As filed with the Securities and Exchange Commission on January 6, 1998.
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
UNISOURCE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
___________________
Arizona 86-0786732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 West Sixth Street
Tucson, Arizona 85701
(520) 571-4000
________________________________________
(Address of principal executive offices)
UNISOURCE ENERGY CORPORATION 1994 OMNIBUS STOCK AND INCENTIVE PLAN
(Full title of the plan)
Dennis R. Nelson, General Counsel
UniSource Energy Corporation
220 West Sixth Street
Tucson, Arizona 85701
_______________________________________
(Name and address of agent for service)
Telephone number, including area code, of agent for service: (520) 571-4000
___________________
<TABLE>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Proposed Proposed
maximum maximum
Title of Amount offering aggregate Amount of
securities to be price offering registration
to be registered registered per unit price fee
Common Stock, no par 1,600,000(1) $18.03125(2) $28,850,000(2) $8,511(2)
value shares
(1) This Registration Statement covers, in addition to the
number of shares of Common Stock stated above, options and
other rights to purchase or acquire the shares of Common
Stock covered by the Prospectus and, pursuant to Rule
416(c) under the Securities Act of 1933, an indeterminate
number of shares which by reason of certain events
specified in the UniSource Energy Corporation 1994 Omnibus
Stock and Incentive Plan (formerly the Tucson Electric
Power Company 1994 Omnibus Stock and Incentive Plan and
referred to herein as the "Plan") may become subject to the
Plan.
(2) Pursuant to Rule 457(h), the maximum offering price, per
share and in the aggregate, and the registration fee were
calculated based upon the average of the high and low
prices of the Common Stock on January 2, 1998 as reported
on the New York Stock Exchange.
</TABLE>
The Exhibit Index for this Registration Statement is at
page S-3.
<PAGE>
PART I
INFORMATION REQUIRED IN THE
SECTION 10(a) PROSPECTUS
The documents containing the information specified in
Part I of Form S-8 (plan information and registrant information)
will be sent or given to optionees as specified by Rule 428(b)(1)
of the Securities Act of 1933, as amended (the "Securities Act").
Such documents need not be filed with the Securities and Exchange
Commission (the "Commission") either as part of this Registration
Statement or as prospectuses or prospectus supplements pursuant to
Rule 424 of the Securities Act. These documents, which include the
statement of availability required by Item 2 of Form S-8, and the
documents incorporated by reference in this Registration Statement
pursuant to Item 3 of Form S-8 (Part II hereof), taken together,
constitute a prospectus that meets the requirements of
Section 10(a) of the Securities Act.
<PAGE>
PART II
INFORMATION REQUIRED IN THE
REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are
incorporated herein by reference:
(a) Annual Report on Form 10-K filed on March 3, 1997
by Tucson Electric Power Company ("TEP"), as
predecessor to UniSource Energy Corporation, for
TEP's fiscal year ended December 31, 1996;
(b) Quarterly Reports on Forms 10-Q filed by TEP for
its quarterly periods ended March 31, 1997, June
30, 1997 and September 30, 1997;
(c) Current Reports on Forms 8-K filed by TEP and dated
November 19, 1997, November 14, 1997, November 7,
1997, July 11, 1997, July 9, 1997, and June 26,
1997;
(d) Current Report on Form 8-K filed by UniSource
Energy Corporation (the "Company") and dated
January 6, 1998; and
(e) The description of the Company's Common Stock
contained in the Company's Registration
Statement on Form 8-A, filed with the Commission
on December 23, 1997.
All documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), prior to the filing
of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities
then remaining unsold shall be deemed to be incorporated by
reference into the prospectus and to be a part hereof from the date
of filing of such documents. Any statement contained herein or in
a document, all or a portion of which is incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified
or superseded for purposes of this Registration Statement to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or amended, to constitute a part
of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
The Common Stock is registered pursuant to Section 12 of
the Exchange Act. Therefore, the description of the securities is
omitted.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The validity of the original issuance of Common Stock
registered hereby is passed on for the Company by Dennis R. Nelson.
Mr. Nelson is the General Counsel of the Company and is compensated
as an employee of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Arizona corporate law generally authorizes, on a non-
exclusive basis, indemnification of officers and directors who have
acted or failed to act, in good faith, in a manner believed to be
in or not opposed to the best interest of the Company (with certain
limitations in the case of actions by or in the right of the
Company) and mandates such indemnification in the case of an
officer or director who is successful on the merits or otherwise in
defense of claims by reason of the fact or such status as an
officer or director.
Article SIXTH of the Amended and Restated Articles of
Incorporation of the Company provides, in part, as follows:
(B) No director of the Company shall be personally
liable to the Company 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 Company 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 Company, or, while a director or officer of
the Company, is or was serving at the request of the Company
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 Company and including,
further, any appeal in connection with any such action, suit
or proceeding.
(2) The Company shall, to the maximum extent
permitted by applicable law, pay any Expenses incurred by a
director or officer of the Company 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 Company by resolution of the Board of
Directors, may extend the benefits of this paragraph (C) of
Article SIXTH to employees and agents of the Company (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 Company and each person who is an Indemnified
Person at any time while this paragraph (C) is in effect any
may be evidenced by a separate contract between the Company
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 Company 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 Company
would have the power to indemnify him against such liability
under this Article. The Company'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 Company 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 Company or in a
resolution of the Board of Directors.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
See the attached Exhibit Index on page S-3.
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus
required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any
facts or events arising after the effective date of
this Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
this Registration Statement; and
(iii) To include any material
information with respect to the plan of
distribution not previously disclosed in this
Registration Statement or any material change to
such information in this Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant with or
furnished to the Commission pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference
in this Registration Statement;
(2) That, for the purpose of determining any
liability under the Securities 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; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of 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 this 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.
(h) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described in Item 6 above, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities 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 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 Securities Act and will be governed by the final adjudication
of such issue.
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the
Securities Act of 1933, the registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements
for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Tucson, State of Arizona, on
December 31, 1997.
UNISOURCE ENERGY CORPORATION
By: /s/ Charles E. Bayless
Charles E. Bayless
Its: Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Charles E. Bayless and Dennis Nelson, or each of them
individually, his or her true and lawful attorney-in-fact and agent
with full powers of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to
do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any
of them individually, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Act, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
SIGNATURE TITLE DATE
/s/ Charles E. Bayless Chairman, President and December 31, 1997
Charles E. Bayless Chief Executive Officer
(Principal Executive Officer)
/s/ Ira R. Adler Senior Vice President and December 31, 1997
Ira R. Adler Chief Financial Officer
(Principal Financial Officer)
/s/ Karen G. Kissinger Vice President and December 31, 1997
Karen G. Kissinger Controller
/s/ Elizabeth T. Bilby Director December 31, 1997
Elizabeth T. Bilby
/s/ Jose L. Canchola Director December 31, 1997
Jose L. Canchola
/s/ John L. Carter Director December 31, 1997
John L. Carter
/s/ John A. Jeter Director December 31, 1997
John A. Jeter
/s/ R.B. O'Rielly Director December 31, 1997
R.B. (Buck) O'Rielly
/s/ Martha R. Seger, Ph.D Director December 31, 1997
Martha R. Seger, Ph.D.
/s/ Donald G. Shropshire Director December 31, 1997
Donald G. Shropshire
/s/ H. Wilson Sundt Director December 31, 1997
H. Wilson Sundt
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
4.1 Tucson Electric Power Company 1994 Omnibus
Stock and Incentive Plan.
4.2 Forms of Option Agreements.
4.3 Form of Restricted Stock Award Agreement.
4.4 Amendment to Tucson Electric Power Company
1994 Omnibus Stock and Incentive Plan.
4.5 Tucson Electric Power Company Stock Unit
Award Program.
4.6 Performance Share Award Agreement.
4.7 General Provisions Applicable to Performance
Share Awards Granted Under the Tucson Electric
Power Company 1994 Omnibus Stock and Incentive
Plan.
5. Opinion of Counsel (opinion re legality).
15. Letter re unaudited interim financial
information.
23.1 Consent of Deloitte & Touche LLP (consent of
independent auditors).
23.2 Consent of Counsel (included in Exhibit 5).
24. Power of Attorney (included in this
Registration Statement under "Signatures").
EXHIBIT 4.1
TUCSON ELECTRIC POWER COMPANY
1994 OMNIBUS STOCK AND INCENTIVE PLAN
TABLE OF CONTENTS
Page
Section 1
Establishment, Purpose, and Effective Date of Plan . . . . . . 1
1.1 Establishment. . . . . . . . . . . . . . . . . . 1
1.2 Purpose. . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Date . . . . . . . . . . . . . . . . . 1
Section 2
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Definitions. . . . . . . . . . . . . . . . . . . 1
2.2 Gender and Number. . . . . . . . . . . . . . . . 3
Section 3
Eligibility and Participation. . . . . . . . . . . . . . . . . 3
3.1 Eligibility and Participation. . . . . . . . . . 3
Section 4
Administration . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Administration . . . . . . . . . . . . . . . . . 3
Section 5
Stock Subject to Plan. . . . . . . . . . . . . . . . . . . . . 4
5.1 Number . . . . . . . . . . . . . . . . . . . . . 4
5.2 Lapsed Awards. . . . . . . . . . . . . . . . . . 4
5.3 Adjustment in Capitalization . . . . . . . . . . 4
Section 6
Duration of Plan . . . . . . . . . . . . . . . . . . . . . . . 4
6.1 Duration of Plan . . . . . . . . . . . . . . . . 4
Section 7
Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . 4
7.1 Grant of Options . . . . . . . . . . . . . . . . 4
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. . . . . . . . . . . . . . . . . . . . . 5
7.7 Restrictions on Stock Transferability. . . . . . 6
7.8 Early Termination of Options on Employment Due
to Death, Disability, or Retirement. . . . . . . 6
7.9 Early Termination of Options on Termination of
Employment Other than for Death, Disability,
or Retirement. . . . . . . . . . . . . . . . . . 6
7.10 Non-Transferability of Options . . . . . . . . . 7
Section 8
Stock Appreciation Rights. . . . . . . . . . . . . . . . . . . 7
8.1 Grant of Stock Appreciation Rights . . . . . . . 7
8.2 Payment of SAR Amount. . . . . . . . . . . . . . 7
8.3 Form and Timing of Payment . . . . . . . . . . . 7
8.4 Rule 16b-3 Requirements. . . . . . . . . . . . . 7
8.5 Term of SAR. . . . . . . . . . . . . . . . . . . 8
8.6 Termination of Employment. . . . . . . . . . . . 8
8.7 Non-Transferability of SARs. . . . . . . . . . . 8
Section 9
Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . 8
9.1 Grant of Restricted Stock. . . . . . . . . . . . 8
9.2 Transferability. . . . . . . . . . . . . . . . . 8
9.3 Other Restrictions . . . . . . . . . . . . . . . 8
9.4 Voting Rights. . . . . . . . . . . . . . . . . . 8
9.5 Dividends and Other Distributions. . . . . . . . 8
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. . . . . . 9
Section 10
Performance Units and Performance Shares . . . . . . . . . . . 10
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. . . . . . . . . . . . 10
10.5 Termination of Employment for Other Reasons. . . 10
10.6 Non-Transferability. . . . . . . . . . . . . . . 10
Section 11
Discounted Stock Options . . . . . . . . . . . . . . . . . . . 11
11.1 Grant of Discounted Stock Options. . . . . . . . 11
11.2 Pricing of Discounted Stock Options. . . . . . . 11
Section 12
Beneficiary Designation. . . . . . . . . . . . . . . . . . . . 11
12.1 Beneficiary Designation. . . . . . . . . . . . . 11
Section 13
Rights of Employees. . . . . . . . . . . . . . . . . . . . . . 11
13.1 Employment . . . . . . . . . . . . . . . . . . . 11
13.2 Participant. . . . . . . . . . . . . . . . . . . 11
Section 14
Change in Control. . . . . . . . . . . . . . . . . . . . . . . 11
14.1 In General . . . . . . . . . . . . . . . . . . . 11
14.2 Definition . . . . . . . . . . . . . . . . . . . 12
Section 15
Amendment, Modification, and Termination of Plan . . . . . . . 12
15.1 Amendment, Modification, and Termination of
Plan . . . . . . . . . . . . . . . . . . . . . . 12
Section 16
Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . 13
16.1 Tax Withholding. . . . . . . . . . . . . . . . . 13
16.2 Disposition of Shares. . . . . . . . . . . . . . 13
Section 17
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 13
17.1 Indemnification. . . . . . . . . . . . . . . . . 13
Section 18
Requirements of Law. . . . . . . . . . . . . . . . . . . . . . 14
18.1 Requirements of Law. . . . . . . . . . . . . . . 14
18.2 Governing Law. . . . . . . . . . . . . . . . . . 14
Section 19
Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
19.1 Funding of Plan. . . . . . . . . . . . . . . . . 14
<PAGE>
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 slotted 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 restric-
tions 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 automati-
cally 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 outstanding Common Stock of the Company;
(ii) any person (as such term is defined in Section
13(d) of the Exchange 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 satisfaction 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 governmental 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 4.2
TUCSON ELECTRIC POWER COMPANY
AWARD NOTICE AND OPTION AGREEMENT
EMPLOYEE GRANTEE
This Agreement between Tucson Electric Power Company (the
"Company") and ________________________ (the "Grantee") contains
specific terms and benefits which apply to the Grantee under the
Tucson Electric Power Company 1994 Omnibus Stock and Incentive
Plan ("Plan").
