UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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UNISOURCE ENERGY CORPORATION
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(Name of the Registrant as Specified in its Charter)
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UNISOURCE ENERGY CORPORATION
One South Church Avenue
Tucson, Arizona 85701
March 30, 2001
James S. Pignatelli (520) 571-4000
Chairman of the Board
Dear Shareholders:
You are cordially invited to attend the UniSource Energy
Corporation 2001 Annual Shareholders Meeting to be held on Friday,
May 11, 2001, at the Presidio Plaza Hotel, soon to be a Radisson
Hotel, 181 West Broadway, Tucson, Arizona. The meeting will begin
promptly at 10:00 a.m., so please plan to arrive earlier. No
admission tickets will be required for attendance at the meeting.
Directors and officers will be available before and after the
meeting to speak with you. During the meeting, we will answer your
questions regarding our business affairs and we will consider the
matters explained in the enclosed Notice and Proxy Statement.
We have enclosed a proxy card that lists all matters that
require your vote. Please vote, sign and return the proxy card as
soon as possible, whether or not you plan to attend the meeting.
You may also vote by telephone or the Internet, as explained on
the proxy card. If you attend the meeting and wish to vote your
shares personally, you may revoke your proxy at that time. Your
interest and continued support of UniSource Energy Corporation are
much appreciated.
Sincerely,
UNISOURCE ENERGY CORPORATION
/s/ James S. Pignatelli
James S. Pignatelli
Chairman of the Board,
President and
Chief Executive Officer
NOTICE OF ANNUAL SHAREHOLDERS MEETING
TO THE HOLDERS OF COMMON STOCK OF
UNISOURCE ENERGY CORPORATION
We will hold the Annual Shareholders Meeting ("Meeting") of
UniSource Energy Corporation ("UniSource Energy") at the Presidio
Plaza Hotel, soon to be a Radisson Hotel, 181 West Broadway,
Tucson, Arizona, on Friday, May 11, 2001, at 10:00 a.m., Mountain
Standard Time. The Meeting's purpose is to:
1. elect 11 directors for the Board for the ensuing year; and
2. consider any other matters which properly come before the
Meeting.
Only shareholders of record of common stock at the close of
business on March 14, 2001 are entitled to vote at the Meeting.
We have enclosed our 2000 Annual Report, including financial
statements, and the Proxy Statement with this notice. Proxy
soliciting material is first being sent or given to shareholders
on March 30, 2001. Your proxy is being solicited by the UniSource
Energy Board of Directors.
Please vote, sign, date and mail the enclosed proxy as soon
as possible in the enclosed return envelope. You may also vote by
telephone or the Internet, as explained on the enclosed proxy
card.
/s/ Vincent Nitido, Jr.
Vincent Nitido, Jr.
Corporate Secretary
Dated: March 30, 2001
YOUR VOTE IS IMPORTANT
EACH SHAREHOLDER IS URGED TO COMPLETE, SIGN, DATE AND RETURN
PROMPTLY THE ENCLOSED PROXY BY MAIL, OR TO VOTE BY TELEPHONE OR
THE INTERNET, AS EXPLAINED ON THE PROXY CARD. IF THE MAIL OPTION
IS SELECTED, USE THE ENCLOSED ENVELOPE, WHICH DOES NOT REQUIRE
POSTAGE IF MAILED IN THE UNITED STATES. RETURNING A SIGNED PROXY
WILL NOT PROHIBIT YOU FROM ATTENDING THE MEETING AND VOTING IN
PERSON IF YOU SO DESIRE.
UNISOURCE ENERGY CORPORATION
One South Church Avenue
Tucson, Arizona 85701
ANNUAL SHAREHOLDERS MEETING
PROXY STATEMENT
Annual Meeting May 11, 2001 Presidio Plaza Hotel
10:00 a.m., MST (soon to be a Radisson Hotel)
181 West Broadway
Tucson, Arizona 85701
RECORD DATE March 14, 2001. If you were a shareholder of
record at the close of business on March 14,
2001, you may vote at the Annual Shareholders
Meeting ("Meeting"). Each share is entitled to
one vote. In the election of directors, you may
cumulate votes. At the close of business on the
record date, we had 33,266,505 shares of our
common stock outstanding.
AGENDA 1. Proposal One: Elect 11 directors for the Board
for the ensuing year.
2. Consider any other matters which properly come
before the Meeting and any adjournments.
INDEPENDENT Representatives of PricewaterhouseCoopers, LLP
AUDITORS are expected to be present at the Meeting with
the opportunity to make a statement and respond
to appropriate questions.
PROXIES A form of proxy for execution by shareholders is
We will follow enclosed. Unless you tell us on the proxy card
your voting to vote differently, we will vote signed
instructions. returned proxies "for" the Board's nominees. The
If none, we Board or proxy holders will use their discretion
will vote on other matters. If a nominee cannot or will
signed proxies not serve as a director, the Board or the
"for" the persons designated as proxies will vote for a
nominees. person whom they believe will carry on our
present policies.
PROXIES The Board of Directors ("Board").
SOLICITED BY
FIRST MAILING We anticipate first mailing this Proxy Statement
DATE on March 30, 2001.
REVOKING YOUR You may revoke your proxy before it is voted at
PROXY the Meeting. To revoke, follow the procedures
listed on page 3 under "Voting Procedures/Revoking
Your Proxy."
COMMENTS Your comments about any aspects of our business
We welcome are welcome. You may use the space provided on
your comments. the proxy card for this purpose, if desired.
The proxy card Although we may not respond on an individual
has room for basis, your comments help us to measure your
them. satisfaction, and we may benefit from your
suggestions.
PLEASE VOTE - YOUR VOTE IS IMPORTANT
Prompt return of your proxy will help reduce the costs of re-
solicitation.
CONTENTS
Voting Procedures/Revoking Your Proxy.................................2
UniSource Energy Share Ownership......................................3
Proposal One: Election of Directors*..................................7
Board Information.....................................................9
Board Compensation...................................................10
Executive Compensation and Other Information**.......................10
Officer Change in Control Agreements ................................14
Transactions with Management and Others..............................15
Compensation Committee Interlocks and Insider Participation..........15
Compensation Committee Report on Executive Compensation..............16
Audit Committee Report...............................................19
Performance Graph**..................................................20
Submission of Shareholder Proposals..................................20
Other Business.......................................................21
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* We expect to vote on this item at the Meeting.
** The Compensation Committee report and the performance graph will
not be incorporated by reference into any present or future
filings we make with the Securities and Exchange Commission
("SEC"), even if those reports incorporate all or any part of
this Proxy Statement.
VOTING PROCEDURES/REVOKING YOUR PROXY
You can vote You can vote your shares by telephone, the Internet,
by telephone, mail or in person at the Meeting. Your proxy card
the Internet, contains instructions for voting by telephone or the
mail or in Internet, which are the least expensive and fastest
person. We methods of voting. To vote by mail, complete and sign
encourage your proxy card, or your broker's voting instruction
you to vote card if your shares are held by your broker, and
by telephone return it in the enclosed return envelope.
or the
Internet to Under Arizona law, a majority of the shares entitled
help us to vote on any single matter which may be brought
save money. before the Meeting will constitute a quorum. Business
may be conducted once a quorum is represented at the
Meeting. Except as otherwise specified by law or in
our Articles of Incorporation or Bylaws, if a quorum
exists, action on a matter other than the election of
directors will be deemed approved if the votes cast in
favor of the matter exceed votes cast against it.
Directors are elected by a plurality of the votes cast
by the shares entitled to vote if a quorum is present.
A plurality means receiving the largest number of
votes, regardless of whether that is a majority.
Withheld votes will be counted as being represented at
the Meeting for quorum purposes but will not have an
effect on the vote.
