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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
MidAmerican Energy Holdings Company
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(Name of Issuer)
Common Stock, no par value
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(Title of Class of Securities)
59562V107
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(CUSIP Number of Class of Securities)
David L. Sokol
MidAmerican Energy Holdings Company
666 Grand Avenue
Des Moines, Iowa 50309
(515) 242-4300
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
Peter J. Hanlon
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
(212) 728-8000
October 14, 1999
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(Date of Event which Requires
Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following: [ ]
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SCHEDULE 13D
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CUSIP NO. 59562V107 PAGE 2 OF 13 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
David L. Sokol S.S. #
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF/00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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7 SOLE VOTING POWER
839,288
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NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY ------- ---------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 839,288
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10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
3,852,777
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.2%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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This Schedule 13D is being filed on behalf of David L. Sokol, an
individual, relating to the common stock, no par value, of MidAmerican Energy
Holdings Company, an Iowa corporation (the "Company" or the "Issuer"). Unless
the context otherwise requires, references herein to the "Common Stock" are to
the Common Stock of MidAmerican Energy Holdings Company, no par value.
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the Common Stock of the
Company, and is being filed pursuant to Rule 13d-1 under the Securities Exchange
Act of 1934, as amended. The address of the principal executive offices of the
Company is 666 Grand Avenue, Des Moines, Iowa 50309.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is filed by Mr. Sokol.
(b) The business address of Mr. Sokol is 302 South 36th Street,
Omaha, NE 68131.
(c) Mr. Sokol is the Chairman of the Board of Directors and Chief
Executive Officer of the Company. Mr. Sokol has been Chairman and Chief
Executive Officer since April 19, 1993. The Company through its retail utility
subsidiaries, MidAmerican Energy in the United States and Northern Electric in
the United Kingdom, provides electric service to 2.2 million customers and
natural gas service to 1.2 million customers worldwide. The Company manages and
owns interests in approximately 8,300 net megawatts of diversified power
generation facilities in operation, construction and development. The Company's
address is 666 Grand Avenue, Des Moines, Iowa 50309.
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(d) Mr. Sokol has not, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) Mr. Sokol has not, during the last five years, been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
(f) Mr. Sokol is a United States citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Of the Common Stock reported as beneficially owned by Mr. Sokol, 180,924
shares were either acquired through the conversion of options issued to Mr.
Sokol by the Company or purchased with personal funds of Mr. Sokol in the
aggregate amount of approximately $4.1 million; the remaining 658,364 shares are
shares issuable under existing options not yet exercised.
As further described in Item 4 (the answer to which is incorporated
herein by reference), on October 14, 1999, each of Berkshire Hathaway Inc.
("Berkshire"), Walter Scott, Jr. and David Sokol (collectively, the "Investors")
entered into an agreement to propose to acquire the Issuer through a merger of a
corporation formed by them with and into the Issuer. By virtue of such agreement
and without the use of any funds, Mr. Sokol acquired beneficial ownership, as
provided in Rule 13d-5(b) under the Securities Exchange Act of 1934, as amended
(the "Exchange
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Act"), of the 3,013,489 shares beneficially owned by Mr. Scott, as such number
has been provided by Mr. Scott, but Mr. Sokol does not have an economic interest
in such shares.
ITEM 4. PURPOSE OF TRANSACTION.
(a)-(b)On October 14, 1999, each of Berkshire, Walter Scott, Jr. (who is
a director of both Berkshire and the Issuer) and David Sokol (who is the
Chairman and Chief Executive Officer of the Issuer) formed a limited liability
company, Teton Formation L.L.C. ("Teton LLC"), and entered into an operating
agreement in connection therewith (the "Operating Agreement"), for the purpose
of forming a new corporation, Teton Acquisition Corp. ("Merger Sub") to
consummate the acquisition of the Issuer.
On October 24, 1999, the Issuer executed an Agreement and Plan of Merger
(the "Merger Agreement") with Teton LLC and Merger Sub. The Merger Agreement
provides that, subject to the terms and conditions thereof (including, without
limitation, approval by shareholders of the Issuer and certain regulatory
approvals), Merger Sub will merge with and into the Issuer, with the Issuer
continuing as the surviving corporation (the "Surviving Corporation"). Upon
consummation of the merger, all of the outstanding shares of Common Stock (other
than shares held by the Issuer, Merger Sub or Teton LLC and shares which have
perfected appraisal rights), will be converted into the right to receive $35.05
per share in cash (the "Merger Consideration"). The transaction (the
"Acquisition") will be subject to Section 13(e) of the Exchange Act. Pursuant to
the terms of the Operating
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Agreement, upon the consummation of the Acquisition, Teton LLC will be
dissolved.
The commitments of each of Berkshire, Mr. Scott and Mr. Sokol to fund
the Acquisition are set forth in individual Amended and Restated Subscription
Agreements (the "Amended and Restated Subscription Agreements" and each such
agreement, an "Amended and Restated Subscription Agreement") entered into on
October 24, 1999 between each of them and Merger Sub, which include (a) a term
sheet relating to certain put and call rights and transfer restrictions relating
to certain securities of the Surviving Corporation owned by the Investors or
others and (b) a draft form of employment agreement amendment which would
entitle Mr. Sokol to become a member of the board of directors of the Surviving
Corporation and designate two additional members of the Surviving Corporation's
ten person board. Pursuant to the Amended and Restated Subscription Agreements,
each of Berkshire, Mr. Scott and Mr. Sokol has agreed to invest cash in, and/or
contribute some or all of his or its equity investments in the Issuer to, the
Merger Sub.
(c) Not applicable.
(d) The Agreement provides that the directors of Merger Sub at the time
of the Acquisition will be the directors of the Surviving Corporation, and the
officers of Merger Sub at the time of the Acquisition will be the officers of
the Surviving Corporation.
(e) In connection with the Acquisition, (x) each share of Common Stock
(other than shares held by the Issuer, Merger Sub
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or Teton LLC and shares which have perfected appraisal rights) will be
extinguished in exchange for the Merger Consideration and (y) each of the
Issuer's 6 1/2% Convertible Junior Subordinated Debentures due 2006 (and the
related 6 1/2 Convertible Preferred Securities of CalEnergy Trust III) and its 6
1/4% Convertible Junior Subordinated Debentures due 2012 (and the related 6 1/4%
Convertible Preferred Securities of CalEnergy Capital Trust II) will, following
consummation of the Acquisition, be convertible only into an amount of cash
based on the Merger Consideration. The capitalization of the Surviving
Corporation will include (A) common stock and (B) convertible preferred stock
which will be owned by Berkshire and/or consolidated subsidiaries of Berkshire
and (I) which will be convertible into common stock of Surviving Corporation
upon certain limited circumstances, including any conversions that would not
cause the holder to be required to register as a holding company under the
Public Utility Holding Company Act of 1935, and upon a sale of the Surviving
Corporation or other change of control transaction, (II) which will be entitled
to elect two of the ten members of the Board of Directors of the Surviving
Corporation, and (III) the holders of which must approve certain fundamental
corporate changes and transactions. Merger Sub will also form a statutory
business trust to issue certain trust preferred securities to Berkshire pursuant
to its Amended and Restated Subscription Agreement. The proceeds from the sale
of such trust preferred securities by the trust will be used to purchase certain
subordinated debentures from the Merger Sub. The subordinated debentures (and
the trust preferred
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securities) will become a part of the capitalization of the Surviving
Corporation upon consummation of the Acquisition.
All other outstanding securities of the Issuer, consisting of
non-convertible notes and bonds, will remain outstanding and will, upon
consummation of the Acquisition, become obligations of the Surviving
Corporation.
(f) Not applicable.
(g) In connection with the Acquisition, Merger Sub's charter and bylaws
will become the restated charter and bylaws of the Surviving Corporation.
(h)-(i)In connection with the Acquisition, the Common Stock will be
delisted from each of the New York Stock Exchange, the Pacific Stock Exchange
and the London Stock Exchange and become eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act.
(j) Not applicable.
The descriptions in this Item 4 of the Merger Agreement, the Amended and
Restated Subscription Agreements and the Operating Agreement are qualified in
their entirety by reference to such agreements, which are attached hereto as
Exhibits 1 through 5 and incorporated by reference herein.
Except as set forth above, Mr. Sokol does not have any plans or
proposals which relate to or would result in: (a) the acquisition by any person
of additional securities of the Company, or the disposition of securities of the
Company; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
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subsidiaries; (c) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries; (d) any change in the present Board of
Directors or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing vacancies on the
board; (e) any material change in the present capitalization or dividend policy
of the Company; (f) any other material change in the Company's business or
corporate structure; (g) changes in the Company's charter, By-laws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person; (h) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act; or (j) any action similar to any of those
enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Mr. Sokol may be deemed to beneficially own 3,852,777 shares of
Common Stock. Of the 3,852,777 shares of Common Stock, Mr. Sokol directly
beneficially owns 839,288. Because of his relationship with Mr. Walter Scott as
disclosed in Item 4, Mr. Sokol may be deemed to beneficially own the 3,013,489
shares of Common Stock beneficially owned by Mr. Scott, as provided by Mr. Scott
to Mr. Sokol. As of the date hereof, 3,852,777 shares of Common Stock represent
approximately 6.2% of the outstanding shares of Common Stock, based on the
61,161,585 shares of Common Stock
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outstanding as of June 30, 1999 based on the Company's Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on August 11, 1999.
Pursuant to the Company's 1996 Stock Option Plan, Mr. Sokol has been granted
options to purchase 1,650,000 shares of Common Stock. Of these option shares,
658,364 are exercisable within 60 days by Mr. Sokol.
(b) Mr. Sokol has the sole power to vote or direct the vote, to dispose
or direct the disposition of 839,288 shares of Common Stock. Mr. Sokol has no
power to vote or direct the vote, to dispose or direct the disposition of the
3,013,489 shares of Common Stock as reported as beneficially owned by Mr. Scott
in his Schedule 13D filed with the Securities and Exchange Commission on the
date hereof.
(c) None.
