General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13D General Statement of Beneficial Ownership 14 40K
2: EX-1 Agreement and Plan of Merger 55 227K
3: EX-2 Amended and Restated Berkshire Hathaway Inc. 33 110K
Subscription Agreement
4: EX-3 Amended & Restated Walter Scott, Jr. Subscription 15 49K
Agreement
5: EX-4 Amended and Restated David L. Sokol Subscription 17 56K
Agreement
6: EX-5 Operating Agreement of Teton Formation L.L.C. 14 45K
EX-4 — Amended and Restated David L. Sokol Subscription Agreement
Exhibit Table of Contents
AMENDED AND RESTATED DAVID L. SOKOL SUBSCRIPTION AGREEMENT
Teton Acquisition Corp.
c/o MidAmerican Energy Holdings Company
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attn: David L. Sokol
Ladies and Gentlemen:
The undersigned is executing this Agreement in connection with
its subscription for shares of common stock, no par value ("Common Stock"), and
options to purchase shares of Common Stock, of Teton Acquisition Corp. (the
"Company"), an Iowa corporation wholly owned by Teton Formation L.L.C. (the
"Parent"), an Iowa limited liability company. The undersigned understands that
the Company is relying upon the accuracy and completeness of the information
contained herein in complying with its obligations under federal and state
securities and other applicable laws.
The Company and the Parent are contemplating entering into an
Agreement and Plan of Merger (the "Merger Agreement") with MidAmerican Energy
Holdings Company ("MidAmerican"), pursuant to which, and subject to the terms
and conditions set forth therein, the Company would merge with and into
MidAmerican, with MidAmerican being the surviving corporation (the "Merger").
The undersigned hereby irrevocably agrees with, and represents
and warrants to and for the benefit of, the Company, the Parent and the members
of the Parent, as follows:
1. Subscription.
(a) On the terms and subject to the conditions of this Agreement,
the undersigned hereby irrevocably subscribes for, and the Company hereby
irrevocably agrees to issue, 180,924 shares of Common Stock and options to
purchase 1,650,000 shares of Common Stock (the "Options") having the terms
described in Section 1(c). The shares of Common Stock to be purchased pursuant
to this Section 1(a) are herein referred to, collectively, as the "Shares," and
the Shares, together with the Options to be purchased pursuant to this Section
1(a), are herein referred to, collectively, as the "Securities."
(b) The purchase price for the Shares to be purchased hereunder
shall be payable only in shares of MidAmerican common stock which shall be
exchanged on a one-for-one basis for Shares.
(c) The purchase price for the Options shall be payable only in
options to purchase shares of MidAmerican common stock, as further set forth
herein. Options to purchase MidAmerican common stock shall be exchanged for
Options to purchase a like
amount of Common Stock and having the same exercise price and other terms of the
MidAmerican options; provided, that, (i) such Options purchased shall be vested
immediately, and (ii) if the exercise term for the MidAmerican options being
exchanged is less than eight years from the Closing, the term of the Options
exchanged therefor shall be extended until the eighth anniversary of the
Closing. The parties hereto shall enter into new option agreements or other
necessary documentation reflecting the issuance of the Options hereunder.
2. Other Subscription Agreements. The Company is entering into,
concurrently with the execution of this Agreement, (i) a subscription agreement
with Walter Scott, Jr. (the "Scott Subscription Agreement"), pursuant to which
Walter Scott, Jr. has agreed to purchase, on the terms and subject to the
conditions stated therein, shares of Common Stock, and (ii) a subscription
agreement with Berkshire Hathaway Inc. (the "Berkshire Subscription Agreement"),
pursuant to which Berkshire Hathaway Inc. has agreed to purchase, on the terms
and subject to the conditions stated therein, shares of Common Stock and
preferred stock of the Company and trust securities of a trust to be established
by the Company. The Company may also enter into subscription agreements with
other members or former members of MidAmerican management (any such agreements,
together with the this Agreement, the "Management Subscription Agreements" and
the Management Subscription Agreements, together with the Scott Subscription
Agreement and the Berkshire Subscription Agreement, collectively, the
"Subscription Agreements"), pursuant to which such persons will agree to
purchase, on the terms and subject to the conditions stated therein, shares of
Common Stock and Options. Each of the Subscription Agreements are separate and
several agreements, and the sales of Securities to the undersigned and to the
other purchasers under the Subscription Agreements are to be separate and
several sales.
