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.

 

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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.

 

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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

 

 

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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

 

 

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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.

 

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(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

 

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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 shall be attached to the statement). If the
Executive objects to the Company’s calculations, the Company shall pay to the
Executive such portion of the Severance Payments (up to 100% thereof) as the
Executive determines is necessary to result in the proper application of
subsection A of this Section 6.2.

 

6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof
shall be made not later than the fifth day following the Date of Termination;
provided, however, that if the amounts of such payments, and the limitation on
such payments set forth in Section 6.2 hereof, cannot be finally determined on
or before such day, the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Executive of the minimum amount of
such payments to which the Executive is clearly entitled and shall pay the
remainder of such payments (together with interest on the unpaid remainder (or
on all such payments to the extent the Company fails to make such payments when
due) at 120% of the rate provided in Section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest
at 120% of the rate provided in Section 1274(b)(2)(B) of the Code).

 

6.4 The Company also shall pay to the Executive all legal fees and expenses
incurred by the Executive in disputing in good faith any issue hereunder
relating to the termination of the Executive’s employment, in seeking in good
faith to obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit provided
hereunder. Such payments shall be made within five (5) business days after
delivery of the Executive’s written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.

 

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6.5 Notwithstanding any other provision of this agreement, if the executive is
entitled to and claims benefits under or pursuant to any other change in control
agreement entered into between Company or Sierra and the executive, or any terms
or conditions thereunder, the executive shall not be entitled to any of the
severance benefits or any other benefits under this agreement or terms or
conditions of this agreement.

 

7. Termination Procedures and Compensation During Dispute.

 

7.1 Notice of Termination. After a Change in Control or potential Change in
Control and during the Term, any purported termination of the Executive’s
employment (other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party hereto in
accordance with Section 10 hereof. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board which was called and held for
the purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive’s
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.

 

7.2 Date of Termination. “Date of Termination,” with respect to any purported
termination of the Executive’s employment after a Change in Control or potential
Change in Control and during the Term, shall mean (i) if the Executive’s
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive’s duties during such thirty (30) day
period), and (ii) if the Executive’s employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by Sierra, shall not be less than thirty (30) days (except in the
case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is given).

 

7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice
of Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this Section 7.3), the party receiving such Notice
of Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the earlier of (i)
the date on which the Term ends or (ii) the date on which the dispute is finally
resolved, either by

 

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mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable
or with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given by the Executive only if such notice is
given in good faith and the Executive pursues the resolution of such dispute
with reasonable diligence.

 

7.4 Compensation During Dispute. If a purported termination occurs following a
Change in Control or potential Change in Control and during the Term and the
Date of Termination is extended in accordance with Section 7.3 hereof, the
Company shall continue to pay the Executive the full compensation in effect when
the notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the Date of Termination, as
determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement (other
than those due under Section 5.2 hereof) and shall not be offset against or
reduce any other amounts due under this Agreement.

 

8. No Mitigation. The Company agrees that, if the Executive’s employment with
Sierra terminates during the Term, the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof.
Further, the amount of any payment or benefit provided for in this Agreement
(other than Section 6.1(B) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the
Executive to the Company, or otherwise.

 

9. Successors; Binding Agreement.

 

9.1 In addition to any obligations imposed by law upon any successor to the
Company, the Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive were to
terminate the Executive’s employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.

 

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9.2 This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive’s
estate.

 

10. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive’s signature on the final
page hereof and, if to the Company, to the address set forth below, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:

 

To the Company:

 

Sierra Power Resources

6100 Neil Road

Reno, Nevada 89520-3150

Attention:  General Counsel

 

11. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or of any lack of compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party; provided, however,
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive’s employment with Sierra only in the event that the
Executive’s employment with Sierra is terminated on or following a Change in
Control or potential Change in Control, by Sierra other than for Cause or by the
Executive other than for Good Reason. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Nevada. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the

 

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Executive has agreed. The obligations of the Company and the Executive under
this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6 and 7 hereof) shall survive such expiration.

