Exhibit 10(e)(4)
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
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THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this "Amendment"),
effective as of January 3, 1997, is entered into among XXXXXX XXXXXXXXX (the
"Employee"); TUCSON ELECTRIC POWER COMPANY, an Arizona corporation (the
"Parent"); and NATIONS ENERGY CORPORATION, an Arizona corporation and a
wholly-owned subsidiary of the Parent (the "Company").
RECITALS
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1. The Employee and the Parent entered into an Employment Agreement
effective as of December 1, 1994 (the "Agreement"). Section 3(c) of the
Agreement contemplated the development of a performance-based incentive plan
consistent with programs in the independent power industry which includes
opportunities for development fees, carried interest and equity
participation.
2. In lieu of participating in such a program in 1995 and 1996,
Employee participated in the annual incentive plan for the Parent's officers.
3. Subsequent to the effective date of the Agreement, a performance-
based IPP Plan was implemented for employees of the Company and it is
appropriate for Employee (in accordance with Section 3(c) of the Agreement)
to discontinue his participation in Parent's Annual Incentive Plan and
instead participate in the same type of plan applicable to other Company
employees. This Amendment also makes certain additional changes to conform
the Agreement to other employment agreements for the Company's employees.
4. In conjunction with the Employee's discontinuance as a participant
in Parent's Annual Incentive Plan, it is no longer appropriate for the
Employee to continue as an officer of the Parent.
AGREEMENTS
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In consideration of the foregoing and of the mutual agreements set forth
in the Agreement, the Employee, the Parent and the Company hereby agree as
follows:
5. PARENT OFFICER STATUS. Effective as of January 3, 1997, the
Employee shall continue his duties and responsibilities as President of the
Company but shall no longer serve as an officer of the Parent. Consistent
with such change, Employee's "Change of Control" Employment Agreement dated
as of December 1, 1994 (the "COC Agreement") shall be amended to reflect (a)
the fact that Employee's status as an officer of the Parent shall cease as of
January 3, 1997; (b) the additional provisions approved by the Board of
Directors of the Parent at the meeting held on December 6, 1996; and (c) the
fact that any payments made under Paragraph 9(a) of the COC Agreement shall
be reduced by any amounts paid as base salary under the Agreement. Except as
amended hereby, the benefits set forth in the COC Agreement shall remain in
effect.
6. EXTENSION OF INITIAL EMPLOYMENT PERIOD. The Initial Employment
Period shall be extended by a one-year period such that the Initial
Employment Period ends on December 1, 1998.
7. 1997 ANNUAL SALARY. Effective as of January 3, 1997, Employee's
1997 annual salary as President of the Company shall be set at $230,000.
8. ADDITIONAL BENEFITS AND COMPENSATION. Effective as of January 3,
1997, Employee shall no longer participate in the Parent's Short-Term or
Long-Term Officer Incentive Plans but instead shall participate in the
Company's incentive program set forth on Exhibit A hereto. This modification
shall in no way affect or reduce the "Fringe Benefits" itemized on Exhibit B
which shall continue in full force and effect for the term of this Agreement.
Additionally, notwithstanding Employee's prior capacity as an officer of the
Parent, Employee is entitled to a carried interest in the Coors Project at
the percentage set forth in Paragraph 3 of Exhibit A; provided, however,
Employee acknowledges and agrees that any entitlement to a carried interest
with respect to the Coors Project for the years 1995 and 1996 has been
satisfied through annual bonus payments for such years.
9. DEATH OR DISABILITY. Section 4 of the Agreement shall be amended
in its entirety to read as follows:
"4. DEATH OR DISABILITY. If the Employee becomes physically or
mentally disabled while employed by the Company, or if the Employee
dies while employed by the Company, this Agreement shall automatically
cease and terminate. Physical or mental disability shall mean that
the Employee shall be unable to perform his duties under this
Agreement. The Company's obligations to the Employee under this
Agreement shall end as of the date of the Employee's death or, in
the case of disability, the Employee's last day of active
employment. The Company's obligations to the Employee under any
compensation or benefit plans applicable to the Employee shall be
governed by the terms of such plans. The death or disability of the
Employee shall not affect any carried interest previously earned by
Employee pursuant to Paragraph 3 of Exhibit A or any "Added Value"
performance payment pursuant to Paragraph 5 of Exhibit A."
