Employment Agreement
Exhibit
10.1
This
EMPLOYMENT AGREEMENT (the “Agreement”),
is
entered into as of the 22nd
day of
December, 2006 (the “Effective
Date”),
by
and between Tucson Electric Power
Company (the “Company”),
an
Arizona corporation, and Xxxxxx X. Xxxxxx (the “Employee”).
Company and Employee may be referred to collectively hereinafter as the
“Parties”
and
singly as a “Party”.
RECITALS
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 enter into
an employment agreement to retain the services of the Employee; and
WHEREAS,
the Employee agrees to the terms of the employment agreement offered by the
Company as set forth herein.
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
Term
and Termination
1.1
Employment
Period.
The
Employee shall be employed by the Company for a term commencing as of the
Effective Date and ending on June 1, 2007, unless sooner terminated in
accordance with the provisions of this Agreement (the “Term”).
1.2
Qualifying
Termination.
The term
“Qualifying
Termination”
shall
mean the occurrence of:
(a)
the
Company or its successor terminates the Employee’s employment, other than for
the reasons delineated in Sections 1.6(a)(i) or 1.6(a)(ii) hereto, during the
Term; or
(b) During
the Term, the Employee terminates employment with the Company or its successor
for any of the reasons delineated in Sections 1.6(b)(i), 1.6(b)(ii),
1.6(b)(iii), or 1.6(b)(iv) hereto.
1.3
Compensation.
(a) For
all
services rendered by the Employee in any capacity during the Term, 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
as of the Effective Date, 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 401k 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
|
Page
2 of 9
|
(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.
|
1.4
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.
1.5
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 arrange-ment to the extent permissible under the general terms and provisions
thereof.
1.6
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
|
Page
3 of 9
|
|
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,
during the Term, 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 such change;
|
|
(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 during
the Term, except as part of a salary reduction program affecting the Company’s
management
Page
4 of 9
|
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. 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 as of the Effective
Date; or
|
(c)
by
either the Company or the Employee, if the Employee accepts employment or a
consulting position with another company.
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 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 a lump sum cash
amount equal to:
|
(a)
|
three
hundred thousand dollars ($300,000), less any amount paid under Section
2.1(b) below; and
|
|
(b)
|
any
annual target bonus owing but unpaid for 2006;
and
|
(c)
a
prorated annual target bonus for the short year in which the Qualifying
Termination occurs.
2.2
Retiree
Medical Plan.
The
Parties agree that the regardless of the actual date of Employee’s termination,
Employee shall be entitled to participate in the Company retiree medical plan
as
in effect on the Effective Date.
2.3
Service
and Benefit Credit.
The
Parties agree that if the Employee is terminated before June 1, 2007, the
Employee shall receive service credit for eligibility and benefit purposes,
including with respect to the Retirement Program, for the period between the
actual date of
Page
5 of 9
termination
and June 1, 2007, as if the Employee had continued to be employed up to June
1,
2007.
2.4
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.
2.5 Source
of Payments.
All
payments provided for in paragraphs 1.3 and 2.1 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
Miscellaneous
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
Page
6 of 9
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, including,
without limitation, any change in control agreement, 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,
Page
7 of 9
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
X.X. Xxx
000
Xxxxxx,
XX 00000
Attention:
Corporate Secretary
To
the
Employee:
Xxxxxx
X.
Xxxxxx
0000
X.
Xxxxxxxx Xxxx. , Xxxxx 000
Xxxxxxxxx,
Xxxxxxx 00000
with
an
additional copy to:
Xxxxxx
X.
Xxxxxx
000
X.
Xxxxxxxx Xxxxx
Xxxxxxxx,
Xxxxxxx 00000
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
Page
8 of 9
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
_________________________________
_________________________________
Title
EMPLOYEE
_____________________________
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Page
9 of 9
