EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into on
this 27th day of May, 1998, by and between MidAmerican Realty Services Company
(the "Company"), a subsidiary of MidAmerican Energy Holdings Company
("MidAmerican") and R. Xxxxxxx Xxxxx (the "Employee").
WHEREAS, the Company believes that the Employee's contribution to the
growth and success of the Company as a member of its management team will be
substantial and desires to employ the Employee in that role; and
WHEREAS, the Employee is desirous of serving the Company in said
capacity on the terms herein provided;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Employment and Term. The Company hereby agrees to employ the Employee
as a member of its management team and the Employee hereby agrees to
serve the Company in such capacity, on the terms and conditions set
forth herein for the period commencing on the date of this Agreement
and continuing for a period of five years from that date, unless
earlier terminated by the Employee or the Company in accordance with
paragraph 6 herein. Upon the expiration of the initial term of this
Agreement, it shall be automatically extended for one-year periods,
unless on or before the date which is one year prior to the expiration
of the initial term of the Agreement or any subsequent one-year
extension period, either party has delivered to the other written
notice of intent to terminate this Agreement upon its next expiration
date. The purpose of the automatic extension is to assure that the
parties have at least one year prior notice of termination of the
Agreement. This Agreement is subject at all times to the provisions of
paragraph 6.
2. Waiver of Rights. The Employee specifically acknowledges and agrees
that upon the effective date of this Agreement, his prior Employment
Agreement with AmerUs Home Services, Inc. (formerly known as Iowa
Realty Co.) and its successors and assigns is canceled
and no longer in effect. Further, the Employee waives any and all
rights, claims or other causes of action he may have against Company,
its affiliates, parents and its and their predecessors and successors
on account of any contract, liability or other thing done or omitted,
from all time in the past until the effective date of this Agreement.
3. Duties. The Employee is engaged by the Company to be responsible for
such duties related to the Company's management as may from time to
time be assigned by its Board of Directors (the "Board"), and shall
report to the Board. The Employee will, during his term of employment
hereunder:
a. Faithfully and diligently do and perform all such acts and duties
and furnish such services for the Company as the Board or its
designated representative shall direct from time to time;
b. Devote his full time, energy and skill to the business of the
Company and to the promotion of its best interests, except for
vacations, absences made necessary because of illness, and
service on other corporate, civic, or charitable boards or
committees not significantly interfering with his duties
hereunder.
4. Compensation. The Company shall pay the Employee base, and, when
earned in accordance with the provisions of this paragraph, incentive
compensation for the performance of his duties under this Agreement,
as follows:
a. Annual base salary of $225,000, payable at the Company's regular
payroll intervals. The Chief Executive Officer of MidAmerican
Energy Holdings Company shall not less than annually during the
Employee's employment review his annual salary and consider
possible increases, taking into account inflation factors,
performance of the Company, salaries paid for positions of
similar responsibility for other companies, and other relevant
factors, and shall recommend such increases when deemed
appropriate, for approval of the Compensation Committee of the
Board of Directors of MidAmerican (the "Committee").
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b. Short-term incentive compensation to be determined as provided
in Exhibit A attached hereto.
With respect to the calculation of short-term incentives under
this subparagraph, if it becomes apparent that the stated
earnings thresholds cannot be achieved for unforeseen reasons and
in spite of diligent management effort, the Employee may
nonetheless be awarded short-term incentive payments, if approved
by the Committee as recommended by the Chief Executive Officer of
MidAmerican Energy Holdings Company, to reward exemplary
performance.
In the event the Company terminates the Employee's employment for
any reason other than Good Cause, as defined in subparagraph 6(c)
other than due to Employee's death or disability, or the Employee
terminates his employment for Good Reason, as defined in
subparagraph 6(d), prior to the end of any calendar year, he
shall be entitled to a short-term incentive payment if the
earnings thresholds described in Exhibit A have been achieved as
of the last day of the calendar year in which his termination of
employment occurs, provided, however, that the amount of such
payment shall be calculated by multiplying the incentive amount
that would have been payable to the Employee pursuant to Exhibit
A, had his employment not terminated during the calendar year, by
a fraction, the numerator of which is the number of full weeks of
employment completed by the Employee during such calendar year
and the denominator of which is 52. If the Employee's employment
is terminated for Good Cause, as defined in subparagraph 6(c),
other than due to death or disability, or the Employee
terminates his employment for other than Good Reason, as defined
in subparagraph 6(d), prior to the end of any calendar year, no
short-term incentive shall be payable for such year.
c. Long-term incentive compensation as provided in Exhibit B
attached hereto.
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d. If the Employee's employment continues subsequent to the fifth
anniversary of the date of this Agreement, the Employee and the
Chief Executive Officer of MidAmerican Energy Holdings Company
shall negotiate the amount of the Employee's future base salary
and the terms of any further short-term and long-term incentive
arrangements at that time, with all such compensation to be
subject to approval of the Committee.