You may In the election of directors, each of our common stock
cumulate shareholders has the right to cumulate his votes by
your votes casting as many votes in the aggregate equal to the
for number of his shares of common stock multiplied by the
directors. number of directors to be elected. He may cast all of
such votes for one nominee or distribute such votes
among two or more nominees.
You can Any shareholder giving a proxy has a right to revoke
revoke your that proxy by giving notice to UniSource Energy in
proxy after writing directed to the Corporate Secretary, UniSource
sending Energy Corporation, One South Church Avenue, Suite
it in by 1820, Tucson, Arizona 85701, or in person at the
following Meeting at any time before the proxy is exercised.
these Those who fail to return a proxy or fail to attend the
procedures. Meeting will not count towards determining any required
plurality, majority or quorum.
The shares represented by an executed proxy will be
voted for the election of directors or withheld in
accordance with the specifications in the proxy. If no
specification is made in the proxy, the proxy will be
voted in favor of the nominees as set forth herein.
PROXY We will bear the entire cost of the solicitation of
SOLICITATION proxies. Solicitations will be made primarily by mail.
Additional solicitation of brokers, banks, nominees
and institutional investors may be made pursuant to a
special engagement of Corporate Investor Communications,
Inc., at a cost of approximately $4,000 plus
reasonable out-of-pocket expenses. Solicitations may
also be made by telephone, facsimile or personal
interview, if necessary, to obtain reasonable
representation of shareholders at the Meeting. Our
employees may solicit proxies for no additional
compensation. We will request brokers or other
persons holding stock in their names, or in the names
of their nominees, to forward proxy materials to the
beneficial owners of such stock or requestl authority
for the execution of the proxies. We will reimburse
brokers and other persons for reasonable expenses
they incur in sending these proxy materials to you if
you are a beneficial holder of our shares.
UNISOURCE ENERGY SHARE OWNERSHIP
SECURITY The following table sets forth the number and
OWNERSHIP percentage of shares beneficially owned as of the
OF MANAGEMENT Record Date and the nature of such ownership by each
of our directors, nominees, the Chief Executive
Officer, the four other most highly compensated
executive officers during 2000, and all directors and
officers as a group. Ownership includes direct and
indirect (beneficial) ownership, as defined by the SEC
rules.
Allocable Amount of
Amount and Shares Under Deferred
Name and Nature of Compensation Stock
Title Title of Beneficial Percent Plan and Restricted
of Class Beneficial Owner Ownership (1) of Class Stock Unit Account (2)
- -------- ---------------- ------------- -------- ----------------------
Common James S. Pignatelli 139,416 (3)(4) * 116,277
Chairman, President
and Chief Executive
Officer
Common Ira R. Adler 72,673 (5)(6) * 27,323
Director
Common Lawrence J. Aldrich 1,500 * -
Director
Common Larry W. Bickle 5,201 (7) * -
Director
Common Elizabeth T. Bilby 7,101 (8) * 2,594
Director
Common Harold W. Burlingame 5,701 (7) * -
Director
Common Jose L. Canchola 9,001 (8) * 412
Director
Common John L. Carter 14,758 (9) * 3,771
Director
Common Daniel W. L. Fessler 4,068 (7) * -
Director
Common John A. Jeter 11,410 (8) * 2,106
Director
Common Martha R. Seger 8,589 (8) * 2,157
Director
Common H. Wilson Sundt 8,801 (8)(10) * 1,863
Director
Common Dennis R. Nelson 52,843 (11)(12) * 25,237
Senior Vice President
and Chief Operating
Officer, Energy
Resources (TEP)
Common Steven J. Glaser 36,570 (13)(14) * 27,733
Senior Vice President
and Chief Operating
Officer, Transmission
and Distribution (TEP)
Common Michael J. DeConcini 14,101 (15)(16) * 23,079
Senior Vice President,
Strategic Planning and
Investments
Common All directors and 552,135 (17) 1.7% 321,839
executive officers as
a group
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* Represents less than 1% of the outstanding common stock of UniSource
Energy.
(1) Amounts include the following:
- Any shares held in the name of the spouse, minor children or
other relatives sharing the home of the director, nominee or
officer. Except as otherwise indicated below, the directors,
nominees and officers have sole voting and investment power over
the shares shown. Voting power includes the power to direct the
voting of the shares held, and investment power includes the power
to direct the disposition of the shares held.
- Shares subject to options exercisable within 60 days, based on
information from directors and officers.
- Equivalent share amounts allocated to the individuals' 401(k)
Plan (formerly the Triple Investment Plan (401(k)) which, since
June 1, 1998, has included a UniSource Energy Stock Fund election
option.
(2) Amounts include the following:
- Shares held in trust under the Deferred Compensation Plan. With
the cash compensation deferred, the trust invests in UniSource
Energy common stock quarterly. Distributions under the Deferred
Compensation Plan are made in common stock. Until the common stock
is distributed, directors and officers are not the beneficial
owners of such shares. The number of shares set forth includes
shares purchased through the last quarterly purchase on January 14,
2001.
- The allocable amount of deferred shares in the participant's
Restricted Stock Unit Account (see Summary Compensation Table).
(3) Includes 127,992 shares subject to options exercisable
within 60 days.
(4) Includes 9,605 shares purchased under the 401(k) Plan
UniSource Energy Stock Fund.
(5) Includes 61,867 shares subject to options exercisable
within 60 days.
(6) Includes 5,647 shares purchased under the 401(k) Plan
UniSource Energy Stock Fund.
(7) Includes 3,201 shares subject to options exercisable
within 60 days.
(8) Includes 6,801 shares subject to options exercisable
within 60 days.
(9) Includes 5,601 shares subject to options exercisable
within 60 days.
(10) Includes 1,000 shares held by a corporation with which Mr.
Sundt is associated.
(11) Includes 44,273 shares subject to options exercisable
within 60 days.
(12) Includes 7,762 shares purchased under the 401(k) Plan
UniSource Energy Stock Fund.
(13) Includes 33,387 shares subject to options exercisable
within 60 days.
(14) Includes 1,750 shares purchased under the 401(k) Plan
UniSource Energy Stock Fund.
(15) Includes 9,947 shares subject to options exercisable
within 60 days.
(16) Includes 4,154 shares purchased under the 401(k) Plan
UniSource Energy Stock Fund.
(17) Includes 461,344 shares subject to options exercisable
within 60 days and 46,296 shares purchased under the 401(k)
Plan UniSource Energy Stock Fund.
SECURITY The following companies are the beneficial owners of
OWNERSHIP OF more than 5% of the outstanding shares of our common
CERTAIN stock:
BENEFICIAL
OWNERS
Amount and
Name and Address Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- --------------- ------------------- -------------------- --------
Common The Prudential Insurance 2,134,340 (1)(2) 6.58%
Company of America
751 Broad Street
Newark, NJ 07102-3777
Common T. Rowe Price Associates, Inc. 2,133,700 (3) 6.50%
100 E. Pratt Street
Baltimore, MD 21202
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(1) In a statement dated January 29, 2001 filed with the SEC on
Schedule 13G/A under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), The Prudential Insurance Company of
America ("Prudential") indicated it presently holds 5,100 shares
of our outstanding common stock for the benefit of its general
account. In addition, Prudential may have direct or indirect
voting and/or investment discretion over 2,129,240 shares of our
outstanding common stock, which are held for its own benefit or
for the benefit of its clients by its separate accounts,
externally managed accounts, registered investment companies,
subsidiaries and/or other affiliates.
(2) In a statement dated February 14, 2001 filed with the SEC on
Schedule 13G under the Exchange Act, Jennison Associates LLC
("Jennison") indicated that it has sole voting and shared
dispositive power over 2,002,540 shares, representing 6.18% of
our outstanding common stock, which are directly held in managed
accounts to which Jennison serves as investment advisor.
