Exhibit 10(p)
Officer Change in Control Agreement
This OFFICER CHANGE IN CONTROL AGREEMENT (the "Agreement"), is entered
into as of the 4th day of December, 1998, by and between Tucson Electric
Power Company (the "Company"), an Arizona corporation, and [Name], of
Tucson, Arizona (the "Employee"). Company and Employee may be referred to
collectively hereinafter as the "Parties" and singly as a "Party".
RECITALS
WHEREAS, the Employee is an integral part of the Company's management
who participates in the decision making process relative to short and long-
term planning and policy for the Company;
WHEREAS, the Board of Directors of the Company has determined that it
would be in the best interests of the Company, its shareholders and the
Employee to assure continuity in the management of the Company's
administration and operations in the event of a Change in Control by
entering into Change in Control agreements to retain the services of the
Employee and certain other key members of the Company's management;
WHEREAS, the Employee agrees to the terms of the Change in Control
agreement offered by the Company as set forth herein; and
WHEREAS, effective as of January 1, 1998, pursuant to a statutory
share exchange, the Company became a wholly owned subsidiary of UniSource
Energy Corporation, an Arizona corporation ("UniSource").
NOW, THEREFORE, in consideration of the Employee's continued service
to the Company and the mutual agreements herein contained, and for other
good and valuable consideration, the receipt of which are hereby
acknowledged, the Company and the Employee hereby agree as follows:
AGREEMENT
ARTICLE 1
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Eligibility for Benefits
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1.1 TERM OF AGREEMENT; EXPIRATION DATE. This Agreement shall be
effective as of the date first indicated above and shall remain in effect
until the latter of: (a) the fifth anniversary of the date either party
gives written notice of the termination of this Agreement; or (b) if a
Change in Control occurs during the term of this Agreement, the fifth
anniversary of the Change of Control.
1.2 CHANGE IN CONTROL. The term "Change in Control" shall mean the
occurrence of any of the following:
(a) UniSource receives a report on Schedule 13D filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") disclosing
that any person, group, corporation or other entity is the beneficial
owner, directly or indirectly, of thirty percent (30%) or more of the
outstanding common stock of UniSource;
(b) any person (as such term is defined in Section 13(d) of the
Exchange Act), group, corporation or other entity other than UniSource, a
wholly-owned subsidiary of UniSource, or an entity formed by UniSource for
the purpose of creating a holding company structure, purchases shares
pursuant to a tender offer or exchange offer to acquire any common stock of
UniSource (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 (30%) or more of
the outstanding common stock of UniSource (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 UniSource's approval of:
(i) any consolidation or merger of UniSource in which
UniSource is not the continuing or surviving corporation or pursuant to
which shares of UniSource common stock 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 related transactions) of all or substantially
all the assets of UniSource;
(d) there shall have been a change in a majority of the members
of the Board of Directors of UniSource within a twenty-four (24) month
period unless the election or nomination for election by UniSource's
stockholders of each new Director was approved by the vote of two-thirds
(2/3) of the Directors then still in office who were in office at the
beginning of the twenty-four (24) month period; or
(e) there occurs a sale, exchange or transfer of all or
substantially all of UniSource's interest in the Company.
1.3 QUALIFYING TERMINATION. The term "Qualifying Termination" shall
mean the occurrence of:
(a) a Change in Control; and
(b) either:
(i) the Company or its successor terminates the
Employee's employment, other than for the reasons delineated in Sections
1.7(a)(i) or 1.7(c) hereto, within five (5) years after the Change in
Control (or within six (6) months before the Change in Control if such
termination is effected in contemplation of the Change in Control); or
(ii) within five (5) years after the Change in Control the
Employee terminates employment with the Company or its successor for any of
the reasons delineated in Sections 1.7(b)(i), 1.7(b)(ii), 1.7(b)(iii), or
1.7(b)(iv) hereto.
The Company shall not be required to provide any benefits to the Employee
pursuant to this Agreement unless a Qualifying Termination occurs.