5. Additional Benefits.
a. The Employee shall be eligible to participate in the ERISA
qualified retirement and welfare benefit plans of the Company in
accordance with the terms and conditions of such plans. The
Employee shall also be entitled to paid vacations and holidays
consistent with the company's customary practice.
b. The Company shall promptly pay (or reimburse the Employee for)
all reasonable expenses incurred by him in the performance of
his duties hereunder in accordance with policies from time to
time adopted by the Board, including business travel and
entertainment expenses. The Employee shall furnish to the
Company such receipts and records as the Company may require to
verify the foregoing expenses.
6. Termination.
a. The Employee may resign his employment with the Company effective
upon two months' advance written notice to the Board. If the
Employee resigns under this paragraph, the Board (by the vote of
a majority of its members other than the resigning Employee and
other members who have given notice of resignation as an
employee) retains the right to terminate the Employee's
employment, effective upon written notice to the Employee, at any
time during the notice period for Good Cause, as defined in
subparagraph 6(c).
b. The employment of the Employee with the Company may be
terminated, for other than Good Cause, as defined in subpara-
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graph 6(c), by the Board directing such termination (by the vote
of a majority of its members other than the Employee and other
members who have given notice of resignation as an employee) and
upon two months' advance written notice to Employee, provided,
however, that Employee may be terminated, effective upon written
notice to Employee, for Good Cause during the notice period. The
Board may require Employee to cease reporting to work during the
notice period, even without Good Cause.
c. The employment of the Employee may be terminated for Good Cause
by the Board directing such termination (by the vote of a
majority of its members other than the Employee and other members
who have given notice of resignation as an employee) and
effective upon written notice to the Employee. Good Cause shall
mean (1) the Employee's conviction of any gross misdemeanor
involving dishonesty, fraud or breach of trust or a felony; (2)
the Employee's engagement in gross misconduct that materially
injures the Company, monetarily or otherwise; (3) the Employee's
gross neglect of his duties under this Agreement, including
Employee's failure to physically appear for work; (4) the
Employee's death or Disability; or (5) the Employee's violation
of paragraph 8 of this Agreement. The Employee shall be
considered to have come under a Disability if he, by reason of
physical or mental disability, becomes unable to perform the
services required of him hereunder for six consecutive months or
more than nine (9) months in the aggregate during any 12-month
period, excluding absences resulting from ordinary transitory
illnesses or injury, and a qualified physician certifies the
Disability.
d. The Employee may terminate his employment with the Company at
any time for Good Reason, effective immediately upon written
notice to the Board. Good Reason shall exist if the Employee
terminates his employment because (1) the Company has materially
breached any of the terms of this Agreement; (2) the Employee is
assigned duties which are materially inconsistent with his
position, duties, responsibilities and status as a member of the
Company's management team; or (3)
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the Employee's office location as assigned to him by the Company
is relocated to a location more than 50 miles from Des Moines,
Iowa; (4) the Company is acquired by Cendant Corporation, or
entities controlled by Cendant Corporation and the Employee is
unable to reach agreement on a modified employment agreement
within thirty (30) days following acquisition.
7. Severance.
a. If the Employee's employment is terminated by the Company for
other than Good Cause or the Employee terminates his employment
with the Company for Good Reason, the Company shall continue to
pay the Employee his base salary as in effect as of his
termination date at the Company's normal payroll intervals during
the Non-Competition Period, as defined in subparagraph 8(a). In
addition, during the Non-Competition Period, the Company shall
also pay to the Employee annually a short-term incentive payment
as described in Exhibit A, equal to the average annual
short-term incentive payments made to the Employee under this
Agreement prior to the Employee's termination. During this
period, if the Employee is eligible for and elects continuation
coverage under one or more group health plans sponsored by the
Company or its subsidiaries, the Company shall pay the same
portion of the premium cost of such coverage, if any, as is paid
by the Company for members of its management team who are
actively employed.
b. If the Employee terminates his employment with the Company for
other than Good Reason, the Company shall pay the Employee his
base salary only through his termination date and the
Non-Competition Period shall continue for the full period
specified in subparagraph 8(a) without additional consideration
other than payments made prior to the Employee's termination
date.
c. If the Employee is terminated by the Company for Good Cause, the
Company shall pay the Employee his base salary
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only through his termination date and the Non-Competition Period
shall continue for the full period specified in subparagraph
8(a) without additional consideration other than the payments
made prior to the Employee's termination date.
d. Except as provided in this paragraph 7 or in subparagraph 4(b),
or as otherwise required pursuant to the laws applicable to the
retirement and welfare plans sponsored by the Company or its
subsidiaries, the Employee shall receive no compensation or
additional benefits following his termination date.
