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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SIERRA PACIFIC RESOURCES
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
[LOGO OF SIERRA PACIFIC RESOURCES]
Walter M. Higgins
Chairman, President
and Chief Executive Officer April 11, 2001
To Our Stockholders:
On behalf of the Board of Directors, I am pleased to invite you to attend
the 2001 Annual Meeting of the Stockholders of Sierra Pacific Resources, which
will be held at 10:00 a.m., Pacific Daylight time, on Monday, May 21, 2001, at
the Rio Suite Hotel & Casino, 3700 West Flamingo Road, Las Vegas, Nevada. The
formal notice of the Annual Meeting is set forth on the next page.
The matters to be acted upon at the meeting are described in the attached
Proxy Solicitation Statement. During the meeting, you and other stockholders
will have the opportunity to ask questions and comment on the Company's
operations. Directors, officers, and other employees of the Company will be
made available to visit with you before and after the formal meeting to answer
whatever questions you may have. In addition to the matters set forth herein,
we will also discuss 2000 financial results and our strategic plan for meeting
the challenges and seizing the opportunities made available from the profound
changes taking place in our industry. Refreshments will be provided before and
after the meeting.
Your views and opinions are very important to the Company. Whether or not
you are able to be present at the Annual Meeting, we would appreciate it if you
would please review the enclosed Annual Report and Proxy Solicitation Statement.
Regardless of the number of shares you own, please execute your proxy card and
promptly return it to us in the postpaid envelope.
We greatly appreciate the interest expressed by our stockholders, and we
are pleased that in the past so many of you have voted your shares either in
person or by proxy. We hope that you will continue to do so and urge you to
return your proxy card as soon as possible.
Sincerely,
/s/ Walter M. Higgins
SIERRA PACIFIC RESOURCES
6100 Neil Road
Reno, Nevada 89511
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 2001
____________
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Sierra
Pacific Resources will be held at the Rio Suite Hotel & Casino, 3700 West
Flamingo Road, Las Vegas, Nevada, on May 21, 2001, at 10:00 a.m., Pacific
Daylight Time, for the following purposes:
1. To elect three (3) members of the Board of Directors to serve until the
Annual Meeting in 2004, or until their successors are elected and
qualified;
2. To transact such other business as may properly come before the
meeting, and any or all adjournments thereof;
all as set forth in the Proxy Solicitation Statement accompanying this notice.
Only holders of record of Common Stock at the close of business on March
16, 2001, will be entitled to vote at the meeting, and any or all adjournments
thereof. The transfer books will not be closed.
Your continued interest as a stockholder in the affairs of your Company,
its growth, and development is greatly appreciated by the Directors, officers,
and employees who serve you.
By Order of the Board of Directors
WILLIAM E. PETERSON, Secretary
DATED: April 11, 2001
IF YOU ARE A HOLDER OF COMMON STOCK OF THE COMPANY AND DO NOT EXPECT TO ATTEND
THE ANNUAL MEETING OF STOCKHOLDERS, IT WILL BE HELPFUL TO US IF YOU WILL READ
THE ACCOMPANYING PROXY STATEMENT, THEN MARK, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED, AS EARLY AS POSSIBLE.
We thank you for your cooperation.
Mailing Address: P.O. Box 30150
Reno, Nevada 89520-3150
SIERRA PACIFIC RESOURCES
6100 Neil Road
Reno, Nevada 89511
PROXY STATEMENT
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General
This proxy statement is furnished to the holders of Common Stock of Sierra
Pacific Resources (hereinafter referred to as the "Company") in connection with
the solicitation of proxies to be voted at the Annual Meeting of Stockholders to
be held on Monday, May 21, 2001. The enclosed proxy is solicited on behalf of
the Board of Directors of the Company. Every properly signed proxy will be
voted.
A person giving the enclosed proxy has the power to revoke it at any time
before it is exercised at the meeting, by written notice to the Secretary of the
Company, by sending a later-dated proxy, or by revoking it in person at the
meeting.
The Company will bear the cost of solicitation of proxies by management,
including charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of Common Stock. In addition to the
use of mail, proxies may be solicited by personal interview, by telephone, by
telegraph or electronic wireless medium, or by certain employees without
compensation. Corporate Investors, Inc., will assist in the solicitation of
proxies at an estimated cost of $4,500. The approximate date on which this
proxy statement and the enclosed proxy will first be sent to Stockholders is
April 11, 2001.
STOCK OUTSTANDING AND VOTING RIGHTS
Only holders of Common Stock of record on the stock transfer books of the
Company at the close of business on March 16, 2001 (the "record date") will be
entitled to vote at the meeting. There were 78,475,217 shares of Common Stock
outstanding on the record date. Each share of Common Stock is entitled to one
vote and a fraction of a share is entitled to the appropriate fraction of a
share vote. Under the Company's By-Laws, a majority of the shares issued and
outstanding and entitled to vote will constitute a quorum, and a majority of the
voting power of shares represented at the meeting will be sufficient to elect
Directors. Abstentions and broker non-votes will be counted for purposes of
determining a quorum and the number of shares which will constitute a majority
of the voting power represented at the meeting.
ELECTION OF DIRECTORS
All Directors elected at the meeting will serve a three-year term ending at
the Annual Meeting in 2004, or until their successors are elected and qualified.
The shares represented by the enclosed proxy will be voted to elect the three
Nominees unless such authority has been withheld. If any Nominee becomes
unavailable for any reason, which is not anticipated, the shares represented by
the enclosed proxy may be voted for such other persons as may be selected by the
Board of Directors of the Company. The affirmative vote of a majority of the
voting power represented at the Annual Meeting will be necessary to elect each
Nominee. Abstentions and broker non-votes will have the practical effect of
withholding authority with respect to a Nominee.
The following information is furnished with respect to each Nominee for
election as a Director and for each Director whose term of office will continue
after the meeting.
1
Principal Occupation Director
Name of Director Age During Last 5 Years Since
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NOMINEES FOR ELECTION FOR A TERM OF THREE YEARS EXPIRING IN 2004
James R. Donnelley 64 Chairman, PMP, Inc., a publishing/distribution company. 1987
Partner, Stet & Query, Ltd., a family-owned investment
company. Retired Vice Chairman of the Board of R.R. Donnelley
& Sons Company since July 1990. He has been a director of that
company since 1976. He is also a director of Pacific
Magazines & Printing Limited and Chairman of the Board of
National Merit Scholarship Corporation.
Walter M. Higgins 57 Chairman, President and Chief Executive Officer of the Company 2000
since August 8, 2000. Chairman, President and Chief Executive
Officer of AGL Resources, Inc., from February 1998 to August
2000. Chairman, President and Chief Executive Officer of the
Company from January 4, 1994, to January 14, 1998. He is also
a director of Aegis Insurance Services, Inc., NEETF, American
Gas Association, and Infrastrux.
John F. O'Reilly 53 Chairman and Chief Executive Officer of the law firm of 1995
Mangels, Butler, Marmaro & O'Reilly, a full service law firm.
Chairman and Chief Executive Officer of Business Resource
Group, and Chairman and Chief Executive Officer of the
O'Reilly Gaming Group, a corporation consisting of various
gaming and entertainment related businesses. He is also a
member of the Advisory Council of the UNLV International
Gaming Institute.
Name of Director Principal Occupation Director
And Nominee Age During Last 5 Years Since
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DIRECTORS WHOSE TERM EXPIRES IN 2003
Edward P. Bliss 66 Consultant, Zurich Scudder Investment Co.; Retired Partner, 1990
Loomis, Sayles & Co., Inc., an investment counsel firm in
Boston, Massachusetts. He is also a director of Seaboard Oil
Company of Midland, Texas.
Mary Lee Coleman 62 President, Coleman Enterprises. She also serves on the Board 1980
of First Dental Health Inc.
T.J. Day 51 Senior Partner, Hale Day Gallagher, a real estate brokerage 1987
and investment company.
Jerry E. Herbst 61 Chief Executive Officer of Terrible Herbst, Inc. He is a 1990
partner of Coast Resorts.
