Attached files
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8-K - FORM 8-K - TUCSON ELECTRIC POWER CO | c16775e8vk.htm |
EX-3.1 - EXHIBIT 3.1 - TUCSON ELECTRIC POWER CO | c16775exv3w1.htm |
Exhibit
10.1
UNISOURCE ENERGY CORPORATION
2011 Omnibus Stock and Incentive Plan
TABLE OF CONTENTS
ARTICLE I ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE OF PLAN |
1 | |||
1.1 Establishment |
1 | |||
1.2 Effective Date |
1 | |||
ARTICLE II PLAN OVERVIEW |
1 | |||
2.1 Purpose |
1 | |||
2.2 Glossary |
1 | |||
ARTICLE III ADMINISTRATION |
2 | |||
3.1 Administration |
2 | |||
3.2 Actions of the Committee |
2 | |||
3.3 Authority of the Committee |
2 | |||
ARTICLE IV STOCK SUBJECT TO PLAN |
3 | |||
4.1 Number |
3 | |||
4.2 Lapsed Awards |
3 | |||
4.3 Adjustment in Capitalization |
4 | |||
4.4 Replacement Awards |
4 | |||
ARTICLE V DURATION OF PLAN |
4 | |||
5.1 Duration of Plan |
4 | |||
ARTICLE VI STOCK OPTIONS |
5 | |||
6.1 Grant of Options |
5 | |||
6.2 Incentive Stock Options |
5 | |||
6.3 Option Award Agreement |
6 | |||
6.4 Exercise Price; No Repricing |
6 | |||
6.5 Duration of Options |
6 | |||
6.6 Exercise of Options |
7 | |||
6.7 Payment |
7 | |||
6.8 Termination of Service |
7 | |||
6.9 Non-Transferability of Options |
7 |
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ARTICLE VII STOCK APPRECIATION RIGHTS |
7 | |||
7.1 Grant of Stock Appreciation Rights |
7 | |||
7.2 SAR Award Agreement |
8 | |||
7.3 Duration of SAR |
8 | |||
7.4 Exercise of SARs |
8 | |||
7.5 Payment of SAR Amount |
8 | |||
7.6 Termination of Service |
9 | |||
7.7 Non-Transferability of SARs |
9 | |||
ARTICLE VIII RESTRICTED STOCK, RESTRICTED STOCK UNITS, STOCK GRANTS, STOCK UNITS AND
DIVIDEND EQUIVALENTS |
9 | |||
8.1 Grant of Restricted Stock and Restricted Stock Units |
9 | |||
8.2 Period of Restriction and Vesting Conditions |
10 | |||
8.3 Stock Grant Awards |
10 | |||
8.4 Stock Unit Awards |
10 | |||
8.5 Transferability |
11 | |||
8.6 Voting Rights |
11 | |||
8.7 Dividends and Other Distributions |
11 | |||
8.8 Dividend Equivalents |
11 | |||
8.9 Termination of Service |
12 | |||
ARTICLE IX PERFORMANCE UNIT, PERFORMANCE SHARE, AND PERFORMANCE CASH AWARDS |
12 | |||
9.1 Grant of Performance Units or Performance Shares |
12 | |||
9.2 Performance Cash Awards |
13 | |||
9.3 Conditions on Awards |
13 | |||
9.4 Performance Criteria |
13 | |||
9.5 Termination of Service |
13 | |||
9.6 Non-Transferability |
13 | |||
ARTICLE X PERFORMANCE-BASED COMPENSATION AWARDS |
14 | |||
10.1 Purpose and Applicability |
14 | |||
10.2 Types of Performance-Based Compensation Awards |
14 | |||
10.3 Committee Discretion with Respect to Performance-Based Compensation
Awards |
14 | |||
10.4 Establishment of Performance Goals |
15 | |||
10.5 Performance Evaluation; Adjustment of Goals |
16 | |||
10.6 Adjustment of Performance Compensation Awards |
16 |
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10.7 Continued Employment Required |
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10.8 Certification by Committee |
17 | |||
10.9 Maximum Award |
17 | |||
10.10 Miscellaneous |
17 | |||
ARTICLE XI BENEFICIARY DESIGNATION |
17 | |||
11.1 Beneficiary Designation |
17 | |||
ARTICLE XII
RIGHTS AND OBLIGATIONS OF PARTIES |
18 | |||
12.1 No Guarantee of Employment or Service Rights |
18 | |||
12.2 Participation |
18 | |||
12.3 Right of Setoff |
18 | |||
12.4 Section 83(b) Election |
18 | |||
12.5 Forfeiture and Recapture of Awards |
18 | |||
12.6 Rights of Shareholder |
19 | |||
ARTICLE XIII
CHANGE IN CONTROL |
20 | |||
13.1 In General |
20 | |||
13.2 Exceptions |
20 | |||
ARTICLE XIV
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN |
21 | |||
ARTICLE XV
TAX WITHHOLDING |
21 | |||
15.1 Tax Withholding |
21 | |||
15.2 Form of Payment |
21 | |||
ARTICLE XVI
INDEMNIFICATION |
22 | |||
16.1 Indemnification |
22 | |||
ARTICLE XVII
REQUIREMENTS OF LAW |
22 | |||
17.1 Requirements of Law |
22 | |||
17.2 Governing Law |
22 | |||
17.3 Securities Law Compliance |
22 | |||
17.4 Restrictions |
22 | |||
17.5 Stock Certificates |
23 | |||
17.6 Section 409A of the Code |
23 | |||
17.7 Severability |
24 |
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ARTICLE XVIII
MISCELLANEOUS |
24 | |||
18.1 Funding of Plan |
24 | |||
18.2 Successors |
24 | |||
18.3 Fractional Shares |
24 | |||
18.4 Gender and Number |
24 | |||
18.5 Titles and Headings |
24 | |||
18.6 Survival of Provisions |
24 |
GLOSSARY
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UNISOURCE ENERGY CORPORATION
2011 OMNIBUS STOCK AND INCENTIVE PLAN
ARTICLE I
Establishment, Purpose, and Effective Date of Plan
2011 OMNIBUS STOCK AND INCENTIVE PLAN
ARTICLE I
Establishment, Purpose, and Effective Date of Plan
1.1 Establishment. Subject to the approval of the shareholders of UniSource Energy
Corporation, an Arizona corporation (UniSource or the Company), the Company hereby establishes
the UniSource Energy Corporation 2011 Omnibus Stock and Incentive Plan (the Plan). The Plan
supersedes and replaces the UniSource Energy Corporation 2006 Omnibus Stock and Incentive Plan (the
2006 Omnibus Plan) and all other prior equity compensation plans or programs maintained by the
Company (collectively the Prior Plans). The Prior Plans, however, shall remain in effect until
all stock options and other awards granted under such Prior Plans have been exercised, forfeited,
canceled, expired or otherwise terminated in accordance with the terms of such awards.
1.2 Effective Date. The Plan is effective as of the date it is approved by the
Companys Board of Directors (the Effective Date), but is subject to approval by the Companys
shareholders at its 2011 Annual Meeting. Any Awards granted prior to such shareholder approval
shall be expressly conditioned upon such shareholder approval of the Plan.
ARTICLE II
Plan Overview
Plan Overview
2.1 Purpose. The purpose of the Plan is to permit the Committee established pursuant
to Section 3.1 or the Board, as the case may be, to grant Awards to certain present and future
Employees, Directors and consultants, thereby giving them a stake in the growth and prosperity of
the Company and encouraging the continuance of their service with the Company or its subsidiaries.
The Awards that may be granted pursuant to the Plan include: Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Performance Cash,
Stock Grants, Stock Units and Dividend Equivalents.
2.2 Glossary. When a word or phrase appears in the Plan with the initial letter
capitalized, and the word or phrase does not commence a sentence, the word or phrase shall
generally be a term defined in the Introduction or in the attached Glossary, which is incorporated
into and made part of this Plan, unless a clearly different meaning is required by the context in
which the word or phrase is used or the word or phrase is defined for a limited purpose elsewhere
in the Plan document.
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ARTICLE III
Administration
Administration
3.1 Administration. The Committee shall be responsible for the administration of the
Plan. The Committee shall consist of not less than two Directors of the Company who are
non-employee directors within the meaning of
Rule 16b-3 of the Securities Exchange Act of 1934, outside directors within the meaning of Section 162(m) of the Code and regulations
thereunder, and independent directors as described in the NYSEs Listed Company Manual, as each
such rule or regulation is in effect from time to time. The Board may, from time to time, remove
members from, or add members to, the Committee. Any vacancies on the Committee shall be filled by
members of the Board. The foregoing notwithstanding, the Board shall perform the functions of the
Committee for purposes of granting Awards to non-Employee Directors, except to the extent that the
Board delegates some or all of these functions to the Committee.
3.2 Actions of the Committee. A majority of the members of the Committee shall
constitute a quorum. The Committee may act at a meeting, including a telephonic meeting, by action
of a majority of the members present, or without a meeting by unanimous written consent.
3.3 Authority of the Committee. The Committee is authorized to interpret the Plan and
any Award Agreement issued under the Plan; to prescribe, amend, and rescind rules and regulations
relating to the Plan; to provide for conditions and assurances deemed necessary or advisable to
protect the interests of the Company; and to make all other determinations necessary or advisable
for the administration of the Plan, but only to the extent not contrary to the express provisions
of the Plan. Determinations, interpretations, or other actions made or taken by the Committee in
good faith pursuant to the provisions of the Plan shall be final, binding and conclusive for all
purposes and upon all persons whomsoever. In addition, the Committee may prescribe, amend and
rescind such rules and regulations as may be necessary or appropriate to provide different terms
and conditions for awards to participants who are foreign nationals or employees outside of the
U.S. if necessary or desirable to recognize differences in local law or tax policy.