(d) Except as set forth in this Item 5, no other person is known to have
the right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, such securities.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Pursuant to an Amended and Restated Employment Agreement, dated May 10,
1999, performance accelerated stock options granted to Mr. Sokol during his
employment will become vested and immediately exercisable upon his termination.
In addition, any portion of the options granted to Mr. Sokol which would become
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vested within the thirty-six (36) months after his termination will vest
immediately upon his termination from the Company. Under the agreement, upon a
change of control of the Company, all of Mr. Sokol's options will become
immediately vested and exercisable. In addition, assuming that Mr. Sokol rolls
forward into the Surviving Corporation all of his existing Common Stock and
options, effective as of the closing date of the Acquisition (the "Closing
Date"), in accordance with his Amended and Restated Subscription Agreement,
Mr. Sokol is entitled to also receive: (i) options for a number of shares of
Common Stock equal to 30% of the sum of (x) the number of shares of Common Stock
owned beneficially by him on October 23, 1999, and (y) without duplication, the
number of shares subject to outstanding Company options held by him as of
October 23, 1999; and (ii) extension of the exercise term of all outstanding
options held by him with an exercise term of less than eight (8) years to an
exercise term of eight (8) years from the Closing Date.
Except as referred to above and the stock option grants to Mr. Sokol
under the 1996 Stock Option Plan described in Item 5, there are no contracts,
arrangements, understandings or relationships among the persons named in Item 2
or between such persons and any other person with respect to any securities of
the Company.
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Agreement and Plan of Merger, dated as of October 24, 1999, by and
among the Company, Teton Formation L.L.C., an Iowa limited liability company,
and Teton Acquisition Corp., an Iowa corporation and a wholly owned subsidiary
of Teton Formation L.L.C.
2. Amended and Restated Subscription Agreement, dated as of October 24,
1999, by and between Berkshire Hathaway Inc. and Teton Acquisition Corp.
3. Amended and Restated Subscription Agreement, dated as of October 24,
1999, by and between Walter Scott, Jr. and Teton Acquisition Corp.
4. Amended and Restated Subscription Agreement, dated as of October 24,
1999, by and between David L. Sokol and Teton Acquisition Corp.
5. Operating Agreement of Teton Formation L.L.C., dated as of
October 14, 1999, by and among David L. Sokol, Walter Scott, Jr. and Berkshire
Hathaway Inc.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: October 25, 1999 /s/ David L. Sokol
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David L. Sokol
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EXHIBIT INDEX
1. Agreement and Plan of Merger, dated as of October 24, 1999, by and
among the Company, Teton Formation L.L.C., an Iowa limited liability company,
and Teton Acquisition Corp., an Iowa corporation and a wholly owned subsidiary
of Teton Formation L.L.C.
2. Amended and Restated Subscription Agreement, dated as of October 24,
1999, by and between Berkshire Hathaway Inc. and Teton Acquisition Corp.
3. Amended and Restated Subscription Agreement, dated as of October 24,
1999, by and between Walter Scott, Jr. and Teton Acquisition Corp.
4. Amended and Restated Subscription Agreement, dated as of October 24,
1999, by and between David L. Sokol and Teton Acquisition Corp.
5. Operating Agreement of Teton Formation L.L.C., dated as of
October 14, 1999, by and among David L. Sokol, Walter Scott, Jr. and Berkshire
Hathaway Inc.
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
MIDAMERICAN ENERGY HOLDINGS COMPANY,
TETON FORMATION L.L.C.
and
TETON ACQUISITION CORP.
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Dated as of October 24, 1999
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TABLE OF CONTENTS
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ARTICLE I. THE MERGER ............................................................................................1
Section 1.1. The Merger...................................................................................1
Section 1.2. Effective Time...............................................................................1
Section 1.3. Effect of the Merger.........................................................................2
Section 1.4. Subsequent Actions...........................................................................2
Section 1.5. Articles of Incorporation; By-Laws; Officers and Directors...................................2
ARTICLE II. TREATMENT OF SHARES...................................................................................3
Section 2.1. Conversion of Securities.....................................................................3
Section 2.2. Dissenting Shares............................................................................3
Section 2.3. Surrender of Shares; Stock Transfer Books....................................................4
Section 2.4. Options Under Company Stock Plans............................................................5
ARTICLE III. THE CLOSING .........................................................................................6
Section 3.1. Closing .....................................................................................6
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................6
Section 4.1. Organization and Qualification...............................................................6
Section 4.2. Subsidiaries.................................................................................7
Section 4.3. Capitalization...............................................................................8
Section 4.4. Authority; Non-Contravention; Statutory Approvals; Compliance................................8
Section 4.5. Reports and Financial Statements............................................................10
Section 4.6. Absence of Certain Changes or Events; Absence of Undisclosed Liabilities....................11
Section 4.7. Litigation .................................................................................11
Section 4.8. Proxy Statement.............................................................................12
Section 4.9. Tax Matters.................................................................................12
Section 4.10. Employee Matters; ERISA....................................................................14
Section 4.11. Environmental Protection...................................................................18
Section 4.12. Regulation as a Utility....................................................................21
Section 4.13. Vote Required..............................................................................21
Section 4.14. Insurance .................................................................................21
Section 4.15. Opinions of Financial Advisers.............................................................21
Section 4.16. Brokers ...................................................................................21
Section 4.17. Non-Applicability of Certain Provisions of Iowa Act........................................22
Section 4.18. Company Rights Agreement...................................................................22
Section 4.19. Year 2000 Compliance.......................................................................22
Section 4.20. Board Recommendation.......................................................................22
Section 4.21. Investment Company and Investment Advisory Matters.........................................23
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ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................................23
Section 5.1. Organization................................................................................23
Section 5.2. Authority; Non-Contravention; Statutory Approvals...........................................23
Section 5.3. Proxy Statement.............................................................................24
Section 5.4. Brokers ....................................................................................24
Section 5.5. Financing ..................................................................................24
Section 5.6. Sale of the Company.........................................................................25
Section 5.7. Share Ownership.............................................................................25
Section 5.8. Regulation Under the 1935 Act...............................................................25
Section 5.9. Investor Agreements.........................................................................25
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER..............................................................26
Section 6.1. Conduct of Business by the Company Pending the Merger.......................................26
Section 6.2. Conduct of Business by Parent and Merger Sub Pending the Merger.............................28
Section 6.3. Additional Covenants by the Company and Parent Pending the Merger...........................29
ARTICLE VII. ADDITIONAL AGREEMENTS..............................................................................30
Section 7.1. Access to Information.......................................................................30
Section 7.2. Proxy Statement and Schedule 13E-3..........................................................30
Section 7.3. Regulatory Approvals and Other Matters......................................................31
Section 7.4. Shareholder Approval........................................................................32
Section 7.5. Directors' and Officers' Indemnification....................................................32
Section 7.6. Disclosure Schedules........................................................................33
Section 7.7. Public Announcements........................................................................34
Section 7.8. No Solicitations............................................................................34
Section 7.9. Expenses ...................................................................................36
Section 7.10. Third Party Standstill Agreements..........................................................36
Section 7.11. Takeover Statutes..........................................................................36
Section 7.12. Subscription Agreements....................................................................36
Section 7.13. Employee Benefits Matters...................................................................37
ARTICLE VIII. CONDITIONS .......................................................................................37
Section 8.1. Conditions to Each Party's Obligation to Effect the Merger..................................37
Section 8.2. Conditions to Obligation of the Company to Effect the Merger................................38
Section 8.3. Conditions to Obligation of Parent to Effect the Merger.....................................39
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER...................................................................40
Section 9.1. Termination.................................................................................40
Section 9.2. Effect of Termination.......................................................................42
Section 9.3. Termination Fee; Expenses...................................................................43
Section 9.4. Amendment ..................................................................................44
Section 9.5. Waiver .....................................................................................44
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ARTICLE X. GENERAL PROVISIONS...................................................................................44
Section 10.1. Non-Survival; Effect of Representations and Warranties.....................................44
Section 10.2. Notices ...................................................................................44
Section 10.3. Miscellaneous..............................................................................46
Section 10.4. Interpretation.............................................................................46
Section 10.5. Counterparts; Effect.......................................................................46
Section 10.6. Enforcement................................................................................46
Section 10.7. Parties in Interest........................................................................46
Section 10.8. Further Assurances.........................................................................47
Section 10.9. Waiver of Jury Trial.......................................................................47
Section 10.10. Certain Definitions........................................................................47
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 24, 1999 (this
"Agreement"), by and among MidAmerican Energy Holdings Company, an Iowa
corporation (the "Company""), Teton Formation L.L.C., an Iowa limited liability
company ("Parent"), and Teton Acquisition Corp., an Iowa corporation and a
wholly owned subsidiary of Parent ("Merger Sub").
W I T N E S S E T H :
WHEREAS, the Investors (as defined in Section 5.5) desire to acquire
the entire equity interest in the Company and have formed Parent and Merger Sub
for the purpose of effecting such transaction; and
WHEREAS, the Boards of Directors of the Company and Merger Sub have
each approved, and deem advisable and in the best interests of their respective
shareholders, and the Company, Parent and Merger Sub have approved, the merger
of Merger Sub with and into the Company, with the Company being the surviving
corporation, in accordance with the Iowa Business Corporation Act (the "Iowa
Act") and upon the terms and subject to the conditions set forth in this
Agreement (such transaction is referred to as the "Merger"), as a result of
which the former shareholders of Merger Sub as of the effective time of the
Merger will own all of the outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in Section
1.2) and upon the terms and subject to the conditions of this Agreement and the
Iowa Act, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation (sometimes hereinafter referred to as the "Surviving
Corporation").
Section 1.2. Effective Time. On the Closing Date (as defined in Section
3.1), articles of merger complying with the requirements of the Iowa Act shall
be executed and filed by the Company and Merger Sub with the Secretary of State
of Iowa. The Merger shall become effective on the date on which the articles of
merger are duly filed with the Secretary of State of Iowa or at such later time
as is mutually agreed by the parties and specified in the articles of merger
(the "Effective Time").