2
Principal Occupation Director
Name of Director Age During Last 5 Years Since
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DIRECTORS WHOSE TERM EXPIRES IN 2002
Krestine M. Corbin 62 President and Chief Executive Officer of Sierra Machinery 1989
Incorporated since 1984 and a director of that company since
1980. She also serves on the Twelfth Federal Reserve Bank
District Board.
Fred D. Gibson, Jr. 72 Retired Chairman, President and Chief Executive Officer of 1978
American Pacific Corporation. He also serves as a Director of
Cashman Equipment and American Pacific Corporation.
James L. Murphy 71 Certified Public Accountant and retired partner of and 1992
consultant to Grant Thornton, L.L.P., an international
accounting and management consulting firm. He is owner,
independent trustee and general manager of several real estate
development projects and numerous rental properties. He is
also a retired Colonel of the United States Air Force Reserve.
Dennis E. Wheeler 57 Chairman, President and Chief Executive Officer of Coeur 1990
d'Alene Mines Corporation since 1986.
All Directors of Sierra Pacific Resources are Directors of its wholly owned
subsidiaries, Sierra Pacific Power Company and Nevada Power Company. Of the
other wholly owned subsidiaries, Messrs. Higgins and Murphy are Directors of
Lands of Sierra, Inc.; Messrs. Day and Higgins are Directors of Tuscarora Gas
Pipeline Company; and Mr. Higgins is a Director of Sierra Pacific Energy
Company, Sierra Gas Holdings Company, Sierra Water Development Company,
Tuscarora Gas Operating Company, Pinon Pine Corp., Pinon Pine Investment Co.,
and GPSF-B.
3
DIRECTOR'S COMPENSATION
Each non-employee Director is paid an annual retainer of $30,000. In keeping
with the Board's policy to tie management and Director compensation to overall
Company performance and to increase Director share ownership, the Board amended
the Non-Employee Director Stock Plan ("Plan") in 1996 to require that a minimum
of $20,000 of the annual retainer be paid in Common Stock of the Company. Under
other provisions of the Plan, several non-employee Directors elected to receive
more Company Stock than the required minimum. This increase in the minimum
amount of the annual retainer Directors must take in Company Stock to 66-2/3%
insures that all Directors will have a minimum of $100,000 worth of Company
Stock after five years of service. In addition to the annual retainer, non-
employee Directors of the Company, its subsidiaries, and members of Board
committees are paid $1200 for each Board or Committee meeting attended, not to
exceed two meeting fees per day regardless of the number of meetings attended.
Directors also receive a full meeting fee or partial meeting fee (depending on
distance) for travel to attend meetings away from the Director's home. In
consideration for their additional responsibility and time commitments, non-
employee Directors serving as Committee Chairpersons are also paid an additional
$1,000 quarterly.
The Company's Retirement Plan for Outside Directors, adopted March 6, 1987,
was terminated on June 25, 1996. The actuarial value of the vested benefit as of
May 20, 1996, for each Director was converted into "phantom stock" of the
Company at its fair market value on May 20, 1996. The "phantom stock" is held
in an account to be paid at the time of the Director's departure from the Board.
All "phantom stock" earns dividends at the same rate as listed stock from the
date of conversion and is deemed reinvested in additional shares of such stock.
BOARD AND COMMITTEE MEETINGS
The Board of Directors maintains the following standing committees: Audit,
Corporate and Civic Responsibility, Human Resources, and Planning and Finance.
The Board also establishes ad hoc committees for specific projects when
required.
The Audit Committee was established in July 1999 to review and confer with
the Company's independent auditors and to review the Company's internal auditing
program and procedures to ensure that its operations are in compliance with
applicable laws, regulations and Company policies. The Directors presently
serving on the Audit Committee are Mr. Murphy (Chair), Mses. Coleman and Corbin,
and Messrs. Bliss and Gibson. The Audit Committee met six times in 2000.
The Corporate and Civic Responsibility Committee was formed in July 1999 to
assume the duties of the previous Environmental Committee. Among its other
duties, this Committee also oversees the Company's environmental policy and
performance and provides guidance to executive management on environmental
issues as well as overseeing corporate giving and legislative and governmental
affairs. The Directors presently serving on the Corporate and Civic
Responsibility Committee are Mr. Gibson (Chair), Ms. Corbin, and Messrs. Day,
Murphy, and O'Reilly. The Corporate and Civic Responsibility Committee met four
times in 2000.
The Human Resources Committee was formed in July 1999 to consider nominations
to the Board of Directors as recommended by Stockholders or others. To be
considered, nominations must be submitted in writing to the Committee in care of
the Secretary of the Company. This Committee also reviews Director and
executive performance, recommends appointments to Board Committees and reviews
and recommends to the Board any changes in directors' fees or compensation
adjustments for all officers and executives of the Company. The Committee also
oversees the Company's pension and 401K benefit programs, and has the
responsibility to appoint, discharge and monitor plan money managers, and to
review and discharge the fiduciary duties delegated to the Committee under the
Company's benefit plans. The Directors presently serving on the Human Resources
Committee are Mr. Donnelley (Chair), Ms.
4
Coleman, and Messrs. Day, Herbst, and Wheeler. The Human Resources Committee met
five times in 2000.
The Planning and Finance Committee was formed in July 1999. This Committee
reviews and recommends to the Board the long-range goals of the parent and
subsidiary companies, and the type and amount of financing necessary to meet
these goals. The Directors presently serving on the Planning and Finance
Committee are Mr. Higgins (Acting Chair), Messrs. Bliss, Donnelley, Herbst,
O'Reilly, and Wheeler. The Planning and Finance Committee met six times in
2000.
There were six regularly scheduled and 14 special meetings of the Board of
Directors held during 2000. The aggregate meeting attendance of all members of
the Board was 95% for Board and Committee meetings.
5
SUMMARY COMPENSATION TABLE
The following table sets forth information about the compensation of each
Chief Executive Officer that served in that position during 2000, and each of
the four most highly compensated officers for services in all capacities to the
Company and its subsidiaries. Mr. Malquist, who left the Company in April 2000,
would have been among the four highest compensated officers had he remained
until year end.
Long-Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
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Securities
Other Under-
Annual Restricted Lying All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Awards SARS Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d)(2) (e)(3) (f)(4) (g)(5) (h)(6) (i)(7)
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Walter M. Higgins (1) 2000 215,151 0 33,690 256,000 400,000 0 411,758
Chairman of the Board,
President, and Chief
Executive Officer
Michael R. Niggli (1) 2000 350,654 0 0 0 0 66,781 3,543,295
Chairman and Chief 1999 400,000 255,130 1,183 0 123,000 410,306 8,934
Executive Officer 1998 353,846 216,000 11,161 0 0 115,399 79,743
Steven W. Rigazio 2000 255,003 0 15,477 0 0 26,713 201,227
President, Nevada Power 1999 262,075 81,700 60,654 0 36,260 127,712 6,811
Company 1998 219,462 30,750 13,712 0 0 29,304 4,800
Mark A. Ruelle Senior 2000 250,255 0 15,967 0 0 59,357 19,160
Vice President and Chief 1999 196,654 86,658 7,389 0 61,292 0 8,565
Financial Officer 1998 192,116 72,843 12,342 0 9,000 50,108 8,974
Malyn K. Malquist 2000 177,306 0 52,415 0 0 110,977 2,855,202
President and Chief 1999 352,692 199,875 14,337 0 298,792 0 22,021
Operating Officer 1998 292,960 180,900 16,486 0 61,000 85,184 15,805
William E. Peterson 2000 216,203 0 25,943 0 0 59,357 20,926
Senior Vice President, 1999 200,000 83,053 20,727 0 80,168 0 11,974
General Counsel and 1998 199,385 71,503 18,918 0 9,000 85,184 29,939
Corporate Secretary
Gloria T. Banks-Weddle 2000 209,426 0 16,154 0 0 16,410 15,934
Vice President, 1999 185,769 57,564 41,358 0 18,220 101,582 7,371
Corporate Services 1998 177,222 54,000 0 0 0 29,960 4,514
(1) Mr. Niggli resigned from his position of Chairman, President and Chief
Executive Officer of Sierra Pacific Resources on July 22, 2000, and Mr.
