Exhibit 10.1

 

TECO ENERGY, INC.

2004 EQUITY INCENTIVE PLAN

 

Nonstatutory Stock Option

 

TECO Energy, Inc. (the “Company”) grants to Sherill W. Hudson (the “Optionee”) a
nonstatutory stock option (the “Option”) dated July 6, 2004 under the Company’s
2004 Equity Incentive Plan (the “Plan”). Capitalized terms not otherwise defined
herein have the meanings given to them in the Plan.

 

1. Grant of Stock Option. Pursuant to the Plan and subject to the terms and
conditions set forth in this Option, the Company hereby grants to the Optionee
the right and option to purchase from the Company the following number of shares
of Common Stock of the Company at the prices listed below on the earlier of the
dates listed below and the date determined under Section 2.

 

Number of Shares

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   Price Per Share

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   Time Option is First Exercisable

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16,667

   $12.0050    July 6, 2005

16,667

   $12.6053    July 6, 2005

16,667

   $13.2055    July 6, 2005

16,667

   $12.0050    July 6, 2006

16,667

   $12.6053    July 6, 2006

16,667

   $13.2055    July 6, 2006

16,666

   $12.0050    July 6, 2007

16,666

   $12.6053    July 6, 2007

16,666

   $13.2055    July 6, 2007

 

The Option may be exercised at any time and from time to time after the first
time it may be exercised in accordance with the foregoing schedule and prior to
the expiration of ten years from the date hereof (the “Expiration Date”), except
as otherwise provided herein. The Option may be exercised only with respect to
whole shares.

 

This Option will not be treated as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended.

 

2. Effects of Certain Events. Notwithstanding Section 1, the Option will become
immediately exercisable in full upon the earliest to occur of the following
events:

 

(a) the Optionee’s death;

 

(b) the termination of Optionee’s employment with the Company or any business
entity in which the Company owns directly or indirectly 50% or more of the total
voting power or has a significant financial interest as determined by the
Committee (an “Affiliate”) because of a disability that would entitle the
Optionee to benefits under the long-term disability benefits program of the
Company for which the Optionee is eligible, as determined by the Committee;

 

(c) the termination by the Company or any Affiliate of Optionee’s employment
other than for Cause as determined by the Committee. “Cause” means (i) willful
and continued failure of the Optionee to substantially perform his duties with
the Company or such Affiliate (other

 

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than by reason of physical or mental illness) after written demand specifically
identifying such failure is given to the Optionee by the Company, or (ii)
willful conduct by the Optionee that is demonstrably and materially injurious to
the Company. For purposes of this subsection, “willful” conduct requires an act,
or failure to act, that is not in good faith and that is without reasonable
belief that the action or omission was in the best interest of the Company or
the Affiliate;

 

(d) the Optionee’s retirement from the Company or an Affiliate at or after
attainment of the age that is three years before the Grantee’s Social Security
Normal Retirement Age, or any earlier date that the Committee determines will
constitute a normal retirement for purposes of this Agreement; or

 

(e) upon a Change in Control. For purposes of this Option, a “Change in Control”
means a change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), whether or not the Company is in fact required to comply therewith;
provided, that, without limitation, such a Change in Control shall be deemed to
have occurred if:

 

(1) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned
directly or indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly of securities of the Company representing 30% or more of the combined
voting power of the Company’s then outstanding securities;

 

(2) during any period of 24 consecutive months (not including any period prior
to the date of this Option), individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director (other
than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in subsections (1), (3) or (4) of
this Section 2(e)) whose election by the Board of Directors of the Company or
nomination for election by the shareholders of the Company was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved cease for any reason to
constitute a majority thereof;

 

(3) there is consummated a merger or consolidation of the Company or any direct
or indirect subsidiary of the Company with any other corporation, other than (i)
a merger or consolidation resulting in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 65% of the combined voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
“person” (as hereinabove defined) acquires 30% or more of the combined voting
power of the Company’s then outstanding securities; or

 

(4) the shareholders of the Company approve a plan of complete liquidation of
the Company or there is consummated the sale or disposition by the Company of
all or substantially all of the Company’s assets.

 

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3. Exercise and Payment. To exercise this Option, the Optionee will deliver
written notice to the Secretary of the Company specifying the date of this
Option, the number of shares as to which this Option is being exercised, the
price at which the Option on those shares is exercisable, and a date not later
than 30 days after the date of delivery of the notice when the Optionee will
take up and pay for such shares. On the date specified in such notice, the
Company will issue to the Optionee the number of shares purchased against
payment therefor in cash, including by check, in shares of the Company’s Common
Stock, valued at Fair Market Value on the date of delivery (which is defined as
the average of the high and low trading price on the New York Stock Exchange on
the previous trading day) or such other form as the committee may approve.

