock, not reserved for any other purpose.
5.2 Lapsed Awards. Subject to the express provisions of the Plan,
if any Award granted under the Plan terminates, expires or lapses for any
reason, or is paid in cash, any Stock subject to such Award again shall be
Stock available for the grant of an Award. With respect to Awards made to
Section 16 insiders, shares of such Stock may be reused to the maximum extent
permitted under Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a Stock dividend or split,
recapitalization, merger, consolidation, combination, exchange of shares, or
other similar corporate change, the aggregate number of shares of Stock
available under the Plan and subject to each outstanding Award, and its
stated exercise price, or the basis upon which the Award is measured shall be
adjusted appropriately by the Committee, whose determination shall be
conclusive; provided, however, that fractional shares shall be rounded to the
nearest whole share. Any adjustment to an incentive stock option shall be
made consistent with the requirements of Section 424(b) of the Code.
Section 6
Duration of Plan
6.1 Duration of Plan. The Plan shall remain in effect, subject to the
Board's right to earlier terminate the Plan pursuant to Section 15 hereof,
until all Awards hereunder shall have expired or terminated or shall have
been exercised or fully vested, and any Stock subject thereto shall have been
purchased or acquired pursuant to the provisions thereof. Notwithstanding the
foregoing, no Award may be granted under the Plan after February 3, 2004.
Section 7
Stock Options
7.1 Grant of Options. Subject to the provisions of Sections 5 and
6, Options may be granted to Participants at any time and from time to time as
shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Options granted to each Participant.
The Committee may grant any type of Option to purchase Company Stock that is
permitted by law at the time of grant. To the extent the aggregate Fair
Market Value (determined at the time the Option is granted) of the Stock with
respect to which incentive stock options are exercisable for the first time
by a Participant in any calendar year (under this Plan and any other plans of
the Company) exceeds $100,000, such Options shall not be deemed incentive
stock options. In determining which Options may be treated as non-qualified
Options under the preceding sentence, Options will be taken into account in
the order of their dates of grant. No incentive stock option may be granted
to any person who owns, directly or indirectly, more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company.
Nothing in this Section 7 of the Plan shall be deemed to prevent the grant of
nonstatutory stock options in amounts which exceed the maximum established by
Section 422 of the Code.
7.2 Option Agreement. Each Option shall be evidenced by an Option
agreement that shall specify the type of Option granted, the Option price,
the duration of the Option, the number of shares of Stock to which the Option
pertains, and such other provisions as the Committee shall determine.
7.3 Exercise Price. No Option shall be granted pursuant to the Plan
at an Exercise price that is less than the Fair Market Value of the Stock on
the date the Option is granted, except Discounted Stock Options described in
Section 11.
7.4 Duration of Options. Each Option shall expire at such time or
times as the Committee shall determine at the time it is granted, provided,
however, that no Option shall be exercisable later than ten years from the
date of its grant.
7.5 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which need not be the same
for all Participants.
7.6 Payment. The purchase price of Stock upon exercise of any
Option shall be paid in full either (i) in cash, (ii) in Stock valued at its
Fair Market Value on the date of exercise, or (iii) by a combination of (i) and
(ii) at the discretion of the Committee. The Committee in its sole discretion
may also permit payment of the purchase price upon exercise of any Option to
be made by (i) having shares withheld from the total number of shares of
common stock to be delivered upon exercise or (ii) delivering a properly
executed notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds to pay
the exercise price. The proceeds from payment of option prices shall be added
to the general funds of the Company and shall be used for general corporate
purposes.
7.7 Restrictions on Stock Transferability. The Committee shall
impose such restrictions on any shares of Stock acquired pursuant to the
exercise of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities law, under
the requirements of any stock exchange upon which such shares of Stock are then
listed and under any blue sky or state securities laws applicable to such
shares.
7.8 Early Termination of Options on Employment Due to Death,
Disability, or Retirement. If a Participant holds any outstanding Option upon
a termination of employment due to death, Disability or Retirement, such
Option shall remain exercisable and shall continue to vest following such
termination of employment in accordance with its terms until the earlier of
(i) the expiration date of the term of the Option, or (ii) the last date on
which such Option is exercisable as specified below, after which date such
Option shall terminate.
(a) Death or Disability. If the termination of employment is
due to the Participant's death or Disability, any outstanding Option then held
by such Participant shall continue to be exercisable (subject to clause (c)
below) until twelve (12) months following the Participant's termination of
employment.
(b) Retirement. If the Participant's termination of employment
is due to Retirement, any outstanding Option then held by such Participant
shall continue to be exercisable (subject to clause (c) below) for three (3)
years after such Participant's termination of employment.
(c) ISO Limit. Notwithstanding the foregoing, in the case of
an incentive stock option, the favorable tax treatment described in Section 422
of the Code shall not be available if such Option is exercised after three
(3) months following a termination of employment due to Retirement
7.9 Early Termination of Options on Termination of Employment Other
than for Death, Disability, or Retirement. If a Participant holds any
outstanding Option upon termination of employment due to a reason other than
death, Disability or Retirement, such Option shall remain exercisable and
shall continue to vest following such termination of employment until the
earlier of (i) the expiration of the term of the Option, or (ii) the last
date on which such Option is exercisable as specified below, after which date
such Option shall terminate.
(a) Resignation, Layoff and Other Events. If the Participant's
termination of employment is due to any reason other than the Participant's
death, Disability, Retirement or the action of the company for cause, as
determined (either before or after such event) by the Committee in its sole
discretion, any outstanding Option then held by such Participant shall continue
to be exercisable for three (3) months following such Participant's termination
of employment.
(b) Termination by the Company For Cause. If the Participant's
employment is terminated by action of the Company for cause, as determined
(either before or after such event) by the Committee in its sole discretion,
any outstanding Option held by such Participant shall terminate immediately
upon such Participant's termination of employment. Termination for cause is
defined as termination for conduct that would be punishable as a felony if
such conduct occurred outside the workplace, or conduct that could be
damaging to either the Company's reputation or financial status. The
Committee has the authority to make the final determination as to whether a
termination is for cause for purposes of the Plan.
7.10 Non-Transferability of Options. No Option granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules thereunder. Further, all incentive
stock options granted to a Participant under the Plan shall be exercisable
only by such Participant during his lifetime.
Section 8
Stock Appreciation Rights
8.1 Grant of Stock Appreciation Rights. Subject to the provisions
of Sections 5 and 6, Stock Appreciation Rights ("SARs") may be granted to
Participants at any time and from time to time as shall be determined by the
Committee. An SAR grant shall be in writing.
8.2 Payment of SAR Amount. Upon exercise of the SAR, the holder
shall be entitled to receive payment of an amount determined by multiplying:
(a) The difference between the Fair Market Value of a share of Stock at
the date of exercise over the price fixed by the Committee at the date of
grant, by
(b) The number of shares with respect to which the SAR is exercised.
8.3 Form and Timing of Payment. At the sole discretion of the
Committee, payment for SARs may be made in cash or Stock, or in a combination
thereof.
8.4 Rule 16b-3 Requirements. Notwithstanding any other provision of
the Plan, the Committee may impose such conditions on exercise of an SAR
(including, without limitation, the right of the Committee to limit the time
of exercise to specified periods) as may be required to satisfy the
requirements of Rule 16b-3 (or any successor rule), under the Exchange Act.
8.5 Term of SAR. The term of an SAR granted under the Plan shall
not exceed ten years.
8.6 Termination of Employment. In the event the employment of a
Participant is terminated by reason of death, Disability, Retirement, or any
other reason, any SARs outstanding shall terminate in the same manner as
specified for Options under Sections 7.8 and 7.9 herein.
8.7 Non-Transferability of SARs. No SAR granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of ERISA, or the rules thereunder. Further, all SARs granted to a
Participant under the Plan shall be exercisable only by such Participant during
his lifetime.
Section 9
Restricted Stock
9.1 Grant of Restricted Stock. Subject to the provisions of
Sections 5
and 6, the Committee, at any time and from time to time, may grant shares of
Restricted Stock under the Plan to such Participants and in such amounts as
it shall determine. Each grant of Restricted Stock shall be in writing.
9.2 Transferability. Except as provided in Section 9.6 and 9.7
hereof, or pursuant to a qualified domestic relations order as defined by the
Code or Title I of ERISA, or the rules thereunder, the shares of Restricted
Stock granted hereunder may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated for such period of time as shall be
determined by the Committee and shall be specified in the Restricted Stock
grant, or upon earlier satisfaction of other conditions as specified by the
Committee in its sole discretion and set forth in the Restricted Stock grant.
9.3 Other Restrictions. The Committee shall impose such other
restrictions on any shares of Restricted Stock granted pursuant to the Plan
as it may deem advisable including, without limitation, restrictions under
applicable Federal or state securities law, and may legend the certificates
representing Restricted Stock to give appropriate notice of such
restrictions.
9.4 Voting Rights. Participants holding shares of Restricted Stock
granted hereunder may exercise full voting rights with respect to those
shares during the Period of Restriction.
9.5 Dividends and Other Distributions. During the Period of
Restriction, Participants holding shares of Restricted Stock granted
hereunder shall be entitled to receive all dividends and other distributions
paid with respect to those shares while they are so held. If any such
dividends or distributions are paid in shares of Stock, the shares shall be
subject to the same restrictions on transferability as the shares of
Restricted Stock with respect to which they were paid.