8. Non-Competition and Non-Solicitation.
a. Employee covenants and agrees that, during his employment and
from the date of his termination of employment with the Company
for any reason until the third anniversary of such date (the
"Non-Competition Period"), he will not, directly or indirectly,
own, manage, operate, control, invest in, be employed by or
under contract with, participate in, consult with or render
services to, or be connected in any manner with the operation,
ownership, management or control of any enterprise which competes
with any business engaged in by Company during his employment and
within the states of Minnesota, North Dakota, Wisconsin, Missouri
and Iowa and such other states in which Company conducts business
during his employment. Employee agrees that he will promptly
notify the Board of his employment or other affiliation with any
other business or entity during the Non-Competition Period.
b. Employee also certifies that he is not currently subject to a
noncompetition agreement with a former employer or any other
person or entity which prohibits him from working with the
Company in the capacity contemplated by this Agreement.
c. The Employee specifically acknowledges that he has obtained and
will, in the course of his employment, continue to obtain and
have access to confidential data pertaining to customers and
prospective customers of the Company, that such data is a
valuable and unique asset of Company's business and that the
7
success or failure of Company's specialized business is
dependent to a significant degree upon the ability of Company to
establish and maintain close and continuing personal contacts and
working relationships with its customers and prospective
customers and to develop proposals which are specifically
devised, refined and adjusted to meet, satisfy and coincide with
the interests and requirements of its customers and prospective
customers. Therefore, this paragraph is specifically intended to
prohibit, during the Non-Competition Period, solicitation, either
directly or indirectly, of any or all of Company's customers and
clients at the time of the Employee's termination of employment
and prospective customers and clients of Company with whom
Employee had contact, or was in a position to have contact with,
during the two years preceding his termination of employment.
d. Employee further agrees that during his employment and during the
Non-Competition Period, Employee will not solicit on his own
behalf or on behalf of any other person, the services of any
person who is an employee or agent of Company or was an employee
or agent of Company during the two years preceding the
Non-Competition Period or solicit any of Company's employees or
agents to terminate their employment or agency with Company,
without advance written approval of the Board of the Company.
e. Employee further acknowledges that he has obtained and will, in
the course of his employment, continue to obtain and have access
to confidential data relating to Company's special vendors and
procurers and their representatives and that this information is
a valuable and unique asset of Company, also developed over time.
Employee agrees that, during the Non-Competition Period, he will
not solicit on his own behalf or on behalf of any other person,
any such vendor, procurer or representative for the purposes of
either providing products or services or terminating their
relationship or agency with Company.
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f. Employee further agrees that, during the Non-Competition Period,
he will do nothing to interfere with any of Company's business
relationships or its goodwill or reputation.
g. Employee hereby acknowledges and agrees that all non-public
information and data of Company, including without limitation
that related to products, customers, pricing, sales and financial
results (collectively "Trade Secrets") are of substantial value
to Company, provide it with a substantial competitive advantage
in its business, and are and have been maintained in strictest
confidence as trade secrets. Except as otherwise approved in
writing by the Board, the Employee shall not divulge, furnish, or
make accessible to anyone (other than the Company, its directors
and officers or to others during the course of Employee's
employment with the Company if, in good faith, the Employee
determines that such disclosure is in the best interest of the
Company) any Trade Secrets.
9. Remedies. Employee acknowledges that the restrictions set forth in
paragraph 8 are reasonably necessary to protect a legitimate business
interest of the Company. It is understood that if the Employee
violates his obligations under any of these paragraphs, Company would
suffer irreparable harm for which a recovery of money damages would be
an incomplete and inadequate remedy. It is therefore agreed that in
the case of any violation or threatened violation of paragraph 8 of
this Agreement, Company may apply for and secure injunctive relief,
temporary or provisional, in court, without bond but upon due notice,
pending final resolution on the merits pursuant to arbitration as set
forth in paragraph 16 below. No waiver of any violation of this
Agreement shall be implied from any failure by Company to take action
under this paragraph.
10. Severability. The parties intend that the covenants and agreements
contained herein shall be deemed to be a series of separate covenants
and agreements, one for each and every state of the United States and
political subdivision outside the United States when the business
described is conducted. If, in any judicial proceeding, a court shall
refuse to enforce any of the separate covenants deemed included in
such action, then such unenforceable covenants shall be deemed
9
eliminated from the provisions of this Agreement for the purpose of
such proceeding to the extent necessary to permit the remaining
covenants to be enforced in such proceeding. Further, in the event
that any provision is held to be over broad as written, such provision
shall be deemed amended to narrow its application to the extent
necessary to make the provision enforceable according to applicable
law and enforced as amended.
11. Binding Effect. The covenants and agreements of paragraph 8 shall
survive the termination of this Agreement for any reason and shall not
be terminated by the voluntary dissolution of the Company (or any
parent, subsidiary or successor of the Company) or merger whereby the
Company (or such parent, subsidiary or successor of the Company) is
not the surviving or resulting corporation, or any transfer of
substantially all the assets of the Company, unless no transferee or
successor continues to carry on the business activities of the
Company. In the event of any such merger or consolidation or transfer
of assets, the provisions of this Agreement shall inure to the benefit
of and shall be binding upon the surviving or resulting corporation or
the corporation to which such assets shall be transferred.
