Exhibit 10.1
EMPLOYMENT AGREEMENT
WHEREAS, Walter M. Higgins ("Executive") is presently employed
as Chairman, President and Chief Executive Officer of Sierra Pacific Resources
("SPR"), Chairman and Chief Executive Officer of its principal two subsidiaries,
Sierra Pacific Power Company ("SPPC") and Nevada Power Company ("NPC")
(together, "Utility Subsidiaries", and all three companies collectively, the
"Company", and all together, the "Parties")), and also has various other
positions with other subsidiaries of SPR, SPPC and NPC; and
WHEREAS, the Company, through its Board of Directors,
considers it in the best interests of its stockholders to secure the continued
employment of Executive in his present capacity, and desires to retain and
continue to retain the Executive in his present employment and current
positions, subject to certain terms and conditions as set forth more fully
below; and
WHEREAS, Executive is willing to continue his employment and
remain in his current position, subject to certain terms and conditions as set
forth more fully below;
WHEREAS, Executive and Company are currently parties to an
employment agreement dated August 4, 2000 (the "Prior Employment Agreement"),
and a Change in Control Agreement dated May 21, 2001 (the "Prior Change in
Control Agreement"), which agreements, except for any specific provisions
provided for and incorporated herein or carried forward herein, the parties
agree to terminate and cancel in consideration for the promises and covenants
set forth herein.
WHEREAS, The Board of Directors (exclusive of the Executive,
who has abstained from the relevant proceedings) has specifically authorized the
Company to enter into this Agreement.
NOW, THEREFORE, Company employs Executive and Executive
accepts employment upon the terms and conditions of this Agreement and the
parties do covenant and agree as follows:
1. Term.
The term of this Agreement ("Employment Term") shall begin on
September 26, 2003 ("Effective Date") and, subject to any early termination that
may occur pursuant to Articles 6 or 7, expire on September 25, 2006 (the
"Expiration Date").
2. Positions and Duties.
2.1 Positions and Duties. During the Employment
Term, the Executive will serve in the positions of Chairman of the
Board, President and Chief Executive Officer of SPR, and Chairman of
the Board and Chief Executive Officer of each of the Utility
Subsidiaries and any other utility subsidiaries which the Company may
come to own, and will have such powers, duties, functions,
responsibilities and authority as are (i) consistent with the
Executive's position as the Company's most senior executive officer and
Chairman of the Board and Chief Executive Officer of
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SPR and the Utility Subsidiaries; or (ii) assigned to his office in the
SPR's and the Utility Subsidiaries' bylaws; or (iii) reasonably
assigned to him by the Board of Directors of the Company. The Executive
will report directly to the Board of Directors of the Company. SPR will
use its best efforts to cause the Executive to continue to be elected
as a member of the Board of Directors of SPR (the "Board") and, if so
elected, will retain him as Chairman of the Board throughout the
Employment Term and will use its best efforts to cause him to be
included in the Board's slate for election as a director of SPR at
every stockholders' meeting at which his term as a director would
otherwise expire. In addition, SPR will cause the Executive to be
elected a member of the board of directors, and as Chairman and Chief
Executive officer, of each Utility Subsidiary throughout the Employment
Term.
2.2 Commitment. During the Employment Term, the
Executive will be SPR's full-time employee and, except as may otherwise
be approved in advance in writing by the Board, and except during
vacation periods and reasonable periods of absence due to sickness,
personal injury, or other disability, the Executive will devote
substantially all of his business time and attention to the performance
of his duties hereunder. Notwithstanding the foregoing, the Executive
may (i) serve as a director of a company or companies which are not
engaged in "Competition" (as defined in Section 10.1) with the Company
or any subsidiary entity owned or majority controlled by the Company,
(ii) serve as an officer, director, or otherwise participate in
educational, welfare, social, religious, and civic organizations, and
(iii) manage personal and family investments and affairs; provided,
however, that the Board may require the Executive to cease the
activities he undertakes hereunder pursuant to clauses (i) and (ii)
above if the Board determines that the Executive is unable to devote
sufficient time and attention to the performance of his duties
hereunder as a result of such activities.
3. Place of Performance. In connection with his
employment during the Employment Term, unless otherwise agreed by the Executive,
the Executive will maintain his principal office in Las Vegas, Nevada, and shall
also have an office at the principal SPR/SPPC offices in the Reno/Sparks area
and shall maintain an office at any other place reasonably determined by the
Board to be necessary or appropriate for the discharge of his duties. The
Executive will undertake normal business travel on behalf of the Company from
office to office and/or to other places appropriate to conduct the business and
affairs of the Company, at Company expense as set forth more fully below. The
Company shall continue to provide a housing allowance and local transportation
on the terms and conditions afforded to date in office locations other than the
Las Vegas offices.
4. Compensation and Related Matters.
4.1 Compensation
(i) Annual Base Salary. During the Employment
Term, the Company will pay to the Executive an annual base
salary ("Base Salary") in such amount as shall be commensurate
with his position and level of responsibility as set forth in
Article 2 as determined by the Board in its reasonably
exercised discretion from time to time; provided, however,
that in no event shall such Base Salary be less than the
Executive's current annual base salary, except under
extraordinary circumstances (including, without
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limitation, a natural disaster or general economic downturn
which significantly and adversely affects the Company's
operations) which directly results in an across-the-board
reduction of the annual base salary of all or substantially
all other senior executives of the Company. Base Salary shall
be payable at the time and in the manner consistent with the
Company's general policies regarding compensation of executive
employees.
(ii) Annual Incentive Compensation. During the
Employment Term, the Executive shall be eligible to receive an
annual cash incentive award and shall be entitled to receive
such an award based on the extent to which the Company
achieves criteria or performance targets, reasonably selected
by the Compensation Committee of the Board at or before the
commencement of the annual performance period, on an annual
target level of not less than 70% percent of Base Salary.
Subject to the foregoing, nothing in this Section 4.1(ii)
shall guarantee to the Executive any specific amount of
incentive compensation.
4.2 Employee and Executive Benefits. In addition to the
compensation described in Section 4.1 and subject to all the provisions
of this Article 4, the Company will make or cause to be made available
to the Executive and his eligible dependents, subject to the terms and
conditions of the applicable plans, including, without limitation, the
eligibility rules, participation in all employee pension, health,
welfare and benefit plans, including all 401(k) plans, employee
retirement income and welfare benefit policies, plans, programs, or
arrangements, in which senior executives of the Company participate
from time to time, including any stock purchase, savings, pension,
supplemental executive retirement or other retirement income or welfare
benefit, disability, salary continuation, and any other deferred
compensation, group and/or executive life, health, medical/hospital, or
other insurance (whether funded by actual insurance or self-insured by
the Company or an affiliate), expense reimbursement, or other employee
benefit policies, plans, programs, or arrangements. As part of these
benefits, but not in addition thereto, the Company, during the
Employment Term, shall continue to maintain a minimum of $2,000,000
life insurance policy for the Executive, who shall have the right to
designate his beneficiaries, as well as an additional $1,000,000 life
insurance policy should the Executive die while traveling on Company
business, and Directors and Officers insurance coverage in
substantially the same amounts and with substantially the same coverage
as exists immediately prior to the Effective Date.
