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 Xxxx Xxxxxx (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 Edina Financial Services, Inc. (formerly
known as E&E Acquisition Company) 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is canceled and no longer in effect.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 $250,000, 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 incen-
tive 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 pay able
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 Company shall reimburse the Employee for up to $5,000 per
year of the premium cost of any life insurance maintained by
the Employee, and up to $2,000 per year of the premium cost of
any long term disability insurance maintained by the Employee.
In addition, 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.
c. The Company shall pay the Employee a vehicle allowance of $800
per month. In addition, the Company shall pay the Employee's
monthly dues at Interlachen Country Club.
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
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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-
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.
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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)
the Employee's office location as assigned to him by the
Company is relocated to a location more than 50 miles from
Edina, Minnesota; (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 de
fined 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, the Company
shall also; (1) continue to reimburse the Employee for the
premium cost of any life or long term disability insurance
maintained by the Employee (subject to the dollar limitations
set forth in subparagraph 5(a); and (2) if the Employee is
eligible for and elects continuation coverage under one or
more group health plans sponsored by the Company or its
subsidiaries, 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.
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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 sub-paragraph 8(a) without additional consider
ation 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 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.
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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
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
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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.
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
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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 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.
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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 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
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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 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/ Xxxx X. Xxxxxxxx
--------------------------
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Title: Secretary
--------------------------
XXXX XXXXXX
/s/ Xxxx Xxxxxx
---------------------------
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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 30% of base salary, with a
maximum award equal to 45% 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 (t his "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 Xxxx Xxxxxx ("Shareholder").
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 Share
holder (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 Anniver sary"); provided, however, that in the
event that Shareholder's employment with MRSC is terminated for any
reason, including, without
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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 Termination due to
death or Disability, 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.
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(c) For purposes of determining credits to the Account, the performance
goals shall be based on achievement of (a) utility service
integration 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.
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5. Restriction on Transfer of Shares. No Shares shall be sold,
transferred, assigned, pledged, hypothecated or otherwise disposed of or in any
manner 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 attempted 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 whatso ever 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.
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PROMISSORY NOTE
$381,376.00 May 27, 1998
-----------
FOR VALUE RECEIVED, the undersigned, Xxxx Xxxxxx (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/ Xxxx Xxxxxx
XXXX XXXXXX (Maker)
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