The Committee shall have the authority, subject to the express provisions of the Plan, in its
discretion, (a) to determine the Employees, Directors and consultants to whom Awards shall be
granted; (b) to determine the times when such Awards shall be granted, the size and type of Awards,
the purchase price or exercise price of Awards, the period(s) during which such Awards shall be
exercisable (whether in whole or in part), and any other terms, restrictions and conditions
applicable to Awards (which need not be identical); and (c) to amend or modify any outstanding
Awards under the Plan to the extent the terms of such Award are within the discretion of the
Committee as provided under the Plan. As permitted by law and the rules of the New York Stock
Exchange or any other established securities market on which the Stock is traded, the Committee may
delegate any authority granted to it herein; provided, however, that the Committee may not delegate
to the Companys executive officers the power and authority to make, cancel, or suspend Awards to
executive officers or Directors.
All authority of the Board and the Committee with respect to Awards issued pursuant to this
Plan, including the authority to amend outstanding Awards, shall continue after the term of this
Plan so long as any Award remains outstanding.
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ARTICLE IV
Stock Subject to Plan
Stock Subject to Plan
4.1 Number. The Shares to be delivered under the Plan may consist, in whole or in
part, of authorized but unissued Stock or treasury Stock not reserved for any other purpose.
Subject to adjustment as provided in Sections 4.2 and 4.3, a total of one million two hundred
thousand (1,200,000) Shares shall be authorized for issuance or to be used for reference purposes
pursuant to Awards granted under the Plan. The number of Shares authorized for issuance shall be
reduced by one Share for each Share subject to awards granted under any Prior Plan on or after
January 1, 2011; provided, however, that no awards will be granted under any Prior Plan on or after
the Effective Date. In addition to the above aggregate limitation:
(a) No Participant shall be granted Options or Stock Appreciation Rights in any 12-month
period covering more than six hundred thousand (600,000) Shares.
(b) No Participant shall be eligible to earn a Performance Unit and/or a Performance Cash
Award for any 12-month Performance Period with a potential value in excess of two million Dollars
($2,000,000). If the Performance Period is less than or exceeds 12 months, the dollar limit
expressed in the preceding sentence shall be reduced or increased proportionately, as the case may
be. For example, if the Performance Period is three years, the limit shall be increased by
multiplying it by three.
(c) The maximum number of Shares that may be issued under the Plan as Incentive Stock Options
is one million two hundred thousand (1,200,000).
4.2 Lapsed Awards. In the event any Awards granted under this Plan, or any awards
outstanding under any Prior Plan after December 31, 2010, shall be forfeited, terminate, be
canceled or expire, the number of Shares subject to such Awards, to the extent of any such
forfeiture, termination, cancellation or expiration, shall thereafter again be available for grant
under the Plan. In addition, if Shares are not delivered pursuant to a Restricted Stock Unit,
Stock Unit, Dividend Equivalent, Performance Unit, or a SAR Award that is not related to an Option,
because the Award is paid in cash, such Shares shall not be deemed to have been delivered for
purposes of determining the maximum number of Shares available for delivery under the Plan. The
exercise of a stock-settled SAR or broker-assisted cashless exercise of an Option (or a portion
thereof) will reduce the number of Shares of Stock available for issuance pursuant to Section 4.1
by the entire number of Shares of Stock subject to that SAR or Option (or applicable portion
thereof), even though a smaller number of Shares of Stock will be issued upon such an exercise.
Shares of Stock tendered to pay the exercise price of an Option or tendered or withheld to satisfy
a tax withholding obligation arising in connection with an Option, SAR or any other Award will not
become available for grant or sale under the Plan. Moreover, Shares purchased on the open market
with the cash proceeds generated by the exercise of an Option will not increase or replenish the
number of Shares available for issuance pursuant to Section 4.1.
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4.3 Adjustment in Capitalization. In the event of any change in corporate
capitalization, such as a stock split, or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other distribution of stock or property of the
Company, extraordinary cash dividend, any reorganization (whether or not such reorganization comes
within the definition of such term in Section 368 of the Code) or any partial or complete
liquidation of the Company, an adjustment shall be made in the number and class of Shares available
for Awards, the number and class of and/or price of Shares subject to outstanding Awards granted
under the Plan and the number of Shares set forth in Sections 4.1 and 4.2, as may be determined to
be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to any Award shall
always be a whole number by rounding any fractional Share to the nearest whole Share. Moreover, in
the event of such transaction or event, the Committee, in its discretion, may provide in
substitution for any or all outstanding Awards under the Plan such alternative consideration
(including cash) as it, in good faith, may determine to be equitable under the circumstances and
may require in connection therewith the surrender of all Awards so replaced. Any adjustment to an
Incentive Stock Option shall be made consistent with the requirements of Section 424 of the Code.
Further, with respect to any Option or Stock Appreciation Right that otherwise satisfies the
requirements of the stock rights exception to Section 409A of the Code, any adjustment pursuant to
this Section 5.3 shall be made consistent with the requirements of the final regulations
promulgated pursuant to Section 409A of the Code.
4.4 Replacement Awards. In the event of any corporate transaction in which the Company
or a Subsidiary acquires a corporate entity which, at the time of such transaction, maintains an
equity compensation plan pursuant to which awards of stock options, stock appreciation rights,
performance shares, performance units, restricted stock, restricted stock units, stock units or
dividend equivalents are then outstanding (the acquired plan), the Committee may, in its
discretion, make Awards under this Plan to assume, substitute or convert such outstanding awards in
such manner as may be determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights; provided, however, that the number of
Shares subject to any Award shall always be a whole number by rounding any fractional Share to the
nearest whole Share. Options or SARs issued pursuant to this Section 4.4 shall not be subject to
the requirement that the exercise price of such Award not be less than the Fair Market Value of
Stock on the date the Award is granted. Shares used in connection with an Award granted in
substitution for an award outstanding under an acquired plan under this Section 4.4 shall not be
counted against the number of Shares reserved under this Plan under Section 4.1. Any shares
authorized and available for issuance under the acquired plan shall, subject to adjustment as
described in Section 4.3, be available for use in making Awards under this Plan with respect to
persons eligible under such acquired plan, by virtue of the Companys assumption of such acquired
plan, consistent with Rule 303A(8) of the NYSE Listed Company Manual, as such Rule may be amended
or replaced from time to time.
ARTICLE V
Duration of Plan
Duration of Plan
5.1 Duration of Plan. The Plan shall remain in effect, subject to the right of the
Companys Board of Directors to amend or terminate the Plan at any time pursuant to Section 14.1,
until all Shares subject to the Plan shall have been purchased or granted according to the Plans
provisions. However, in no event may an Award be granted under the Plan on or after the
tenth anniversary of the Effective Date unless the shareholders of the Company approve an
extension of the Plan.
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ARTICLE VI
Stock Options
Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be
granted to one or more Participants in such number, upon such terms and conditions, and at any time
and from time to time, as determined by the Committee in its sole discretion. The Committee may
grant either Nonqualified Stock Options or Incentive Stock Options and shall have complete
discretion in determining the number of Options of each granted to each Participant, subject to the
limitations of Article IV.
6.2 Incentive Stock Options. Incentive Stock Options shall be granted only to
Participants who are Employees. The terms of any Incentive Stock Options granted pursuant to the
Plan must comply with the following provisions of this Section 6.2:
(a) Exercise Price. Subject to Section 6.2(e), the exercise price per Share of Stock shall be
set by the Committee, provided that the exercise price for any Incentive Stock Option may not be
less than the Fair Market Value of one Share of Stock on the Grant Date.
(b) Exercise. In no event may any Incentive Stock Option be exercisable for more than ten
years from the Grant Date.
(c) Lapse of Option. An Incentive Stock Option shall lapse in the following circumstances:
(i) The Incentive Stock Option shall lapse ten years from the Grant Date, unless an earlier
time is set in the Award Agreement.
(ii) The Incentive Stock Option shall lapse upon termination for Cause or for any other
reason, other than the Participants death or Disability, unless otherwise provided in the Award
Agreement.
(iii) Unless otherwise provided in the Award Agreement, if the Participant terminates
employment on account of Disability or death before the Option lapses pursuant to paragraph (i) or
(ii) above, the Incentive Stock Option shall lapse, unless it is previously exercised, on the
earlier of (a) the scheduled expiration date of the Option; or (b) 12 months after the date of the
Participants Termination of Employment on account of Disability or death. Upon the Participants
Disability or death, any Incentive Stock Options exercisable at the Participants Disability or
death may be exercised by the Participants legal representative or representatives, by the person
or persons entitled to do so pursuant to the Participants last will and testament in the case of
death, or, if the Participant fails to make testamentary disposition of such Incentive Stock Option
or dies intestate, by the person or persons entitled to receive the Incentive Stock Option pursuant
to the applicable laws of descent and distribution.
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(d) Individual Dollar Limitation. The aggregate Fair Market Value (determined as of the time
an Award is made) of all Shares of Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed $100,000.00 or such other
limitation as may be imposed by Section 422(d) of the Code, as it may be amended or replaced. To
the extent that Incentive Stock Options are first exercisable by a Participant in excess of such
limitation, the excess shall be considered Non-Qualified Stock Options.
(e) Ten Percent Owners. An Incentive Stock Option may be granted to any individual who, at the
Grant Date, owns stock possessing more than ten percent of the total combined voting power of all
classes of Stock of the Company only if such Option is granted at a price that is not less than
110% of Fair Market Value on the Grant Date and the Option is exercisable for no more than five
years from the Grant Date.
