Amended and Restated
Officer Change in Control Agreement
This Amended and Restated Officer Change in
Control Agreement is entered into as of this 18th day of September,
2009 by and between Tucson Electric Power Company (the
“Company”), an Arizona corporation, and Michael J.
DeConcini (the “Employee”).
A. The Company and the Employee entered
into an Officer Change in Control Agreement (the “Prior
Agreement”) dated December 4, 1998, which was amended on
one prior occasion, and which expires by its own terms on
March 3, 2010.
B. The Board of Directors of the Company
has determined that it continues to be in the best interests of the
Company and its shareholders to assure continuity in the management
of the Company, UniSource Energy Corporation (“UniSource
Energy”) and the applicable Affiliate(s) (as defined in this
Agreement) in the event of a Change in Control (as defined in this
Agreement) occurs.
C. By executing this Amended and Restated
Officer Change in Control Agreement (the “Agreement”),
the Company and the Employee intend to replace and supersede the
Prior Agreement in its entirety.
D. In consideration for the
Employee’s execution of this Agreement, the Company and
UniSource Energy will offer the Employee a new change in control
agreement that will become effective immediately following the
expiration of this Agreement. The new agreement will be
substantially in the form that the Company and UniSource Energy
then offer to executives of Employee’s level.
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 and sufficiency of which are hereby
acknowledged, the Company and the Employee hereby agree as
follows:
ARTICLE I
Eligibility for Benefits
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 March 3, 2010 at which
time it will automatically terminate. If a Change in Control occurs
on or before March 3, 2010, however, this Agreement will
remain in effect until the fifth anniversary of the Change in
Control, at which time it will automatically terminate.
1.2 Change in Control . For purposes of
this Agreement, “Change in Control” shall mean each
occurrence of any of the following:
(a) Any person, or more than one person
acting as a group (as determined in accordance with Treas. Reg.
§ 1.409A-3(i)(5)), acquires (or has acquired during the
12-month period ending on the most recent acquisition by such
person or persons) ownership of stock of UniSource Energy
possessing 40% or more of the total voting power of the stock of
UniSource Energy, unless such person is, or shall be, a trustee or
other fiduciary holding securities under an employee benefit plan
of UniSource Energy or a corporation owned, directly or indirectly,
by the stockholders of UniSource Energy in substantially the same
proportion as their ownership of stock of UniSource
Energy;
(b) The closing of a merger or
consolidation of UniSource Energy or Company with another entity
that is not affiliated with UniSource Energy immediately before the
Change in Control; provided, however, that, in the case of a merger
or consolidation involving UniSource Energy, if the merger or
consolidation results in the voting securities of UniSource Energy
outstanding immediately prior thereto continuing to represent,
either by remaining outstanding or by being converted into voting
securities of the surviving entity, more than 50% of the combined
voting power of the voting securities of UniSource Energy or such
surviving entity outstanding immediately after such merger or
consolidation, the merger or consolidation will be disregarded; and
provided further that, in the case of a merger or consolidation
involving the Company, if UniSource Energy continues to hold more
than 50% of the combined voting power of the voting securities of
the Company or the surviving entity outstanding immediately after
such merger or consolidation, the merger or consolidation will be
disregarded;
(c) During any period of twelve
(12) consecutive months, excluding any period prior to the
execution of this Agreement, the majority of members of UniSource
Energy’s Board is replaced by directors whose appointment or
election is not endorsed by a majority of the members of the Board
before the date of such appointment or election; or
(d) UniSource Energy’s execution of
an agreement for the sale or disposition by UniSource Energy of all
or substantially all of UniSource Energy’s assets.
Notwithstanding the foregoing, a Change in
Control will not be deemed to have occurred until: (1) any
required regulatory approval, including any final non-appealable
regulatory order, has been obtained; and (2) the transaction
that would otherwise be considered a Change in Control closes.
Further, to the extent required by Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”),
a transaction will not be considered a Change in Control for
purposes of this Section 7 unless the transaction also constitutes
a “change in control event ” as such term is used in
Treas. Reg. § 1.409A-3(i)(5).