1. NOTICE OF AWARD OF STOCK OPTIONS: The Company hereby awards
options to the Grantee to purchase the Company's common stock as
follows:
Incentive Stock Option Grant No. ###
Date of Grant #####
Total Number of Options Granted #####
Exercise Price Per Share #####
Expiration Date of Unexercised Options #####
Options shall vest ratably and become exercisable in one-third
(1/3) increments on each anniversary of the grant date. This
award is subject to the: (a) terms and conditions of the Plan;
(b) Policies and Procedures necessary for Plan administration;
and (c) provisions of this Agreement.
2. STATUS OF THE OPTIONS: The options are intended to be
incentive stock options ("ISOs") as defined by Section 422 of the
Internal Revenue Code of 1986, as amended ("IRC"); however, the
Company does not guarantee that the options will qualify as ISOs.
3. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION: The Grantee
agrees to promptly notify the Company's Shareholder Services
section if the Grantee disposes of the shares of common stock
acquired through these options: (a) within one year from the date
the Grantee exercises all or part of the options, or (b) within
two years of the date of grant. For purposes of this section,
"disposes" includes holding the stock in the name of another
person as well as any sale or exchange.
During periods described above, the Company may place a legend or
legends on any stock certificate(s) for shares acquired on
exercise of the options, requesting that the Company be notified
of any such transfers. Regardless of the placement of a legend,
the Grantee remains obligated to notify the Company of any such
transfer.
4. BINDING EFFECT: This Agreement shall inure to the benefit of
the successors and assigns of the Company and shall be binding
upon the Grantee and the spouse, heirs, executors,
administrators, successors and assigns of the Grantee.
5. INTEGRATED AGREEMENT: This Agreement and the Plan constitute
the entire understanding and agreement of the Grantee and the
Company regarding the Plan and the award of options. There are
no other agreements, understandings, representations or
warranties between the Grantee and the Company other than those
set forth or provided for here or in the Plan. This Agreement
does not constitute a contract for continued employment with the
Company. The provisions of this Agreement and the Plan shall
survive any exercise of options, and shall remain in full force
and effect until the exercise or expiration of the options
awarded.
6. SUBJECT TO PLAN: Except as may be specifically set forth
herein, the rights of the Grantee are subject to the terms and
conditions of the Plan, including Policies and Procedures
established to effect its administration. The provisions of the
Plan are incorporated by reference.
7. GOVERNING LAW: This Agreement shall be construed in
accordance with and governed by the laws of the State of Arizona.
IN WITNESS WHEREOF, the Company and Grantee have executed this
Agreement.
TUCSON ELECTRIC POWER COMPANY
Dated: _________________ By: _____________________________
The Grantee represents that he/she is familiar with the terms and
provisions of this Agreement and the Plan, hereby acknowledges
receipt of both documents, and hereby accepts the options subject
to all of the terms and provisions thereof. The Grantee hereby
agrees to accept as binding, conclusive and final all decisions
or interpretations of the Committee (including Policies and
Procedures established to administer the Plan) regarding any
questions arising under this Agreement or the Plan.
GRANTEE
Dated: __________________ By: _____________________________
<PAGE>
TUCSON ELECTRIC POWER COMPANY
AWARD NOTICE AND STOCK OPTION AGREEMENT
Manager/Officer Grantee
This Agreement between Tucson Electric Power Company (the
"Company") and _________________________ (the "Grantee") contains
specific terms and benefits which apply to the Grantee under the
Tucson Electric Power Company 1994 Omnibus Stock and Incentive
Plan ("Plan").
1. NOTICE OF AWARD OF STOCK OPTIONS: The Company hereby awards
options to the Grantee to purchase the Company's common stock as
follows:
Incentive Stock Option Grant No. ###
Date of Grant #####
Total Number of Options Granted #####
Exercise Price Per Share #####
Fair Market Value of Shares on Date of Grant #####
Expiration Date of Unexercised Options #####
Options shall vest ratably and become exercisable in one-third
(1/3) increments on each anniversary of the grant date. This
award is subject to the: (a) terms and conditions of the Plan;
(b) Policies and Procedures necessary for Plan administration;
and (c) provisions of this Agreement.
2. STATUS OF THE OPTIONS: The options are intended to be
incentive stock options ("ISOs") as defined by Section 422 of the
Internal Revenue Code of 1986, as amended ("IRC"); however, the
Company does not guarantee that the options will qualify as ISOs.
3. LIMITATION OF ISO TREATMENT: If the options qualify as ISOs
as intended, preferential tax treatment is limited to the first
$100,000 in aggregate fair market value of shares underlying
stock options which are exercisable for the first time during a
given calendar year. Remaining stock options that are first
exercisable during the year will be deemed to be nonqualified
stock options.
4. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION: The Grantee
agrees to promptly notify the Company's Shareholder Services
section if the Grantee disposes of the shares of common stock
acquired through these options: (a) within one year from the date
the Grantee exercises all or part of the options, or (b) within
two years of the date of grant. For purposes of this section,
"disposes" includes holding the stock in the name of another
person as well as any sale or exchange.
During periods described above, the Company may place a legend or
legends on any stock certificate(s) for shares acquired on
exercise of the options, requesting that the Company be notified
of any such transfers. Regardless of the placement of a legend,
the Grantee remains obligated to notify the Company of any such
transfer.
5. BINDING EFFECT: This Agreement shall inure to the benefit of
the successors and assigns of the Company and shall be binding
upon the Grantee and the spouse, heirs, executors,
administrators, successors and assigns of the Grantee.
6. INTEGRATED AGREEMENT: This Agreement and the Plan constitute
the entire understanding and agreement of the Grantee and the
Company regarding the Plan and the award of options. There are
no other agreements, understandings, representations or
warranties between the Grantee and the Company other than those
set forth or provided for here or in the Plan. This Agreement
does not constitute a contract for continued employment with the
Company. The provisions of this Agreement and the Plan shall
survive any exercise of options, and shall remain in full force
and effect until the exercise or expiration of the options
awarded.
7. SUBJECT TO PLAN: Except as may be specifically set forth
herein, the rights of the Grantee are subject to the terms and
conditions of the Plan, including Policies and Procedures
established to effect its administration. The provisions of the
Plan are incorporated by reference.
8. GOVERNING LAW: This Agreement shall be construed in
accordance with and governed by the laws of the State of Arizona.
IN WITNESS WHEREOF, the Company and Grantee have executed this
Agreement.
TUCSON ELECTRIC POWER COMPANY
Dated: ____________________ By: ___________________________
The Grantee represents that he/she is familiar with the terms and
provisions of this Agreement and the Plan, hereby acknowledges
receipt of both documents, and hereby accepts the options subject
to all of the terms and provisions thereof. The Grantee hereby
agrees to accept as binding, conclusive and final all decisions
or interpretations of the Committee (including Policies and
Procedures established to administer the Plan) regarding any
questions arising under this Agreement or the Plan. The Grantee
is aware that exercise of these options constitutes a purchase
for purposes of Section 16(b) of the Securities Act of 1933.
GRANTEE
Dated: ____________________ By: __________________________
TUCSON ELECTRIC POWER COMPANY
RESTRICTED STOCK AWARD AGREEMENT
THIS RESTRICTED STOCK AWARD AGREEMENT (this "Agreement")
is dated as of the ____ day of __________, 1997, between TUCSON
ELECTRIC POWER COMPANY, an Arizona corporation (the "Company"), and
_________________________ (the "Employee").
W I T N E S S E T H
WHEREAS, the Company has adopted and the shareholders of
the Company have approved the Tucson Electric Power Company 1994
Stock and Incentive Plan (the "Plan"); and
WHEREAS, the Compensation Committee of the Board of
Directors (the "Committee") has granted to the Employee as of the
date first written above (the "Award Date") a restricted stock
award ("Restricted Stock Award") under the Plan, upon the terms and
conditions set forth herein; and
WHEREAS, the Company has not yet determined whether the
Restricted Stock Award will be satisfied through the issuance of
new shares of its common stock, no par value ("Common Stock"), or
shares of Common Stock that it acquires on the open market; and
WHEREAS, the Company and the Employee desire to evidence
the Committee's grant of the Restricted Stock Award and provide
that the Committee will, subject to the restrictions described
below, transfer shares of its Common Stock to Employee upon the
terms and conditions described herein as soon as practical
following the Company's determination as to the source of such
shares;
NOW, THEREFORE, in consideration of the services rendered
and to be rendered by the Employee, and the mutual promises made
herein and the mutual benefits to be derived therefrom, the parties
agree to the terms and conditions set forth herein (including the
terms and conditions incorporated by reference from the Plan).
1. DEFINED TERMS. Capitalized terms not otherwise
defined herein shall have the meaning assigned to such terms in the
Plan.
2. AWARD OF RESTRICTED STOCK. Subject to the terms of
this Agreement, the Company grants to the Employee a Restricted
Stock Award with respect to an aggregate of ____________ shares of
Common Stock (the "Restricted Stock") as of the Award Date. The
Company will transfer such shares of Restricted Stock to Employee
after it has determined the source of such shares.
3. OWNERSHIP RIGHTS OF RESTRICTED STOCK.
(a) Restrictions on Transfer. Prior to the time they
become vested, neither the shares of Restricted Stock comprising
the Restricted Stock Award nor any interest therein, amount payable
in respect thereof, nor Restricted Property (as defined in Section
7) subject thereto, may be sold, assigned, transferred, pledged or
otherwise disposed of, alienated or encumbered, either voluntarily
or involuntarily, other than by will or the laws of descent and
distribution.
(b) Dividends; Voting Rights. Subject to the terms of
this Agreement, during the Restricted Period (as defined in Section
4), the Employee shall have, with respect to the Restricted Stock,
all rights of a shareholder of the Company, including the right to
vote such shares and the right to receive all regular cash
dividends, if any, paid with respect to the shares of Restricted
Stock; provided, that such voting and dividend rights shall
terminate immediately with respect to any shares of Restricted
Stock upon forfeiture of those shares pursuant to Section 5 of this
Agreement.
(c) Certificates. Subject to the requirements of
Section 8, the Company shall issue a certificate or certificates
for the shares of Restricted Stock subject to the Restricted Stock
Award, registered in the name of the Employee, which certificate(s)
shall, upon redelivery thereof to the Company pursuant to
subsection (d) below, be held by the Company until the restrictions
on such shares shall have lapsed and the shares shall thereby have
become vested or the shares represented thereby are forfeited
hereunder. The certificate(s) representing shares forfeited
hereunder and any shares accumulated thereon shall be cancelled;
any other rights or property (including Restricted Property)
accumulated in respect thereof shall also be forfeited and shall
revert to the Company. The share certificate(s) representing
Restricted Stock shall bear a legend referring to this Agreement
and restrictions and limitations on such shares.