 

12. Validity.

 

12.1 The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

 

13. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

 

14. Settlement of Dispute; Arbitration.

 

14.1 All claims by the Executive for benefits under this Agreement shall be
directed to and determined by the Board and shall be in writing. Any denial by
the Board of a claim for benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific reasons for the denial and
the specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that the
Executive’s claim has been denied.

 

14.2 Any further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Reno, Nevada in
accordance with the rules of the American Arbitration Association then in
effect; provided, however, that the evidentiary standards set forth in this
Agreement shall apply. Judgment may be entered on the arbitrator’s award in any
court having jurisdiction. Notwithstanding any provision of this Agreement to
the contrary, the Executive shall be entitled to seek specific performance of
the Executive’s right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.

 

15. Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated below:

 

(A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Exchange Act.

 

(B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.

 

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(C) “Base Amount” shall have the meaning set forth in Section 280G(b)(3) of the
Code.

 

(D) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.

 

(E) “Board” shall mean the Board of Directors of the Company.

 

(F) “Cause” for termination by Sierra of the Executive’s employment shall mean
(i) the willful and continued failure by the Executive to substantially perform
the Executive’s duties with Sierra (other than any such failure resulting from
the Executive’s incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 7.1 hereof) after a written demand
for substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive’s duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to Sierra, monetarily or otherwise. For purposes of clauses
(i) and (ii) of this definition, (x) no act, or failure to act, on the
Executive’s part shall be deemed “willful” unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive’s act, or failure to act, was in the best interest of Sierra and (y)
in the event of a dispute concerning the application of this provision, no claim
by Sierra that Cause exists shall be given effect unless Sierra establishes to
the Board by clear and convincing evidence that Cause exists.

 

(G) A “Change in Control” shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:

 

(I) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company or its affiliates)
representing 30% or more of the combined voting power of the Company’s then
outstanding securities, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (i) of paragraph (III)
below; or

 

(II) the following individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Company’s stockholders was approved or

 

 

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recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
or

 

(III) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any subsidiary of
the Company, at least 66.66% of the combined voting power of the securities of
the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities acquired directly
from the Company or its Affiliates other than in connection with the acquisition
by the Company or its Affiliates of a business) representing 30% or more of the
combined voting power of the Company’s then outstanding securities; or

 

(IV) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or
disposition by the Company of all or substantially all of the Company’s assets,
other than a sale or disposition by the Company of all or substantially all of
the Company’s assets to an entity, at least 66.66% of the combined voting power
of the voting securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company immediately
prior to such sale.

 

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.

 

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(H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

(I) “Company” shall mean Sierra Pacific Resources and, except in determining
under Section 15(G) hereof whether or not any Change in Control of the Company
has occurred, shall include any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.

 

(J) “Date of Termination” shall have the meaning set forth in Section 7.2
hereof.

 

(K) “Disability” shall be deemed the reason for the termination by Sierra of the
Executive’s employment, if, as a result of the Executive’s incapacity due to
physical or mental illness, the Executive shall have been absent from the
full-time performance of the Executive’s duties with Sierra for a period of six
(6) consecutive months, Sierra shall have given the Executive a Notice of
Termination for Disability, and, within thirty (30) days after such Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of the Executive’s duties.

 

(L) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended
from time to time.

 

(M) “Executive” shall mean the individual named in the first paragraph of this
Agreement.

 

(N) “Good Reason” for termination by the Executive of the Executive’s employment
shall mean the occurrence (without the Executive’s express written consent)
after any Change in Control, or prior to a Change in Control under the
circumstances described in clauses (ii) and (iii) of the second sentence of
Section 6.1 hereof (treating all references in paragraphs (I) through (VII)
below to a “Change in Control” as references to a “Potential Change in
Control”), of any one of the following acts by Sierra, or failures by Sierra to
act, unless, in the case of any act or failure to act described in paragraphs
(I), (IV), (V) or (VI) below, such act or failure to act is corrected prior to
the Date of Termination specified in the Notice of Termination given in respect
thereof:

 