9.6 Termination of Employment Due to Retirement. In the event that
a Participant attains normal retirement age under the Company's Salaried
Employees Retirement Plan or the Pension Trust Plan for Employees of Tucson
Electric Power Company represented by IBEW Local 1116, the Period of
Restriction applicable to the Restricted Stock pursuant to Subsection 9.2
hereof shall automatically terminate and, except as otherwise provided in
Subsection 9.3, the shares of Restricted Stock shall thereby be free of
restrictions and freely transferable. In the event that a Participant
terminates his employment with the Company because of Early Retirement under
the Salaried Employees Pension Plan, any shares of Restricted Stock still
subject to restrictions shall be forfeited and returned to the Company;
provided, however, that the Committee in its sole discretion may waive the
restrictions remaining on any or all shares of Restricted Stock or add such
new restrictions to those shares of Restricted Stock as it deems appropriate.
9.7 Termination of Employment Due to Death or Disability. In the
event a Participant terminates his employment with the Company because of death
or Disability during the Period of Restriction, the restrictions applicable to
the shares of Restricted Stock pursuant to Section 9.2 hereof shall terminate
automatically with respect to that number of shares (rounded to the nearest
whole number) equal to the number of shares of Restricted Stock granted to
such Participant multiplied by the number of full months which have elapsed
since the date of grant divided by the maximum number of full months of the
Period of Restriction. All remaining shares still subject to restrictions
shall be forfeited and returned to the Company; provided, however, that the
Committee in its sole discretion, may waive the restrictions remaining on any
or all such remaining shares.
9.8 Termination of Employment for Reasons Other Than Death,
Disability, or Retirement. In the event that a Participant terminates his
employment with the Company for any reason other than those set forth in
Sections 9.6 and 9.7 hereof during the Period of Restriction, then any shares
of Restricted Stock still subject to restrictions at the date of such
termination automatically shall be forfeited and returned to the Company;
provided, however, that, in the event of an involuntary termination of the
employment of a Participant by the Company, the Committee in its sole
discretion may waive the automatic forfeiture of any or all such shares and/or
may add such new restrictions to such shares of Restricted Stock as it deems
appropriate.
Section 10
Performance Units and Performance Shares
10.1 Grant of Performance Units or Performance Shares. Subject to the
provisions of Sections 5 and 6, Performance Units or Performance Shares may
be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee shall have complete discretion in
determining the number of Performance Units or Performance Shares granted to
each Participant.
10.2 Value of Performance Units and Performance Shares. Each
Performance Unit and each Performance Share shall have a value determined by
the Committee at the time of grant. The Committee shall set performance goals
in its discretion which, depending on the extent to which they are met, will
determine the ultimate value of the Performance Unit or Performance Share to
the Participant. The time period during which the performance goals must be
met shall be called a performance period and shall be determined by the
Committee.
10.3 Form and Timing of Payment. Payment shall be made in cash, Stock,
or a combination thereof as determined by the Committee. Payment may be made
in a lump sum or installments as prescribed by the Committee. If any payment
is to be made on a deferred basis, the Committee may provide for the payment
of dividend equivalents or interest during the deferral period.
10.4 Termination of Employment Due to Death, Disability, or Retirement.
In the case of death, Disability, or Retirement, the holder of a Performance
Unit or Performance Share (or his beneficiary in the event of death) shall
receive pro rata payment based on the number of months' service during the
performance period but based on the achievement of performance goals during
the entire performance period. Payment shall be made at the time payments are
made to Participants who did not terminate service during the performance
period.
10.5 Termination of Employment for Other Reasons. In the event that a
Participant terminates employment with the Company for any reason other than
death, Disability or Retirement, all Performance Units and Performance Shares
shall be forfeited; provided, however, that in the event of an involuntary
termination of the employment of the Participant by the Company, the
Committee in its sole discretion may waive the automatic forfeiture
provisions and pay out on a pro rata basis as set forth in Section 10.4.
10.6 Non-Transferability. No Performance Units or Performance Shares
granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, otherwise than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of ERISA, or the rules thereunder, until
the termination of the applicable performance period. All rights with respect
to Performance Units and Performance Shares granted to a Participant under
the Plan shall be exercisable only by such Participant during his lifetime.
Section 11
Discounted Stock Options
11.1 Grant of Discounted Stock Options. Subject to the provisions of
Sections 5 and 6 of the Plan, Discounted Stock Options may be granted to
Participants hereunder. Such Discounted Stock Options shall satisfy each of
the requirements set forth in Section 7 hereof and the other provisions of
this Plan which are applicable to Option awards which are not intended to be
incentive stock options, except Section 7.3 of the Plan (which requires the
exercise price of an Option to be not less than the Fair Market Value of the
Stock covered by the Option).
11.2 Pricing of Discounted Stock Options. The exercise price of a
Discounted Stock Option shall be determined by the Committee and set forth in
the stock option agreement with the Participant, but in no event shall such
price be less than the greater of $1.00 or 25 percent of the Fair Market
Value of the Stock covered by the Option on the date the Discounted Stock
Option is granted.
Section 12
Beneficiary Designation
12.1 Beneficiary Designation. Each Participant under the Plan may
name, from time to time, any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in case of his death before he receives any or all of such benefit. Each
designation will revoke all prior designations by the same Participant, shall
be in a form prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to his estate.
Section 13
Rights of Employees
13.1 Employment. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ
of the Company.
13.2 Participant. No Employee shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a
Participant.
Section 14
Change in Control
14.1 In General. In the event of a change in control of the Company as
defined in Section 14.2 below, all Awards under the Plan shall vest 100%. All
Performance Units and Performance Shares shall be paid out based upon the
extent to which performance goals during the performance period have been met
up to the date of the change in control, or at target, whichever is higher.
Restrictions on Restricted Stock shall lapse. Options and SAR's shall be
immediately exercisable by the holder.
14.2 Definition. For purposes of the Plan, a "change in control" shall
mean any of the following events:
(i) the Company receives a report on Schedule 13D filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the Exchange
Act disclosing that any person, group, corporation or other entity is the
beneficial owner directly or indirectly of thirty percent or more of the out-
standing Common Stock of the Company;
(ii) any person (as such term is defined in Section 13(d) of the Ex-
change Act, group, corporation or other entity other than the Company or a
wholly-owned subsidiary of the Company, purchases shares pursuant to a tender
offer or exchange offer to acquire any common stock of the Company (or
securities convertible into common stock) for cash, securities or any other
consideration, provided that after consummation of the offer, the person,
group, corporation or other entity in question is the beneficial owner (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of thirty percent or more of the outstanding Common Stock of the
Company (calculated as provided in paragraph (d) of Rule 13d-3 under the
Exchange Act in the case of rights to acquire common stock);
(iii) the stockholders of the Company approve (a) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted
into cash, securities or other property, or (b) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company; or
(iv) there shall have been a change in a majority of the members of the
Board of Directors of the Company within a 24 month period unless the
election or nomination for election by the Company's stockholders of each new
director was approved by the vote of two-thirds of the directors then still
in office who were in office at the beginning of the 24 month period.
Section 15
Amendment, Modification, and Termination of Plan
15.1 Amendment, Modification, and Termination of Plan. The Board at
any time may terminate, and from time to time may amend or modify the Plan,
provided, however, that any such action of the Board, shall be subject to
approval of the shareholders, to the extent required by law.
No amendment, modification, or termination of the Plan or any Award
under the Plan shall in any manner adversely affect any Award theretofore
granted under the Plan, without the consent of the holder thereof.
Section 16
Tax Withholding
16.1 Tax Withholding. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to
satisfy federal, state, and local withholding tax requirements on any Award
under the Plan.
To the extent permissible under applicable tax, securities, and other
laws, the Company may, in its sole discretion, permit the Participant to
satisfy a tax withholding requirement by (i) using already owned shares; (ii)
through a cashless transaction; or (iii) directing the Company to apply
shares of stock to which the Participant is entitled as a result of the
exercise of an option or the lapse of a Period of Restriction (including, for
this purpose, the filing of an election under Section 83(b) of the Code), to
satisfy such requirement.
16.2 Disposition of Shares. In the event that a Participant shall
dispose (whether by sale, exchange, gift, the use of a qualified domestic
relations order as defined by the Code or Title I of ERISA, or the rules
thereunder, or any like transfer) of any shares of Common Stock of the
Company (to the extent such shares are deemed to be purchased pursuant to an
incentive stock option) acquired by him within two years of the date of grant
of the related option or within one year after the acquisition of such
shares, he will notify the secretary of the Company no later than 15 days
from the date of such disposition of the date or dates and the number of
shares disposed of by him and the consideration received, if any, and, upon
notification from the Company, promptly forward to the secretary of the
Company any amount requested by the Company for the purpose of satisfying its
liability, if any, to withhold federal, state or local income or earnings tax
or any other applicable tax or assessment (plus interest or penalties
thereon, if any, caused by delay in making such payment) incurred by reason
of such disposition.
Section 17
Indemnification
17.1 Indemnification. Each person who is or shall have been a member of
the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be a party or in
which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in satis-
faction of any judgment in any such action, suit, or proceeding against him,
provided he shall give the Company an opportunity, at its own expense, to
handle and defend the same before he undertakes to handle and defend it on
his own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or Bylaws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
Section 18
Requirements of Law
18.1 Requirements of Law. The granting of Awards and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any govern-
mental agencies or national securities exchanges as may be required.
18.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
Arizona.
Section 19
Funding
19.1 Funding of Plan. Except in the case of Awards of Restricted Stock,
the Plan shall be unfunded. The Company shall not be required to segregate
any of its assets to assure the payment of any Award under the Plan. Neither
the Participant nor any other persons shall have any interest in any fund or
in any specific asset or assets of the Company or any other entity by reason
of any Award, except to the extent expressly provided hereunder. The interest
of each Participant and former Participant hereunder are unsecured and shall
be subject to the general creditors of the Company.