Higgins was named Chairman, President and Chief Executive Officer on August
8, 2000.
6
(2) The amounts presented for 2000 and 1999, and those for Company executives
in 1998, represent incentive pay received pursuant to the Company's "pay
for performance" team incentive plan approved by Stockholders in May 1994.
The 1998 amounts for the Nevada Power Company ("NVP") executives represent
pay received according to the NVP Short-Term Incentive Plan. All of the
amounts are reported in the year they were earned, although payment may
have occurred in a subsequent reporting period. The Board of Directors has
elected not to grant payment of the 2000 incentive pay to the executives.
(3) For the executives listed, except Mr. Malquist, these amounts represent
Personal Time Off payouts. Of the amount reported for Mr. Malquist,
$17,687.17 represents the difference between the price paid by the
executive, upon the exercise of non-qualified stock options, and the fair
market value on the date of purchase; the remainder, $34,727.49, represents
the payment of dividend equivalents.
(4) Upon rehire, Mr. Higgins was awarded a restricted stock grant of 16,000
shares with the payment of dividend equivalents. On the date of grant the
value of this award was $256,000 at $16.00 per share. At December 31,
2000, the value of the grant was $257,000 at $16.0625 per share. The grant
will vest on condition of continued employment on the vesting date over a
four year period in the following manner:
September 2002 4,000 shares
September 2003 4,000 shares
September 2004 8,000 shares
(5) As a result of the August 1, 1999, merger with NVP, all Company
nonqualifying stock options outstanding as of that date were converted at a
ratio of 1.44:1. For the pre-merger Company executives, the 1999 option
amounts include the number of new shares issued during the year, as well as
the total number of shares that were converted for that employee. For 1998
the amounts are the same as those presented in prior years and do not
reflect the conversion. Also, the 2000 Non-qualified Stock Options were
granted in August of 1999, therefore they are included in the 1999 amounts.
(6) The Long-term incentive payouts for the Company executives, for the three-
year period January 1, 1997, to December 31, 1999, were not approved for
payment by the Company's Board of Directors; therefore, zero amounts are
shown in 1999 for the pre-merger Company executives. In 1999, NVP
executives received a lump sum payout of all their performance shares as a
result of the August 1, 1999, merger.
(7) Amounts for all Other Compensation include the following for 2000:
7
Gloria T.
Walter M. Michael R. Steven W. Mark A. Malyn K. William E. Banks
Description Higgins Niggli Rigazio Ruelle Malquist Peterson Weddle
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Company $ 10,200 $ 10,200 $ 10,200 $10,200 $ 10,200 $10,200 $10,200
contributions to
the 401K deferred
Compensation plan
Company-paid 2,444 1,844 5,499 5,499 917 5,499 4,149
portion of
Medical/Dental/
Vision Benefits
Company 2,785 4,497 3,391
contributions to
the nonqualified
deferred
compensation plan
Imputed income on 1,233 955 653 328 253 728 715
group term life
insurance
premiums paid by
the Company
Insurance 1,116 348 558 1,107 870
premiums paid
for executive
term life polices
Moving Expense 32,323
Reimbursement
Additional 397,881
Compensation
upon Rehire/1/
Non-Qualified 249,666
Pension Payments
Severance/Stay 3,496,856 184,875 2,589,111
Agreement
payments
Total $411,758 $3,543,295 $201,227 $19,160 $2,855,202 $20,925 $15,934
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/1/ The reasons for and components of this payment are described in the Report
of the Human Resources Committee on Executive Compensation and Chief Executive
Officer Compensation.
8
OWNERSHIP OF STOCK BY DIRECTORS, NOMINEES
FOR DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
Voting Stock
So far as the Company knows, no person, firm or corporation owned
beneficially more than 5% of the shares of Common Stock outstanding on the
record date.
The table below sets forth the shares of Sierra Pacific Resources Common
Stock beneficially owned by each Director, nominee for Director, the Chief
Executive Officer, and the four other most highly compensated executive
officers. No Director, nominee for Director or executive officer owns, nor do
the Directors and executive officers as a group own, in excess of one percent of
the outstanding Common Stock of the Company. Unless otherwise indicated, all
persons named in the table have sole voting and investment power with respect to
the shares shown.
Shares
Beneficially Percent of Total Shares
Owned as of Outstanding as of
Name of Director or Nominee March 15, 2001 March 15, 2001
- --------------------------------- -------------------- ---------------------------
Edward P. Bliss 26,637
Mary L. Coleman 165,895
Krestine M. Corbin 19,636
Theodore J. Day 34,172
James R. Donnelley 34,459 No director or nominee
Fred D. Gibson Jr. 21,580 for director owns in excess
Jerry E. Herbst 13,902 of one percent
Walter M. Higgins 30,010
James L. Murphy 18,513
John F. O'Reilly 12,733
Dennis E. Wheeler 17,552
--------------------
395,089
====================
Shares
Beneficially Percent of Total Shares
Owned as of Outstanding as of
Executive Officers March 15, 2001 March 15, 2001
- --------------------------------- -------------------- -------------------------
Walter M. Higgins 30,010
Michael R. Niggli (1) 0
Steven W. Rigazio 31,660 No executive officer owns
Mark A. Ruelle 50,286 in excess of one percent.
William E. Peterson 69,275
Gloria T. Banks-Weddle 14,825
--------------------
196,056
====================
All Directors and executive officers
as a group (a)(b)(c) 739,782
====================
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-9-
(1) Mr. Niggli resigned from his position of Chairman, President and Chief
Executive Officer of Sierra Pacific Resources on July 21, 2000, and Mr.
Higgins was named Chairman, President and Chief Executive Officer on August
8, 2000.
(a) Includes shares acquired through participation in the Employee Stock
Purchase Plan and/or 401(k) Plan.
(b) The number of shares beneficially owned includes shares which the executive
officers currently have the right to acquire pursuant to stock options
granted and performance shares earned under the Executive Long-Term
Incentive Plan. Shares beneficially owned pursuant to stock options granted
to Messrs. Higgins, Rigazio, Ruelle, Peterson, Ms. Banks Weddle, and
Directors and executive officers as a group are 0, 16,407, 47,244, 60,316,
13,891, and 261,881 shares, respectively. Shares beneficially owned as a
result of performance shares earned by Messrs. Higgins, Rigazio, Peterson,
Ruelle, Ms. Banks Weddle, and Directors and executive officers as a group
are 0, 1,521, 3,042, 3,042, 934, and 14,506 shares, respectively.
Additionally, 16,000 shares are beneficially owned by Mr. Higgins pursuant
to restricted stock grants.
(c) Included in the shares beneficially owned by the Directors are 97,683
shares of "phantom stock" representing the actuarial value of the
Directors' vested benefits in the terminated Retirement Plan for Outside
Directors. The "phantom stock" is held in an account to be paid at the time
of the Director's departure from the Board.
-10-
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options to the named executive
officers of Sierra Pacific Resources in 2000. Pursuant to Securities and
Exchange Commission (the "SEC") rules, the table also shows the present value of
the grant at the date of grant. The exercise price of all options is the market
value of the stock as listed on the New York Stock Exchange at the time the
options are granted.
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Individual Grants (1)
- ------------------------------------------------------------------------------------
Percent of
Number of Total
Securities Options/SARs
underlying Granted to Exercise Grant
Options/ Employees of Base Date
SARs in Fiscal Price Expiration Present
Name Granted Year ($/Sh) Date Value
(a) (1) (b) (c) (2) (d) (e) (3) (f) (4)
- ---------------------------------------------------------------------------------------------------
Walter M. Higgins 400,000 100.00% $16.00 02/18/2009 $1,520,635
08/04/2000 Grant
Michael R. Niggli 0 0 0 0 0
Steven W. Rigazio 0 0 0 0 0
Mark A. Ruelle 0 0 0 0 0
Malyn K. Malquist 0 0 0 0 0
William E. Peterson 0 0 0 0 0
Gloria T. Banks 0 0 0 0 0
Weddle
- ---------------------------------------------------------------------------------------------------
(1) Under the Company's executive long-term incentive plan, a grant of 400,000
shares of nonqualifying stock options was made on August 4, 2000. One-
quarter of this grant vests annually commencing one year after the date of
the grant, and is dependent on certain performance criteria.