(f) Expiration of Incentive Stock Options. No Award of an Incentive Stock Option may be made
pursuant to this Plan after the tenth anniversary of the Effective Date, unless the shareholders of
the Company vote to approve an extension of the Plan.
(g) Right to Exercise. Except as provided in Section 6.2(c)(iii), during a Participants
lifetime, an Incentive Stock Option may be exercised only by the Participant.
6.3 Option Award Agreement. Each Option shall be evidenced by an Award Agreement that
shall specify the type of Option granted, the Option price, the duration of the Option, the number
of Shares of Stock to which the Option pertains, and such other terms and conditions (which need
not be identical among Participants) as the Committee shall determine in its sole discretion. The
Award Agreement shall specify whether the Option is to be treated as an ISO within the meaning of
Section 422 of the Code. If such Option is not designated as an ISO, such Option shall be deemed a
NQSO.
6.4 Exercise Price; No Repricing. Except as otherwise provided in Section 4.4 with
respect to replacement Awards, no Option shall be granted pursuant to the Plan at an exercise price
that is less than the Fair Market Value of the Stock on the Grant Date of the Option.
Notwithstanding any other provision in the Plan to the contrary, an Option may not be amended or
modified to reduce the exercise price after the Grant Date, and may not be surrendered in
consideration of or exchanged for cash, other Awards or a new Option having an exercise price below
that of the Option being surrendered or exchanged, except in connection with a Change in Control or
as otherwise provided in Section 4.3 with respect to an adjustment in capitalization, without
approval of the Companys shareholders.
6.5 Duration of Options. Each Option shall expire at such time or times as the
Committee shall determine at the time it is granted, provided, however, that no Option shall be
exercisable later than ten years from the Grant Date.
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6.6 Exercise of Options. Options granted under the Plan shall vest at such time or
times and in such manner, and be subject to such restrictions and conditions, as the Committee
shall in each instance approve, which need not be the same for all Participants; provided,
however, that an Option shall not be fully vested prior to the third anniversary of the Grant
Date of the Option, except (in the Committees discretion) in the case of death, Disability or a
Change in Control or in any replacement Award granted pursuant to Section 4.4. An incremental
portion of the Option may become vested at the end of each year of the three-year vesting period in
accordance with the terms of the Award Agreement. For example, if the Option vests over a
three-year period, each year the Option may become vested with respect to one-third of the total
Shares available for purchase pursuant to the Option. For purposes of this Plan, no Option is
exercisable until it vests.
6.7 Payment. The Committee shall determine: (a) the methods by which the exercise
price of an Option may be paid; (b) the form of payment, including, without limitation, cash,
Shares of Stock, any net-issuance arrangement or other property acceptable to the Committee
(including broker-assisted cashless exercise arrangements); and (c) the methods by which Shares
of Stock shall be delivered or deemed to be delivered to Participants.
6.8 Termination of Service. The Committee shall set forth in the applicable Award
Agreement the extent to which a Participant shall have the right to exercise the Option or Options
following the Participants Termination of Employment or Termination of Service. Such provisions
shall be in the sole discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for such termination,
including, but not limited to, termination for Cause or reasons relating to the breach or
threatened breach of restrictive covenants.
6.9 Non-Transferability of Options. No Option granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or
by the laws of descent and distribution. Further, all Incentive Stock Options and, except as
otherwise provided in the applicable Award Agreement, Nonqualified Stock Options, granted to a
Participant under the Plan shall be exercisable only by such Participant during his or her
lifetime. Notwithstanding the foregoing, the Committee may, in its sole discretion, permit the
transfer of an Option to a family member or family trust or partnership, or to a charitable
organization, provided that no value or consideration is received by the Participant with respect
to such transfer.
ARTICLE VII
Stock Appreciation Rights
Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights. Subject to the terms and provisions of the
Plan, Stock Appreciation Rights may be granted to one or more Participants in such number, upon
such terms and conditions, and at any time and from time to time, as determined by the Committee in
its sole discretion. The Committee may grant Non-Tandem SARs, Tandem SARs, or any combination of
these forms of SARs. The Committee shall designate, at the time of grant, the grant price of a
Non-Tandem SAR, which grant price shall be at least equal to the Fair Market Value of a Share on
the Grant Date of the SAR (or, if applicable, on the Grant Date of an Option with respect to a
Non-Tandem SAR granted in exchange for, but subsequent to, the Option (subject to the requirements
of Section 409A of the Code)), except as otherwise provided in Section 4.4 with respect to
replacement awards. The grant price of Tandem SARs shall equal the exercise price of the related Option. Notwithstanding any other provision in the Plan to
the contrary, a SAR may not be amended or modified to reduce the grant price after the Grant Date,
and may not be surrendered in consideration of or exchanged for cash, other Awards or a new SAR
having a grant price below that of the SAR being surrendered or exchanged, except in connection
with a Change in Control or as otherwise provided in Section 4.3 with respect to an adjustment in
capitalization, without shareholder approval.
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7.2 SAR Award Agreement. Each SAR shall be evidenced by an Award Agreement that shall
specify the type of SAR granted, the SAR grant price, the duration of the SAR, the number of Shares
of Stock to which the Award pertains, and such other terms and conditions (which need not be
identical among Participants) as the Committee shall determine in its sole discretion.
7.3 Duration of SAR. The term of a SAR granted under the Plan shall not exceed ten
years. A Tandem SAR shall have the same term as the Option to which it relates.
7.4 Exercise of SARs. SARs granted under the Plan shall vest at such time or times and
in such manner, and be subject to such restrictions and conditions, as the Committee shall in each
instance approve, which need not be the same for all Participants; provided, however, that a SAR
shall not be fully vested prior to the third anniversary of the date on which the SAR was granted,
except (in the Committees discretion) in the case of death, Disability, or a Change in Control or
in any replacement Award granted pursuant to Section 4.4. An incremental portion of the SAR may
become vested at the end of each year of the three-year vesting period in accordance with the terms
of the Award Agreement. For example, if the SAR becomes vested over a three-year period, each year
the SAR may become vested with respect to one-third of the total SARs. Tandem SARs may be
exercised for all or part of the Shares subject to the related Option upon the surrender of the
right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only
with respect to the Shares for which its related Option is then exercisable. Notwithstanding any
other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection
with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO;
(b) the value of the payout with respect to the Tandem SAR may be for no more than 100% of the
difference between the Option exercise price of the underlying ISO and the Fair Market Value of the
Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (c) the Tandem
SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the
Option exercise price of the ISO. For purposes of this Plan, no SAR is exercisable until it vests.
7.5 Payment of SAR Amount. Upon exercise of the SAR, the holder shall be entitled to
receive payment of an amount determined by multiplying (a) the difference between the Fair Market
Value of a Share of Stock at the date of exercise over the price fixed by the Committee at the
Grant Date, by (b) the number of Shares with respect to which the SAR is exercised. Payment shall
be made in the manner and at the time designated by the Committee in the Award Agreement. In the
exercise of its discretion, the Committee may provide in the Award Agreement that payment for the
SARs will be made in cash or Stock, or deferred cash or Stock, or in a combination thereof. The
payment provisions shall be structured to either qualify for an
exception to or to comply with the provisions of Section 409A of the Code and applicable
regulations.
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7.6 Termination of Service. The Committee shall set forth in the applicable Award
Agreement the extent to which a Participant shall have the right to exercise the SARs following
Termination of Employment or Termination of Service. Such provisions shall be in the Committees
discretion, need not be uniform among all SAR Awards issued pursuant to the Plan, and may reflect
distinctions based on the reasons for such termination, including, but not limited to, termination
for Cause or reasons relating to the breach or threatened breach of restrictive covenants.
7.7 Non-Transferability of SARs. No SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or
by the laws of descent and distribution. Further, except as otherwise provided in the Award
Agreement, all SARs granted to a Participant under the Plan shall be exercisable only by such
Participant during his or her lifetime. Notwithstanding the foregoing, the Committee may, in its
sole discretion, permit the transfer of a SAR to a family member or family trust or partnership, or
to a charitable organization, provided that no value or consideration is received by the
Participant with respect to such transfer.
ARTICLE VIII
Restricted Stock, Restricted Stock Units, Stock Grants, Stock Units and Dividend Equivalents
Restricted Stock, Restricted Stock Units, Stock Grants, Stock Units and Dividend Equivalents
8.1 Grant of Restricted Stock and Restricted Stock Units. Subject to the terms and
provisions of the Plan, Restricted Stock and/or Restricted Stock Units may be granted to one or
more Participants in such number, upon such terms and conditions, and at any time and from time to
time, as determined by the Committee in its sole discretion. Each Restricted Stock or Restricted
Stock Unit Award will be evidenced by an Award Agreement that shall specify the Period or Periods
of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units
granted and such other provisions as the Committee shall determine.
Payment for Restricted Stock Units shall be made in the manner and at the time designated by
the Committee in the Award Agreement. In the Award Agreement, the Committee may provide that
payment will be made in cash or Stock, or in deferred cash or Stock, or in a combination thereof.
The payment provisions described in the Award Agreement shall be structured to either qualify for
an exception to or to comply with the provisions of Section 409A of the Code and the applicable
regulations.
Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee
shall determine. If certificates representing Shares of Restricted Stock are registered in the
name of the Participant, the certificates must bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock, and the Company may, in its
discretion, retain physical possession of the certificate until such time as all applicable
restrictions lapse.
