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 Xxxxxx X. Xxxxxxx (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is canceled and no longer in effect.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 $325,000, payable at the
Company's regular payroll intervals. The Chief
Executive Officer of MidAmerican Energy Holdings
Company shall not less than annually during the
Employee's employment review his annual salary and
consider possible increases, taking into account
inflation factors, performance of the Company,
salaries paid for positions of similar responsibility
for other companies, and other relevant factors, and
shall recommend such increases when deemed
appropriate, for approval of the Compensation
Committee of the Board of Directors of MidAmerican
(the "Committee").
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b. Short-term incentive compensation to be determined as
provided in Exhibit A attached hereto.
With respect to the calculation of short-term
incentives under this subparagraph, if it becomes
apparent that the stated earnings thresholds cannot
be achieved for unforeseen reasons and in spite of
diligent management effort, the Employee may
nonetheless be awarded short-term incentive payments,
if approved by the Committee as recommended by the
Chief Executive Officer of MidAmerican Energy
Holdings Company, to reward exemplary performance.
In the event the Company terminates the Employee's
employment for any reason other than Good Cause, as
defined in subparagraph 6(c) other than due to
Employee's death or disability, or the Employee
terminates his employment for Good Reason, as defined
in subparagraph 6(d), prior to the end of any
calendar year, he shall be entitled to a short-term
incentive payment if the earnings thresholds
described in Exhibit A have been achieved as of the
last day of the calendar year in which his
termination of employment occurs, provided, however,
that the amount of such payment shall be calculated
by multiplying the incentive amount that would have
been payable to the Employee pursuant to Exhibit A,
had his employment not terminated during the
calendar year, by a fraction, the numerator of which
is the number of full weeks of employment completed
by the Employee during such calendar year and the
denominator of which is 52. If the Employee's
employment is terminated for Good Cause, as defined
in subparagraph 6(c), other than due to death or
disability, or the Employee terminates his
employment for other than Good Reason, as defined in
subparagraph 6(d), prior to the end of any calendar
year, no short-term incentive shall be payable for
such year.
c. Long-term incentive compensation as provided in
Exhibit B attached hereto.
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d. If the Employee's employment continues subsequent to
the fifth anniversary of the date of this Agreement,
the Employee and the Chief Executive Officer of
MidAmerican Energy Holdings Company shall negotiate
the amount of the Employee's future base salary and
the terms of any further short-term and long-term
incentive arrangements at that time, with all such
compensation to be subject to approval of the
Committee.
5. Additional Benefits.
a. The 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 Dellwood
Hills 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 subparagraph 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
defined in subparagraph 8(a). In addition, during the
Non-Competition Period, the Company shall also pay
to the Employee annually a short-term incentive
payment as described in Exhibit A, equal to the
average annual short-term incentive payments made to
the Employee under this Agreement prior to the
Employee's termination. During this period, 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 consideration
other than payments made prior to the Employee's
termination date.
c. If the Employee is terminated by the Company for Good
Cause, the Company shall pay the Employee his base
salary 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
9
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.
10
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/ X. Xxxxx
---------------------------------
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Title: Vice President and Chief Financial Officer
XXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxx
---------------------------------------------------
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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; amortiza-
tion 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") ap-
proves the incentive award computations, based
upon the recommendation of the Chief Execu-
tive Officer ("CEO") of MidAmerican Energy
Holdings Company.
Purpose: The intent of the incentive award and its under-
lying 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 concur-
rence 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.
15
EXHIBIT B
LONG TERM INCENTIVE COMPENSATION PLAN
FOR SENIOR EXECUTIVES OF
MIDAMERICAN REALTY SERVICES COMPANY
This Exhibit B (this "Exhibit Agreement") constitutes a part of the
employment agreement (the "Employment Agreement") dated May 27, 1998, between
MidAmerican Realty Services Company ("MRSC"), a subsidiary of MidAmerican Energy
Holdings Company ("MidAmerican") and Xxxxxx X. Xxxxxxx ("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
Shareholder (the "Account") for the purpose of establishing a
credit towards payment of the Promissory Note. In [March] of
each of the five years commencing in 1999, a credit shall be
made to the Account if certain performance goals are achieved
with respect to the preceding fiscal year as hereinafter set
forth. Additionally, all dividends declared and paid with
respect to the Shares shall be credited to the Account Bal-
ance. Aggregate amounts credited to the Account shall be
referred to herein as the "Account Balance." The Promissory
Note shall become due and payable on the fifth anniversary
thereof (the "Fifth Anniversary"); provided, however, that in
the event that Shareholder's employment with MRSC is
terminated for any reason, including, without
16
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 Execu-
tive 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, trans-
ferred, 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. Share-
holder shall exercise the Put Option, if at all, by delivering a written notice
of exercise to MRSC; provided, however, that such exercise shall be deemed to
occur upon the date of Termination in the case of the Mandatory Put Exercise.
MRSC or its successor or assign shall exercise the Call Option, if at all, by
delivering a written notice of exercise to Shareholder or its permitted
transferee. Any such exercise of the Put Option or the Call Option is referred
to herein as the "Exercise."