1.4 Compensation.
(a) For all services rendered by the Employee in any capacity
during the term of this Agreement following a Change of Control, including
services as an executive, officer, director, or member of any committee of
the Company or any subsidiary or affiliate thereof, the Company shall pay
the Employee a fixed salary at a rate of not less than Employee's salary in
effect at the time of the Change in Control, subject to such periodic
increases as the Board of Directors, or a committee designated by said
Board, shall deem appropriate in accordance with the Company's customary
procedures and practices regarding the salaries of senior management
employees. Such salary shall be payable in accordance with the customary
payroll practices of the Company. Such periodic increases in salary, once
granted, shall not be subject to revocation.
(b) Nothing in this Agreement shall preclude or affect any
rights or benefits that may now or hereafter be provided for the Employee
or for which the Employee may be or become eligible under any bonus or
other form of compensation or employee benefit plan now existing or that
may hereafter be adopted or awarded by the Company. Specifically, the
Employee shall:
(i) participate in the Company's Retirement Plan and any
related excess benefit or supplemental retirement program (hereinafter
referred to collectively as the "Retirement Program");
(ii) participate in the Company's Deferred Compensation
Plan;
(iii) participate in the Company's Triple Investment Plan;
(iv) participate in any stock option, stock appreciation
right, equity incentive or deferred compensation plan maintained by the
Company;
(v) participate in the Company's death benefit plans;
(vi) participate in the Company's disability benefit
plans;
(vii) participate in the Company's medical, dental and
health and welfare plans;
(viii) participate in the Company's annual incentive plan;
and
(ix) participate in equivalent successor plans thereto for
which senior management employees are eligible; provided, however, that
nothing in this Agreement shall preclude the Company from amending or
terminating any such plan or program, on the condition that such amendment
or termination is applicable to all of the Company's senior management
employees generally.
1.5 BUSINESS EXPENSES. The Company shall pay or reimburse the
Employee for all reasonable travel or other expenses incurred in connection
with the performance of the Employee's duties under this Agreement in
accordance with such procedures as the Company may from time to time
establish.
1.6 ADDITIONAL BENEFITS. Nothing in this Agreement shall affect the
Employee's eligibility to participate in all group health, dental,
hospitalization, life, travel or accident or other insurance plans or
programs and all other perquisites, fringe benefit or retirement plans or
additional compensation, including termination pay programs, which the
Company may hereafter, in its sole and absolute discretion, elect to make
available to its senior management employees generally, and the Employee
shall be eligible to receive, during his employment, all benefits and
emoluments for which key employees are eligible under every such plan,
program, perquisite or arrangement to the extent permissible under the
general terms and provisions thereof.
1.7 TERMINATION OF EMPLOYMENT. Notwithstanding any other provision
of this Agreement, the Employee's employment with the Company may be
terminated:
(a) by the Company:
(i) in the event of the Employee's fraud or dishonesty
which has resulted or is likely to result in material economic damage to
the Company or any of its subsidiaries, as determined by a vote of two-
thirds (2/3) of the Directors of the Company at a meeting of the Board of
Directors at which the Employee had an opportunity to be heard and such
termination is based on facts and circumstances known by a majority of the
non-employee Directors for a period of no more than twelve (12) months by
written notice to the Employee, specifying the event relied upon for such
termination; or
(ii) upon the Disability or death of the Employee. For
purposes of this Agreement, the term "Disability" is defined as the
inability of the Employee to engage in his regular occupation for twelve
(12) consecutive months and the inability thereafter to engage in any
occupation in which the Employee could reasonably expect to engage giving
due consideration to the Employee's education, training and experience. The
Employee must be under the regular medical care of a physician in
connection with treatment for such Disability.