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8.2 Period of Restriction and Vesting Conditions. The Committee may impose such
conditions and/or restrictions on any Shares of Restricted Stock and/or Restricted Stock Units
granted pursuant to the Plan as it may deem advisable, including, without limitation, a requirement
that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions
based upon the achievement of specific Performance Goals, time-based restrictions on vesting, which
may or may not follow the attainment of the Performance Goals, sales restrictions, and/or
restrictions under applicable Federal or state securities laws.
As a general rule, the Period of Restriction for any Restricted Stock or Restricted Stock
Units with respect to which the restrictions lapse solely based on the passage of time shall not be
less than three years and the Period of Restriction for any Restricted Stock or Restricted Stock
Units with respect to which the restrictions lapse based on the satisfaction of Performance
Criteria shall not be less than one year. In either case, incremental amounts of the Restricted
Stock or Restricted Stock Units may be released from restriction at the end of each year of the
Period of Restriction in accordance with the provisions of the Award Agreement. The Period of
Restriction for Restricted Stock or Restricted Stock Unit Awards issued to newly hired Employees in
order to replace forfeited awards granted by a prior employer shall not be less than one year. The
Period of Restriction, if any, for Restricted Stock or Restricted Stock Units granted to a Director
shall be as determined by the Committee and set forth in the Award Agreement.
8.3 Stock Grant Awards. Stock Grant Awards may be granted to Participants at any time
and from time to time as shall be determined by the Committee. A Stock Grant Award grants a
Participant the right to receive (or purchase at such price as determined by the Committee) Shares
of Stock free of any vesting restrictions. The purchase price, if any, for a Stock Grant Award
shall be payable in cash or in any other form of consideration acceptable to the Committee. A
Stock Grant Award may be granted or sold as described in the preceding sentence in respect of past
services or other valid consideration, or in lieu of any cash compensation due to such Participant.
All Stock Grant Awards will be evidenced by an Award Agreement that shall specify the number of
Shares of Stock granted and such other provisions as the Committee shall determine. The payment
provisions described in the Award Agreement shall be structured to either qualify for an exception
to, or to comply with, the provisions of Section 409A of the Code and the applicable regulations.
8.4 Stock Unit Awards. Stock Unit Awards also may be granted to Participants at any
time and from time to time as shall be determined by the Committee. A Stock Unit Award grants a
Participant the right to receive Shares of Stock, or a cash payment equal to the Fair Market Value
of a designated number of Shares of Stock, in the future free of any vesting restrictions. A Stock
Unit Award may be granted as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of any cash compensation due to such Participant. All Stock
Unit Awards will be evidenced by an Award Agreement that shall specify the number of Shares of
Stock to which the Award relates, whether the Stock Units will be settled in Stock or cash, and
such other provisions as the Committee shall determine. The payment provisions described in the
Award Agreement shall be structured either to qualify for an exception to or to comply with the
provisions of Section 409A of the Code and the applicable regulations.
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8.5 Transferability. Restricted Stock and/or Restricted Stock Units granted under the
Plan may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
during the Period of Restriction, except as otherwise provided in the Award Agreement or by will or
by the laws of descent and distribution. Shares issued pursuant to a Stock Grant shall not be
subject to any restrictions other than those imposed by applicable law, if any. Stock Units
granted under the Plan may not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated prior to payment, except as otherwise provided in the Award Agreement or by will or by
the laws of descent and distribution. All rights with respect to Restricted Stock and/or
Restricted Stock Units granted to a Participant under the Plan shall be available during his or her
lifetime only to such Participant. Except as otherwise provided in the Plan or in any Award
Agreement, Restricted Stock shall become freely transferable by the Participant after the last day
of the applicable Period of Restriction.
8.6 Voting Rights. Except as otherwise provided in the Award Agreement, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect
to those Shares during the Period of Restriction. Participants shall not have any voting rights
with respect to Shares underlying a Restricted Stock Unit or Stock Unit.
8.7 Dividends and Other Distributions. Unless otherwise designated by the Committee,
Participants holding Restricted Stock granted hereunder shall be credited with regular cash
dividends declared by the Company with respect to the underlying Shares during the Period of
Restriction. Any other distributions with respect to the underlying Shares shall be held (without
provision for interest accrual) subject to the Period of Restriction applicable to the underlying
Shares. The Committee may apply any restrictions to such dividends or other distributions as it
deems appropriate.
In no event may dividends on Restricted Stock Awards that vest based on the achievement of a
Performance Goal be paid unless and until the Award is earned by satisfaction of the Performance
Goal. Pending a determination of whether the Performance Goal has been satisfied, the dividends
shall be accumulated without interest. Any dividends that become payable will be paid in the form
of cash or additional Shares of Stock in accordance with the provisions of the Award Agreement.
No cash dividends shall be paid or provided with respect to any Option or SAR Award.
8.8 Dividend Equivalents. The Committee, in its discretion, may grant a Dividend
Equivalent Award to a Participant in connection with any Restricted Stock Unit, Stock Unit,
Performance Unit or Performance Share Award granted pursuant to this Article VIII or Article IX, as
the case may be. A Dividend Equivalent Award grants a Participant the right to receive a payment
based on the dividends declared on the Shares of Stock that are subject to any Restricted Stock
Unit, Stock Unit, Performance Unit or Performance Share Award, to be credited as of dividend
payment dates, during the period between the date such Award is granted and the date such Award is
exercised, vests or expires, as determined by the Committee. In no event may a Dividend Equivalent
Award made with respect to a Restricted Stock Unit Award that vests based on the achievement of
Performance Goals, or with respect to a
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Performance Unit or Performance Share Award be paid unless
and until such Award vests or is earned by satisfaction of the applicable Performance Goals. A Dividend Equivalent Award shall initially be expressed
in terms of cash or Shares of Stock, depending on the way in which the dividends to which it
relates are declared. Such Award shall be converted to cash or Shares of Stock, as the case may
be, by such formula and at such time and subject to such limitations as may be determined by the
Committee. A Dividend Equivalent Award may not be made in connection with any Option or SAR Award.
Any Dividend Equivalent Award shall be structured either to qualify for an exception to or to
comply with the provisions of Section 409A of the Code and the applicable regulations.
8.9 Termination of Service. The Committee shall set forth in the applicable Award
Agreement the extent to which a Participant shall have the right to retain Restricted Stock or
Restricted Stock Units (including any related Dividend Equivalent Award) following Termination of
Employment or Termination of Service during the Period of Restriction. Such provisions shall be in
the sole discretion of the Committee, need not be uniform among all Restricted Stock or Restricted
Stock Unit Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons
for such termination, including, but not limited to, termination for Cause or reasons relating to
the breach or threatened breach of restrictive covenants.
ARTICLE IX
Performance Unit, Performance Share, and Performance Cash Awards
Performance Unit, Performance Share, and Performance Cash Awards
9.1 Grant of Performance Units or Performance Shares. Subject to the terms and
provisions of the Plan, Performance Units or Performance Shares may be granted to one or more
Participants in such number, upon such terms and conditions, and at any time and from time to time,
as shall be determined by the Committee in its sole discretion. Each Performance Unit or
Performance Share Award shall be evidenced by an Award Agreement that shall specify the Performance
Period, the Performance Goal or Goals, the number of Performance Units or Performance Shares
granted, the payment provisions, the vesting provisions, and such other provisions as the Committee
shall determine in its sole discretion. The Committee may provide in the Award Agreement for any
Performance Unit that payment will be made in cash or Stock, or in deferred cash or Stock, or in a
combination thereof. The payment provisions described in the Award Agreement shall be structured
either to qualify for an exception to or to comply with the provisions of Section 409A of the Code
and the applicable regulations.
Except as set forth below, no Performance Shares or Performance Units may fully vest during
the one-year period following the Grant Date for such Performance Shares or Performance Units.
Nevertheless, the Performance Shares or Performance Units may vest in increments during such
one-year period in accordance with the provisions of the Award Agreement. The Committee, in its
discretion, also may provide in the Award Agreement for any Performance Share or Performance Unit
Award that such Performance Shares or Performance Units will vest in whole or in part in the event
of a Termination of Employment due to death, Disability, retirement or the occurrence of a Change
in Control.
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9.2 Performance Cash Awards. Subject to the terms and provisions of the Plan,
Performance Cash Awards also may be granted to Participants at any time and from time to time as
determined by the Committee. A Performance Cash Award grants a Participant the right to
receive an amount of cash depending on the satisfaction of one or more Performance Goals for a
particular Performance Period, as determined by the Committee. Each Performance Cash Award shall
be evidenced by an Award Agreement that shall specify the Performance Period, the Performance Goal
or Goals, the payment provisions and such other provisions as the Committee shall determine in its
sole discretion. The payment provisions described in the Award Agreement shall be structured
either to qualify for an exception to or to comply with the provisions of Section 409A of the Code
and the applicable regulations.
9.3 Conditions on Awards. The Committee may impose such conditions and/or restrictions
on any Performance Unit, Performance Share, or Performance Cash Award granted pursuant to the Plan
as it may deem advisable, in its discretion, including, without limitation, restrictions based upon
the achievement of specific Performance Goals (Company-wide, Subsidiary-wide, divisional, and/or
individual), time-based restrictions on vesting, which may or may not commence following the
attainment of the Performance Goals, sales restrictions, and/or restrictions under applicable
Federal or state securities laws. The time period during which any Performance Goals must be met
shall be called a Performance Period and shall be determined by the Committee in its sole
discretion; provided, however, that the Performance Period for a Performance Unit or Performance
Share Award shall not be less than one year.