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to the undersigned that:
(a) Organization and Qualification. The Company is duly formed,
validly existing and in good standing under the laws of the State of Iowa. The
Company was organized solely for the purposes of consummating the Merger and the
other transactions to be contemplated by the Merger Agreement and taking action
with respect thereto. Except for obligations or liabilities incurred, or to be
incurred, in connection with the transactions to be contemplated by the Merger
Agreement (including the Subscription Agreements) or in connection with its
organization, on the Closing Date the Company will not have incurred any
obligations or liabilities or engaged in any business activities of any kind.
(b) Authority. The Company has the requisite power and authority
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby have been duly and validly approved by
all necessary action, and no other proceedings on the part of the Company are
necessary to authorize the execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by
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the undersigned, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Issuance of Securities. The Shares to be issued and sold by
the Company pursuant to this Agreement, when issued in accordance with the
provisions hereof, will be validly issued, fully paid and nonassessable stock of
the Company, and no holder of stock of the Company will have any preemptive
rights to subscribe for any such Shares. The shares of Common Stock initially
issuable upon exercise of the Options to be issued and sold by the Company
pursuant to this Agreement have been duly reserved for issuance and, when issued
in accordance with the terms of such Options, will be validly issued, fully paid
and nonassessable stock of the Company, and no holder will have any preemptive
rights to subscribe for any such shares of Common Stock. Other than shares of
Common Stock, the only securities authorized for issuance by the Company are the
shares of Preferred Stock to be issued and sold by the Company pursuant to the
Berkshire Subscription Agreement.
(d) Approvals and Consents; Non-Contravention. The creation,
authorization, issuance, offer and sale of the Securities do not require any
consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority on the part of the Company (other than as will
be described in the Merger Agreement) or the vote, consent or approval in any
manner of the holders of any capital stock or other security of the Company as a
condition to the execution and delivery of this Agreement or the creation,
authorization, issuance, offer and sale of the Securities. The execution and
delivery by the Company of this Agreement and the performance by the Company of
its obligations hereunder will not violate (i) the terms and conditions of the
Articles of Incorporation or the Bylaws of the Company, or any agreement to
which the Company is a party or by which it is bound or (ii) subject to the
accuracy of the representations and warranties of the undersigned contained in
Section 4 hereof, any federal or state law.
4. Representations and Warranties of the Undersigned. The
undersigned hereby represents and warrants to the Company that:
(a) Authority. The undersigned has the requisite power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the undersigned and, assuming the due
authorization, execution and delivery of this Agreement by the Company,
constitutes a legal, valid and binding obligation of the undersigned enforceable
against the undersigned in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
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(b) Approvals and Consents; Non-Contravention. Except as required
under the HSR Act (as defined below), the execution, delivery and performance of
this Agreement by the undersigned and the consummation by the undersigned of the
transactions contemplated hereby do not require any consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority on the part of the undersigned, or the vote, consent or
approval in any manner of the holders of any capital stock or other security of
the undersigned as a condition to the execution and delivery of this Agreement
or the consummation by the undersigned of the transactions contemplated hereby.
The execution and delivery by the undersigned of this Agreement and the
performance by the undersigned of its obligations hereunder will not violate (i)
any agreement to which the undersigned is a party or by which it is bound or
(ii) any federal or state law.
(c) Residence. The principal place of business address set forth
on the signature page hereof is the undersigned's true and correct principal
place of business and is the only jurisdiction in which an offer to sell the
Securities was made to the undersigned and the undersigned has no present
intention of moving its principal place of business to any other state or
jurisdiction.
(d) No Registration. The undersigned understands that the
Securities have not been registered under the Securities Act of 1933, as amended
(the "Act"), or under the laws of any other jurisdiction, and that the Company
does not contemplate and is under no obligation to so register the Securities.
The undersigned understands and agrees that the Shares and the shares of Common
Stock issuable upon the exercise of the Options must be held indefinitely unless
they are subsequently transferred (i) pursuant to an effective registration
statement under the Act and, where required, under the laws of other
jurisdictions or (ii) pursuant to an exemption from applicable registration
requirements. The undersigned recognizes that there is no established trading
market for the Shares and that it is unlikely that any public market for the
Shares will develop for at least five years. The undersigned will not offer,
sell, transfer or assign its Securities or the shares of Common Stock issuable
upon exercise of the Options or any interest therein in contravention of this
Agreement, the Act or any state or federal law.
