EXHIBIT 10.4
MIDAMERICAN ENERGY HOLDINGS COMPANY
X.X. XXX 000
XXX XXXXXX, XX 00000-0000
January 24, 1996
Xx. Xxxxxxx X. Xxxxxxxxxxxx
000 Xxxxx Xxxxxx
X.X. Xxx 000
Xxx Xxxxxx, XX 00000-0000
Dear Xx. Xxxxxxxxxxxx:
Pursuant to the Agreement and Plan of Exchange ("Exchange Agreement") dated
as of January 24, 1996, by and between MidAmerican Energy Company
("MidAmerican"), and MidAmerican Energy Holdings Company ("Holdings"),
MidAmerican will become a subsidiary of Holdings. In recognition of the value of
your past services to MidAmerican and its subsidiaries, and in anticipation of
your contribution to the future growth and success of Holdings and its
subsidiaries, Holdings wishes to provide itself and its subsidiaries the
continuing benefits of your service as a senior executive officer of Holdings
and its subsidiaries on the terms and conditions set forth below.
This letter sets forth our agreement with respect to your employment with
Holdings and its subsidiaries during the period commencing on the Effective Time
(as defined in the Exchange Agreement) and ending on the date your employment
with Holdings and its subsidiaries terminates (as defined herein, "Employment
Period") and beyond the Employment Period, with respect to your acting as a
consultant and advisor to Holdings during the period commencing at the end of
the Employment Period and ending on the third anniversary of the retirement date
("Consulting Period") or until such earlier date as otherwise may be determined
hereunder.
1.(a) Between the Effective Time and May 31, 1997 (the "Employment
Period"), you shall serve as Chairman of the Board of the Directors of Holdings
("Chairman"), performing those responsibilities set forth on Exhibit A attached
hereto. Your retirement date shall be May 31, 1997 ("Retirement Date") and the
Consulting Period shall commence on June 1, 1997. During the Employment Period
your duties and services generally shall be performed by you on regular business
days during normal business hours, and you agree to be present as required and
for as much time as is necessary to perform your duties and services for the
business of Holdings and its subsidiaries. You shall be entitled to vacation
in accordance with the policy from time to time in effect for senior executive
officers of Holdings and its subsidiaries with credit for past service with
MidAmerican and its subsidiaries and predecessors of each. During the Employment
Period you shall be reimbursed by Holdings in accordance with the Holdings's
policy from time to time in effect for any expenses commensurate with your
position which you may reasonably incur in the performance of your duties and
services hereunder and which are properly substantiated.
(b) In consideration of and as compensation for your services hereunder and
your agreement not to compete with Holdings as set forth herein, during the
Employment Period, Holdings will pay to you, in equal installments with the same
frequency as for other executives of Holdings, but at least monthly, a base
salary at the annual rate of not less than $400,000, such base salary to be
subject to adjustment during the Employment Period in accordance with Holdings's
policy for executives, and shall never be less than the base salary of the Chief
Executive Officer of Holdings. In addition to such salary, you shall be eligible
to receive, as additional compensation, appropriate management bonuses,
long-term incentive awards and such other compensation elements as are
applicable, in amounts not less than those paid or accrued for the Chief
Executive Officer of Holdings, in relation to the achievement by Holdings and
its subsidiaries of corporate goals and objectives and Holdings will provide to
you all other benefits accorded to full-time senior executive employees of
Holdings from time to time, provided that such benefits shall be not less in the
aggregate than those in effect at MidAmerican as of the Effective Time.
Holdings's obligations to make the salary payments and to provide the other
benefits provided for by this paragraph 1(b) shall be expressly contingent upon,
and subject to, your observance of, and substantial compliance with, all of the
terms and provisions hereof.
2.(a) During the Consulting Period, you shall serve as consultant and
advisor to Holdings. You agree, in your capacity as consultant and advisor, to
hold yourself ready to and to render such advice and counsel to Holdings and any
of its subsidiaries and affiliates as may be requested from time to time with
reasonable advance notice by the Board of Directors or Chief Executive Officer
of Holdings; provided, that you shall not be required to devote in excess of
sixty (60) days in any twelve-month period to your duties as a consultant
hereunder, and provided further that telephonic consultation shall not require
advance notice. It is understood and agreed that such requests for consultation
shall not unreasonably interfere with your employment with any other employer.