(2) The total number of nonqualifying stock options granted to all employees in
2000 was 400,000. All of the executives, except Mr. Higgins because his
employment did not begin until 2000, were granted their year 2000 shares on
the date of the NVP & SPR merger, August 1, 1999. As a result, these grants
were reported in 1999.
(3) Mr. Higgins' grant will expire on either his 65th birthday, 02/18/09, or
one year from his date of retirement, whichever occurs first.
(4) The hypothetical grant-date present values are calculated under the Black-
Scholes Model. The Black-Scholes Model is a mathematical formula used to
value options traded on stock exchanges. The assumptions used in
determining the option grant date present value listed above include the
stock's average expected volatility (30.49%), average risk free rate of
return (6.14%), average projected dividend yield (4.81%), the stock option
term (9.5 years), and an adjustment for risk of forfeiture during the
vesting period (4 years at 3%). No adjustment was made for non-
transferability.
-11-
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table provides information as to the value of the options
held by the named executive officers at year-end measured in terms of the
closing price of Sierra Pacific Resources common stock on December 31, 2000.
Number of Securities Dollar
Underlying Value of Unexercised
Unexercised in-the-Money
Options/SARS at Options/SARS at
Shares Fiscal Year-End Fiscal Year-End
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- ----------------------------------------------------------------------------------------------------
Walter M. Higgins 0 0 0/400,000 0/25,000
Michael R. Niggli 0 0 0 0
Steven W. Rigazio 0 0 4,320/31,940 0
Mark A. Ruelle 0 0 25,032/36,260 0
Malyn K. Malquist 14,107 17,687 0 0
William E. Peterson 0 0 42,899/37,269 28,412/ 0
Gloria T. Banks-Weddle 0 0 2,640/15,580 0
- ----------------------------------------------------------------------------------------------------
(c) Related to the exercise of the options reported in (b), Mr. Malquist
received dividend equivalents totaling $34,727.
(e) Pre-tax gain. Value of in-the-money options based on December 31, 2000,
closing trading price of $16.0625 less the option exercise price.
-12-
LONG-TERM INCENTIVE PLANS - AWARDS
IN LAST FISCAL YEAR
The Executive Long-Term Incentive Plan (LTIP) provides for the granting of
stock options (both nonqualified and qualified), stock appreciation rights
(SARs), restricted stock performance units, performance shares and bonus stock
to participating employees as an incentive for outstanding performance.
Incentive compensation is based on the achievement of pre-established financial
goals for the Company. Goals were established for customer satisfaction, total
shareholder return (TSR) compared against the Dow Jones Utility Index and annual
growth in earnings per share (EPS).
The following table provides information as to the performance shares
granted to the named executive officers of Sierra Pacific Resources in 2000.
Nonqualifying stock options granted to the named executives as part of the LTIP
are shown in the table "Option/SAR Grants in Last Fiscal Year."
Estimated Future Payouts Under Non-Stock
Price-Based Plans
-----------------------------------------
Performance or
Number of Other Period
Shares, Units Until
or Other Maturation or Threshold Target Maximum
Name Rights Payout $ $ $
(a) (b) (c) (d) (1) (e) (2) (f) (3)
- --------------------------------------------------------------------------------------------------
Walter M. Higgins 10,164 3 years $132,132 $264,264 $462,462
Michael R. Niggli 0 0 0 0 0
Steven W. Rigazio 2,900 3 years $ 37,700 $ 75,400 $131,950
Mark A. Ruelle 2,900 3 years $ 37,700 $ 75,400 $131,950
Malyn K. Malquist 0 0 0 0 0
William E. Peterson 2,900 3 years $ 37,700 $ 75,400 $131,950
Gloria T. Banks 1,300 3 years $ 16,900 $ 33,800 $ 59,150
Weddle
- ----------------------------------------------------------------------------------------------------
(1) The threshold represents the level of TSR and EPS achieved during the cycle
which represents minimum acceptable performance and which, if attained,
results in payment of 50% of the target award. Performance below the
minimum acceptable level results in no award earned.
(2) The target represents the level of TSR and EPS achieved during the cycle
which indicates excellent performance and which, if attained, results in
payment of 100% of the target award.
(3) The maximum represents the maximum payout possible under the plan and a
level of TSR and EPS indicative of exceptional performance which, if
attained, results in a payment of 175% of the target award.
All levels of awards are made with reference to the price of each
performance share at the time of the grant.
-13-
PENSION PLANS
The following table shows annual benefits payable on retirement at normal
retirement age 65 to elected officers under the Company's defined benefit plans
based on various levels of remuneration and years of service which may exist at
the time of retirement.
Highest Average Annual Benefits for Years of Service Indicated
Five-Years -------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
- --------------- -------------------------------------------------------
$ 60,000 $ 27,000 $ 31,500 $ 36,000 $ 36,000 $ 36,000
$120,000 $ 54,000 $ 63,000 $ 72,000 $ 72,000 $ 72,000
$180,000 $ 81,000 $ 94,500 $108,000 $108,000 $108,000
$240,000 $108,000 $126,000 $144,000 $144,000 $144,000
$300,000 $135,000 $157,500 $180,000 $180,000 $180,000
$360,000 $162,000 $189,000 $216,000 $216,000 $216,000
$420,000 $189,000 $220,500 $252,000 $252,000 $252,000
$480,000 $216,000 $252,000 $288,000 $288,000 $288,000
$540,000 $243,000 $283,500 $324,000 $324,000 $324,000
$600,000 $270,000 $315,000 $360,000 $360,000 $360,000
$660,000 $297,000 $346,500 $396,000 $396,000 $396,000
$720,000 $324,000 $378,000 $432,000 $432,000 $432,000
The Company's noncontributory Retirement Plan provides retirement benefits
to eligible employees upon retirement at a specified age. Annual benefits
payable are determined by a formula based on years of service and final average
earnings consisting of base salary and incentive compensation. Remuneration for
the named executives is the amount shown under "Salary" and "Incentive Pay" in
the Summary Compensation Table. Pension costs of the Retirement Plan to which
the Company contributes 100% of the funding are not and cannot be readily
allocated to individual employees and are not subject to Social Security or
other offsets.
During 2000, a change was made to the policy for calculating credited years
of service; now, the first year of service is recognized as credited.
Reflecting this change, the years of credited service for the named executives
are as follows: Mr. Higgins, 7.1; Mr. Niggli, 0; Mr. Malquist, 0; Mr. Rigazio,
16.5; Mr. Ruelle, 3.8; Mr. Peterson, 14.5; and Ms. Banks Weddle, 26.5.
A supplemental executive retirement plan (SERP) and an excess plan are also
offered to the named executive officers. The SERP is intended to ensure the
payment of a competitive level of retirement income to attract, retain and
motivate selected executives. The excess plan is intended to provide benefits
to executive officers whose pension benefits under the Company's retirement plan
are limited by law to certain maximum amounts.
In addition, the Company has entered into an agreement with Mr. Peterson
crediting him with four years of service for prior years service with his
previous employer, most of which was dedicated to performing legal services for
the Company and SPPC, and an additional one-half year credit for each year of
service with the Company for the first ten years of his employment.
-14-
SEVERANCE ARRANGEMENTS
----------------------
Individual severance allowance contracts exist for the named executive
officers which provide for severance pay, payable in a lump sum or by purchase
of an annuity, if within two years after a change in control of the Company,
there is a termination of employment by the Company related to such change in
control, or a termination of employment by the employee for good reason, in each
case as described in the contracts. In these circumstances, officers are
entitled to a severance allowance not to exceed an amount equal to 36 months of
the officer's base salary and any bonus and the continuation for up to 36 months
of participation in the Company's group medical and life insurance plans.