12. Entire Agreement. From and after the date of this Agreement, the terms
and provisions of this Agreement constitute the entire agreement
between the parties. This Agreement supersedes any previous oral or
written communications, representations, or agreements with respect to
any subject, including the subject matter of compensation, incentive,
participation and profit sharing and termination compensation.
13. Waiver. No waiver by either party at any time of any breach by the
other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver
of any other provisions or conditions at the same time or at any prior
or subsequent time.
14. Applicable Law. All questions pertaining to the validity,
construction, execution and performance of this Agreement shall be
construed and governed in accordance with the laws of the State of
Iowa. The parties consent to the personal jurisdiction of the State of
Iowa, waive
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any argument that such a forum is not convenient, and agree that any
litigation or arbitration relating to this Agreement shall be venued
in Polk County, Iowa.
15. Tax Withholding. The Company may withhold from any payment of benefits
under this Agreement (and forward to the appropriate taxing authority)
any taxes required to be withheld under applicable law.
16. Disputes. Any and all claims or disputes between Employee and Company
(including the validity, scope, and enforceability of this paragraph),
except as otherwise provided under paragraph 9 herein, shall be
submitted for arbitration and resolution to an arbitrator. No demand
for arbitration may be made after the date when the institution of
legal or equitable proceedings based on such claim or dispute would be
barred by the applicable statute of limitation. The arbitrator shall
be selected by mutual agreement of the parties. Unless otherwise
provided for in this Agreement, the Expedited Labor Arbitration Rules
of the American Arbitration Association shall apply. If the parties
are unable to agree upon an arbitrator, any such dispute shall be
solely and finally settled by arbitration in accordance with the
Expedited Labor Arbitration Rules of the American Arbitration
Association ("AAA"), except (1) the arbitrator shall be selected by
the AAA as follows: (a) the AAA shall submit a list of names of five
arbitrators with significant experience in arbitrating executive
employment disputes; (b) each party shall have the right to exercise
unlimited challenges to said named arbitrators for cause, the AAA to
determine, if disputed, whether any such challenge for cause is
justifiable and to replace any such stricken arbitrator name with
another name so that the parties are presented with five names, none
of which can be stricken for cause; (c) each party hereto may exercise
up to two peremptory challenges to names on the submitted list of five
names; and (d) the AAA shall selected the arbitrator from the
remaining names; and (2) the arbitrator shall render an Award in
writing with sufficient detail to determine the arbitrator's decision
on each issue submitted to arbitration. The parties agree that no
punitive damages shall be awarded hereunder. The parties also agree
that all awards, decisions and remedies in favor of a winning party
hereunder with respect to any issue shall be proportional to the
violation caused by the losing party with respect to that issue. All
costs in conducting the
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arbitration, including but not limited to the arbitration filing fee,
the arbitrator's fees and expenses, and the reasonable attorney's fees
and expenses of the prevailing party (including the attorney's fees
and costs incurred by the prevailing party in seeking or resisting
temporary or provisional court relief as set out in paragraph 9
above), shall be the responsibility of the losing party. In the event
there is more than one issue in dispute and there is no one prevailing
party with respect to all issues in dispute, costs and attorneys' fees
shall be prorated by the arbitrator according to the relative dollar
value of each issue. The arbitrator's Award shall be final and
binding. In the event either party must resort to the judicial process
to enforce the provisions of this Agreement, the award of an
arbitrator or equitable relief granted by an arbitrator, the party
seeking enforcement shall be entitled to recover from the other party
all costs of litigation including, but not limited to, reasonable
attorney's fees and court costs. The arbitration proceedings and Award
shall be maintained by both parties as strictly confidential, except
as otherwise required by court order and with respect to the parties'
attorneys and tax advisors, and, with respect to Company, members of
its management, and, with respect to Employee, his family and close
confidants.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
effective as of the day and year first above written.
MIDAMERICAN REALTY SERVICES COMPANY
By: /s/ X. Xxxxx
-------------------------------------------
Title: Vice President and Chief Financial Officer
-------------------------------------------
R. XXXXXXX XXXXX
/s/ R. Xxxxxxx Xxxxx
----------------------------------------------------
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EXHIBIT A
Short-Term Incentive Compensation Plan for
Senior Executives of MidAmerican Realty Services Company
Participants:
Start Date: January 1, 1998
Term of Plan: 5 years
Award Opportunity: Target award of 70% of base salary, with a
maximum award equal to 100% of base salary
Definition of EBITDA: Operating profit before depreciation; amortization
of transaction costs and goodwill; interest
income or expense; income taxes and unusual
non-recurring gains or expenses (e.g., legal
settlements, provisions for contingencies, effect
of accounting changes and severance costs).