(e) Purchase for Investment. The Securities for which the
undersigned hereby subscribes are being acquired solely for the undersigned's
own account for investment and are not being purchased with a view to or for
resale, distribution or other disposition, and the undersigned has no present
plans to enter into any contract, undertaking, agreement or arrangement for any
such resale, distribution or other disposition.
(f) Information. The undersigned has been granted the opportunity
to ask questions of, and receive answers from, the Company and the officers of
the Company concerning the terms and conditions of the sale of the Securities,
the Merger Agreement and the transactions contemplated thereby, and to obtain
any additional information which the undersigned deems necessary to make an
informed investment decision. The undersigned has received or has had access to
other documents requested from the Company relating to the Securities and the
purchase thereof, and the Company has afforded the undersigned the opportunity
to discuss the undersigned's investment in the Company and to ask and receive
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answers to any questions relating to the investment in the Securities, the
Merger Agreement and the transactions contemplated thereby. The undersigned
understands and has evaluated the risks of a purchase of the Securities.
(g) Accredited Investor. The undersigned has read the text of
Rule 501(a)(1) - (8) of Regulation D under the Act and confirms that it is an
"accredited investor" as described thereby.
(h) Holding Company. The undersigned is not a "public utility
company", a "holding company", a "subsidiary company" of a "holding company", or
an "affiliate" of a "holding company" or of a "subsidiary company", as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended,
or a "public utility" as such term is defined in the Federal Power Act.
(i) Ownership. At the Closing Date, the undersigned will have
good and marketable title to, and own free and clear of any liens, encumbrances,
mortgages, charges, rights or other security interests, the shares of
MidAmerican common stock and MidAmerican options to be exchanged for Securities
pursuant to this Agreement.
5. Closing. The closing (the "Closing") of the purchase and sale
of the Securities pursuant to this Agreement shall be held at the same place and
at the same time as the closings under the other Subscription Agreements (the
"Closing Date") and immediately prior to the effective time of the Merger.
6. Conditions to Closing. (a) The undersigned's obligation to
purchase the Securities under this Agreement at the Closing is subject to the
fulfillment on or prior to the Closing of the following conditions:
(i) Representations and Warranties. Each representation and
warranty made by the Company in this Agreement shall be true and
correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on the Closing Date,
and any representation or warranty made as of a specified date earlier
than the Closing Date shall have been true and correct in all material
respects on and as of such earlier date.
(ii) Performance. The Company shall have performed and complied
with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied
with by the Company at or before the Closing Date.
(iii) Merger Agreement. The Merger Agreement shall have been
executed and delivered by the parties thereto in form and substance
reasonably satisfactory to the undersigned. As of the Closing all
conditions to the consummation of the transactions contemplated by the
Merger Agreement shall have been satisfied or waived and the closing
of the transactions contemplated hereunder shall occur immediately
prior to the effective time of the Merger.
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(iv) Stockholders Agreement. The Stockholders Agreement (having
terms substantially the same as those set forth on Schedule I hereto)
(the "Stockholders Agreement") shall have been executed and delivered
by the Company and each of the parties to the Subscription Agreements.
(v) Subscription Agreements. The Subscription Agreements shall be
in full force and effect, no cancellation or termination (purported or
otherwise) shall have occurred in respect of any Subscription
Agreement, no material breach or default shall have occurred and be
continuing under any of the Subscription Agreements, and closings
under all of the Subscription Agreements shall be effected
concurrently.
(vi) Amendment to Employment Agreement. Contemporaneously with
the Closing, the undersigned and the Company will enter into an
amendment to the Employment Agreement of the undersigned substantially
in the form of the draft set forth on Schedule II hereto (the "Amended
Employment Agreement").
(b) The Company's obligation to sell the Securities under this
Agreement at the Closing is subject to the fulfillment on or prior to the
Closing of the following conditions:
(i) Representations and Warranties. Each representation and
warranty made by the undersigned in this Agreement shall be true and
correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on the Closing Date,
and any representation or warranty made as of a specified date earlier
than the Closing Date shall have been true and correct in all material
respects on and as of such earlier date.
(ii) Performance. The undersigned shall have performed and
complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied
with by the undersigned at or before the Closing Date.