You shall report during the Consulting Period directly to the Chief Executive
Officer of Holdings, who shall represent Holdings in all matters relating to the
performance of this Agreement. During the Consulting Period, you shall be
reimbursed for any expenses which you may reasonably incur in the performance of
your duties hereunder and which are properly substantiated.
2
(b) In consideration of and as compensation for your services as a
consultant and advisor to Holdings hereunder, and your agreement not to compete
with Holdings as set forth herein, during the Consulting Period Holdings will
pay to you in equal monthly installments a consulting fee at a rate of $50,000
per annum. Holdings shall not be obligated to make such payments in respect of
any period following the Employment Period if you continue to be actively
employed by Holdings or any subsidiary or affiliate after the Employment Period.
During the Consulting Period Holdings shall provide to you the benefits
described in paragraph 1 (other than the base salary, bonus, long-term incentive
and other cash compensation elements referred to therein), including office
space, equipment and furnishings and a full-time secretary, selected by you, at
the expense of Holdings in quarters agreed upon by you and Holdings. Holdings's
obligations to pay the consulting fee and benefits provided for by this
paragraph 2(b) shall be expressly contingent upon, and subject to, your
observance of, and substantial compliance with, all of the terms and provisions
hereof.
3. You agree that during the Employment Period and the Consulting Period,
and any additional period during which you are employed by or act as a
consultant to Holdings or any subsidiary or affiliate, except with the prior
written consent of Holdings, you will not in any way, directly or indirectly,
own, manage, operate, control, accept employment or a consulting position with,
or otherwise advise or assist or be actively connected with or have any
financial interest in, directly or indirectly, any enterprise which engages in,
or otherwise carries on, any business activity in competition with the business
of Holdings and its subsidiaries in any geographic area in which they engages in
such business. You further agree that during the Employment Period, the
Consulting Period, and any additional period during which you are employed by
Holdings or any subsidiary or an affiliate and, in any event, until the sixth
anniversary of the Effective Time, subject to the foregoing, you will not take
any action which might divert from Holdings or any of its subsidiaries or
affiliates, successors or assigns any opportunity which would be within the
scope of its or their respective present or future operations or business. It is
understood that ownership of not more than one percent (1%) of the equity
securities of a public company shall in no way be prohibited pursuant to the
foregoing provisions.
4. Notwithstanding any of the foregoing provisions of this Agreement,
Holdings may terminate your duties and services hereunder during the term hereof
and discharge you (i) in the event of a breach of this Agreement by you in any
material respect as determined by the affirmative vote of two-thirds of the
membership of Holdings's Board of Directors ("Board"), provided that the Board
shall have given you written notice of such breach, and you shall have failed to
remedy such breach within thirty (30) days of receipt of such notice, (ii) for
cause, upon the affirmative vote of two-thirds of the membership of the Board
(cause, for
3
purposes of this Agreement, shall mean persistent incompetence, willful
misconduct, dishonesty or conviction of a felony), or (iii) upon the affirmative
vote of two-thirds of the membership of the Board, provided, in the case of
(iii), Holdings shall be obligated to make the salary payments to and provide
the other benefits provided for by paragraph 1(b) through the remainder of the
Employment Period and the salary payments and other benefits provided for by
paragraph 2(b) through the remainder of the Consulting Period notwithstanding
such termination. Your duties and services hereunder shall terminate in the
event of your death or your physical inability to perform the services required
to be performed by you hereunder, provided such inability shall have persisted
for a continuous period of 270 days. Should your services be terminated by
reason of your breach of this Agreement, or for cause, Holdings shall pay to you
your salary or consulting fee, as the case may be, only through the end of the
calendar month in which such termination occurs, and if your services are
terminated by reason of your death prior to the Retirement Date or your physical
inability to perform the services required to be performed by you hereunder,
your salary hereunder shall terminate on the date benefits in respect of your
death or physical disability are made available to your estate or personal
representative under Holdings's benefit plans.
In the event of a breach of the Agreement by Holdings in any material
respect, such breach shall be deemed to constitute a constructive termination of
your employment in contravention of this Agreement, qualifying you for payment
pursuant to paragraph 4(iii) above and such other remedies as are available in
law or in equity; provided, however, that you shall have given the Board of
Holdings written notice of such breach, and the Board shall have failed to cause
Holdings to remedy such breach within thirty (30) days of receipt of such
notice.