(d) Certificates to be Held by Company; Power of
Attorney. Upon delivery to the Employee of the certificate(s)
representing shares of Restricted Stock awarded to the Employee,
the Employee shall redeliver such certificate(s) to the Company,
together with a stock power or stock powers, in blank, with respect
to such certificate(s), to be held by the Company pursuant to the
terms hereof. The Employee hereby appoints the Company and each of
its authorized representatives as the Employee's attorney(s)-in-
fact to effect any transfer of unvested forfeited shares (or shares
otherwise reacquired by the Company hereunder) or related cash,
property or rights (including Restricted Property) to the Company
as may be required pursuant to the Plan and this Agreement and to
execute such documents as the Company or such representatives deem
necessary or advisable in connection with any such transfer.
(e) Delivery of Certificates. Subject to the
requirements of Section 8, promptly after the lapse or other
release of restrictions in accordance with the terms hereof, a
certificate or certificates evidencing the number of shares of
Common Stock as to which the restrictions have lapsed or been
released or such lesser number as may be permitted pursuant to
Section 9 shall be delivered to the Employee or other person
entitled under the Plan to receive the shares. The Employee or
such other person shall deliver to the Company any representations
or other documents or assurances required pursuant to Section 8.
The shares so delivered shall no longer be Restricted Stock or
restricted shares hereunder or under the Plan.
(f) Return of Shares. Upon the occurrence of any for-
feiture of shares of Restricted Stock hereunder, such unvested,
forfeited shares shall, without payment of any consideration by the
Company for such transfer, be automatically transferred to the
Company, without any other action by the Employee, or the
Employee's Beneficiary or Personal Representative, as the case may
be. The Company may exercise its powers under Section 3(d) and
take any other action necessary or advisable to evidence such
transfer. The Employee, or the Employee's Beneficiary or Personal
Representative, as the case may be, shall deliver any additional
documents of transfer that the Company may request to confirm the
transfer of such unvested, forfeited shares to the Company.
(g) Delivery of Shares. Vested shares and any other
amounts deliverable pursuant to this Award shall be delivered and
paid only to the Employee or the Employee's Beneficiary or Personal
Representative, as the case may be.
4. LAPSE OF RESTRICTIONS. The shares of Restricted
Stock awarded to the Employee pursuant to Section 2 hereof and any
additional Restricted Property shall be subject to the restrictions
set forth in Section 3(a) during the Restricted Period (as defined
below). The "Restricted Period" shall commence as of the Award
Date and shall terminate as follows:
Date Shares Become Percentage of Shares
Free From Restrictions Free From Restrictions
First anniversary 33-1/3%
of Award Date
Second anniversary 33-1/3%
of Award Date
Third anniversary 33-1/3%
of Award Date
5. TERMINATION OF EMPLOYMENT.
(a) In the event that Employee terminates employment
with the Company for any reason other than those set forth in
subsections 5(b) and 5(c) during the Restricted Period, then any
shares of Restricted Stock which are still subject to any
restrictions set forth above shall upon such termination of
employment automatically be forfeited and returned to the Company;
provided, however, that in the event of an involuntary termination
of Employee's employment, the Committee may, in its sole
discretion, waive the automatic forfeiture of any or all shares of
Restricted Stock and may add such new restrictions as it deems
appropriate.
(b) In the event that Employee 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 Restricted Period applicable to
the Restricted Stock pursuant to Section 4 hereof shall
automatically terminate and, except as otherwise provided in
Section 8, the shares of Restricted Stock shall thereby be free of
restrictions and freely transferable. In the event that the
Employee terminates 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.
(c) If the employment of the Employee terminates by
reason of death or Disability, the restrictions applicable to the
shares of Restricted Stock pursuant to Section 4 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 Restricted Period. 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. The Calculated Portion (as defined
below) of all shares of Restricted Stock, which are then subject to
any restrictions set forth above, shall automatically be made free
from restrictions. The remaining shares of Restricted Stock shall
be forfeited and returned to the Company except to the extent such
shares shall be made free from restrictions by the Committee. The
"Calculated Portion" shall mean the number of shares (rounded to
the nearest whole number) equal to the number of shares of
Restricted Stock granted, multiplied by the number of full months
which have elapsed since the Award Date, divided by the maximum
number of full months remaining in the Restricted Period.
6. CONTINUANCE OF EMPLOYMENT. Notwithstanding any
commitment of the Employee to remain in the employ of the Company,
the grant of this Award shall not confer upon the Employee any
right with respect to the continuation of his or her employment by
the Company or any Subsidiary or alter or interfere in any way with
the right of the Company or of any Subsidiary at any time to
terminate such employment or to change the compensation of the
Employee or other terms of his or her employment; and neither shall
these terms alter or in any way affect the rights of the Company or
the Employee under any other written employment agreement between
them, except as expressly provided herein.
7. ADJUSTMENTS UPON SPECIFIED EVENTS. Upon the
occurrence of certain events relating to the Company's stock
contemplated by Section 5.3 of the Plan, the Committee shall make
adjustments if appropriate in the number and kind of securities
that may become vested under this Award. If any adjustment shall
be made under Section 5.3 or 9.5 of the Plan pursuant to an event
described therein and the shares of Restricted Stock are not fully
vested upon such event or prior thereto, the restrictions
applicable to such shares of Restricted Stock shall continue in
effect with respect to any consideration or other securities (the
"Restricted Property"), received in respect of such Restricted
Stock. Such Restricted Property shall vest at such times and in
such proportion as the shares of Restricted Stock to which the
Restricted Property is attributable vest, or would have vested
pursuant to the terms hereof if such shares of Restricted Stock had
remained outstanding.
8. COMPLIANCE; APPLICATION OF SECURITIES LAWS.
Notwithstanding anything else contained herein to the contrary, no
shares of Common Stock shall be delivered and (subsequent to
vesting) no shares shall be offered for sale by the Employee unless
and until (i) the Company has received ACC approval to issue the
shares and (ii) any then applicable requirements of the Securities
and Exchange Commission (the "Commission") or any other regulatory
agency having jurisdiction and any exchanges upon which the Common
Stock may be listed shall have been fully satisfied. Upon the
Company's request, the Employee, or any other person entitled to
such shares of Common Stock pursuant to this Award, shall provide
a written assurance of compliance (or representations reasonably
requested by the Company to assure such compliance) satisfactory to
the Company.
9. WITHHOLDING TAX. The Employee agrees that, in the
event the award of the Restricted Stock or the expiration of
restrictions thereon results in the Employee's realization of
income which for federal, state or local income tax purposes is, in
the opinion of counsel for the Company, subject to withholding of
tax at source by the Company, the Employee will pay to the Company
an amount equal to such withholding tax (or the Company may
withhold such amount from the Employee's salary or from dividends
deposited with the Company with respect to the Restricted Stock).
To the extent permissible under tax, securities and other
laws, the Company may, in its sole discretion, allow the Employee
to satisfy a tax withholding requirement (i) by using already owned
(and fully vested) shares; (ii) through a cashless transaction; or
(iii) by directing the Company to apply shares of stock to which
the Employee is entitled as a result of the lapse of the
Restriction Period.
10. INVESTMENT REPRESENTATIONS. The Employee represents
and agrees that if the Restricted Stock is awarded at a time when
there is not in effect under the Securities Act of 1933 (the
"Securities Act") a registration statement relating to the Common
Stock and there is not available for delivery a prospectus meeting
the requirements of Section 10(a)(3) of the Securities Act, (i) the
Employee will acquire the shares upon such award for the purpose of
investment and not with a view to their resale or distribution,
(ii) that upon such award, the Employee will furnish to the Company
an investment letter in form and substance satisfactory to the
Company, (iii) prior to selling or offering for sale any shares of
Common Stock, the Employee will furnish the Company with an opinion
of counsel satisfactory to it to the effect that such sale may
lawfully be made and will furnish it with such certificates as to
factual matters as it may reasonably request, and (iv) that
certificates representing shares of Common Stock may be marked with
an appropriate legend describing such conditions precedent to sale
or transfer.
11. LAWS APPLICABLE TO CONSTRUCTION. The
interpretation, performance and enforcement of the Award and this
Agreement shall be governed by the laws of the State of Arizona.
12. ACCELERATION. In the event of a change in control,
as described in Section 14.2 of the Plan, the Restricted Stock
shall immediately vest free of restrictions.
13. NOTICES. Any notice to be given to the Company
under the terms of this Agreement shall be in writing and addressed
to the Company at its principal office located at 220 West Sixth
Street, Tucson, Arizona 85702, Attention: Corporate Secretary, and
any notice to be given to the Employee shall be addressed to him or
her at the address given beneath the Employee's signature hereto,
or at such other address as either party may hereafter designate in
writing to the other party.
14. AMENDMENT. This Agreement may only be amended in
writing by an instrument signed by both parties.
15. GENERAL TERMS. The award of Restricted Stock and
this Agreement are subject to, and the Company and the Employee
agree to be bound by, the provisions of the Plan that apply to the
Restricted Stock or Restricted Stock awards. Such provisions are
incorporated herein by this reference. The Employee acknowledges
receiving a copy of the Plan and reading its applicable provisions.
Provisions of the Plan that grant discretionary authority to the
Committee shall not create any rights in the Employee, unless such
rights are expressly set forth herein.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date and year first written above.
TUCSON ELECTRIC POWER COMPANY,
an Arizona corporation
By: ___________________________________
Name: _________________________________
Title: ________________________________
EMPLOYEE
__________________________________
(Signature)
__________________________________
(Print Name)
__________________________________
(Address)
__________________________________
(City, State, Zip Code)
__________________________________
(Social Security Number)
<PAGE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing
Restricted Stock Award Agreement by the Company, I,
_________________, the spouse of the Employee herein named, do
hereby join with my spouse in executing the foregoing Restricted
Stock Award Agreement and do hereby agree to be bound by all of the
terms and provisions thereof and of the Plan.
DATED: _______________, 19__. __________________________
Signature of Spouse
AMENDMENT TO TUCSON ELECTRIC POWER COMPANY
1994 OMNIBUS STOCK AND INCENTIVE PLAN
The Tucson Electric Power Company 1994 Omnibus Stock and
Incentive Plan is amended as follows:
1. Section 2.1(a) of the Plan is amended to read as follows:
"'Award' means any Option, Stock Appreciation Right,
Restricted Stock, Performance Unit, Performance Share,
or Stock Unit granted under this Plan."
2. Section 2.1 of the Plan is amended by adding the following
subsection (s) at the end thereof:
"(s) 'Stock Unit' means a non-voting unit of
measurement which is deemed for bookkeeping purposes to
be equivalent to one outstanding share of Stock (subject
to adjustment)."
3. Section 4.1 of the Plan is amended by adding the following
paragraphs thereto:
"Notwithstanding the provisions hereof regarding the
term of this Plan, all authority of the Board and the
Committee with respect to Awards hereunder, including
(subject to the Stock limits of Section 5) the authority
to amend outstanding Awards, shall continue after the
term of this Plan, so long as any Award remains
outstanding.
The Committee shall have the authority to (i) permit the
recipient of Restricted Stock granted under Section 9
the right to elect to receive an award of Stock Units in
lieu of such Restricted Stock, and (ii) grant additional
Stock Units as dividend equivalents; as contemplated by
and pursuant to the Tucson Electric Power Company Stock
Unit Award Program adopted under this Plan (the
"Program"). The Committee may deliver Stock in respect
of such Stock Units as set forth in or pursuant to the
recipient's Stock Unit Agreement (as defined in the
Program) and the Program. The authority of the Board
and Committee shall extend to all Stock Units."