9.4 Performance Criteria. The Performance Goal or Goals applicable to any Performance
Share, Performance Unit or Performance Cash Award shall be based on the Performance Criteria
selected by the Committee and designated in the Award Agreement. The Performance Criteria
applicable to any Performance Share, Performance Unit or Performance Cash Award granted to a
Covered Employee that is designated as, or deemed to be, a Performance-Based Compensation Award
pursuant to Section 10.1 shall be limited to the Performance Criteria listed in Section 10.4(a).
The Performance Criteria applicable to any other Performance Share, Performance Unit or Performance
Cash Award shall include the Performance Criteria listed in Section 10.4(a) and such other criteria
or factors as may be determined by the Committee and specified in the Award Agreement.
9.5 Termination of Service. The Committee shall set forth in the applicable Award
Agreement the extent to which a Participant shall have the right to receive Performance Unit or
Performance Share Awards (including any Dividend Equivalent Award related to either of them) or
Performance Cash Awards following Termination of Employment or Termination of Service. Such
provisions shall be in the discretion of the Committee, need not be uniform among all Performance
Unit, Performance Share, or Performance Cash Awards issued pursuant to the Plan, and may reflect
distinctions based on the reasons for such termination, including, but not limited to, termination
for Cause or reasons relating to the breach or threatened breach of restrictive covenants.
9.6 Non-Transferability. No Performance Unit, Performance Share, or Performance Cash
Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and distribution. All rights with
respect to a Performance Unit, Performance Share, or Performance Cash Award granted to a
Participant under the Plan shall be exercisable only by such Participant during his or her
lifetime.
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ARTICLE X
Performance-Based Compensation Awards
Performance-Based Compensation Awards
10.1 Purpose and Applicability. Section 162(m) of the Code limits the amount of the
Companys deductions for compensation payable to Covered Employees to $1,000,000 per year.
Performance-based compensation that meets the requirements set forth in Section 162(m) and the
applicable regulations is not subject to this limitation.
The purpose of this Article X is to enable the Committee, in the exercise of its discretion,
to make performance-based Awards (the Performance-Based Compensation Awards) to Covered Employees
that will satisfy all of the requirements of the performance-based compensation exception to the
deduction limitation provisions of Section 162(m). If the Committee, in its discretion, decides
that a particular Award to a Covered Employee should qualify as performance-based compensation,
the Committee will provide in the Award Agreement that the Award is intended to be a
Performance-Based Compensation Award. If the Committee concludes that a particular Award to a
Covered Employee should not be qualified as performance-based compensation, the Committee will
indicate in the Award Agreement that the Award is not intended to be a Performance-Based
Compensation Award. Unless the Award Agreement evidencing an Award to a Covered Employee
specifically indicates that the Award is not intended to be a Performance-Based Compensation Award,
the Award will be considered to be a Performance-Based Compensation Award and will be subject to
all of the requirements of this Article X.
This Article X shall apply only to Performance-Based Compensation Awards. If this Article X
applies, its provisions control over any contrary provision contained in any other Section of this
Plan or an Award Agreement. The provisions of this Article X and any Award Agreement for a
Performance-Based Compensation Award shall be interpreted in a manner consistent with the
requirements of Section 162(m) and the applicable regulations. If any provision of this Plan or
any Award Agreement for a Performance-Based Compensation Award does not comply with or is
inconsistent with the requirements of Section 162(m) or the applicable regulations, such provision
shall be construed or deemed amended to the extent necessary to conform to such requirements.
10.2 Types of Performance-Based Compensation Awards. Options granted to Covered
Employees pursuant to Article VI and SARs granted to Covered Employees pursuant to Article VII
should, by their terms, qualify for the performance-based compensation exception to the deduction
limitations of Section 162(m) of the Code. The Committee, in the exercise of its discretion, also
may choose to designate some or all of the Restricted Stock Unit or Restricted Stock Awards granted
to Covered Employees pursuant to Article VIII and/or some or all of the Performance Share,
Performance Unit or Performance Cash Awards granted to Covered Employees pursuant to Article IX as
Performance-Based Compensation Awards.
10.3 Committee Discretion with Respect to Performance-Based Compensation Awards. With
regard to a particular Performance Period, the Committee shall have full discretion to select the
length of the Performance Period, the type of Performance-Based Compensation Awards to be issued,
the kind and/or level of the Performance Goal or Goals and
whether the Performance Goal or Goals apply to the Company, an Affiliate, or any division or
business unit thereof or the Participant or any group of Participants. Depending on the
Performance Criteria used to establish the Performance Goals, the Performance Goals may be stated
in terms of absolute levels or relative to another company or companies or to an index or indices.
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10.4 Establishment of Performance Goals. A Performance-Based Compensation Award shall
provide for payment only upon the attainment of one or more pre-established, objective Performance
Goals. The Performance Goals, and the process by which they are established, shall satisfy all of
the requirements of Section 162(m) and the applicable regulations. By way of illustration, but not
limitation, the following requirements must be satisfied:
(a) The Performance Goals shall be based solely on the following Performance Criteria, as
selected by the Committee in the exercise of its discretion: revenue; revenue growth; earnings
(including earnings before taxes, earnings before interest and taxes or earnings before interest,
taxes, depreciation and amortization); operating income; pre- or after-tax income; cash flow
(before or after dividends); cash flow per share (before or after dividends); net earnings;
earnings per share; return on equity; return on capital (including return on total capital or
return on invested capital); cash flow return on investment; return on assets or net assets;
economic value added (or an equivalent metric); share price performance; total shareholder return;
improvement in or attainment of expense levels; and improvement in or attainment of working capital
levels. Measurement of performance against goals may exclude, in the Committees sole discretion,
the impact of charges for restructurings, discontinued operations, extraordinary items, and other
unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as
defined by generally accepted accounting principles and as identified in the financial statements,
notes to the financial statements, managements discussion and analysis or other SEC filings.
(b) The Performance Goals shall be considered to be pre-established only if the Performance
Goals are established by the Committee in writing not later than ninety (90) days after the
commencement of the Performance Period for such Award; provided that (i) the outcome must be
substantially uncertain at the time the Committee establishes the Performance Goals; and (ii) in no
event may the Committee establish the Performance Goals for any Performance-Based Compensation
Award after 25% of the Performance Period for such Award has elapsed.
(c) A Performance Goal will be considered to be objective only if a third party having
knowledge of the relevant facts could determine whether the Performance Goal has been met.
(d) The Performance Goal must state, in terms of an objective formula or standard, the method
for computing the amount of compensation payable to the Covered Employee if the Goal is attained.
For this purpose, the formula will be considered to be objective only if a third party having
knowledge of the relevant performance results could calculate the amount to be paid to the Covered
Employee.
(e) The objective formula or standard must preclude discretion to increase the amount of
compensation payable that would otherwise be due upon attainment of the Performance Goal.
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10.5 Performance Evaluation; Adjustment of Goals. At the time that a Performance-Based
Compensation Award is first issued, the Committee, in the Award Agreement or in another written
document, may specify whether performance will be evaluated including or excluding the effect of
any of the following events that occur during the Performance Period, as the Committee, in its
discretion, deems to be appropriate including:
(a) Judgments entered or settlements reached in litigation;
(b) The write down of assets;
(c) The impact of any reorganization or restructuring;
(d) The impact of changes in tax laws, accounting principles, regulatory actions or other laws
affecting reported results;
(e) Extraordinary non-recurring items, as described in Accounting Principles Board Opinion No.
30 or any successor or replacement publication or pronouncement, and/or in managements discussion
and analysis of financial condition and results of operations appearing in the Companys annual
report to shareholders or Annual Report on Form 10-K, as the case may be, for the applicable year;
(f) The impact of any mergers, acquisitions, spin-offs or other divestitures; and
(g) Foreign exchange gains and losses.
The inclusion or exclusion of these items shall be expressed in a form that satisfies the
requirements of Section 162(m) and the applicable regulations. The Committee, in its discretion,
also may, within the time prescribed by Section 162(m) and the applicable regulations, adjust or
modify the calculation of Performance Goals for such Performance Period in order to prevent the
dilution or enlargement of the rights of Participants: (i) in the event of, or in anticipation of,
any unusual or extraordinary corporate item, transaction, event, or development; or (ii) in
recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the
Company, or the financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business conditions.
10.6 Adjustment of Performance Compensation Awards. The Committee shall have the sole
discretion to adjust the determinations of the degree of attainment of the pre-established
Performance Goals. Notwithstanding any provision herein to the contrary, the Committee may not
make any adjustment or take any other action with respect to any Performance-Based Compensation
Award that will increase the amount payable under any such Award. The Committee shall retain the
sole discretion to adjust Performance-Based Compensation Awards
downward or to otherwise reduce the amount payable with respect to any Performance-Based
Compensation Award.
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10.7 Continued Employment Required. Unless otherwise provided in the relevant Award
Agreement, a Participant must be an Employee of the Company or an Affiliate on the day a
Performance-Based Compensation Award for such Performance Period is paid to the Participant.
10.8 Certification by Committee. The payment for a Performance-Based Compensation
Award shall not occur until the Committee certifies, in writing, that the pre-established
Performance Goals and any other material terms and conditions precedent to such payment have been
satisfied. Committee certification is not required for compensation that is attributable solely to
the increase in the value of the Companys Stock.
10.9 Maximum Award. If a Performance-Based Compensation Award is payable in Stock, the
maximum Performance-Based Compensation Award a Participant may be eligible to earn for any 12-month
Performance Period is one hundred fifty thousand (150,000) Shares of Stock. If a Performance-Based
Compensation Award is payable in cash, the maximum Performance-Based Compensation Award a
Participant may be eligible to earn for any 12-month Performance Period is two million Dollars
($2,000,000). If the Performance Period is less than or exceeds 12 months, the limits described in
the preceding sentences shall be reduced or increased proportionately. For example, if the
Performance Period is three years, the limit shall be increased by multiplying it by three.