Prudential owns 100% equity interests of Jennison. As a result,
Prudential may be deemed to have the power to exercise or to
direct the exercise of such voting and/or dispositive power that
Jennison may have with respect to our common stock. Jennison has
not filed its Schedule 13G jointly with Prudential, as such,
shares of our common stock reported on Jennison's Schedule 13G
may be included in the shares reported on Schedule 13G filed by
Prudential.
(3) In a statement dated February 13, 2001 filed with the SEC on
Schedule 13G under the Exchange Act, T. Rowe Price Associates,
Inc. ("Price Associates") indicated it has sole voting power
over 1,018,400 shares and sole dispositive power over 2,133,700
shares of our outstanding common stock. These securities are
owned by various individual and institutional investors for
which Price Associates serves as investment advisor with power
to direct investments and/or sole power to vote the securities
For purposes of the reporting requirements of the Exchange act,
Price Associates is deemed to be beneficial owner of such
securities; however, Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such securities.
SECTION 16(a) Section Section 16(a) of the Exchange Act and SEC
BENEFICIAL regulations require directors, certain officers and
OWNERSHIP persons who own greater than 10% of our stock to file
REPORTING reports of ownership and changes in ownership of such
COMPLIANCE stock with the SEC and the New York Stock Exchange.
These directors, officers and greater than 10%
beneficial owners are required by law to furnish us with
copies of all forms they file under Section 16(a).
Based solely on a review of the copies of such forms
furnished to us and on written representations of our
directors and officers, we believe that all Section 16(a)
filing requirements applicable to our directors and
officers were complied with during 2000.
PROPOSAL 1: ELECTION OF DIRECTORS
GENERAL At the Meeting, the shareholders will elect eleven
We will directors to serve on our Board for the ensuing year
elect 11 and until their successors are elected and qualified.
directors The shares represented by executed proxies in the form
this year. enclosed, unless withheld, will be voted for the eleven
nominees listed below, or, in the discretion of the
persons acting as proxies, will be voted cumulatively
for one or more of such nominees. All of the current
nominees are present members of the Board. All of the
nominees have consented to serve if elected. If any
nominee becomes unavailable for any reason or a vacancy
should occur before the election, it is the intention
of the persons designated as proxies to vote, in their
discretion, for other nominees.
BOARD NOMINEES
James S. Chairman of the Board of Directors, President and Chief
Pignatelli Executive Officer of UniSource Energy since July 1998;
Senior Vice President and Chief Operating Officer of
UniSource Energy from December 1997 to July 1998;
Chairman of the Board of Directors, President and Chief
Executive Officer of Tucson Electric Power Company
("TEP"), a wholly owned subsidiary of UniSource Energy,
since July 1998; Executive Vice President and Chief
Operating Officer of TEP from March 1998 to July 1998;
Senior Vice President and Chief Operating Officer of
TEP from 1996 to 1998; Senior Vice President of
Business Development of TEP from 1994 to 1996; Chairman
of the Board of Directors, President and Chief
Executive Officer of Millennium Energy Holdings, Inc.
("Millennium"), a wholly owned subsidiary of UniSource
Energy, since 1997; President and Chief Executive
Officer of Mission Energy Company, a subsidiary of SCE
Corp. from 1988 to 1993; Director of INNCOM
International, Inc. Age 57.
Ira R. Adler Director of UniSource Energy since July 1998; President
and CEO of Global Energy Solutions, Inc. and Global
Solar Energy, Inc. since October 2000; Executive Vice
President, Chief Financial Officer and Treasurer of
UniSource Energy from July 1998 to September 2000;
Executive Vice President of TEP from March 1998 to
September 2000; Chief Financial Officer of TEP from
July 1990 to September 2000; Senior Vice President of
TEP from 1990 to 1998; Director of Millennium since
1998; Vice President and Chief Financial Officer of
Millennium from April 1998 to November 1998. Age 50.
Lawrence J. Principal, Aldrich Capital Company, a venture capital
Aldrich company, since February 2000; President and Chief
(1)(4) Executive Officer of Tucson Newspapers from January
1992 to February 2000; Director of TEP and Millennium
since 2000. Board member since 2000. Age 48.
Larry W. Managing Director of Haddington Ventures, LLC, an
Bickle investment company, since 1997; Chairman and Chief
(2)(3)(4) Executive Officer of TPC Corporation (formerly Tejas
Power Corporation) from 1982 to May 1997; Director, St.
Mary Land & Exploration Company; Director, Western Hub
Properties; Director of Millennium since 1998. Board
member since 1998. Age 55.
Elizabeth T. President and Treasurer of Gourmet Products, Inc., an
Bilby agricultural product marketing company; Director of
(1)(2)(3)(4) Marketing of Green Valley Pecans since 1982. Director
of TEP since 1995; Director of Millennium since 1998.
Board member since 1995. Age 61.
Harold W. Executive Vice President, Communications & Human
Burlingame Resources of AT&T Wireless Services since April 2000;
(1)(2)(3) Executive Vice President, Merger & Joint Venture
Integration of AT&T from March 1999 to March 2000;
Executive Vice President of Human Resources of AT&T
from 1987 to March 1999; Member of the AT&T Foundation;
Director of TEP since 1998. Board member since 1998.
Age 60.
Jose L. Chairman of Canchola Group, holder of several
Canchola restaurant franchises in Tucson and Nogales, Arizona,
(3)(4) since 1976; Member of McDonald's Corporation Operators
Advisory Board from 1981 to 1993; National Franchise
Director, U.S. Department of Commerce, Office of
Minority Business Enterprise from 1974 to 1976;
Director of Millennium since 1998. Board member since
1992. Age 69.
John L. Executive Vice President and Chief Financial Officer of
Carter Burr-Brown Corporation from 1993 to 1996; President and
(2)(4) Chief Executive Officer of Qualtronics Manufacturing,
Inc. from 1987 to 1996; Director of TEP since 1996;
Director of Millennium since 1998. Board member since
1996. Age 66.
Daniel W.L. Partner in the law firm of LeBoeuf, Lamb, Greene &
Fessler MacRae L.L.P. since 1997; Member of the Harvard
(1)(4) Electricity Policy Group since 1993; Member of the
American Law Institute since 1985; Professor of Law,
University of California, Davis from 1970 to 1995;
President of the California Public Utilities Commission
from 1991 to 1996; Commissioner of the California
Transportation Commission from 1991 to 1995; Director
of TEP since 1998. Board member since 1998. Age 59.
Martha R. Consultant, Martha R. Seger and Associates Economic and
Seger Financial Consulting; John M. Olin Distinguished Fellow
(1)(2)(4) at the Karl Eller Center for the Study of Private
Market Economy at the University of Arizona from 1991
to 1993; Financial Economist and Governor of the
Federal Reserve System from 1984 to 1991; Director of
Xerox Corporation, Kroger Company, Fluor Corporation,
and Amerisure; Director of TEP since 1992. Board member
since 1992. Age 69.
H. Wilson Retired Chairman of the Board, The Sundt Companies
Sundt Inc.; Chairman of the Board and Chief Executive Officer
(2)(3) of Sundt Corp, a general construction contracting firm,
from 1979 to December 1998, having served as President
from 1979 to 1983; Director of Magma Copper Company
from October 1987 to January 1996; Director of
Millennium since 1998. Board member since 1976. Age 68.
- ---------------
(1) Member of the Nominating Committee. Mr. Aldrich was elected to
this Committee effective May 12, 2000.
(2) Member of the Audit Committee. Ms. Bilby served on this
Committee through May 11, 2000.
(3) Member of the Compensation Committee.
(4) Member of the Finance Committee. Mr. Aldrich was elected to
this Committee effective May 12, 2000. Ms. Bilby served on this
Committee through May 11, 2000.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THESE NOMINEES.
BOARD INFORMATION
BOARD In 2000, the Board held a total of six regular meetings
MEETINGS and one special meeting. Each director attended at
least 75% of his or her Board and committee meetings.
