EXHIBIT 10(C)
CHANGE IN CONTROL
AGREEMENT
THIS AGREEMENT
, dated January 22, 2004, is made by
and between Sierra Pacific Resources, a Nevada corporation (the
“Company”), and Ernest E. East (the
“Executive”).
WHEREAS , the Company considers it essential to the best
interests of its stockholders to foster the continued employment of
key management personnel; and
WHEREAS , the Board recognizes that, as is the case with
many publicly held corporations, the possibility of a Change in
Control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment
of the Company and its stockholders; and
WHEREAS , the Board has determined that appropriate
steps should be taken to reinforce and encourage the continued
attention and dedication of members of the management of the
Company and its subsidiaries (collectively, “Sierra”),
including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
NOW , THEREFORE , in consideration of the
premises and the mutual covenants herein contained, the Company and
the Executive hereby agree as follows:
1. Defined Terms . The
definitions of capitalized terms used in this Agreement are
provided in the last Section hereof.
2. Term of Agreement .
Subject to the provisions of Section 12.2 hereof, the term of this
Agreement shall commence on the date hereof and shall continue in
effect through December 31, 2004; provided , however
, that if a Change in Control shall have occurred during the Term,
the Term shall expire no earlier than twenty-four (24) months
beyond the month in which such Change in Control occurred; and
further provided , however , that if a
Potential Change in Control shall have occurred during the Term,
the Term shall expire no earlier than the latter of (a) the date on
which such potential Change in Control shall have been terminated,
or (b) 24 months beyond the date on which such potential Change in
Control shall have resulted in a Change of Control.
1
3. Company’s Covenants
Summarized . In order to induce the Executive to remain in the
employ of Sierra and in consideration of the Executive’s
covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance
Payments and the other payments and benefits described herein.
Except as provided in Section 9.1 hereof, no Severance Payments
shall be payable under this Agreement unless there shall have been
(or, under the terms of the second sentence of Section 6.1 hereof,
there shall be deemed to have been) a termination of the
Executive’s employment with Sierra following a Change in
Control or potential Change in Control and during the Term. This
Agreement shall not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in writing
between the Executive and Sierra, the Executive shall not have any
right to be retained in the employ of Sierra. The obligations of
the Company hereunder shall be deemed satisfied to the extent
payments are made by Sierra Pacific Power, Nevada Power, or any
affiliate of the Company.
4. The Executive’s
Covenants . The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in
Control during the Term, the Executive will remain in the employ of
the Company until the earliest of (i) a date which is six (6)
months from the date of such Potential Change of Control, (ii) the
date of a Change in Control, (iii) the date of termination by the
Executive of the Executive’s employment for Good Reason or by
reason of death, Disability or Retirement, or (iv) the termination
by Sierra of the Executive’s employment for any
reason.
5. Compensation Other Than
Severance Payments .
5.1 Following a Change in Control or
potential Change in Control and during the Term, during any period
that the Executive fails to perform the Executive’s full-time
duties with Sierra as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive’s full
salary to the Executive at the rate in effect at the commencement
of any such period, together with all compensation and benefits
payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by Sierra during
such period, until the Executive’s employment is terminated
by Sierra for Disability.
5.2 If the Executive’s
employment shall be terminated for any reason following a Change in
Control or potential Change in Control and during the Term, the
Company shall pay the Executive’s full salary to the
Executive through the Date of Termination at the rate in effect
immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the Date
of Termination under the terms of Sierra compensation and benefit
plans, programs or arrangements as in effect immediately prior to
the Date of Termination or, if more favorable to the Executive, as
in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
2
5.3 If the Executive’s
employment shall be terminated for any reason following a Change in
Control or potential Change in Control and during the Term, the
Company shall pay to the Executive the Executive’s normal
post-termination compensation and benefits as such payments become
due. Such post-termination compensation and benefits shall be
determined under, and paid in accordance with, Sierra’s
retirement, insurance and other compensation or benefit plans,
programs and arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, as in
effect immediately prior to the occurrence of the first event or
circumstance constituting Good Reason.
6. Severance Payments
.