TUCSON ELECTRIC POWER COMPANY
STOCK UNIT AWARD PROGRAM
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I PURPOSE AND AUTHORIZED SHARES. . . . . . . . . . . . . 1
1.1. PURPOSES . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. SHARES AVAILABLE . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III PARTICIPATION . . . . . . . . . . . . . . . . . . . 6
3.1. GENERAL PARTICIPATION REQUIREMENTS . . . . . . . . . . 6
3.2. MANNER AND TIMING OF ELECTION. . . . . . . . . . . . . 6
3.3. ABILITY TO REVOKE ELECTION.. . . . . . . . . . . . . . 6
3.4. APPROVAL BY COMMITTEE. . . . . . . . . . . . . . . . . 6
3.5. EXECUTION OF STOCK UNIT AGREEMENT BY THE
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV ELECTION TO RECEIVE STOCK UNIT AWARD . . . . . . . . . 8
4.1. FORM OF AGREEMENT. . . . . . . . . . . . . . . . . . . 8
4.2. LIMITED ABILITY TO EFFECT QUALIFYING AWARD . . . . . . 8
ARTICLE V STOCK UNIT ACCOUNTS. . . . . . . . . . . . . . . . . . 9
5.1. CREDITING OF STOCK UNITS . . . . . . . . . . . . . . . 9
5.2. DIVIDEND EQUIVALENT CREDITS TO STOCK UNIT
ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . 9
5.3. VESTING. . . . . . . . . . . . . . . . . . . . . . . . 9
5.4. DISTRIBUTION OF BENEFITS . . . . . . . . . . . . . . . 10
5.5. ADJUSTMENTS IN CASE OF CHANGES IN COMMON STOCK.. . . . 11
ARTICLE VI ADMINISTRATION . . . . . . . . . . . . . . . . . . . . 12
6.1. THE ADMINISTRATOR. . . . . . . . . . . . . . . . . . . 12
6.2. COMMITTEE ACTION . . . . . . . . . . . . . . . . . . . 12
6.3. RIGHTS AND DUTIES. . . . . . . . . . . . . . . . . . . 12
6.4. INDEMNITY AND LIABILITY. . . . . . . . . . . . . . . . 13
ARTICLE VII PROGRAM CHANGES AND TERMINATION . . . . . . . . . . 14
7.1. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . 14
7.2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 15
8.1. LIMITATION ON PARTICIPANT'S RIGHTS . . . . . . . . . . 15
8.2. BENEFICIARY DESIGNATION. . . . . . . . . . . . . . . . 15
8.3. STOCK UNITS AND OTHER BENEFITS NOT ASSIGNABLE;
OBLIGATIONS BINDING UPON SUCCESSORS. . . . . . . . . . 16
8.4. TAX WITHHOLDING. . . . . . . . . . . . . . . . . . . . 16
8.5. GOVERNING LAW; SEVERABILITY. . . . . . . . . . . . . . 16
8.6. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . 16
8.7. PROGRAM CONSTRUCTION . . . . . . . . . . . . . . . . . 16
8.8. HEADINGS NOT PART OF PROGRAM . . . . . . . . . . . . . 17
EXHIBIT A STOCK UNIT AGREEMENT . . . . . . . . . . . . . . . . . . . . A-1
<PAGE>
TUCSON ELECTRIC POWER COMPANY
STOCK UNIT AWARD PROGRAM
ARTICLE I
PURPOSE AND AUTHORIZED SHARES
1.1. PURPOSES
The purpose of this Program is to promote the ownership
and retention of Shares by increasing the length of time that a
Participant is committed to having a deemed investment in Shares.
Another purpose of this Program is to enable Eligible Employees
to elect to receive Stock Units in lieu of a restricted stock
award granted under the Plan.
1.2. SHARES AVAILABLE
The number of Shares that may be issued under the Plan
as part of this Program with respect to any Stock Units credited
hereunder is subject to any applicable Share limits set forth in
the Plan, and such Shares issued under the Plan as part of this
Program shall be charged against such limits.
1.3. RELATIONSHIP TO PLAN
This Program (adopted under the Plan) and all rights
under it are provided under and shall be subject to and construed
consistently with the terms of the Plan, except as the context
otherwise requires.
<PAGE>
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Program they
shall have the meaning specified below unless the context clearly
indicates to the contrary:
"BENEFICIARY" or "BENEFICIARIES" shall mean the person,
persons, trust or trusts (or similar entity), personal
representative, or other fiduciary, last designated in writing by
a Participant in accordance with the provisions of Section 8.2 to
receive the benefits specified hereunder in the event of the
Participant's death. If there is no valid Beneficiary designation
in effect that complies with the provisions of Section 8.2, or if
there is no surviving designated Beneficiary, then the
Participant's surviving spouse shall be the Beneficiary. If there
is no surviving spouse to receive any benefits payable in
accordance with the preceding sentence, the duly appointed and
currently acting personal representative of the Participant's
estate (which shall include either the Participant's probate estate
or living trust) shall be the Beneficiary. In any case where there
is no such personal representative of the Participant's estate duly
appointed and acting in that capacity within 90 days after the
Participant's death (or such extended period as the Committee
determines is reasonably necessary to allow such personal
representative to be appointed, but not to exceed 180 days after
the Participant's death), then Beneficiary or Beneficiaries shall
mean the person or persons who can verify by affidavit or court
order to the satisfaction of the Committee that they are legally
entitled to receive the benefits specified hereunder.
"BOARD" shall mean the Board of Directors of the Company.
"CHANGE IN CONTROL EVENT" shall mean any of the following:
(a) 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 30% or more of the outstanding
Common Stock;
(b) Any person (as such term is defined in Section
13(d) of the Exchange 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 (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 30% or more of the outstanding
Common Stock (calculated as provided in paragraph
(d) of Rule 13d-3 under the Exchange Act in the
case of rights to acquire Common Stock);
(c) The stockholders of the Company approve (i) any
consolidation or merger of the Company in which
the Company is not the continuing or surviving
corporation pursuant to which Shares would be
converted into cash, securities or other property,
or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of
transactions) of all or substantially all of the
assets of the Company; or
(d) 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 at least two-thirds of
the directors then still in office who were in
office at the beginning of the 24 month period;
(e) Provided, however, that notwithstanding any of the
foregoing to the contrary, a Change in Control
Event shall not be deemed to have occurred (i)
upon or in connection with the formation of a
holding company to acquire the outstanding Common
Stock in exchange for the common stock of the
holding company, or (ii) any such transfer of
Common Stock to the holding company.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMON STOCK" shall mean the Common Stock, no par value, of
the Company, subject to adjustment pursuant to Section 5.5 of this
Program and Section 5.3 of the Plan.
"COMMITTEE" shall mean the Board or a Committee of the Board
acting in accordance with Article VI.
"COMPANY" shall mean Tucson Electric Power Company, an Arizona
corporation, and its successors and assigns.
"DIVIDEND EQUIVALENT" shall mean the amount of cash dividends
or other cash distributions paid by the Company on that number of
shares of Common Stock equal to the number of Stock Units credited
to a Participant's Stock Unit Account as of the applicable record
date for the dividend or other distribution, which amount shall be
credited in the form of additional Stock Units to the Stock Unit
Account of the Participant, as provided in Section 5.2.
"EFFECTIVE DATE" shall mean the date that this Program is
adopted by the Board.
"ELECTION PERIOD" shall mean the period of time within which
an Eligible Employee may file a Stock Unit Agreement with respect
to a Qualifying Award, as set forth in the Stock Unit Agreement.
"ELIGIBLE EMPLOYEE" a person selected by the Committee to
participate in this Program pursuant to Section 3.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"FAIR MARKET VALUE" shall have the meaning assigned to such
term in the Plan.
"INTEREST RATE" shall mean the rate (quoted as an annual rate)
that is 120% of the federal long-term rate for compounding on a
quarterly basis, determined and published by the Secretary of the
United States Department of Treasury under Section 1274(d) of the
Code, for the month in which the interest is credited.
"PARTICIPANT" shall mean any person who has Stock Units
credited to a Stock Unit Account under this Program.
"PLAN" shall mean the Tucson Electric Power Company 1994
Omnibus Stock and Incentive Plan, as it may be amended from time to
time.
"PROGRAM" shall mean this Tucson Electric Power Company Stock
Unit Award Program, as it may be amended from time to time, adopted
under the Plan.
"QUALIFYING AWARD" shall mean a grant of restricted stock,
approved by the Committee or the Board, to an Eligible Employee
under the Plan.
"SHARE" shall mean a share of Common Stock.
"STOCK UNIT" or "UNIT" shall mean a non-voting unit of
measurement which is deemed solely for bookkeeping purposes to be
equivalent to one outstanding Share (subject to Section 5.5) solely
for purposes of this Program.
"STOCK UNIT AGREEMENT" shall mean an agreement entered into
between the Company and an Eligible Employee in accordance with
Section 3.2 pursuant to which the Eligible Employee elects to
receive a credit of Stock Units under this Program in lieu of a
Qualifying Award.
"STOCK UNIT ACCOUNT" shall mean the bookkeeping account
maintained by the Company on behalf of each Participant which is
credited with Stock Units in accordance with Section 5.1(a) and
Dividend Equivalents thereon in accordance with Section 5.2.
"SUBACCOUNTS" shall mean subaccounts established and
maintained under a Stock Unit Account to reflect different vesting
schedules or different distribution elections made by a
Participant.
"SUBSIDIARY" shall mean any corporation or other entity a
majority or more of the outstanding voting stock or voting power of
which is beneficially owned directly or indirectly by the Company.
<PAGE>
ARTICLE III
PARTICIPATION
3.1. GENERAL PARTICIPATION REQUIREMENTS.
The group of persons eligible to participate in this Program
shall be limited to a select group of management or highly
compensated employees of the Company who are eligible to be granted
awards under the Plan, as determined by the Committee. From this
select group, the Committee shall, in its sole discretion, select
those individuals who, in connection with a grant of a Qualifying
Award, shall be Eligible Employees. An Eligible Employee may, in
lieu of receipt of the Qualifying Award, elect to be credited with
an award of Stock Units under this Program; provided that the
Committee approves such election in accordance with Section 3.4
3.2. MANNER AND TIMING OF ELECTION.
An election to participate in this Program must be made by the
Eligible Employee by completing and executing a form of Stock Unit
Agreement which meets the requirements of Article IV and submitting
such form to the Committee after the Effective Date but on or
before the last day of the applicable Election Period.
3.3. ABILITY TO REVOKE ELECTION.
An Eligible Employee may revoke a Stock Unit Agreement by
written notice to the Committee, signed by the Eligible Employee;
provided that the notice of revocation is received by the Committee
on or before the last day of the applicable Election Period and
provided that the notice of revocation states with specificity the
agreement to which it relates. Stock Unit Agreements become
irrevocable by the Eligible Employee at the expiration of the
Election Period.
3.4. APPROVAL BY COMMITTEE.
After the end of the applicable Election Period, the Committee
shall determine, in its sole discretion, those valid and timely
filed Stock Unit Agreements that will be approved under this
Program. The Committee may, in its sole discretion and for any
reason whatsoever, decide that any number of Stock Unit Agreements
shall not be approved. Any election which is not approved shall
have no force or effect and shall be deemed to have been timely
revoked by the Eligible Employee.
3.5. EXECUTION OF STOCK UNIT AGREEMENT BY THE COMPANY.
Immediately following the Committee's review of and decisions
regarding the Eligible Employees' Stock Unit Agreements, the
Company, acting through any of its officers, shall execute the
Stock Unit Agreement form for each election by an Eligible Employee
which is approved by the Committee and deliver a copy of such fully
executed Stock Unit Agreement to that Eligible Employee. Each such
fully executed Stock Unit Agreement shall thereupon be an
effective, binding contract with respect to both parties.
<PAGE>
ARTICLE IV
ELECTION TO RECEIVE STOCK UNIT AWARD
4.1. FORM OF AGREEMENT.
Each Stock Unit Agreement shall be in the form attached hereto
as Exhibit A or any other form approved by the Committee. Each
Stock Unit Agreement shall expressly provide that, upon the
acceptance of such agreement by the Committee, the Eligible
Employee shall no longer be entitled to receive the related
Qualifying Award and such award will not be effected. A Stock Unit
Agreement shall provide for the crediting of a number of Stock
Units equal to the number of Shares that were the subject of the
related Qualifying Award and such Units shall vest according to the
same vesting schedule as set forth in the related Qualifying Award.
