EXHIBIT 10.1

 

EL PASO ELECTRIC COMPANY

AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT

FOR EXECUTIVE OFFICERS

 

AGREEMENT by and between El Paso Electric Company, a Texas corporation (the
“Company”), and                  (the “Executive”), dated as of the
                 day of             , 200    .

 

WITNESSETH

 

WHEREAS, the Executive currently serves as a key employee of the Company and his
or her services and knowledge are valuable to the Company in connection with the
management of the Company; and

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that
it is in the best interests of the Company and its stockholders to secure the
Executive’s continued services and to ensure the Executive’s continued
dedication and objectivity in the event of any threat or occurrence of, or
negotiation or other action that could lead to, or create the possibility of, a
Change in Control (as defined in Attachment 1) of the Company, without concern
as to whether the Executive might be hindered or distracted by personal
uncertainties and risks created by any such possible Change in Control, and to
encourage the Executive’s full attention and dedication to the Company, the
Board has authorized the Company to enter into this Agreement.

 

NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and the Executive hereby
agree as follows:

 

1. Employment Period. (a) The Company hereby agrees to employ the Executive and
the Executive hereby agrees to accept employment with and remain in the
employment of the Company, subject to the terms and conditions of this
Agreement, for the period commencing upon the occurrence of a Change in Control
and ending on the second anniversary thereof, or such later date as may be
mutually agreed upon by the Company and the Executive. Notwithstanding the
foregoing, the Executive’s employment hereunder may be earlier terminated,
subject to Section 4 of this Agreement. The period of time between the
commencement of a Change in Control and the termination of the Executive’s
employment hereunder shall be referred to herein as the “Employment Period”.

 

(b) Prior to the occurrence of a Change in Control, the Executive’s employment
by the Company shall be deemed at will (or shall be governed by any current
contract of employment), and this Agreement shall not confer upon the Executive
any right to continued employment by the Company in his or her current position
or otherwise nor affect in any manner the right of the Company to change the
Executive’s duties and

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responsibilities in any manner, or to reduce Executive’s compensation or
terminate the employment of the Executive at any time prior to the occurrence of
a Change in Control and/or to cancel this Agreement at any time prior to the
occurrence of a Change in Control. In particular, the Executive shall not have
any rights under this Agreement for any such change, reduction or termination of
employment or of this Agreement “in anticipation of” any “change of control”
that shall occur prior to the occurrence of a Change in Control.

 

2. Terms of Employment. (a) Position and Duties. (i) During the Employment
Period, (A) the Executive shall serve as                      of the Company or
his or her then current position at the time of a Change in Control (or the
equivalent position in the division, subsidiary or other portion of any
post-merger or post-acquisition successor that is operationally responsible for
the electric business conducted by the Company prior to the merger or
acquisition), with such authority, duties and responsibilities as are
commensurate with such position and as may be consistent with such position as
may be assigned to him or her by the Board and (B) the Executive’s services
shall be performed at the Company’s offices in El Paso, Texas. Notwithstanding
the foregoing, the Company and the Executive may mutually agree to such changes
in the Executive’s position, reporting or location of employment as are in the
best interest of the Company without violating the provisions of this paragraph.

 

(ii) During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
substantially all of his or her attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive’s best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements, or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with
this Agreement.

 

(b) Compensation. (i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary (“Annual Base Salary”), payable biweekly, at
least equal to the annual base salary paid or payable, including any base salary
which has been earned but deferred, to the Executive by the Company in respect
of the twelve-month period immediately preceding the occurrence of a Change in
Control. During the Employment Period, the Annual Base Salary shall be reviewed
no more than 12 months after the last salary increase awarded to the Executive
prior to the occurrence of a Change in Control and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary shall refer
to Annual Base Salary as so increased. As used in this Agreement, the term

 

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“affiliated companies” shall include any company controlled by, controlling or
under common control with the Company.

 

(ii) Annual Bonus. In addition to Annual Base Salary, for each fiscal year
ending during the Employment Period the Executive shall be eligible, based upon
the Executive’s achievement of performance goals, and the Company’s achievement
of financial and other operating goals, in each case set by the Compensation
Committee of the Board, in consultation with the Executive, at levels
substantially consistent with past practice, during such fiscal year, to receive
a bonus (the “Annual Bonus”) at a target level of not less than                 
of the Annual Base Salary (the “Target Bonus Amount”) with the opportunity,
substantially consistent with past practice, to earn in excess of such amount
based upon the attainment of agreed upon performance goals. Each such Annual
Bonus shall be paid no later than the last business day of the third month of
the fiscal year next following the fiscal year for which the Annual Bonus is
awarded (the “Last Payment Date”).