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1.3 Qualifying Termination . The term
“Qualifying Termination” shall mean the occurrence of
both:
(a) a Change in Control on or before
March 3, 2010; and
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(i)
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the Employee incurs a Separation
from Service with the Company or its successor due to the
Company’s or successor’s termination of the
Employee’s employment, other than for the reasons delineated
in Sections 1.7(a)(i), 1.7(a)(ii) or 1.7(c) hereto, within
five (5) years following the Change in Control described in
paragraph (a) (or within six (6) months before such Change in
Control if the Employee’s Separation from Service is effected
in contemplation of the Change in Control); or
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(ii)
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the Employee incurs a Separation
from Service due to the Employee’s termination of employment
with the Company or its successor for “Good Reason” in
accordance with the provisions of Section 1.7(b) hereto,
within five (5) years following the Change in Control
described in paragraph (a) (or within six (6) months before
such Change in Control if the Employee’s Separation from
Service is effected in contemplation of the Change in
Control).
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Notwithstanding any provision to the contrary,
the Company shall not be required to provide any benefits to the
Employee pursuant to this Agreement unless a Change in Control
occurs on or before March 3, 2010.
(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.
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(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:
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(i)
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participate in the Company’s
Retirement Plan and any related excess benefit or supplemental
retirement program (hereinafter referred to collectively as the
“Retirement Program”);
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(ii)
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participate in the Company’s
Deferred Compensation Plan;
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(iii)
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participate in the Company’s
Triple Investment Plan;
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(iv)
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participate in any stock option,
stock appreciation right, equity incentive or deferred compensation
plan maintained by the Company;
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(v)
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participate in the Company’s
death benefit plans;
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(vi)
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participate in the Company’s
disability benefit plans;
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(vii)
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participate in the Company’s
medical, dental and health and welfare plans;
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(viii)
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participate in the Company’s
annual incentive plan; and
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(ix)
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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.
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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. The
Employee shall be entitled to reimbursement for business expenses
in accordance with this Section 1.5 for expenses incurred
while the Employee is employed by the Company. The amount of
expenses incurred in one calendar year will not affect the expenses
eligible for reimbursement in any other calendar year. All expenses
incurred in one calendar year must be reimbursed no later than the
last day of the next calendar year. The right to reimbursement is
not subject to liquidation or exchange for any other
benefit.
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.
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1.7 Termination of Employment .
Notwithstanding any other provision of this Agreement, the
Employee’s employment with the Company may be
terminated:
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(i)
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at any time for “Cause”
upon written notice to the Employee specifying the basis for the
termination. For purposes of this Agreement, the term
“Cause” shall mean the termination of the
Employee’s employment by the Company for one or more of the
following reasons:
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(1)
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The Employee’s willful
failure to perform any of the Employee’s duties which
continues after the Company has given the Employee written notice
describing the Employee’s failure and provided to the
Employee an opportunity to cure such failure within thirty
(30) days (or such longer period as may be specified by the
Board) of such written notice; or
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(2)
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The Employee’s material
violation of Company policy; or
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(3)
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Any act of fraud or dishonesty
resulting or intended to result in the Employee’s personal
enrichment at the Company’s or any Affiliate’s expense;
or
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(4)
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The Employee’s gross
misconduct in the performance of the Employee’s duties that
results in material economic harm to the Company or any Affiliate;
or
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(5)
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The Employee’s conviction of,
or plea of guilty or no contest (or its equivalent) to, a felony;
or
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(6)
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The Employee’s material
breach of the Employee’s employment agreement with the
Company, if any.
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The existence of Cause shall be determined by
the Board, in its discretion.
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(ii)
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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.