Payment: Payment of the award will be made upon
achievement of the performance criteria and
after the Compensation Committee of the
Board of Directors of MidAmerican Energy
Holdings Company (the "Committee") approves the
incentive award computations, based upon the
recommendation of the Chief Executive Officer
("CEO") of MidAmerican Energy Holdings Company.
Purpose: The intent of the incentive award and its
underlying formula is to focus senior executives
on maximizing "enterprise value".
Award Determination: Award to be recommended to the Committee
will be determined by the CEO and based upon
objective performance criteria to be established
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at the beginning of each calendar year. Such
criteria will also be recommended by the CEO to the
Committee for approval. For 1998, the performance
criteria in effect will be based upon "EBITDA"
level, which will be established by the CEO
following acquisition of AmerUs Home Services, Inc.
by MidAmerican Energy Holdings Company. During a
calendar year, performance criteria may be adjusted
at the sole discretion of the CEO, with the
concurrence of the Committee, to reflect
modifications to MidAmerican Realty Services
Company's operations, resulting from items such as
acquisitions or other items such as acquisitions or
other items for which an adjustment is deemed
appropriate. The CEO and the Committee will be
under no obligation to make any such adjustments to
the performance criteria.
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EXHIBIT B
LONG TERM INCENTIVE COMPENSATION PLAN
FOR SENIOR EXECUTIVES OF
MIDAMERICAN REALTY SERVICES COMPANY
This Exhibit B (this "Exhibit Agreement") constitutes a part of the
employment agreement (the "Employment Agreement") dated May 27, 1998, between
MidAmerican Realty Services Company ("MRSC"), a subsidiary of MidAmerican Energy
Holdings Company ("MidAmerican") and R. Xxxxxxx Xxxxx ("Share holder").
1. Stock Subscription. Shareholder agrees to purchase from
MidAmerican Realty Services Company ("MRSC"), and MRSC hereby agrees to sell to
Shareholder, in accordance with the terms of this Exhibit Agreement, a total of
125 shares of MRSCs common stock (the "Shares").
2. Purchase Price and Manner of Payment.
(a) The total purchase price for the Shares shall be Three Hundred
Eighty-One Thousand Three Hundred Seventy-Six and No/100 Dollars
($381,376.00) (the "Original Purchase Price") which amount will
be payable to MRSC contemporaneously with the execution of the
Employment Agreement by delivery to MRSC of Shareholder's
Promissory Note (the "Promissory Note") in such amount, which
Promissory Note shall be substantially in the form of Attachment
A hereto.
(b) MRSC shall establish a bookkeeping account for the benefit of
Shareholder (the "Account") for the purpose of establishing a
credit towards payment of the Promissory Note. In [March] of each
of the five years commencing in 1999, a credit shall be made to
the Account if certain performance goals are achieved with
respect to the preceding fiscal year as hereinafter set forth.
Additionally, all dividends declared and paid with respect to the
Shares shall be credited to the Account Balance. Aggregate
amounts credited to the Account shall be referred to herein as
the "Account Balance." The Promissory Note shall become due and
payable on the fifth anniversary thereof (the "Fifth
Anniversary"); provided, however, that in the event that
Shareholder's em-
15
ployment with MRSC is terminated for any reason, including,
without limitation, death or disability, prior to the Fifth
Anniversary ("Termination"), the Promissory Note shall become
due and payable on the Closing Date (as hereinafter defined)
following the Termination and, provided further, that in the
event MRSC exercises the Call Option, as hereinafter defined,
prior to the Fifth Anniversary, the Promissory Note shall become
due and payable on the Closing Date following such exercise (the
"Call Option Closing Date"). If Shareholder is employed by MRSC
on the Fifth Anniversary, the Account Balance shall be offset
against amounts owing under the Promissory Note and any remaining
amounts in the Account Balance shall be paid to Shareholder
within [30] days following the Fifth Anniversary. In the event of
Termination for Good Cause, other than due to death or Disability
or without Good Reason, the Account Balance shall be deemed to be
zero, and MRSC shall repurchase the Shares for the Original
Purchase Price plus accrued interest on the Promissory Note
pursuant to Section 9 of this Exhibit Agreement, which shall be
offset against amounts owing under the Promissory Note. In the
event of Termination for Good Reason or not for Good Cause, other
than due to death or Disability, the Account Balance shall be
credited with the target credit, determined in accordance with
subparagraph (c) below, with respect to any further period for
which such credit may be made, and the Account Balance shall be
offset against amounts owing under the Promissory Note. In the
event of exercise of the Call Option prior to the Fifth
Anniversary, the Account Balance shall be credited with the
target credit, determined in accordance with subparagraph (c)
below, with respect to any further period for which such credit
may be made, and the Account Balance shall be offset against
amounts owing under the Promissory Note on the Call Option
Closing Date and, if the Call Option is exercised with respect to
all of the Shares, any remaining amounts in the Account Balance
shall be paid to Shareholder within (30) days following the Call
Option Closing Date; provided that if the Call Option is
exercised with respect to a portion of the Shares, any amounts
remaining in the Account Balance shall not be paid until the
earlier of the Fifth Anniversary or the exercise of the Call
Option with respect to all of the Shares.