EXHIBIT E
TUCSON ELECTRIC POWER COMPANY
1994 OUTSIDE DIRECTOR STOCK OPTION PLAN
TUCSON ELECTRIC POWER COMPANY
1994 Outside Director Stock Option Plan
Table of Contents Page
- ------------------ ----
Section 1
Establishment, Purpose, and Effective Date of Plan
1.1 Establishment......................................... 1
1.2 Purpose............................................... 1
1.3 Effective Date........................................ 1
Section 2
Definitions
2.1 Definitions........................................... 1
Section 3
Eligibility
3.1 Eligibility........................................... 2
Section 4
Administration
4.1 Administration........................................ 2
Section 5
Duration of Plan
5.1 Duration of Plan...................................... 2
Section 6
Stock Options
6.1 Initial Grant......................................... 3
6.2 Annual Awards......................................... 3
6.3 Exercise Price........................................ 3
6.4 Vesting............................................... 3
6.5 Expiration............................................ 3
6.6 Payment............................................... 3
6.7 Agreement............................................. 3
6.8 Lapsed Awards......................................... 4
6.9 Restrictions on Stock Transferability................. 4
6.10 Non-Transferability of Options........................ 4
6.11 Beneficiary Designation............................... 4
Section 7
Adjustment in Capitalization
7.1 Adjustment in Capitalization........................... 4
Section 8
Termination of Service
8.1 Termination of Service................................ 5
Section 9
Change in Control
9.1 In General............................................ 5
9.2 Definition............................................ 6
Section 10
Amendment, Modification, and Termination of Plan
10.1 Amendment, Modification, and Termination of Plan...... 6
Section 11
Requirements of Law
11.1 Requirements of Law................................... 6
11.2 Governing Law......................................... 6
TUCSON ELECTRIC POWER COMPANY
1994 Outside Director Stock Option Plan
Section 1
Establishment, Purpose and Effective Date of Plan
1.1 Establishment. Tucson Electric Power Company, an Arizona corporation,
hereby establishes the "Tucson Electric Power Company 1994 Outside Director
Stock Option Plan" (the "Plan") for non-employee members of the Board.
1.2 Purpose. The purpose of the Plan is to enable the Company to attract
and retain highly qualified non-employee members of the Board by providing to
them a significant equity interest in the Company, and to help provide such
non-employee members of the Board of Directors with reasonable and fair
compensation.
1.3 Effective Date. The Plan shall become effective immediately upon
its adoption by the Board of the Company (the "Effective Date") subject to
its ratification by the shareholders of the Company and the receipt of any
necessary governmental approvals.
Section 2
Definitions
2.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(i) "Annual Award Date" means the first and each succeeding anniversary
of the Initial Award Date.
(ii) "Board" means the Board of Directors of the Company.
(iii) "Company" means Tucson Electric Power Company, an Arizona
corporation.
(iv) "Eligible Directors" means those non-employee members of the Board
who are eligible to participate in the Plan under Section 3 hereof.
(v) "Fair Market Value" means the average of the highest and lowest
sales prices of the Stock as reported on the consolidated tape for securities
listed on the New York Stock Exchange on a particular date. In the event that
there are no Stock transactions on such date, the Fair Market Value shall be
determined by utilization of the above formula as of the immediately
preceding date on which there were Stock transactions.
(vi) "Ineligible Directors" means those non-emeritus members of the
Board who are not eligible to participate in the Plan.
(vii) "Initial Award Date" means the first business day of the calendar
month following the ratification of the Plan by the shareholders of the
Company and the receipt of any necessary governmental approvals.
(viii) "Option" means a "nonstatutory stock option" (an option which is
not an incentive stock option as described under Section 422 of the Internal
Revenue Code of 1986, as amended).
(ix) "Stock" means the Common Stock of the Company, no par value.
Section 3
Eligibility
3.1 Eligibility. All members of the Board are eligible to participate
in the Plan, unless they are common law employees of the Company or emeritus
directors of the Company.
Section 4
Administration
4.1 Administration. The Ineligible Directors shall be responsible for
the administration of the Plan. The Ineligible Directors, by majority action
thereof, are authorized to interpret the Plan, to prescribe, amend, and
rescind rules and regulations relating to the Plan, to provide for conditions
and assurances deemed necessary or advisable to protect the interests of the
Company, and to make all other determinations necessary or advisable for the
administration of the Plan, but only to the extent not contrary to the
express provisions of the Plan. Determinations, interpretations, or other
actions made or taken by the Ineligible Directors in good faith pursuant to
the provisions of the Plan shall be final, binding and conclusive for all
purposes and upon all persons whomsoever.
The Ineligible Directors may, from time to time, appoint a Company
employee to administer, construe and/or interpret the terms of the Plan.
Section 5
Duration of Plan
5.1 Duration of Plan. The Plan shall remain in effect, subject to the
Board's right to terminate the Plan pursuant to Section 10 hereof, provided,
however, that no Option may be granted under the Plan on or after the tenth
(10th) anniversary of the Plan's effective date.
Section 6
Stock Options
6.1 Initial Grant. On the Initial Award Date, each Eligible Director
shall receive Options to purchase 6,000 shares of Stock, which shall be
exercisable on the terms set forth herein. Each individual who becomes an
Eligible Director after the Initial Award Date shall receive initial Options
to purchase 6,000 shares of Stock on the date he becomes an Eligible Director.
The shares of Stock to be delivered under the Plan may consist, in whole or in
part, of authorized but unissued stock or treasury stock, not reserved for any
other purpose.
6.2 Annual Awards. On each Annual Award Date following the Initial
Award Date, each person who is an Eligible Director on that date shall
receive Options to purchase 6,000 shares of Stock, which shall be exercisable
on the terms set forth herein.
6.3 Exercise Price. Each Option granted hereunder shall have an
exercise price equivalent to the Fair Market Value of the Stock on the day
such Option is granted.
6.4 Vesting. Awards made on the Initial Award Date, on the date of
initial grant to an Eligible Director after the Initial Award Date, and on
any Annual Award Date shall vest ratably and become exercisable in 1 /3
increments on each anniversary of the date of Grant.
6.5 Expiration. Except as otherwise provided in Section 8.1 hereof,
Options granted hereunder shall expire ten years from the date of the award
of the Option.
6.6 Payment. The purchase price of Stock upon exercise of any Option
shall be paid in full either (i) in cash, (ii) in Stock valued at its Fair
Market Value on the date of exercise or (iii) by a combination of (i) and
(ii) at the discretion of the Ineligible Directors. The Ineligible Directors
in their sole discretion may also permit payment of the purchase price upon
exercise of any Option to be made by (i) having shares withheld from the
total number of shares of Stock to be delivered upon exercise or (ii)
delivering a properly executed notice together with irrevocable instructions
to a broker to promptly deliver to the Company the amount of sale or loan
proceeds to pay the exercise price. The proceeds from payment of option
prices shall be added to the general funds of the Company and shall be used
for general corporate purposes.
6.7 Agreement. Options awarded under this Plan will be evidenced by an
agreement in writing, signed by the Option holder and a duly authorized
representative of the Company.
6.8 Lapsed Awards. Subject to the express provisions of the Plan, if
any Award granted under the Plan terminates, expires or lapses for any
reason, any Stock subject to such Award again shall be available for the
grant of an Award.
6.9 Restrictions on Stock Transferability. The Ineligible Directors
shall impose such restrictions on any shares of Stock acquired pursuant to
the exercise of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities law,
under the requirements of any stock exchange upon which such shares of Stock
are then listed and under any blue sky or state securities laws applicable to
such shares.
6.10 Non-Transferability of Options. No Option granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined
by the Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA"), or the rules
thereunder.
6.11 Beneficiary Designation. Each Eligible Director may name, from
time to time, any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under the Plan is to be paid in case of
his death before he receives any or all of such benefit. Each designation will
revoke all prior designations by the same participant, shall be in a form
prescribed by the Ineligible Directors, and will be effective only when filed
by the participant in writing with the Ineligible Directors during his
lifetime. In the absence of any such designation, benefits remaining unpaid
at the Participant's death shall be paid to his estate.
Section 7
Adjustment in Capitalization
7.1 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock that occurs after ratification of the Plan by the
shareholders of the Company by reason of a stock dividend or split,
recapitalization, merger, consolidation, combination, exchange of shares, or
other similar corporate change, the aggregate number of shares of Stock to be
granted, the aggregate number of shares subject to each outstanding Option,
and its stated exercise price, shall be adjusted appropriately by the
Ineligible Directors, whose determination shall be conclusive; provided,
however, that fractional shares shall be rounded to the nearest whole share.
Section 8
Termination of Service
8.1 Termination of Service. If the service of an Eligible Director is
terminated for any reason other than involuntarily for cause, the rights
under any then outstanding Option which has vested under Section 6.4 hereof
shall terminate upon the expiration date of the Option or six months after
the termination of service as an Eligible Director, whichever occurs first.
Where the service of an Eligible Director is terminated by reason of death,
the rights under any outstanding Option which has vested at the time of the
Eligible Director's death may be exercised by the Eligible Director's
personal representative within the time permitted under this paragraph. Where
termination of services as an Eligible Director is involuntary for cause,
rights under all Options shall terminate immediately upon termination of
service.
Section 9
Change in Control
9.1 In General. In the event of a change in control of the Company
as defined in Section 9.2 below, all Options under the Plan shall vest 100%,
and shall be immediately exercisable by the holder.