BOARD The AUDIT COMMITTEE selects and recommends to the
COMMITTEES Board a firm of independent certified public accountants
to audit annually our financial statements; reviews and
discusses the scope of such audit; receives and reviews
the audit reports and recommendations; transmits its
recommendations to the Board; reviews our accounting and
internal control procedures with our internal audit
department from time to time and makes recommendations
to the Board for any changes deemed necessary in such
procedures; and performs such other functions delegated
by the Board. Our Audit committee held four meetings
in 2000 and was in full compliance with its written
charter. See appendix attached hereto for a copy of
the UniSource Energy Corporation Audit Committee of the
Board of Directors Charter.
The COMPENSATON COMMITTEE reviews the performance of
our directors and officers and makes recommendations
to the Board with respect to directors' and officers'
compensation. Our Compensation Committee held three
meetings in 2000.
The FINANCE COMMITTEE reviews and recommends to the
Board long-range financial policies and objectives and
actions required to achieve those objectives.
Specifically, the Finance Committee reviews capital
and operating budgets, current and projected financial
results of operations, short-term and long-range
financing plans, dividend policy, risk management
activities and major commercial banking, investment
banking, financial consulting and other financial
relations of UniSource Energy. Our Finance Committee
held four meetings in 2000.
The NOMINATING COMMITTEE interviews potential
directors, nominates and recommends to the
shareholders and directors, as the case may be,
qualified persons to serve as directors. The
Nominating Committee held one meeting in 2000. At such
times as director vacancies occur, the Nominating
Committee will consider written recommendations from
shareholders for the Board. The deadline for
consideration of recommendations for next year's
Annual Meeting of Shareholders is November 30, 2001.
Recommendations must include detailed biographical
material indicating the candidate's qualifications and
a written statement from the candidate of willingness
and availability to serve. Recommendations should be
directed to the Corporate Secretary, UniSource Energy
Corporation, One South Church Avenue, Suite 1820,
Tucson, Arizona 85701.
BOARD COMPENSATION
RETAINER In 2000, each non-employee director received a $24,000
AND FEES annual cash retainer, $1,000 for each Board meeting
attended, $1,000 for each committee meeting attended
and an additional $500 if acting as a committee
chairperson. We reimburse directors for any expenses
related to their Board service.
OPTION Non-employee directors also receive options to
GRANTS purchase 2,000 shares of our common stock when they
become directors and another 2,000 for each year they
serve as director thereafter. The exercise price of
the options is the fair market value of our shares on
the grant date. These are grants of UniSource Energy
common stock options under the 1994 Outside Director
Stock Option Plan which vest in one-third increments
on the grant date anniversary and expire in ten years.
This year, with the exception of Mr. Aldrich, options
were granted to each of the directors on January 3,
2000, at an exercise price of $11.00.
DIRECTOR COMPENSATION FOR LAST FISCAL YEAR
Cash Compensation Security Grants
----------------- ---------------
Number of
Number Securities
Annual Retainer of Underlying
Name (1) Fee ($) (2) Meeting Fees ($)(2) Shares Options/SARs (3)
- -------- --------------- ------------------- ------ ----------------
Lawrence J. Aldrich 18,000 13,000 - 2,000 (4)
Larry W. Bickle 24,000 31,000 - 2,000
Elizabeth T. Bilby 24,000 29,000 - 2,000
Harold W. Burlingame 24,000 25,000 - 2,000
Jose L. Canchola 24,000 28,000 - 2,000
John L. Carter 24,000 32,000 - 2,000
Daniel W. L. Fessler 24,000 25,000 - 2,000
John A. Jeter 24,000 30,000 - 2,000
R.B. O'Rielly 10,000 14,500 - 2,000
Martha R. Seger 24,000 26,000 - 2,000
H. Wilson Sundt 24,000 21,500 - 2,000
- ---------------
(1) Mr. Pignatelli and Mr. Adler are not listed in the above table
because directors who are officers of UniSource Energy or salaried
employees of its subsidiaries do not receive compensation in their
capacity as members of the Board. Refer to the Summary
Compensation Table for information concerning their conpensation.
(2) Cash compensation includes amounts earned but deferred at the
election of directors.
(3) Grants of UniSource Energy common stock options under the 1994
Outside Director Stock Option Plan.
(4) Mr. Aldrich was granted shares on May 12, 2000, the date on which
he became a director, at an exercise price of $15.50.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF The following table summarizes the compensation and
COMPENSATION stock option grants to and stock options/stock
appreciation rights ("SARs") held by our Chief
Executive Officer and our four other most highly
compensated executive officers at December 31, 2000
("Named Executives").
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
------------------- -------------------
Restricted Securities
Stock Underlying All Other
Name and Awards Options/ Compensation
Principal Position Year Salary ($) Bonus ($) ($)(1) SARs (#) ($)(2)
- ------------------ ---- ---------- --------- ---------- ----------- ------------
James S. Pignatelli 2000 528,462 440,000 - 100,000 7,650
President and 75,000 (3)
Chief Executive 1999 450,008 272,800 1,200,005 114,500 7,200
Officer 1998 410,050 216,004 - 58,246 7,200
Ira R. Adler 2000 314,423 110,000 - 51,000 7,650
President and 75,000 (3)
Chief Executive 1999 299,988 135,000 225,010 31,800 7,200
Officer (Global 1998 297,614 125,995 - 17,700 7,200
Energy Solutions, Inc.)
Dennis R. Nelson 2000 244,423 112,000 - 40,000 7,650
Senior Vice President 1999 214,769 67,500 225,010 18,200 7,200
and Chief Operating 1998 206,693 72,000 - 8,800 7,200
Officer, Energy
Resources (TEP)
Steven J. Glaser 2000 204,519 115,000 - 40,000 7,650
Senior Vice President 1999 180,000 64,800 283,760 11,450 7,200
and Chief Operating 1998 186,174 54,000 - 8,000 7,200
Officer, Transmission
and Distribution (TEP)
Michael J. DeConcini 2000 159,616 100,000 - 20,000 7,650
Senior Vice President, 20,000 (3)
Strategic Planning and 1999 139,785 35,000 275,319 8,900 7,200
Investments 1998 127,319 37,800 - 4,000 7,080
- ---------------
(1) Award amount represents the fair market value of the restricted
stock units on the grant date. The restrictions on the 1999 grants
lapse 50% on the third anniversary and 50% on the fourth
anniversary of the award date. Recipients are entitled to receive
shares of stock after the restrictions have lapsed, but may elect
to defer receipt of such stock to a future period. The restricted
stock units are not entitled to dividends. As of December 31, 2000,
based on the closing market price of UniSource Energy's stock on
that date of $18.8125 , Mr. Pignatelli held 100,524 restricted
stock units valued at $1,891,108; Mr. Adler held 18,849 restricted
stock units valued at $354,597; Mr. Nelson held 18,849 restricted
stock units valued at $354,597 ; Mr. Glaser held 23,849 restricted
stock units valued at $448,659 ; and Mr. DeConcini held 23,079
restricted stock units valued at $434,174
(2) All Other Compensation is comprised of UniSource Energy's
contributions to the 401(k) Plan.
(3) Options granted to Mr. Pignatelli, Mr. Adler and Mr. DeConcini in
the common stock of Global Energy Solutions, Inc. ("GES"), Global
Solar Energy, Inc. ("GSE") and Infinite Power Solutions, Inc.
("IPS") pursuant to each company's Stock Incentive Plan. Exercising
options in any one of these companies reduces the relative number
of options available for exercise in the other two companies.
UniSource Energy owns 67% of GES. GSE and IPS are wholly-owned
subsidiaries of GES.