10.10 Miscellaneous. The designation of a Covered Employee as a Participant for any
Performance Period shall not in any manner entitle the Participant to receive a Performance-Based
Compensation Award for such Performance Period. Moreover, designation of a Covered Employee as a
Participant for a particular Performance Period shall not require designation of such Covered
Employee as a Participant for any subsequent Performance Period.
ARTICLE XI
Beneficiary Designation
Beneficiary Designation
11.1 Beneficiary Designation. Each Participant under the Plan may, from time to time,
name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his or her death before he or she receives any or
all of such benefit. Each such designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective only when filed by
the Participant in writing with the Secretary of the Company during the Participants lifetime. In
the absence of any such designation, benefits remaining unpaid at the Participants death shall be
paid to the Participants estate.
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ARTICLE XII
Rights and Obligations of Parties
Rights and Obligations of Parties
12.1 No Guarantee of Employment or Service Rights. Nothing in the Plan shall interfere
with or limit in any way the right of the Company to terminate any Participants employment or
service at any time, nor confer upon any Participant any right to continue as a Director of the
Company, or to continue in the employ of or continue to provide services pursuant to a consulting
arrangement with the Company or any Subsidiary. Similarly, nothing in the Plan shall confer upon
any Director the right to continue to serve as a Director.
12.2 Participation. No Employee, Director or consultant shall have the right to be
selected to receive an Award under the Plan, or, having been so selected, to be selected to receive
a future Award. The provisions of any Award granted to a prospective Director, Employee or
consultant must specifically provide that no portion of the Award will vest, become exercisable or
be issued prior to the date on which such individual begins providing the anticipated services to
the Company or any Affiliates.
12.3 Right of Setoff. The Company or any Affiliate may, to the extent permitted by
applicable law, deduct from and set off against any amounts the Company or Affiliate may owe to the
Participant from time to time (including amounts payable in connection with any Award, owed as
wages, fringe benefits, or other compensation owed to the Participant) such amounts as may be owed
by the Participant to the Company. The Participant shall remain liable for any part of the
Participants payment obligation not satisfied through such deduction and setoff. By accepting any
Award granted under this Plan, the Participant agrees to any deduction or set off pursuant to this
Section 12.3. In the context of an Award that is subject to the requirements of Section 409A, any
set off rights shall be included in the Award Agreement and shall be designed to comply with the
requirements of Section 409A.
12.4 Section 83(b) Election. No election under Section 83(b) of the Code (to include
in gross income in the year of transfer the amounts specified in Section 83(b) of the Code) or
under a similar provision of the laws of a jurisdiction outside the United States may be made,
unless expressly permitted by the terms of the Award Agreement or by action of the Committee in
writing before the making of such election. In any case in which a Participant is permitted to
make such an election in connection with an Award, the Participant shall notify the Company of such
election within ten days of filing notice of the election with the Internal Revenue Service or
other governmental authority, in addition to any filing and notification required pursuant to
regulations issued under Section 83(b) of the Code or other applicable provision.
12.5 Forfeiture and Recapture of Awards. In an Award Agreement, the Committee may, in
its sole discretion, include provisions calling for the forfeiture or recapture of all or any
portion of an Award in certain designated circumstances. For example, an Award Agreement may
provide for the forfeiture or recapture of all or any portion of an Award in the event of an
accounting restatement due to material noncompliance by the Company with any financial reporting
requirement under the securities laws which reduces the amount of any Award that would have been
earned had the financial results been properly reported, as determined by the Committee. By
accepting an Award, the Participant will agree to be bound by the terms of the
forfeiture or recapture provisions. Upon the occurrence of any forfeiture or recapture event
specified by the Committee in the Award Agreement, except as otherwise provided by the Committee in
the Award Agreement:
(a) All or a portion (as designated in the Award Agreement) of the unexercised portion of any
Option, whether or not vested, and any other Award not then settled will be immediately forfeited
and canceled upon the occurrence of the designated forfeiture or recapture event; and
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(b) The Participant will be obligated to repay to the Company upon demand, in cash, all or a
portion (as designated in the Award Agreement) of the total amount of award gain (as defined
below) realized by the Participant upon each exercise of an Option or SAR or settlement of an Award
that occurred within the period beginning 12 months prior to the earlier of the designated
forfeiture or recapture event or the date of the Participants Termination of Service, and ending
on the date of the Companys demand (or such other period required by law).
For purposes of this Section, the term award gain shall mean with respect to a given Option
exercise, the product of (i) the Fair Market Value per Share at the date of such exercise (without
regard to any subsequent change in the market price of Shares) minus the Option exercise price
times (ii) the number of Shares as to which the Option was exercised at that date. With respect to
any other settlement of an Award granted to the Participant, the term award gain shall mean (i)
the Fair Market Value of the cash or Shares paid or payable to the Participant less (ii) any cash
or the Fair Market Value of any Shares or property (other than an Award that would have itself then
been forfeitable hereunder and excluding any payment of tax withholding) paid by the Participant to
the Company as a condition of or in connection such settlement. In any case, if so provided in the
Award Agreement, the award gain may include actual earnings on such award gain through the date of
payment of the Companys demand hereunder.
In addition to any forfeiture or other restrictions imposed by the terms of an Award
Agreement, every Award issued pursuant to the Plan shall be subject to potential forfeiture or
claw back to the fullest extent called for by applicable federal or state law. Each Participant,
by accepting an Award pursuant to the Plan, agrees to return the full amount required by applicable
law.
12.6 Rights of Shareholder. No Participant shall have any rights as a shareholder of
the Company with respect to any Award under the Plan, unless and until unrestricted Shares are
issued to the Participant or the restrictions on any Shares previously issued lapse, except as
specifically otherwise provided in the Plan or the Award Agreement.
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ARTICLE XIII
Change in Control
Change in Control
13.1 In General. Unless otherwise provided in an Award Agreement, if a Change in
Control occurs in which the successor company assumes an Award or provides a substitute award (or
in which the Company is the ultimate parent corporation and continues the Award)
and, within 24 months following such Change in Control, an Employee Participants employment
with the Company and all Affiliates is terminated in a qualifying termination, the following
provisions will apply:
(a) Any and all Options and SARs granted hereunder shall become immediately exercisable, and
shall remain exercisable throughout their entire then remaining term;
(b) Any Period of Restriction and other restrictions imposed on Restricted Stock or Restricted
Stock Units shall lapse; and
(c) Awards of Performance Units and Performance Shares shall be converted to Restricted Stock,
which shall vest over the then-remaining Performance Period (or upon earlier Termination of
Service, death or Disability as provided in the Award Agreement). If 50% or more of the
Performance Period has elapsed as of the date of the Change in Control, such conversion shall be
based upon the value of the Performance Units and/or Performance Shares determined based upon
actual performance to date; and if less than 50% of the Performance Period has elapsed as of the
date of the Change in Control, such conversion shall be made based upon the target value of the
Performance Units and/or Performance Shares.
For purposes of this Section, the term qualifying termination means a termination by the
Company or the applicable Affiliate without Cause, or by the Participant for good reason (as
good reason is defined in any agreement between the Participant and the Company or the applicable
Affiliate) if the Participant is entitled to terminate his or her employment for good reason
pursuant to any such agreement.
The Committee, in its discretion, may prescribe different vesting provisions that will apply
in the event of a Change in Control in which the successor company does not assume an Award or does
not provide a substitute award (or in which the Company is the ultimate parent corporation and does
not continue the Award).
13.2 Exceptions. Notwithstanding the foregoing provisions of Section 13.1, the Board,
prior to a Change in Control, may determine that no Change in Control shall be deemed to have
occurred or that some or all of the enhancements to the rights of Participants under outstanding
Awards upon a Change in Control, as provided under Section 13.1 or the Award Agreement, shall not
apply to specified Awards. The preceding sentence shall apply only if, before or immediately upon
the occurrence of the specified event that would otherwise constitute a Change in Control (the
Event), both the Board of the Company prior to the Change in Control, and the Board of the
Company (or any successor thereto) after the Change in Control reasonably conclude, in good faith,
that Participants holding Awards affected by action of the Board under this Section 13.2 shall be
protected by legally binding obligations of the Company because such Awards either shall remain
outstanding following consummation of all transactions involved in or contemplated by such Change
in Control or shall be assumed and adjusted by the surviving entity resulting from such
transactions, and that changes in the terms of the Award resulting from such transactions will not
materially impair the value of the Awards to the Participants or their opportunity for future
appreciation in respect of such Awards.
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ARTICLE XIV
Amendment, Modification, and Termination of Plan
Amendment, Modification, and Termination of Plan
Except as described in Sections 6.4 and 7.1, the Board may amend, suspend or terminate the
Plan or the Committees authority to grant Awards under the Plan without the consent of
shareholders or Participants, unless shareholder approval of a particular amendment is required by
any federal or state law or regulation or the rules of any stock exchange or automated quotation
system on which the Shares may then be listed or quoted. Further, the Board may not amend the Plan
or any Award without shareholder approval if such approval is required in order to satisfy the
requirements of the performance-based compensation exception to the deduction limitations imposed
by Section 162(m) of the Code and applicable regulations, unless the Board concludes that the
deduction limitations of Section 162(m) of the Code will not become applicable or that the
amendment is appropriate despite the deduction limitations imposed by Section 162(m) of the Code.
If shareholder approval is required, the amendment shall be submitted to the Companys shareholders
for approval not later than the earliest annual meeting for which the record date is after the date
of the Boards action.