(b) by the Employee:
(i) if, following a Change of Control, there has been any
material change by the Company of the Employee's status, title, authority,
duties or responsibilities which change would cause the Employee's position
with the Company to become of less responsibility or scope from that which
the Employee held immediately prior to the Change in Control;
(ii) upon the assignment or reassignment by the Company or
by one of its subsidiaries of the Employee to another place of employment
more than fifty (50) miles from the Employee's current place of employment;
(iii) upon the liquidation, dissolution, consolidation or
merger of the Company, or transfer of all or substantially all of its
assets, other than a transaction in which a successor corporation with a
net worth at least equal to that of the Company assumes this Agreement and
all obligations and undertakings of the Company hereunder; or
(iv) upon a reduction in the Employee's target
compensation or any component thereof, following a Change of Control,
except as part of a salary reduction program affecting the Company's
management employees generally, or other material breach of this Agreement
by the Company or any of its subsidiaries, by written notice to the
Company, specifying the event or events relied upon for such termination
and given at any time within one (1) year after the occurrence of such
event or events. For the purpose of this Agreement, "target compensation"
shall include the Employee's base salary plus the opportunity to
participate in the Company's annual incentive plan and the Company's 1994
Omnibus Stock and Incentive Plan or any successor plans thereto (the
"Plan"), at the same level and terms available to the Employee immediately
prior to the Change in Control; or
(c)by either the Company or the Employee, if the Employee accepts
employment or a consulting position with another company.
ARTICLE II
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Compensation Upon Termination
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2.1 BASIC SEVERANCE PAYMENT. In the event of a Qualifying
Termination, the Company shall, as liquidated damages or severance pay, or
both, pay to the Employee and provide the Employee and the dependents,
beneficiaries and estate of the Employee within thirty (30) business days
after such Qualifying Termination of employment with the following:
(a) A lump sum cash amount equal to:
(i) three (3) times the sum of Employee's base annual
salary immediately preceding the Change in Control; adjusted to reflect any
increases in such base salary following the Change in Control plus the
Employee's annual target bonus; and
(ii) a prorated annual target bonus for the short year in
which the Qualifying Termination occurs.
(b) A lump sum cash amount equal to the present value of the
excess of:
(i) the aggregate benefit that would have been paid under
the Retirement Program described in paragraph 1.4(b)(i) above as in effect
on the date first above written, if the Employee had continued to be
employed and to be entitled to service credit for eligibility and benefit
purposes during the sixty (60) month period immediately following such
Qualifying Termination, at an annual rate of compensation equal to that
used to calculate the payments provided by paragraph 2.1(a) above,
calculated on the basis of the compensation amount used in the benefit
formula under said Retirement Program, and assuming that the Employee is
fully vested in such benefit, over
(ii) the aggregate benefit actually payable under the
Retirement Program and any successor retirement program of the Company
consisting of a tax-qualified pension plan and a related excess benefit
plan. In clarification of the immediately preceding sentence, the aggregate
benefit that would have been paid under the Retirement Program shall be
calculated as of the normal or early retirement date for which the Employee
would have qualified, if the Employee were still employed on that date, and
which would produce the highest present value.
(c) To the extent not otherwise paid or payable under this
Agreement or the Plan, the present value of any Employee awards under the
Plan which are outstanding at the time of the Qualifying Termination
(whether vested or not) prorated based on length of service, and assuming,
for the purpose of this paragraph, that any contingencies or performance
goals related to such awards are fully achieved at the one hundred percent
(100%) level.
(d) For purposes of calculating the lump sum cash payments
provided by paragraph 2.1(b) above, present value shall be determined by
using a discount factor equal to one (1) percentage point below the Prime
Rate, compounded annually. The "Prime Rate" shall be the base rate on
corporate loans at large U.S. money center commercial banks as reported in
the Wall Street Journal (or, if such rate is no longer published, such
other base rate on corporate loans by large money center commercial banks
in the United States to their most credit worthy customers as published by
any newspaper or periodical of general circulation) as of the date on which
Qualifying Termination shall have occurred.