6.1 Subject to Section 6.2 hereof,
if the Executive’s employment is terminated following a
Change in Control and during the Term, other than (A) by Sierra for
Cause, (B) by reason of death or Disability, or (C) by the
Executive without Good Reason, then Sierra shall pay the Executive
the amounts, and provide the Executive the benefits, described in
this Section 6.1 (“Severance Payments”), in addition to
any payments and benefits to which the Executive is entitled under
Section 5 hereof. For purposes of this Agreement, the
Executive’s employment shall be deemed to have been
terminated following a Change in Control by Sierra without Cause or
by the Executive with Good Reason, if (i) the Executive’s
employment is terminated by Sierra 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 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 Sierra 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 severance benefits relating to or resulting from the
Supplemental Executive Retirement Plan, whether as a consequence of
a Change in Control or otherwise, the Company shall pay to the
Executive a
3
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 Sierra 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 6.2 hereof),
such health insurance benefits shall be provided through a
third-party insurer. Benefits otherwise receivable by the Executive
pursuant to this Section 6.1(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. If the Severance Payments shall be
decreased pursuant to Section 6.2 hereof, and the Section 6.1(B)
benefits which remain payable after the application of Section 6.2
hereof are thereafter reduced pursuant to the immediately preceding
sentence, the Company shall, no later than five (5) business days
following such reduction, pay to the Executive the least of (a) the
amount of the decrease made in the Severance Payments pursuant to
Section 6.2 hereof, (b) the amount of the subsequent reduction in
these Section 6.1(B) benefits, or (c) the maximum amount which can
be paid to the Executive without being, or causing any other
payment to be, nondeductible by reason of Section 280G of the
Code.
(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
4
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 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 Pension Plans (without regard to any amendment to any
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 and had been
credited under each Pension Plan during such period with
compensation equal to the Executive’s compensation (as
defined in 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
6.1(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 Executive, immediately
prior to the first occurrence of an event or circumstance
constituting Good Reason.
5
(E) If the Executive would have
become entitled to benefits under Sierra’s post-retirement
health care or life insurance plans, as in effect immediately prior
to the Date of Termination or, if more favorable to the Executive,
as in effect immediately prior to the first occurrence of an event
or circumstance constituting Good Reason, had the Executive’s
employment terminated at any time during the period of thirty-six
(36) months after the Date of Termination, the Company shall
provide such post-retirement health care or life insurance benefits
to the Executive and the Executive’s dependents commencing on
the later of (i) the date on which such coverage would have first
become available and (ii) the date on which benefits described in
subsection (B) of this Section 6.1 terminate.
6.2 (A) Notwithstanding any other
provisions of this Agreement, in the event that any payment or
benefit received or to be received by the Executive in connection
with a Change in Control or the termination of the
Executive’s employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in a Change in Control or
any Person affiliated with the Company or such Person) (all such
payments and benefits, including the Severance Payments, being
hereinafter called “Total Payments”) would be subject
(in whole or part), to the Excise Tax, then, after taking into
account any reduction in the Total Payments provided by reason of
section 280G of the Code in such other plan, arrangement or
agreement, the cash Severance Payments shall first be reduced, and
the non-cash Severance Payments shall thereafter be reduced, to the
extent necessary so that no portion of the Total Payments is
subject to the Excise Tax but only if (A) the net amount of such
Total Payments, as so reduced (and after subtracting the net amount
of federal, state and local income taxes on such reduced Total
Payments) is greater than or equal to (B) the net amount of such
Total Payments without such reduction (but after subtracting the
net amount of federal, state and local income taxes on such Total
Payments and the amount of Excise Tax to which the Executive would
be subject in respect of such unreduced Total Payments);
provided , however , that the Executive may elect to
have the non-cash Severance Payments reduced (or eliminated) prior
to any reduction of the cash Severance Payments.
(B) For purposes of determining
whether and the extent to which the Total Payments will be subject
to the Excise Tax, (i) no portion of the Total Payments the receipt
or enjoyment of which the Executive shall have waived at such time
and in such manner as not to constitute a “payment”
within the meaning of Section 280G(b) of the Code shall be taken
into account, (ii) no portion of the Total Payments shall be taken
into account which, in the opinion of tax counsel (“Tax
Counsel”) reasonably acceptable to the Executive and selected
by the accounting firm (the “Auditor”) which was,
immediately prior to the Change in Control, the Company’s
independent auditor, does not constitute a “parachute
payment” within the meaning of Section 280G(b)(2) of the Code
(including by reason of Section 280G(b)(4)(A) of the Code) and, in
calculating the Excise Tax, no portion of such Total Payments shall
be taken into account which, in the opinion of Tax
6
Counsel, constitutes reasonable compensation for
services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, in excess of the Base Amount allocable
to such reasonable compensation, and (iii) the value of any
non-cash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Auditor in accordance
with the principles of Sections 280G(d)(3) and (4) of the
Code.
(C) At the time that payments are
made under this Agreement, the Company shall provide the Executive
with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the
Company has received from Tax Counsel, the Auditor or other
advisors or consultants (and any such opinions or advice which are
in writing sha