(c) For purposes of determining credits to the Account, the
performance goals shall be based on achievement of (a) utility
service integration
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goals (the "Utility Goals") and (b) Realty Co. EBITDA (as
hereinafter defined) goals (the "Realty Goals"), each as approved
annually by the Compensation Committee of the Board of Directors
of MidAmerican (the "Committee"), and upon the recommendation of
the Chief Executive Officer ("CEO") of MidAmerican. The target
credit for each fiscal year shall be 20% of the amount that shall
be due on the Promissory Note on the Fifth Anniversary. The
maximum credit for each fiscal year shall be 40%. The actual
credit made with respect to each fiscal year from 1998 through
2002 shall be based on achievement of the Utility Goals and
Realty Goals, with the relative weight of importance for each
such goal with respect to each of the fiscal years as set forth
below:
Fiscal Year
-------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Utility Goals 30% 35% 40% 45% 50%
Realty Goals 70% 65% 60% 55% 50%
"EBITDA" means earnings of MRSC for a fiscal year before
interest, taxes, depreciation and amortization; provided, however, that the CEO
of MidAmerican may, with the concurrence of the Committee, make such adjustments
as he, in his sole discretion, deems appropriate in connection with intercompany
charges and revenues and the effect of business acquisitions and combinations by
MRSC and the impact of other extraordinary items on financial results.
3. Share Register. Upon receipt from Shareholder of the
Promissory Note, MRSC shall record Shareholder's ownership in the shares in its
share register, which shall be the sole evidence of such ownership. So long as
Shareholder is not in default in the payment of principal or interest on the
Promissory Note, the Shares shall be entitled to full voting rights and to share
in all dividends payable on the Shares.
4. Stock Pledge. To secure the full performance of
Shareholder's obligation to MRSC under the Promissory Note, Shareholder hereby
grants to MRSC a security interest in the Shares.
5. Restriction on Transfer of Shares. No Shares shall be sold,
transferred, assigned, pledged, hypothecated or otherwise disposed of or in any
manner
17
transferred upon the books of MRSC, nor shall any purchaser or other transferee
thereof have any right to demand or require the transfer of any of the Shares at
tempted to be sold or transferred or otherwise disposed of to him or her or any
of the rights of a shareholder of MRSC, without the prior written consent of
MRSC as expressed in a resolution of the MRSC Board of Directors. Any such
purported disposition or encumbrance without compliance with the provisions of
this Exhibit Agreement shall be null and void and shall not be effected on the
books of MRSC.
6. Investment Representations. Shareholder hereby represents
and agrees as follows:
(a) The Shares are being acquired for investment purposes and not
with the view toward the distribution or sale thereof in a public
offering within the meaning of the Securities Act of 1933 (the
"Securities Act") or any rule of regulation under the Securities
Act.
(b) Shareholder has had an adequate opportunity to obtain from
representatives of MRSC the information necessary to permit
Shareholder to evaluate the merits and risks of Shareholder's
investment in MRSC.
(c) Shareholder has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in
the purchase of the Shares and to make an informed investment
decision with respect to that purchase, and can afford a complete
loss of the value of the Shares and is able to bear the economic
risk of holding the Shares for an indefinite period.
(d) Shareholder acknowledges that:
(i) The Shares have not been registered under either the
Securities Act or applicable state securities law, and MRSC
will be relying upon the foregoing investment
representations in issuing the Shares to Shareholder;
(ii) MRSC has no obligation or current intention to register the
Shares under the Securities Act;
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(iii) The Shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under
the Securities Act or an exemption from registration is
then available; and
(iv) The transferability of the Shares will be subject to
restrictions imposed by all applicable federal and state
securities laws, as well as restrictions contained in this
Exhibit Agreement and in the event MRSC chooses, in its
sole discretion, to issue certificates with respect to the
Shares, the certificates evidencing such Shares will be
imprinted with a legend substantially in the following
form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be sold, transferred or otherwise disposed of
in the absence of an effective registration statement
under that Act or an opinion of counsel satisfactory to
the corporation to the effect that registration is not
required. The shares represented by this certificate are
further subject to certain restrictions contained in an
agreement relating to such shares between the shareholder
and the Company dated."
7. Put Option.
(a) On and after the fifth anniversary of the Employment Agreement,
Shareholder shall have the option (the "Put Option") at any time
to require MRSC to purchase all of the Shares, subject to the
terms and conditions of this Exhibit Agreement. The purchase
price, closing date and similar matters in connection with
exercise of the Put Option are as set forth in Section 9 of this
Exhibit Agreement.
(b) In the event of Termination, the Shareholder shall be deemed to
have exercised the Put Option on the date of Termination (the
"Mandatory Put Exercise"). The purchase price, closing date and
similar matters in connection with the Mandatory Put Exercise are
as set forth in Section 9 of this Exhibit Agreement.
