Exhibit 10.1
Mr. Walter M. Higgins August 4, 2006
5067 Rivedro Street
Las Vegas, NV 89135
Dear Walter:
This letter (this "Amendment") refers to the employment agreement
between you and Sierra Pacific Resources ("SPR"), a Nevada corporation, Sierra
Pacific Power Company ("SPPC"), a Nevada corporation, and Nevada Power Company
("NPC"), a Nevada corporation (SPR, SPPC and NPC, collectively, the "Company")
dated September 26, 2003 (the "Employment Agreement") and confirms our mutual
agreement to a modification of the terms thereof. You and the Company hereby
agree that the Employment Agreement shall be amended as provided herein. Defined
terms used herein without definition shall have the meanings ascribed to such
terms in the Employment Agreement.
1. Term. This Amendment shall become effective upon approval by the Board
(the "Amendment Date") and, subject to any early termination that may occur as
provided in Section 4 of this Amendment or pursuant to Articles 6 or 7 of the
Employment Agreement. The Employment Agreement, as modified herein, shall expire
on June 1, 2008 (the "Employment Term"). Notwithstanding the foregoing, solely
for purposes of the last sentence of Section 4.5 of the Employment Agreement,
the term Expiration Date shall continue to refer to September 25, 2006.
2. Equity Award. On the Amendment Date, the Company shall grant you an
award of performance shares as set forth in Exhibit A attached hereto (the
"Performance Shares"). Without limiting the generality of the foregoing, the
Performance Shares shall be treated in the same manner as are the performance
shares granted to replace the Phantom Shares under Sections 6 and 7 of the
Employment Agreement. The Performance Shares may be earned, through the end of
your employment, according to the performance criteria outlined in Exhibit A.
Any such performance shares granted to you pursuant to Section 5.3 of the
Employment Agreement remaining unvested as of the Amendment Date shall be
canceled on the Amendment Date and Section 5.3 shall cease to apply.
3. Termination following a Change in Control. Effective as of the Amendment
Date, if your employment is terminated (as a result of a termination described
in Section 7.3 of the Employment Agreement) following a Change in Control and
prior to June 1, 2007, (i) the benefits provided to you pursuant to Section
7.3(A) of the Employment Agreement shall equal two times the sum of 7.3(A)(i)
and 7.3(A)(ii); (ii) the benefits provided in Section 7.3(B) shall be
provided for a period of twenty-four (24) months; and (iii) your benefits under
the SERP shall be calculated by the amount provided for in the last sentence of
Section 4.5 of the Employment Agreement, or twenty-four (24) months, whichever
is greater). In the event your employment is terminated (as a result of a
termination described in Section 7.3 of the Employment Agreement) following a
Change in Control and after June 1, 2007 but prior to expiration of the
Employment Term (x) the benefits provided to you pursuant to Section 7.3(A) of
the Employment Agreement shall equal one times the sum of 7.3(A)(i) and
7.3(A)(ii); (y) the benefits provided in Section 7.3(B) shall be provided for a
period of twelve (12) months; and (z) your benefits under the SERP shall be
calculated by the amount provided for in the last sentence of Section 4.5 of the
Employment Agreement, or twelve (12) months, whichever is greater).
4. Succession. You acknowledge and agree that in connection with the
Company's planning for your contemplated succession, your ceasing to serve as
President and/or Chief Executive Officer of the Company or any of its
subsidiaries shall not provide grounds for you to terminate your employment with
the Company for Good Reason provided that you continue to serve as Chairman of
the Board through the remainder of the Employment Term.
5. Resignation with Board Consent/Completion of Employment Term. In the
event you remain employed by the Company through June 1, 2008 or resign your
employment prior to June 1, 2008, with the consent of the Board, the Company
shall: (i) continue to make Base Salary payments to you through June 1, 2008,
(ii) pay you any short term incentive earned in any measurement period which had
been completed prior to the date on which such resignation occurs and which had
not previously been paid, (iii) pay you a cash amount in respect of any accrued
but unused vacation days, (iv) reimburse you for any business expenses incurred
on or prior to the date of your resignation that are eligible for reimbursement
in accordance with the Company's expense reimbursement policies as then in
effect, (v) pay you a cash amount, or at the discretion of the Board and if
legally permissible, stock, equal to the number of Performance Shares then
remaining unvested multiplied by a fraction, the numerator of which shall be the
number of days between the Amendment Date and the date of your resignation and
the denominator of which shall be the number of days between the Amendment Date
and June 1, 2008; provided, however, that the payment under this Section 5 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 attached hereto to be achieved by the respective target dates, (vi) to
the extent permitted under the terms of the Company's employee welfare benefit
plans and applicable law, provide you and your spouse with coverage under such
plans, (vii) provide you with an office at the principal SPR/SPPC offices in the
Reno/Sparks area or in your residence for a period of three years following such
resignation, (viii) maintain, until you reach age seventy, a life insurance
policy providing a minimum benefit of $1,000,000 for the beneficiaries of your
designation and (ix) transfer to you of membership in one Reno club of your
choosing. This Section 5 will not limit your entitlement to any other benefits
then available to you under any agreement, benefit plan, or policy that is
maintained by the Company or its affiliates for your benefit or in which you
participated.