 

(iii) Long-Term Incentive Compensation. During the Employment Period, the
Executive shall be entitled to participate in all long-term incentive plans,
practices, policies and programs applicable generally to other peer executives
of the Company.

 

(iv) Savings and Retirement Plans. During the Employment Period, the Executive
shall be entitled to participate in all savings and retirement plans, practices,
policies and programs on a basis no less favorable than that generally
applicable to peer executives of the Company.

 

(v) Welfare Benefit Plans. During the Employment Period, the Executive and/or
the Executive’s dependents, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company on a basis no less
favorable than that generally applicable to peer executives of the Company.

 

(vi) Expenses. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the Company’s policies.

 

(vii) Vacation. During the Employment Period, the Executive shall be entitled to
paid vacation in accordance with the plans, policies, programs and practices of
the Company on a basis no less favorable than that generally applicable to peer
executives of the Company but, in any event, shall be entitled to no less than
four weeks of vacation per year during the Employment Period.

 

3. Termination of Employment. (a) Death or Disability. The Executive’s
employment shall terminate automatically upon the Executive’s death during the
Employment Period. If the Disability of the Executive occurs during the
Employment Period pursuant to the definition of Disability set forth below, the
Company may give the

 

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Executive written notice, in accordance with Section 10(b) of this Agreement, of
its intention to terminate the Executive’s employment. In such event, the
Executive’s employment with the Company shall terminate effective on the 60th
day after receipt of such notice by the Executive (the “Disability Effective
Date”); provided that, within the 60 days after such receipt, the Executive
shall not have returned to substantially full time performance of the
Executive’s duties. For purposes of this Agreement, “Disability” shall mean the
absence of the Executive from the performance of the Executive’s duties with the
Company on a full time basis for an aggregate of 120 out of any 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by an independent physician selected by
the Company or its insurers and reasonably acceptable to the Executive or the
Executive’s legal representative.

 

(b) Cause. The Company may terminate the Executive’s employment during the
Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean
the willful and continued failure by the Executive to perform his or her duties,
or the engaging by the Executive in illegal conduct or misconduct which is
materially injurious to the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described above, and specifying the particulars thereof in detail.

 

(c) Good Reason. The Executive’s employment may be terminated by the Executive
for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:

 

(i) a material reduction in Executive’s duties or responsibilities, excluding
for these purposes (A) assignment to a comparable position and duties in the
division, subsidiary or other portion of any post-merger or post-acquisition
successor that is operationally responsible for the electric business conducted
by the Company prior to the merger or acquisition, (B) an isolated and
insubstantial action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive, and (C) any
action to which the Executive has given his or her written consent;

 

(ii) any failure by the Company to comply with any of the provisions of Section
2(b) of this Agreement, other than an isolated and insubstantial failure not
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;

 

(iii) the Company’s requiring the Executive without the Executive’s written
consent to be based at any office or location located more than 100 miles from
the office or location provided in Section 2(a)(i)(B) hereof or the Company’s
requiring the Executive to travel on

 

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Company business to a substantially greater extent than required immediately
prior to the occurrence of a Change in Control;

 

(iv) any failure by the Company to comply with and satisfy Section 9(c) of this
Agreement; or

 

(v) the Company’s purported termination of Agreement other than in accordance
with its terms.

 

(d) Notice of Termination. Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 10(b) of this Agreement. In
the case of a Good Reason termination, such Notice of Termination shall be given
within 90 days of the occurrence of the event that provides the basis for the
termination as a condition of such claim being treated as a Good Reason
termination hereunder. For purposes of this Agreement, a “Notice of Termination”
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 30 days after the giving of such notice). The failure by the Executive
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(e) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive for any
reason (including Good Reason), the date of receipt of the Notice of Termination
or any later date specified therein that is within 30 days of such Notice, as
the case may be, (ii) if the Executive’s employment is terminated by the Company
other than for Cause or Disability, the Date of Termination shall be the date on
which the Company notifies the Executive of such termination and (iii) if the
Executive’s employment is terminated by reason of death or Disability, the Date
of Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.