STOCK OPTIONS During 2000, the Compensation Committee of our Board
GRANTS IN granted stock options intended to be non-qualified stock
2000 options under the Internal Revenue Code of 1986, as
amended, to officers and managers. The options have
exercise prices equal to the fair market value of the
common stock at the date of grant. The options vest
ratably over a three-year period. The aggregate number
of shares attributable to the 2000 grants is 464,000
(UNS) and 190,000 (GES, GSE and IPS).
The following table includes our 2000 grants of stock
options and SARs to the Named Executives. The amounts
shown as potential realizable values rely on arbitrarily
assumed increases in value required by the SEC. In
assessing those amounts, please note that the ultimate
value of the options, as well as the shares, depends on
actual future share prices. Market conditions and the
efforts of the directors, the officers and others to
foster the future success of UniSource Energy and its
subsidiaries can influence those future share values.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
Potential
Percent of Realizable Value at
Number of Total Options/ Assumed Annual Rates
Securities SARs of Stock Price
Underlying Granted to Exercise Appreciation for
Options/SARs Employees Price Expiration Option Term
Name Granted (#) in Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------------ -------------- -------- ---------- ------ -------
James S. Pignatelli 100,000 21.6% 15.2813 08/03/10 961,033 2,435,446
75,000 (1) 39.5% (2) 3.2500 (3) 08/03/10 153,293 (4) 388,475 (4)
Ira R. Adler 51,000 11.0% 15.2813 08/03/10 490,127 1,242,077
75,000 (1) 39.5% (2) 3.2500 (3) 10/01/10 153,293 (4) 388,475 (4)
Dennis R. Nelson 40,000 8.6% 15.2813 08/03/10 384,413 974,178
Steven J. Glaser 40,000 8.6% 15.2813 08/03/10 384,413 974,178
Michael J. DeConcini 20,000 4.3% 15.2813 08/03/10 192,207 487,089
20,000 (1) 10.5% (2) 3.2500 (3) 08/03/10 40,878 (4) 103,593 (4)
- ---------------
(1) Options granted to Mr. Pignatelli, Mr. Adler and Mr. Deconcini in
GES, GSE and IPS pursuant to each company's Stock Incentive Plan.
Exercising options in any one of the companies reduces the
relative number of options available for exercise in the other
two companies.
(2) The percentage of GES, GSE and IPS options granted to employees
is based on the total number of GES, GSE and IPS options granted
exclusively to UniSource Energy officers and directors.
(3) The GES exercise price is the total of the GSE and the IPS
exercise prices, which are $2.00 and $1.25 respectively.
(4) Due to the start-up nature of the operations of GES, GSE and IPS,
and the fact there is no readily available market price for the
common stock of GES, GSE and IPS, these calculations assume a
market price equal to the GES exercise price of $3.25 at the
grant date.
2000 OPTION The following table includes the number and value of
AND SAR exercisable and non-exercisable options and SARs held by
HOLDINGS the Named Executives as of December 31, 2000.
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities
Underlying
Unexercised Value of Unexercised
Shares Options/SARs at In-the-Money
Acquired Fiscal Year-End (#) Options/SARs at Fiscal
on Exercise Value Exercisable/ Year End ($) Exercisable/
Name (#) Realized ($) Unexercisable Unexercisable
---- ----------- ------------ ------------- -------------------------
James S. Pignatelli - - 123,214/195,748 557,785/915,043
0/75,000 (1) 0/0 (2)
Ira R. Adler - - 61,867/78,100 264,200/337,836
0/75,000 (1) 0/0 (2)
Dennis R.Nelson - - 39,913/55,066 176,984/230,098
Steven J. Glaser - - 30,844/50,299 129,361/199,834
Michael J. DeConcini - - 9,947/27,266 52,014/113,743
0/20,000 (1) 0/0 (2)
- ---------------
(1) Options granted to Mr. Pignatelli, Mr. Adler and Mr. Deconcini in
the common stock of GES, GSE and IPS pursuant to each company's
Stock Incentive Plan. Exercising options in any one of these
companies reduces the relative number of options available for
exercise in the other two companies.
(2) GES, GSE and IPS options were not in the money as of December 31,
2000. Options are in the money if the market value of the
underlying stock exceeds the exercise price of the option.
PENSION PLANS The following table shows the estimated annual retirement
benefit payable to participants, including the Named
Executives, for the average annual earnings and years of
service indicated. Remuneration is comprised of the
officers' average annual compensation during the five
consecutive years of employment with the highest
compensation within the last 15 years preceding retirement.
Compensation is comprised of salary and bonus, as shown on
the Summary Compensation Table.
PENSION PLAN TABLE
Years of Service
--------------------------------------------------------
Remuneration ($) 10 15 20 25 30 35
---------------- -- -- -- -- -- --
125,000 54,850 54,850 54,850 54,850 54,850 54,850
150,000 65,820 65,820 65,820 65,820 65,820 65,820
175,000 76,790 76,790 76,790 76,790 76,790 76,790
200,000 87,760 87,760 87,760 87,760 87,760 87,760
225,000 98,730 98,730 98,730 98,730 98,730 98,730
250,000 109,700 109,700 109,700 109,700 109,700 109,700
300,000 131,640 131,640 131,640 131,640 131,640 131,640
400,000 175,520 175,520 175,520 175,520 175,520 175,520
450,000 197,460 197,460 197,460 197,460 197,460 197,460
500,000 219,400 219,400 219,400 219,400 219,400 219,400
550,000 241,340 241,340 241,340 241,340 241,340 241,340
600,000 263,280 263,280 263,280 263,380 263,280 263,280
650,000 285,220 285,220 285,220 285,220 285,220 285,220
700,000 307,160 307,160 307,160 307,160 307,160 307,160
750,000 329,100 329,100 329,100 329,100 329,100 329,100
800,000 351,040 351,040 351,040 351,040 351,040 351,040
850,000 372,980 372,980 372,980 372,980 372,980 372,980
900,000 394,920 394,920 394,920 394,920 394,920 394,920
950,000 416,860 416,860 416,860 416,860 416,860 416,860
1,000,000 438,800 438,800 438,800 438,800 438,800 438,800
The amount of the pension benefit is equal to a base of
40% of the compensation for 25 years of service, plus 9.7%
of such calculated amount. The estimated benefits shown in
the Pension Plan Table are straight life annuities not
subject to a reduction for any Social Security Benefits.
The table also reflects amounts payable under the Excess
Benefits Plan which will pay from the general funds of
UniSource Energy the difference, if any, between the
benefits under TEP's pension plan and any benefit payments,
which may be limited by federal income tax regulations.
The credited years of service for UniSource Energy's Named
Executives are as follows.
Credited
Name Years of Service
---- ----------------
James S. Pignatelli 6
Ira R. Adler 15
Dennis R. Nelson 23
Steven J. Glaser 11
Michael J. DeConcini 12
OFFICER CHANGE IN CONTROL AGREEMENTS
Change in TEP has Change in Control Agreements ("Agreements")
Control with all of its officers. The Agreements are in effect
Agreements until the latter of: (i) five years after the date
were adopted either TEP or the officer gives written notice of
to attract and termination of the Agreement or (ii) if a change in
retain quality control occurs during the term of the Agreement, five
management. years after the change of control. For the purpose of
the Agreements, a change in control includes the
acquisition of beneficial ownership of 30% of the
common stock of UniSource Energy, certain changes in
the UniSource Energy Board of Directors, approval by
the shareholders of certain mergers or consolidations,
or certain transfers of the assets of UniSource
Energy. The Agreements provide that each officer shall
be employed by TEP or one of its subsidiaries or
affiliates in a position comparable to their current
position, with compensation and benefits which are at
least equal to their then current compensation and
benefits, for an employment period of five years after
a change in control (subject to earlier termination
due to the officer's acceptance of a position with
another company or termination for cause).