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8. Call Option. On and after the second anniversary of the Employment
Agreement, MRSC and its successors and assigns shall have the option (the "Call
Option") at any time and from time to time to purchase any or all of the Shares,
subject to the terms and conditions of this Exhibit Agreement. The purchase
price, closing date and similar matters in connection with exercise of the Call
Option are as set forth in Section 9 of this Exhibit Agreement. Prior to the
fifth anniversary of the Employment Agreement, MRSC shall be able to exercise
the Call Option only in the event of corporate need, as defined and addressed by
the MidAmerican Energy Holdings Company Board of Directors.
9. Put Option, Mandatory Put Exercise and Call Option Terms.
Shareholder shall exercise the Put Option, if at all, by delivering a written
notice of exercise to MRSC; provided, however, that such exercise shall be
deemed to occur upon the date of Termination in the case of the Mandatory Put
Exercise. MRSC or its successor or assign shall exercise the Call Option, if at
all, by delivering a written notice of exercise to Shareholder or its permitted
transferee. Any such exercise of the Put Option or the Call Option is referred
to herein as the "Exercise."
The purchase price for the Shares that are repurchased pursuant to the
Exercise (the "Purchase Price") shall be the fair market value of the Shares as
mutually agreed upon by Shareholder and MRSC, but in no event greater than the
product of (x) the decimal representing the percentage ownership of MRSC voting
capital stock held by Shareholder (based on percentage of votes) at the time of
Exercise multiplied by (y) the Corporate Value (as hereinafter defined) at the
time of Exercise. "Corporate Value" shall mean the market value of the Company
less outstanding liabilities; provided that in no event shall the value exceed
the product of (x) 7 multiplied by (y) the average EBITDA for the two
twelve-month periods immediately preceding the date of the calculation. In the
event the Call Option is exercised in connection with the sale of the Company,
the Corporate Value shall be the sale price for all of the equity of the
Company. In the event that Shareholder and MRSC do not agree on the calculation
of the Purchase Price or the Corporate Value, any dispute shall be resolved
pursuant to arbitration in accordance with the rules of the American Arbitration
Association then in effect. Such arbitration result shall be binding on the
parties. The Purchase Price for the Shares that are repurchased pursuant to the
Mandatory Put Exercise shall be the Purchase Price determined above, except when
the Mandatory Put Exercise results from a Termination for Good Cause, other than
death or Disability or not for Good Reason, the purchase price shall be the
Original Purchase Price plus accrued interest on the Promissory Note.
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MRSC shall make payment of the purchase price for any Shares reacquired
pursuant to the Exercise or the Mandatory Put Exercise by offsetting and
reducing the outstanding principal balance of, and any accrued interest on, the
Promissory Note delivered to MRSC by Shareholder pursuant to Section 2 of this
Exhibit Agreement. The closing of the Exercise or the Mandatory Put Exercise
shall be not less than 30 and not more than 45 days following notice of such
exercise on a date mutually agreeable to MRSC and Shareholder (the "Closing
Date"); provided, however, that in the event of a dispute regarding the Purchase
Price or the inability to determine Corporate Value, the Closing Date shall be a
date not less than 30 and not more than 45 days following resolution of such
dispute. The balance of the purchase price owing to Shareholder, if any, shall
be paid on the Closing Date by delivering to Shareholder MRSC's check in the
amount of the balance of such purchase price.
On the Closing Date, the Share ownership relating to the shares
repurchased recorded in MRSC's share register shall be canceled by MRSC.
10. No Restriction on MRSC's Accounting; Adjustments. This
Exhibit Agreement shall not in any way interfere with the right of MRSC to
select among, adopt or change accounting practices or procedures, whether or not
such accounting practices or procedures have not been previously employed by
MRSC, or to consummate any business investments, acquisitions or divestitures
or to adopt any other policies or plans, at any time or from time to time in its
sole and absolute discretion. In order to carry out the intent and purpose of
this Exhibit Agreement, the CEO of MidAmerian may, in his sole and absolute
discretion, make such adjustments to computations made pursuant to this Exhibit
Agreement in connection with changes in accounting practices or procedures as he
deems necessary or appropriate to prevent dilution or enlargements of the
benefits provided pursuant to this Exhibit Agreement. Such adjustments may be in
connection with changes in accounting practices and procedures, fundamental
transactions and other matters of a similar nature.
11. Unsecured Interest. It is intended that MRSC is only under a
contractual obligation with respect to the Account. The Account Balance shall
not be financed through a trust fund, insurance contracts, or otherwise, and all
such credits shall be satisfied out of the general funds of MRSC, but only if
and to the extent such funds are legally available therefore. Shareholder shall
not have any interest whatsoever in the specific assets of MRSC pursuant to
this Exhibit Agreement and all rights of Shareholder shall be no greater than
the right of any unsecured general creditor of MRSC.