 

4. Obligations of the Company upon Termination. (a) Good Reason; Other than for
Cause, Death or Disability. If, during the Employment Period, the Company shall
terminate the Executive’s employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:

 

(i) the Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following amounts:

 

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A. the sum of (1) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid; (2) the product of (x) the
target bonus of the Executive for the year of termination under the Company’s
Annual Short-Term Bonus Plan (the “Target Bonus”) and (y) a fraction, the
numerator of which is the number of days in the current year through the Date of
Termination, and the denominator of which is 365; and (3) any accrued vacation
pay to the extent not theretofore paid (the sum of the amounts described in
clauses (1), (2), and (3) shall be hereinafter referred to as the “Accrued
Obligations”);

 

B. the amount equal to the product of (1) [two] [three]1 and (2) the sum of (x)
the Executive’s Annual Base Salary and (y) the Target Bonus; and

 

C. the actuarial equivalent of the amounts by which the Executive’s total vested
benefits under The El Paso Electric Company Retirement Plan (or any successor
plan put into effect prior to a Change in Control), computed as if Executive had
[two] [three] 1 additional years of benefit accrual service, exceed the
Executive’s actual pension benefits. For this computation, the Executive’s final
average salary shall be deemed to be the Executive’s annual base compensation in
effect immediately prior to the time a Notice of Termination is given and the
benefit and accrual formulas and actuarial assumptions shall be no less
favorable than those in effect at such time; “base compensation” shall include
any amounts deducted by the Company for Executive’s account under any agreement
with the Company or Section 125 and 401(k) of the Internal Revenue Code of 1986,
as amended (the “Code”).

 

(ii) for two years after the Executive’s Date of Termination, or such longer
period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue the medical, long-term
disability, dental, accidental death and dismemberment and life insurance
benefits to the Executive and/or the Executive’s dependents at least equal to
those which would have been provided to them in accordance with the plans,
programs, practices and policies in effect under Section 2(b)(v) of this
Agreement (the “Continuing Benefit Plans”) as if the Executive’s employment had
not been terminated (either by permitting the Executive and/or the Executive’s
dependents to participate in the Continuing Benefit Plans, paying Executive’s
premiums for COBRA coverage under applicable plans, by providing the Executive
and/or the Executive’s dependents with equivalent benefits outside the
Continuing Benefit Plans or by providing Executive a cash payment sufficient for
the Executive to purchase equivalent benefits, as the Company may elect, so long
as the net after-tax benefit to them is the same as if the Executive had
remained an employee of the Company participating in the Continuing Benefit
Plans); provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical, long-term disability, dental,
accidental death and dismemberment or life insurance benefits under another
employer-provided plan, the

 

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1 3X for Hedrick, Bates, and Carrillo; 2X for others.

 

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medical, long-term disability, dental, accidental death and dismemberment and
life insurance benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to the Continuing Benefit Plans and any
other welfare benefit plans, practices, policies and programs provided by the
Company and its affiliated companies, the Executive shall be considered to have
remained employed until two years after the Date of Termination and to have
retired on the last day of such period;

 

(iii) for one year after the Executive’s Date of Termination, the Company shall
provide outplacement services for the Executive; and

 

(iv) to the extent not theretofore paid or provided, the Company shall timely
pay or provide to the Executive any other amounts or benefits required to be
paid or provided or which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the Company, as of the
Date of Termination (such other amounts are benefits shall be thereinafter
referred to as the “Other Benefits”).

 

(b) Death. If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period, this Agreement shall terminate
without further obligation to the Executive’s Legal Representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive’s estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. The term Other Benefits as utilized in this
Section 4(b) shall include death benefits as in effect on the date of the
Executive’s death.

 

(c) Disability. If the Executive’s employment is terminated by reason of the
Executive’s Disability during the Employment Period, this Agreement shall
terminate without further obligation to the Executive, other than for payment of
Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.

 

(d) Cause; Other than for Good Reason. If the Executive’s employment shall be
terminated for Cause or the Executive terminates his or her employment without
Good Reason during the Employment Period, this Agreement shall terminate without
further obligation to the Executive other than the obligation to pay to the
Executive (x) his or her Annual Base Salary through the Date of Termination and
(y) Other Benefits, in each case to the extent theretofore unpaid.

 

5. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the Executive’s continuing or future participation in any plan, program, policy
or practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor, subject to Section 10(f), shall anything
herein limit or otherwise affect

 

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such rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated Companies. Any rights that are vested and any
benefits that the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.

 

6. Full Settlement. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
provided in section 4(a)(ii) of this Agreement, such amounts shall not be
reduced whether or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law, all legal fees
and expenses which the Executive may reasonably incur as a result of any contest
regardless of the outcome thereof by the Company, the Executive or others of the
validity or enforceability of, liability under, any provision of this Agreement
of any guarantee of performance thereof including as a result of any contest by
the Executive about the amount of any payment pursuant to this Agreement;
provided, however, that the foregoing shall not apply in connection with any
such contest in which the finder of fact determines that the contest is
frivolous or was brought by the Executive in bad faith.