(iii) Merger Agreement. The Merger Agreement shall have been
executed and delivered by the parties thereto in form and substance
reasonably satisfactory to the Company. As of the Closing all
conditions to the consummation of the transactions contemplated by the
Merger Agreement shall have been satisfied or waived and the closing
of the transactions contemplated hereunder shall occur immediately
prior to the effective time of the Merger.
(iv) Stockholders Agreement. The Stockholders Agreement shall
have been executed and delivered by the Company and each of the
parties to the Subscription Agreements.
(v) Subscription Agreements. The Subscription Agreements shall be
in full force and effect, no cancellation or termination (purported or
otherwise) shall have occurred in respect of any Subscription
Agreement, no material breach or default shall
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have occurred and be continuing under any of the Subscription
Agreements, and closings under all of the Subscription Agreements
shall be effected concurrently.
7. Covenants. Each of the Company and the undersigned covenants
and agrees with the other that, at all times from and after the date hereof
until the Closing Date, it will comply with all covenants and provisions of this
Section 7, except to the extent the other party may otherwise consent in
writing.
(a) Regulatory and Other Approvals. Subject to the terms and
conditions of this Agreement, each of the Company and the undersigned will
proceed diligently and in good faith to, as promptly as practicable (x) obtain
all consents, approvals or actions of, make all filings with and give all
notices to governmental or regulatory authorities or any public or private third
parties required of the Company and the undersigned to consummate the
transactions contemplated hereby and by the Merger Agreement, and (y) provide
such other information and communications to such governmental or regulatory
authorities or other public or private third parties as the other party or such
governmental or regulatory authorities or other public or private third parties
may reasonably request in connection therewith. In addition to and not in
limitation of the foregoing, each of the parties will (1) take promptly all
actions necessary to make the filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") (2) comply at the earliest practicable
date with any request for additional information received from the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "Antitrust Division"), pursuant to the HSR Act, and (3) cooperate with the
other party in connection with such party's filings under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by either the FTC or the
Antitrust Division or state attorneys general.
(b) Notice and Cure. Each of the Company and the undersigned will
promptly notify the other in writing of, and contemporaneously will provide the
other with true and complete copies of any and all information or documents
relating to, and will use all commercially reasonable efforts to cure before the
Closing Date, any event, transaction or circumstance, occurring after the date
of this Agreement that causes or will cause any covenant or agreement of either
such party under this Agreement to be breached or that renders or will render
untrue any representation or warranty of either such party contained in this
Agreement as if the same were made on or as of the date of such event,
transaction or circumstance.
(c) Fulfillment of Conditions. Each of the Company and the
undersigned will take all commercially reasonable steps necessary or desirable
and proceed diligently and in good faith to satisfy each condition to the
obligations of such party contained in this Agreement and will not take any
action that could reasonably be expected to result in the nonfulfillment of any
such condition or fail to take any commercially reasonable action that could
reasonably be expected to prevent the nonfulfillment of any such condition.
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(d) Amended Employment Agreement. Each of the undersigned and the
Company will enter into the Amended Employment Agreement contemporaneously with
the Closing.
8. Indemnification. The undersigned agrees to indemnify and hold
harmless the Company, the Parent, or any member, officer, director or control
person (within the meaning of Section 15 of the Act) of any such entity from and
against any and all loss, damage or liability due to or arising out of a breach
of any representation or warranty of the undersigned contained in any document
furnished by the undersigned in connection with the offering and sale of the
Securities, including, without limitation, this Agreement, or failure by the
undersigned to comply with any covenant or agreement made by the undersigned
herein or in any other document furnished by the undersigned to any of the
foregoing in connection with this transaction; provided, however, the aggregate
amount for which the undersigned shall have to indemnify any other person shall
not exceed the fair market value of the equity ownership (including options) of
the undersigned in MidAmerican on the date that such indemnity amounts become
due and payable and the proceeds of any sales of equity securities held
immediately subsequent to the Merger by the undersigned.
9. Survival; Binding Effect. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and delivery of the Securities and payment therefor
and, notwithstanding any investigation heretofore or hereafter made by the
undersigned or on the undersigned's behalf, shall continue in full force and
effect. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party and all covenants, promises and agreements in this Agreement by or on
behalf of the Company, or by or on behalf of the undersigned, shall bind and
inure to the benefit of the successors and assigns of such parties hereto.