5. It is understood and agreed that the services to be rendered under this
Agreement by you are special, unique and of an extraordinary character, and,
more particularly, that in the event of any breach or threatened breach by you
of the provisions of paragraph 3 hereof, Holdings shall have no adequate remedy
in law. Consequently, in the event of a breach or threatened breach by you of
the provisions of paragraph 3 hereof, in addition to Holdings's right to
terminate this Agreement pursuant to paragraph 4 hereof, Holdings shall be
entitled to an injunction restraining you from any such breach or threatened
breach.
6. Any paragraph, sentence, phrase or other provision of this Agreement
which is in conflict with any applicable statute, rule or other law shall be
deemed, if possible, to be modified or altered to conform thereto or, if not
possible, to be omitted herefrom. The invalidity of any portion hereof shall not
affect the force and effect of the remaining valid portions hereof.
7. This Agreement is governed by and is to be construed in accordance with
the substantive law (and not the choice of law rules) of the State of Iowa. This
Agreement (and the Exchange Agreement at Article V) constitutes the entire
4
understanding between you and Holdings with respect to the subject matter
contained herein and, except as otherwise set forth in this paragraph 7, at the
Effective Time of the Share Exchange supersedes and cancels any and all prior
written or oral understandings and agreements with respect to such matters,
including the employment agreement dated July 26, 1994. It is understood and
agreed that the share exchange as contemplated in the Exchange Agreement shall
not constitute a Change in Control for purposes of the Agreement between you and
MidAmerican, as successor to Midwest Energy Company, dated April 19, 1989 ("MWE
Agreement") only, and that notwithstanding the foregoing, the MWE Agreement
shall remain in full force and effect in accordance with the terms thereof with
respect to any event, transaction or circumstance other than the share exchange.
8. Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and delivered personally
or sent by registered or certified mail, postage prepaid, or sent by an
overnight delivery service, addressed as follows:
If to Holdings:
MidAmerican Energy Holdings Company
000 Xxxxx Xxxxxx
X.X. Xxx 000
Xxx Xxxxxx, XX 00000-0000
If to you:
Xx. Xxxxxxx X. Xxxxxxxxxxxx
000 Xxxxx Xxxxxx
X.X. Xxx 000
Xxx Xxxxxx, XX 00000-0000
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
9. This Agreement may be amended only by an instrument in writing signed by
the parties hereto, and any provision hereof may be waived only by an instrument
in writing signed by the party or parties against whom or which enforcement of
such waiver is sought. The failure of either party hereto at any time to require
the performance by the other party hereto of any provision hereof shall in no
way affect the full right to require such performance at any time thereafter,
nor shall the waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such provision or a
waiver of the provision itself or a waiver of any other provision of this
Agreement.
5
10. This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal representatives. Neither this Agreement nor any right or obligation
hereunder may be assigned by Holdings or by you.
11. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
12. This Agreement shall have no force and effect unless and until the
Effective Time.
Sincerely,
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ XXXXXXX X. XXXXXX
---------------------
Xxxxxxx X. Xxxxxx
President and
Chief Executive Officer
Accepted and agreed to as
of the date first written
above.
/s/ XXXXXXX X. XXXXXXXXXXXX
---------------------------
Xxxxxxx X. Xxxxxxxxxxxx
6
EXHIBIT A
RESPONSIBILITIES OF CHAIRMAN
* Shareholder Meetings
* Meetings of the Board of Directors and Committees of the Board.
(The Chairman would preside and the President and CEO would have
a principal presentation role.)
* Agenda setting for board and board committee meetings to be
done by the Chairman with concurrence of the President and
CEO.
* Committees of the Board
* Executive (President and CEO to serve as chairman; Chairman
to serve as vice chairman.)
* Nominating
* Finance (Chairman and President and CEO to be members.)
* Audit
* Compensation
* Strategy (President and CEO to serve as chairman)
* Corporate Charter and Bylaw Revisions
* Major Economic Development Initiatives
* Major Governmental or Regulatory Initiatives and programs
undertaken by Holdings at the federal, state or local level.
* Major Industry Initiatives
MIDAMERICAN ENERGY HOLDINGS COMPANY
X.X. XXX 000
XXX XXXXXX, XX 00000-0000
January 29, 1997
Xx. Xxxxxxx X. Xxxxxxxxxxxx
X.X. Xxx 000
Xxx Xxxxxx, XX 00000-0000
Dear Xx. Xxxxxxxxxxxx:
By letter dated as of January 24, 1996 ("Letter"), you and MidAmerican
Energy Holdings Company agreed to the terms and conditions of your continuing
employment as an employee of Holdings during the Employment Period and as a
consultant to Holdings during the Consulting Period. This letter sets forth our
agreement as to certain amendments to the Letter which will allow the deferral
by you of the annual fee ("Consulting Fee") to be paid to you by Holdings during
the Consulting Period. Terms contained herein and not otherwise defined shall
have the meaning ascribed to them in the Letter.