(e) For a period of sixty (60) months (commencing with the month
in which the Qualifying Termination shall have occurred), the Employee
shall continue to be entitled to all employee benefits provided for in
paragraph 1.4(b)(v) through (vii) above as if the Employee were still
employed during such period under this Agreement, with benefits based upon
the compensation used to calculate the payments provided by paragraph
2.1(a) above, and if and to the extent that such benefits shall not be
payable or provided under any such plan, the Company shall pay or provide
such benefits on an individual basis. The benefits provided for in
paragraph 1.4(b)(vii) above in accordance with this paragraph 2.1(e) shall
be secondary to any comparable benefits provided by another employer.
2.2 TAX WITHHOLDING. The Company may withhold from any payment made
under this Agreement, all federal, state or other tax as required by law,
government regulation or ruling.
2.3 EXCISE TAX GROSS-UP. Should Employee become entitled to any
payment or benefit under this Agreement (the "Total Payments"), and the
Total Payments are subject to the tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Excise Tax"), the Company
shall pay to Employee, in cash, an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Employee after deduction
of
(a) any Excise Tax upon the Total Payments, and
(b) any federal, state or local income tax and Excise Tax upon
the Gross-Up Payment provided for by this paragraph,
shall be equal to the Total Payments. Such payment shall be made to
Employee within thirty (30) days from the Qualifying Termination giving
rise to payments under this Agreement.
2.4 TAX COMPUTATION. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amounts of such
Excise Tax:
(a) Any payments or benefits received by Employee in connection
with a Qualifying Termination (whether pursuant to the terms of this
Agreement or any other plan, or agreement with the Company, or with any
person (as defined in Section 3(a)(9) of the Exchange Act, including a
"group" as defined in Section13(d) therein) whose actions result in a
Change in Control or any person affiliated with the Company or such
persons) shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"), and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel as supported by the Company's independent auditors
and acceptable to the Employee, such other payments or benefits (in whole
or in part) do not constitute parachute payments, or unless such excess
parachute payments (in whole or in part) represent reasonable compensation
for services actually rendered within the meaning of Section 280G(b)(4) of
the Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of:
(i) the total amount of the Total Payments; or
(ii) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a) above); and
(iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Company's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
For purposes of determining the amount of the Gross-Up Payment, the
Employee shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made, and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the
Employee's residence on the date of Qualifying Termination, net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
2.5 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service adjusts the computation made by the Company under paragraph 2.4
herein so that Employee did not receive the greatest net benefit, the
Company shall reimburse Employee for the full amount necessary to make
Employee whole, plus a market rate of interest, as determined by the
Company.
2.6 SOURCE OF PAYMENTS. All payments provided for in paragraphs 1.4,
2.1, 2.3, and 2.5 above shall be paid in cash from the general funds of the
Company. The Company shall not be required to establish a special or
separate fund or other segregation of assets to assure such payments.
ARTICLE III
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Miscellaneous
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3.1 LITIGATION EXPENSES. In the event of any litigation or other
proceeding between the Company and the Employee with respect to the subject
matter of this Agreement and the enforcement of rights hereunder, the
Company shall advance the Employee all reasonable costs and expenses
relating to such litigation or other proceeding as they are incurred,
including reasonable attorneys' fees and expenses, however, if such
litigation results in any settlement or judgment or order in favor of the
Employer, Employee shall reimburse Employer for all such monies advanced.
Notwithstanding the preceding sentence or any provision of Arizona law
to the contrary, in no event shall the Employee be required to reimburse
the Company for any of the costs and expenses incurred by the Company on
its own behalf relating to such litigation or other proceeding. The
obligation of the Company under this paragraph 3.1 shall survive the
termination of this Agreement (whether such termination is by the Company,
by the Employee, upon the expiration of this Agreement or otherwise).
3.2 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement or the breach thereof, shall be settled by arbitration.
The Party desiring arbitration shall deliver written notice of demand for
arbitration to the other Party within a reasonable time after the
controversy or claim arises, but in no event after the date when
institution of legal or equitable proceedings based on such controversy or
claim would be barred by the applicable statute of limitations.