10. Termination.
(a) This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned (i) at any time before the Closing, by
mutual written agreement of the Company and the undersigned or (ii) at any time
before the Closing, by the Company or the undersigned, in the event that any
order or law becomes effective restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions contemplated by
this Agreement or the Company, upon notification of the non-terminating party by
the terminating party.
(b) This Agreement shall terminate, with no further action being
required on the part of either party hereto, (i) automatically, if the Merger
Agreement is not executed and delivered by the parties hereto on or before 11:59
p.m. on October 24, 1999 or (ii) automatically, once the Merger Agreement has
been executed and delivered, upon any termination of the Merger Agreement in
accordance with its terms by MidAmerican or (with the requisite Member vote
under the Parent's Operating Agreement or the requisite two-thirds vote of the
Company's Board of Directors) by the Parent or the Company, as applicable.
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(c) If this Agreement is validly terminated pursuant to this
Section 10, this Agreement will forthwith become null and void, and there will
be no liability or obligation on the part of the undersigned or the Parent or
the Company (or any of their respective members, officers, directors, employees,
agents or other representatives or affiliates). Notwithstanding the foregoing,
no such termination shall affect the obligations of the undersigned pursuant to
Section 8, which shall survive any such termination.
11. Notices. All notices, statements, instructions or other
documents required to be given hereunder shall be in writing and shall be given
either personally, by overnight courier or by facsimile, addressed to the
Company at its principal offices and to the other parties at its address or
facsimile number reflected on the signature page hereto. The undersigned, by
written notice given to the Company in accordance with this Section 11 may
change the address to which notices, statements, instructions or other documents
are to be sent to the undersigned. All notices, statements, instructions and
other documents hereunder that are mailed shall be deemed to have been given on
the date of delivery.
12. Complete Agreement; Counterparts. This Agreement constitutes
the entire agreement and supersedes all other agreements and understandings,
both written and oral, between the parties hereto, with respect to the subject
matter hereof. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
13. Assignment. Without the prior written consent of each of the
parties hereto, neither this Agreement nor any right, interest or obligation
hereunder may be assigned by any party hereto and any attempt to do so will be
void. Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and shall be enforceable by the parties hereto and their
respective successors and assigns.
14. Amendment and Waiver. This Agreement may be amended or
modified only by an instrument signed by the parties hereto. A waiver of any
provision of this Agreement must be in writing, designated as such, and signed
by the party against whom enforcement of that waiver is sought. The waiver by a
party of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent or other breach thereof.
15. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
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IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Subscription Agreement on this 24th day of October 1999.
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Mailing Address
/s/ David L. Sokol
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David L. Sokol City State Zip Code
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Tax Identification Number
SUBSCRIPTION ACCEPTED AS OF THE ABOVE DATE
TETON ACQUISITION CORP.
By: /s/ David L. Sokol
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Name: David L. Sokol
Title: Chairman, Chief Executive
Officer and President
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Schedule I
PROJECT TETON
SUMMARY OF TERMS FOR SHAREHOLDERS' AGREEMENT
AND MANAGEMENT EQUITY PARTICIPATION
BACKGROUND
o In order to encourage equity participation in NewCo by Management, DLS
will be required to roll over (tax free) 100% of his total current
equity in Monarch (both shares directly owned and those subject to
options), and up to three additional Management participants may be
offered the opportunity to rollover (tax free) up to 100%, but not less
than 65%, of such person's total current equity in Monarch (both shares
directly owned and those subject to options), into NewCo's voting
common stock or options, as applicable. Management's contribution will
be valued on the basis of the price paid to the public stockholders of
Monarch in the Merger (the "Merger Price") less any applicable option
exercise price.
o Walter and/or his children and their respective personal trusts will
invest a total of $280.4 million in voting common stock of NewCo, with
such investment achieved through a roll-over of certain of their
present Monarch holdings and through cash investments at the closing.
At least 5 million shares (or approximately $175 million in value) of
such common shares will be directly owned by Walter or his personal
trusts.
o Teton will acquire NewCo voting common stock, convertible preferred
stock and trust preferred stock in separately agreed amounts through
cash investments or through contributions of Monarch common stock
valued at the Merger Price at the closing.
OPTION TERMS
o The number of existing shares subject to options and the exercise price
per share will remain unchanged.
o As per the terms of the existing option plan, all existing options will
be fully vested as of the closing date.
o Subject to review of accounting implications, in order to encourage
retention of existing options and avoid the need to finance early
option exercises, all outstanding options will have their exercise
terms extended until
eight years after the closing date. Options with current exercise terms
of greater than eight years from the closing date will not be affected.