Except as provided in the next sentence, no amendment, modification, or termination of the
Plan or any Award Agreement shall in any material manner adversely affect any Award previously
granted under the Plan without the consent of the holder of the Award. The consent of the holder
of an Award is not needed if the change is required to cause the benefits under the Plan (a) to
qualify as performance-based compensation within the meaning of Section 162(m) of the Code and
applicable regulations or other interpretive authority or (b) to comply with the provisions of
Section 409A of the Code. Additional rules relating to amendments to the Plan or any Award
Agreement to assure compliance with Section 409A of the Code are set forth in Section 17.6.
The Committee shall have no authority to waive or modify any other Award term after the Award
has been granted to the extent that the waived or modified term was mandatory under the Plan.
ARTICLE XV
Tax Withholding
Tax Withholding
15.1 Tax Withholding. The Company shall have the power to withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local
withholding tax requirements on any Award under the Plan. To the extent that alternative methods
of withholding are available under applicable tax laws, the Company shall have the power to choose
among such methods.
15.2 Form of Payment. To the extent permissible under applicable tax, securities, and
other laws, the Company may, in its sole discretion, permit the Participant to satisfy a tax
withholding requirement by (a) using already owned Shares; (b) a broker-assisted cashless
transaction; (c) directing the Company to apply Shares of Stock to which the Participant is
entitled pursuant to the Award (including, for this purpose, the filing of an election under
Section 83(b) of the Code), to satisfy the required minimum statutory withholding amount; or (d)
personal check or other cash equivalent acceptable to the Company.
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ARTICLE XVI
Indemnification
Indemnification
16.1 Indemnification. Each person who is or shall have been a member of the Committee
or of the Board shall be indemnified and held harmless by the Company against and from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he may be involved by reason of any action taken or failure to act under the
Plan and against and from any and all amounts paid by him in settlement thereof, with the Companys
approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or
proceeding against him or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the Companys Articles of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have
to indemnify them or hold them harmless.
ARTICLE XVII
Requirements of Law
Requirements of Law
17.1 Requirements of Law. The granting of Awards and the issuance of Stock in
connection with any Award shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as may be required.
17.2 Governing Law. The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Arizona.
17.3 Securities Law Compliance. With respect to any Participant who is, on the
relevant date, obligated to file reports pursuant to Section 16 of the Securities Exchange Act,
transactions pursuant to this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors pursuant to the Securities Exchange Act. Notwithstanding any other
provision of the Plan, the Committee may impose such conditions on the exercise of any Award as may
be required to satisfy the requirements of Rule 16b-3 or its successors pursuant to the Securities
Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be void to the extent permitted by law and voidable as deemed advisable by the
Committee.
17.4 Restrictions. The Committee shall impose such restrictions on any Awards under
the Plan as it may deem advisable, including without limitation, restrictions under applicable
federal securities law, under the requirements of the New York Stock Exchange or any other exchange
or automated quotation system upon which the Stock is then listed, quoted or traded and under any
blue sky or state securities laws applicable to such Awards.
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17.5 Stock Certificates. Notwithstanding anything herein to the contrary, the Company
shall not be required to issue or deliver any certificates evidencing Shares of Stock pursuant to
the exercise of any Award, unless and until the Committee has determined, with advice of counsel,
that the issuance and delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities and, if applicable, the requirements of any exchange or
quotation system on which the Shares of Stock are listed, quoted or traded. All Stock certificates
delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as
the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction
securities or other laws, rules and regulations and the rules of any exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends
on any Stock certificate to reference restrictions applicable to the Stock. In addition to the
terms and conditions provided herein, the Board may require that a Participant make such reasonable
covenants, agreements, and representations as the Board, in its discretion, deems advisable in
order to comply with any such laws, regulations, or requirements.
17.6 Section 409A of the Code.
(a) General Compliance. Some of the Awards that may be granted pursuant to the Plan
(including, but not necessarily limited to, Restricted Stock Unit Awards, Performance Share Awards,
Performance Unit Awards, Performance Cash Awards and Stock Grant Awards) may be considered to be
non-qualified deferred compensation subject to Section 409A of the Code. If an Award is subject
to Section 409A of the Code, the Company intends (but cannot and does not guarantee) that the Award
Agreement and this Plan comply fully with and meet all of the requirements of Section 409A of the
Code or an exception thereto and the Award Agreement shall include such provisions, in addition to
the provisions of this Plan, as may be necessary to assure compliance with Section 409A of the Code
or an exception thereto. An Award subject to Section 409A of the Code also shall be administered
in good faith compliance with the provisions of Section 409A of the Code as well as applicable
guidance issued by the Internal Revenue Service and the Department of Treasury. To the extent
necessary to comply with Section 409A of the Code, any Award that is subject to Section 409A of the
Code may be modified, replaced or terminated in the discretion of the Committee. Notwithstanding
any provision of this Plan or any Award Agreement to the contrary, in the event that the Committee
determines that any Award is or may become subject to Section 409A of the Code, the Company may
adopt such amendments to the Plan and the related Award Agreements, without the consent of the
Participant, or adopt other policies and procedures (including amendments, policies and procedures
with retroactive effective dates), or take any other action that the Committee determines to be
necessary or appropriate to either comply with Section 409A of the Code or to exclude or exempt the
Plan or any Award from the requirements of Section 409A of the Code.
(b) Delay for Specified Employees. If, at the time of a Participants Separation from
Service, the Company has any Stock which is publicly traded on an established securities market or
otherwise, and if the Participant is considered to be a Specified Employee, to the extent any
payment for any Award is subject to the requirements of Section 409A of the Code and is payable
upon the Participants Separation from Service, such payment shall not commence prior to the first
business day following the date which is six months after the Participants Separation from Service
(or if earlier than the end of the six month period, the date
of the Participants death). Any amounts that would have been distributed during such six
month period will be distributed on the day following the expiration of the six month period.
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(c) Prohibition on Acceleration or Deferral. Under no circumstances may the time or schedule
of any payment for any Award that is subject to the requirements of Section 409A of the Code be
accelerated or subject to further deferral except as otherwise permitted or required pursuant to
regulations and other guidance issued pursuant to Section 409A of the Code. If the Company fails
to make any payment pursuant to the payment provisions applicable to an Award that is subject to
Section 409A of the Code, either intentionally or unintentionally, within the time period specified
in such provisions, but the payment is made within the same calendar year, such payment will be
treated as made within the time period specified in the provisions. In addition, in the event of a
dispute with respect to any payment, such payment may be delayed in accordance with the regulations
and other guidance issued pursuant to Section 409A of the Code.
17.7 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included.
ARTICLE XVIII
Miscellaneous
Miscellaneous
18.1 Funding of Plan. Except in the case of Awards of Restricted Stock, the Plan shall
be unfunded. The Company shall not be required to segregate any of its assets to assure the
payment of any Award under the Plan. Neither the Participant nor any other persons shall have any
interest in any fund or in any specific asset or assets of the Company or any other entity by
reason of any Award, except to the extent expressly provided hereunder. The interest of each
Participant and former Participant hereunder are unsecured and shall be subject to the general
creditors of the Company.
18.2 Successors. All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect merger, consolidation, purchase of all or
substantially all of the business and/or assets of the Company or otherwise.
18.3 Fractional Shares. No fractional Shares shall be issued or delivered pursuant to
the Plan or any Award. The Committee shall determine whether cash, other Awards or other property
shall be issued or paid in lieu of such fractional Shares or whether such fractional Shares or any
rights thereto shall be forfeited or otherwise eliminated.
18.4 Gender and Number. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine; the plural shall include the singular and the
singular shall include the plural.
18.5 Titles and Headings. The titles and headings of the Articles and Sections in the
Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan,
rather than such titles or headings, shall control.
18.6 Survival of Provisions. The rights, remedies, agreements, obligations and
covenants contained in or made pursuant to this Plan, any Award Agreements and any notices or
agreements made in connection with this Plan shall survive the execution and delivery of such
notices and agreements and the delivery and receipt of such Shares of Stock.
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GLOSSARY
(a) Affiliate means any subsidiary or parent of the Company that is: (i) a member of a
controlled group of corporations (within the meaning of Section 414(b) of the Code as modified by
Section 415(h) of the Code) that includes the Company as a member of the group; or (ii) a member of
a group of trades or businesses under common control (within the meaning of Section 414(c) of the
Code as modified by Section 415(h) of the Code) that includes the Company as a member of the group.
In applying Section 1563(a)(1), (2) and (3) of the Code for purposes of determining the members of
a controlled group of corporations under Section 414(b) of the Code, the language at least 50
percent shall be used instead of at least 80 percent each place it appears in Section
1563(a)(1), (2) and (3) and in applying Treasury Regulation Section 1.414(c)-2 for purposes of
determining the members of a group of trades or businesses (whether or not incorporated) that are
under common control for purposes of Section 414(c) of the Code, the language at least 50 percent
shall be used instead of at least 80 percent each place it appears in Treasury Regulation Section
1.414(c)-2.
(b) Award means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock
Unit, Performance Unit, Performance Share, Performance Cash, Stock Grant, Stock Unit or Dividend
Equivalents granted under this Plan.
(c) Award Agreement means a written agreement, or other document, including an electronic
agreement or document, between the Company and a Participant that sets forth the terms and
provisions applicable to an Award granted to the Participant under the Plan.
(d) Board means the Board of Directors of the Company.