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Section 1.3. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Iowa Act.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.4. Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of, and assume the liabilities of, either of the
Company or Merger Sub acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of either the
Company or Merger Sub, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of each of such corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in, and the assumption of the liabilities of,
the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.5. Articles of Incorporation; By-Laws; Officers and
Directors.
(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time the Articles of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Restated Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Restated Articles of Incorporation.
(b) Unless otherwise determined by Parent prior to the Effective Time,
the By-Laws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Restated By-Laws of the Surviving Corporation until thereafter
amended as provided by law, the Restated Articles of Incorporation of the
Surviving Corporation and such Restated By-Laws.
(c) Unless otherwise determined by Parent prior to the Effective Time,
the officers of Merger Sub in office at the Effective Time shall be and
constitute the officers of the Surviving Corporation, each holding the same
office in the Surviving Corporation as he or she held in Merger Sub for the
terms elected and/or until their respective successors shall be elected or
appointed and qualified.
(d) Unless otherwise determined by Parent prior to the Effective Time,
the directors of Merger Sub in office at the Effective Time shall be and
constitute the directors of the Surviving Corporation, each holding the same
directorship in the Surviving Corporation as he or she held in Merger Sub for
the terms elected and/or until their respective successors shall be elected or
appointed and qualified.
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ARTICLE II.
TREATMENT OF SHARES
Section 2.1. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, the Company, Merger
Sub or the holder of any of the following securities:
(a) Each share (collectively, the "Shares") of common stock, no par
value, of the Company ("Company Common Stock"), together with the associated
purchase rights ("Company Rights") under the Company Rights Agreement (as
defined in Section 4.18), issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section 2.1(b)
and any Dissenting Shares (as defined in Section 2.2(a)) shall be canceled and
extinguished and be converted into the right to receive $35.05 (the "Per Share
Amount"), in cash payable to the holder thereof, without interest, upon
surrender of the certificate representing such Share in accordance with Section
2.3. Throughout this Agreement, the term "Shares" refers to the shares of
Company Common Stock together with the associated Company Rights.
(b) Each Share held in the treasury of the Company and each Share owned
by Parent, Merger Sub or any direct or indirect Subsidiary (as defined in
Section 4.1) of Parent, Merger Sub or the Company (other than Shares held in
trust accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) immediately prior to the Effective Time
shall be canceled and extinguished, and no payment or other consideration shall
be made with respect thereto.
(c) Each share of common stock, no par value, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall thereafter represent
one validly issued, fully paid and nonassessable share of common stock, no par
value, of the Surviving Corporation. Each share of Zero Coupon Convertible
Preferred Stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall thereafter represent one validly issued, fully paid and
nonassessable share of Zero Coupon Convertible Preferred Stock of the Surviving
Corporation.
Section 2.2. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any Shares held by a holder who has demanded and perfected his demand for
appraisal of his Shares in accordance with Section 1302 of the Iowa Act and as
of the Effective Time has neither effectively withdrawn nor lost his right to
such appraisal ("Dissenting Shares"), shall not be converted into or represent a
right to receive cash pursuant to Section 2.1, but the holder thereof shall be
entitled to only such rights in respect thereof as are granted by Section 1302
of the Iowa Act.
(b) Notwithstanding the provisions of subsection (a) of this Section
2.2, if any holder of Shares who demands appraisal of his Shares under the Iowa
Act shall effectively withdraw
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or lose (through failure to perfect or otherwise) his right to appraisal, then
as of the Effective Time or the occurrence of such event, whichever later
occurs, such holder's Shares shall automatically be converted into and represent
only the right to receive cash as provided in Section 2.1(a), without interest
thereon, upon surrender of the certificate or certificates representing such
Shares in accordance with Section 2.3.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands, and any other instruments served pursuant to the Iowa Act received
by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the Iowa Act. The
Company shall not voluntarily make any payment with respect to any demands for
appraisal and shall not, except with the prior written consent of Parent, settle
or offer to settle any such demands.
Section 2.3. Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, the Company shall designate a bank or
trust company to act as agent for the holders of Shares (the "Exchange Agent")
to receive the funds necessary to make the payments contemplated by Section 2.1.
At the Effective Time, Parent or Merger Sub shall deposit, or cause to be
deposited (including from available cash balances at the Company), in trust with
the Exchange Agent for the benefit of holders of Shares, the aggregate
consideration to which such holders shall be entitled at the Effective Time
pursuant to Section 2.1.
(b) Each holder of a certificate or certificates representing any
Shares canceled upon the Merger pursuant to Section 2.1(a) may thereafter
surrender such certificate or certificates to the Exchange Agent, as agent for
such holder, to effect the surrender of such certificate or certificates on such
holder's behalf for a period ending one year after the Effective Time. Parent
and Merger Sub agree that as promptly as practicable after the Effective Time
the Surviving Corporation shall cause the distribution to holders of record of
Shares as of the Effective Time of appropriate materials to facilitate such
surrender. Upon the surrender of certificates representing the Shares, the
Surviving Corporation shall cause the Exchange Agent to pay the holder of such
certificates in exchange therefor cash in an amount equal to the Per Share
Amount multiplied by the number of Shares represented by such certificate. Until
so surrendered, each such certificate (other than certificates representing
Dissenting Shares and certificates representing Shares canceled pursuant to
Section 2.1(b)) shall represent solely the right to receive the aggregate Per
Share Amount relating thereto.
(c) If payment of cash in respect of canceled Shares is to be made to a
Person other than the Person in whose name a surrendered certificate or
instrument is registered, it shall be a condition to such payment that the
certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the certificate or
instrument surrendered or
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shall have established to the satisfaction of the Surviving Corporation or the
Exchange Agent that such tax either has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfer of
any shares of capital stock thereafter on the records of the Company. From and
after the Effective Time, the holders of certificates evidencing ownership of
the Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares, except as otherwise provided for
herein or by applicable law. If, after the Effective Time, certificates for
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for cash as provided in Section 2.1(a) and Sections 2.3(b) and (c). No
interest shall accrue or be paid on any cash payable upon the surrender of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares.
(e) Promptly following the date which is one year after the Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation all cash
(including any interest received with respect thereto), certificates and other
documents in its possession relating to the transactions contemplated hereby,
and the Exchange Agent's duties shall terminate. Thereafter, each holder of a
certificate representing Shares (other than certificates representing Dissenting
Shares and certificates representing Shares canceled pursuant to Section 2.1(b))
shall be entitled to look only to the Surviving Corporation (subject to
applicable abandoned property, escheat and similar laws) and only as general
creditors thereof with respect to the aggregate Per Share Amount payable upon
due surrender of their certificates, without any interest or dividends thereon.
Notwithstanding the foregoing, neither Parent, the Surviving Corporation nor the
Exchange Agent shall be liable to any holder of a certificate representing
Shares for the Per Share Amount delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) The Per Share Amount paid in the Merger shall be net to the holder
of Shares in cash, subject to reduction only for any applicable federal back-up
withholding or, as set forth in Section 2.3(c), stock transfer taxes payable by
such holder.
Section 2.4. Options Under Company Stock Plans.
(a) Except as provided in Section 2.4(b), the Company shall take all
actions necessary to provide that, immediately prior to the Effective Time, (x)
each outstanding option to acquire shares of Company Common Stock (the "Company
Options") granted under any of the Company Stock Plans (as defined in Section
4.3), whether or not then exercisable or vested, shall become fully exercisable
and vested, (y) each Company Option which is then outstanding shall be canceled
and (z) in consideration of such cancellation, and except to the extent that
Parent and the holder of any such Company Option otherwise agree in writing, the
Company (or, at Parent's option, Parent or the Surviving Corporation) shall pay
in cash to such holders of Company Options an amount in respect thereof equal to
the product of (A) the excess, if any, for each Company Option, of the Per Share
Amount over the per share exercise price thereof and (B) the number of shares of
Company Common Stock subject thereto (such
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payment to be net of applicable withholding taxes); provided that the foregoing
shall not require any action which violates the Company Stock Plans.
(b) Certain Company Options held by certain members or former members
of Company management, as Parent shall notify the Company in writing prior to
the Effective Time, shall become fully exercisable and vested immediately prior
to the Effective Time and shall thereafter remain exercisable in accordance with
their terms and any other terms which are agreed to in writing between Parent
and such holders.
(c) Except as provided in Section 2.4(b) or as otherwise agreed to in
writing by the parties to this Agreement, the Company shall use all reasonable
efforts to ensure that following the Effective Time no holder of Company Options
or any participant in the Company Stock Plans or any other such plans, programs
or arrangements shall have any right thereunder to acquire any equity securities
(or any interests therein) of the Company, the Surviving Corporation or any
Subsidiary thereof.
ARTICLE III.
THE CLOSING
Section 3.1. Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York, 10019 at 10:00 A.M., New York time, on the second business day
immediately following the date on which the last of the conditions set forth in
Article VIII hereof is fulfilled or waived, or at such other time, date and
place as Parent and the Company shall mutually agree (the "Closing Date").
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
Section 4.1. Organization and Qualification. The Company and each of
the Company Subsidiaries and, to the knowledge of the Company, each of the
Company Joint Ventures is a corporation or other entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority and has
been duly authorized by all necessary approvals and orders to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its assets and properties makes such qualification necessary other
than in such jurisdictions where the failure to so qualify and be in good
standing, when taken together with all other such failures, would not have a
material adverse effect on the business, operations, properties, assets,
financial condition, Company Prospects (as defined below) or the results of
operations of the Company and the Company Subsidiaries taken as a whole or on
the consummation of the transactions contemplated by this Agreement
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(to the extent such adverse effect does not arise from (i) general economic
conditions or (ii) the securities markets generally) (any such material adverse
effect, a "Company Material Adverse Effect"). The term "Subsidiary" of a Person
shall mean any corporation or other entity (including partnerships and other
business associations and joint ventures) in which such Person directly or
indirectly owns at least a majority of the voting power represented by the
outstanding capital stock or other voting securities or interests having voting
power under ordinary circumstances to elect a majority of the directors or
similar members of the governing body, or otherwise to direct the management and
policies, of such corporation or entity, and the term "Company Subsidiary" shall
mean a Subsidiary of the Company. The term "Joint Venture" of a Person shall
mean any corporation or other entity (including partnerships and other business
associations and joint ventures) in which such Person directly or indirectly
owns an equity interest that is less than a majority of any class of the
outstanding voting securities or equity of any such entity, other than equity
interests in entities in which such Person does not control the operations and
does not appoint at least 50% of the board of directors (or comparable governing
body), and the term "Company Joint Venture" shall mean a Joint Venture of the
Company. The term "Company Prospects" shall mean the prospects of the Company
and the Company Subsidiaries, taken as a whole, but only as they may be affected
by statutory or regulatory changes (whether relating to utility, environmental
or other statutory or regulatory matters) or by expropriation events.