 

7. Gross-Up Provision. (a) If the payments provided by Section 4(a) hereof (the
“Agreement Payments”) would be subject to the tax imposed by Section 4999 of the
Code (the “Excise Tax”), the Company shall pay to Executive at the time
specified in Section 7(b) below an amount (the “Gross-up Payment”) such that the
net amount retained by Executive, after deduction of any Excise Tax on the Total
Payments (as hereinafter defined), and any federal, state and local income tax
and Excise Tax upon the Gross-up Payment provided for by this subsection (a)
shall be equal to what the Total Payments would have been had the Excise Tax not
applied, as determined by the Company’s independent auditors or another
nationally recognized public accounting firm selected by the Company (in either
case, the “Independent Auditors”).

 

For purposes of determining whether any of the Agreement Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received or to be received by Executive in connection with
a Change in Control or Executive’s termination of employment (under this
Agreement or any other agreement with the Company or any person whose actions
result in a Change in Control or any person affiliated with the Company) (which,
together with the Agreement Payments, shall constitute the “Total Payments”)
shall be treated as “parachute payments” within the meaning of Section
280G(b)(2) of the Code, and all “excess parachute payments” within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Independent Auditors such
other payments or benefits (in whole or in part) are not subject to the Excise
Tax, (ii) the amount of the Total Payments which shall be treated as subject to
the Excise Tax shall be equal to

 

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the lesser of (A) the Total Payments or (B) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) of the Code (after applying
clause (i), above), and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Independent Auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.

 

For purposes of determining the Gross-up Payment, Executive shall be deemed to
pay federal, state, and local income taxes at the highest applicable marginal
rate for the calendar year in which the Gross-up Payment is to be made net of
the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. If the Excise Tax is finally determined
to be less than the amount taken into account at the time the Gross-up Payment
is made, Executive shall repay the portion attributable to such reduction (plus
the portion of the Gross-up Payment attributable to a reduction in Excise Tax
and/or a federal and state and local income tax deduction), plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B)of the
Code. If the Excise Tax is later determined to exceed the amount taken into
account at the time the Gross-up Payment is made, the Company shall make an
additional gross-up payment (plus any interest payable with respect to such
excess at the rate provided in Section 1274(b)(2)(B) of the Code) when such
excess is finally determined.

 

(b) The Gross-up Payment or portion thereof provided for in subsection (a) above
shall be paid not later than the 45th day following payment of any amounts under
Section 4(a)(i).

 

8. (a) Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive’s employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). The Executive shall not, at any time during his or her employment
with the Company or at any time thereafter, for any reason, in any fashion, form
or manner, either directly or indirectly, communicate, divulge, copy or permit
to be copied (without the prior written consent of the Company or as may
otherwise be required by law or legal process or in order to enforce his or her
rights under this Agreement or as necessary to defend himself or herself against
a claim asserted directly or indirectly by the Company or any of its affiliated
companies) any secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
in any manner whatsoever, that is not otherwise publicly available to, or for
the benefit of, any person, firm, corporation or other entity, other than the
Company and those designated by it or in the course of his or her employment
with the Company and its affiliated companies. As used herein, the term “all
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies, and their respective businesses” shall include,
without limitation, the Company’s plans,

 

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strategies, proposals to potential customers and/or partners, costs, prices,
proprietary systems for buying and selling, client and customer lists, identity
of prospects, proprietary computer programs, policy or procedure-manuals,
proprietary training and recruiting procedures, proprietary accounting
procedures, and the status and contents of the Company’s contracts with its
suppliers, clients, customers or prospects. The Executive further agrees to
maintain in confidence any confidential information of third parties received as
a result of his or her employment with the Company.

 

(b) Enforcement. In the event of a breach or threatened breach of this Section
8, the Executive agrees that the Company shall be entitled, in addition to any
other remedies available to it to specific performance and injunctive relief in
a court of appropriate jurisdiction to remedy any such breach or threatened
breach, and the Executive acknowledges that damages would be inadequate and
insufficient. In no event shall an asserted violation of the provisions of this
Section 8 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.

 

(c) Survival. Any termination of the Executive’s employment or of this Agreement
shall have no effect on the continuing operation of this Section 8.

 

9. Successors. (a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive’s legal
representatives.

 

(b) This Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns.