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12. Shareholder's Rights in Future Financing. For a period
commencing on the date of the Employment Agreement and ending on the fifth
anniversary of the Employment Agreement, in the event of any proposed sale of
securities of MRSC (including, without limitation, the sale of Common Stock,
preferred stock, convertible securities and debt instruments, other than
commercial loans or extensions of credit made by a bank, insurance company or
other third-party financial institution, or the issuance of securities in
connection with a capital contribution by an affiliate of MRSC), other than
pursuant to grants of employee stock options, Shareholder shall be provided at
least 10 days' advance notice and have the right to invest in such sale of
securities, on the same terms as offered to any third party (which shall include
affiliates of MRSC), in a percentage amount equal to the percentage ownership of
voting capital stock held by Shareholder immediately prior to such sale;
provided, however, that such right does not include any sale of the Company's
equity securities in connection with a public offering pursuant to a
registration statement filed with the Securities and Exchange Commission.
Nothing in this Section shall limit the right of MRSC, as determined by its
Board of Directors, to issue shares of capital stock of MRSC and determine all
of the terms of such issuance in its discretion.
22
PROMISSORY NOTE
$381,376.00 May 27, 1998
-----------
FOR VALUE RECEIVED, the undersigned, R. Xxxxxxx Xxxxx (the "Maker"),
whose address is _________________________________________ ____________,
promises to pay to the order of MidAmerican Realty Services Company, an Iowa
corporation (the "Lender"), at its office at Des Moines, Iowa, in lawful money
of the United States, or at such other address as the holder hereof may from
time to time designate in writing, the principal amount of Three Hundred
Eighty-One Thousand Three Hundred Seventy-Six and No/100 Dollars ($381,376.00).
The amount and date of the loan evidenced hereunder shall be entered by the
Lender into its records, which records shall be conclusive evidence of the
subject matter thereof absent manifest error.
This Note matures on May 27, 2003 (the "Maturity Date"). Principal and
interest due on the Note on the Maturity Date will be offset by the amount, if
any, in the Account Balance [as defined in the Exhibit Agreement dated May 27,
1998, between Maker and Lender (the "Agreement")] in accordance with terms of
the Agreement. Notwithstanding the foregoing, the Maturity Date shall be deemed
to be the "Closing Date" in the event of exercise of the "Put Option" or the
"Call Option" or in the event of a "Mandatory Put Exercise" as each term is
defined in the Agreement. If the Call Option is exercised with respect to a
portion of the Shares (as defined in the Agreement), the Principal and interest
due on the Note on such Maturity Date shall be equal to the pro rata amount due
on the Promissory Note with respect to the Shares purchased pursuant to the
exercise of such option.
Interest on the unpaid principal balance of this Note shall accrue from
the date hereof at a per annum rate equal to MRSC's average annual borrowing
rate. The Maker also shall pay interest on any overdue installment of principal
from the due date thereof until paid at an interest rate per annum equal at all
times to six percent (6.0%) per annum in excess of the interest rate set forth
above, which interest shall be payable upon demand. Interest shall accrue on the
basis of actual days elapsed in a year consisting of 360 days. No provision of
this Note shall require the payment or permit the collection of interest in
excess of the rate permitted by applicable law.
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Both principal and interest are payable in lawful money of the United
States of America in immediately available funds, subject to the provisions set
forth above in connection with the Account Balance.
All payments under this Note shall be applied initially against accrued
interest and thereafter in reduction of principal.
The Maker warrants and represents to the Lender that this Note is the
Maker's legal, valid and binding obligation, enforceable in accordance with its
terms.
If this Note or any payment required to be made thereunder is not paid
on the due date, the holder hereof shall have, in addition to any other rights
it may have under applicable laws, the right to set off the indebtedness
evidenced by this Note against any indebtedness of such holder to the Maker,
including, without limitation, any salary or other compensation owing by the
Lender to the Maker.
No failure or delay on the part of the holder of this Note in
exercising any power or right under this Note shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof of the exercise of any other power or right.
No notice to or demand on the Maker in any case shall entitle the Maker to any
notice or demand in similar or other circumstances.
The Maker agrees to reimburse the holder of this Note, upon demand, for
all reasonable out-of-pocket expenses, including reasonable attorneys' fees, in
connection with such holder's enforcement of the obligations of the Maker
hereunder.
Presentment and demand for payment, notice of dishonor, protest and
notice of protest are hereby waived.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Iowa (without giving effect to the conflicts of
laws principles thereof). The Maker hereby submits himself to the jurisdiction
of the courts of the State of Iowa and the federal courts of the United States,
located in such state in respect of all actions arising out of or in connection
with the interpretation or enforcement of this Note, waives any argument that
venue in such forums is not convenient and agrees that any actions initiated by
the Maker shall be venued in such forums.
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/s/ R. Xxxxxxx Xxxxx
-----------------------------------
R. XXXXXXX XXXXX (Maker)
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