4.2. LIMITED ABILITY TO EFFECT QUALIFYING AWARD.
An Eligible Employee's Qualifying Award may not be effected on
or after the date that the Eligible Employee's Stock Unit Agreement
becomes irrevocable by the Eligible Employee, except as provided
below in this Section 4.2. Any attempt to effect a Qualifying
Award after such date shall be of no effect. If a Qualifying Award
is effected after a Stock Unit Agreement is filed, but prior to the
date that such agreement becomes irrevocable by the Eligible
Employee, the Stock Unit Agreement shall be deemed to have been
revoked by the Eligible Employee. If an Eligible Employee's Stock
Unit Agreement is accepted by the Committee in accordance with
Section 3.4, the related Qualifying Award will not be effected. If
an Eligible Employee's Stock Unit Agreement is not accepted, the
Eligible Employee shall have 30 days from the date of such
Committee meeting, or such other period of time as may be
determined by the Committee, to effect the related Qualifying
Award.
<PAGE>
ARTICLE V
STOCK UNIT ACCOUNTS
5.1. CREDITING OF STOCK UNITS.
(a) CREDITING OF REGULAR STOCK UNITS. If an Eligible
Employee's Stock Unit Agreement is accepted by the Committee, the
Eligible Employee's Stock Unit Account shall be credited with the
number of Stock Units set forth in the Stock Unit Agreement as of
the date specified in the Stock Unit Agreement.
(b) SUBACCOUNTS. The Committee shall establish separate
Subaccounts under a Participant's Stock Unit Account as necessary
to separately account for Stock Units that are subject to different
vesting schedules or different distribution elections made by the
Participant.
(c) LIMITATIONS ON RIGHTS ASSOCIATED WITH UNITS. A
Participant's Stock Unit Account shall be a memorandum account on
the books of the Company. The Units credited to a Participant's
Stock Unit Account shall be used solely as a device for the
determination of the number of Shares to be eventually distributed
to such Participant in accordance with this Program. The Units
shall not be treated as property or as a trust fund of any kind.
No Participant shall be entitled to any voting or other stockholder
rights with respect to Units granted or credited under this
Program. The number of Units credited (and the Common Stock to
which the Participant is entitled under this Program) shall be
subject to adjustment in accordance with Section 5.5 of this
Program and Section 5.3 of the Plan.
5.2. DIVIDEND EQUIVALENT CREDITS TO STOCK UNIT ACCOUNTS.
As of any applicable dividend or distribution payment date, a
Participant's Stock Unit Account shall be credited with additional
Units in an amount equal to the amount of the Dividend Equivalents
divided by the Fair Market Value of a share of Common Stock as of
the applicable dividend payment date. If the limit on the number
of Shares available under this Program is reached, the Company may
in its discretion credit or settle such amounts in cash.
5.3. VESTING.
All Units credited to a Participant's Stock Unit Account shall
vest as provided in the applicable Stock Unit Agreement. The
Committee may provide in the applicable Stock Unit Agreement that
the vesting of Stock Units will be accelerated upon or in
connection with the occurrence of a Change in Control Event or the
death or disability of the Participant. Stock Units credited as
Dividend Equivalents shall vest at the same time as the Stock Units
to which they relate.
5.4. DISTRIBUTION OF BENEFITS.
(a) TIME AND MANNER OF DISTRIBUTION. A Participant shall
be entitled to receive a distribution of Shares in an amount equal
to the number of vested Units credited to his or her Stock Unit
Account at such time as elected by the Participant and set forth in
the Participant's Stock Unit Agreement. A Participant may elect
any of the distribution commencement dates set forth in the form of
Stock Unit Agreement approved by the Committee.
(b) EFFECT OF CHANGE IN CONTROL EVENT. Notwithstanding
Section 5.4(a) and unless the Committee provides in advance that no
such acceleration shall occur in connection with a specific Change
in Control Event, then upon the occurrence of a Change in Control
Event, Shares equal in number to the vested Stock Units then
credited to the Participant's Stock Unit Account shall be
distributed immediately in a lump sum.
(c) EFFECT OF DEATH OR DISABILITY. Notwithstanding Section
5.4(a), if a Participant dies or becomes disabled (as determined by
the Committee), then Shares equal in number to the vested Stock
Units then credited to the Participant's Stock Unit Account shall
be distributed as soon as administratively practicable in a lump
sum after such event.
(d) FORM OF DISTRIBUTION. Stock Units credited to a
Participant's Stock Unit Account shall be distributed in a lump sum
in an equivalent whole number of Shares. Fractional Share
interests shall be disregarded, but may, in the Committee's
discretion, be paid in cash.
(e) SECTION 162(m) LIMITATION. Notwithstanding the
foregoing, if the Committee determines in good faith that there is
a reasonable likelihood that any benefits paid to a Participant for
a taxable year of the Company would not be deductible by the
Company or a Subsidiary solely by reason of the limitation under
Code Section 162(m), then to the extent reasonably deemed necessary
by the Committee to ensure that the entire amount of any
distribution to the Participant pursuant to this Program is
deductible, the Committee may defer all or any portion of a
distribution under this Plan. The amounts so deferred shall be
distributed to the Participant or his or her Beneficiary (in the
event of the Participant's death) at the earliest possible date, as
determined by the Committee in good faith, on which the
deductibility of compensation paid or payable to the Participant
for the taxable year of the Company during which the distribution
is made will not be limited by Code Section 162(m).
(f) PAYMENTS TO MINORS OR PERSONS UNDER INCAPACITY. In the
event any amount is payable under this Program to a minor, payment
shall not be made to the minor, but instead shall be paid (i) to
that person's then living parent(s) to act as custodian, (ii) if
that person's parents are then divorced, and one parent is the sole
custodial parent, to such custodial parent, or (iii) if no parent
of that person is living, to a custodian selected by the Committee
to hold the funds for the minor under the Uniform Transfers or
Gifts to Minors Act in effect in the jurisdiction in which the
minor resides. If no parent is living and the Committee decides
not to select another custodian to hold the funds for the minor,
then payment shall be made to the duly appointed and currently
acting guardian of the estate for the minor or, if no guardian of
the estate for the minor is duly appointed and currently acting
within 60 days after the date the amount becomes payable, payment
shall be deposited with the court having jurisdiction over the
estate of the minor.
5.5. ADJUSTMENTS IN CASE OF CHANGES IN COMMON STOCK.
(a) If any stock dividend, stock split, recapitalization,
merger, consolidation, combination or other reorganization,
exchange of shares, sale of all or substantially all of the assets
of the Company, split-up, split-off, spin-off, extraordinary
redemption, liquidation or similar change in capitalization or any
distribution to holders of the Common Stock (other than cash
dividends and cash distributions) shall occur, proportionate and
equitable adjustments consistent with the effect of such event on
stockholders generally (but without duplication of benefits if
Dividend Equivalents are credited) shall be made in the number and
type of Shares or other securities, property and/or rights
contemplated hereunder and of rights in respect of Units and Stock
Unit Accounts credited under this Program so as to preserve the
benefits intended. The provisions of Section 5.3 of the Plan also
shall apply to the Stock Units granted under the Plan in accordance
with this Program.
(b) If such an event results in any rights of stockholders
to receive cash on a deferred basis, a corresponding adjustment
shall be made to each Participant's Stock Unit Account to provide
for the right to receive the appropriate amount of cash at such
times and in such manner as otherwise provided under this Program
and/or the applicable election made by the Participant in
accordance with the terms of this Program. Any such right to
receive cash shall be maintained as a cash balance credited to the
Participant's Stock Unit Account. As of the last day of each
calendar quarter, the Participant's Stock Unit Account shall be
credited with earnings on the cash balance credited to such Stock
Unit Account as of the last day of the preceding quarter or, if
later, the date of such event, at a rate equal to the Interest
Rate.
<PAGE>
ARTICLE VI
ADMINISTRATION
6.1. THE ADMINISTRATOR.
The Committee hereunder shall consist of (i) the Compensation
Committee of the Board, or (ii) such other committee of the Board,
each member of which is a Non-Employee Director (as defined in Rule
16b-3 promulgated under the Exchange Act) and an "outside director"
for purposes of Section 162(m) of the Code, and who may be
appointed from time to time by the Board to serve as administrator
of this Program. Any member of the Committee may resign by
delivering a written resignation to the Board. Members of the
Committee shall not receive any additional compensation for
administration of this Program.
6.2. COMMITTEE ACTION.
Action of the Committee with respect to the administration of
this Program shall be taken pursuant to a majority vote or by
unanimous written consent of its members. A member of the
Committee shall not vote or act upon any matter which relates
solely to himself or herself as a Participant in this Program.
6.3. RIGHTS AND DUTIES.
(a) Subject to the limitations of this Program, the
Committee shall be charged with the general administration of this
Program and the responsibility for carrying out its provisions, and
shall have all powers necessary to accomplish those purposes,
including, but not by way of limitation, the following:
(1) To construe and interpret this Program;
(2) To resolve any questions concerning the amount of
benefits payable to a Participant;
(3) To make all other determinations required by this
Program;
(4) To maintain all the necessary records for the
administration of this
Program and provide at least annual statements of Stock Unit
Accounts to Participants;
(5) To make and publish forms, rules and procedures for
the administration of this Program; and
(6) To establish and maintain claims procedures for
presentation of claims by Participants and Beneficiaries for
benefits under this Program.
(b) The Committee shall have full discretion to construe
and interpret the terms and provisions of this Program (but not to
increase amounts payable hereunder) and to resolve any disputed
question or controversy, which interpretation or construction or
resolution shall be final and binding on all parties, including but
not limited to the Company and any Eligible Employee, Participant
or Beneficiary, except as otherwise required by law. The Committee
shall administer such terms and provisions in a nondiscriminatory
manner and in full accordance with any and all laws applicable to
the Program. In performing its duties, the Committee shall be
entitled to rely on information, opinions, reports or statements
prepared or presented by: (i) officers or employees of the Company
whom the Committee believes to be reliable and competent as to such
matters; and (ii) counsel (who may be employees of the Company),
independent accountants and other persons as to matters which the
Committee believes to be within such persons' professional or
expert competence. The Committee shall be fully protected with
respect to any action taken or omitted by it in good faith pursuant
to the advice of such persons. The Committee may delegate
ministerial, bookkeeping and other non-discretionary functions to
individuals who are officers or employees of the Company.
6.4. INDEMNITY AND LIABILITY.
All expenses of the Committee shall be paid by the Company and
the Company shall furnish the Committee with such clerical and
other assistance as is necessary in the performance of its duties.
No member of the Committee shall be liable for any act or omission
of any other member of the Committee nor for any act or omission on
his or her own part, excepting only his or her own willful
misconduct or gross negligence. To the extent permitted by law,
the Company shall indemnify and save harmless each member of the
Committee against any and all expenses and liabilities arising out
of his or her membership on the Committee, excepting only expenses
and liabilities arising out of his or her own willful misconduct or
gross negligence, as determined by the Board.
<PAGE>
ARTICLE VII
PROGRAM CHANGES AND TERMINATION
7.1. AMENDMENTS.
The Board or the Committee shall have the right to amend this
Program in whole or in part from time to time or may at any time
suspend or terminate this Program; provided, however, that no
amendment or termination shall cancel or otherwise adversely affect
in any way, without his or her written consent, any Participant's
rights with respect to Stock Units and Dividend Equivalents
credited to his or her Stock Unit Account. Any amendments autho-
rized hereby shall be stated in an instrument in writing, and all
Eligible Employees shall be bound thereby upon receipt of notice
thereof. Adjustments pursuant to Section 5.5 hereof or Section 5.3
of the Plan shall not be deemed amendments to this Program, the
Stock Unit Accounts or the rights of Participants.