10. TERMINATION BY EMPLOYEE. Section 5 of the Agreement shall be
amended in its entirety to read as follows:
"5. TERMINATION BY EMPLOYEE. The Employee shall have the right to
terminate this Employment Agreement at any time. The Employee agrees
to provide the Company with thirty (30) days prior written notice of
any such termination. The Company's obligation to pay the
Employee's compensation pursuant to this Agreement shall cease as
of the Employee's last day of work. The Company's obligation to the
Employee under any compensation or benefit plans shall be governed
by the terms of such plans. Termination by Employee will not
affect any carried interest previously earned by Employee pursuant
to Paragraph 3 of Exhibit A or any "Added Value" performance
payment pursuant to Paragraph 5 of Exhibit A."
11. TERMINATION WITHOUT CAUSE. The Agreement shall be amended by
restating Section 6(b) in its entirety as follows:
"(b) TERMINATION WITHOUT CAUSE. The Company may also terminate
this Employment Agreement without cause, at any time before the
stated termination date of the Initial Employment Period. If
Employee's employment is terminated pursuant to this Paragraph,
however, the Company shall pay the Employee termination pay, less
required payroll taxes and related deductions, equal to the greater
of 100% of the Employee's annual base salary which would have been
paid to the Employee for the remainder of the Initial Employment Period
or six months of Employee's base salary then in effect under Paragraph
7 of this Amendment at the time of termination (the "Termination
Amount"). Said Termination Amount shall be paid in equal monthly
installments, beginning on the first business day of the calendar
month following the Employee's termination. Additionally, the
Employee shall receive a prorated annual bonus payment. The
Employee shall not be entitled to any other compensation or
benefits set forth in this Employment Agreement, except as may be
provided under the terms of any separate compensation or benefit
plan or as may be separately negotiated by the parties and approved
by the Board of Directors in writing in conjunction with the
Employee's termination under this Paragraph. In the event of
termination without cause, the Company's obligation to the Employee
under any compensation or benefit plans shall be governed by the
terms of such plans. Termination of Employee under this Section
6(b) shall not affect any of the provisions of Exhibit A."
12. EFFECT OF TERMINATION. The last paragraph of Section 7 of the
Agreement is modified as follows:
"Any payment due for services rendered prior to termination shall
be made as provided in the Employment Agreement, as amended."
13. RELEASE OF CLAIMS. For and in consideration of the mutual
covenants herein, Employee agrees to compromise, release and fully and
forever discharge and covenants not to xxx the Parent or the Company,
including, but not in limitation thereof, all directors, officers, employees,
agents, or attorneys thereof, from and with respect to any and all claims of
whatever kind or nature, known or unknown, suspected or unsuspected and
however arising, including, but not in limitation thereof, all claims for
personal injury (including all claims for medical treatment related thereto),
pain and suffering, mental anguish, humiliation or embarrassment, loss or
diminution of self or professional esteem, reputation, or any and all claims
of whatever kind or nature, arising out of, resulting from or concerning any
information upon which the Employee relied in entering into the Agreement or
Employee's employment with the Parent or the Company through and including
the date of execution of this Amendment.
IN WITNESS WHEREOF, the Parent and the Company have caused this
Amendment to be executed by its duly authorized officers, and the Employee
has hereunto signed this Amendment, on the 1st day of August, 1997.
TUCSON ELECTRIC POWER COMPANY
/s/ Xxxxxxx X. Xxxxxxx
By ---------------------------
Chairman, President and CEO
Its --------------------------
NATIONS ENERGY CORPORATION
/s/ X. X. Xxxxxxxxxx
By ---------------------------
Chairman
Its --------------------------
/s/ Xxxxxx Xxxxxxxxx
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XXXXXX XXXXXXXXX
EXHIBIT A TO AMENDMENT NO. 1
TO EMPLOYMENT AGREEMENT
1. 1997 ANNUAL BONUS - Employee is eligible for an annual bonus for the
year 1997 based upon the following objectives. Such bonus will be a target
percentage of 40% of the Employee's Base Salary for the year based on
achieving the objectives described below. In the event each of the
objectives set forth below is achieved, the bonus shall be no less than 40%
of Employee's Base Salary for the year. To the extent that performance is
achieved above and beyond such objectives the annual bonus may be increased
to a maximum percentage of 60% of Employee's Base Salary for the year. The
annual bonus payment shall be paid by no later than March 1, 1998. The
actual percentage to be paid will be determined by the Board of Directors of
the Company, based upon the Company's progress in meeting the following
business objectives for the year 1997:
Objective No. 1 - Cash Flow
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1997 cash flow from investment in Coors Project shall
equal or exceed $2.1 million.