ADDITIONAL OPTIONS
o As an additional incentive for Management to rollover a higher
proportion of their equity into NewCo, if DLS or any other Management
participant rolls over 100% of his common stock and stock options, then
for each ten shares rolled over (whether directly owned or subject to
options), DLS and each such other Management participant will receive
an option to purchase three additional shares of NewCo at an exercise
price equal to the per share Merger Price. These additional options
will vest in increments of 1/3 per year over the three years following
the closing date. All options will contain various other customary
terms, including anti-dilution provisions.
MANAGEMENT EQUITY -- TRANSFERABILITY; PUT AND CALL RIGHTS, ETC.
o All Management shares and options will be nontransferable for a period
of three years following the closing date (subject to exceptions for
transfers to immediate family members and personal trusts for their
benefit or management's benefit). After three years, transfer
restrictions will be lifted (subject to customary plan limitations as
to options); however, such shares and options will be subject to both
put and call rights (described below).
o At any time after the third anniversary of the closing, management will
be allowed one opportunity per year to put their shares and options to
NewCo for cash in increments of not less than 25% of their total equity
holdings as of the closing date, at a price to be agreed upon. If the
parties cannot agree on a price for the shares or options, the option
to put will be based on an "appraised value" to be determined by an
independent appraiser mutually acceptable to Management and NewCo. The
option to put at appraised value may be made by any management
stockholder at any time within 30 days after the appraised value has
been finally determined. The purchase price for the options will be
equal to the agreed or appraised value, as applicable, of the
underlying common shares less an amount equal to the applicable option
exercise price.
o NewCo will be required to have an appraisal of the common shares made
on the third anniversary of the closing date. Thereafter, NewCo will be
required to have an appraisal
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made at the request of a selling Management shareholder, but not more
frequently than once per calendar year.
o In determining appraised value, the third party appraiser will value
Management shares based on their percentage of the total equity value
of NewCo as a going concern, and will value the shares as though NewCo
were a publicly traded company, with reasonable liquidity and without a
controlling block of shares and with no sell-out premium (as might
exist in a change of control or sale of the company transaction).
o At any time after the third anniversary of the closing, NewCo will be
allowed one opportunity per year to call Management shares and options
for cash in increments of not less than 25% of their total equity
holdings at a price to be agreed upon, or, failing agreement, at the
appraised value, determined in the same manner.
o Since all currently-owned management shares and options will be fully
vested on the closing date, those shares and options will not be
affected by any termination of employment. For example, if a Management
shareholder's employment is terminated prior to the end of the
three-year period, the put and call rights described above will mature
beginning at the end of the three-year period and will be exercisable
by both parties in the same manner as if the Management shareholder had
still been employed.
o With respect to additional option grants subject to vesting, in the
event a Management shareholder's employment is terminated without
"cause," or by the Management shareholder for "good reason," or by
reason of his or her death or disability, such additional options will
become fully vested and (after three years) subject to the put and call
provisions. If a Management shareholder's employment is terminated
within the three-year period by the NewCo for cause or by him without
good reason, any unvested additional option shares will be forfeited.
WALTER AND WALTER FAMILY SHARES -- TRANSFERABILITY,
PUTS AND CALLS, ETC.
o 5 million of the voting common shares owned by Walter and/or his
personal trusts will not be transferable except in "Permitted
Transfers". "Permitted Transfers" will include (a) transfers by and
among Walter, his personal trusts and any foundation or foundation
created by Walter where the voting of such common shares is directed by
Walter, (b) provided Teton is an "Eligible Purchaser" as defined below,
transfers to third parties
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made after compliance with the right of first refusal provisions in
favor of Teton described below, (c) transfers made at any time after
the earlier of Walter's death or the third anniversary of the closing
date pursuant to a put by Walter or his personal trusts or his estate
of some or all of such shares to Teton for cash or Teton common stock
(at the election of Walter or his personal trusts or estate), with such
put exercisable only if Teton is an Eligible Purchaser, i.e., purchase
by Teton would not cause Teton to become - - subject to regulation as a
registered holding company under the Public Utility Holding Company Act
of 1935 ("PUHCA")due to the repeal or amendment of PUHCA or otherwise
and (d) such other transfer arrangements as may be agreed by and among
Walter and Teton promptly following the signing of a definitive merger
agreement which would not cause Teton or Walter to become subject to
regulation as a registered holding company under PUHCA. Any put
pursuant to clause (c) above shall be at agreed or appraised value
determined in the same manner as applies to management's puts.
o Such 5 million shares shall also be subject to a right of first refusal
in favor of Teton if a transfer of any such shares is proposed to be
made to a third party at any time.
o The balance of the voting common shares (i.e. the excess over 5 million
shares) owned by Walter or his children or any of their respective
personal trusts shall not be subject to any contractual transfer
restrictions and shall not be subject to any puts, calls or rights of
first refusal.