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(b) by the Employee for “Good
Reason.” The Employee shall have “Good Reason” to
terminate employment with the Company if the Employee provides the
Company with notice of such termination as set forth below. For
purposes of this Agreement, the term “Good Reason”
shall mean and include each of the following (unless the Employee
has expressly agreed to such event in a signed writing):
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(i)
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A material, adverse diminution in
Employee’s authority, duties, or responsibilities;
or
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(ii)
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A material change in the geographic
location at which Employee must primarily perform services;
or
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(iii)
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A material diminution in
Employee’s base salary provided that such diminution is not a
result of a generally applicable reduction in the base salary of
all officers of the Company in an amount that does not exceed 10%;
or
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(iv)
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Any action or inaction that
constitutes a material breach of this Agreement by the Company
which, for this purpose, shall include, but not be limited to, the
Company’s failure to ensure that any successor to the Company
or UniSource Energy assumes the Company’s obligations
pursuant to this Agreement.
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Notwithstanding any provisions of this Agreement
to the contrary, none of the events described in this
Section 1.7(b) will constitute Good Reason if, within thirty
(30) days after the Employee provides the Company with a
written notice specifying the occurrence or existence of the breach
or action that the Employee believes constitutes Good Reason, the
Company has fully corrected (or reversed) such breach or action.
The Employee’s Separation from Service for Good Reason will
occur on the day following the expiration of this thirty
(30) day “cure period,” (unless the Company has
fully corrected (or reversed) the breach or action) unless the
Employee and the Company agree to a later date not later than two
years following the initial existence of such breach or action. The
Employee shall be deemed to have waived the Employee’s right
to terminate for Good Reason with respect to any such breach or
action if the Employee fails to notify the Company in writing of
such breach or action within ninety (90) days of the event
that gives rise to such breach or action.
(c) by either the Company or the Employee,
if the Employee accepts employment or a consulting position with
another company.
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ARTICLE II
Compensation Upon Termination
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 the
following:
(a) A lump sum cash amount equal
to:
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(i)
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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
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(ii)
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a prorated annual target bonus for
the short year in which the Qualifying Termination
occurs.
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(b) A lump sum cash amount equal to the
present value of the excess of:
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(i)
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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
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(ii)
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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.
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(c) To the extent not otherwise paid or
payable under this Agreement or the Plan, a lump sum cash amount
equal to 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.
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(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.
(f) The Employee’s continued
participation in the Company’s medical, dental and health and
welfare benefit plans pursuant to Section 2.1(e) after the
period of time during which the Employee would be entitled to
continuation coverage pursuant to Section 4980B of the Code if
the Employee elected the coverage and paid the premiums (the
“Excess Medical Benefits”) may be considered to be
“deferred compensation” subject to the requirements of
Section 409A of the Code. In order to assure compliance with
the requirements of Section 409A and avoid adverse tax consequences
to Employee, the only Excess Medical Benefits that will be subject
to reimbursement under such plans will be expenses for medical care
within the meaning of Section 105(b) of the Code. In addition, all
reimbursements of Excess Medical Benefits under such plans shall be
made on or before the last day of the calendar year following the
calendar year in which the expense was incurred and the right to
reimbursement for such Excess Medical Benefits will not be subject
to liquidation or exchange for another benefit.
(g) The basic severance payments described
in Sections 2.1(a), (b), and (c) above shall be paid to
the Employee within twenty (20) business days following the
occurrence of a Change in Control, in the event the
Employee’s Qualifying Termination is one in which the
Employee’s Separation from Service occurs prior to the Change
in Control, or the Employee’s Separation from Service in the
event the Employee’s Qualifying Termination is one in which
the Employee’s Separation from Service occurs after the
occurrence of a Change in Control. In no event will any payment be
made prior to the expiration of the revocation period described in
Section 2.1(h). The payment provisions set forth in this
Section 2.1(g) are subject to the provisions of
Section 3.12(b) (which generally requires a six-month delay in
payments to a Specified Employee), if applicable.
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(h) In order to receive the payments and
benefits described in this Section 2.1, the Employee must
execute (and not revoke) any release reasonably requested by the
Company of any claims that the Employee may have against the
Company, UniSource Energy or any Affiliate in connection with the
Employee’s employment with the Company and UniSource Energy
or otherwise. The release shall be provided to the Employee within
five (5)&nbs
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