9.2 Definition. For purposes of the Plan, a "change in control"
shall mean any of the following events:
(i) the Company receives a report on Schedule 13D filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the Securi-
ties Exchange Act of 1934, as amended (the "Exchange Act") disclosing that
any person, group, corporation or other entity is the beneficial owner
directly or indirectly of thirty percent or more of the outstanding Common
Stock of the Company;
(ii) any person (as such term is defined in Section 13(d) of the Ex-
change Act, group, corporation or other entity other than the Company or a
wholly-owned subsidiary of the Company, purchases shares pursuant to a tender
offer or exchange offer to acquire any Common Stock of the Company (or
securities convertible into Common Stock) for cash, securities or any other
consideration, provided that after consummation of the offer, the person,
group, corporation or other entity in question is the beneficial owner (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of thirty percent or more of the outstanding Common Stock of the
Company (calculated as provided in paragraph (d) of Rule 13d-3 under the
Exchange Act, as amended in the case of rights to acquire Common Stock);
(iii) the stockholders of the Company approve (a) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted
into cash, securities or other property, or (b) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company; or
(iv) there shall have been a change in a majority of the members of the
Board within a 24 month period unless the election or nomination for election
by the Company's stockholders of each new director was approved by the vote
of two-thirds of the directors then still in office who were in office at the
beginning of the 24 month period.
Section 10
Amendment, Modification. and Termination of Plan
10.1 Amendment, Modification, and Termination of Plan. The Board at any
time may terminate, and from time to time amend or modify the Plan, provided,
however, that any such action of the Board shall be subject to approval of
the shareholders, to the extent required by Rule 16b-3 of the Exchange Act or
otherwise by law.
No amendment, modification, or termination of the Plan shall in any
manner adversely affect any Option theretofore granted under the Plan,
without the consent of the Option holder. In no event shall the provisions of
this Plan be amended more than once every six months, other than to comport
with changes in the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules thereunder.
Section 11
Requirements of Law
11.1 Requirements of Law. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
11.2 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
Arizona.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article SIXTH of the Restated Articles of Incorporation of UniSource
Energy Corporation will provide, in part, as follows:
(B) No director of the Corporation shall be personally liable to the
Corporation or its shareholders for money damages for any action taken or any
failure to take any action as a Director; provided, however, that nothing
herein shall be deemed to eliminate or limit any liability which may not be
so eliminated or limited under the laws of the State of Arizona, as in effect
at the effective date of this paragraph (B) of Article SIXTH or as thereafter
amended. No amendment, modification or repeal of this paragraph (B) shall
eliminate or limit the protection afforded by this paragraph (B) to a
director with respect to any act or omission occurring before the effective
date thereof.
(C)(1) The Corporation shall, to the maximum extent permitted by
applicable law, as from time to time in effect, indemnify any individual who
is or was a party to or otherwise involved in (or threatened to be made a
party to or otherwise involved in) any Proceeding (as hereinafter defined)
because such individual is or was a director or officer of the Corporation,
or, while a director or officer of the Corporation, is or was serving at the
request of the Corporation as a director, officer, partner, trustee, employee
or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against all
Liability (as hereinafter defined) incurred by such individual in connection
with such Proceeding.
As used in this paragraph (C) of Article SIXTH, (a) the term
"Expenses" includes attorneys' fees and all other costs and expenses reasonably
related to a Proceeding, (b) the term "Liability" means the obligation to pay a
judgment, settlement, penalty or fine (including any excise tax assessed with
respect to an employee benefit plan) and reasonable Expenses incurred with
respect to a Proceeding, and includes without limitation obligations and
Expenses that have not yet been paid but that have been or may be incurred,
and (c) the term "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal, including without limitation
any action, suit or proceeding by or in the right of the Corporation and
including, further, any appeal in connection with any such action, suit or
proceeding.
(2) The Corporation shall, to the maximum extent permitted by applicable
law, pay any Expenses incurred by a director or officer of the Corporation in
defending any such Proceeding in advance of the final disposition thereof
upon receipt of any undertaking by or on behalf of such individual to repay
such advances if it is ultimately determined that such individual did not
meet any standard of conduct prescribed by applicable law and upon the
satisfaction of such other conditions as may be imposed by applicable law.
(3) The Corporation, by resolution of the Board of Directors, may extend
the benefits of this paragraph (C) of Article SIXTH to employees and agents
of the Corporation (each individual entitled to benefits under this paragraph
(C) being hereinafter sometimes called an "Indemnified Person").
(4) All rights to indemnification and to the advancement of expenses
granted under or pursuant to this paragraph (C) shall be deemed to arise out
of a contract between the Corporation and each person who is an Indemnified
Person at any time while this paragraph (C) is in effect and may be evidenced
by a separate contract between the Corporation and each Indemnified Person;
and such rights shall be effective in respect of all Proceedings commenced
after the effective date of this paragraph (C), whether arising from acts or
omissions occurring before or after such date. No amendment, modification or
repeal of this Article shall affect any rights or obligations theretofore
existing.
(5) The Corporation may purchase and maintain insurance on behalf of, or
insure or cause to be insured, any individual who is an Indemnified Person
against any Liability asserted against or incurred by him in any capacity in
respect of which he is an Indemnified Person, or arising out of his status in
such capacity, whether or not the Corporation would have the power to
indemnify him against such liability under this Article. The Corporation's
indemnity of any individual who is an Indemnified Person shall be reduced by
any amounts such individual may collect with respect to such liability (a)
under any policy of insurance purchased and maintained on his behalf by the
Corporation or (b) from any other entity or enterprise served by such
individual.
(6) The rights to indemnification and to the advancement of Expenses and
all other benefits provided by, or granted pursuant to, this Article shall
continue as to a person who has ceased to serve in the capacity in respect of
which such person was an Indemnified Person and shall inure to the benefit of
the heirs, executors and administrators of such person.
(7) The Board of Directors shall have the power and authority to make,
alter, amend and repeal such procedural rules and regulations relating to
indemnification and the advancement of Expenses as it, in its discretion, may
deem necessary or expedient in order to carry out the purposes of this
Article, such rules and regulations, if any, to be set forth in the Bylaws of
the Corporation or in a resolution of the Board of Directors.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
Reference is made to the Exhibit Index on page II-5 hereof.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended (the "Act"), each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act") (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(2) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(3) That every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415 will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, and 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referred to in Item 20 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
POWER OF ATTORNEY
Each director and/or officer of the Registrant whose signature appears
below hereby appoints the Agents for Service named in this Registration
Statement, and each of them severally, as his attorney-in-fact to sign in his
name and behalf, in any and all capacities stated below, and to file with the
Securities and Exchange Commission, any and all amendments, including post-
effective amendments, to this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in The City of New York,
State of New York on March 22, 1995.
UNISOURCE ENERGY CORPORATION
By: Joseph Mirrione
Joseph Mirrione
President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature
Title
Date
Joseph Mirrione
Joseph Mirrione
Director, President and Assistant
Secretary (Principal Executive Officer)
March 22, 1995
Howard Wagner
Howard Wagner
Director, Vice President, Secretary and
Treasurer (Principal Financial and
Accounting Officer)
March 22, 1995
Oriel Thomas
Oriel Thomas
Director, Vice President and Assistant Secretary
March 22, 1995
EXHIBIT INDEX
The Exhibits designated by an asterisk are filed herewith. Exhibits
not so designated have been provided to the Commission, and are incorporated
herein by reference.
Exhibit No. Document
2(a) - Agreement and Plan of Exchange between Tucson Electric Power
Company and UniSource Energy Corporation (incorporated by
reference to Annex A to the Proxy Statement/ Prospectus
included herein).
*3(a)(1) - Articles of Incorporation of the Registrant.
3(a)(2) - Form of Restated Articles of Incorporation of the Registrant
(incorporated by reference to Annex B to the Proxy Statement/
Prospectus included herein).
*3(b)(1) - Bylaws of the Registrant.
3(b)(2) - Form of Bylaws, as amended, of the Registrant (incorporated
by reference to Annex C to the Proxy Statement-Prospectus
included herein).
*5(a) - Opinion of Dennis R. Nelson, Esq.
*5(b) and 8 - Opinion of Reid & Priest LLP.
*23(a) - The consents of Dennis R. Nelson, Esq. and Reid & Priest LLP
are contained in their opinions filed as Exhibit 5(a) and
Exhibits 5(b) and 8, respectively.
*23(b) - Independent Auditors' Consent.
24 - Power of Attorney is contained herein at page II-4.
*99 - Forms of Proxy.
Exhibit 3(a)(1)
ARTICLES OF INCORPORATION
OF
UNISOURCE ENERGY CORPORATION
KNOW ALL MEN BY THESE PRESENTS: That the incorporators, having
associated themselves together for the purpose of forming a corporation
under and by virtue of the laws of the State of Arizona did adopt Articles of
Incorporation, which are restated as follows:
FIRST: The name of the Corporation shall be UniSource Energy Corporation.
SECOND: The address of the Corporation within the State of Arizona shall
be 7037 North 11th Street, Phoenix, Arizona 85020, but the known place of
business may be established and maintained in or outside of the State of
Arizona at such places as the Board of Directors may designate.
THIRD: The purposes for which the Corporation is organized shall be the
transaction of any or all lawful business for which corporations may be
incorporated under Chapter 1 of Title 10, Arizona Revised Statutes.
The character of business which the Corporation initially intends actually
to conduct in the State of Arizona is the acquisition and holding of securities
of other corporations.
FOURTH: The total number of shares of Capital Stock of all classes which
the Corporation shall have authority to issue is Two Hundred Fifty-One Million
(251,000,000) shares, divided into:
One Million (1,000,000) shares of Preferred Stock without par value;
and
Two Hundred Fifty Million (250,000,000) shares of Common Stock
without par value.
Preferred Stock
The Board of Directors of the Corporation shall have the authority to
divide the Preferred Stock into series and determine the designation,
preferences, privileges and voting powers of the shares of each series so
established and the restrictions and qualifications thereof, all to the
extent and in the manner provided by law.
Common Stock
Subject to the limitations, if any, specified with respect to the
Preferred Stock, or any series thereof, dividends may be paid on shares of the
Common Stock, out of any funds legally available therefor, when and as declared
by the Board of Directors.