4.3 Vacation and Fringe Benefits. During the Employment
Term, the Executive shall be entitled to vacation in such amounts as
would be available under the Company's normal vacation policies
applicable to senior executives, as in effect from time to time, to an
employee who as of the Effective Date would have service with the
Company equal to the Executive's years of professional service, as
credited under Company policy (which, as of the Effective Date, was
37), such vacation to be taken in accordance with such normal vacation
policies; and the Executive shall be entitled to the perquisites and
other fringe benefits made available to senior executives of the
Company, commensurate with his position and level of responsibility
with the Company.
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4.4 Expenses. The Company will promptly reimburse the
Executive for all travel and other business expenses the Executive
incurs in order to perform his duties to the Company under this
Agreement in a manner commensurate with the Executive's position and
level of responsibility with the Company, and in accordance with the
Company's policy regarding substantiation of expenses. In addition, the
Executive shall receive not less than $30,000 annually as and for a
perquisite allowance to cover expenses including a car, tax
preparation, club memberships, and to facilitate participation in
certain community activities. In addition, Company will, subject to
Board approval at its discretion, bear the expense of memberships in
other appropriate clubs and facilities at appropriate locations for the
purpose of advancing and protecting the business interests of the
Company.
4.5 Supplemental Executive Retirement Plan ("SERP") and
Other Benefits. The Executive is currently vested, and shall remain
eligible for a benefit under the SERP heretofore established by the
Company for executives. The benefit to which the Executive is entitled
under the SERP will (1) be payable at the time and in such forms as are
set forth in the SERP, (2) be calculated in accordance with the terms
and conditions of the SERP and (3) remain subject to all the terms and
conditions of the SERP as it is currently stated, except that Executive
shall be entitled to all years of service performed for the Company at
any time and additional years of credit under the SERP for each year of
service (as defined by the Company's SERP) with AGL Resources or
Louisville Gas & Electric Company. Any additional benefit provided
under the SERP resulting from such additional years of credited service
with AGL Resources or Louisville Gas & Electric Company shall be
reduced by any amount of qualified benefit received from AGL Resources
or Louisville Gas & Electric Company under their qualified pension
plans. In addition, if the Executive is employed by the Company on the
Expiration Date (or as provided in the last sentence of Section
6.5(f)), SERP and retiree medical benefits and all other benefits at
retirement shall be calculated as though Executive had reached age 62
on the Expiration Date and had accrued service time as of the
Expiration Date as if he had worked continuously from his first date of
service with SPR (including time served with AGL Resources or
Louisville Gas & Electric Company) until he had reached in the normal
course of time age 62.
5. Special Compensation.
5.1 Long-Term Incentive Plan. Executive shall continue
for fiscal year 2003 to be included in the regular Executive Long-Term
Incentive Plan grants appropriate to the position of the Chief
Executive Officer.
5.2 Previous Long-Term Incentive Plan Grants. Stock
options, performance shares, and restricted stock granted to Executive
under the Prior Employment Agreement, and all other stock options,
performance shares, and Phantom Shares subsequently granted to
Executive, as may have been modified by subsequent actions of the Board
pursuant to the Long-Term Incentive Plan, shall continue in full force
and, to the extent granted under the Prior Employment Agreement, shall
remain subject to the terms and conditions set forth thereunder.
5.3 Phantom Shares. On the Effective Date of this
Agreement, the Company shall grant Executive 600,000 shares of SPR
common stock (the
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"Phantom Shares"). Executive shall not take physical possession of any
of said Phantom Shares nor shall Executive be permitted to sell,
transfer, or alienate any of said Phantom Shares until they become
vested. Any unvested Phantom Shares shall vest and be delivered to
Executive in cash, or at the discretion of the Board and if legally
permissible, stock without restriction on the sixth anniversary of the
Effective Date, provided Executive is still employed by the Company on
such date. If, on the Expiration Date, this Agreement is not renewed on
mutually acceptable terms and conditions, then Executive shall be
entitled to receive the number of remaining unvested Phantom Shares in
cash, or at the discretion of the Board and if legally permissible,
stock, multiplied by a fraction, the numerator of which shall be the
number of days between the Effective Date and the Expiration Date, and
the denominator of which shall be the number of days between the
Effective Date and the sixth anniversary thereof; provided, however,
that the payment under this Section 5.3 shall only be made upon the
Expiration Date if the Board of Directors determines, in good faith, at
such time that there is a reasonable opportunity for the performance
goals and measures set forth in Exhibit A to be achieved by the
respective target dates. Such cash or stock shall be delivered to him
without restriction within ten (10) days of the expiration of this
Agreement. Vesting of Phantom Shares herein will be accelerated and
Company will deliver to Executive such cash or, at the discretion of
the Board if legally permissible, shares free of restriction in such
amounts as Executive shall be entitled to receive not later than seven
(7) days after the Company achieves the performance goals and measures
set forth in Exhibit A. Until such time as the Phantom Shares are
distributed to the Executive as shares of stock, the Executive shall
have the right to receive dividend equivalents with respect thereto,
with all such dividend equivalents being credited to the Executive as
additional Phantom Shares. Notwithstanding the foregoing, if restricted
shares become available for grant under the Company's equity-based
incentive plans, the Phantom Shares shall be replaced, in whole or in
part, by shares of restricted stock to the extent available (and all
references to dividend equivalents shall be deemed to refer to actual
dividends).
5.4 Cash Retention. On the Effective Date, and on each of
the second and third anniversaries of the Effective Date, the Company
shall pay Executive $333,333, to the extent the Executive remains in
the employ of the Company on such dates. Retention payments provided in
this Agreement in no way affect the Executive's eligibility for any
cash short-term incentive programs which the Board may put into place
for the Company's executive officers. If, prior to the first
anniversary of the Effective Date, the Executive's employment is
terminated by (i) the Company for Cause (as defined in Section 6.3) or
(ii) the Executive without Good Reason (as defined in Section 6.4),
then the Executive shall repay to the Company, within five (5) days of
such termination of employment, a lump sum amount equal to the product
of (x) and (y), where (x) is the after-tax amount received from the
Company in respect of the first retention payment and (y) is a
fraction, the numerator of which shall be the number of days between
the date of the Executive's termination of employment and the first
anniversary of the Effective Date and the denominator of which shall be
365.
6. Termination. Notwithstanding the Employment Term, the
termination of the Executive's employment hereunder will be governed by the
following provisions. If at the time the Executive's employment terminates for
any reason, other than by reason of his
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death, the Executive is a member of the Board, or a member of the board of
directors of the Utility Subsidiaries, or any Affiliate of the Company, the
Executive shall execute and deliver to the Company the Executive's resignation
from membership on the Board and from membership on all such other boards of
directors and, notwithstanding any other provision of this Agreement, no benefit
or amount will be paid or made available to the Executive under Section 6.5(d),
(e), (f) or (g) until the Executive executes and delivers to the Company such
resignation.