Change in control is defined in the plans as, among other things, a dissolution
or liquidation, a reorganization, merger or consolidation in which the Company
is not the surviving corporation, the sale of all or substantially all the
assets of the Company (not the sale of a work unit) or the acquisition by any
person or entity of 30% or more of the voting power of the Company.
In addition, several merger-related and merger-conditioned severance
arrangements have been entered into between the Company and several executives,
which are described in the section "Certain Relationships and Related
Transactions.
-15-
PERFORMANCE GRAPH
The line graph below compares the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the Standard & Poor's (S&P) Composite-500 Index and
the Dow Jones Utilities Index for a five-year period commencing December 31,
1995, and ending December 31, 2000.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG SIERRA PACIFIC RESOURCES, THE S & P 500 INDEX
AND THE DOW JONES UTILITIES INDEX
- ---------------------------------------------------------------------------------------------------------------------------
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
------------------------------------------------------------------------------
SIERRA PACIFIC RESOURCES $100 $128.91 $175.07 $183.75 $ 87.37 $ 90.45
- ---------------------------------------------------------------------------------------------------------------------------
STANDARD & POORS 500 $100 $122.96 $163.98 $210.84 $255.22 $231.98
- ---------------------------------------------------------------------------------------------------------------------------
DOW JONES UTILITIES $100 $109.10 $134.19 $159.52 $149.91 $226.01
- ---------------------------------------------------------------------------------------------------------------------------
*$100 invested on 12/31/95 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
- ---------------------------------------------------------------------------------------------------------------------------
-16-
REPORT OF THE AUDIT COMMITTEE
The Audit Committee, described in the section "Board and Committee
Meetings," has adopted and maintains a written charter which was approved by the
full Board of Directors. The Committee reviews and reassesses the adequacy of
its charter on an annual basis. A copy of the charter is attached hereto as
Exhibit A. In accordance with its written charter, the Committee assists the
Board in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing, and financial reporting practices of the
Company. The Committee Chair, as representative of the Committee, discussed the
interim financial information contained in each quarterly earnings announcement
with the CFO, Controller, and independent auditors prior to public release, and
the entire Committee reviewed and discussed the Annual Report on Form 10-K
before recommending its adoption and filing by the Board with the Securities and
Exchange Commission.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors' independence. A
statement of audit fees and all other fees charged by the auditors is set forth
immediately following this report.
The Committee also discussed with management, the internal auditors, and
the independent auditors the quality and adequacy of the Company's internal
controls and the internal audit function's organization, responsibilities,
budget and staffing. The Committee reviewed with both the independent and the
internal auditors their audit plans, audit scope, and identification of audit
risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Committee reviewed the audited financial statements of the Company as
of and for the fiscal year ended December 31, 2000, with management and the
independent auditors. Management has the responsibility for the preparation of
the Company's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that the Company's
audited financial statements be included in its Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, for filing with the Securities and
Exchange Commission. The Committee also recommended the reappointment of the
independent auditors and the Board concurred in such recommendation.
All members of the Audit Committee are independent as defined in Sections
303.01(B)(2)(a) and (3) of the New York Stock Exchange Standards. No member of
the Committee has any relationship with the Company that might interfere with
the exercise of independence from management of the Company. Each member is
financially knowledgeable and the Chairman is a CPA and retired partner of and
consultant to Grant Thornton, an international accounting and management
consulting firm.
Members of the Audit Committee:
Edward P. Bliss Fred D. Gibson, Jr.
Mary Lee Coleman James L. Murphy, Chair
Krestine M. Corbin
-17-
Audit Fees
- ----------
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively
"Deloitte"), for professional services rendered for the audit of the Company's
annual financial statements for the fiscal year ended December 31, 2000, and for
the reviews of the financial statements included in the Company's quarterly
reports on Form 10-Q for that fiscal year were $358,620.
All Other Fees
- --------------
The aggregate fees billed by Deloitte for services rendered to the
Company, other than the services described above under "Audit Fees," for the
fiscal year ended December 31, 2000, were $555,230, and primarily relate to work
performed in connection with filings made with the Securities and Exchange
Commission and debt financings. The Audit Committee has considered and
determined that the provision of these services is compatible with maintaining
the principal accountant's independence.
REPORT OF THE HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION
In 1994, Sierra Pacific Resources Directors and Stockholders approved a
compensation plan designed to tie executive pay to the Company's overall
performance as well as to their own achievements as individuals. To review, the
guiding principles of the pay-for-performance plan are:
. To encourage executive involvement in creating long-term Stockholder
value by emphasizing the executive's ownership of Company Stock.
. To tie cash awards to specific goals set for the Company, the
executive's business unit, and the individual.
. To make improved customer satisfaction, as measured by outside
surveys, a specific element of the performance program.
. To tie compensation to both annual and long-term strategic plans.
. To be able to attract and retain executives of the high caliber vital
to long-term Company success.
. To relate base pay to industry standards but to require superior
performance in order to receive payouts above those standards.
The plan sets base salaries for executives at a 50/50 blend of median
levels for comparably sized companies in utility and general industries, with
additional "at risk" compensation, which is awarded on condition that goals
designed to increase Stockholder value are satisfied or exceeded. The at-risk
portion is based on competitive data for comparable positions which is assembled
and evaluated by independent consultants and is set at the 50th percentile of
general industry companies with annual revenues of $1-$3 billion. The
expectation is that total cash compensation will exceed the competitive market
in good performance years and fall below market if performance is below average.
Long-term performance share grant incentives are based on meeting or
exceeding financial performance, operational, and/or customer satisfaction goals
established by the Board at the beginning of each cycle. In 2000, the long-term
grants reported on the table comprised 10% to 15% of an executive's position
rate. These stock grants, which include dividend equivalents provided goals are
met, cover a period of three years commencing on January 1, 2000. They are
earned by meeting requirements for annual growth in earnings per share and total
Stockholder return in comparison with the S&P utilities index, as measured over
the three-year period of the award.
The 2000 grants did not include any non-qualified stock option grants
except for the CEO, as discussed in the Report on Chief Executive Office
Compensation below. The year 2000 options were
-18-
granted to the executive group on the date of the NVP and SPR merger. As a
result, these grants were reported in 1999.
For the past several years, including 2000, the Board of Directors
commissioned Towers Perrin to review the Company's executive compensation
strategy and levels of compensation. For 2000, the Committee determined not to
increase base salary position rates for the officer group as a whole, except for
an across-the-board inflation adjustment.
The annual cash incentive plan contemplates a payment in cash or stock
based on achieving pre-established goals based on revenue growth, cost
reductions, customer satisfaction, and/or earnings improvement. Mid-term awards
in restricted stock are based on achievement of goals tied to performance over a
period ranging from one to three years and includes factors such as execution
and achievement of strategies tied to long-term value, such as market
performance and overall operational efficiencies. The long-term program
provides for an opportunity to earn amounts ranging from 27% to 140% (CEO) of
base pay in performance shares and options, paid 60% in options, which vest 33-
1/3% per year, and 40% in performance shares subject to achieving pre-
established goals designed to increase Stockholder value. Long-term awards of
stock options are ultimately based on recognition that long-term Stockholder
value is the ultimate indication of the degree of success. Due to the financial
performance of the Company and its financial condition as a whole, no annual
incentive or mid-term grants were awarded to the executive group as a whole for
the year 2000.
1998 long-term grant opportunities paid in 2001 were earned over a period
of six to 24 months. Targets were based on timeliness of closing the NVP merger
and achievement of merger savings. Despite the Company's financial performance,
which was principally related to rising fuel and purchased power costs which the
operating companies could not fully recover in retail electric rates, the
Company realized over $30,000,000 in savings within 12 months of the closing of
the merger with Nevada Power, which occurred approximately 14 months after
merger announcement. Those extraordinary achievements resulted in an award of
performance shares of 162.5% of target, and are reflected in the summary
compensation table.