Section 4.2. Subsidiaries. Section 4.2 of the Company Disclosure
Schedule delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Schedule") sets forth a list of all the
Company Subsidiaries and the Company Joint Ventures, including the name of each
such entity, a brief description of the principal line or lines of business
conducted by each such entity and the interest of the Company and the Company
Subsidiaries therein. Each of the Company and MidAmerican Funding, LLC
("MidAmerican Funding") is a "public utility holding company" (as defined in the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act")) exempt
from all provisions (other than Section 9(a)(2)) of the 1935 Act, pursuant to
Section 3(a)(1) in accordance with Rule 2 of the 1935 Act, and MidAmerican
Energy Company ("MidAmerican Utility") is a "public utility company" within the
meaning of Section 2(a)(5) of the 1935 Act. With the exception of MidAmerican
Utility and MidAmerican Funding, no Company Subsidiary or Company Joint Venture
is a "holding company" or a "public utility company" within the meaning of
Sections 2(a)(7) and 2(a)(5) of the 1935 Act, respectively, nor, except with
respect to their relationship with the Company and MidAmerican Funding, are any
of such entities an "affiliate" or a "subsidiary company" of a holding company
within the meaning of Sections 2(a)(11) and 2(a)(8) of the 1935 Act,
respectively. Except as set forth in Section 4.2 of the Company Disclosure
Schedule, (i) all of the issued and outstanding shares of capital stock of each
Company Subsidiary are validly issued, fully paid, nonassessable and free of
preemptive rights and are owned, directly or indirectly, by the Company, free
and clear of any liens, claims, encumbrances, security interests, charges and
options of any nature whatsoever, and (ii) there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
pledges, security interests, encumbrances, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating the Company or any Company
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Subsidiary to issue, deliver or sell, pledge, grant a security interest or
encumber, or cause to be issued, delivered or sold, pledged or encumbered or a
security interest to be granted on, shares of capital stock of any Company
Subsidiary or obligating the Company or any Company Subsidiary to grant, extend
or enter into any such agreement or commitment.
Section 4.3. Capitalization. The authorized capital stock of the
Company consists of 180,000,000 shares of Company Common Stock and 2,000,000
shares of preferred stock, no par value, none of which preferred stock is
outstanding. As of the close of business on October 22, 1999, (i) 59,877,313
shares of Company Common Stock are outstanding, (ii) not more than 7,156,363
shares of Company Common Stock are reserved for issuance pursuant to the
Company's existing stock option agreements and plans and its 1994 Employee Stock
Purchase Plan and 401(k) Savings Plan (such agreements and plans, collectively,
the "Company Stock Plans"), (iii) 23,102,187 shares of Company Common Stock are
held by the Company in its treasury or by its wholly owned Subsidiaries, and
(iv) except as set forth in Section 4.3 of the Company Disclosure Schedule, no
bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on which
shareholders may vote ("Voting Debt") is issued or outstanding. All of the
issued and outstanding shares of Company Common Stock are validly issued, fully
paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, except as set forth in Section 4.3 of the Company Disclosure Schedule
or as may be provided by the Company Stock Plans, there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
pledges, security interests, encumbrances, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating the Company to issue, deliver or sell, pledge, grant a
security interest or encumber, or cause to be issued, delivered or sold, pledged
or encumbered or a security interest to be granted on, shares of capital stock
or any Voting Debt of the Company or obligating the Company to grant, extend or
enter into any such agreement or commitment.
Section 4.4. Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority. The Company has all requisite power and authority to
enter into this Agreement and, subject to the receipt of the Company
Shareholders' Approval (as defined in Section 4.13) and the Company Required
Statutory Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to obtaining the Company Shareholders' Approval. This Agreement
has been duly and validly executed and delivered by the Company, and, assuming
the due authorization, execution and delivery hereof by the other signatories
hereto, this Agreement constitutes the valid and binding obligation of the
Company enforceable against it in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
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(b) Non-Contravention. The execution and delivery of this Agreement by
the Company do not, and the consummation of the transactions contemplated hereby
will not, in any respect, violate, conflict with or result in a breach of any
provision of, or constitute a default (with or without notice or lapse of time
or both) under, or result in the termination or modification of, or accelerate
the performance required by, or result in a right of termination, cancellation
or acceleration of any obligation or the loss of a benefit under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the agreements, properties or assets of the Company or any of the Company
Subsidiaries or the Company Joint Ventures (any such violation, conflict,
breach, default, right of termination, modification, cancellation or
acceleration, loss or creation, is referred to herein as a "Violation" with
respect to the Company, and such term when used in Article V shall have a
correlative meaning with respect to Parent and Merger Sub) pursuant to any
provisions of (i) the articles of incorporation, by-laws or similar governing
documents of the Company or any of the Company Subsidiaries or the Company Joint
Ventures, (ii) subject to obtaining the Company Required Statutory Approvals and
the receipt of the Company Shareholders' Approval, any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
of any court, federal, state, local or foreign governmental or regulatory body
(including a stock exchange or other self-regulatory body) or authority (each, a
"Governmental Authority") applicable to the Company or any of the Company
Subsidiaries or the Company Joint Ventures or any of their respective properties
or assets or (iii) subject to obtaining the third-party consents set forth in
Section 4.4(b) of the Company Disclosure Schedule (the "Company Required
Consents"), any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which the Company or any of the Company Subsidiaries
or the Company Joint Ventures is a party or by which it or any of its properties
or assets may be bound or affected, excluding from the foregoing clauses (ii)
and (iii) such Violations which would not, in the aggregate, have a Company
Material Adverse Effect.
(c) Statutory Approvals. Except as set forth in Section 4.4(c) of the
Company Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
is necessary for the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby (the
"Company Required Statutory Approvals," it being understood that references in
this Agreement to "obtaining" such Company Required Statutory Approvals shall
mean making such declarations, filings or registrations; giving such notices;
obtaining such authorizations, consents or approvals; and having such waiting
periods expire as are necessary to avoid a violation of law).
(d) Compliance. Except as set forth in Section 4.4(d) or 4.11 of the
Company Disclosure Schedule or as disclosed in the Company SEC Reports (as
defined in Section 4.5) filed as of the date of this Agreement, neither the
Company nor any of the Company Subsidiaries nor, to the knowledge of the
Company, any Company Joint Venture is in violation of, is, to the knowledge of
the Company, under investigation with respect to any violation of, or has been
given notice or been charged with any violation of, any law, statute, order,
rule, regulation, ordinance or judgment (including, without limitation, any
applicable environmental
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law, ordinance or regulation) of any Governmental Authority, except for
violations which individually or in the aggregate do not, and would not
reasonably be expected to, have a Company Material Adverse Effect. Except as set
forth in Section 4.4(d) or 4.11 of the Company Disclosure Schedule, the Company
and the Company Subsidiaries and, to the knowledge of the Company, the Company
Joint Ventures have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their businesses as
presently conducted which are material to the operation of the businesses of the
Company and the Company Subsidiaries. Except as set forth in Section 4.4(d) of
the Company Disclosure Schedule, the Company and each of the Company
Subsidiaries and, to the knowledge of the Company, Company Joint Ventures is not
in breach or violation of or in default in the performance or observance of any
term or provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default by the Company or any Company
Subsidiary or, to the knowledge of the Company, any Company Joint Venture under
(i) its articles of incorporation, by-laws or other organizational document or
(ii) any contract, commitment, agreement, indenture, mortgage, loan agreement,
note, lease, bond, license, approval or other instrument to which it is a party
or by which the Company or any Company Subsidiary or any Company Joint Venture
is bound or to which any of its property is subject, except in the case of
clause (ii) above, for violations, breaches or defaults which individually or in
the aggregate do not, and would not reasonably be expected to, have a Company
Material Adverse Effect.
Section 4.5. Reports and Financial Statements. The filings required to
be made by the Company and the Company Subsidiaries under the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the 1935 Act, the Public Utility Regulatory
Policies Act of 1978 ("PURPA"), the Federal Power Act (the "Power Act") and
applicable state, municipal, local and other laws, including franchise and
public utility laws and regulations, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, have been filed with the Securities and
Exchange Commission (the "SEC"), the Federal Energy Regulatory Commission (the
"FERC"), and the appropriate Iowa, Illinois, South Dakota, Nebraska or other
appropriate Governmental Authorities, as the case may be, and complied, as of
their respective dates, in all material respects with all applicable
requirements of the appropriate statutes and the rules and regulations
thereunder. The Company has made available to Parent a true and complete copy of
each report, schedule, registration statement and definitive proxy statement and
all amendments thereto filed with the SEC by the Company or any Company
Subsidiary (or their predecessors, including, without limitation, CalEnergy
Company, Inc.) pursuant to the requirements of the Securities Act or Exchange
Act since January 1, 1999 (as such documents have since the time of their filing
been amended, the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of the Company and MidAmerican Utility
included in the Company SEC Reports (collectively, the "Company Financial
Statements") have been prepared in accordance with generally accepted accounting
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principles applied on a consistent basis ("GAAP") (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
the Company and MidAmerican Utility, as the case may be, as of the dates thereof
and the results of their operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring audit adjustments. True, accurate and complete copies of the articles
of incorporation and by-laws of the Company and MidAmerican Utility, as in
effect on the date of this Agreement, are included (or incorporated by
reference) in the Company SEC Reports.