6.1 Death. In the event of the termination of Executive's
employment during the Employment Term by reason of the Executive's
death, the Company will pay to the Executive's designated beneficiaries
or estate, as appropriate, promptly after the Executive's death, (a)
any unpaid Base Salary to which the Executive is entitled, through the
date of the Executive's death; (b) any accrued but unused vacation
days; (c) a number of Phantom Shares in cash, or at the discretion of
the Board and if legally permissible, stock, equal to the number of
Phantom Shares then remaining unvested multiplied by a fraction, the
numerator of which shall be the number of days between the Effective
Date and the date of the Executive's death and the denominator of which
shall be the number of days between the Effective Date and the sixth
anniversary thereof; provided, however, that the payment under this
Section 6.1(c) shall only be made if the Board determines, in good
faith, that there is a reasonable opportunity for the performance goals
and measures set forth in Exhibit A to be achieved by the respective
target dates, and (iv) except for the cash retention payment set forth
in Section 5.4, any other cash payment or stock payment or other award
or benefit which Executive would earn if he were employed by the
Company on a certain date, in the full amount of such payment or stock
award at target award multiplied by a fraction, the numerator of which
shall be the number of days from the effective date of such award to
the date of the Executive's death and the denominator of which shall be
the number of days from the effective date of such award to the date
the award would have been paid assuming target level performance had
the Executive lived to that date. This Section 6.1 will not limit the
entitlement of the Executive's estate or beneficiaries to any death,
disability, health, welfare or pension, or other benefits then
available to the Executive under any pension, SERP, life insurance,
stock ownership, stock options, or other health, welfare, or pension
benefit plan or policy that is maintained by the Company or its
affiliates for the Executive's benefit or in which the Executive
participated.
6.2 Disability.
(i) If the Executive has incurred a Disability
(as defined below) during the Employment Term, the Company may
give the Executive written notice of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company will terminate
effective on the 30th calendar day after receipt of such
notice by the Executive, provided that within the 30 calendar
days after such receipt, the Executive will not have returned
to full-time performance of his duties. The Executive will
continue to receive his Base Salary (less any amounts payable
to the Executive for such period under any short- or long-term
disability plan maintained by the Company or an affiliate) and
benefits until the date of termination. In the event of the
Executive's Disability, the Company will pay the Executive or
his legal guardian or representative as appropriate, promptly
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after the Executive's termination, (a) any unpaid Base Salary
to which he is entitled through the date of the Executive's
termination (less any amounts payable to the Executive for
such period under any short- or long-term disability plan
maintained by the Company or an affiliate); (b) any accrued
but unused vacation days; (c) a number of Phantom Shares in
cash, or at the discretion of the Board and if legally
permissible, stock, equal to the number of Phantom Shares then
remaining unvested multiplied by a fraction, the numerator of
which shall be the number of days between the Effective Date
and the date of the Executive's termination of employment and
the denominator of which shall be the number of days between
the Effective Date and the sixth anniversary thereof;
provided, however, that the payment under this Section 6.2(c)
shall only be made if the Board determines, in good faith, at
such time that there is a reasonable opportunity for the
performance goals and measures set forth in Exhibit A to be
achieved by the respective target dates, and (d) except for
the cash retention payment set forth in Section 5.4, any other
cash payment or stock payment or other award or benefit which
Executive would earn if he were employed by the Company on a
certain date, in the full amount of such payment or stock
award at target award multiplied by a fraction, the numerator
of which shall be the number of days from the effective date
of such award to the date of the Executive's termination of
employment and the denominator of which shall be the number of
days from the effective date of such award to the date the
award would have been paid assuming target level performance
had the Executive lived to that date. This Section 6.2 will
not limit the entitlement of the Executive's estate or
beneficiaries to any death, disability, health, welfare or
pension, or other benefits then available to the Executive
under any pension, SERP, life insurance, stock ownership,
stock options, or other health, welfare, or pension benefit
plan or policy that is maintained by the Company or its
affiliates for the Executive's benefit or in which the
Executive participated.
(ii) For purposes of this Agreement, "Disability"
will mean the Executive's incapacity due to physical or mental
illness or injury substantially to perform his duties on a
full-time basis for six consecutive months and within 30
calendar days after a notice of termination is thereafter
given by the Company the Executive will not have returned to
the full-time performance of the Executive's duties; provided,
however, if the Executive disagrees with a determination to
terminate him because of Disability, the question of the
Executive's Disability will be subject to the certification of
a qualified medical doctor agreed to by the Company and the
Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal representative. In
the absence of agreement between the Company and the
Executive, each party will nominate a qualified medical doctor
and the two doctors will select a third doctor, who will make
the determination as to Disability. In order to facilitate
such determination, the Executive will, as reasonably
requested by the Company, (a) make himself available for
medical examinations by a doctor in accordance with this
Section 6.2(ii), and (b) grant the Company and any such doctor
access to all relevant medical information concerning him,
arrange to furnish copies of medical records to such doctor
and use his best efforts to cause his own doctor to be
available to discuss his health with such doctor.
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6.3 Cause.
(i) The Company may terminate the Executive's
employment hereunder for Cause (as defined below) during the
Employment Term by written notice as provided in Section 13.6.
In the event of the Executive's termination for Cause, the
Company will promptly pay to the Executive (or his
representative) any unpaid Base Salary and unpaid vacation and
any unpaid fully vested award or benefit to which he is
entitled through the date the Executive is terminated and the
Executive will be entitled to no other compensation or
benefits, except as otherwise may be due or payable to him
under applicable law or pursuant to any agreement, benefit
plan or policy that is maintained by the Company or its
affiliates for the Executive or in which the Executive
participated.
(ii) For purposes of this Agreement, "Cause"
means that, at any time prior to the Expiration Date
(including, but not limited to, periods prior to the Effective
Date),
(a) the Executive shall have committed or engaged in:
(1) An act of fraud, embezzlement, or
theft in connection with the Executive's duties or in
the course of the Executive's employment with the
Company;
(2) An intentional breach of any of the
express covenants set forth in Sections 10.1, 10.2,
or 10.3;
(3) Gross negligence or gross
misconduct against the Company or another employee,
or in carrying out the Executive's duties and
responsibilities and any such act shall have been
materially harmful to the company;
(b) the Executive shall have engaged in intentional and
repeated failure substantially to carry out the Executive's
duties and/or responsibilities (other than any such failure
resulting from the Executive's incapacity due to physical or
mental illness or injury that qualifies as a Disability or
would qualify as a Disability if such incapacity continued for
the required length of time), which failure is not or cannot
be cured within ten calendar days after the Company has given
written notice to the Executive specifying in detail the
particulars of the acts or omissions deemed to constitute such
failure; or
(c) the Executive shall have been convicted of a felony or
entered a plea of nolo contendere in respect of a felony
charge (in each case, other than a traffic-related felony).
For purposes of this Section, no act or failure to act on the
part of the Executive shall be deemed intentional" if it was
due primarily to an error in judgment or negligence, but shall
be deemed "intentional" only if done or omitted to be done by
the Executive not in good faith and without reasonable
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belief that the Executive's action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for
Cause hereunder unless and until (1) there shall have been
delivered to the Executive a written notice from the Company
stating that it has determined that the Executive had
committed an act constituting Cause as herein defined and
specifying the particulars thereof in detail, (2) the
Executive shall have had the opportunity to appear before the
Board (with counsel if he so elects) to respond to such
particulars and (3) at least 75% of the members of the Board
(not including the Executive) shall have voted to terminate
his employment for Cause. Nothing herein will limit the right
of the Executive or the Executive's beneficiaries to contest
the validity or propriety of any such determination. The
Company hereby acknowledges it has no knowledge of any fact,
event or circumstance that would provide the Company with
grounds to terminate the Executive's employment hereunder for
Cause and the Executive hereby represents that he has not
committed or engaged in any activity that would provide the
Company with grounds to terminate his employment hereunder for
Cause.