7.2. TERM.
It is the current expectation of the Company that this Program
shall be continued indefinitely, but continuance of this Program is
not assumed as a contractual obligation of the Company. In the
event that the Board decides to discontinue or terminate this
Program, it shall notify the Committee and Participants in this
Program of its action in writing, and this Program shall be
terminated at the time therein set forth. All Participants shall
be bound thereby. In such event, the then credited benefits of a
Participant shall be distributed at the time(s) and in the manner
elected and provided under Section 5.4, subject to Sections 5.2 and
5.5.
<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1. LIMITATION ON PARTICIPANT'S RIGHTS.
Participation in this Program shall not give any person the
right to continued employment or service or any rights or interests
other than as herein provided. No Eligible Employee or Participant
shall have any right to any payment or benefit hereunder except to
the extent provided in this Program. This Program creates no
fiduciary duty to Eligible Employees or Participants and shall
create only a contractual obligation on the part of the Company as
to such amounts; the Program shall not be construed as creating a
trust. The Program, in and of itself, has no assets. Participants
shall have rights no greater than the right to receive the Common
Stock (and any cash as expressly provided herein) as a general
unsecured creditor in respect of their Stock Unit Accounts.
8.2. BENEFICIARY DESIGNATION.
Upon forms provided by and subject to conditions imposed by
the Company, each Participant may designate in writing the
Beneficiary or Beneficiaries whom such Participant desires to
receive any Shares or amounts payable under this Program after his
or her death. A Participant may from time to time change his or
her designated Beneficiary or Beneficiaries without the consent of
such Beneficiary or Beneficiaries by filing a new designation with
the Committee. However, if a married Participant wishes to
designate a person other than his or her spouse as Beneficiary,
such designation shall be consented to in writing by the spouse,
which consent shall acknowledge the effect of the designation. The
Participant may change any election designating a Beneficiary or
Beneficiaries without any requirement of further spousal consent if
the spouse's consent so provides. Notwithstanding the foregoing,
spousal consent shall be unnecessary if it is established (to the
satisfaction of the Committee or a Committee representative) that
there is no spouse or that the required consent cannot be obtained
because the spouse cannot be located. The Company and the
Committee may rely on the Participant's designation of a
Beneficiary or Beneficiaries last filed in accordance with the
terms of this Program. Upon the dissolution of marriage of a
Participant, any designation of the Participant's former spouse as
a Beneficiary shall be treated as though the Participant's former
spouse had predeceased the Participant, unless (a) the Participant
executes another Beneficiary designation that complies with this
Section 8.2 and that clearly names such former spouse as a
Beneficiary, or (b) a court order is presented to the Company that
requires the former spouse be maintained as the Beneficiary. In
any case where the Participant's former spouse is treated under the
Participant's Beneficiary designation as having predeceased the
Participant, no heirs or other beneficiaries of the former spouse
shall receive benefits from the Plan as a Beneficiary of the
Participant except as provided otherwise in the Participant's
Beneficiary designation.
8.3. STOCK UNITS AND OTHER BENEFITS NOT ASSIGNABLE;
OBLIGATIONS BINDING UPON SUCCESSORS.
Stock Units and other benefits of a Participant under this
Program shall not be assignable or transferable and any purported
transfer, assignment, pledge or other encumbrance or attachment of
any payments or benefits under this Program, or any interest
therein, other than by operation of law or pursuant to Section 8.2,
shall not be permitted or recognized. Obligations of the Company
under this Program shall be binding upon successors of the Company.
8.4. TAX WITHHOLDING.
The Company (including its Subsidiaries) may satisfy any state
or federal employment tax or income tax withholding obligation
arising from the crediting or vesting of Stock Units under this
Program or delivery of Shares in respect thereof by deducting such
amount(s) from any amount of compensation otherwise payable to the
Participant. Alternatively, the Company (including its
Subsidiaries) may require or permit a Participant (i) to deliver to
it the amount of any such withholding obligation as a condition
precedent to the crediting or vesting of Stock Units or delivery of
any Shares, or (ii) to satisfy a withholding obligation in a manner
permitted under Section 16 of the Plan subject to the terms set
forth therein.
8.5. GOVERNING LAW; SEVERABILITY.
The validity of this Program or any of its provisions shall be
construed, administered and governed in all respects under and by
the laws of the State of Arizona. If any provisions of this
instrument shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions hereof shall
continue to be fully effective.
8.6. COMPLIANCE WITH LAWS.
This Program and the offer, issuance and delivery of Shares
and/or the payment in Shares under this Program are subject to
compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal
securities law) and to such approvals by any listing, agency or any
regulatory or governmental authority as may, in the opinion of
counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Program shall be
subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may
deem necessary or desirable to assure compliance with all
applicable legal requirements.
8.7. PROGRAM CONSTRUCTION.
It is the intent of the Company that transactions pursuant to
this Program satisfy and be interpreted in a manner that satisfies
the applicable requirements of Rule 16b-3 promulgated under the
Exchange Act ("Rule 16b-3") so that to the extent elections are
timely made, the crediting of Stock Units and the distribution of
Shares with respect to Stock Units under this Program will be
entitled to the benefits of Rule 16b-3 or other exemptive rules
under Section 16 of the Exchange Act and will not be subjected to
avoidable liability thereunder.
8.8. HEADINGS NOT PART OF PROGRAM.
Headings and subheadings in this Program are inserted for
reference only and are not to be considered in the construction of
the provisions hereof.
<PAGE>
CERTIFICATE
The undersigned duly authorized officer of the Company
hereby certifies that the Program was adopted by the Board of
Directors on ________________, ____, 1997.
TUCSON ELECTRIC POWER COMPANY
By: _______________________________
Its: ______________________________
<PAGE>
TUCSON ELECTRIC POWER COMPANY
STOCK UNIT AWARD PROGRAM
STOCK UNIT AGREEMENT
THIS STOCK UNIT AGREEMENT (this "AGREEMENT") is entered
into by and between TUCSON ELECTRIC POWER COMPANY, an Arizona
corporation (the "Company"), and __________________________ (the
"Employee").
W I T N E S S E T H
WHEREAS, the Company has adopted and the shareholders of
the Company have approved the Tucson Electric Power Company 1994
Stock and Incentive Plan (the "Plan");
WHEREAS, the Company has adopted a Stock Unit Award
Program (the "Program") under the Plan;
WHEREAS, the Compensation Committee of the Company's Board
of Directors (the "Committee") has determined that the Employee is
an "Eligible Employee" under the Program and was granted as of June
27, 1997 (the "Award Date") ___________ shares of restricted stock
under the Plan on the terms and conditions set forth in the
applicable Restricted Stock Award Agreement (the "Restricted Stock
Award");
WHEREAS, the Employee is now given the opportunity to
elect to receive, in lieu of the Restricted Stock Award, a credit
of stock units under the Program on the terms and conditions set
forth herein and in the Program (the "Stock Unit Award");
WHEREAS, the Company has not yet determined whether the
Stock Unit Award will be satisfied through the issuance of new
shares of its common stock, no par value ("Common Stock"), or
shares of Common Stock that it acquires on the open market;
WHEREAS, the Employee desires to effect the Stock Unit
Award in lieu of any and all rights that he or she may have to the
Restricted Stock Award; and
WHEREAS, the Company and the Employee desire to evidence
the Committee's grant of the Stock Unit Award and provide that the
Committee will, subject to the restrictions described below,
transfer shares of its Common Stock to the Employee upon the terms
and conditions described herein and in the Program as soon as
practical after the time established herein for such transfer and
following the Company's determination as to the source of such
shares;
NOW, THEREFORE, in consideration of the services rendered
and to be rendered by the Employee, and other valued consideration,
the receipt of which is hereby acknowledged, the parties agree to
the terms and conditions set forth herein (including the terms and
conditions of the Program and the Plan which are incorporated
herein by reference).
1. CAPITALIZED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to
such terms in the Program.
2. AWARD OF STOCK UNITS. Subject to the terms of this Agreement,
the Company grants to the Employee a Stock Unit Award with
respect to an aggregate of [Conform to number of Shares
subject to Restricted Stock Award] Stock Units as of the Award
Date.
3. OWNERSHIP RIGHTS.
(a) Restrictions on Transfer. Neither the Stock Unit
Award nor, at any time prior to the time that they
have become vested and are issued and held of record
by the Participant, any Shares underlying or issuable
in respect of such award, nor any interest therein or
amount payable in respect thereof, may be sold,
assigned, transferred, pledged or otherwise disposed
of, alienated or encumbered, either voluntarily or
involuntarily, other than by will or the laws of
descent and distribution.
(b) Dividends; Voting Rights. The Employee shall have no
rights as a stockholder of the Company, including
dividend rights (except as expressly provided in the
Program with respect to the crediting of Dividend
Equivalent Units) and voting rights, with respect to
the Stock Units and any Shares underlying or issuable
in respect of such Stock Units until such Shares are
actually issued and held of record by him or her.
4. VESTING. The total number of Stock Units set forth in Section
2 shall become vested in installments as follows:
Percentage of Stock Units
Date Which Vest
First anniversary 33-1/3%
of Award Date
Second anniversary 33-1/3%
of Award Date
Third anniversary 33-1/3%
of Award Date
5. FORFEITURE OF STOCK UNITS.
(a) In the event that the Employee terminates employment
with the Company for any reason other than those set
forth in subsections 5(b) and 5(c), then any unvested
Stock Units shall, upon such termination of
employment, automatically terminate and be forfeited
by the Employee; provided, however, that in the event
of an involuntary termination of the Employee's
employment, the Committee may, in its sole discretion,
waive the automatic forfeiture of any or all Stock
Units and may add such new vesting conditions as it
deems appropriate.
(b) In the event that the Employee 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, any Stock Units granted hereby
which are not then vested shall become fully vested as
of such date. In the event that the Employee
terminates employment with the Company because of
Early Retirement under the Salaried Employees Pension
Plan, any unvested Stock Units shall automatically
terminate and be forfeited by the Employee; provided,
however, that in the event of the Employee's Early
Retirement, the Committee may, in its sole discretion,
waive the automatic forfeiture of any or all Stock
Units and may add such new vesting conditions as it
deems appropriate.
(c) If the employment of the Employee terminates by reason
of death or Disability (as such term is defined in the
Plan), the Employee shall become vested in a number of
Stock Units equal to (i) the total number of Stock
Units granted to the Employee under Section 2
multiplied by the number of full months which have
elapsed, as of the date of the Employee's death or
Disability, since the Award Date (which number shall
not be greater than 36) divided by 36, less (ii) the
number of Stock Units granted hereby which, at the
time of the Participant's death or Disability, have
already become vested. All remaining unvested Stock
Units shall automatically terminate and be forfeited
by the Employee; provided, however, that in the event
of the Employee's death or Disability, the Committee
may, in its sole discretion, waive the automatic
forfeiture of any or all Stock Units and may add such
new vesting conditions as it deems appropriate.
6. CONTINUANCE OF EMPLOYMENT. Notwithstanding any commitment of
the Employee to remain in the employ of the Company, the grant
of this Stock Unit Award shall not confer upon the Employee
any right with respect to the continuation of his or her
employment by the Company or any Subsidiary or alter or
interfere in any way with the right of the Company or of any
Subsidiary at any time to terminate such employment or to
change the compensation of the Employee or other terms of his
or her employment; and neither shall these terms alter or in
any way affect the rights of the Company or the Employee under
any other written employment agreement between them, except as
expressly provided herein.
[7. ACCELERATION. In the event of a Change in Control Event, any
outstanding Stock Units granted hereby which are not then
vested shall immediately vest.]