 

(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, “Company” shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid (whether or not the Company
ceases to exist) which assumes and agrees to perform this Agreement by operation
of law, or otherwise. In the event of any such succession, “Board” shall mean
the board of directors or similar managing body of the successor to the Company.

 

10. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

 

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(b) All notices and other communications hereunder shall be in writing and shall
be given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

[                    ]

[                    ]

[                    ]

 

If to the Company:

 

El Paso Electric Company

100 North Stanton

El Paso, Texas 79901

Attention: Board of Directors

 

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

 

(c) The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement.

 

(d) The Company may withhold from any amounts payable under this Agreement such
Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

 

(e) Subject to Section 3(d) of this Agreement, the Executive’s or the Company’s
failure to insist upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.

 

(f) This Agreement constitutes the entire agreement between the parties and is
intended to be an integration of all agreements between the parties with respect
to the Executive’s employment by the Company on and after the occurrence of a
Change in Control, the terms and conditions of such employment or the
termination of such employment. Any and all prior agreements, understandings or
commitments between the

 

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Company and the Executive with respect to any such matter are hereby superseded
and revoked.

 

(g) The Company shall indemnify and hold the Executive and his or her legal
representatives harmless to the fullest extent permitted by applicable law, from
and against all judgments, fines, penalties, excise taxes, amounts paid in
settlement, losses, expenses, costs, liabilities and legal fees if the Executive
is made, or threatened to be made a party to any threatened or pending or
completed action, suit, proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Company or any of
its affiliated companies to procure a judgment in its favor, by reasons of the
fact that the Executive is or was serving in any capacity at the request of the
Company or any of its affiliated companies for any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
The right to indemnification provided, in this paragraph (g) shall not be deemed
exclusive under any law or the charter or by-laws of the Company or any of its
affiliated companies or otherwise, both as to action in the Executive’s official
capacity and as to action in another capacity while holding such office, and
shall continue after the Executive has ceased to be a director or officer and
shall inure to the benefit of the Executive’s heirs, executors and
administrators. Any reimbursement obligation arising hereunder shall be
satisfied on an as-incurred basis. In addition, the Company agrees to continue
to maintain customary and appropriate directors and liability insurance during
the Employment Period and the Executive shall be entitled to the protection of
any such insurance policies on no less favorable a basis than is provided to any
other officer or director of the Company or any of its affiliated companies.

 

12

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.

 

“EXECUTIVE”

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[                        ]

EL PASO ELECTRIC COMPANY

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Gary R. Hedrick

President and Chief Executive Officer

 

13

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Attachment 1

 

“Change in Control” shall mean:

 

(1) the acquisition by any individual, entity or group (a “Person”), including
any “person” within the meaning of Section 13(d) (3) or 14(d) (2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) of beneficial
ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act,
of 30% more of either (i) the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or (ii) the combined voting
power of the then outstanding securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); excluding, however, the following: (A) any acquisition directly
from the Company (excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security being so
exercised, converted or exchanged was acquired directly from the Company), (B)
any acquisition by the Company, (C) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (D) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of subsection (3)
of this definition;

 

(2) individuals who, as of March 10, 2005, constitute the Board of Directors
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of such Board; provided that any individual who becomes a director of the
Company subsequent to March 10, 2005 whose election, or nomination for election
by the Company’s stockholders, was approved by the vote of at least a majority
of the directors then comprising the Incumbent Board shall be deemed a member of
the Incumbent Board; and provided further, that any individual who was initially
elected as a director of the Company as a result of an actual or threatened
election contest, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall not be deemed a member of the Incumbent Board;

 

(3) approval by the stockholders of the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a “Corporate Transaction”); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially all of the
individual or entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 60% of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
indirectly) in substantially the same

 

A-1

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proportions relative to each other as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (ii) no Person (other
than: the Company; any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; the
corporation resulting from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate Transaction, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 30% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors and (iii)
individuals who were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the corporation resulting
from such Corporate Transaction; or

 

(4) approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.

 

Notwithstanding the foregoing, in no event shall a “Change in Control” be deemed
to have occurred as a result of the formation of a Holding Company. For the
purposes hereof, “Holding Company” shall mean an entity that becomes a holding
company for the Company or its businesses as a part of any reorganization,
merger, consolidation or other transaction, provided that the outstanding shares
of common stock of such entity and the combined voting power of such entity
entitled to vote generally in the election of directors is, immediately after
such reorganization, merger, consolidation or other transaction, beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Company Voting Securities immediately prior to such reorganization, merger,
consolidation or other transaction in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger, consolidation
or other transaction, of such Outstanding Company Voting Securities.

 

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