6.4 Termination.
(i) Involuntary Termination. The Executive's
employment hereunder may be terminated during the Employment
Term by the Company for any reason other than Death,
Disability, or for Cause by written notice as provided in
Section 13.6. In the event of such a termination, the
Executive will be entitled to the payments and benefits
provided in Section 6.5, subject to the second sentence of
this Article 6. This Section 6.4(i) and Section 6.5, however,
will not limit the entitlement of the Executive to any other
benefits then available to the Executive under any benefit
plan or policy that is maintained by the Company or its
affiliates for the Executive's benefit or in which the
Executive participated. The Executive will be treated for
purposes of this Section 6.4(i) as having been terminated by
the Company for reasons other than Death, Disability, or for
Cause if the Executive terminates his employment with the
Company for any of the following reasons (each, a "Good
Reason") prior to the date of the Executive's Death,
Disability, or the date on which the Executive has committed
or engaged in an act constituting Cause: (a) the Company has
materially breached any provision of this Agreement and within
ten (10) calendar days after notice thereof from the
Executive, the Company fails to cure such breach; (b) a
successor or assign (whether direct or indirect, by purchase,
merger, consolidation, operation of law, or otherwise) to all
or substantially all of the business and/or assets of the
Company fails to expressly assume and agree to perform this
Agreement pursuant to Section 13.2(i); (c) a reduction in the
scope or value of the aggregate benefits and incentive
compensation described in Sections 4.1(iii), 4.2, 4.3, 4.5,
and 4.6 provided to the Executive or the termination or denial
of the Executive's rights to such benefits or incentive
compensation, any of which is not remedied by the Company
within 10 calendar days after receipt by the Company of
written notice from the Executive of such reduction or
termination; (d) the Executive is not nominated for election
to the Board or is removed from the Board; (e) the Board fails
to appoint the Executive as Chief Executive Officer of the
Company, or if the Executive is elected to the Board,
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he is not elected as Chairman of the Board of the Company, or
the Executive is removed from any such position; (f) the
Executive is not elected to or is removed from any of the
boards of directors of the Utility Subsidiaries or the
position of Chairman of the boards of directors of any of the
Utility Subsidiaries; (g) a reduction in the Executive's Base
Salary (except under extraordinary circumstances as described
in Section 4.1(i) hereof) or the opportunity to earn annual
incentive compensation under Section 4.1(ii) on a basis at
least as favorable to the Executive (in terms of each of the
amounts of benefits, levels of coverage, and performance
measures and levels of required performance) as the benefits
payable thereunder prior to the reduction or the failure to
pay the Executive Base Salary or incentive compensation earned
when due; (h) a significant adverse change in the nature or
scope of authorities, powers, functions, responsibilities, or
duties attached to the positions held by the Executive from
those authorities, powers, functions, responsibilities, or
duties which the Executive holds in accordance with this
Agreement; (i) a change in circumstances has occurred,
including, without limitation, a change in the scope of the
business or other activities for which the Executive was
responsible immediately prior to the change, which has
rendered the Executive substantially unable to carry out, has
substantially hindered the Executive's performance of, or has
caused the Executive to suffer a substantial reduction in, any
of the authorities, powers, functions, responsibilities, or
duties attached to any of the Executive's positions
immediately prior to such change, which situation is not
remedied within 10 calendar days after written notice to the
Company from the Executive of such determination; or (j) the
relocation of the Company's principal executive offices to
other than Reno or Las Vegas if the Executive's principal
location of work is then in such offices, or any requirement
that the Executive's principal location of work change to any
location that is in excess of 50 miles from the location
thereof immediately preceding the relocation, or the Company
requires that the Executive travel away from the Executive's
office in the course of discharging the Executive's
responsibilities or duties hereunder at least 20% more (in
terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to
any prior year) than was required of Executive in any of two
full years immediately prior to such change without, in either
case, the Executive's prior written consent. Notwithstanding
the foregoing, change in the Executive's title or titles or
positions required by law, rule, order, or regulation of any
agency with competent jurisdiction shall not be deemed Good
Reason for purposes of this Agreement. In addition,
notwithstanding anything in this Agreement to the contrary,
the Executive shall not have Good Reason to terminate his
employment hereunder pursuant to clauses (a), (h) or (i) of
this Section 6.4(i) as a result of increased Board (or any
committee thereof) involvement in the Company if the Board
determines in good faith that such increased involvement is
warranted in light of issues facing the Company.
(ii) Voluntary Termination. The Executive may
terminate his employment hereunder without Good Reason at any
time upon ninety (90) days' notice to the Company as provided
in Section 13.6. The Company may, prior to the date the
Executive's voluntarily termination of employment becomes
effective, accelerate the date upon which such termination
shall
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become effective by providing notice to the Executive as
provided in Section 13.6 If the Company accelerates the date
upon which the Executive's voluntary termination of employment
becomes effective, the Company shall continue to pay the
Executive his Base Salary in accordance with regular payroll
practice until the earlier to occur of (i) the date the
Executive's voluntary termination of employment would
otherwise have become effective or (ii) the date the Executive
commences new employment or enters into an agreement to
commence new employment. In addition, in the event of any such
termination, the Company will also promptly pay the Executive
any unpaid Base Salary to which the Executive is entitled,
pursuant to Section 4.1, through the date of the Executive's
termination, and any accrued but unused vacation days and any
fully vested unpaid benefit. This Section 6.4(ii) will not
limit the entitlement of the Executive to any other benefits
then available to the Executive under any agreement, benefit
plan, or policy that is maintained by the Company or its
affiliates for the Executive's benefit or in which the
Executive participated. If the Company accelerates the date
upon which the Executive's voluntary termination of employment
becomes effective, prior to receiving any Base Salary
attributable to such acceleration, the Executive shall, if
requested by the Company, certify in writing that he has not
commenced new employment or entered into an agreement to
commence new employment.
6.5 Termination Payments and Benefits.
If the Executive's employment is terminated other
than by reason of Death, Disability, Voluntary Termination
under Section 6.4(ii), or for Cause as provided in Section
6.4(i), the Company will promptly pay or provide to the
Executive:
(a) the unpaid Base Salary to which the
Executive is entitled as well as any earned but
unpaid incentive plan payments, pursuant to Section
4.1, through the date of the Executive's termination;
(b) any accrued but unused vacation
days;
(c) any fully vested but unpaid
benefit;
(d) a lump sum payment within five (5)
business days after termination in an amount equal to
the sum of (A) one year's Base Salary (prior to any
deferrals or reductions under qualified or
non-qualified plans) being paid to the Executive
immediately prior to termination (or immediately
prior to any reduction therein occurring prior to
termination, if greater), plus (B) one year's annual
incentive compensation at target payment; plus
(e) (1) a number of Phantom Shares in
cash, or at the discretion of the Board and if
legally permissible, stock, equal to the number of
Phantom Shares then remaining unvested multiplied by
a fraction, the numerator of which shall be the
number of days between
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the Effective Date and the date of the Executive's
termination of employment and the denominator of
which shall be the number of days between the
Effective Date and the sixth anniversary thereof;
provided, however, that the payment under this
Section 6.5(e)(1) shall only be made if the Board of
Directors determines, in good faith, at such time
that there is a reasonable opportunity for the
performance goals and measures set forth in Exhibit A
to be achieved by the respective target dates and (2)
except for the cash retention payment set forth in
Section 5.4, any other cash payment or stock payment
or other award or benefit which Executive would earn
if he were employed by the Company on a certain date,
in the full amount of such payment or stock award at
target award multiplied by a fraction, the numerator
of which shall be the number of days from the
effective date of such award to the date of the
Executive's termination of employment and the
denominator of which shall be the number of days from
the effective date of such award to the date the
award would have been paid assuming target level
performance had the Executive lived to that date.