6. Section 409A Compliance. The parties intend that any severance, benefits
or other compensation under the Employment Agreement and this Amendment be paid
or provided to you in compliance with Section 409A of the Code such that there
are no adverse tax consequences, interest, or penalties as a result of the
payments or benefits. The parties agree to
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modify the timing of such severance, benefits or other compensation to the
extent necessary to comply with Section 409A.
7. Consulting Agreement. Upon the expiration of this Amendment, Mr. Higgins
and the Board may enter into a consulting agreement for a period of not more
than six months to assist with the transition to his successor.
Except as provided herein, all other terms of the Employment Agreement
shall remain in full force and effect.
Please confirm your acknowledgment of, and consent to, this Amendment by
signing and returning the enclosed copy of this letter.
Sincerely,
..
Accepted this day of , 2006
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Walter M. Higgins
Acknowledged and agreed to by:
SIERRA PACIFIC RESOURCES
By
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EXHIBIT A
SUMMARY OF PERFORMANCE SHARES
The following table summarizes the principal terms applicable to the Performance
Shares granted pursuant to the Amendment to which this Exhibit A is attached.
You will not be permitted to sell, transfer, or alienate any Performance Shares
until they become vested. Any unvested Performance Shares shall vest after the
Company achieves the performance goals and measures set forth below. Until such
time as the Performance Shares have vested, you shall have the right to receive
dividends with respect thereto, with all such dividends being credited to you as
additional Performance Shares. Except as provided in Section 4 of the Amendment,
any unvested Performance Shares shall be canceled on June 1, 2008.
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MEASURE SUMMARY OF MEASURE SHARES SUBJECT TO MEASURE
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TOTAL SHAREHOLDER RETURN o Align CEO total shareholder return plan with the Executive relative total
shareholder return plan.
o Performance will be measured versus the Dow Jones Utility Index (the "DJUI")
o Threshold is achieved if SPR is positioned at the 40th percentile of the
DJUI. 50% of target award delivered. Target 85,000
o Target is achieved if SPR is positioned at or above the 50th percentile of Maximum 135,000
the DJUI. Target award delivered.
o Maximum is achieved if SPR is positioned at or above the 75th percentile of
the DJUI. Maximum award delivered.
o There is no payout for performance below the 40th percentile of the DJUI.
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DEFERRED ENERGY COSTS o Recover all of deferred energy charges previously denied in 2002 PUCN 50,000
deferred energy cases or such lesser amount as determined appropriate by the
Board for purposes of this Amendment.
o The number of shares delivered will be based on the Board's assessment of
the level of achievement.
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CREDIT RATING o Restore numeric credit financial ratios of the Company to investment grade 100,000
status for the senior secured debt of the utilities.
o 100% of shares delivered if goal is attained, otherwise no shares delivered.
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PERFORMANCE MILESTONES o Satisfactory achievement of remaining regulatory and litigation milestones 65,000
(REGULATORY/LITIGATION) as measured by the Board.
o The number of shares delivered will be based on the Board's assessment of
the level of achievement.
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RESTORATION OF THE DIVIDEND o Restore quarterly common stock dividend. 100,000
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July 2006
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MEASURE SUMMARY OF MEASURE SHARES SUBJECT TO MEASURE
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o 100% of shares delivered if goal is attained, otherwise no shares delivered.
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OTHER o Attain Public Utility Commission approval and secure all necessary licenses 50,000
and permits that are required to commence construction for the proposed Ely
plant.
o The number of shares delivered will be based on the Board's assessment of
the level of achievement.
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July 2006