The purchase price for the Shares that are repurchased pursuant to the
Exercise (the "Purchase Price") shall be the fair market value of the Shares as
mutually agreed upon by Shareholder and MRSC, but in no event greater than the
product of (x) the decimal representing the percentage ownership of MRSC voting
capital stock held by Shareholder (based on percentage of votes) at the time of
Exercise multiplied by (y) the Corporate Value (as hereinafter defined) at the
time of Exercise. "Corporate Value" shall mean the market value of the Company
less outstanding liabilities; provided that in no event shall the value exceed
the product of (x) 7 multiplied by (y) the average EBITDA for the two
twelve-month periods immediately preceding the date of the calculation. In the
event the Call Option is exercised in connection with the sale of the Company,
the Corporate Value shall be the sale price for all of the equity of the
Company. In the event that Shareholder and MRSC do not agree on the calculation
of the Purchase Price or the Corporate Value, any dispute shall be resolved
pursuant to arbitration in accordance with the rules of the American Arbitration
Association then in effect. Such arbitration result shall be binding on the
parties. The Purchase Price for the Shares that are repurchased pursuant to the
Mandatory Put Exercise shall be the Purchase Price determined above, except when
the Mandatory Put Exercise results from a Termination for Good Cause, other than
death or Disability or not for Good Reason, the purchase price shall be the
Original Purchase Price plus accrued interest on the Promissory Note.
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MRSC shall make payment of the purchase price for any Shares reacquired
pursuant to the Exercise or the Mandatory Put Exercise by offsetting and
reducing the outstanding principal balance of, and any accrued interest on, the
Promissory Note delivered to MRSC by Shareholder pursuant to Section 2 of this
Exhibit Agreement. The closing of the Exercise or the Mandatory Put Exercise
shall be not less than 30 and not more than 45 days following notice of such
exercise on a date mutually agreeable to MRSC and Shareholder (the "Closing
Date"); provided, however, that in the event of a dispute regarding the Purchase
Price or the inability to determine Corporate Value, the Closing Date shall be a
date not less than 30 and not more than 45 days following resolution of such
dispute. The balance of the purchase price owing to Shareholder, if any, shall
be paid on the Closing Date by delivering to Shareholder MRSC's check in the
amount of the balance of such purchase price.
On the Closing Date, the Share ownership relating to the shares
repurchased recorded in MRSC's share register shall be canceled by MRSC.
10. No Restriction on MRSC's Accounting; Adjustments. This Exhibit
Agreement shall not in any way interfere with the right of MRSC to select among,
adopt or change accounting practices or procedures, whether or not such
accounting practices or procedures have not been previously employed by MRSC, or
to consummate any business investments, acquisitions or divestitures or to
adopt any other policies or plans, at any time or from time to time in its sole
and absolute discretion. In order to carry out the intent and purpose of this
Exhibit Agreement, the CEO of MidAmerian may, in his sole and absolute
discretion, make such adjustments to computations made pursuant to this Exhibit
Agreement in connection with changes in accounting practices or procedures as he
deems necessary or appropriate to prevent dilution or enlargements of the
benefits provided pursuant to this Exhibit Agreement. Such adjustments may be in
connection with changes in accounting practices and procedures, fundamental
transactions and other matters of a similar nature.
11. Unsecured Interest. It is intended that MRSC is only under a
contractual obligation with respect to the Account. The Account Balance shall
not be financed through a trust fund, insurance contracts, or otherwise, and all
such credits shall be satisfied out of the general funds of MRSC, but only if
and to the extent such funds are legally available therefore. Shareholder shall
not have any interest whatsoever in the specific assets of MRSC pursuant to
this Exhibit Agreement and all rights of Shareholder shall be no greater than
the right of any unsecured general creditor of MRSC.
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12. Shareholder's Rights in Future Financing. For a period commencing
on the date of the Employment Agreement and ending on the fifth anniversary of
the Employment Agreement, in the event of any proposed sale of securities of
MRSC (including, without limitation, the sale of Common Stock, preferred stock,
convertible securities and debt instruments, other than commercial loans or
extensions of credit made by a bank, insurance company or other third-party
financial institution, or the issuance of securities in connection with a
capital contribution by an affiliate of MRSC), other than pursuant to grants of
employee stock options, Shareholder shall be provided at least 10 days' advance
notice and have the right to invest in such sale of securities, on the same
terms as offered to any third party (which shall include affiliates of MRSC), in
a percentage amount equal to the percentage ownership of voting capital stock
held by Shareholder immediately prior to such sale; provided, however, that such
right does not include any sale of the Company's equity securities in connection
with a public offering pursuant to a registration statement filed with the
Securities and Exchange Commission. Nothing in this Section shall limit the
right of MRSC, as determined by its Board of Directors, to issue shares of
capital stock of MRSC and determine all of the terms of such issuance in its
discretion.
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PROMISSORY NOTE
$381,376.00 May 27, 1998
FOR VALUE RECEIVED, the undersigned, Xxxxxx X. Xxxxxxx (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/ Xxxxxx X. Xxxxxxx
XXXXXX X. XXXXXXX (Maker)
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