Section 4.6. Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities.
(a) Absence of Certain Changes or Events. Except as set forth in
Section 4.6(a) of the Company Disclosure Schedule or as disclosed in the Company
SEC Reports filed prior to the date of this Agreement, since December 31, 1998,
the Company and each of the Company Subsidiaries and, to the knowledge of the
Company, each of the Company Joint Ventures, have conducted their business only
in the ordinary course of business consistent with past practice and there has
not been, and no fact or condition exists which would have, or could reasonably
be expected to have, a Company Material Adverse Effect.
(b) Absence of Undisclosed Liabilities. Neither the Company nor any
Company Subsidiary, nor, to the knowledge of the Company, any Company Joint
Venture, has any liabilities or obligations (whether absolute, accrued,
contingent or otherwise and including, without limitation, margin loans) of a
nature required by GAAP to be reflected in a consolidated corporate balance
sheet, except liabilities, obligations or contingencies which are accrued or
reserved against in the consolidated financial statements of the Company and
MidAmerican Utility or reflected in the notes thereto for the year ended
December 31, 1998, or which were incurred after December 31, 1998 in the
ordinary course of business and would not, in the aggregate, have a Company
Material Adverse Effect.
Section 4.7. Litigation. Except as set forth in Section 4.7 or 4.11 of
the Company Disclosure Schedule or as disclosed in the Company SEC Reports filed
prior to the date of this Agreement, (a) there are no claims, suits, actions or
proceedings by any Governmental Authority or any arbitrator, pending or, to the
knowledge of the Company, threatened, nor are there, to the knowledge of the
Company, any investigations or reviews by any Governmental Authority or any
arbitrator pending or threatened against, relating to or affecting the Company
or any of the Company Subsidiaries or, to the knowledge of the Company, the
Company Joint Ventures, (b) there have not been any significant developments
since December 31, 1998 with respect to such disclosed claims, suits, actions,
proceedings, investigations or reviews and (c) there are no judgments, decrees,
injunctions, rules or orders of any Governmental Authority or any arbitrator
applicable to the Company or any of the Company Subsidiaries or, to the
knowledge of the Company, applicable to any of the Company Joint Ventures,
which, when taken together with any other nondisclosures described in clauses
(a), (b) or (c), could reasonably be expected to have a Company Material Adverse
Effect.
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Section 4.8. Proxy Statement. None of the information supplied or to be
supplied by or on behalf of the Company for inclusion or incorporation by
reference in the proxy statement in definitive form ("Proxy Statement") relating
to the Company Meeting (as defined in Section 7.4(a)) will, at the date mailed
to shareholders of the Company or at the time of the Company Meeting (giving
effect to any documents incorporated by reference therein), include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading or necessary to correct any statement in any
earlier authorized communication with respect to the solicitation of proxies on
behalf of the Company for the Company Meeting which has become false or
misleading. Notwithstanding the foregoing, the Company does not make any
representation or warranty with respect to any information that has been
supplied by Parent, Merger Sub or their affiliates (other than the Company and
the Company Subsidiaries), accountants, counsel or other authorized
representatives for use in any of the foregoing documents. The Proxy Statement
will comply as to form in all material respects with the provisions of
applicable federal securities law.
Section 4.9. Tax Matters. "Taxes," as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal property, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties (civil or criminal) on or additions to any such taxes
and any expenses incurred in connection with the determination, settlement or
litigation of any Tax liability. "Tax Return," as used in this Agreement, means
a report, return or other information required to be supplied to a governmental
entity with respect to Taxes including, without limitation, where permitted or
required, combined or consolidated returns for any group of entities that
includes the Company or any Company Subsidiary.
(a) Filing of Timely Tax Returns. The Company and each of the Company
Subsidiaries have filed (or there has been filed on their behalf) all material
Tax Returns required to be filed by each of them under applicable law. All such
Tax Returns were and are in all material respects true, complete and correct and
filed on a timely basis.
(b) Payment of Taxes. The Company and each of the Company Subsidiaries
have, within the time and in the manner prescribed by law, paid (and until the
Closing Date will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable, except for those contested in good
faith and for which adequate reserves have been taken.
(c) Tax Reserves. The Company and the Company Subsidiaries have
established (and until the Closing Date will maintain) on their books and
records reserves which adequately reflect its estimate of the amounts required
to pay all Taxes in accordance with GAAP.
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(d) Tax Liens. There are no Tax liens upon any material assets of the
Company or any of the Company Subsidiaries except liens for Taxes not yet due.
(e) Withholding Taxes. The Company and each of the Company Subsidiaries
have complied (and until the Closing Date will comply) in all material respects
with the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), relating to the payment and withholding of Taxes, including, without
limitation, the withholding and reporting requirements under Code Sections 1441
through 1464, 3401 through 3406 and 6041 through 6049, as well as similar
provisions under any other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required.
(f) Extensions of Time For Filing Tax Returns. Except as set forth in
Section 4.9(f) of the Company Disclosure Schedule, neither the Company nor any
of the Company Subsidiaries has requested any extension of time within which to
file any Tax Return, which Tax Return has not since been timely filed.
(g) Waivers of Statute of Limitations. Except as set forth in Section
4.9(g) of the Company Disclosure Schedule, neither the Company nor any of the
Company Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as disclosed in
Section 4.9(h) of the Company Disclosure Schedule, the statute of limitations
for the assessment of all Taxes has expired for all applicable Tax Returns of
the Company and the Company Subsidiaries or those Tax Returns have been examined
by the appropriate taxing authorities for all tax periods ending before the date
of this Agreement, and no deficiency for any Taxes has been proposed, asserted
or assessed against The Company or any of the Company Subsidiaries that has not
been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as disclosed in
Section 4.9(i) of the Company Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are presently pending, or, to
the knowledge of the Company, threatened, with regard to any Taxes or Tax
Returns of the Company or any of the Company Subsidiaries.
(j) Tax Rulings. Neither The Company nor any of the Company
Subsidiaries has received or requested a Tax Ruling (as defined below) or
entered into a Closing Agreement (as defined below), with any taxing authority
that would have a continuing adverse effect after the Closing Date. "Tax
Ruling," as used in this Agreement, shall mean a written ruling of a taxing
authority relating to Taxes. "Closing Agreement," as used in this agreement,
shall mean a written and legally binding agreement with a taxing authority
relating to Taxes.
(k) Availability of Tax Returns. The Company has made available to
Parent, where requested by Parent, complete and accurate copies of (i) all
federal and state income Tax Returns for open years, and any amendments thereto,
filed by the Company or any of the Company Subsidiaries, (ii) all audit reports
or written proposed adjustments (whether formal
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or informal) received from any taxing authority relating to any Tax Return filed
by the Company or any of the Company Subsidiaries and (iii) any Tax Ruling or
request for a Tax Ruling applicable to the Company or any of the Company
Subsidiaries and Closing Agreements entered into by the Company or any of the
Company Subsidiaries.
(l) Tax Sharing Agreements. Except as disclosed in Section 4.9(l) of
the Company Disclosure Schedule, neither the Company nor any Company Subsidiary
is a party to any agreement relating to allocating or sharing of Taxes.
(m) Code Section 341(F). Neither the Company nor any of the Company
Subsidiaries has filed (or will file prior to the Closing) a consent pursuant to
Code Section 341(f) or has agreed to have Code Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as that term is defined in Code Section
341(f)(4)), owned by the Company or any of the Company Subsidiaries.
(n) Code Section 168. Except as set forth in Section 4.9(n) of the
Company Disclosure Schedule, no property of the Company or any of the Company
Subsidiaries is property that the Company or any Company Subsidiary or any party
to this transaction is or will be required to treat as being owned by another
person pursuant to the provisions of Code Section 168(f)(8) (as in effect prior
to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Code Section 168(h).
(o) Code Section 481 Adjustments. Except as set forth in Section 4.9(o)
of the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries is required to include in income for any tax period ending after
the date hereof any adjustment pursuant to Code Section 481(a) by reason of a
voluntary change in accounting method initiated by the Company or any of the
Company Subsidiaries, and, to the knowledge of the Company, the Internal Revenue
Service ("IRS") has not proposed any such adjustment or change in accounting
method.
(p) Consolidated Tax Returns. Except as disclosed in Section 4.9(p) of
the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has ever been a member of an affiliated group of corporations
(within the meaning of Code Section 1504(a)) filing consolidated returns, other
than the affiliated group of which the Company is the common parent.
(q) 5% Foreign Shareholders. To the Company's knowledge, based on
Schedule 13D and 13G filings with the SEC with respect to the Company, no
foreign person owns, as of the date of this Agreement, 5% or more of the
outstanding shares of Company Common Stock.
Section 4.10. Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the Company Disclosure Schedule
contains a true and complete list of each employee benefit plan, practice,
program or arrangement currently sponsored, maintained or contributed to by the
Company or any of the Company Subsidiaries for the benefit of employees, former
employees or directors and their beneficiaries
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in respect of services provided to any such entity, including, but not limited
to, any employee benefit plans within the meaning of Section 3(3) of Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), employee pension
benefit plan, program, arrangement or agreement, any health, medical, welfare,
disability, life insurance, bonus, option, stock appreciation plan, performance
stock plan, restricted stock plan, deferred compensation plan, retiree benefits
plan, severance pay and other employee benefit or fringe benefit plan and any
employment, consulting, non-compete, severance or change in control agreement
(collectively, the "Company Benefit Plans"), together with, for any option,
stock appreciation plan, performance stock plan, restricted stock plan, deferred
compensation plan and supplemental retirement plan, the amounts or benefits
granted or payable under each, as of September 30, 1999 and as of the Effective
Time (assuming no termination of employment as of such times), and exercise
prices regarding Company Options or other securities which represent the right
(contingent or other) to purchase or receive shares of Company Common Stock or,
following the Merger, of Surviving Corporation Common Stock. For the purposes of
this Section 4.10, the term "Company" shall be deemed to include predecessors
thereof.