Following a change in control, in the event that the
officer's employment is terminated by TEP (with the
exception of termination due to the officer's
acceptance of another position or for cause), or if
the officer terminates his employment because of a
reduction in position, responsibility, salary or for
certain other stated reasons, the officer is entitled
to severance benefits in the form of: (i) a lump sum
payment equal to the present value of three times his
salary and bonus compensation; (ii) the present value
of the additional amount he would have received under
the TEP Retirement Plan if he had continued to be
employed for the five-year period after a change in
control occurs; and (iii) the present value of any
employee awards under the 1994 Omnibus Stock and
Incentive Plan or any successor plan, which are
outstanding at the time of the officer's termination
(whether vested or not), prorated based on length of
service. Such officer is also entitled to continue to
participate in TEP's health, death and disability
benefit plans for five years after the termination.
The Agreements further provide that TEP will make a
payment to the officer to offset any excise taxes
that may become payable under certain conditions.
Any payments made in respect of such excise taxes
are not deductible. Assuming a change in control
occurred on the Record Date which resulted in the
immediate termination of the Chief Executive Officer
and the other Named Executives, the total payments
made by UniSource Energy pursuant to the Agreements
would not be expected to exceed $15.7 million.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
TUCSON Millennium Energy Holdings, Inc., a subsidiary of
COMMUNITY UniSource Energy, has made a $5 million capital
VENTURES L.L.C. commitment to Tucson Community Ventures, L.L.C., a
venture capital fund. Mr. Aldrich, a member of our
Board, owns the company that manages the fund.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
LEBOEUF, LAMB The law firm of LeBoeuf, Lamb, Greene & MacRae L.L.P.
GREENE & has provided certain legal services to UniSource
MACRAE L.L.P. Energy. Mr. Fessler, a member of our Compensation
Committee, is an equity owner of that firm. The
arrangements with that firm are competitive with those
of other law firms serving us.
HADDINGTON Millennium Energy Holdings, Inc., a subsidiary of
ENERGY UniSource Energy, has been authorized by its Board of
PARTNERS Directors to invest $15 million, in aggregate, over a
II L.P. three- to five-year period in Haddington Energy
Partners II L.P. Mr. Bickle, a member of our
Compensation Committee, is the managing director of
Haddington Ventures L.L.C., the general partner of
Haddington Energy Partners II L.P.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE COMMITTEE The Compensation Committee of the Board (the
"Compensation Committee") is responsible for developing
and administering executive compensation policies and
programs for UniSource Energy and TEP and making
recommendations to the Board with respect thereto. In
2000, the Compensation Committee was comprised of
six independent outside directors. The Compensation
Committee determines the compensation of UniSource
Energy's executive officers, including Mr. Pignatelli
and the other Named Executives, and sets policies for
and reviews the compensation awarded to other key
members of management. UniSource Energy applies a
consistent philosophy to compensation for all
executive employees, including the Named Executives.
OVERALL UniSource Energy's executive compensation policies and
OBJECTIVES programs generally are intended to relate the
compensation of employees to the success of UniSource
Energy and the corresponding creation of shareholder
value to attract, retain and motivate executives and
key employees with competitive compensation
opportunities.
EXECUTIVE We review executives' pay each year. Compensation
COMPENSATION depends on many factors, including individual
GENERALLY performance responsibilities, future challenges and
objectives and the executive's potential contribution
to our future success. We also look at UniSource
Energy's financial performance and the compensation
levels at comparable companies.
UniSource Energy's 2000 compensation program consisted
of three components:
- base salary;
- short-term incentive compensation; and
- long-term incentive compensation.
BASE SALARY The base salary component of compensation is intended
to be competitive with that paid by comparable
companies in the energy industry. In developing the
compensation program, the Compensation Committee
retained an external consultant to conduct a
competitive analysis of pay for UniSource Energy's
officer group. In conducting its analysis for 2000,
the consultant used two comparator groups: (i) an
energy group consisting of 12 gas and electric
utilities with revenues from $.6 to $4.6 billion; and
(ii) a group of 27 public companies in the energy
industry, for utility specific jobs and a mixed group
of energy and general industry for jobs not specific
to the utility industry, with revenues from $.5 to
$3.1 billion. The Compensation Committee believes
the companies in the comparator groups are a more
appropriate comparison for UniSource Energy than the
Edison Electric 100 companies used in the Performance
Graph on page 20, because the type of business and
annual revenues of the companies included in the
survey are more closely related to those of
UniSource Energy and the companies in the comparator
groups represent primary competitors to UniSource
Energy for top-level management personnel. The external
data from companies in the comparator groups was
used to develop a market compensation for each
executive position. "Market compensation" refers to
the median salary for executives in the comparator
groups. Base salaries for UniSource Energy's
executive officers, including Mr. Pignatelli and the
other Named Executives, were set at market compensation
levels in January 2000, in recognition of the
increasingly competitive environment in the electric
industry and the need to continue to attract and
retain highly qualified executives and the fact that
a substantial portion of each executive's total
compensation package is "at-risk," based on the
achievement of certain corporate goals. See Short-Term
Incentive Compensation and Long-Term Incentive
Compensation below.
SHORT-TERM The Board adopted a Short-Term Incentive Plan to
INCENTIVE provide compensation for meeting or exceeding
COMPENSATION specified objectives designed to contribute to the
attainment of UniSource Energy's long-term strategic
plan. Under the Short-Term Incentive Plan, target
award levels are set as a percentage of each
participant's base salary. In 2000, the target award
levels for our executive officers ranged from 30%-60%
of base salary. Awards for Mr. Pignatelli and the
remaining executive officers are determined by the
Board based on the accomplishment of previously
established individual goals and contribution to
business results. Based on the foregoing factors, the
Compensation Committee made awards to executive
officers of the Company ranging from 30% to 80% of
base salary. Incentive compensation awarded to Mr.
Pignatelli and the other Named Executives is set forth
in the preceding Summary Compensation Table.
LONG-TERM UniSource Energy's long-term incentive compensation is
INCENTIVE intended to attract and retain quality employees over
COMPENSATION the long term in a manner that directly aligns them
with shareholder interests.
At the recommendation of the Compensation Committee,
the Board of Directors unanimously adopted, and at
the 1994 Annual Meeting of Shareholders, the
shareholders approved the Tucson Electric Power
Company 1994 Omnibus Stock and Incentive Plan. On
August 3, 2000, the Compensation Committee issued non-
qualified stock options ("NQSOs") to all executive
officers of UniSource Energy including Mr. Pignatelli
and the other Named Executives. In calculating the
level of awards to the other executive officers, the
Compensation Committee considered the above analysis
of executive compensation for comparative companies.
Based on such analysis, the Compensation Committee
awarded Mr. Pignatelli NQSOs with a total value equal
to 125% of his base salary. The total value of stock
options issued to the other Named Executives ranged
from 75% to 140% of base salary. The number of shares
covered by the stock option grant to Mr. Pignatelli
was 100,000 (UNS) and 75,000 (GES, GSE and IPS). The
Compensation Committee did not consider the number of
options previously granted or outstanding.
In 2000, the Compensation Committee issued awards of
restricted stock units to two executive officers.
Restricted stock units represent the right to receive
UniSource Energy stock following the expiration of a
stated period of time and were issued to retain key
management personnel. Executives who received
restricted stock awards in 2000 are entitled to
receive one-half of the awarded stock on March 6, 2003
and the remaining half on March 6, 2004, provided
they are then still employed by UniSource Energy or
its subsidiaries.
TAX CODE The Compensation Committee does not presently have a
CONCERNS policy regarding qualifying compensation paid to
executive officers for deductibility under Section
162(m) of the Internal Revenue Code of 1986, as
amended.
CONCLUSION We believe Mr. Pignatelli and his executive team have
provided outstanding service to UniSource Energy. We
will work to assure the executive compensation
programs continue to meet our strategic goals as well
as the overall objectives discussed above.