1. Paragraph 2 is amended by adding a new subparagraph (c) as follows:
2.(c). During the Consulting Period you shall be entitled to defer one
hundred percent (100%) of your Consulting Fee pursuant to a Deferred
Compensation Agreement and in accordance with the terms and conditions
of such Deferred Compensation Agreement. A form of the Deferred
Compensation Agreement is attached hereto and by this reference
incorporated herein.
2. All other terms and conditions of the Letter shall remain in full effect
and are not amended hereby.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ XXXXXXX X. XXXXXX
--------------------------------
Xxxxxxx X. Xxxxxx, President and Chief Executive Officer
Accepted and agreed to as of the date first written above.
/s/ XXXXXXX X. XXXXXXXXXXXX
-----------------------------
Xxxxxxx X. Xxxxxxxxxxxx
MIDAMERICAN ENERGY HOLDINGS COMPANY
DEFERRED COMPENSATION AGREEMENT
WITH
XXXXXXX X. XXXXXXXXXXXX
SECTION 1. PURPOSE. The purpose of this Agreement is to enable MidAmerican
Energy Holdings Company to retain in its employment the Executive by providing
such Executive the opportunity to defer his cash compensation.
SECTION 2. DEFINITIONS.
(a) "Cash Compensation" means one hundred percent (100%) of the Executive's
annual base salary attributable to his services for the Company between February
1, 1997 and December 31, 1997, and the cash portion of any incentive
compensation received by the Executive attributable to 1997 which is eligible
for deferral under the terms of the applicable incentive compensation plan of
the Company.
(b) "Common Stock" means shares of common stock of MidAmerican Energy Holdings
Company.
(c) "Company" means MidAmerican Energy Holdings Company.
(d) "Compensation Committee" means the Compensation Committee established by
the Board of Directors of the Company.
(e) "Deferred Compensation" means 100% of the Cash Compensation as defined in
(a) above.
(f) "Executive" means Xxxxxxx X. Xxxxxxxxxxxx.
(g) "Plan Year" shall mean each January 1 through December 31.
SECTION 3. ADMINISTRATION.
(a) Compensation Committee. The Compensation Committee shall have the
responsibility of making such determinations as may be necessary or advisable to
administer the Agreement. No member of the Compensation Committee shall be
liable for any act done or determination made in good faith.
(b) Delegation. The Compensation Committee may, in its discretion, delegate its
routine administrative duties to an officer or employee of the Company, or to a
committee composed of such officers or employees. The Corporate Secretary of the
Company shall maintain the records and accounts of the Agreement.
1
SECTION 4. BENEFICIARY DESIGNATION.
Executive shall designate one or more beneficiaries in writing to the Committee.
Such designation may be revoked or modified at any time by designating a new
beneficiary in writing to the Committee. Executive's beneficiary designation
shall be deemed automatically revoked in the event all designated beneficiaries
predecease the Executive or, if the sole beneficiary is the Executive's spouse,
in the event of dissolution of marriage. In such event, or in the event the
Executive does not designate a beneficiary, the benefits hereunder shall be paid
to the Executive's estate.
Section 5. Book Value Deferral Method.
(a) Deferred Compensation Units. The Book Value Deferral Method credits Deferred
Compensation units ("Units") to the Executive's account determined by dividing
the cash amount of Deferred Compensation by the Book Value of the Common Stock
at December 31, 1996. The Executive's account shall be credited with amounts
equal to dividends paid in cash from time to time on the Common Stock. "Book
Value" of Common Stock shall be the total Common Stock equity on a consolidated
basis divided by total shares outstanding, as shown in the applicable annual
report certified by the independent certified public accountants retained as
auditors of the Company.
(b) Special Ledger. The Company shall keep an appropriate record, hereinafter
called the Special Ledger, of (i) the amount of Cash Compensation deferred by
the Executive, (ii) the number of Units credited under paragraph (c) of this
Section 5, and (iii) the amount of dividends and Units credited with respect
thereto under paragraph (d) of this Section 5.
(c) Credit of Units to Account. The number of Units to be credited to the
Executive's account shall be determined by dividing the cash amount of Deferred
Compensation by the Book Value of the Common Stock at December 31, 1996.