8. TIMING AND MANNER OF DISTRIBUTION OF STOCK UNITS. Subject to
any changes imposed by or allowed under the provisions of the
Program, the Employee hereby irrevocably elects to receive a
distribution of his or her vested Stock Units credited under
the Program pursuant to this Agreement, in shares of Common
Stock, subject to and in accordance with the Program and the
choice checked and initialed by the Employee below (check
applicable box and initial on corresponding line):
/_/ ________
A single lump sum deliverable on the first day of January of
the year which is _____ (specify a number not less than 3 nor
more than 10) full years after the Award Date; or
/_/ ________
A single lump sum deliverable on the first day of the first
month beginning at least 10 business days after the date of
the Employee's termination of employment with the Company and
its Subsidiaries;
/_/ ________
A single lump sum deliverable on the first day of January in
the year after the date of the Employee's termination of
employment with the Company and its Subsidiaries; or
/_/ ________
A single lump sum deliverable on the earlier of (a) the first
day of January of the year which is _____ (specify a number
not less than 3 nor more than 10) full years after the Award
Date or (b) (check applicable item)
________ the first day of January in the year after
the date of the Employee's termination of
employment with the Company and its Subsidiaries;
or
________ the first day of the first month beginning
at least 10 business days after the date of the
Employee's termination of employment with the
Company and its Subsidiaries; or
/_/ ________
A single lump sum deliverable on the later of (a) the first
day of January of the year which is ________ (specify a number
not less than 3 nor more than 10) full years after the Award
Date or (b) (check applicable item)
________ the first day of January in the year after
the date of the Employee's termination of
employment with the Company and its Subsidiaries;
or
________ the first day of the first month beginning
at least 10 business days after the date of the
Employee's termination of employment with the
Company and its Subsidiaries.
THE EMPLOYEE UNDERSTANDS THAT THE FOREGOING DISTRIBUTION
ELECTION IS IRREVOCABLE (EXCEPT AS EXPRESSLY PROVIDED IN THE
PROGRAM), AND THAT THE PROGRAM AND THE PLANS PROVIDE FOR
ADJUSTMENTS AND/OR ACCELERATION OF THE TIME OF PAYOUT IN
CERTAIN CIRCUMSTANCES AND MAY BE TERMINATED PROSPECTIVELY BY
THE BOARD.
If any specified payment date is not a business day, the
applicable date will be the next business day thereafter.
Delivery of certificates representing the Shares will be made
on or as soon as administratively practicable after the
specified delivery date(s). Delivery of certificates will be
made to the Employee's address as written below unless the
Company is otherwise instructed in writing.
9. ADJUSTMENTS UPON SPECIFIED EVENTS. Upon the occurrence of
certain events relating to the Company's stock contemplated by
Section 5.5 of the Program and Section 5.3 of the Plan, the
Committee shall make adjustments if appropriate in the number
of Stock Units contemplated hereby and the number and kind of
securities that may be issued in respect of this Stock Unit
Award.
10. COMPLIANCE; APPLICATION OF SECURITIES LAWS. Notwithstanding
anything else contained herein to the contrary, no shares of
Common Stock shall be delivered and no shares shall be offered
for sale by the Employee (consistent with Section 3) unless
and until any then applicable requirements of the Securities
and Exchange Commission (the "Commission") or any other
regulatory agency having jurisdiction and any exchanges upon
which the Common Stock may be listed shall have been fully
satisfied. Upon the Company's request, the Employee, or any
other person entitled to such shares of Common Stock pursuant
to this Stock Unit Award, shall provide a written assurance of
compliance (or representations reasonably requested by the
Company to assure such compliance) satisfactory to the
Company.
11. WITHHOLDING TAX. The Employee agrees to pay or provide for
payment of all applicable withholding taxes in accordance with
Section 8.4 of the Program.
12. INVESTMENT REPRESENTATIONS. The Employee represents and
agrees that if the Stock Units (or Dividend Equivalent Units)
are awarded at a time when there is not in effect under the
Securities Act of 1933, as amended (the "Securities Act"), a
registration statement relating to the Common Stock and there
is not available for delivery a prospectus meeting the
requirements of Section 10(a)(3) of the Securities Act, (i)
the Employee will acquire such units and any shares in respect
thereof for the purpose of investment and not with a view to
their resale or distribution, (ii) that upon such award, the
Employee will furnish to the Company an investment letter in
form and substance satisfactory to the Company, (iii) prior to
selling or offering for sale any shares of Common Stock, the
Employee will furnish the Company with an opinion of counsel
satisfactory to it to the effect that such sale may lawfully
be made and will furnish it with such certificates as to
factual matters as it may reasonably request, and (iv) that
certificates representing shares of Common Stock may be marked
with an appropriate legend describing such conditions
precedent to sale or transfer.
13. RIGHTS WITH RESPECT TO RESTRICTED STOCK AWARD. By execution
and delivery of this Agreement the Employee acknowledges (i)
that he or she shall have no rights with respect to the
Restricted Stock Award if this Agreement is accepted by the
Committee, and (ii) that any attempt to effect the Restricted
Stock Award after the date that this Agreement becomes
irrevocable by the Employee as set forth in Section 3.3 of the
Program shall be of no effect; provided that if this Agreement
is not accepted by the Committee, the Employee shall have a
limited period of time, determined in accordance with Section
4.2 of the Program, to effect the Restricted Stock Award on
its terms. Notwithstanding anything else contained herein to
the contrary, the Employee shall have no right to effect both
the Restricted Stock Award and this Stock Unit Award.
14. FILING / ACCEPTANCE OF AGREEMENT. In order for this Agreement
to become effective (i) the Consent of Spouse following the
signature page of this Agreement must be completed (if the
Employee is married), (ii) this Agreement must be received by
the Company after the Award Date and on or before the 30th day
after the Award Date (the "Election Period"), and (iii) this
Agreement must be accepted by the Committee. Pursuant to the
terms of the Program (i) the Committee may, in its sole
discretion and for any reason, not accept this Agreement, and
(ii) if this Agreement is not accepted by the Committee it
shall be deemed to have been timely revoked by the Employee.
Once the Employee has signed this Agreement and filed it with
the Company, it may only be revoked by the Employee if the
Company receives a written revocation, signed by the Employee,
on or before the last day of the Election Period. After the
close of the Election Period, this Agreement is irrevocable by
the Employee.
15. NOTICES. This Agreement, when executed, and any notice to be
given to the Company under the terms of this Agreement shall
be in writing and addressed to the Company at its principal
office located at 220 West Sixth Street, Tucson, Arizona
85702, Attention: Corporate Secretary, and any notice to be
given to the Employee shall be addressed to him or her at the
address given beneath the Employee's signature hereto, or at
such other address as either party may hereafter designate in
writing to the other party.
16. AMENDMENT. This Agreement may only be amended in writing by
an instrument signed by both parties.
17. LAWS APPLICABLE TO CONSTRUCTION. The interpretation,
performance and enforcement of this Stock Unit Award and this
Agreement shall be governed by the laws of the State of
Arizona.
18. GENERAL TERMS. The award of Stock Units and any payment or
delivery of shares in respect thereof are subject to, and the
Company and the Employee agree to be bound by, the provisions
of the Plan and the Program. The provisions of the Plan and
the Program are incorporated herein by this reference. The
Employee acknowledges receiving a copy of the Plan and the
Program and reading their applicable provisions. The Employee
acknowledges receiving a copy of the Plan's Prospectus and the
Prospectus Supplement relating to the Program and
understanding their contents. Provisions of the Plan and the
Program that grant discretionary authority to the Committee
shall not create any rights in the Employee, unless such
rights are expressly set forth herein.
STOCK UNITS ARE UNSECURED GENERAL CREDIT OBLIGATIONS OF THE
COMPANY.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the dates and year written below.
EMPLOYEE
__________________________________
Signature
__________________________________
Print Name
__________________________________
Address
__________________________________
City, State, Zip Code
__________________________________
Social Security Number
TUCSON ELECTRIC POWER COMPANY,
an Arizona corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
(The Company will execute this
Agreement only if it is accepted by
the Committee.)
<PAGE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Stock
Unit Agreement by Tucson Electric Power Company, I,
__________________________, the spouse of the Employee therein
named, do hereby join with my spouse in executing the foregoing
agreement and do hereby agree to be bound by all of the terms and
provisions thereof, of the Tucson Electric Power Company Stock Unit
Award Program, and of the provisions of the Tucson Electric Power
Company 1994 Stock and Incentive Plan.
DATED: _______________, ____. __________________________________
Signature of Spouse
TUCSON ELECTRIC POWER COMPANY
PERFORMANCE SHARE AWARD AGREEMENT
THIS PERFORMANCE SHARE AWARD AGREEMENT (this
"AGREEMENT") is entered into by and between TUCSON ELECTRIC POWER
COMPANY, an Arizona corporation (the "Company"), and
__________________________ (the "Employee").
W I T N E S S E T H
WHEREAS, the Company has adopted and the shareholders
of the Company have approved the Tucson Electric Power Company
1994 Omnibus Stock and Incentive Plan (the "Plan");
WHEREAS, the Compensation Committee of the Company's
Board of Directors (the "Committee") has granted to the Employee
as of July 1, 1997 (the "Award Date") an award of Performance
Shares (as such term is defined in the Plan) on the terms and
conditions set forth herein (the "Performance Share Award");
WHEREAS, the Company has not yet determined whether
the Performance Share Award, if it vests, will be satisfied
through the issuance of new shares of its common stock, no par
value ("Common Stock"), or shares of Common Stock that it
acquires on the open market;
WHEREAS, the Company and the Employee desire to
evidence the Committee's grant of the Performance Share Award and
provide that the Committee will, subject to the vesting
provisions and other conditions and restrictions contained
herein, transfer shares of its Common Stock to the Employee as
soon as practical after the time established herein for such
transfer and following the Company's determination as to the
source of such shares;
NOW, THEREFORE, in consideration of the services
rendered and to be rendered by the Employee, and other valuable
consideration, the receipt of which is hereby acknowledged, the
parties agree to the terms and conditions set forth herein.
1. AWARD OF PERFORMANCE SHARES. The target number of
Performance Shares subject to this Performance Share Award
is ______________ shares (the "Target Number of Shares").
The maximum number of shares of Common Stock that may be
delivered in respect of this Performance Share Award is
_____________ [150% of the Target Number of Shares] shares
(the "Maximum Number of Shares").
2. INCORPORATION OF GENERAL PROVISIONS. The terms, conditions
and other provisions of the General Provisions Applicable
to Performance Share Awards Granted Under the Tucson
Electric Power Company 1994 Omnibus Stock and Incentive
Plan (the "General Provisions") attached hereto are
incorporated herein by this reference. The Performance
Shares subject hereto shall vest and are subject to
forfeiture as set forth in the General Provisions. Vested
Performance Shares shall be paid in shares of Common Stock
at the time and in the manner set forth in the General
Provisions. The Employee's transfer, dividend and voting
rights are limited as set forth in the General Provisions.
3. AMENDMENT. This Agreement and the General Provisions may
only be amended in writing by an instrument signed by both
parties.
4. LAWS APPLICABLE TO CONSTRUCTION. The interpretation,
performance and enforcement of this Performance Share Award
and this Agreement shall be governed by the laws of the
State of Arizona.
5. GENERAL TERMS. This Agreement, the General Provisions, the
award of Performance Shares and any payment or delivery of
shares of Common Stock in respect thereof are subject to,
and the Company and the Employee agree to be bound by, the
provisions of the Plan. The provisions of the Plan are
incorporated herein by this reference. The Employee
acknowledges receiving a copy of the Plan and the General
Provisions, and reading and understanding them. The
Employee acknowledges receiving a copy of the Plan's
Prospectus and understanding its contents. Provisions of
the Plan and this Performance Share Award that grant
discretionary authority to the Committee shall not create
any rights in the Employee, unless such rights are
expressly set forth herein.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of this ___ day of _______________, 1997.
EMPLOYEE TUCSON ELECTRIC POWER
COMPANY, an Arizona corporation
________________________________
Signature By: ______________________________
________________________________ Name: ________________________
Print Name
Title: ___________________________
________________________________
Address
________________________________
City, State, Zip Code
________________________________
Social Security Number
CONSENT OF SPOUSE
In consideration of the execution of the foregoing
Performance Share Award Agreement by Tucson Electric Power
Company, I, __________________________, the spouse of the
Employee therein named, do hereby join with my spouse in
executing the foregoing agreement and do hereby agree to be bound
by all of the terms and provisions thereof, of the General
Provisions (as such term is defined therein), and of the
provisions of the Tucson Electric Power Company 1994 Omnibus
Stock and Incentive Plan.