The arbitration shall be heard before a single neutral arbitrator
appointed by mutual agreement of the Parties. If the Parties fail to agree
upon a single arbitrator within ten (10) days of the referral of the
dispute to arbitration, each Party shall choose one arbitrator who shall
sit on a three-member arbitration panel. The two arbitrators so chosen
shall within ten (10) days select a third arbitrator. In either case, the
arbitrator(s) shall be knowledgeable in executive and employee compensation
matters, and shall not have any current or past substantial business or
financial relationships with any Party to the arbitration. The arbitration
shall be conducted under the rules of the American Arbitration Association,
except as modified herein, and shall take place in Tucson, Arizona. No
discovery shall be permitted. The arbitrator shall issue a scheduling
order that shall not be modified except by the mutual agreement of the
Parties.
The award of the arbitrator(s) shall be final and binding and shall be
enforceable in any court of competent jurisdiction.
3.3 ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding between the Company and the Employee with respect to the
subject matter hereof and supersedes any prior employment agreement and
amendment thereto between the Company and the Employee, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the Employee of a kind elsewhere provided and not expressly
provided in this Agreement.
3.4 SEVERABILITY. If, for any reason, any one or more of the
provisions or part of a provision contained in this Agreement shall be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part
of a provision of this Agreement not held so invalid, illegal or
unenforceable, and each other provision or part of a provision shall, to
the full extent consistent with law, continue in full force and effect. If
this Agreement is held invalid or cannot be enforced, then to the full
extent permitted by law, any prior agreement between the Company and the
Employee shall be deemed reinstated as if this Agreement had not been
executed.
3.5. CONSOLIDATION, MERGER, OR SALE OF ASSETS. Nothing in this
Agreement shall preclude the Company from consolidating or merging into or
with or transferring all or substantially all of its assets to another
corporation with a net worth at least equal to that of the Company and
which assumes this Agreement and all obligations and undertakings of the
Company hereunder. Upon such a consolidation, merger or transfer of assets
and assumption, the term, "the Company", as used herein shall mean such
other corporation and this Agreement shall continue in full force and
effect.
3.6 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be given in writing and shall be
deemed to have been duly given if delivered or mailed, postage prepaid,
first class as follows:
To the Company: Tucson Electric Power Company
P.O. Box 711
Tucson, AZ 85702
Attention: Corporate Secretary
To the Employee: [Name]
[Internal]
Tucson Electric Power Company
P.O. Box 711
Tucson, AZ 85702
with an additional copy to:
[Name]
[Street]
[Town]
or to such other address as either Party shall have previously specified in
writing to the other.
3.7 NO ATTACHMENT. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process or
assignment by operation of law, or any attempt, voluntary or involuntary,
to effect any such action shall be null, void and of no effect.
3.8 BINDING AGREEMENT. This Agreement shall be binding upon, and
shall inure to the benefit of, the Employee and the Company and their
respective permitted successors and assigns.
3.9 MODIFICATION AND WAIVER. This Agreement may not be modified or
amended except by an instrument in writing signed by the Parties. No term
or condition of this Agreement shall be deemed to have been waived, nor
shall there be any estoppel against the enforcement of any provision of
this Agreement except by written instrument signed by the Party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to
any act other than that specifically waived.
3.10 HEADINGS. The headings contained in this Agreement are included
solely for convenience and shall not in any way affect the meaning or
interpretation of any of the provisions of this Agreement.
3.11 GOVERNING LAW. This Agreement and its validity, interpretation,
performance, and enforcement shall be governed by the laws of the State of
Arizona, without regard to the choice of law provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its officers thereunto duly authorized, and the Employee has
signed this Agreement, all as of the date first above written.
TUCSON ELECTRIC POWER COMPANY
/s/ James S. Pignatelli
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James S. Pignatelli
Chairman, President and
Chief Executive Officer
EMPLOYEE
/s/
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