CHIEF EXECUTIVE OFFICER COMPENSATION
Under the Company's compensation plan, CEO compensation is based on the
same guiding principles established for the executive group as a whole.
Mr. Higgins
- -----------
On August 4, 2000, the Company elected Walter M. Higgins as President,
Chief Executive Officer and Chairman of the Board under terms and conditions of
an employment offer. The terms and conditions of that agreement essentially
replicate Mr. Higgins' compensation and benefits package provided by his
previous employer, AGL Resources, and make him whole for benefits and
compensation lost, forgone, or otherwise forfeited as a result of his accepting
employment with the Company.
The Board of Directors engaged Towers Perrin to evaluate Mr. Higgins' offer
prior to consummating it in order to assure that it was consistent with Company
policy to compensate its senior executives, including the Chief Executive
Officer, at or near the midpoint of the competitive market for base salary and
incentive compensation opportunities for executives of comparably sized
companies in general industry.
The employment agreement with Mr. Higgins provides for an annual base
salary of $590,000, participation in the Company's short-term incentive program
at 65% of base pay, and participation in the Company's long-term incentive
program approved by Stockholders at 140% of base salary. These programs are
described in the Human Resources Committee Report on Executive Compensation
provided above. Under the agreement, Mr. Higgins was also paid $387,881,
representing 83% of the
-19-
incentive payment he would have earned as of September 30, 2000, and would have
been paid had he remained at AGL Resources, Inc., until November 1, 2000. The
agreement also provides that Mr. Higgins would receive one-half of 38% of the
year 2000 Company annual incentive opportunity provided he satisfied
expectations of the Board during the remainder of the year, and one-half of 38%
of the year 2000 award opportunity based on the same goals and under the same
terms and conditions as exist for the officer group as a whole. The Committee
determined that Mr. Higgins achieved his performance goals and therefore earned
one-half of the 38%, but consistent with its decision not to pay any incentive
award to the officer group as a whole, elected not to award Mr. Higgins any
annual incentive compensation for FY 2000. Future payments will be based on
corporate and personal performance targets established under terms and
conditions of the plan. The agreement also provides that Mr. Higgins will be
paid long-term incentives in accordance with the terms of the plan approved by
Stockholders in 1994, which contemplates a performance share grant of 13,200
shares effective January 2001, to be earned over a three-year period under
performance measurements relating to financial performance and total Stockholder
return. Effective January 1, 2001, he also received 104,000 non-qualified stock
options, which will vest at one-third per year. As with the officer group as a
whole, the strike price will be fixed at the average daily closing price of the
stock on the New York Stock Exchange for the 30-day period January 1-31. In
addition, Mr. Higgins will be eligible to receive on a pro-rata basis (28 of 36
months) the 2000-2002 performance share grants, which are also earned based on
targets relating to financial performance and total Stockholder return. Mr.
Higgins also received a one-time restricted stock grant of 16,000 shares with
dividend equivalents, grossed-up for taxes, which will vest over a four-year
period. Mr. Higgins is required to accumulate and maintain, over five years, two
times annual compensation in Company stock, and was also granted 400,000 non-
qualified stock options at a strike price based on the closing stock price on
the day he accepted employment with the Company, which will vest 25% per year or
sooner if certain price threshold levels are met. Mr. Higgins is also eligible
to participate in the Company's Supplemental Executive Retirement Plan and was
provided credit for all previous years of service with the Company, plus all
years served at AGL Resources or Louisville Gas & Electric, with benefits
reduced by any qualified benefits received from that prior employment. Mr.
Higgins was also provided $2,000,000 of life insurance coverage at Company
expense and is otherwise eligible to participate in all employer-sponsored
health, pension, benefit, and welfare plans. In the event Mr. Higgins is
terminated by the Company for any reason other than cause (as defined in the
agreement), he will receive one year's base salary and annual incentive payment,
subject to execution of an appropriate release and non-compete covenants. In the
event of a termination resulting from a change in control, within 24 months
following a change in control of the Company (as defined in the agreement either
(a) by the Company for reasons other than cause (as defined in the agreement),
(b) death or disability, or (c) by Mr. Higgins for good reason as defined in the
agreement, including a diminution of responsibilities, compensation, or benefits
(unless, with respect to reduction in salary or benefits, such reduction is
applicable to all senior executives of the Company and the acquirer)), he will
receive certain payments and benefits. This severance payment and benefit
include (i) a lump sum payment equal to three times the sum of his base salary
and target bonus, (ii) a lump sum payment equal to the present value of the
benefits he would have received had he continued to participate in the Company's
retirement plans for an additional three years (or, in the case of the Company's
Supplemental Executive Retirement Plan only, the greater of three years or the
period from the date of termination until the executive's early retirement date,
as defined in such plan), and (iii) continuation of life, disability, accident
and health insurance benefits for a period of 36 months immediately following
termination of employment.
Under the employment agreement, Sierra Pacific will pay any additional
amounts sufficient to hold Mr. Higgins harmless for any excise tax that might be
imposed as a result of being subject to the federal excise tax on "excess
parachute payments" or similar taxes imposed by state or local law in connection
with receiving any compensation or benefits that are considered contingent on a
change in control.
A change in control for purposes of the Employment Agreement occurs (i) if
the Company merges or consolidates, or sells all or substantially all of its
assets, and less than 65% of the voting power of the surviving corporation is
owned by those Stockholders who were Stockholders of the Company immediately
prior to such merger or sale; (ii) any person acquires 20% or more of the
Company's voting stock; (iii) the Company enters into an agreement or the
Company or any person announces an intent to take action, the consummation of
which would otherwise result in a change in control, or the Board of
-20-
Directors of the Company adopts a resolution to the effect that a change in
control has occurred; (iv) within a two-year period, a majority of the Directors
of the Company at the beginning of such period cease to be directors; or (v) the
Stockholders of the Company approve a complete liquidation or dissolution of the
Company.
Mr. Niggli
- ----------
Michael Niggli served as Chief Executive Officer from July 28, 1999, to
July 21, 2000, at which time his employment was terminated by the Board of
Directors. His year 2000 compensation and benefits were not adjusted from that
which was reported in last year's Committee Report to Stockholders. As a result
of his termination, Mr. Niggli was entitled to receive the compensation and
benefits under his employment contract, which was entered into in connection
with the July 1999 merger of NVP and the Company which was approved by
Stockholders in 1998. Under the terms of that contract, Mr. Niggli received the
severance payments set forth in the summary compensation table, principally
consisting of three times base pay and annual incentive award, earned but unpaid
performance shares as of the date of termination, three years additional
retirement, and extended health and medical benefits. The terms and conditions
of that contract are described in the section "Certain Relationships and Related
Transactions."
Members of the Human Resources Committee
Theodore J. Day Jerry E. Herbst
Mary Lee Coleman Dennis E. Wheeler
James R. Donnelley, Chair
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
Mr. Peterson, formerly a partner with the law firm of Woodburn and Wedge,
became Senior Vice President and General Counsel for Sierra Pacific Resources in
1993. Woodburn and Wedge, which has performed legal services for Sierra Pacific
Power Company since 1920 and for Sierra Pacific Resources and all of its
subsidiaries from their inception, continues to perform legal work for the
Company. Mr. Peterson's spouse, an equity partner in the firm since 1982, has
performed work for the Company since 1976 and continues to do so from time to
time.
Susan Oldham, a former employee of Sierra Pacific Power Company
specializing in water resources law, planning and policy, accepted the Company's
voluntary severance offering in December 1995. Ms. Oldham is the spouse of
Steven C. Oldham, Senior Vice President, Corporate Development and Strategic
Planning, for the Company. Ms. Oldham, a licensed attorney in Nevada and
California, has continued to perform specialized legal services in the water
resources area for the Company on a contract basis.