DATED: _______________, ____. ___________________________________
Signature of Spouse
TUCSON ELECTRIC POWER COMPANY
GENERAL PROVISIONS APPLICABLE TO
PERFORMANCE SHARE AWARDS GRANTED UNDER
THE TUCSON ELECTRIC POWER COMPANY
1994 OMNIBUS STOCK AND INCENTIVE PLAN
(Applicable to July 1, 1997 Awards)
These General Provisions shall apply to a Performance Share Award
if they are incorporated by reference in the applicable
Performance Share Award Agreement and shall be constructed as
provisions of the Performance Share Award Agreement.
1. DEFINED TERMS. Unless otherwise expressly provided herein,
capitalized terms not otherwise defined herein shall have
the meaning assigned to such terms in the Performance Share
Award Agreement.
2. OWNERSHIP RIGHTS.
(a) Restrictions on Transfer. Neither the Performance
Share Award, the Performance Shares nor, at any time
prior to the time that the Performance Shares shall
have become vested and shares of Common Stock are
issued and held of record by the Employee, any shares
of Common Stock underlying or issuable in respect of
such Performance Share Award, nor any interest
therein or amount payable in respect thereof, may be
sold, assigned, transferred, pledged or otherwise
disposed of, alienated or encumbered, either
voluntarily or involuntarily, other than by will or
the laws of descent and distribution.
(b) Dividends; Voting Rights. The Employee shall have no
rights as a stockholder of the Company, including
dividend rights and voting rights, with respect to
the Performance Shares and any shares of Common Stock
underlying or issuable in respect of such Performance
Shares until such shares of Common Stock are actually
issued and held of record by him or her.
3. VESTING. The number of Performance Shares which vest shall
be determined on December 31, 2001 (the "Vesting Date").
As soon as administratively practicable after the Vesting
Date, the Committee shall, in its sole discretion,
determine the Total Shareholder Return. For this purpose
"Total Shareholder Return" shall equal (i) the Fair Market
Value (as such term is defined in the Plan) of a share of
Common Stock on the Vesting Date plus the aggregate amount
(without interest) of cash dividends paid on a single share
of Common Stock after the Award Date and before the Vesting
Date, divided by (ii) $14.50.
The Committee shall then, in its sole discretion and on a
substantially similar basis, compute the total shareholder
return for each corporation in the Peer Group for the same
period (commencing with the Award Date and ending on the
Vesting Date). For this purpose, "Peer Group" shall mean
each corporation which is, as of the Vesting Date, included
in the S&P Electric Utility Index, or, if such index is not
available, a substantially similar index or group of
corporations selected by the Committee. The Committee may
make appropriate adjustments for corporations included in
such index which were not in existence on the Award Date.
The Committee shall then rank the performance of the
Company against the corporations in the Peer Group based on
each entity's total shareholder return.
The number of Performance Shares which shall vest shall be
determined by multiplying (X) the percentage that
corresponds to the Company's percentile ranking in the
following table, by (y) the Target Number of Shares;
provided, however, that no Performance Shares shall vest if
the Company's Total Shareholder Return is negative unless
the Company's percentile ranking versus the Peer Group is
above the 50th percentile.
Percentile Ranking of Company Percent of Target
Number
Versus Peer Group of Shares That Vest
Below 30th 0%
At 30th 50%
Above 30th, but below 90th Straight line interpolation
between 50% and 150%
calculated with respect
to actual percentile
ranking between 30th
and 90th (that is, at
60th percentile, vesting
percentage would equal
100%)
At or above 90th 150%
4. PAYMENT IN SHARES. As soon as administratively practicable
after the Committee has made the determinations required
pursuant to Section 3, the Company shall deliver to the
Employee (or such other person as may be entitled to
receive the shares in the event of the Employee's death)
one share of Common Stock for each Performance Share which
shall have become vested in accordance with Section 3
(unless the Employee terminates employment prior to the
Vesting Date, in which case the number of shares of Common
Stock deliverable to the Employee shall be determined under
Section 8). The Employee or such other person shall
deliver to the Company any representations or assurances
required pursuant to Section 6. The delivery of shares of
Common Stock shall be in complete satisfaction of any and
all rights of the Employee in respect of the Performance
Share Award and any and all obligations of the Company in
respect thereof. The Employee shall have no rights with
respect to any Performance Shares which fail to vest on the
Vesting Date. In no event shall the Employee receive more
than the Maximum Number of Shares in respect of the
Performance Share Award.
5. ADJUSTMENTS UPON SPECIFIED EVENTS. Upon the occurrence of
certain events relating to the Company's stock contemplated
by Section 5.3 of the Plan, the Committee shall make
adjustments if appropriate in the number of Performance
Shares contemplated by the Performance Share Award
Agreement, the limits contained in Section 1 of the
Performance Share Award Agreement and the number and kind
of securities that may be issued in respect thereof.
The Committee, in its sole discretion, may adjust the
Company's Total Shareholder Return or the total shareholder
return of a Peer Group Corporation (i) to account for a
change in corporate capitalization, a corporate transaction
(such as a reorganization, combination, separation, or
merger) or a complete or partial corporate liquidation,
(ii) to disregard the effect of any change in accounting
policies or practices affecting the entity or the
determination of shareholder return, (iii) to adjust for
any other circumstance or event deemed to be material by
the Committee, or (iv) any combination of the foregoing.
6. COMPLIANCE; APPLICATION OF SECURITIES LAWS.
Notwithstanding anything else contained herein to the
contrary, no shares of Common Stock shall be delivered and
no shares shall be offered for sale by the Employee
(consistent with Section 2) unless and until any then
applicable requirements of the Securities and Exchange
Commission or any other regulatory agency having
jurisdiction and any exchanges upon which the Common Stock
may be listed shall have been fully satisfied. Upon the
Company's request, the Employee, or any other person
entitled to such shares of Common Stock pursuant to this
Performance Share Award, shall provide a written assurance
of compliance (or representations reasonably requested by
the Company to assure such compliance) satisfactory to the
Company.
7. WITHHOLDING TAX. The Employee agrees that, in the event
the award of Performance Shares or the vesting or payment
of shares of Common Stock or other property in respect
thereof results in the Employee's realization of income
which for federal, state or local income tax purposes is,
in the opinion of counsel for the Company, subject to
withholding of tax at source by the Company (or a
Subsidiary), the Employee will pay to the Company an amount
equal to such withholding tax (or the Company or a
Subsidiary may withhold such amount from the Employee's
salary or from other amounts payable to the Employee).
To the extent permissible under tax, securities and other
laws, the Company may, in its sole discretion, allow the
Employee to satisfy a tax withholding requirement (i) by
using already owned (and fully vested) shares; (ii) through
a cashless transaction; or (iii) by directing the Company
to apply shares of stock to which the Employee is entitled
as a result of the vesting of the Performance Share Award.
8. TERMINATION OF EMPLOYMENT.
(a) Termination of Employment. In the event that
Employee terminates employment with the Company for any
reason other than those set forth in subsections 8(b) and
8(c) prior to the Vesting Date, then the Performance Share
Award shall, upon such termination of employment,
automatically be terminated and no shares of Common Stock
shall be issued thereunder; provided, however, that in the
event of an involuntary termination of Employee's
employment, the Committee may, in its sole discretion,
waive the automatic termination of the Performance Share
Award (in whole or in part) and any remaining Performance
Shares shall continue to be eligible for vesting on the
Vesting Date in accordance with subsection 8(d) and shall
be subject to such new restrictions as the Committee, in
its discretion, may impose.
(b) Retirement. In the event that Employee retires after
attaining 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 Performance Shares
subject to the Performance Share Award shall continue to be
eligible for vesting on the Vesting Date in accordance with
subsection 8(d). In the event that the Employee terminates
employment with the Company because of Early Retirement
under the Salaried Employees Pension Plan, such Early
Retirement shall be deemed to be, for purposes of the
Performance Share Award, a termination of employment
subject to the provisions of subsection 8(a) and not a
retirement after attaining normal retirement age under this
subsection 8(b).
(c) Death or Disability. If the employment of the
Employee terminates by reason of death or Disability (as
such term is defined in the Plan), the Performance Shares
subject to the Performance Share Award shall continue to be
eligible for vesting on the Vesting Date in accordance with
subsection 8(d).
(d) Payment after Termination of Employment. In the event
that Performance Shares remain eligible for vesting under
subsection 8(a), 8(b), or 8(c) after the Employee's
termination of employment, then the number of Performance
Shares in which he or she will become vested upon the
Vesting Date shall equal: (i) the number of Performance
Shares which would have vested on the Vesting Date had the
Employee not terminated employment (determined pursuant to
Section 3); multiplied by (ii) the number of full months
occurring after the Award Date but prior to the date of the
Employee's termination of employment with the Company,
divided by the maximum number of months (rounded to the
nearest whole month) occurring between the Award Date and
the Vesting Date.
9. CONTINUANCE OF EMPLOYMENT. Notwithstanding any commitment
of the Employee to remain in the Employ of the Company, the
grant of the Performance Share Award shall not confer upon
the Employee any right with respect to the continuation of
his or her employment by the Company or any Subsidiary (as
such term is defined in the Plan) or alter or interfere in
any way with the right of the Company or of any Subsidiary
at any time to terminate such employment or to change the
compensation of the Employee or other terms of his or her
employment; and neither shall these terms alter or in any
way affect the rights of the Company or the Employee under
any other written employment agreement between them, except
as expressly provided herein.
[DOES A "CHANGE IN CONTROL" (AS SUCH TERM IS DEFINED IN THE
PLAN) HAVE ANY EFFECT ON THE PERFORMANCE SHARE AWARD?
(E.G., ACCELERATED VESTING OR GUARANTEED MINIMUM LEVEL OF
VESTING.)]
DENNIS R. NELSON
GENERAL COUNSEL
UNISOURCE ENERGY CORPORATION
220 WEST SIXTH STREET
TUCSON, ARIZONA 85701
January 2, 1998
UniSource Energy Corporation
220 West Sixth Street
Tucson, Arizona 85701
Re: Registration on Form S-8 of Unisource
Energy Corporation (the "Company")
Gentlemen:
At your request, I have examined the Registration
Statement on Form S-8 to be filed with the Securities and
Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of 1,600,000 shares of Common
Stock, without par value, of the Company (the "Common Stock"),
and additional rights (together with the Common Stock, the
"Shares"), to be issued pursuant to the UniSource Energy
Corporation 1994 Omnibus Stock and Incentive Plan (the "Plan").
I have examined the proceedings heretofore taken and to be taken
in connection with the authorization of the Plan and the Shares
to be issued pursuant to and in accordance with the Plan.
Based upon such examination and upon such matters of
fact and law as I have deemed relevant, I am of the opinion that
the Shares have been duly authorized by all necessary corporate
action on the part of the Company and, when issued in accordance
with such authorization, the provisions of the Plan and relevant
agreements duly authorized by and in accordance with the terms of
the Plan, will be validly issued, fully paid and nonassessable.
I consent to the use of this opinion as an exhibit to
the Registration Statement.
Respectfully submitted,
/s/ Dennis R. Nelson
Dennis R. Nelson
General Counsel
January 5, 1998
Tucson Electric Power Company
220 West Sixth Street
Tucson, Arizona 85701
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Tucson Electric Power
Company and subsidiaries for the periods ended March 31, 1997 and
1996, June 30, 1997 and 1996 and September 30, 1997 and 1996 as
indicated in our reports dated May 2, 1997, July 31, 1997 and
October 20, 1997, respectively; because we did not perform an
audit, we expressed no opinion on that information.
We are aware that our reports referred to above, which were
included in your Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997 are
being used in this Registration Statement.
We also are aware that the aforementioned reports, pursuant to
Rule 436(c) under the Securities Act of 1933, are not considered
a part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of UniSource Energy Corporation and its subsidiaries on
Form S-8 of our report dated January 27, 1997, appearing in the
Annual Report on Form 10-K of Tucson Electric Power Company and
its subsidiaries for the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
January 5, 1998