(b) Contributions. Except as set forth in Section 4.10(b) of the
Company Disclosure Schedule, all material contributions and other payments
required to be made by the Company or any of the Company Subsidiaries to any
Company Benefit Plan (or to any person pursuant to the terms thereof) have been
timely made or the amount of such payment or contribution obligation has been
reflected in the Company Financial Statements. Except as set forth in Section
4.10(b) of the Company Disclosure Schedule, (i) the current value of all accrued
benefits under any Company Benefit Plan which is a defined benefit plan did not,
as of the date of the most recent actuarial valuation for such plan, exceed the
then current value of the assets of such plan, based on the actuarial
assumptions set forth in such valuation for calculating the minimum funding
requirements of Code Section 412, which actuarial assumptions and calculations
have been provided to Parent prior to the date of this Agreement, and (ii)
neither the Company nor any Company Subsidiary contributes or has contributed,
during the six-year period immediately prior to the date of this Agreement, to a
multiemployer plan (as defined in Section 3(37) of ERISA), or has any liability
under ERISA Section 4203 or Section 4205 in respect of any such plan.
(c) Qualification; Compliance. Except as set forth in Section
4.10(c) of the Company Disclosure Schedule, each of the Company Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the IRS to be so qualified, and, to the knowledge of the
Company, no circumstances exist that are reasonably expected by the Company to
result in the revocation of any such determination. The Company and each of the
Company Subsidiaries are in compliance in all material respects with, and each
Company Benefit Plan is and has been operated in all material respects in
compliance with the terms thereof and all applicable laws, rules and regulations
governing such plan, including, without limitation, ERISA and the Code. Each
Company Benefit Plan intended to provide for the deferral of income, the
reduction of salary or other compensation or to afford other income tax benefits
is reasonably designed to comply with the requirements of the applicable
provisions of the Code or other laws, rules and regulations required to provide
such income tax benefits.
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(d) Liabilities. With respect to the Company Benefit Plans
individually and in the aggregate, there are no actions, suits, claims pending
or, to the knowledge of the Company, threatened, and, to the knowledge of the
Company, no event has occurred that could reasonably be expected to subject the
Company or any of the Company Subsidiaries to any liability arising under the
Code, ERISA or any other applicable law (including, without limitation, any
liability of any kind whatsoever, whether direct or indirect, contingent,
inchoate or otherwise, to any such plan or the Pension Benefit Guaranty
Corporation (the "PBGC")), or under any indemnity agreement to which the Company
or any of the Company Subsidiaries is a party, in each such case, which
liability, individually or in the aggregate, could reasonably be expected to
have a Company Material Adverse Effect.
(e) Welfare Plans. Except as set forth in Section 4.10(e) of the
Company Disclosure Schedule, none of the Company Benefit Plans that are "welfare
plans", within the meaning of Section 3(1) of ERISA, provides for any benefits
payable to or on behalf of any employee or director after termination of
employment or service, as the case may be, other than elective continuation
required pursuant to Code Section 4980B or coverage which expires at the end of
the calendar month following such event. Each such plan that is a "group health
plan" (as defined in Code Section 4980B(g)) has been operated in compliance with
Code Section 4980B at all times, except for any non-compliance that could not
reasonably be expected to give rise to a Company Material Adverse Effect.
(f) Documents Made Available. The Company has made available to
Parent a true and correct copy of each collective bargaining agreement to which
the Company or any of the Company Subsidiaries is a party or under which the
Company or any of the Company Subsidiaries has obligations, and with respect to
each Company Benefit Plan, to the extent applicable, (i) such plan and summary
plan description (including all amendments to each such document), (ii) the most
recent annual report filed with the IRS, (iii) each related trust agreement,
insurance contract, service provider or investment management agreement
(including all amendments to each such document), (iv) the most recent
determination of the IRS with respect to the qualified status of such plan and
(v) the most recent actuarial report or valuation.
(g) Payments Resulting from Merger and Other Severance Payments.
Except as set forth in Section 4.10(g) of the Company Disclosure Schedule or as
specifically provided for in this Agreement, the announcement or consummation of
any transaction contemplated by this Agreement will not (either alone or upon
the occurrence of any additional or further acts or events, including, without
limitation, termination of employment) result, as of September 30, 1999 or as of
the Effective Time, in any (A) payment (whether of severance pay or otherwise)
becoming due from the Company or any of the Company Subsidiaries to any officer,
employee, former employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement or (B) benefit being established or becoming
accelerated, vested or payable under any Company Benefit Plan.
(h) Labor Agreements. As of the date hereof, except as set forth
in Section 4.10(h) of the Company Disclosure Schedule, neither the Company nor
any of the Company
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Subsidiaries is a party to any collective bargaining agreement or other labor
agreement with any union or labor organization. Except as set forth in Section
4.10(h) of the Company Disclosure Schedule, to the knowledge of the Company, as
of the date hereof, there is no current union representation question involving
employees of the Company or any of the Company Subsidiaries, nor does the
Company know of any activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any such employees. Except
as set forth in Section 4.10(h) of the Company Disclosure Schedule, (i) there is
no unfair labor practice, employment discrimination or other complaint against
the Company or any of the Company Subsidiaries pending or, to the knowledge of
the Company, threatened, which has or could reasonably be expected to have a
Company Material Adverse Effect, (ii) there is no strike, dispute, slowdown,
work stoppage or lockout pending, or, to the knowledge of the Company,
threatened, against or involving the Company or any of the Company Subsidiaries
which has or could reasonably be expected to have, a Company Material Adverse
Effect and (iii) there is no proceeding, claim, suit, action or governmental
investigation pending or, to the knowledge of the Company, threatened, in
respect of which any director, officer, employee or agent of the Company or any
of the Company Subsidiaries is or may be entitled to claim indemnification from
the Company pursuant to their respective articles of incorporation or by-laws or
as provided in the Indemnification Agreements listed in Section 4.10(h) of the
Company Disclosure Schedule. Except as set forth in Section 4.10(h) of the
Company Disclosure Schedule, the Company and the Company Subsidiaries have
complied in all material respects with all laws relating to the employment of
labor, including without limitation any provisions thereof relating to wages,
hours, collective bargaining and the payment of social security and similar
taxes, and no person has, to the knowledge of the Company, asserted that the
Company or any of the Company Subsidiaries is liable in any material amount for
any arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing.
(i) Parachute Payments. Section 4.10(i) of the Company Disclosure
Schedule sets forth (1) the name of each officer of the Company and the
President of each of MidAmerican Utility and the Company's U.K. utility
Subsidiary who, in connection with the transactions contemplated with this
Agreement, will receive, or will or may become entitled to receive in the future
or upon termination of such person's employment, any payments (including without
limitation accelerated vesting of Company Options or other equity-based awards)
which could reasonably be expected to constitute "excess parachute payments"
with respect to such person within the meaning of Section 280G of the Code
("Excess Parachute Payments"), and (2) with respect to each such person, the
maximum amount of Excess Parachute Payments which could reasonably be expected
to be so received (determined in accordance with proposed regulations of the IRS
promulgated under Section 280G of the Code).
(j) Section 162(m). Except as set forth in Section 4.10(j) of the
Company Disclosure Schedule, no payments to any executive officer of the Company
or any Company Subsidiaries will fail to be deductible for Federal income tax
purposes by reason of the deduction limit imposed under Section 162(m) of the
Code. Section 4.10(j) of the Company Disclosure Schedule sets forth the name of
each executive officer who will receive compensation which may not be fully
deductible by reason of the application of Section
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162(m), and a reasonable estimate of the amount of such potentially
nondeductible compensation.
(k) Changes in Compensation, Benefits Since September 30, 1999.
Except as specifically described in Section 4.10(k) of the Company Disclosure
Schedule, since September 30, 1999, the Company has not, nor has any of the
Company Subsidiaries, (i) entered into, adopted or amended or increased the
amount or accelerated the payment or vesting of any benefit or amount payable
under, any employee benefit plan or other contract, agreement, commitment,
arrangement, plan, trust, fund or policy maintained by, contributed to or
entered into by the Company or any of the Company Subsidiaries (including,
without limitation, the Company Benefit Plans set forth in Section 4.10(a) of
the Company Disclosure Schedule, as in effect on September 30, 1999) or
increased, or entered into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any related rights, of
any director, officer or other employee of the Company or any of the Company
Subsidiaries, except pursuant to binding legal commitments existing on September
30, 1999 and specifically identified in Section 4.10(a) of the Company
Disclosure Schedule and except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, did not result in
a material increase in benefits or compensation expense to the Company or any of
the Company Subsidiaries; (ii) entered into or amended any employment,
severance, pension, deferred compensation or special pay arrangement with
respect to the termination of employment or other similar contract, agreement or
arrangement with (A) any director or officer or (B) other employee other than in
the ordinary course of business consistent with past practice; or (iii)
deposited into any trust (including any "rabbi trust") amounts in respect of any
employee benefit obligations or obligations to directors other than transfers
into trusts (other than a rabbi or other trust with respect to any non-qualified
deferred compensation) in accordance with past practice or pursuant to binding
legal agreements existing on September 30, 1999.
Section 4.11. Environmental Protection.