(f) For a period of 36 months following
the termination (the "Continuation Period"), the
Company will, at its expense, arrange to provide the
Executive and his eligible dependents with health
(including medical/hospital, dental, and vision) and
life benefits substantially similar to those that the
Executive and his eligible dependents were receiving
or entitled to receive immediately prior to
termination. Such benefits will be provided to the
Executive on the same terms and conditions (including
employee contributions toward the premium payments)
under which the Executive was entitled to participate
immediately prior to the Executive's termination (or,
if more favorable to the Executive, immediately prior
to the reduction, termination, or denial described in
Section 6.4(i)(c)). To the extent the coverage or
benefits provided during the Continuation Period
under this Section 6.5(f) results in the Executive or
any dependent or beneficiary thereof incurring
additional federal, state, or local taxes that would
otherwise not have been incurred in connection with
the provision of such coverage or benefits had the
Executive's employment not been terminated, the
Company shall promptly pay the Executive, dependent,
or beneficiary, as the case may be, on an after-tax
basis, an additional payment in an amount equal to
all taxes, including interest and penalties thereon,
imposed as the result of such coverage or benefits.
On or after the Termination Date, Executive will be
eligible to receive all the benefits he would have
been entitled to receive pursuant to the last
sentence of Section 4.5 if Executive had remained
employed until the Expiration Date. Benefits
otherwise receivable by the Executive pursuant to
this Section 6.5(f) during the Continuation Period
will be reduced to the extent comparable benefits are
actually received by or in respect of the Executive
from another employer during the Continuation Period,
and any such benefits actually received shall be
reported by the Executive or other recipient to the
Company.
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(g) Director and Officer Coverage. For
a period of four years following the Executive's termination
of employment, the Company shall maintain or obtain Directors
and Officers Coverage ("D&O Coverage"), which covers the
Executive as an insured on the policy in the same amounts and
with equivalent coverage protection as covered the Executive
immediately prior to such termination. Thereafter, the Company
will continue to indemnify Executive for actions undertaken by
Executive during his employment.
7. Change in Control Provisions.
7.1 Impact of Change in Control. Notwithstanding anything
in this Agreement to the contrary, if the Executive's employment is
terminated within two years following a Change in Control and during
the Term, other than (A) by the Company for Cause, (B) by reason of
death or Disability, or (C) by the Executive without Good Reason, then
(a) the provisions of Section 10.1, 10.3, and 11 will be inapplicable
to the Executive and (b) the Company shall pay the Executive the
amounts, and provide the Executive the benefits, described in Section
7.3, below, in lieu of any payments or benefits under Article 6 hereof.
7.2 Definition of Change in Control. For purposes of this
Agreement, a "Change in Control" will be deemed to occur if any of the
following events occur:
(i) any Person (as defined below) is or becomes the Beneficial
Owner (within the meaning set forth in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of SPR (not including in the securities
beneficially owned by such Person any securities acquired
directly from SPR or its Affiliates (within the meaning set
forth in Rule 12b-2 under the Securities Exchange Act of
1934)) representing 30% or more of the combined voting power
of SPR's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a
transaction described in clause (A) of paragraph (iii) below;
or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the Effective Date, constitute the Board
and any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
SPR) whose appointment or election by the Board or nomination
for election by SPR's shareholders was approved or recommended
by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof
or whose appointment, election or nomination for election was
previously so approved or recommended; or
(iii) there is consummated a merger or consolidation of SPR or
any direct or indirect subsidiary of SPR with any other
corporation, other than (A) a merger or consolidation which
would result in the voting securities of SPR outstanding
immediately prior to such merger or consolidation continuing
to
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represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or
any parent thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 65% of the
combined voting power of the securities of SPR or such
surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of SPR
(or similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities SPR
(not including in the securities Beneficially Owned by such
Person any securities acquired directly from SPR or its
Affiliates) representing 30% or more of the combined voting
power of SPR's then outstanding securities; or
(iv) SPR stockholders or a court or regulatory agency having
jurisdiction over the matter approves a plan of complete
liquidation or dissolution of SPR or there is consummated an
agreement for or a court or regulatory agency having
jurisdiction over the matter approves the sale or disposition
by SPR of all or substantially all of SPR's assets, other than
a sale or disposition by SPR of all or substantially all of
SPR's assets to an entity, at least 65% of the combined voting
power of the voting securities of which are owned by
stockholders of SPR in substantially the same proportions as
their ownership of SPR immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of SPR immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of SPR immediately
following such transaction or series of transactions. For purposes of this
Article 7, "Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include (i) SPR or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of SPR in substantially the same proportions as their ownership of
stock of SPR.
7.3 Severance Payments. If the Executive's employment is
terminated within two years following a Change in Control and during
the Term, other than (A) by the Company for Cause, (B) by reason of
death or Disability, or (C) by the Executive without Good Reason, then
the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 7.3 ("Severance
Payments"), in lieu of any payments and benefits to which the Executive
would otherwise have been entitled under Article 6 hereof. For purposes
of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without
Cause or by the Executive with Good Reason, if (i) the Executive's
employment is terminated by the Company without Cause prior to a Change
in Control (whether or not a Change in Control ever occurs) and such
termination was at the request or direction of a Person who has entered
into an agreement with the Company the consummation of which would
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constitute a Change in Control, (ii) the Executive terminates his
employment for Good Reason prior to a Change in Control (whether or not
a Change in Control ever occurs) and the circumstance or event which
constitutes Good Reason occurs at the request or direction of such
Person, or (iii) the Executive's employment is terminated by the
Company without Cause or by the Executive for Good Reason and such
termination or the circumstance or event which constitutes Good Reason
is otherwise in connection with or in anticipation of a Change in
Control (whether or not a Change in Control ever occurs). For purposes
of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be
presumed to be correct unless the Company establishes to the Board by
clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination
and in lieu of any severance benefit otherwise payable to the
Executive under or pursuant to any contract or plan, except
for any benefits relating to or resulting from the SERP,
whether as a consequence of a Change in Control or otherwise,
the Company shall pay to the Executive a lump sum severance
payment, in cash, equal to three times the sum of (i) the
Executive's base salary as in effect immediately prior to the
Date of Termination or, if higher, in effect immediately prior
to the first occurrence of an event or circumstance
constituting Good Reason, and (ii) the target annual incentive
award applicable to the Executive pursuant to any annual bonus
or incentive plan maintained by the Company in respect of the
fiscal year ending immediately prior to the fiscal year in
which occurs the Date of Termination or, if higher,
immediately prior to the fiscal year in which occurs the first
event or circumstance constituting Good Reason.
(B) For the thirty-six (36) month period immediately
following the Date of Termination, the Company shall arrange
to provide the Executive and his dependents life, disability,
accident and health insurance benefits substantially similar
to those provided to the Executive and his dependents
immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive
and his dependents immediately prior to the first occurrence
of an event or circumstance constituting Good Reason, at no
greater cost to the Executive than the cost to the Executive
immediately prior to such date or occurrence; provided,
however, that, unless the Executive consents to a different
method (after taking into account the effect of such method on
the calculation of "parachute payments" pursuant to Section 8
hereof), such health insurance benefits shall be provided
through a third-party insurer. Benefits otherwise receivable
by the Executive pursuant to this Section 7.3(B) shall be
reduced to the extent benefits of the same type are received
by or made available to the Executive during the thirty-six
(36) month period following the Executive's termination of
employment (and any such benefits received by or made
available to the Executive shall be reported to the Company by
the Executive); provided, however, that the Company shall
reimburse the Executive for the excess, if any, of the cost of
such benefits to the Executive over such cost immediately
prior to the Date of Termination or, if more favorable to the
Executive, the first occurrence of an event or circumstance
constituting Good Reason.