Subject to the limitations, if any, specified with respect to the
Preferred Stock, or any series thereof, in the event of any dissolution or
other winding up of the Corporation, whether voluntary or involuntary, the
assets of the Corporation available for payment and distribution to
shareholders shall be distributed ratably in accordance with their holdings to
the holders of shares of the Common Stock.
All voting power shall vest exclusively as the holders of shares of the
Common Stock, except as any statute of the State of Arizona shall expressly
provide to the contrary, and except as and to the extent otherwise specified
with respect to the Preferred Stock, or any series thereof, and each holder of
the Common Stock shall, in the election of directors and upon each other matter
coming before any meeting of shareholders, be entitled to one vote for each
share of such stock standing in the name of such holder on the books of the
Corporation.
General Provisions
The Corporation may, subject to such limitations, if any, as may be
specified with respect to the Preferred Stock, or any series thereof, amend
these Articles of Incorporation from time to time, in as many respects as may
be desired and as now or hereafter permitted by law. The rights conferred upon
shareholders in these Articles of Incorporation are granted subject to the
foregoing right to amend.
A statutory merger of the Corporation shall not be deemed to be a
dissolution or other winding up of the Corporation within the meaning of any
provision of these Articles of Incorporation.
In consideration of the issuance by the Corporation of shares of the
Capital Stock of the Corporation, each and every present and future holder of
shares of the Capital Stock of the Corporation shall be conclusively deemed, by
acquiring or holding such shares, to have expressly consented to all and
singular the terms and provisions of these Articles of Incorporation and to
have agreed, among other things, that the voting rights of such holder and the
restrictions or qualifications thereof shall be as set forth in, or determined
pursuant to, this Article.
Any action required or permitted by these Articles of Incorporation to be
taken by the Board of Directors of the Corporation may be taken by a duly
authorized committee of the Board of Directors, except as otherwise required by
law.
FIFTH: The period of duration of the Corporation shall be perpetual.
SIXTH: (A) The affairs of the Corporation shall be conducted by a
Board of Directors consisting of a number of persons, not less than two (2)
nor more than 10, specified by the Board of Directors in the Bylaws of the
Corporation. Directors shall receive reasonable compensation for the services
which they perform. Directors shall be elected annually by the shareholders at
the annual meeting of shareholders and when so elected shall serve until the
next annual meeting of shareholders or until their successors have been duly
elected and qualified.
(B) No director of the Corporation shall be personally liable
for monetary damages for breach of fiduciary duty as a Director; provided,
however, that nothing herein shall be deemed to eliminate or limit any
liability which may not be so eliminated or limited under the laws of the State
of Arizona, as in effect at the effective date of this paragraph (B) of Article
SEVENTH or as thereafter amended. No amendment, modification or repeal of this
paragraph (B) shall eliminate or limit the protection afforded by this
paragraph (B) to a director with respect to any act or omission occurring
before the effective date thereof.
(C)(1)The Corporation shall, to the maximum extent permitted by
applicable law, as from time to time in effect, indemnify any person who was or
is a party to or otherwise involved in (or threatened to be made a party to or
otherwise involved in) any threatened, pending or completed action, suit or
proceeding (hereinafter called an "Action"), whether civil, criminal,
administrative or investigative (including without limitation any Action by or
in the right of the Corporation to procure a judgment in its favor) by reason
of the fact that he is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or officer of
another corporation, of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or any other entity or
enterprise, against expenses, including attorneys' fees, and against judgments,
fines and amounts paid in settlement incurred by him in connection with such
Action or any appeal therein.
(2)The Corporation shall pay any expenses incurred by a
director or officer of the Corporation in defending any such Action in advance
of the final disposition thereof upon receipt of any undertaking by or on
behalf of such person to repay such advances to the extent of the amount to
which such person shall ultimately be determined not to be entitled.
(3)The Corporation, by resolution of the Board of Directors,
may extend the benefits of this paragraph (C) of Article SEVENTH to employees,
agents and other representatives of the Corporation (each director, officer,
employee, agent and other representative entitled to benefits under this
paragraph (D) being hereinafter sometimes called an "Indemnified Person").
(4)All rights to indemnification and to the advancement of
expenses granted under or pursuant to this paragraph (C) shall be deemed to
arise out of a contract between the Corporation and each person who is an
Indemnified Person at any time while this paragraph (C) is in effect and may
be evidenced by a separate contract between the Corporation and each
Indemnified Person; and such rights shall be effective in respect of all
Actions commenced after the effective date of this paragraph (C), whether
arising from acts or omissions occurring before or after such date. No
amendment, modification or repeal of this Article shall affect any rights or
obligations theretofore existing.
(5)The Corporation may purchase and maintain insurance on
behalf of, or insure or cause to be insured, any person who is an Indemnified
Person against any liability asserted against him and incurred by him in any
capacity in respect of which he is an Indemnified Person, or arising out of his
status in such capacity, whether or not the Corporation would have the power to
indemnify him against such liability under this Article. As used in this
Section, "insurance" includes retrospectively rated and self-insured programs;
provided, however, that no such program shall provide coverage for directors
and officers which is prohibited by applicable law. The Corporation's
indemnity of any person who is an Indemnified Person shall be reduced by any
amounts such person may collect with respect to such liability (a) under any
policy of insurance purchased and maintained on his behalf by the Corporation
or (b) from any other entity or enterprise served by such person.
(6)The rights to indemnification and to the advancement of
expenses and all other benefits provided by, or granted pursuant to, this
Article shall continue as to a person who has ceased to serve in the capacity
in respect of which such person was an Indemnified Person and shall inure to
the benefit of the heirs, executors and administrators of such person.
(7)The Board of Directors shall have the power and authority
to make, alter, amend and repeal such procedural rules and regulations relating
to indemnification and the advancement of expenses as it, in its discretion,
may deem necessary or expedient in order to carry out the purposes of this
Article, such rules and regulations, if any, to be set forth in the Bylaws of
the Corporation or in a resolution of the Board of Directors.
SEVENTH: The name and address of each incorporator are as follows:
Name Address
Joseph Mirrione 225 West 34th Street
Suite 2110
New York, New York 10122
Oriel Thomas 225 West 34th Street
Suite 2110
New York, New York 10122
EIGHTH: The name and address of each person who is to serve as a director
of the Corporation until a successor is elected and qualifies are as follows:
Name Address
Joseph Mirrione 225 West 34th Street
Suite 2110
New York, New York 10122
Howard Wagner 225 West 34th Street
Suite 2110
New York, New York 10122
Oriel Thomas 225 West 34th Street
Suite 2110
New York, New York 10122
NINTH: The name and street address of the Corporation's statutory agent
are as follows:
Name Street Address
Arizona Statutory Agent Corp.7037 North 11th Street
Phoenix, Arizona 85020
TENTH: The directors of the Corporation shall have the power to make,
alter, amend and repeal such bylaws for the management of the business and
affairs of the Corporation as they may deem necessary or expedient, and to
fill vacancies occurring in the Board of Directors from any cause.
IN WITNESS WHEREOF, the undersigned Incorporators have hereto affixed
their signatures as of this 7TH day of March, 1995.
JOSEPH MIRRIONE
_____________________________
Incorporator, Joseph Mirrione
ORIEL THOMAS
___________________________
Incorporator, Oriel Thomas
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On the 7th day of March, 1995, before me, a notary public, personally
appeared Joseph Mirrione and Oriel Thomas and acknowledged themselves to be
the persons who executed the above document for the purpose set forth herein.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
DANNY A. VETTESE
____________________
Notary Public
My Commission Expires:
7/30/96
Exhibit 3(b)(1)
BYLAWS OF
UNISOURCE ENERGY CORPORATION
ARTICLE I.
Meetings of Shareholders.
Section 1. Meetings. The Annual Meeting of the Shareholders shall be
held at the known and principal place of business of the Company in the City of
Tucson, State of Arizona, or such other place as may be designated by the Board
of Directors on a day designated by the Board of Directors, subject to
applicable laws, for the election of directors and the transaction of such
other business as may properly come before the meeting. Special Meetings of
the Shareholders, except as otherwise provided by law, shall be held at the
known and principal place of business of the Company in the City of Tucson,
State of Arizona, or such other place as may be designated by the Board of
Directors and may be called by the Chairman of the Board, the President, any
two directors, or the Executive Committee, if there be one, and shall be called
by the Secretary upon the request of the owners of 25% of the stock outstanding
and entitled to vote at such meeting.
Section 2. Notice. Written notice of meeting, signed by the Chairman
of the Board, the President or a Vice President, or the Secretary, or Assistant
Secretary, or having the name of the Chairman of the Board, the President or a
Vice President or the Secretary or Assistant Secretary printed thereon, stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than 10 nor more than 50 days before the date of the meeting, either
personally or by mail, by an officer of the Company at the direction of the
person or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when mailed to the shareholder at his address as it appears on the
stock transfer books of the Company; provided, however, if any shareholder
shall fail to furnish the Secretary with his correct Post Office address, he
shall not be entitled to such separate notice. No business shall be transacted
at any special meeting except as shall be mentioned in said notice. In the
event of the transfer of his stock by any shareholder after such service of
such notice and prior to the holding of the meeting, it shall not be necessary
to serve notice of the meeting on the transferee.