(a) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person or entity
(including any Governmental Authority) alleging potential liability
(including, without limitation, potential responsibility for or
liability for enforcement, investigatory costs, cleanup costs, spent
fuel or waste disposal costs, decommissioning costs, governmental
response costs, removal costs, remediation costs, natural resources
damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (A) the presence, Release or threatened
Release into the environment of any Hazardous Materials at any location
in which the Company or any of the Company Subsidiaries has an economic
or ownership interest, whether or not owned, operated, leased or
managed by the Company or any of the Company
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Subsidiaries or Company Joint; or (B) circumstances forming the basis
of any violation or alleged violation of any Environmental Law or (C)
any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all applicable federal, state
and local laws, rules, regulations, ordinances, orders, directives and
any binding judicial or administrative interpretation thereof, and
regulatory common law and equitable doctrines relating to pollution,
the environment (including, without limitation, indoor or ambient air,
surface water, groundwater, land surface or subsurface strata) or
protection of human health or safety as it relates to the environment
including, without limitation, those relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to the
manufacture, generation, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls; (B) any chemicals, materials or
substances which are now defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants" or words of similar import; under any
Environmental Law and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under
any Environmental Law in a jurisdiction in which the Company or any of
the Company Subsidiaries or Company Joint Ventures operates.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
(b) Compliance. Except as set forth in Section 4.11(b) of the Company
Disclosure Schedule, the Company and each of the Company Subsidiaries and, to
the knowledge of the Company, the Company Joint Ventures are in compliance with
all applicable Environmental Laws except where the failure to so comply would
not have a Company Material Adverse Effect, and neither the Company nor any of
the Company Subsidiaries has received any communication (written or oral), from
any person or Governmental Authority that alleges that the Company or any of the
Company Subsidiaries or the Company Joint Ventures is not in such compliance
with applicable Environmental Laws. To the knowledge of the Company, compliance
with all applicable Environmental Laws will not require the Company or any
Company Subsidiary or, to the knowledge of the Company, any Company Joint
Venture to incur costs that will be reasonably likely to result in a Company
Material Adverse Effect, including but not limited to the costs of the Company
and Company Subsidiary and Company Joint Venture pollution control equipment
required or reasonably contemplated to be required in the future.
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(c) Environmental Permits. Except as set forth in Section 4.11(c) of
the Company Disclosure Schedule, the Company and each of the Company
Subsidiaries and, to the knowledge of the Company, the Company Joint Ventures,
have obtained or has applied for all permits, registrations and governmental
authorizations required under any Environmental Law (collectively, the
"Environmental Permits") necessary for the construction of its facilities or the
conduct of its operations except where the failure to so obtain would not have a
Company Material Adverse Effect, and all such Environmental Permits are in good
standing or, where applicable, a renewal application has been timely filed and
is pending agency approval, and the Company and the Company Subsidiaries and, to
the knowledge of the Company, the Company Joint Ventures are in compliance with
all terms and conditions of all Environmental Permits necessary for the
construction of its facilities or the conduct of its operations, except where
the failure to so comply, in the aggregate, would not have a Company Material
Adverse Effect.
(d) Environmental Claims. Except as set forth in Section 4.11(d) of the
Company Disclosure Schedule, there is no Environmental Claim pending (or, to the
knowledge of the Company, threatened) (A) against the Company or any of the
Company Subsidiaries or, to the knowledge of the Company, any of the Company
Joint Ventures, (B) to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of the
Company Subsidiaries or, to the knowledge of the Company, any of the Company
Joint Ventures has or may have retained or assumed either contractually or by
operation of law, or (C) against any real or personal property or operations
which the Company or any of the Company Subsidiaries or, to the knowledge of the
Company, any of the Company Joint Ventures owns, leases or manages, in whole or
in part, which would reasonably be expected to have, in the aggregate, a Company
Material Adverse Effect.
(e) Releases. Except as set forth in Section 4.11(e) of the Company
Disclosure Schedule, the Company has no knowledge of any Releases of any
Hazardous Material that would be reasonably likely to form the basis of any
Environmental Claim against the Company or any of the Company Subsidiaries or
the Company Joint Ventures, or against any person or entity whose liability for
any Environmental Claim the Company or any of the Company Subsidiaries or the
Company Joint Ventures has or may have retained or assumed either contractually
or by operation of law except for any Environmental Claim which would not have,
in the aggregate, a Company Material Adverse Effect.
(f) Predecessors. Except as set forth in Section 4.11(f) of the Company
Disclosure Schedule, the Company has no knowledge, with respect to any
predecessor of the Company or any of the Company Subsidiaries or the Company
Joint Ventures, of any Environmental Claim pending or threatened, or of any
Release of Hazardous Materials that would be reasonably likely to form the basis
of any Environmental Claim, which, if determined adversely could reasonably be
expected to require payments of $20 million or more or which could reasonably be
expected to have a Company Material Adverse Effect.
(g) Disclosure. The Company has disclosed in writing to Parent all
material facts which the Company reasonably believes form the basis of an
Environmental Claim which could have a Company Material Adverse Effect arising
from (i) the cost of the Company
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pollution control equipment (including, without limitation, upgrades and other
modifications to existing equipment) currently required or reasonably
contemplated to be required in the future, (ii) current remediation costs or
costs to the Company or any of the Company Subsidiaries for remediation
reasonably contemplated to be required in the future or (iii) any other
environmental matter affecting the Company or any of the Company Subsidiaries.
(h) Cost Estimates. To the Company's knowledge, no environmental matter
set forth in the Company SEC Reports or the Company Disclosure Schedule could
reasonably be expected to exceed the cost estimates provided in the Company SEC
Reports by an amount that individually or in the aggregate could reasonably be
expected to have a Company Material Adverse Effect.
Section 4.12. Regulation as a Utility. MidAmerican Utility is regulated
as a public utility by the FERC and in the States of Illinois, Iowa, Nebraska
and South Dakota and in no other state. Except as set forth in the preceding
sentence or Section 4.12 of the Company Disclosure Schedule, neither the Company
nor any "subsidiary company" or "affiliate" (as each such term is defined in the
1935 Act) of the Company is subject to regulation as a public utility or public
service company (or similar designation) by the FERC or any municipality,
locality, state in the United States or any foreign country.
Section 4.13. Vote Required. The approval of the Merger by the
affirmative vote of a majority of the votes entitled to be cast by holders of
Company Common Stock (the "Company Shareholders' Approval") is the only vote of
the holders of any class or series of the securities of the Company or any of
the Company Subsidiaries required to approve this Agreement, the Merger and the
other transactions contemplated hereby.
Section 4.14. Insurance. Except as set forth in Section 4.14 of the
Company Disclosure Schedule, the Company and each of the Company Subsidiaries
is, and has been continuously since January 1, 1998, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary in all material respects for companies conducting the business as
conducted by the Company and the Company Subsidiaries during such time period.
Neither the Company nor any of the Company Subsidiaries has received any notice
of cancellation or termination with respect to any material insurance policy of
the Company or any of the Company Subsidiaries. The insurance policies of the
Company and each of the Company Subsidiaries are valid and enforceable policies
in all material respects.
Section 4.15. Opinions of Financial Advisers. The Company has obtained
the opinions of Warburg Dillon Read LLC ("Dillon Read") and Lehman Brothers Inc.
("Lehman"), each dated as of the date of this Agreement, to the effect that, as
of the date hereof, the Per Share Amount to be paid to holders of Company Common
Stock (other than the Investors) pursuant to this Agreement is fair from a
financial point of view to such holders. True and correct copies of such
opinions have been provided by the Company to Parent.
Section 4.16. Brokers. No broker, finder or investment banker (other
than Dillon Read and Lehman) is entitled to any brokerage, finder's or other fee
or commission in
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connection with the Merger based upon arrangements made by or on behalf of the
Company. The Company has heretofore furnished to Parent a complete and correct
copy of all agreements between the Company and each of Dillon Read and Lehman,
pursuant to which each such firm would be entitled to any payment relating to
the Merger. The fees payable under such agreements and any other brokerage,
finder's or other fee or commission payable in connection with the Merger based
upon arrangements made by or on behalf of the Company do not exceed $11 million
in the aggregate.
Section 4.17. Non-Applicability of Certain Provisions of Iowa Act. None
of the business combination provisions of Section 1110 of the Iowa Act or any
similar provisions of the Iowa Act, the articles of incorporation or by-laws of
the Company are applicable to the transactions contemplated by this Agreement
because such provisions do not apply by their terms or because any required
approvals of the Board of Directors of the Company have been obtained.
Section 4.18. Company Rights Agreement. Prior to the date of this
Agreement, the Company has delivered to Parent and its counsel a true and
complete copy of the Amended and Restated Rights Agreement, dated as of
September 14, 1999, between ChaseMellon Shareholder Services, L.L.C., as Rights
Agent, and the Company (the "Company Rights Agreement") in effect as of the date
hereof, and has authorized all necessary action (and promptly after the date of
this Agreement and prior to the Closing Date, will have taken all necessary
action), including amending the Company Rights Plan, such that the consummation
of the transactions contemplated by this Agreement will not result in the
separation of the Company Rights from the Shares, the Company Rights becoming
non-redeemable, the Rights associated with Shares beneficially owned by the
Investors (or their affiliates or associates) becoming void or voidable, or the
triggering of any right or entitlement of shareholders of the Company under the
Company Rights Agreement or any similar agreement to which the Company or any of
its affiliates is a party.
Section 4.19. Year 2000 Compliance. The Company and the Company
Subsidiaries have put into effect reasonable and customary practices and
programs to be Year 2000 Compliant (as defined below)) designed to enable all
material software, hardware and equipment (including microprocessors) that are
owned or utilized by the Company or any of the Company Subsidiaries in the
operations of its or their respective business to be capable, by December 31,
1999, of accounting for all calculations using a century and date sensitive
algorithm for the year 2000 and the fact that the year 2000 is a leap year and
to otherwise continue to function without any material interruption caused by
the occurrence of the year 2000 (such capabilities are herein referred to as
being "Year 2000 Compliant").
Section 4.20. Board Recommendation . The Board of Directors of the
Company, at a meeting duly called and held, has by unanimous vote of those
directors present (who constituted all of the directors then in office other
than David L. Sokol, Walter Scott, Jr. and Bernard W. Reznicek, who did not
participate in such deliberations or vote due to their status as, and/or
affiliation with, one of the Investors) (i) determined that this Agreement, the
Merger and the other transaction contemplated hereby are fair to and in the best
interests of the
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shareholders of the Company, and (ii) resolved to recommend that the holders of
Company Common Stock approve this Agreement, the Merger and the other
transactions contemplated hereby.
Section 4.21. Investment Company and Investment Advisory Matters .