(e) Cause means any of the following, unless otherwise provided in an Award Agreement:
(1) The Participants willful failure to perform any of the Participants duties which
continues after the Company has given the Participant written notice describing the Participants
failure and provided to the Participant an opportunity to cure such failure within 30 days (or such
longer period as may be specified by the Board) of such written notice; or
(2) The Participants material violation of Company policy; or
(3) Any act of fraud or dishonesty resulting or intended to result in the Participants
personal enrichment at the Companys or any Affiliates expense; or
(4) The Participants gross misconduct in the performance of the Participants duties that
results in material economic harm to the Company or any Affiliate; or
(5) The Participants conviction of, or plea of guilty or no contest (or its equivalent) to, a
felony; or
(6) The Participants material breach of the Participants employment agreement with the
Company, if any.
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(f) Change in Control means and shall be deemed to have occurred, except as otherwise
provided in an applicable Award Agreement, as of the date of the occurrence of any of the following
events:
(1) 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 Company possessing 40% or
more of the total voting power of the stock of Company, unless such person is, or shall be, a
trustee or other fiduciary holding securities under an employee benefit plan of Company or a
corporation owned, directly or indirectly, by the stockholders of Company in substantially the same
proportion as their ownership of stock of Company;
(2) The closing of a merger or consolidation of Company or its subsidiary, Tucson Electric
Power Company (TEP), with another entity that is not affiliated with Company immediately before
the Change in Control; provided, however, that, in the case of a merger or consolidation involving
Company, if the merger or consolidation results in the voting securities of Company 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 Company 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 TEP, if Company continues to hold more
than 50% of the combined voting power of the voting securities of TEP or the surviving entity
outstanding immediately after such merger or consolidation, the merger or consolidation will be
disregarded;
(3) During any period of 12 consecutive months, excluding any period prior to the adoption of
this Plan by the Board, the majority of members of the 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
(4) Companys execution of an agreement for the sale or disposition by Company of all or
substantially all of Companys 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 Code, a transaction will not be considered a
Change in Control for purposes of this Plan unless the transaction also constitutes a change in
control event as such term is used in Treas. Reg. § 1.409A-3(i)(5).
(g) Code means the Internal Revenue Code of 1986, as amended.
(h) Committee means the Compensation Committee of the Board, or such other person or persons
as the Board shall designate to administer the Plan, as provided in Article III.
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(i) Company means UniSource Energy Corporation, an Arizona Corporation and (except for
purposes of determining whether a Change in Control has occurred) any successor corporation.
(j) Covered Employee means an Employee who is, or could be, a covered employee as defined
by Section 162(m) of the Code.
(k) Director means any individual who is a member of the Board.
(l) Disability means that a Participant who is an Employee (a) is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or to last for a continuous period of not less than 12
months; (b) is, by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Company; or (c) has been determined to be
totally disabled by the Social Security Administration.
(m) Dividend Equivalent means a right granted to a Participant pursuant to Article VIII to
receive the equivalent value (in cash or Stock) of dividends paid on Stock. A Dividend Equivalent
shall be payable without interest, unless otherwise provided in an Award Agreement.
(n) Employee means any full time or part time employee of the Company or one of its
Affiliates (including any officer or Director who is also an employee).
(o) Fair Market Value determined as of any particular date means the last sales price for
that date as reported on the consolidated tape for securities listed on the New York Stock Exchange
(NYSE) (or, if the Stock is not listed on the NYSE, such other established securities market on
which the Stock is traded). In the event that there are no Stock transactions on such date, the
Fair Market Value shall be determined by the formula above as of the immediately preceding date on
which there were Stock transactions.
(p) Grant Date means, as determined by the Committee, the latest to occur of (i) the date as
of which the Committee approves an Award, (ii) the date on which an Award to a prospective
Employee, officer, Director or consultant first becomes effective, or (iii) such other date as may
be specified by the Committee in the Award Agreement.
(q) Incentive Stock Option or ISO means the right to purchase Stock pursuant to terms and
conditions that provide that such right will be treated as an incentive stock option within the
meaning of Section 422 of the Code, as described in Article VI.
(r) Nonqualified Stock Option or NQSO means the right to purchase Stock pursuant to terms
and conditions that provide that such right will not be treated as an Incentive Stock Option, as
described in Article VI.
(s) Non-Tandem SAR means an SAR that is granted independently of any Options, as described
in Article VII.
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(t) Option means the right to purchase Stock at a stated price for a specified period of
time. For purposes of the Plan, an Option may be either an Incentive Stock Option or a
Nonqualified Stock Option.
(u) Participant means a current or prospective Employee, Director or consultant who has
outstanding an Award granted under the Plan, and includes those former Employees, Directors or
consultants who have certain post-termination rights under the terms of an Award granted under the
Plan.
(v) Performance-Based Compensation Award means an Award intended to satisfy the requirements
of the performance-based compensation exception to the limitations imposed by Section 162(m) of the
Code on the tax deductibility of compensation payable to Covered Employees.
(w) Performance Cash Award means an Award granted to a Participant in accordance with
Article IX evidencing the right to receive a payment in cash as determined by the Committee.
(x) Performance Criteria means the criteria that the Committee may employ for purposes of
establishing the Performance Goal or Performance Goals for a Participant for a Performance Period.
The Performance Criteria that may be selected by the Committee are listed in Section 9.4 and
Section 10.4.
(y) Performance Goals means the goal or goals established in writing by the Committee for a
Performance Period based on the Performance Criteria.
(z) Performance Period means the period of time over which satisfaction or achievement of a
Performance Goal will be measured.
(aa) Performance Share means a right granted to a Participant pursuant to Article IX to
receive Stock, the payment of which is contingent upon achieving certain Performance Goals
established by the Committee.
(bb) Performance Unit means a right granted to a Participant pursuant to Article IX to
receive Stock or cash, the payment of which is contingent upon achieving certain Performance Goals
established by the Committee
(cc) Period of Restriction means the period during which Restricted Stock or Restricted
Stock Units are subject to restrictions pursuant to the applicable provisions of the Plan.
(dd) Plan means the UniSource Energy Corporation 2011 Omnibus Stock and Incentive Plan, as
set forth herein.
(ee) Prior Plans means the UniSource Energy Corporation 2006 Omnibus Stock and Incentive
Plan, the UniSource Energy Corporation 1994 Omnibus Stock and Incentive Plan
and the UniSource Energy Corporation Amended and Restated 1994 Outside Directors Stock Option
Plan, or any one of such plans, depending on the context in which such term is used.
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(ff) Restricted Stock means Stock granted to a Participant pursuant to Article VIII that is
subject to certain restrictions and to the risk of forfeiture.
(gg) Restricted Stock Unit means the right granted to a Participant pursuant to Article VIII
to receive cash or Stock in the future, the payment of which is subject to certain restrictions and
to the risk of forfeiture.
(hh) Retirement
(including Early Retirement and Normal Retirement) means, with respect
to an Employee, Termination of Service of the Employee after he or she has become eligible for an
immediate early, normal or late retirement benefit under the terms of a defined benefit pension
plan sponsored by the Company and applicable to such Employee.
(ii) Separation from Service means either: (a) the termination of a Participants employment
with the Company and all Affiliates due to death, retirement or other reasons; or (b) a permanent
reduction in the level of bona fide services the Participant provides to the Company and all
Affiliates to an amount that is 20% or less of the average level of bona fide services the
Participant provided to the Company and all Affiliates in the immediately preceding 36 months, with
the level of bona fide service calculated in accordance with Treasury Regulation Section
1.409A-1(h)(1)(ii).
Solely for purposes of determining whether a Participant has a Separation from Service, a
Participants employment relationship is treated as continuing while the Participant is on military
leave, sick leave, or other bona fide leave of absence (if the period of such leave does not exceed
six months, or if longer, so long as the Participants right to reemployment with the Company or an
Affiliate is provided either by statute or contract). If the Participants period of leave exceeds
six months and the Participants right to reemployment is not provided either by statute or by
contract, the employment relationship is deemed to terminate on the first day immediately following
the expiration of such six-month period. Whether a Termination of Employment has occurred will be
determined based on all of the facts and circumstances and in accordance with regulations issued by
the United States Treasury Department pursuant to Section 409A of the Code.
In the case of a non-Employee Director, Separation from Service means that such Director has
ceased to be a member of the Board. Whether an independent contractor consultant has incurred a
Separation from Service will be determined in accordance with Treasury Regulation Section
1.409A-1(h).
(jj) Share means a share of Stock.
(kk) Specified Employee means certain officers and highly compensated Employees of the
Company as defined in Treasury Regulation Section 1.409A-1(i).
(ll) Stock means the common stock of the Company, no par value.
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(mm) Stock Appreciation Right or SAR means the right to receive a payment from the Company
equal to the excess of the Fair Market Value of a Share of Stock at the date of exercise over a
specified price fixed by the Committee in the Award Agreement, as provided in Section 7.1. In the
case of a Stock Appreciation Right which is granted in conjunction with an Option, the specified
price shall be the Option exercise price.
(nn) Stock Grant means the grant of Stock to a Participant as described in Article VIII.
(oo) Stock Unit means a non-voting unit of measurement which is deemed for bookkeeping
purposes to be equivalent to one outstanding Share of Stock (subject to adjustment), granted to a
Participant pursuant to Article VIII.
(pp) Tandem SAR means a SAR that is granted in connection with a related Option pursuant to
Article VII, the exercise of which shall require forfeiture of the right to purchase a Share under
the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly
be forfeited).
(qq) Termination of Service or Termination of Employment means the cessation of
performance of services for the Company, as determined by the Committee. For this purpose,
transfer of a Participant among the Company and any Subsidiary, or transfer from a position as
Director or consultant to Employee, shall not be considered a Termination of Service or a
Termination of Employment with the Company. In the context of an Award that is subject to the
requirements of Section 409A of the Code, the terms Termination of Service or Termination of
Employment means a Separation from Service.
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