Section 3. Quorum. At any meeting of the shareholders, a majority
of the shares entitled to vote at such meeting represented in person or by
proxy shall constitute a quorum at the meeting of shareholders. Business may
be conducted once a quorum is present and may continue until adjournment of
the meeting notwithstanding the withdrawal or temporary absence of sufficient
shares to reduce the number present to less than a quorum. Unless the vote of
a greater number of shares or voting by class is required by the Articles of
Incorporation or the laws of the State of Arizona, the affirmative vote of a
majority of the shares represented at any meeting and entitled to vote on the
subject matter shall be the act of the shareholders; provided, however, that
if the shares then represented are less than required to constitute a quorum,
the affirmative vote must be such as would constitute a majority if a quorum
were present; provided, further, the affirmative vote of a majority of the
shares then present is sufficient in all cases to adjourn a meeting.
Section 4. Adjournments. Whenever at any meeting of the
shareholders, notice of which shall have been duly given, a quorum shall not
be present, or whenever for any other reason it may be deemed desirable, a
majority in interest of the shareholders present in person or by proxy may
adjourn the meeting to another time or place. If the adjournment is for a
period of no more than 30 days, no notice other than by announcement at the
meeting at which the adjournment is taken need be given. If the adjournment
is for more than 30 days or if, after the adjournment, a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at the meeting. At any
such adjourned meeting at which a quorum shall be present, any business may
be transacted which might have been transacted at the original meeting.
Section 5. Organization. The Chairman of the Board or, in his
absence, the President or, in their absence, a Vice President shall call any
meeting of the shareholders to order and shall act as Presiding Officer of
such meeting. The shareholders may appoint any shareholder or the proxy of
any shareholder to act as Presiding Officer of any meeting of the shareholders
in the absence of the Chairman of the Board, the President and the Vice
Presidents. The Secretary or, in the Secretary's absence, an Assistant
Secretary, shall act as Secretary at all meetings of the shareholders; or in
the absence of the Secretary and Assistant Secretaries at any meeting of the
shareholders, the Presiding Officer may appoint any person to act as Secretary
of such meeting.
Section 6. Inspectors. At each meeting of the shareholders at which
a vote by ballot is taken, unless otherwise determined at such meeting, the
polls shall be opened and closed, the proxies and ballots shall be received
and be taken in charge, and the validity of proxies and the acceptance or
rejection of votes shall be decided by two inspectors. Such inspectors shall
be appointed by the Board of Directors before the meeting, or if no such
appointment shall have been made then by the Presiding Officer of the meeting.
If for any reason any of the inspectors previously appointed shall fail to
attend or refuse or be unable to serve, inspectors in place of any so failing
to attend or refusing or unable to serve, shall be appointed in like manner.
Section 7. Voting. Each shareholder shall have such voting rights
as are provided by the Articles of Incorporation and the laws of the State of
Arizona. Shareholders entitled to vote may be represented and vote by a proxy
or proxies appointed by an instrument in writing; in the event that such
instrument in writing shall designate two or more persons to act as proxies, a
majority of such persons present at the meeting, or if only one shall be
present then that one, shall have and may exercise all of the powers conferred
by such written instrument upon all of the persons so designated, unless the
instrument shall otherwise provide. In all elections for directors voting
shall be by ballot.
ARTICLE II.
Directors.
Section 1. Election and Term. The business and affairs of the
Company shall be managed by a Board of Directors consisting of three members
who need not be shareholders of the Company. The directors shall be elected
annually by the shareholders at the annual meeting thereof, and each director
shall hold office until his successor shall be elected and qualified or until
his earlier resignation or removal.
Section 2. Chairman of the Board. The Board of Directors shall
elect one of its members as the Chairman of the Board. During the absence or
incapacity of the President, he shall be the acting President. He shall have
such other powers and perform such other duties as from time to time the Board
of Directors may prescribe. If the Board of Directors shall create an
Executive Committee, the Chairman of the Board shall be a member and the
Chairman thereof.
Section 3. Vacancies. Any vacancies occurring in the Board of
Directors by reason of death, resignation or otherwise, may be filled by the
affirmative vote of the remaining directors, though not less than a quorum,
or by the shareholders at any meeting thereof, and any director so chosen
shall hold office until his successor shall be elected and qualified.
Section 4. Meetings. The meetings of the Board of Directors shall
be held at such place or places within or without the State of Arizona as the
Board of Directors may from time to time designate.
The Chairman of the Board shall preside at all meetings of the Board
of Directors. In the absence of the Chairman of the Board, the President
shall preside or, in their absence, the directors present may elect a Chairman
of the meeting.
The Annual Meeting of the Board of Directors for the election of
officers, the designation of members of committees of the Board of Directors,
and the transaction of such other business as may properly come before the
meeting, shall be, unless otherwise noticed, the regular meeting in May of
each year. Regular meetings of the Board of Directors shall be held at such
date and time as may be determined by the Board of Directors.
Special meetings of the Board of Directors shall be held whenever
called by the direction of the Chairman of the Board, the President, any two
directors, or the Executive Committee.
Meetings of the Board of Directors, regular or special, may be held
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting.
Section 5. Notice. No notice shall be required of any annual or
regular meeting of the Board of Directors unless the place, day, or time
thereof shall be other than that last designated by the Board. Notice of any
annual or regular meeting, when required, or of any special meeting of the
Board of Directors shall be given to each director by letter, telegram,
telephone, or personally at least 24 hours before the time fixed for the
meeting. Such notice may be waived by any director. Unless otherwise
indicated in the notice thereof any and all business may be transacted at a
special meeting. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except when a director attends a meeting
for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 6. Quorum. A majority of the Board of Directors then
serving shall constitute a quorum for the transaction of business, and any act
receiving the affirmative vote of a majority of the directors present at any
meeting shall be the act of the Board of Directors.
Section 7. Adjournments. Any annual, regular or special meeting of
the Board of Directors may be adjourned from time to time by the members
present whether or not a quorum shall be present, and no notice shall be
required of any adjourned meeting beyond the announcement of such adjournment
at the meeting.
Section 8. Director Emeritus. The Board of Directors may from time
to time elect one or more individuals to serve as a Director Emeritus whose
duty shall be to consult with and advise the Board of Directors of the
Company. The title of a Director Emeritus shall be honorary only and such
title shall carry with it the right to attend and participate in discussions
held during the meetings of the Board of Directors, to receive notice of such
meetings and to receive such compensation as is from time to time determined
appropriate by resolution passed by a majority vote of the Board of Directors.
The rights and privileges of a Director Emeritus are expressly limited to those
described in the preceding sentence and such title shall not carry with it the
right to vote at Board meetings, the right to participate on any committees
established by the Board of Directors, or any rights, duties, privileges,
liabilities or obligations otherwise associated with being a member of the
Board of Directors.
ARTICLE III.
Committees.
Section 1. Executive Committee. The Board of Directors may by
resolution passed by a majority of the whole Board designate two or more of
their members to constitute an Executive Committee which may have and
exercise, subject to such limitations, if any, as may be prescribed by
resolution of the Board, the powers of the Board of Directors in the
management of the business and affairs of the Company; provided, such
Executive Committee shall only act at such times as the Board of Directors
is not in session and in no case to the exclusion of the Board of Directors
at any time to act as a Board upon any business of the Company; and further
provided that the Executive Committee shall not have the authority of the
Board of Directors in reference to the following matters: the submission to
shareholders of any action that requires shareholders' authorization or
approval, or the filling of vacancies on the Board of Directors or in any
committee of the Board of Directors, or the amendment or repeal of the Bylaws,
or the adoption of new bylaws, or the fixing of compensation of directors
for serving on the Board or on any committee of the Board of Directors.
Section 2. Other Committees. The Board of Directors may by
resolution passed by a majority of the whole Board designate two or more of
their members to constitute one or more other committees which may have and
exercise, subject to such limitations, if any, as may be prescribed by
resolution of the Board, the powers of the Board of Directors in the
management of the business and affairs of the Company; provided that no such
committee shall have the authority of the Board of Directors in reference to
the following matters: the submission to shareholders of any action that
requires shareholders' authorization or approval, or the filling of vacancies
on the Board of Directors or in any committee of the Board of Directors, or
the amendment or repeal of the Bylaws, or the adoption of new bylaws, or the
fixing of compensation of directors for serving on the Board or on any
committee of the Board of Directors.
ARTICLE IV.
Officers.
Section 1. Number, Election and Term. The officers of the Company
shall be a President, one or more Vice Presidents, a Secretary and a
Treasurer, who shall be elected annually by the affirmative vote of a
majority of the whole Board of Directors at the Annual Meeting thereof, and
who shall hold their respective offices until their successors shall be
elected and qualified. One or more of the Vice Presidents may be designated
as Executive Vice President or Senior Vice President. The President shall be
elected from the members of the Board. The Board of Directors may elect or
appoint from time to time Assistant Secretaries and Assistant Treasurers who
shall hold such offices subject to the pleasure of the Board. The Board of
Directors may also elect or appoint from time to time such other officers or
assistant officers as the interest of the Company may require, and fix their
duties and terms of office. Any person may hold more than one office but the
offices of President and Secretary shall not be held by the same person at the
same time. Any vacancy occurring in any office may be filled by the Board of
Directors. All officers or assistant officers shall be subject to removal
with or without cause at any time by the affirmative vote of a majority of
the whole Board of Directors.
Section 2. President. The President shall be the chief executive
officer of the Company; and subject to the control and direction of the
Chairman of the Board and the Board of Directors, he shall have general
control and management of the business and affairs of the Company, and shall
perform such other duties as may from time to time be assigned to him by the
Board of Directors or which he may be authorized or required to do by reason
of any provisions of law or the Bylaws of the Company.
Section 3. Vice Presidents. The Vice Presidents shall perform such
duties as the Board of Directors or Executive Committee shall require, and one
or more as designated by the Board shall, during the extended absence or
incapacity of the Chairman of the Board and the President, assume and perform
all functions and duties which the Chairman of the Board or President might
lawfully do if present and not under any incapacity.