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(C) Notwithstanding any provision of any annual or
long-term incentive plan to the contrary, the Company shall
pay to the Executive a lump sum amount, in cash, equal to the
sum of (i) any unpaid incentive compensation which has been
allocated or awarded to the Executive for a completed fiscal
year or other measuring period preceding the Date of
Termination under any such plan and which, as of the Date of
Termination, is contingent only upon the continued employment
of the Executive to a subsequent date, and (ii) a pro rata
portion to the Date of Termination of the aggregate value of
all contingent incentive compensation awards to the Executive
for all then uncompleted periods under any such plan,
calculated as to each such award by multiplying the award that
the Executive would have earned on the last day of the
performance award period, assuming the achievement, at the
target level of the individual and corporate performance goals
established with respect to such award, by the fraction
obtained by dividing the number of full months and any
fractional portion of a month during such performance award
period through the Date of Termination by the total number of
months contained in such performance award period.
(D) In addition to the retirement benefits to which
the Executive is entitled under each Company pension plan or
any successor plan thereto, the Company shall pay the
Executive a lump sum amount, in cash, equal to the excess of
(i) the actuarial equivalent of the aggregate retirement
pension (taking into account any early retirement subsidies
associated therewith and determined as a straight life annuity
commencing at the date (but in no event earlier than the third
anniversary of the Date of Termination) as of which the
actuarial equivalent of such annuity is greatest) which the
Executive would have accrued under the terms of all such
pension plans (without regard to any amendment to any such
pension plan made subsequent to a Change in Control and on or
prior to the Date of Termination, which amendment adversely
affects in any manner the computation of retirement benefits
thereunder), determined as if the Executive were fully vested
thereunder and had accumulated (after the Date of Termination)
thirty-six (36) additional months of service credit thereunder
(except in the case of the SERP, in which case benefits shall
be calculated by the amount provided for in the last sentence
of Section 4.5, or 36 months, whichever is greater) and had
been credited under each such pension plan during such period
with compensation equal to the Executive's compensation (as
defined in each such pension plan) during the twelve (12)
months immediately preceding the Date of Termination or, if
higher, during the twelve months immediately prior to the
first occurrence of an event or circumstance constituting Good
Reason, over (ii) the actuarial equivalent of the aggregate
retirement pension (taking into account any early retirement
subsidies associated therewith and determined as a straight
life annuity commencing at the date (but in no event earlier
than the Date of Termination) as of which the actuarial
equivalent of such annuity is greatest) which the Executive
had accrued pursuant to the provisions of the pension plans as
of the Date of Termination. For purposes of this Section
7.3(D), "actuarial equivalent" shall be determined using the
same assumptions utilized under the Sierra Pacific Power
Company Retirement Plan immediately prior to the Date of
Termination. or, if more favorable to the
16 of 26
Executive, immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.
8. Certain Additional Payments by the Company.
(i) If it is determined (as hereafter provided)
that any payment or distribution by the Company, any person
whose actions result in a Change in Control or any affiliate
of the Company or such persons, to or for the benefit of the
Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement,
policy, plan, program, or arrangement, including, without
limitation, any stock option, stock appreciation right, or
similar right, or the lapse or termination of any restriction
on or the vesting or exercisability of any of the foregoing
(each a "Payment", and all such Payments, excluding the
Gross-Up Payments (as defined below), the "Total Payments")),
would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision thereto) by reason of
being considered "contingent on a change in ownership or
control" of the Company, within the meaning of Section 280G of
the Code (or any successor provision thereto) or to any
similar tax imposed by state or local law, or any interest or
penalties with respect to such tax such tax or taxes, together
with any such interest and penalties, are hereafter
collectively referred to as the "Excise Tax"), then the
Executive will be entitled to receive an additional payment or
payments (collectively, a "Gross-Up Payment") in an amount
such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to
such taxes), including any Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(ii) Subject to the provisions of Section 8(vi)
hereof, all determinations required to be made under this
Article 8, including whether an Excise Tax is payable by the
Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the
Executive and the amount of such Gross-Up Payment, will be
made by a nationally recognized firm of certified public
accountants (the "Accounting Firm") selected by the Executive
in his sole discretion. The Executive will direct the
Accounting Firm to submit its determination and detailed
supporting calculations to both the Company and the Executive
within 15 calendar days after the Executive's termination, if
applicable, and any other such time or times as may be
requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the
Executive, the Company will pay the required Gross-Up Payment
to the Executive within five business days after receipt of
such determination and calculations with respect to any
Payment to the Executive. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it will, at
the same time as it makes such determination, furnish the
Company and the Executive an opinion that the Executive has
substantial authority not to report any Excise Tax on the
Executive's federal, state, local income or other tax return.
Any determination by the Accounting Firm as to the amount of
the Gross-Up Payment will be binding upon the Company and the
Executive. As a result of
17 of 26
the uncertainty in the application of Section 4999 of the Code
(or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will not
have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to
be made hereunder. In the event that the Company exhausts or
fails to pursue its remedies pursuant to Section 8(vi) hereof
and the Executive thereafter is required to make a payment of
any Excise Tax, the Executive will direct the Accounting Firm
to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting
calculations to both the Company and the Executive as promptly
as possible. Any such Underpayment will be promptly paid by
the Company to, or for the benefit of, the Executive within
five business days after receipt of such determination and
calculations.
(iii) The Company and the Executive will each
provide the Accounting Firm access to and copies of any books,
records, and documents in the possession of the Company or the
Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the
determinations and calculations contemplated by Section 8(ii)
hereof.
(iv) The federal, state, and local income or
other tax returns filed by the Executive will be prepared and
filed on a consistent basis with the determination of the
Accounting Firm with respect to the Excise Tax payable by the
Executive. The Executive will make proper payment of the
amount of any Excise Tax, and at the request of the Company,
provide to the Company true and correct copies (with any
amendments) of the Executive's federal income tax return as
filed with the Internal Revenue Service and corresponding
state and local tax returns, if relevant, as filed with the
applicable taxing authority, and such other documents
reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax
return, or corresponding state or local tax return, if
relevant, the Accounting Firm determines that the amount of
the Gross-Up Payment should be reduced, the Executive will
within five business days pay to the Company the amount of
such reduction.
(v) The fees and expenses of the Accounting Firm
for its services in connection with the determinations and
calculations contemplated by Sections 8(ii) and (iv) hereof
will be borne by the Company.
(vi) The Executive will notify the Company in
writing of any claim by the Internal Revenue Service or other
taxing authority that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such
notification will be given as promptly as practicable but no
later than ten (10) business days after the Executive actually
receives notice of such claim and the Executive will further
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid (in each case, to
the extent known by the Executive). The Executive will not pay
such claim
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prior to the earlier of (a) the expiration of the
30-calendar-day period following the date on which the
Executive gives such notice to the Company, and (b) the date
that any payment of amount with respect to such claim is due.