CHANGE IN CONTROL AGREEMENTS
The Company has entered into change in control severance agreements with
Gloria Banks Weddle, Jeffrey L. Ceccarelli, Matt H. Davis, Steven C. Oldham,
William E. Peterson, Douglas R. Ponn, Mark A. Ruelle, Mary O. Simmons, and Mary
Jane Reed. These agreements provide that, upon termination of the executive's
employment within 24 months following a change in control of the Company (as
defined in the agreement either (a) by the Company for reasons other than cause
(as defined in the agreements), (b) death or disability, or (c) by the executive
for good reason as defined in the agreement, including a diminution of
responsibilities, compensation, or benefits (unless, with respect to reduction
in salary or benefits, such reduction is applicable to all senior executives of
the Company and the acquirer), the executive will receive certain payments and
benefits. These severance payments and benefits include (i) a lump sum payment
equal to three times the sum of the executive's base salary and target bonus,
(ii) a lump sum payment equal to the present value of the benefits the executive
would have
-21-
received had he continued to participate in the Company's retirement plans for
an additional three years (or, in the case of the Company's Supplemental
Executive Retirement Plan only, the greater of three years or the period from
the date of termination until the executive's early retirement date, as defined
in such plan), and (iii) continuation of life, disability, accident and health
insurance benefits for a period of 36 months immediately following termination
of employment. The agreements also provide that if any compensation paid, or
benefit provided, to the executive, whether or pursuant to the change in control
agreements, would be subject to the federal excise tax on "excess parachute
payments," payments and benefits provided pursuant to the agreement will be cut
back to the largest amount that would not be subject to such excise tax, if such
cutback results in a higher after-tax payment to the executive. The Board of
Directors entered into these agreements in order to attract and retain excellent
management and to encourage and reinforce continued attention to the executives'
assigned duties without distraction under circumstances arising from the
possibility of a change in control of the Company. In entering into these
agreements, the Board was advised by Towers Perrin, the national compensation
and benefits consulting firm described above, and Skadden, Arps, Slate, Meagher
& Flom, an independent outside law firm, to insure that the agreements entered
into were in line with existing industry standards, and provided benefits to
management consistent with those standards. The Company declined to renew these
contracts in 2000, and they will expire on December 31, 2001, unless renewed or
replaced before that time.
EMPLOYMENT AGREEMENTS
Walter M. Higgins
- -----------------
Mr. Higgins' employment contract is discussed in the Human Resources
Committee Report on Executive Compensation.
Mr. Niggli and Mr. Malquist
- ---------------------------
In connection with the 1999 merger of Sierra Pacific Resources and NVP, the
Company entered into Employment Agreements with Messrs. Niggli and Malquist.
Messrs. Niggli and Malquist are sometimes hereinafter individually referred to
as the "Executive." The Employment Agreements became effective on July 28,
1999, and had a term of three years.
Pursuant to the Employment Agreements, Mr. Niggli served as Chairman and
Chief Executive Officer of the Company, and Mr. Malquist served as President and
Chief Operating Officer of the Company and Chief Executive Officer of NVP and
Sierra Pacific Power Company.
Each Executive's Employment Agreement provided that he would receive annual
base salary commensurate with his position and level of responsibility, as
determined by the Company's Board (or compensation committee thereof), but not
less than the Executive's annual base salary as in effect immediately prior to
the Merger. Each Employment Agreement also provided that the Executive would be
eligible to participate in any annual incentive and long-term cash incentive
plans applicable to executive and management employees that are authorized by
the Board. The Executives were also entitled to participate in all employee
benefit plans in which senior executives of the Company are entitled to
participate, in certain fringe benefits, and in the supplemental retirement
plans in which they participated immediately prior to the Merger.
If during the term of the employee agreement the Company terminated the
employment of the Executive for reasons other than cause (as defined in the
agreement), death or disability, or the Executive terminated his employment for
good reason (as defined in the employment agreement), the Executive would
receive, in addition to all compensation earned through the date of termination
and coverage and benefits under all benefit and incentive plans to which he is
entitled pursuant to the terms thereof, a severance payment equal to three times
the sum of his annual base salary and target annual bonus. In addition, the
Executive would continue to receive health benefits (i.e., medical insurance,
etc.) and life benefits on the same terms and conditions as existed prior to his
termination for 36 months following his
-22-
termination (the "Continuation Period"). The Company also agreed to pay any
additional amounts sufficient to hold the Executive harmless for any excise tax
that might be imposed as a result of being subject to the federal excise tax on
"excess parachute payments" or similar taxes imposed by state or local law in
connection with receiving any compensation or benefits that is considered
contingent on a change in control. Mr. Malquist's employment was terminated on
April 18, 2000, and Mr. Niggli's employment was terminated on July 21, 2000, in
each case under circumstances which entitled the Executive to the termination
benefits described above and as set forth in the summary compensation table. As
a result of these terminations, Mr. Malquist received a total payment (including
a gross-up for excise taxes) of $2,589,111, and Mr. Niggli received a total
payment (including a gross-up for excise taxes) of $3,496,856.
Steven W. Rigazio
- -----------------
On August 31, 2000, the Company entered into an employment agreement with
Steven W. Rigazio, President of NVP. Under the terms of the agreement, Mr.
Rigazio will be paid $255,000 in annual base salary, subject to adjustment if
the Board determines that an adjustment is appropriate. In addition, Mr.
Rigazio is entitled to receive annual incentive and long-term compensation in
accordance with the terms and conditions of existing plans as apply to the
officer group as a whole. If Mr. Rigazio becomes disabled during the course of
his employment, he will be entitled to receive 100% of base salary for six
months, and any annual incentive pay for which he would otherwise be eligible
during the year he first went on disability. At the expiration of any short-
term disability, Mr. Rigazio would be eligible for long-term disability under
the Company's long-term disability plan and will continue to be covered by the
Company's medical, vision, and dental plans during all of such time and will
continue to earn years of service under the Retirement Plan until age 65 at
which time he will be required to retire. During such time, he will also
receive life insurance benefits substantially similar to those he was entitled
to receive before going on short-term disability or long-term disability. If
Mr. Rigazio dies before age 55 (the Retirement Plan's earliest retirement date),
his surviving spouse will be eligible to receive the Retirement Plan's pre-
retirement death benefit at the time Mr. Rigazio would have become 55. If Mr.
Rigazio dies while on short-term disability or long-term disability, his
surviving spouse will be eligible for SERP benefits as if Mr. Rigazio were 62
and will be paid an annuity on the date of death, or when Mr. Rigazio would have
reached age 55, whichever occurs later. In addition, the Company will continue
to provide the Employee's spouse and eligible dependents all medical coverage so
long as they are not covered by other plans.
In addition to salary, the Company will also pay Mr. Rigazio $1,109,250 in
six $184,875 installments beginning on October 1, 2000, and ending July 2002.
If Mr. Rigazio is terminated or dies, any remaining balance will be paid to his
estate or surviving spouse.
David G. Barneby
- ----------------
On June 19, 1999, NVP entered into a retention agreement effective on the
date of the merger with David G. Barneby, Vice President, Generation, which
provides him with benefits which he would have been entitled to receive had he
voluntarily terminated his original May 13, 1998, employment agreement with NVP.
The agreement provides, in addition to base pay and any incentive pay or long-
term pay accrued during the period of his employment, an additional $600,890 in
cash, payable in substantially equal quarterly installments commencing on
October 1, 1999, and ending on July 31, 2002. If employment is terminated
during the term or if the employee dies during the term, any remaining and
unpaid installments shall be paid to the employee or to his heirs. If the
employee is terminated or retires, then the employee shall, in addition, receive
the economic equivalent to an enhancement of his retirement allowing for payment
in cash of the present value of the average early retirement benefit calculated
on the basis of the greater of actual age or age 55, and an additional five
years of age or years of service or a combination thereof to maximize retiree
medical benefits. The employee is also entitled to 24 months of employee health
and life benefits in amounts substantially equivalent to those in effect
immediately prior to termination.
-23-
In the event any payments or benefits or distributions thereof under the
contract or any other agreements, policies, or plans of the Company would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
by reason of being considered contingent on a change of control, then the
employee is entitled to receive an additional payment equal to such excise tax.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, the Company's independent public accountants, has
been selected to conduct an audit and to report on the Company's financial
statements for the years 2000 and 2001.