Objective No. 2 - Project Closings
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By no later than December 31, 1997, complete financial
closing for projects with customary representations,
warranties and commitments and no material post-closing
contingencies in which the total equity commitment by the
Company equals or exceeds the lesser of (a) $100 million
or (b) the maximum amount made available by Parent to
Company for such equity commitment.
Objective No. 3 - Expenditure Level
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Maintain 1997 annual expenditures for general and
administrative and general project development at or
below $4.2 million.
2. DEVELOPMENT FEE BONUS POOL - Employee shall also be entitled to
participate in a bonus pool paid as a percentage of the development fee
received by the Company upon the financial closing of each Greenfield
project, calculated as follows:
Development Fee
Net of Expenses Bonus Pool to Participants
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First $ 200,000 100%
Next $ 300,000 50%
Next $ 500,000 40%
Beyond $1,000,000 25%
The share received by the Employee in each bonus pool shall be determined by
the Board of Directors of the Company; however, in no event shall such share
received by the Employee be less than 20% of each bonus pool.
3. CARRIED INTEREST - In addition, the Employee shall be entitled to a
carried interest in the amount of at least three and one-half percent (3-
1/2%) of pre-tax cash flow distributed to the Company associated with:
(a) projects in which the Company invests during the extended
term of this Agreement (December 1, 1994 through and
including December 1, 1998), and
(b) projects for which the Company during the extended term
of this Agreement obtains a Board-approved call option at
such time as the Company exercises such option.
In no event, shall any taxable income be allocated from a project to the
Employee associated with any carried interest. Carried interest to which the
Employee may become entitled under this paragraph 3 shall be paid to the
Employee at such time as distributions are made by the project(s) and shall
survive the termination of the Agreement.
4. ANNUAL BONUS OFFSET - Amounts payable to the Employee under paragraph 1
of this Exhibit A will be reduced by amounts received by the Employee
pursuant to paragraphs 2, 3 and 5 of this Exhibit A. In no event the annual
bonus shall be less than zero.
5. ADDED VALUE PERFORMANCE PAYMENT - In the event a definitive Board-
approved agreement is reached during the term of this Agreement for the
reduction of the Parent's ownership interest in the Company to 45 percent or
less, Employee shall be entitled to elect, at his sole discretion, upon the
closing of such sale, a payment equal to 5 percent of the Added Value of the
Company. For the purpose of this provision, the term "Added Value" means:
(i) the purchase price paid by the investors multiplied by a fraction, the
numerator of which is 1 and the denominator of which is the percentage of the
Company sold; less (ii) the Parent's Net Cash Contributions to the Company
for all periods up to the date of the sale, with interest imputed at the rate
of 10.75 percent per annum. For the purpose of this provision, the term "Net
Cash Contributions" shall mean all cash contributions made by the Parent to
the Company, less any project distribution and development fee received by
the Company. Projects upon which any calculation of Added Value is based
shall be specifically identified and the Carried Interest with respect to
such projects shall thereafter be reduced to one percent (1%). Carried
Interest on all other projects covered by paragraph 3 of Exhibit A shall be
in the amount of 3-1/2 percent.
EXHIBIT B TO AMENDMENT NO. 1
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TO EMPLOYMENT AGREEMENT
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FRINGE BENEFITS
1. Annual vacation of 25 days
2. Ten (10) paid holidays annually
3. Salaried Employees Retirement Plan
4. Triple Investment Plan 401(k)
5. Business Travel Accident Insurance
6. Group Life and Medical/Dental Plans
7. A Company-provided vehicle
8. Employment Agreement (Change of Control)