 

4. Termination of Employment. If the Optionee’s employment with the Company or
an Affiliate terminates for any reason (a “Termination of Employment”)
coincident with or after the first time this Option may be exercised, the Option
will remain exercisable, with respect to the shares with respect to which the
Option was exercisable as of the date of Termination of Employment, for the
longest applicable period provided below. This Option will terminate, and no
rights will be exercisable hereunder, after the expiration of the applicable
exercise period.

 

(a) The Optionee may exercise the rights available under this Option at the time
of Termination of Employment for a period of three months thereafter, but in no
event after the Expiration Date.

 

(b) If Termination of Employment occurs because of disability, the Optionee or
the Optionee’s guardian or legal representative may exercise the rights
available under this Option at the time of Termination of Employment at any time
on or before the later of (i) twelve months after the Termination of Employment
or (ii) the Expiration Date. The Committee will determine whether and when
Termination of Employment because of disability has occurred for purposes of
this Section 4(b).

 

(c) If Termination of Employment occurs for any reason on or after the age that
is three years before the Grantee’s Social Security Normal Retirement Age, or
any earlier age that the Committee determines will constitute a normal
retirement for purposes of this Option, the Optionee (or the Optionee’s guardian
or legal representative or, after death, the Optionee’s Designated Beneficiary
under the Plan or, if none has been designated, those entitled to do so by the
Optionee’s will or the laws of descent and distribution) may exercise the rights
available under this Option at the time of Termination of Employment at any time
on or before the Expiration Date.

 

(d) Upon the death of the Optionee, the Optionee’s Designated Beneficiary under
the Plan or, if none has been designated, those entitled to do so by the
Optionee’s will or the laws of descent and distribution, may exercise the rights
available under this Option at the time of death for a period of twelve months
thereafter or, if Termination of Employment occurs because of death, at any time
on or before the later of (i) twelve months after the date of death or (ii) the
Expiration Date.

 

The Committee will determine whether an authorized leave of absence constitutes
Termination of Employment for purposes of this Option.

 

5. Adjustment of Terms. In the event of corporate transactions affecting the
Company’s outstanding Common Stock, the Committee will equitably adjust the
number and kind of shares subject to this Option and the exercise price
hereunder to the extent provided by the Plan.

 

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6. No Transfer. This Option will not be transferable other than by will or the
laws of descent and distribution and will be exercisable during the Optionee’s
lifetime only by the Optionee or the Optionee’s guardian or legal
representative.

 

7. Securities Laws. The purchase of any shares by the Optionee upon exercise of
this Option will be subject to the conditions that (i) the Company may in its
discretion require that a registration statement under the Securities Act of
1933 with respect to the sale of such shares to the Optionee will be in effect,
and such shares will be duly listed, subject to notice of issuance, on any
securities exchange on which the Common Stock may then be listed, (ii) all such
other action as the Company considers necessary to comply with any law, rule or
regulation applicable to the sale of such shares to the Optionee will have been
taken and (iii) the Optionee will have made such representations and agreements
as the Company may require to comply with applicable law.

 

8. Withholding Taxes. The Optionee will pay to the Company, or make provision
satisfactory to the Committee for payment of, any taxes required by law to be
withheld in respect of the exercise of the Option no later than the date of the
event creating the tax liability. Such tax obligations may be paid in whole or
in part in shares of Common Stock, including shares retained from the exercise
of this Option, valued at Fair Market Value on the date of delivery (which is
defined as the average of the high and low trading price on the New York Stock
Exchange on the previous trading day). The Company and its Affiliates may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to the Optionee.

 

9. The Committee. Any determination by the Committee under, or interpretation of
the terms of, this Option or the Plan will be final and binding on the Optionee.

 

10. Limitation of Rights. The Optionee will have no rights as a shareholder with
respect to any shares subject to this Option until such shares are issued
against payment therefor. The Optionee will have no right to continued
employment by virtue of this Option.

 

11. Amendment. The Company may amend, modify or terminate this Option, including
substituting another Award of the same or a different type and changing the date
of realization, provided that the Optionee’s consent to such action will be
required unless the action, taking into account any related action, would not
adversely affect the Optionee.

 

12. Governing Law. This Option will be governed by and interpreted in accordance
with the laws of Florida.

 

TECO ENERGY, INC. By:         C.E. Childress     Chief Human Resources Officer

 

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