Section 4. Secretary. The Secretary shall keep a record in the
proper books provided for that purpose of meetings and proceedings of the
Board of Directors, Executive Committee and the shareholders and shall record
all votes of the directors, Executive Committee and shareholders in a book to
be kept for that purpose. The Secretary shall notify the directors and
shareholders of their respective meetings as required by law or the Bylaws of
the Company and shall perform such other duties as may be required by law or
the Bylaws of the Company, or which may be assigned from time to time by the
Chairman of the Board, the Board of Directors or the Executive Committee.
Section 5. Assistant Secretaries. The Assistant Secretaries, if and
when appointed as aforesaid, shall perform such duties as the Secretary, the
Board of Directors or Executive Committee shall require, and shall, during the
absence or incapacity of the Secretary, assume and perform all functions and
duties which the Secretary might lawfully do if present and not under any
incapacity.
Section 6. Treasurer. The Treasurer shall have charge of the funds
of the Company. He shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Company, and shall deposit all moneys
and other valuable effects in the name and to the credit of the Company in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Company as may be ordered by the Board, and shall
render to the President or the Board whenever he or it may require it,
account of all his transactions as Treasurer and of the financial condition
of the Company. In addition, when authorized and empowered by the Board of
Directors, the Treasurer may execute in the name and on behalf of the Company
any loan agreements, credit agreements and other contracts or arrangements
relating to the borrowing of funds by the Company and any contracts, purchase
agreements, underwriting agreements and other agreements or arrangements
relating to securities to be issued and sold, guaranteed or funded by the
Company, and any and all indemnification agreements, certificates, financial
statements, letters or other papers and documents (other than instruments
evidencing securities of the Company, unless execution of such instruments is
permitted under other provisions of these Bylaws and authorized by the Board
of Directors) required in connection with any of the foregoing.
Section 7. Assistant Treasurers. The Assistant Treasurers, if and
when appointed as aforesaid, shall perform such duties as the Treasurer, Board
of Directors or Executive Committee shall require, and shall, during the
absence or incapacity of the Treasurer, assume and perform all functions and
duties which the Treasurer might lawfully do if present and not under any
incapacity.
ARTICLE V.
Contracts.
No contract or other transaction between the Company and one or more
of its directors or any other corporation, firm, association or entity in
which one or more of its directors are directors or officers or are
financially interested, shall be affected because of such relationship or
interest or because such director or directors are present at the meeting of
the Board of Directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction or because his or their votes are counted
for such purpose, if: the fact of such relationship or interest is disclosed
or known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested directors;
or the fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote; or the contract or transaction is fair and
reasonable to the Company at the time the contract or transaction is
authorized, approved or ratified, in the light of circumstances known to those
entitled to vote thereon at that time. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies such
contract or transaction.
ARTICLE VI.
Negotiable Instruments.
Except as otherwise specially provided by the Board of Directors,
all checks, drafts, bills of exchange, promissory notes and other negotiable
instruments shall be signed by the Treasurer or an Assistant Treasurer and
countersigned by the President or a Vice President of the Company; but in no
case shall any one person sign and countersign in the capacity of two
officers.
ARTICLE VII.
Capital Stock.
Section 1. Certificates of Stock. Certificates for shares of the
capital stock of the Company shall be in such form, not inconsistent with the
Articles of Incorporation, as shall be approved by the Board of Directors.
The certificates shall be signed by the President or a Vice President and by
the Secretary or an Assistant Secretary and may be sealed with the seal of the
Company or a facsimile thereof. The signatures of such President, Vice
President, Secretary or Assistant Secretary of the Company may be facsimiles,
engraved, lithographed, printed or otherwise imprinted or reproduced on such
certificates. In case any officer of the Company whose signature, whether
facsimile or otherwise, shall have been placed upon any certificate shall cease
to be such officer before any certificate so signed shall have been actually
issued and delivered, such certificate may nevertheless be issued and
delivered by the Company as though the person who had signed such certificate
had not ceased to be such officer. No certificate shall be issued for any
share of capital stock until such share is fully paid.
Every certificate representing shares issued by the Company shall set
forth or summarize upon the face or back of the certificate, or shall state
that the Company will furnish to any shareholder upon request and without
charge, a full statement of the designations, preferences, limitations, and
relative rights of the shares of each class authorized to be issued, and the
variations in the relative rights and preferences between the shares of each
series so far as the same have been fixed and determined, and the authority of
the Board of Directors to fix and determine the relative rights and
preferences of subsequent series. In addition, each certificate representing
shares shall state upon the face thereof: that the Company is organized under
the laws of Arizona; the name of the person to whom issued; the number and
class of shares, and the designation of the series, if any, which such
certificate represents; and the par value of each share represented by such
certificate or a statement that the shares are without par value.
The Company may issue a new certificate for shares of stock in the
place of any certificate theretofore issued and alleged to have been lost,
stolen or destroyed, but the Board of Directors may require the owner of such
lost, stolen or destroyed certificate, or his legal representative, to furnish
an affidavit as to such loss, theft, or destruction and to give a bond in such
form and substance, and with such surety or sureties, with fixed or open
penalty, as it may direct, to indemnify the Company, the Transfer Agent or
Agents and Registrar or Registrars against any claim that may be made on
account of the alleged loss, theft or destruction of such certificate. The
Board of Directors may adopt from time to time rules and regulations relating
to lost, stolen or destroyed certificates of the capital stock of the Company
or bonds or other evidences of indebtedness of the Company.
Section 2. Transfers of Stock. All transfers of shares must be made
on the books of the Company and be duly signed by the shareholder in person or
by a duly authorized attorney of such shareholder, subject to the rules and
regulations of the Company relating to transfers in force at the time. In all
cases of transfers, the certificate or certificates representing the shares to
be transferred, or any part thereof, must be surrendered for cancellation
simultaneously with the making of the transfer. No new certificate shall be
issued until the prior certificate has been canceled.
Section 3. Closing of Transfer Books. The Board of Directors shall
have power to close the transfer books of the Company for a period not
exceeding 60 days preceding the date of any meeting of shareholders, or
adjournment thereof or the payment of any dividend or other distribution or
allotment of any rights or the entitlement of any shareholder to exercise any
rights in respect of any change, conversion or exchange of shares or for the
purpose of any other lawful action; provided, however, that in lieu of closing
the transfer books as aforesaid, the Board of Directors may fix a record date
pursuant to the provisions of Article VIII hereof.
Section 4. Transfer Agents and Registrars. The Company shall, if and
whenever the Board of Directors shall so determine, maintain one or more
transfer offices or agencies, each in charge of a transfer agent designated by
the Board of Directors, where the shares of the capital stock of the Company
shall be directly transferable, and also one or more registry offices, each in
charge of a registrar designated by the Board of Directors, where such shares
of stock shall be registered, and no certificate for shares of the capital
stock of the Company, in respect of which one or more transfer agents and
registrars shall have been designated, shall be valid unless countersigned by
manual or facsimile signature by one of such transfer agents and registered
by one of such registrars. The same corporation may at the direction of the
Board of Directors, be both transfer agent and registrar. The Board of
Directors may also make such additional rules and regulations as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of the capital stock of the Company.
ARTICLE VIII.
Record Date.
In order that the Company may determine the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of shares or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than 70 nor less than 10 days before the date of such
meeting, nor more than 70 days nor less than 10 days prior to any such other
action. Only such shareholders of record on the record date shall be entitled
to such notice of, and to vote at such meeting, or to receive the payment of
such dividend, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on the
books of the Company after any such record date fixed as aforesaid.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting and further provided that the adjournment or
adjournments do not exceed 30 days in the aggregate.
ARTICLE IX.
Dividends.
Pursuant to and upon the conditions of the Articles of Incorporation,
dividends upon the capital stock of the Company may be declared from time to
time by the Board of Directors, in its discretion, provided that no dividend
shall be declared and paid if the Company is or would thereby be rendered
insolvent or which would diminish the amount of its capital stock.
ARTICLE X.
Corporate Seal.
The common corporate seal is, and until otherwise ordered by the
Board of Directors shall be, an impression circular in form upon paper bearing
the words, "UniSource Energy Corporation, Seal".
The seal shall be in the charge of the Secretary, and a duplicate of
the seal may be kept and be used by the Treasurer or by an Assistant Secretary
or Assistant Treasurer.
ARTICLE XI.
Offices.
The address of the Company within the State of Arizona shall be
7037 North 11th Street, Phoenix, Arizona, but the known place of business may
be established and maintained in or outside of the State of Arizona at such
places as the Board of Directors may designate.
ARTICLE XII.
Amendments.
These Bylaws may be altered, amended, or repealed from time to time
by the affirmative vote of a majority of the Board of Directors at any
regular, special or annual meeting.
Exhibit 5(a)
Tucson, Arizona
March 22, 1995
UniSource Energy Corporation
225 West 34th Street
Suite 2110
New York, New York 10122
Ladies and Gentlemen:
I am acting as counsel to Tucson Electric Power
Company, an Arizona corporation ("TEP"), in connection with the
proposed statutory share exchange (the "Share Exchange") between
TEP and UniSource Energy Corporation, an Arizona corporation (the
"Company"). The Share Exchange is to be effected pursuant to an
Agreement and Plan of Exchange (the "Share Exchange Agreement")
between TEP and the Company. Under the terms of the Share
Exchange Agreement, all of the outstanding common stock of TEP
will be exchanged on a share-for-share basis for Company common
stock.
This opinion is being rendered in connection with the
filing by the Company of a Registration Statement on Form S-4
(the "Registration Statement") relating to the registration of
the shares of Company common stock to be issued in the Share
Exchange under the Securities Act of 1933, as amended (the
"Act").