The Company's financial statements, and the financial statements of
subsidiary companies for the year ended December 31, 2000, were audited by
Deloitte & Touche LLP. A representative of Deloitte and Touche will be present
at the Annual Meeting to answer questions from Stockholders and will have an
opportunity to make a statement if desired. The auditors fees for year 2000 and
the Audit Committee's review of auditor independence is set forth in the Report
of the Audit Committee above.
DISCRETIONARY AUTHORITY
The Company has no knowledge of any matters to be presented for action by
the Stockholders at the meeting other than as set forth herein. However, the
enclosed proxy gives discretionary authority to the persons named therein to act
in accordance with their best judgment in the event that any additional matters
should be presented.
DEADLINE FOR STOCKHOLDERS PROPOSALS
Proposals of Stockholders intended to be presented at the 2002 Annual
Meeting of Stockholders must be received on or before December 12, 2001, for
inclusion in the proxy materials relating to that meeting. Any such proposals
should be sent to William E. Peterson, Secretary, Sierra Pacific Resources, P.O.
Box 30150, Reno, NV 89520-3150.
ANNUAL REPORT
In order to exercise prudent judgment, Stockholders are invited to examine
the financial statements contained in the Company's Annual Report for 2000, a
copy of which has been mailed to all Stockholders of record through the close of
business on March 16, 2001.
-24-
EXHIBIT A
SIERRA PACIFIC RESOURCES
AUDIT COMMITTEE
CHARTER
One committee of the Board of Directors will be known as the Audit
Committee (the "Committee"). Only independent Directors may serve on the
Committee. An independent Director is free of any relationship that could
influence his or her judgment as a Committee member. An independent Director
may not be associated with a major vendor, consultant, or customer of the
Company unless the customer is a recipient of tariffed service. When there is
any doubt about independence, the Director should recuse himself from any
decisions that might be influenced by that relationship.
The primary function of the Audit Committee is to assist the Board in
fulfilling its oversight responsibilities by reviewing the financial information
that will be provided to the Stockholders and others, the systems of internal
controls management and the Board of Directors have established, and all audit
processes.
A. General Responsibilities
1. The Committee provides open avenues of communications among the
internal auditors, the independent accountants, and the Board of Directors.
2. The Committee must report all committee actions to the full Board and
make appropriate recommendations.
3. The Committee has the power and authority to conduct or authorize
investigations and inquiries into all matters within the Committee's scope of
authority. The Committee is authorized to retain consultants or others as it
needs to assist it in discharging its responsibilities.
4. The Committee will meet at least four (4) times a year and more
frequently as circumstances dictate. The Committee Chair has the power to call
a Committee meeting whenever he or she deems necessary. The Committee may ask
members of management or others to attend the meeting and provide any
information or reports the Committee deems necessary or appropriate.
B. Responsibilities for Engaging Independent Accountants and Reviewing and
Ratifying the Appointment of the Internal Auditor
1. The Committee will select the independent accountants for the annual
Company audit. The Committee's selection is subject to approval by the full
Board of Directors. The Committee also will review and set any fees paid to the
independent accountants and review and approve dismissal of the independent
accountants.
2. The Committee will review and have veto power over the appointment,
replacement, reassignment, or dismissal of the Director of Internal Audit.
3. The Committee will confirm and assure the independence of the internal
auditor and the independent accountants, including a review of management
consulting services provided by the independent accountant and the fees paid for
them.
-25-
4. The Committee will consider, in consultation with management and the
independent accountant and the Director of Internal Audit, the audit scope and
procedural plans made by the internal auditors and the independent accountants.
5. The Committee will listen to management and the primary independent
accountant if either thinks there might be a need to engage additional auditors.
The Committee will decide whether to engage an additional firm and, if so, which
one.
6. The Committee will make sure that the Director of Internal Audit and
the independent accountants coordinate the internal and external audits. The
purpose of coordinating these efforts is to assure completeness of coverage,
reduce redundancy, and use of audit resources effectively.
C. Responsibilities for Reviewing Internal Audits, the Annual External Audit,
and the Review of Quarterly and Annual Financial Statements
1. The Committee will ascertain that the independent accountants view the
Board of Directors as its client, that it will be available to the full Board of
Directors at least annually, and that it will provide the Committee with a
timely analysis of significant financial reporting issues.
2. The Committee will ask management, the Director of Internal Audit, and
the independent accountants about significant risks and exposures and will
assess management's steps to minimize them.
3. The Committee will review the following with the independent
accountants and the Director of Internal Audit:
a. The adequacy of the Company's internal controls, including
computerized information system controls and security.
b. Any significant findings and recommendations made by the independent
accountants or internal audit, together with management's responses to
them.
c. The auditor's qualitative judgments about the appropriateness,
quality, not just the acceptability, of accounting principles and financial
disclosures and how aggressive (or conservative) the accounting principles
and underlying estimates are.
4. Shortly after the annual examination is completed and periodically
after quarterly financial reports, the Committee will review with management and
the independent accountants:
a. The Company's annual financial statements and related footnotes.
b. The independent accountants' audit of and report on the financial
statements.
c. Any serious difficulties or disputes with management encountered
during the course of the audit.
d. Anything else about the audit procedures or findings that GAAS
requires the auditors to discuss with the Committee.
5. The Committee will consider and review with management and the Director
of Internal Audit:
a. Any significant findings during the year and management's responses
to them.
b. Any difficulties the internal auditor encountered while conducting
audits, including any restrictions on the scope of their work or access to
required information.
-26-
c. Any changes to the planned scope of management's internal audit plan
that the Committee thinks advisable.
d. The Internal Audit Department's budget and staffing.
e. The Internal Audit Department's charter.
f. Whether the Internal Audit Department has complied with the
Institute of Internal Auditing's Standards for the Professional Practice of
Internal Auditing.
6. The Committee will review with management annual filings with the SEC
and other published documents containing the Company's financial statements and
will consider whether the information in the filings is consistent with the
information in the financial statements.
7. The Committee will review the interim financial reports with
management, the independent accounts, and the Director of Internal Audit before
those interim reports are released to the public or filed with the SEC or other
regulators.
D. Periodic Responsibilities
1. Review and update the Committee's charter annually.
2. Review policies and procedures covering officers' expense accounts and
perquisites, including their use of corporate assets, and consider the results
of any review of those areas by the internal auditor or the independent
accountants.
3. Review legal and regulatory matters that may have a material effect on
the organization's financial statements.
4. Meet with the Director of Internal Audit, the independent accountants,
and management in separate executive sessions to discuss any matters the
Committee or these groups believe should be discussed privately with the
Committee.
5. Periodically review claims, litigation, and other contingent
liabilities asserted against or involving the Company.
Adopted: September 20, 1999
-27-
SIERRA PACIFIC RESOURCES This Proxy is Solicited on behalf of
the Board of Directors.
The undersigned hereby appoints Walter M. Higgins and James L. Murphy or either
of them, each with full power of substitution, proxies to vote all shares of
Common Stock of Sierra Pacific Resources which the undersigned may be entitled
to vote at the Annual Meeting of the Stockholders to be held on May 21, 2001,
and at any and all adjournments thereof:
1. TO ELECT THE MEMBERS OF THE BOARD OF DIRECTORS.
For all nominees listed below Withhold authority to vote
(except as written to the contrary below) [_] for all nominees [_]
James R. Donnelley Walter M. Higgins John F. O'Reilly
(INSTRUCTION: To withhold authority to vote for any individual nominee write the
nominee's name on the space provided below.)
________________________________________________________________________________
2. WITH DISCRETIONARY AUTHORITY TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
(CONTINUED FROM OTHER SIDE)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED "FOR" ALL NOMINEES IN ITEM 1.
Please sign below exactly as your name
appears on this card, including the
title "Executor", "Trustee", etc., if
the same is indicated. When stock is
held by a corporation, this proxy
should be executed by an authorized
officer thereof.
______________________________________
Signature
______________________________________
Dated: ___________________ , 2001 Signature if held jointly
Please mark, sign, date and
return the proxy card using
the enclosed envelope.