(I) the assignment to the Executive of any duties substantially below the
Executive’s status as a senior executive officer of Sierra or a substantial
adverse reduction in the nature or status of the Executive’s responsibilities
from those in effect immediately prior to the Change in Control other than any
such alteration primarily attributable to the fact that the Company may no
longer be a public company;

 

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(II) a reduction by Sierra in the Executive’s annual base salary as in effect on
the date hereof or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all senior executives of
Sierra and all senior executives of any Person in control of Sierra;

 

(III) the failure by Sierra to pay to the Executive any portion of the
Executive’s current compensation except pursuant to an across-the-board
compensation deferral similarly affecting all senior executives of Sierra and
all senior executives of any Person in control of Sierra, or to pay to the
Executive any portion of an installment of deferred compensation under any
deferred compensation program of Sierra, within thirty (30) days of the date
such compensation is due;

 

(IV) the failure by Sierra to continue in effect any compensation plan in which
the Executive participates immediately prior to the Change in Control which is
material to the Executive’s total compensation, including but not limited to the
Company’s Officer and Senior Managers Annual Incentive Plan, Executive Long-Term
Incentive Plan, Long-Term Performance Share Program and Stock Option Plan or any
substitute plans adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by Sierra to continue the
Executive’s participation therein (or in such substitute or alternative plan) on
a basis not materially less favorable, both in terms of the amount or timing of
payment of benefits provided and the level of the Executive’s participation
relative to other participants, as existed immediately prior to the Change in
Control;

 

(V) the failure by Sierra to continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive under any of Sierra’s
pension, savings, life insurance, medical, health and accident, or disability
plans in which the Executive was participating immediately prior to the Change
in Control (except for across the board changes similarly affecting all senior
executives of Sierra and all senior executives of any Person in control of
Sierra), the taking of any other action by Sierra which would directly or
indirectly materially reduce any of such benefits or deprive the Executive of
any material fringe benefit enjoyed by the Executive at the time of the Change
in Control, or the failure by Sierra to provide the Executive with substantially
the same number of paid vacation days to which the Executive is entitled on the
basis of years of service with Sierra in accordance with Sierra’s normal
vacation policy in effect at the time of the Change in Control; or

 

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(VI) any purported termination of the Executive’s employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 7.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.

 

The Executive’s right to terminate the Executive’s employment for Good Reason
shall not be affected by the Executive’s incapacity due to physical or mental
illness. The Executive’s continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act constituting
Good Reason hereunder.

 

For purposes of any determination regarding the existence of Good Reason, any
claim by the Executive that Good Reason exists shall be presumed to be correct
unless the Company establishes to the Board by clear and convincing evidence
that Good Reason does not exist.

 

(O) “Notice of Termination” shall have the meaning set forth in Section 7.1
hereof.

 

(P) “Pension Plan” shall mean any tax-qualified, supplemental or excess benefit
pension plan maintained by Sierra and any other plan or agreement entered into
between the Executive and Sierra which is designed to provide the Executive with
supplemental or additional retirement benefits.

 

(Q) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

 

(R) “Potential Change in Control” shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:

 

(I) the Company enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control;

 

(II) the Company or any Person publicly announces an intention to take or to
consider taking actions which, if consummated, would constitute a Change in
Control;

 

(III) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 15% or more of either the then
outstanding shares of common stock of the Company

 

 

16

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or the combined voting power of the Company’s then outstanding securities (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates); or

 

(IV) any of the items in R(I) through (III) occurs which is connected with or
arises out of a potential Change in Control, is caused by, or results from
another potential Change in Control.

 

(S) “Retirement” shall be deemed the reason for the termination by the Executive
of the Executive’s employment if such employment is terminated in accordance
with Sierra’s retirement policy, including early retirement, generally
applicable to its salaried employees.

 

(T) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.

 

(U) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.

 

(V) “Term” shall mean the period of time described in Section 2 hereof
(including any extension, continuation or termination described therein).

 

(W) “Total Payments” shall mean those payments so described in Section 6.2
hereof.

 

Sierra Pacific Resources

By:

 

 

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Walter M. Higgins

   

Chairman, President & CEO

 

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Ernest E. East

 

 

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