(d) Credit for Dividends. The Company shall credit to the Executive's account in
the Special Ledger amounts equal to dividends paid in cash from time to time on
the account, so that the amount of each such credit will be the equivalent of
the dividends which the Participant would have received had the Executive been
the owner of the number of shares of Common Stock equal to the number of Units
in the Participant's account. Such amounts credited to each Participant's
account shall be converted into additional Units in the manner provided in
paragraph (c) of this Section 5 (using Book Value as of the previous December
31), and thereafter such additional Units shall be included in the base for
determining future credits.
(e) Adjustment in Number of Units. In the event of any stock dividend on the
Common Stock or any stock split, reverse stock split or combination of shares of
2
Common Stock, appropriate adjustment shall be made in the number of Units
credited to the account of the Executive in the Special Ledger.
SECTION 6. PAYMENT.
(a) Conditions on Right to Receive Payment. The Executive shall not be entitled
to payment of any Deferred Compensation until he is entitled to payment of
deferred compensation under the MidAmerican Energy Company Deferred Compensation
Plan-- Executives. Upon approval by the Committee, payment may be made to the
Executive earlier than the date specified above.
(b) Form and Timing of Payment. (i) Under the Book Value Deferral Method, the
value of Units at the time of payout shall be based on (w) the closing market
price of Common Stock on the last trading date of the preceding Plan Year of the
Common Stock on the New York Stock Exchange, (x) the average of the daily
closing market price for the Common Stock for the twelve month period ending on
the date of termination of services as an employee of the Company or (y) the
Book Value of Common Stock as of the most recent December 31 prior to date of
payment. The Executive (or beneficiary in the event of death prior to any payout
to the Executive) shall make a selection between the foregoing methods of
valuation prior to the time for payment of a lump sum or prior to the first
payment in the case of annual installments. Such selection cannot be changed
with respect to any subsequent payments in the case of annual installments. The
per Unit value as selected by the Participant shall be referred to as the
"Payout Value".
(ii) At the election of the Compensation Committee, upon consultation with
the Executive, payments of deferred compensation shall be made on the date
selected by the Committee and shall be made in a lump sum or in approximately
equal annual installments, and if annual installments are elected, the
Compensation Committee shall determine, upon consultation with the Executive,
the period over which payments are to be made.
(iii) If annual installments are elected, each annual installment shall be
not less that an amount equal to the value of the account at the beginning of
the Plan Year in which distribution is to be made divided by the life expectancy
of the Executive at the beginning of such Plan Year (or the joint life
expectancy of the Executive and spouse if the Executive is married). Each annual
installment payment shall be made within fifteen (15) days following the first
day of each Plan Year.
(iv) If an election is made to receive annual installments, then Units
remaining in the account at any time shall continue to be credited with
dividends (which shall purchase additional Units), until full payment has been
made with respect to all Units. Units shall continue to fluctuate in value based
on the Payout Value until full payment
3
has been made with respect to the Units. In the alternative, instead of having
the account fluctuate in value, the Executive may elect to have the value of his
account fixed as of the December 31 prior to the first payment, based on the
selection of Payout Value under paragraph (b)(i) of this Section 6. If such an
election is made, the account shall be credited each December 31 with interest
at the then current Fixed Rate of Interest credited under the Fixed Rate of
Interest Deferral Option in the Company's "Deferred Compensation
Plan--Executives".
(v) If an election is made to receive a lump sum payment, payment shall be
made within fifteen (15) days following the first day of the Plan Year in which
payment is to be made (or as soon thereafter as reasonably possible if the value
is based on Book Value), and the amount of the lump sum payment shall be equal
to the value of the account as of December 31 of the preceding Plan Year (based
on the Payout Value selected under paragraph (b)(i) of this Section 6).
(vi) Payment of a lump sum amount or any annual installment shall be made
in cash.
(vii) In the event of the death of an Executive occurring either before the
commencement of payment or before the full balance of the Executive's account
has been paid, the unpaid balance of Deferred Compensation shall be paid in a
lump sum to the Executive's designated beneficiary or estate. Payment shall be
made within thirty (30) days following the date of death. Dividends to which
owners of Common Stock would be entitled through date of death shall be credited
to the account. The value of Units shall be based on the closing market price of
Common Stock on the date of death (or on the preceding business day if date of
death is not business day) or as otherwise selected by the beneficiary in
accordance with paragraph (b)(i) of this Section 6 if no payments had yet begun
to the Executive.