If the Company notifies the Executive in writing prior the
expiration of such period that it desires to contest such
claim, the Executive will:
(a) provide the Company with any
written records or documents in the Executive's
possession relating to such claim reasonably
requested by the Company;
(b) take such action in connection with
contesting such claim as the Company will reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney competent
in respect of the subject matter and reasonably
selected by the Company;
(c) cooperate with the Company in good
faith in order to effectively contest such claim; and
(d) permit the Company to participate
in any proceedings relating to such claim;
provided, however, that the Company will bear and pay directly
all costs and expenses (including interest and penalties)
incurred in connection with such contest and will indemnify
and hold harmless the Executive, on an after-tax basis, from
and against any Excise Tax or income tax, including interest
and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without
limiting the foregoing provisions of this Section 8(vi), the
Company will control all proceedings taken in connection with
the contest of any claim contemplated by this Section 8(vi)
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim (provided,
however, that the Executive may participate therein at the
Executive's own cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction, and in one or more appellate courts,
as the Company will determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and sue
for a refund, the Company will advance the amount of such
payment to the Executive on an interest-free basis and will
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income or other tax, including
interest or penalties with respect thereto, imposed with
respect to such advance; and provided further, however, that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim will be limited
to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive will be entitled to
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settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 8(vi)
hereof, the Executive receives any refund with respect to such
claim, the Executive will (subject to the Company's complying
with the requirements of Section 8(vi) hereof) promptly pay to
the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(vi) hereof, a
determination is made that the Executive will not be entitled
to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance will
be forgiven and will not be required to be repaid and the
amount of such advance will offset, to the extent thereof, the
amount of the Gross-Up Payment required to be paid by the
Company to the Executive pursuant to this Article 8.
(viii) Notwithstanding the foregoing provisions of
this Section 8, if it shall be determined that the Executive
is entitled to a Gross-Up Payment, but the Total Payments do
not exceed 110% of the greatest amount (the "Reduced Amount")
that could be paid to the Executive such that the receipt of
the Total Payments would not give rise to any Excise Tax, then
no Gross-Up Payment shall be made to the Executive and the
Total Payments, in the aggregate, shall be reduced to the
Reduced Amount. If a reduction is required, the Executive and
the Company shall determine, after consultation, which
payments and or benefits shall be waived, reduced or forfeited
to accomplish the reduction.
9. Mitigation and Offset. The payment of severance
compensation by the Company to the Executive in accordance with the terms of the
Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive is under no obligation to mitigate damages or the amount of any
payment provided for hereunder by seeking other employment or otherwise. Any
amounts payable to the Executive by the Company upon termination of employment
shall be offset by any amounts then owed by the Executive to the Company or any
entity that is then an Affiliate (within the meaning set forth in Rule 12b-2
under the Securities Exchange Act of 1934) of the Company.
10. Competition; Confidentiality; Nonsolicitation
10.1 (i) Subject to Section 7.1(i), the Executive
hereby covenants and agrees that during the Employment Term
and for one year following the end of the Employment Term he
will not, without the prior written consent of the Company,
engage in Competition (as defined below) with the Company. For
purposes of this Agreement, if the Executive takes any of the
following actions he will be engaged in "Competition:"
engaging in or carrying on, directly or indirectly, any
enterprise, whether as an advisor, principal, agent, partner,
officer, director, employee, stockholder, associate or
consultant to any person, partnership, corporation, or any
other business entity, that is
20 of 26
principally engaged in the business of generation, purchase,
transmission, distribution, or sale of electricity, the
provision of natural gas, in each case to customer segments
being served or pursued in its business plans by the Company
or its Subsidiaries, in states in which the Company or its
Subsidiaries has significant operations; provided, however,
that "Competition" will not include ownership by the Executive
of stocks, bonds or other securities of any corporation or
other entity (but without participating in the business
thereof) if such stocks, bonds, or other securities are listed
for trading on a national securities exchange or
NASDAQ-National Market and the Executive's investment does not
exceed 1% of the issued and outstanding shares of capital
stock, or in the case of bonds or other securities, 1% of the
aggregate principal amount thereof issued and outstanding. For
purposes of applying the preceding sentence, operations of the
Company or its Subsidiaries in the State of California will be
deemed not to be significant if they are not materially
greater than the operations in the aggregate of the Company
and its respective Subsidiaries in the State of California as
of the date of this Agreement.
(ii) Subject to Section 7.1(i), the Executive
hereby covenants and agrees that during the Employment Term
and for three years following the end of the Employment Term
he will not assist a third party in preparing or making an
unsolicited bid for the Company, engaging in a proxy contest
with the Company, or engaging in any other similar activity.
10.2 During the Employment Term, the Company agrees that
it will disclose to Executive its confidential or proprietary
information (as defined in this Section 10.2) to the extent necessary
for Executive to carry out the Executive's obligations under this
Agreement. The Executive hereby covenants and agrees that he will not,
without the prior written consent of the Company, during the Employment
Term or at any time thereafter disclose to any person not employed by
the Company or a Subsidiary, or use in connection with engaging in
Competition with the Company or a Subsidiary, any confidential or
proprietary information of the Company or its Subsidiaries. For
purposes of this Agreement, the term "confidential or proprietary
information" will include all information of any nature and in any form
that is owned by the Company or a Subsidiary and that is not publicly
available or generally known to persons engaged in businesses similar
or related to those of the Company or a Subsidiary. Confidential
information will include, without limitation, the Company's or a
Subsidiary's financial matters, customers, employees, industry
contracts, and all other secrets and all other information of a
confidential or proprietary nature. The foregoing obligations imposed
by this Section 10.2 will cease if such confidential or proprietary
information will have become, through no fault of the Executive,
generally known to the public or the Executive is required by law to
make disclosure (after giving the Company notice and an opportunity to
contest such requirement).
10.3 Subject to Section 7.1(i), the Executive hereby
covenants and agrees that during the Employment Term and for one year
thereafter the Executive will not attempt to influence, persuade or
induce, or assist any other person in so persuading or inducing, any
employee of the Company or a Subsidiary to give up, or to not commence,
employment or a business relationship with the Company or a Subsidiary.
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11. Post-Termination Assistance. Subject to Section
7.1(i), the Executive agrees that after the Executive's employment with the
Company has terminated the Executive will provide, upon reasonable notice, such
information and assistance to the Company as may reasonably be requested by the
Company in connection with any litigation in which it or any of its affiliates
is or may become a party; provided, however, that the Company agrees to promptly
reimburse the Executive for any related out-of-pocket expenses, including travel
expenses as well as reasonable compensation for any time expended,
portal-to-portal, at a rate which approximates the Executive's gross cash income
(base plus target incentive) at the time of termination.
12. Survival. The expiration or termination of the
Employment Term will not impair the rights or obligations of any party hereto
that accrue hereunder prior to such expiration or termination, except to the
extent specifically stated herein. In addition to the foregoing, the Executive's
covenants contained in Sections 5.4, , 6,4(ii), 10.1, 10.2, 10.3, and 11, and
the Company's obligations under Articles Sections 6 and 8, and Section 13.1 will
survive the expiration or termination of this Agreement or the termination of
the Executive's employment for any reason whatsoever.