For purposes of this opinion, I have examined originals
or copies, certified or otherwise identified to my satisfaction,
of (i) the Share Exchange Agreement; (ii) the Registration
Statement; (iii) the Articles of Incorporation and Bylaws of the
Company, as in effect on the date hereof and as to be amended
immediately prior to consummation of the Share Exchange; (iv)
resolutions adopted by the Board of Directors of TEP relating to
the Share Exchange; (v) resolutions adopted by the Board of
Directors of the Company relating to the Share Exchange and the
issuance and delivery of Company common stock in connection
therewith; and (vi) such other documents, certificates or other
records as I have deemed necessary or appropriate. In addition,
I have assumed, without investigation, that all shares of TEP
common stock issued, heretofore or hereafter and prior to the
consummation of the Share Exchange, pursuant to director plans,
employee benefit plans and shareholder plans, including without
limitation options and warrants, have been or will be issued
against full consideration therefor authorized by the Board of
Directors of TEP and that certificates therefor have been or will
be countersigned and registered.
Based upon the foregoing, and subject to the
qualifications hereinafter expressed, I am of the opinion that:
(1) TEP is a corporation duly organized, validly
existing and in good standing under the laws of
the State of Arizona.
(2) The Board of Directors of TEP has taken such
action as may be necessary to authorize the
consummation of the Share Exchange.
(3) The Company is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Arizona.
(4) The Board of Directors of the Company has taken
such action as may be necessary to authorize the
consummation of the Share Exchange and to the
issuance and delivery of the Company's common
stock in connection therewith.
(5) The shares of the Company common stock registered
by the Registration Statement will be duly
authorized and validly issued, and fully paid and
non-assessable when (i) the Registration Statement
shall have become effective under the Act; (ii)
the requisite approval for consummation of the
Share Exchange shall have been obtained from the
holders of TEP common stock and the holders of
Company common stock; (iii) TEP and the Company
shall have received all necessary regulatory
approvals required to consummate the Share
Exchange; and (iv) the Share Exchange shall have
been consummated in accordance with the terms of
the Share Exchange Agreement and the laws of the
State of Arizona.
As a member of the Arizona bar, I do not hold myself
out as an expert of the laws of other jurisdictions other than
the laws of the United States and, to the extent the opinions
expressed are dependent upon matters governed by the law of the
State of New York, I have relied, with your consent, upon the
opinion of even date herewith rendered to you by Reid & Priest
LLP.
Reid & Priest LLP is hereby authorized to rely upon
this letter as if such letter were addressed to it. This letter
is not being delivered for the benefit of, nor may it be relied
upon by, the holders of TEP common stock or any other party to
which it is not specifically addressed or to which reliance has
not been expressly permitted hereby.
I hereby consent to the filing of this opinion with the
Securities and Exchange Commission as Exhibit 5(a) to the
Registration Statement and to the reference to me under the
caption "LEGAL MATTERS" in the Proxy Statement-Prospectus
constituting a part thereof.
Very truly yours,
DENNIS R. NELSON
_________________
Dennis R. Nelson
Exhibit 5(b) and Exhibit 8
Reid & Priest LLP
40 West 57th Street
New York, New York 10019-4097
212-603-2000
New York, New York
March 22, 1995
UniSource Energy Corporation
225 West 34th Street
Suite 2110
New York, New York 10122
Ladies and Gentlemen:
We are acting as counsel to Tucson Electric Power
Company, an Arizona corporation ("TEP"), and UniSource Energy
Corporation, an Arizona corporation (the "Company"), in
connection with the proposed statutory share exchange (the "Share
Exchange") between TEP and the Company. The Share Exchange is to
be effected pursuant to an Agreement and Plan of Exchange (the
"Share Exchange Agreement") between TEP and the Company. Under
the terms of the Share Exchange Agreement, all of the outstanding
common stock of TEP will be exchanged on a share-for-share basis
for Company common stock.
This opinion is being rendered in connection with the
filing by the Company of a Registration Statement on Form S-4
(the "Registration Statement") relating to the registration of
the shares of Company common stock to be issued in the Share
Exchange under the Securities Act of 1933, as amended (the
"Act").
For purposes of this opinion, we have examined
originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Share Exchange Agreement; (ii) the
Registration Statement; (iii) the Articles of Incorporation and
Bylaws of the Company, as in effect on the date hereof and as to
be amended immediately prior to consummation of the Share
Exchange; (iv) resolutions adopted by the Board of Directors of
TEP relating to the Share Exchange; (v) resolutions adopted by
the Board of Directors of the Company relating to the Share
Exchange and the issuance and delivery of Company common stock in
connection therewith; and (vi) such other documents, certificates
or other records as we have deemed necessary or appropriate. In
addition, we have assumed, without investigation, that all shares
of TEP common stock issued, heretofore or hereafter and prior to
the consummation of the Share Exchange, pursuant to director
plans, employee benefit plans and shareholder plans, including
without limitation options and warrants, have been or will be
issued against full consideration therefor authorized by the
Board of Directors of TEP and that certificates therefor have
been or will be countersigned and registered.
Based upon the foregoing, and subject to the
qualifications hereinafter expressed, we are of the opinion that:
(1) TEP is a corporation duly organized, validly
existing and in good standing under the laws of
the State of Arizona.
(2) The Board of Directors of TEP has taken such
action as may be necessary to authorize the
consummation of the Share Exchange.
(3) The Company is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Arizona.
(4) The Board of Directors of the Company has taken
such action as may be necessary to authorize the
consummation of the Share Exchange and to the
issuance and delivery of the Company's common
stock in connection therewith.
(5) The shares of the Company common stock registered
by the Registration Statement will be duly
authorized and validly issued, and fully paid and
non-assessable when (i) the Registration Statement
shall have become effective under the Act; (ii)
the requisite approval for consummation of the
Share Exchange shall have been obtained from the
holders of TEP common stock and the holders of
Company common stock; (iii) TEP and the Company
shall have received all necessary regulatory
approvals required to consummate the Share
Exchange; and (iv) the Share Exchange shall have
been consummated in accordance with the terms of
the Share Exchange Agreement and the laws of the
State of Arizona.
We are further of the opinion that the statements
contained in the Proxy Statement/Prospectus under the caption
"PROPOSAL 2 - HOLDING COMPANY PROPOSAL - Certain Federal Income
Tax Consequences" describing certain Federal income tax
consequences to holders of TEP common stock, as qualified
therein, constitutes an accurate description, in general terms,
of the indicated United States Federal income tax consequences of
the Share Exchange.
As members of the New York bar, we do not hold
ourselves out as experts of the laws of other jurisdictions other
than the laws of the United States and, to the extent the
opinions expressed are dependent upon matters governed by the law
of the State of Arizona, we have relied, with your consent, upon
the opinion of even date herewith rendered to you by Dennis R.
Nelson, Esq.
TEP is is hereby authorized to rely upon this letter as
if such letter were addressed to it. This letter is not being
delivered for the benefit of, nor may it be relied upon by, the
holders of TEP common stock or any other party to which it is not
specifically addressed or to which reliance has not been
expressly permitted hereby.
We hereby consent to the filing of this opinion with
the Securities and Exchange Commission as Exhibit 5(b) and as Exhibit 8
to the Registration Statement and to the reference to our firm under the
caption "LEGAL MATTERS" in the Proxy Statement-Prospectus
constituting a part thereof.
Very truly yours,
REID & PRIEST LLP
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement on Form S-4 of our report (which expresses an
unqualified opinion and includes an explanatory paragraph
referring to the timing of the recovery of the costs associated
with 37.5% of Springerville Unit 2 which cannot presently be
determined) dated January 31, 1995 (March 7, 1995 as to Note 6)
appearing in the Annual Report on Form 10-K of Tucson Electric
Power Company and subsidiaries for the year ended December 31, 1994
and to the reference to us under the heading "EXPERTS" in the Proxy
Statement-Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Tucson, Arizona
March 21, 1995
Exhibit 99
(FORM OF PROXY FOR REGISTERED SHAREHOLDERS)
Shareholder Name
Address
Address
You are cordially invited to join us at the 1995 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 26,
1995 starting at 2:30 p.m. Registration and admittance will start at
2:30 p.m. and the Meeting will begin promptly at 2:30 p.m. At the
meeting we will elect directors, vote on the Holding Company Proposal
and amendments to the 1994 Omnibus Stock and Incentive Plan.
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 26th of May. In the
meantime, if you have questions regarding the Meeting, please phone our
Shareholder 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 & 3.
ACCOUNT 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 & 3.
1. ELECTION OF DIRECTORS:
NOMINEES FOR WITHHELD NOMINEES FOR WITHHELD
Alexander [] [] Seger [] []
Bayless [] [] Shropshire [] []
Canchola [] [] Sundt [] []
Jeter [] [] Winter [] []
O'Rielly [] []
2. HOLDING COMPANY PROPOSAL
[] FOR [] AGAINST [] ABSTAIN
3. AMENDMENTS TO THE 1994 OMNIBUS STOCK AND INCENTIVE PLAN
[] 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 26, 1995
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
26, 1995, 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&3 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 & 3.
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 1994 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 & 3.
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 & 3.
1. ELECTION OF DIRECTORS: FOR WITHHOLD AUTHORITY
ALEXANDER, BAYLESS, all nominees as to all nominees
CANCHOLA, JETER, (except as indicated below)
O'RIELLY, SEGER, [] []
SHROPSHIRE, SUNDT,
WINTER
Withhold Authority to vote for the following nominees (write names):
2. HOLDING COMPANY PROPOSAL
[] FOR [] AGAINST [] ABSTAIN
3. AMENDMENTS TO THE 1994 OMNIBUS STOCK AND INCENTIVE PLAN
[] 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 26, 1995
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
26, 1995, 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&3 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 & 3.
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 1994 Annual Report attached
thereto.
(continued, and to be voted on other side)