Respectfully submitted,
THE COMPENSATION COMMITTEE
H. Wilson Sundt, Chair
Larry W. Bickle
Elizabeth T. Bilby
Harold W. Burlingame
Jose L. Canchola
John A. Jeter
AUDIT COMMITTEE REPORT
THE COMMITTEE The Audit Committee is made up of non-employee,
financially literate, directors who are independent,
as defined in the applicable New York Stock Exchange
listing standards. Several members of the Audit
Committee have accounting or related financial
management expertise. The Board previously adopted a
written charter for the Audit Committee. On July 14,
2000, the Board approved amendments to the charter. The
Audit Committee Charter is included as an appendix to
this Proxy Statement. The Committee has complied with
its charter including the requirement to meet
periodically with UniSource Energy's independent
auditors, our Internal Audit Department, and our
management to discuss the auditors' findings and
other financial and accounting matters.
In connection with our December 31, 2000 financial
statements, the Audit Committee has (i) reviewed and
discussed the audited financial statements with
management; (ii) discussed with PricewaterhouseCoopers,
LLP, our independent auditor, the matters required to
be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU Sec. 380); (iii) received from
PricewaterhouseCoopers, LLP the written disclosures
and the letter required by Independence Standards
Board Standard No. 1 (Independence Discussions with
Audit Committees); and iv) discussed with
PricewaterhouseCoopers, LLP its independence.
The following table details fees paid to
PricewaterhouseCoopers, LLP for professional services
during the year 2000. The Audit Committee has
considered whether the provision of services to us by
PricewaterhouseCoopers, LLP, beyond those rendered in
connection with their audit and review of our financial
statements, is compatible with maintaining their
independence as auditors.
Financial Information
System Design and All
Audit Fees Implementation Fees Other Fees
---------- ------------------- ----------
$322,847 - $234,060
Based on all of its activities during the year, the
Audit Committee recommended to the Board that the
financial statements for 2000 be included in the
Annual Report on Form 10-K for filing with the
Securities and Exchange Commission.
Respectfully submitted,
THE AUDIT COMMITTEE
John A. Jeter, Chair
Larry W. Bickle
Harold W. Burlingame
John L. Carter
Martha R. Seger
H. Wilson Sundt
PERFORMANCE GRAPH
Comparison of Cumulative Three-Year Total Return Among
UniSource Energy, Standard & Poor's 500 Index
and EEI Index of 100 Investor-Owned Utilities (1)
The graph showing on the hard copy represents the comparison of three year
cumulative total return between UniSource Energy Corporation, the S&P 500
Index, and EEI Index of 100 investor-owned utilities. The graph's X-axis
shows the years 1997 to 2000, and the Y-axis shows dollar values from 50
to 200. The data points are connected by lines with the following markers:
UniSource Energy - triangles; S&P 500 Index - diamonds; EEI Index of 100
investor-owned utilities - squares. The datapoints are as follows:
1997 1998 1999 2000
---- ---- ---- ----
UniSource Energy
Corporation $100 $74 $62 $106
S&P 500 Index $100 $129 $156 $141
EEI Index of 100
Investor-owned
Utilities $100 $114 $93 $137
- --------------------
(1) Assumes $100 invested on December 31, 1997 in UniSource Energy
common stock, S&P Index and EEI Index. It is assumed that all
dividends are reinvested in stock at the frequency paid and the
returns of each component peer group issuer are weighted
according to the issuer's stock market capitalization at the
beginning of the period.
Data and Calculations 1998 1999 2000
--------------------- ---- ---- ----
S & P 500 Total Return Change 28.58% 21.04% -9.10%
EEI Index - 100 Electrics 13.89% -18.60% 47.97%
UniSource Energy Change -25.52% -17.13% 71.80%
SUBMISSION OF SHAREHOLDER PROPOSALS
GENERAL Rule 14a-4 of the SEC's proxy rules allows us to use
discretionary voting authority to vote on a matter
coming before an annual meeting of the shareholders,
which was not included in our Proxy Statement (if we
do not have notice of the matter at least 45 days
before the date on which we first mailed our proxy
materials for the prior year's annual meeting of the
shareholders). In addition, we may also use
discretionary voting authority if we receive timely
notice of such matter (as described in the preceding
sentence) and if, in the Proxy Statement, we describe
the nature of such matter and how we intend to exercise
our discretion to vote on it. Accordingly, for our 2002
Annual Meeting of Shareholders, any such notice must be
submitted to the Corporate Secretary of UniSource
Energy on or before February 13, 2002.
We must This requirement is separate and apart from the SEC's
receive your requirements that a shareholder must meet in order to
shareholder have a shareholder proposal included in our Proxy
proposals by Statement. Shareholder proposals intended to be
November 30, presented at our 2002 Annual Meeting of Shareholders
2001. must be received by us no later than November 30, 2001
in order to be eligible for inclusion in our Proxy
Statement and the form of proxy relating to that
meeting. Direct any proposals, as well as related
questions, to the undersigned.
OTHER BUSINESS
The Board knows of no other matters for consideration
at the Meeting. If any other business should properly
arise, the persons appointed in the enclosed proxy have
discretionary authority to vote in accordance with
their best judgment.
Additional copies of our 2000 Annual Report on form
10-K may be obtained by shareholders, without charge,
upon written request to Library and Resource Center,
UniSource Energy Corporation, 3950 East Irvington Road,
Mail Stop RC114, P.O. Box 711, Tucson, Arizona 85702.
You may also obtain our SEC filings through the
Internet at www.sec.gov.
By order of the Board of Directors.
/s/ Vincent Nitido, Jr.
Vincent Nitido, Jr.
Corporate Secretary
PLEASE VOTE - YOUR VOTE IS IMPORTANT
APPENDIX
Amended
July 14, 2000
UNISOURCE ENERGY CORPORATION
----------------------------
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
-----------------------------------------
CHARTER
-------
1. COMPOSITION
-----------
The Audit Committee of the Board of Directors (the "Committee")
consists of not less than five non-employee Directors appointed
annually by the Board. No Director who accepts any compensation
other than fees for Board service and no Director who is not
completely independent of management and the Corporation shall be
appointed. The Board shall designate one of the Committee members
as Chairman of the Committee. Each member of the Committee shall
be financially literate, and one member shall have accounting or
financial management expertise.
2. MEETINGS
--------
The Committee will hold at least four regular meetings each year,
and such additional meetings as it may deem necessary. Additional
meetings will be called by the Chairman of the Committee. The
agendas for the regular meetings shall include all items necessary
to complete the duties of the Committee as set forth herein. In
addition to the Committee members and the Secretary, the Chairman
of the Board, Chief Executive Officer and President and other
members of management, internal audit and representatives of the
independent auditors may attend as appropriate.
3. RULES OF PROCEDURE
------------------
The Committee will determine its own rules of procedure with respect
to how its meetings are to be called, as well as the place and time.
4. COMPENSATION
------------
Each member will be paid such fees as may be established from time
to time by the Board for service on the Committee, and will be
reimbursed for travel expenses incurred by attendance at meetings.
5. COMMITTEE SECRETARY
-------------------
The Secretary of the Committee will be the Assistant Corporate
Secretary of the Company (or such other representative of
management as the Committee may designate) and not be a member of
the Committee. The Secretary will attend all meetings and maintain
minutes, advise members of all meetings called, arrange with the
Chairman or other convening authority for preparation and
distribution of the agenda for each meeting, and carry out other
functions as may be assigned from time to time by the Committee.
At such meetings where attendance by a Company representative is
not appropriate, the Chairman shall act as secretary of the
meeting or appoint another member of the Committee to act as
secretary of such meetings.
6. QUORUM
------
A majority of the total membership of the Committee will constitute
a quorum.
7. RESPONSIBILITIES
----------------
The Committee is to assist the Board in discharging its duties and
responsibilities regarding financial accounting, reporting and
internal controls. To ensure independence and assure adequate
consideration of audit recommendations the Corporate General
Auditor reports directly to the Chairman of the Committee.