13. Miscellaneous Provisions.
13.1 Legal Fees and Expenses. If it should appear to the
Executive that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or
any other person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or other
action or proceeding designed to deny, or to recover from, the
Executive the benefits provided or intended to be provided to the
Executive hereunder, the Company irrevocably authorizes the Executive
from time to time to retain counsel of Executive's choice (other than
any counsel with whom the Company has any existing or prior
attorney-client relationship), at the expense of the Company as
hereafter provided, to advise and represent the Executive in connection
with any such interpretation, enforcement, or defense, including,
without limitation, the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director,
officer, stockholder, or other person affiliated with the Company, in
any jurisdiction. If the facts or circumstances relating to such
interpretation, enforcement or defense arise prior to a Change in
Control and the Executive prevails, in whole or in part, in any
material issue in dispute, the Company will pay and be solely
financially responsible for any and all reasonable attorneys' fees and
related fees and expenses incurred by the Executive in good faith in
connection with such dispute. If the facts or circumstances relating to
such interpretation, enforcement or defense arise on or after a Change
in Control, the Company will reimburse the Executive for any and all
reasonable attorneys' fees and related fees and expenses incurred by
the Executive in good faith in connection with such interpretation,
enforcement or defense as such fees and expenses are incurred;
provided, however, that the Executive shall be required to reimburse
the Company for the amounts advanced to the Executive pursuant to this
sentence if the Executive does not prevail, in whole or in part, in any
material issue in dispute.
13.2 Successors and Binding Agreement. (i) The Company
will require any successor (whether direct or indirect, by purchase,
merger, consolidation,
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reorganization, operation of law, or otherwise) to all or substantially
all of the business or assets of the Company, by agreement in form and
substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession
had taken place. This Agreement will be binding upon and inure to the
benefit of the Company and any successor to the Company, including,
without limitation, any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company, whether by
purchase, merger, consolidation, reorganization, operation of law, or
otherwise (and such successor shall thereafter be deemed the Company
for the purposes of this Agreement), but will not otherwise be
assignable, transferable, or delegable by the Company.
(ii) This Agreement will inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributes, and legatees.
(iii) This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of
the other, assign, transfer, or delegate this Agreement or any
rights or obligations hereunder except as expressly provided
in Sections 13.2(i) and 13.2(ii). Without limiting the
generality or effect of the foregoing, the Executive's right
to receive payments hereunder will not be assignable,
transferable, or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by
Executive's will or by the laws of descent and distribution
and, in the event of any attempted assignment or transfer
contrary to this Section 13.2(iii), the Company shall have no
liability to pay any amount so attempted to be assigned,
transferred, or delegated.
13.3 Governing Law. This Agreement will be governed,
construed, interpreted, and enforced in accordance with the substantive
laws of the State of Nevada, without regard to conflicts of law
principles.
13.4 Withholding of Taxes. The Company may withhold from
any amounts payable under this Agreement all federal, state, city, or
other taxes as the Company is required to withhold pursuant to any law
or government regulations or ruling.
13.5 Severability. Any provision of this Agreement that is
deemed invalid, illegal, or unenforceable in any jurisdiction will, as
to that jurisdiction be ineffective to the extent of such invalidity,
illegality, or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or
any other provisions of this Agreement invalid, illegal, or
unenforceable in any other jurisdiction. If any covenant should be
deemed invalid, illegal, or unenforceable because its scope is
considered excessive, such covenant will be modified so that the scope
of the covenant is reduced only to the minimum extent necessary to
render the modified covenant valid, legal, and enforceable.
13.6 Notices. For all purposes of this Agreement, all
communications, including, without limitation, notices, consents,
requests or approvals, required or permitted to be given hereunder will
be in writing and will be deemed to have been
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duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days
after having been mailed by United States registered or certified mail,
return receipt requested, postage prepaid, or three business days after
having been sent by a nationally recognized overnight courier service
such as Federal Express, UPS, or Purolator, addressed to the Company
(to the attention of the Secretary of the Company) at its principal
executive offices and to the Executive at his principal residence, or
to such other address as any party may have furnished to the other in
writing and in accordance herewith, except that notices of changes of
address will be effective only upon receipt.
(i) To the Company: If to the Company, addressed
to the attention of the Secretary; 6100 Neil Road, Reno,
Nevada 89511, or to 6226 West Sahara Avenue, Las Vegas,
Nevada, 89146.
(ii) To the Executive: If to the Executive, at
his address on file with SPR.
13.7 Counterparts. This Agreement may be executed in
several counterparts, each of which will be deemed to be an original,
but all of which together will constitute one and the same Agreement.
13.8 Effectiveness; Prior Agreement; Entire Agreement.
This Agreement shall become effective on the Effective Date and shall
have no force or effect prior thereto. On the Effective Date, the terms
of this Agreement are intended by the parties to be the final
expression of their agreement with respect to the Executive's
employment by the Company, may not be contradicted by evidence of any
prior or contemporaneous agreement, and shall supersede in all respects
any prior or other agreement or understanding between the Company, any
Subsidiary, and the Executive, including, but not limited to, the Prior
Employment Agreement, which, except for any specific provisions
included or carried forward herein, will terminate and be without
further effect immediately upon the effectiveness of this Agreement
without further action, and the Prior Change in Control Agreement,
which will terminate and be without further effect immediately upon the
effectiveness of this Agreement without further action. The parties
further intend that this Agreement will constitute the complete and
exclusive statement of its terms and that no extrinsic evidence
whatsoever may be introduced in any judicial, administrative, or other
legal proceeding to vary the terms of this Agreement.
13.9 Amendments; Waivers. This Agreement may not be
modified, amended, or terminated except by an instrument in writing,
signed by the Executive and the Company. Failure on the part of either
party to complain of any action or omission, breach, or default on the
part of the other party, no matter how long the same may continue, will
never be deemed to be a waiver of any rights or remedies hereunder, at
law, or in equity. The Executive or the Company may waive compliance by
the other party with any provision of this Agreement that such other
party was or is obligated to comply with or perform only through an
executed writing; provided, however, that such waiver will not operate
as a waiver of, or estoppel with respect to, any other or subsequent
failure.
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13.10 Headings and Section References. The headings used in
this Agreement are intended for convenience or reference only and will
not in any manner amplify, limit, modify, or otherwise be used in the
construction or interpretation of any provision of this Agreement. All
section references are to sections of this Agreement, unless otherwise
noted.
13.11 Interest. Without limiting the rights of the
Executive at law or in equity, if the Company fails to make any payment
or provide any benefit required to be made or provided hereunder on a
timely basis, the Company will pay interest on the amount or value
thereof at an annualized rate of interest equal to the so-called
composite "prime rate" as quoted from time to time during the relevant
period in the Northeast Edition of The Wall Street Journal. Such
interest will be payable as it accrues on demand. Any change in such
prime rate will be effective on and as of the date of such change.
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IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the ____ day of September, 2003, but effective as provided in Article 1.
By_____________________________________
Walter M. Higgins
SIERRA PACIFIC RESOURCES,
a Nevada corporation
By_____________________________________
James R. Donnelley, Chair
Compensation Committee, as directed by
and approved by
The Board of Directors
SIERRA PACIFIC POWER COMPANY,
a Nevada corporation
By_____________________________________
James R. Donnelley, Chair
Compensation Committee, as directed by
and approved by
The Board of Directors
NEVADA POWER COMPANY,
a Nevada corporation
By_____________________________________
James R. Donnelley, Chair
Compensation Committee, as directed by
and approved by
The Board of Directors
WMH-EMPLAGRMT-03
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