TETON'S HOLDINGS
o Pursuant to the terms thereof, the Trust Preferred shall be
non-transferable.
o Teton's Convertible Preferred and voting common stock shall be freely
transferable (subject to PUHCA and other applicable legal constraints).
To the extent that Teton transfers (other than transfers to any of its
consolidated subsidiaries) 5% or more of its common stock or
Convertible Preferred, all transfer restrictions, rights of first
refusal and puts in respect of common stock owned by Walter or his
personal trusts shall immediately lapse. In addition, if any such
transfer by Teton represents more than 50% of the voting power or 50%
of the combined equity value of NewCo (exclusive of Trust Preferred),
then Walter, Walter's children and their respective personal trusts
shall have the right on a
-4-
proportional basis to tag-along in connection with such sale on the
same terms and conditions as apply to Teton's sale.
o No puts, calls or rights of first refusal shall apply to any of Teton's
holdings.
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Schedule II
DRAFT
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN
MIDAMERICAN ENERGY HOLDINGS COMPANY
AND
DAVID L. SOKOL
This Amendment No. 1 (the "Amendment") to the Amended and
Restated Employment Agreement dated as of May 10, 1999 (the "Employment
Agreement") by and between MidAmerican Energy Holdings Company, an Iowa
corporation (the "Company"), and David L. Sokol (the "Executive"), is entered
into as of _____________.
WHEREAS, the Company and the Executive are presently parties to
the Employment Agreement; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement as set forth herein;
NOW, THEREFORE, the Employment Agreement is hereby amended as
follows:
By inserting immediately following Section 2(b) a new Section
2(c) to read as follows:
"(c) For so long as the Executive continues to serve as either
Chairman or Chief Executive Officer of the Company, he shall have
the right (i) to serve as a member of the Board, and (ii) to
designate two other individuals as nominees for election to the
Board."
By inserting immediately following Section 5(b) a new Section
5(c) to read as follows:
"(c) Effective as of the Closing Date (as defined in the
Agreement and Plan of Merger by and among the Company, Teton
L.L.C. and Teton Acquisition Corp. (the "Merger Agreement")) and
conditioned on the occurrence of the Closing, the Executive shall
be granted under the Company's 1996 Stock Option Plan (or any
successor plan thereto), new options (the "New Options") for a
number of shares of Company common stock equal to 30% of the sum
of (i) the number of shares of Company common stock owned
beneficially by Executive as of October 23, 1999 (provided
that all such shares are rolled over into common stock of the
Surviving Corporation (as such term is defined in the Merger
Agreement)), plus (ii) without duplication, the number of
shares subject to outstanding Company common stock options
held by Executive as of October 23, 1999 (provided that all
such options are rolled over into equivalent options in
respect of Surviving Corporation common stock). The exercise
price applicable to the New Options shall be $35.05 per share.
The New Options shall vest in equal installments of one-third
of the number of shares subject to the grant on each of the
first three anniversary dates of the Closing Date, shall have
an exercise term of ten (10) years from the Closing Date, and
shall otherwise be subject to customary terms and conditions,
including anti-dilution protections."
By inserting immediately following Section 5(c) a new Section
5(d) to read as follows:
"(d) As of the Closing Date and conditioned on the occurrence of
the Closing, all outstanding options held by Executive which have
a remaining exercise term of less than eight (8) years shall be
amended to provide for an exercise term of eight (8) years from
the Closing Date."
Except as provided herein and to the extent necessary to give
full effect to the provisions of this Amendment, the terms of the Employment
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have entered into this
Amendment effective as of _____________.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By:
---------------------------
Name:
Title:
EXECUTIVE
--------------------------------
David L. Sokol
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Dates Referenced Herein and Documents Incorporated by Reference
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