SECTION 7. GENERAL PROVISIONS.
(a) The obligations hereunder shall at all times be unsecured and payments with
respect to any benefits hereunder shall be paid out of the general operating
revenue of the Company. A trust may be established to provide for the payment of
benefits to the Executive hereunder as long as the assets of such trust are
subject to the claims of general creditors of the Company with respect to the
value of the Executive's account.
(b) Withholding. The Committee shall have the right to require Executive to
remit to the Company an amount sufficient to satisfy Federal, state and local
tax withholding requirements, or to deduct from any or all payments made
pursuant to the Agreement amounts sufficient to satisfy such withholding tax
requirements.
4
(c) Costs of the Agreement. All costs of implementing and administering the
Agreement shall be borne by the Company.
(d) Non-Alienation of Benefits. No right or benefit under this Agreement shall
be subject to anticipation, alienation, sale, assignment, pledge, encumbrance,
or charge, and any attempt to anticipate, alienate, sell, assign, pledge,
encumber, or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities, or
claims of the person entitled to such benefit. If the Executive or designated
beneficiary hereunder should become bankrupt or attempt to anticipate, alienate,
sell, assign, pledge, encumber, or charge any right or benefit hereunder, then
such right or benefit shall, in the discretion of the Compensation Committee,
cease, and in such event, the Company may hold or apply the same or any part
thereof for the benefit of the Executive or the designated beneficiary, his or
her spouse, children, or other dependents, or any of them, in such manner and in
such proportion as the Compensation Committee may deem proper.
(e) Successors. All obligations of the Company under the Agreement shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the direct or indirect result of a merger or
reorganization involving the Company or the purchase or other acquisition, of
all or substantially all of the business or assets of the Company.
(f) Amendment or Termination of Agreement. Any amendment or termination of this
Agreement shall only be accomplished and permitted by written agreement between
the Executive and Company.
(g) Separability. If any term or provision of this Agreement as presently in
effect or as amended from time to time, or the application thereof to any
payments or circumstances, shall to any extent be invalid or unenforceable, the
remainder of the Agreement, and the application of such term or provision to
payments or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term or provision of the
Agreement shall be valid and enforced to the fullest extent permitted by law.
(h) Construction. The provisions of this Agreement shall be construed,
administered and enforced according to the laws of the State of Iowa.
(i) Titles. The titles of the Articles and Sections herein are included for
convenience of reference only and shall not be construed as part of this
Agreement, or have any effect upon the meaning of the provisions hereof.
5
(j) Authorized Officers. Whenever the Company under the terms of the Agreement
is permitted and required to perform any act or matter or thing, it shall be
done and performed by a duly authorized officer of the Company.
Executed by the parties this 29th day of January, 1997.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: ____________________________
--------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
6
MIDAMERICAN ENERGY HOLDINGS COMPANY
DEFERRED COMPENSATION AGREEMENT
WITH
XXXXXXX X. XXXXXXXXXXXX
SECTION 1. PURPOSE. The purpose of this Agreement is to enable MidAmerican
Energy Holdings Company to retain the Executive as a consultant to the Company
by providing such Executive the opportunity to defer his cash compensation.
SECTION 2. DEFINITIONS.
(a) "Cash Compensation" means one hundred percent (100%) of the Executive's
annual consulting fees attributable to his services as a consultant for the
Company between June 1, 1997 and May 31, 2000.
(b) "Common Stock" means shares of common stock of MidAmerican Energy Holdings
Company.
(c) "Company" means MidAmerican Energy Holdings Company.
(d) "Compensation Committee" means the Compensation Committee established by
the Board of Directors of the Company.
(e) "Deferred Compensation" means 100% of the Cash Compensation as defined in
(a) above.
(f) "Executive" means Xxxxxxx X. Xxxxxxxxxxxx.
(g) "Plan Year" shall mean each January 1 through December 31.
SECTION 3. ADMINISTRATION.
(a) Compensation Committee. The Compensation Committee shall have the
responsibility of making such determinations as may be necessary or advisable to
administer the Agreement. No member of the Compensation Committee shall be
liable for any act done or determination made in good faith.
(b) Delegation. The Compensation Committee may, in its discretion, delegate its
routine administrative duties to an officer or employee of the Company, or to a
committee composed of such officers or employees. The Corporate Secretary of the
Company shall maintain the records and accounts of the Agreement.