8. SPECIFIC DUTIES OF THE COMMITTEE
--------------------------------
a) Select and evaluate a firm for recommendation to the Board for
the Board to engage as the Company's independent auditor and,
where appropriate, to replace such firm.
b) Review the independent auditor's compensation, the proposed
terms of its engagement, and its independence.
c) Ensure that the auditors understand that they are ultimately
accountable to the Board of Directors and the Committee, as
representatives of the stockholders.
d) Annually receive a written statement from the auditors
delineating all relationships between the auditor and the Company.
e) Review the appointment, replacement, reassignment or dismissal
of the Company's General Auditor.
f) Review and approve the internal audit department charter.
g) Serve as a channel of communication between the independent
auditor and the Board and between the Company's General Auditor
and the Board to maintain the best allocation of available
resources.
h) Review the results of each independent audit, including any
qualifications in the independent auditor's opinion, any related
management letter, management's response to recommendations made
by the independent auditor in connection with the audit, reports
submitted to the Committee by the internal and independent
auditors that are material to the Company as a whole, and
management's response to those reports.
i) Review the Company's annual financial statements and any
significant disputes between management and the independent
auditor that arose in connection with the preparation of those
financial statements. (The Committee does not review interim
financial reports before they are published, because our
independent auditors review such reports and issue written
reports on their reviews, and because of the tight preparation
and distribution schedule of such reports.)
j) Discuss with the independent auditor the quality (not just the
acceptability) of the Company's application of Generally Accepted
Accounting Principles (GAAP), including a discussion of such
issues as the clarity of the financial disclosures and the degree
of aggressiveness or conservatism of the Company's application of
GAAP.
k) Review management and General Auditor reports on the adequacy
of the Company's internal controls established by management to
provide, among other things, reasonable assurance that the
Company's publicly reported financial statements are presented
fairly in conformity with GAAP.
l) Consider major changes and other major questions of choice
proposed by management regarding the appropriate auditing
practices to be followed by the Company's internal audit staff
and accounting principles and practices to be followed when
preparing the Company's financial statements.
m) Review the procedures employed by the Company in preparing
published financial statements and related management
commentaries.
n) Meet periodically with management to review the Company's major
financial risk exposure, and the measures taken to reduce such
risk.
o) Annually review the Company policy on a Corporate Code of
Conduct and compliance therewith.
p) Annually review this Audit Committee Charter and make any
necessary changes.
q) Annually review travel and entertainment expenses of officers
and directors. Include in this review a discussion of
perquisites.
r) Annually perform an evaluation of the Committee, its members,
functions and performance.
9. EXECUTIVE SESSION
-----------------
At all meetings of the Committee, sufficient opportunity shall be
made available for the internal and independent auditors to meet
with the Committee members in executive session without management
present.
10. RESPONSIBILITIES OF THE CHAIRMAN
--------------------------------
The Chairman of the Committee will present the Committee's
recommendations to the Board for its approval and periodically
provide the Board, for its information, with a summary of the
Committee's determinations and approvals.
11. RESPONSIBILITIES OF THE CHIEF EXECUTIVE OFFICER
-----------------------------------------------
The Chief Executive Officer of the Company will advise and make
recommendations to the Committee and, in the normal course, attend
all meetings of the Committee.
12. OTHER AUTHORITY
---------------
The Committee may call upon any person including employees of the
Company or its subsidiaries, knowledgeable in matters discussed by
the Committee, for information and counsel, provided, however, the
Committee shall not retain independent counsel or advisors without
the consent of the Board.
APPENDIX B
FORM OF PROXY CARD
UNISOURCE ENERGY
Two New Ways to Vote
VOTE BY INTERNET OR TELEPHONE
24 Hours a Day - 7 Days a Week
It's Fast and Convenient
INTERNET
- --------
http://proxy.shareholder.com/uns
- -- Go to the website address listed above.
- -- Have your proxy card ready.
- -- Enter your Control Number located in the box below.
- -- Follow the simple instructions on the website.
OR
TELEPHONE
- ---------
1-800-574-7048
- -- Use any touch-tone telephone.
- -- Have your proxy card ready.
- -- Enter your Control Number located in the box below.
- -- Follow the simple recorded instructions.
OR
MAIL
- ----
- -- Mark, sign and date your proxy card.
- -- Detach your proxy card.
- -- Return your proxy card in the postage-paid envelope provided.
Your Internet or telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card. If you have submitted your proxy by the Internet or telephone there is
no need for you to mail back your proxy card.
1-800-574-7048
CALL TOLL-FREE TO VOTE
-----------------------------
CONTROL NUMBER
FOR INTERNET/TELEPHONE VOTING
-----------------------------
THE INTERNET AND TELEPHONE VOTING FACILITIES WILL BE AVAILABLE UNTIL 5:00 P.M.
E.S.T. ON MAY 10, 2001.
DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY THE INTERNET OR TELEPHONE
- -------------------------------------------------------------------------------
(FORM OF PROXY CARD - FRONT)
The Board of Directors Recommends a Vote FOR the following proposal:
1. Election of Directors
FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS [ ]
listed below for all nominees listed
[ ] below [ ]
Nominees: 01-Ira R. Adler, 02-Lawrence J. Aldrich, 03-Larry W. Bickle,
04-Elizabeth T.Bilby, 05-Harold W. Burlingame, 06-Jose L. Canchola,
07-John L. Carter, 08-Daniel W. L. Fessler, 09-James S. Pignatelli,
10-Martha R. Seger, 11-H. Wilson Sundt
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below).
*Exceptions -------------------------------------------------------------------
If you agree to access
our Annual Report and Proxy
Statement electronically in
the future, please mark this
box. [ ]
Change of Address and
or Comments Mark Here [ ]
PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. When shares are held by joint
tenants in common or as community
property, both should sign. When
signing as attorney, executor,
administrator, trustee, guardian or
custodian, please give full title as
such. If a corporation, please sign in
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person. Receipt is hereby
acknowledged of Notice of Annual
Meeting, Proxy Statement and the 2000
Annual Report.
Dated: 2001
------------------------,
------------------------------------
Signature
------------------------------------
Signature
Votes MUST be indicated
(x) in Black or Blue ink. [X]
Please Sign, Date and Return the Proxy
Promptly Using the Enclosed Envelope.
- -------------------------------------------------------------------------------
PLEASE DETACH HERE
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
- -------------------------------------------------------------------------------
The Presidio Plaza Hotel, soon to be a Radisson Hotel,
is located at 181 West Broadway. From the freeway,
head east on Congress. The hotel is located one and
a half blocks east of the freeway on the south side of
Broadway (when heading east, Congress turns into Broadway).
[A street map showing the location of
the annual shareholders meeting is set forth
in this area.]
- -------------------------------------------------------------------------------
(FORM OF PROXY CARD - BACK)
UNISOURCE ENERGY CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors of the Company for
the Annual Meeting to be held May 11, 2001
P R O X Y
The undersigned hereby appoints James S. Pignatelli and Kevin P. Larson, and
each of them, with the power of substitution, to represent and to vote on behalf
of the shareholder all shares of Common Stock which the shareholder is entitled
to vote at the Annual Meeting of Shareholders scheduled to be held in the
Presidio Plaza Hotel, soon to be a Radisson Hotel, 181 West Broadway, Tucson,
Arizona, on May 11, 2001, and at any adjournments thereof, with all powers
the shareholder would possess if personally present and particularly with
respect to Item 1 and in their discretion, upon such other business as may
properly come before the meeting. This proxy, when properly executed, will be
voted in the manner directed herein by the shareholder. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" ITEM 1.
(Continued, and to be dated and signed on reverse side.)
UNISOURCE ENERGY CORPORATION
C/O THE BANK OF NEW YORK
P.O. BOX 11030
NEW YORK, N.Y. 10203-0030