SECTION 4. BENEFICIARY DESIGNATION.
Executive shall designate one or more beneficiaries in writing to the Committee.
Such designation may be revoked or modified at any time by designating a new
beneficiary in writing to the Committee. Executive's beneficiary designation
shall be deemed automatically revoked in the event all designated beneficiaries
predecease the Executive or, if the sole beneficiary is the Executive's spouse,
in the event of dissolution of marriage. In such event, or in the event the
Executive does not designate a beneficiary, the benefits hereunder shall be paid
to the Executive's estate.
SECTION 5. BOOK VALUE DEFERRAL METHOD.
(a) Deferred Compensation Units. The Book Value Deferral Method credits Deferred
Compensation units ("Units") to the Executive's account determined by dividing
the cash amount of Deferred Compensation by the Book Value of the Common Stock
at December 31 of the previous calendar year. The Executive's account shall be
credited with amounts equal to dividends paid in cash from time to time on the
Common Stock. "Book Value" of Common Stock shall be the total Common Stock
equity on a consolidated basis divided by total shares outstanding, as shown in
the applicable annual report certified by the independent certified public
accountants retained as auditors of the Company.
(b) Special Ledger. The Company shall keep an appropriate record, hereinafter
called the Special Ledger, of (i) the amount of Cash Compensation deferred by
the Executive, (ii) the number of Units credited under paragraph (c) of this
Section 5, and (iii) the amount of dividends and Units credited with respect
thereto under paragraph (d) of this Section 5.
(c) Credit of Units to Account. The number of Units to be credited to the
Executive's account shall be determined by dividing the cash amount of Deferred
Compensation by the Book Value of the Common Stock at December 31 of the
previous calendar year.
(d) Credit for Dividends. The Company shall credit to the Executive's account in
the Special Ledger amounts equal to dividends paid in cash from time to time on
the account, so that the amount of each such credit will be the equivalent of
the dividends which the Participant would have received had the Executive been
the owner of the number of shares of Common Stock equal to the number of Units
in the Participant's account. Such amounts credited to each Participant's
account shall be converted into additional Units in the manner provided in
paragraph (c) of this Section 5 (using Book Value as of the previous December
31), and thereafter such additional Units shall be included in the base for
determining future credits.
2
(e) Adjustment in Number of Units. In the event of any stock dividend on the
Common Stock or any stock split, reverse stock split or combination of shares of
Common Stock, appropriate adjustment shall be made in the number of Units
credited to the account of the Executive in the Special Ledger.
SECTION 6. PAYMENT.
(a) Conditions on Right to Receive Payment. The Executive shall not be entitled
to payment of any Deferred Compensation until he is entitled to payment of
deferred compensation under the MidAmerican Energy Company Deferred Compensation
Plan-- Executives. Upon approval by the Committee, payment may be made to the
Executive earlier than the date specified above.
(b) Form and Timing of Payment. (i) Under the Book Value Deferral Method, the
value of Units at the time of payout shall be based on (w) the closing market
price of Common Stock on the last trading date of the preceding Plan Year of the
Common Stock on the New York Stock Exchange, (x) the average of the daily
closing market price for the Common Stock for the twelve month period ending on
the date of termination of services as an employee of the Company or (y) the
Book Value of Common Stock as of the most recent December 31 prior to date of
payment. The Executive (or beneficiary in the event of death prior to any payout
to the Executive) shall make a selection between the foregoing methods of
valuation prior to the time for payment of a lump sum or prior to the first
payment in the case of annual installments. Such selection cannot be changed
with respect to any subsequent payments in the case of annual installments. The
per Unit value as selected by the Participant shall be referred to as the
"Payout Value".
(ii) At the election of the Compensation Committee, upon consultation with
the Executive, payments of deferred compensation shall be made on the date
selected by the Committee and shall be made in a lump sum or in approximately
equal annual installments, and if annual installments are elected, the
Compensation Committee shall determine, upon consultation with the Executive,
the period over which payments are to be made.
(iii) If annual installments are elected, each annual installment shall be
not less that an amount equal to the value of the account at the beginning of
the Plan Year in which distribution is to be made divided by the life expectancy
of the Executive at the beginning of such Plan Year (or the joint life
expectancy of the Executive and spouse if the Executive is married). Each annual
installment payment shall be made within fifteen (15) days following the first
day of each Plan Year.
(iv) If an election is made to receive annual installments, then Units
remaining in the account at any time shall continue to be credited with
dividends (which shall
3
purchase additional Units), until full payment has been made with respect to all
Units. Units shall continue to fluctuate in value based on the Payout Value
until full payment has been made with respect to the Units. In the alternative,
instead of having the account fluctuate in value, the Executive may elect to
have the value of his account fixed as of the December 31 prior to the first
payment, based on the selection of Payout Value under paragraph (b)(i) of this
Section 6. If such an election is made, the account shall be credited each
December 31 with interest at the then current Fixed Rate of Interest credited
under the Fixed Rate of Interest Deferral Option in the Company's "Deferred
Compensation Plan--Executives".
(v) If an election is made to receive a lump sum payment, payment shall be
made within fifteen (15) days following the first day of the Plan Year in which
payment is to be made (or as soon thereafter as reasonably possible if the value
is based on Book Value), and the amount of the lump sum payment shall be equal
to the value of the account as of December 31 of the preceding Plan Year (based
on the Payout Value selected under paragraph (b)(i) of this Section 6).
(vi) Payment of a lump sum amount or any annual installment shall be made
in cash.
(vii) In the event of the death of an Executive occurring either before the
commencement of payment or before the full balance of the Executive's account
has been paid, the unpaid balance of Deferred Compensation shall be paid in a
lump sum to the Executive's designated beneficiary or estate. Payment shall be
made within thirty (30) days following the date of death. Dividends to which
owners of Common Stock would be entitled through date of death shall be credited
to the account. The value of Units shall be based on the closing market price of
Common Stock on the date of death (or on the preceding business day if date of
death is not business day) or as otherwise selected by the beneficiary in
accordance with paragraph (b)(i) of this Section 6 if no payments had yet begun
to the Executive.
SECTION 7. GENERAL PROVISIONS.
(a) The obligations hereunder shall at all times be unsecured and payments with
respect to any benefits hereunder shall be paid out of the general operating
revenue of the Company. A trust may be established to provide for the payment of
benefits to the Executive hereunder as long as the assets of such trust are
subject to the claims of general creditors of the Company with respect to the
value of the Executive's account.
(b) Withholding. The Committee shall have the right to require Executive to
remit to the Company an amount sufficient to satisfy Federal, state and local
tax withholding
4
requirements, or to deduct from any or all payments made pursuant to the
Agreement amounts sufficient to satisfy such withholding tax requirements.
(c) Costs of the Agreement. All costs of implementing and administering the
Agreement shall be borne by the Company.
(d) Non-Alienation of Benefits. No right or benefit under this Agreement shall
be subject to anticipation, alienation, sale, assignment, pledge, encumbrance,
or charge, and any attempt to anticipate, alienate, sell, assign, pledge,
encumber, or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities, or
claims of the person entitled to such benefit. If the Executive or designated
beneficiary hereunder should become bankrupt or attempt to anticipate, alienate,
sell, assign, pledge, encumber, or charge any right or benefit hereunder, then
such right or benefit shall, in the discretion of the Compensation Committee,
cease, and in such event, the Company may hold or apply the same or any part
thereof for the benefit of the Executive or the designated beneficiary, his or
her spouse, children, or other dependents, or any of them, in such manner and in
such proportion as the Compensation Committee may deem proper.
(e) Successors. All obligations of the Company under the Agreement shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the direct or indirect result of a merger or
reorganization involving the Company or the purchase or other acquisition, of
all or substantially all of the business or assets of the Company.
(f) Amendment or Termination of Agreement. Any amendment or termination of this
Agreement shall only be accomplished and permitted by written agreement between
the Executive and Company.
(g) Separability. If any term or provision of this Agreement as presently in
effect or as amended from time to time, or the application thereof to any
payments or circumstances, shall to any extent be invalid or unenforceable, the
remainder of the Agreement, and the application of such term or provision to
payments or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term or provision of the
Agreement shall be valid and enforced to the fullest extent permitted by law.
(h) Construction. The provisions of this Agreement shall be construed,
administered and enforced according to the laws of the State of Iowa.
(i) Titles. The titles of the Articles and Sections herein are included for
convenience of reference only and shall not be construed as part of this
Agreement, or have any effect upon the meaning of the provisions hereof.
5
(j) Authorized Officers. Whenever the Company under the terms of the Agreement
is permitted and required to perform any act or matter or thing, it shall be
done and performed by a duly authorized officer of the Company.
Executed by the parties this 29th day of January, 1997.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: ____________________________
--------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
6