Neither the Company nor any of the Company Subsidiaries is an "investment
company" as defined in the Investment Company Act of 1940, as amended. Neither
the Company nor any of the Company Subsidiaries is an "investment advisor" as
defined in the Investment Advisers Act of 1940, as amended, or conducts
activities of or controls an "investment adviser" as defined therein, whether or
not registered under such Act.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company as
follows:
Section 5.1. Organization. Parent is a limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Parent and Merger Sub were organized solely for the purposes of
consummating the Merger and the other transactions contemplated by this
Agreement and taking action with respect thereto. Except for obligations or
liabilities incurred in connection with the transactions contemplated by this
Agreement or in connection with their organization, at the Effective Time
neither Parent nor Merger Sub will have incurred any obligations or liabilities
or engaged in any business activities of any kind.
Section 5.2. Authority; Non-Contravention; Statutory Approvals.
(a) Authority. Parent and Merger Sub have all requisite power and
authority to enter into this Agreement and, subject to the Parent Required
Statutory Approvals (as defined in Section 5.2(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by Parent and Merger Sub of the transactions contemplated
hereby have been duly authorized by all necessary limited liability company
action on the part of Parent and all necessary corporate action on the part of
Merger Sub. This Agreement has been duly and validly executed and delivered by
Parent and Merger Sub, and, assuming the due authorization, execution and
delivery hereof by the Company, this Agreement constitutes the valid and binding
obligation of each of Parent and Merger Sub enforceable against them in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity.
(b) Non-Contravention. The execution and delivery of this Agreement by
Parent and Merger Sub do not, and the consummation of the transactions
contemplated hereby will not, result in a Violation pursuant to any provisions
of (i) the articles of formation or operating
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agreement of Parent or the articles of incorporation or by-laws of Merger Sub,
(ii) subject to obtaining the Parent Required Statutory Approvals, any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any Governmental Authority applicable to Parent or Merger
Sub or any of their properties or assets or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which Parent
or Merger Sub is a party or by which it or any of its properties or assets may
be bound or affected, excluding from the foregoing clauses (ii) and (iii) such
Violations which would not, in the aggregate, have a material adverse effect on
the ability of Parent or Merger Sub to consummate the transactions contemplated
by this Agreement (any such material adverse effect, a "Parent Material Adverse
Effect").
(c) Statutory Approvals. Except as described in Section 5.2(c) of the
Parent Disclosure Schedule delivered by Parent to the Company prior to the
execution of this Agreement (the "Parent Disclosure Schedule"), no declaration,
filing or registration with, or notice to or authorization, consent or approval
of, any Governmental Authority is necessary for the execution and delivery of
this Agreement by Parent and Merger Sub or the consummation by Parent and Merger
Sub of the transactions contemplated hereby (the "Parent Required Statutory
Approvals"), it being understood that references in this Agreement to
"obtaining" Parent Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law).
Section 5.3. Proxy Statement. None of the information supplied by
Parent or Merger Sub, or their officers, directors, representatives, agents or
employees, for inclusion in the Proxy Statement, or in any amendments thereof or
supplements thereto, will, on the date the Proxy Statement is first mailed to
shareholders or at the time of the Company Meeting (giving effect to any
documents incorporated by reference therein), contain any statement which, at
such time and in light of the circumstances under which it will be made, will be
false or misleading with respect to any material fact, or will omit to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Meeting which has
become false or misleading.
Section 5.4. Brokers. No broker, finder or investment banker (other
than Credit Suisse First Boston ("CSFB")) is entitled to any brokerage, finder's
or other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of Parent or Merger Sub. Parent has heretofore furnished to
the Company a complete and correct copy of all agreements between Parent or
Merger Sub and CSFB, pursuant to which such firm would be entitled to any
payment relating to the Merger.
Section 5.5. Financing. Merger Sub has, on or prior to the date hereof,
entered into subscription agreements, dated as of the date of this Agreement,
with each of David L. Sokol, Walter Scott, Jr. and Berkshire Hathaway Inc.
(collectively, the "Subscription Agreements"), pursuant to which the subscribers
thereunder (the "Investors") have agreed, on the terms and
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subject to the conditions contained in the Subscription Agreements, to provide
an aggregate of $2.352 billion to Merger Sub in cash and/or shares of Common
Stock or options to purchase shares of Common Stock (valued for these purposes
at the Per Share Amount) in exchange for securities of Merger Sub. Merger Sub
has furnished true and correct copies of the Subscription Agreements to the
Company.
Section 5.6. Sale of the Company. Neither Parent nor Merger Sub nor any
of their affiliates has any agreement, understanding or any present intention
(i) to sell the Company or any material part of the Company (other than the
purchase of securities of Merger Sub by (A) one or more subsidiaries of
Berkshire Hathaway Inc. which are consolidated with Berkshire Hathaway Inc. for
financial accounting purposes, in accordance with the Subscription Agreement
with Berkshire Hathaway Inc. and (B) the Scott Family Entities (as defined in
the Subscription Agreement with Walter Scott, Jr.), in accordance with the
Subscription Agreement with Walter Scott, Jr.) or (ii) enter into, or cause the
Company to enter into, any extraordinary transaction.
Section 5.7. Share Ownership. Section 5.7 of the Parent Disclosure
Schedule sets forth the number of shares of Company Common Stock beneficially
owned, as of the date of this Agreement, by each of Parent and Merger Sub and
their respective Subsidiaries and affiliates, either individually or as part of
a group for purposes of Rule 13d-3 under the Exchange Act.
Section 5.8. Regulation Under the 1935 Act. Neither Parent nor Merger
Sub is a "public utility company" or a "holding company" (as each such term is
defined in the 1935 Act), and neither Parent nor Merger Sub is a "subsidiary
company" or "affiliate" (as each such term is defined in the 1935 Act) of a
"public utility company" or "holding company," in each case, without giving
effect to the Merger.
Section 5.9. Investor Agreements. Except (i) for the Subscription
Agreements and the other agreements contemplated thereby, (ii) as would not
reasonably be expected to have a Parent Material Adverse Effect and (iii) except
as set forth in Section 5.9 of the Parent Disclosure Schedule, there are no
governance, voting or similar agreements among the Investors relating to Parent,
Merger Sub or the Company.
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ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees, as to itself and each of the Company Subsidiaries,
that after the date of this Agreement and prior to the Effective Time or earlier
termination of this Agreement, except as expressly contemplated or permitted in
this Agreement, or to the extent Parent shall have otherwise consented in
writing, which decision regarding consent shall be made as soon as reasonably
practicable (it being understood that if a particular activity is permissible as
a result of its being disclosed and, where applicable, approved in writing by
Parent under any one of the Section 6.1 subsections of the Company Disclosure
Schedule, that activity will not be prohibited under any of the subsections of
Section 6.1):
(a) Ordinary Course of Business. The Company shall, and shall cause the
Company Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use their commercially reasonable efforts to preserve intact their
present business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them and, subject to prudent management of workforce needs and ongoing or
planned programs relating to downsizing, re-engineering and similar matters,
keep available the services of their present officers and employees to the end
that their goodwill and ongoing businesses shall not be impaired in any material
respect at the Effective Time. Except as set forth in Section 6.1(a) of the
Company Disclosure Schedule, the Company shall not, nor shall the Company permit
any of the Company Subsidiaries to, (i) enter into a new line of business
involving any material investment of assets or resources or any material
exposure to liability or loss to the Company and the Company Subsidiaries taken
as a whole, or (ii) acquire, or agree to acquire, by merger or consolidation
with, or by purchase or otherwise, a substantial equity interest in or a
substantial portion of the assets of, any business or any corporation,
partnership, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets (other than equipment, fuel,
supplies and similar items or for capital expenditures, in each case, in the
ordinary course of business consistent with past practice); provided, however,
that notwithstanding the above, the Company or any of the Company Subsidiaries
may enter into a new line of business or make such an other acquisition to the
extent the investment or other acquisition, as the case may be (which shall
include the amount of equity invested plus the amount of indebtedness incurred,
assumed or otherwise owed by or with recourse to the Company or any Company
Subsidiary (other than the entity being acquired or in which the investment is
made or any special purpose entity formed in connection with such investment or
other acquisition)), in a new line of business or acquisition, as the case may
be, does not exceed, together with all other such investments and other
acquisitions made from and after the date of this Agreement, $100 million in the
aggregate; and provided, further, that no such investment shall be made in, and
no such other acquisition shall consist of, any common equity securities of any
U.S. gas or electric utility company.
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(b) Dividends. The Company shall not, nor shall the Company permit any
of the Company Subsidiaries to, (i) declare or pay any dividends on or make
other distributions in respect of any of their capital stock other than (A) to
the Company or its wholly owned Subsidiaries and (B) dividends required to be
paid on any outstanding preferred stock of the Company or its Subsidiaries in
accordance with the terms of the preferred stocks identified in Section 6.1(b)
of the Company Disclosure Schedule; or (ii) split, combine, reclassify, redeem
or repurchase any of their capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of their capital stock.
(c) Issuance of Securities. Except as described in Section 6.1(c) of
the Company Disclosure Schedule, the Company shall not, nor shall the Company
permit any of the Company Subsidiaries to, issue, agree to issue, deliver, sell,
award, pledge, dispose of or otherwise encumber or authorize or propose the
issuance, delivery, sale, award, pledge, grant of a security interest, disposal
or other encumbrance of, any shares of their capital stock of any class or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares or convertible or exchangeable securities,
other than (i) issuances by a wholly owned Subsidiary of its capital stock to
its direct or indirect parent and (ii) issuances of shares of Company Common
Stock after the date of this Agreement pursuant to Company Options and other
Company convertible securities, in each case existing as of the date hereof and
as identified in Section 4.10(a) of the Company Disclosure Schedule.
(d) Indebtedness. Except as set forth in Section 6.1(d) of the Company
Disclosure Schedule, the Company shall not, nor shall the Company permit any of
the Company Subsidiaries to, incur or guarantee any indebtedness (including any
debt borrowed or guaranteed or otherwise assumed including, without limitation,
the issuance of debt securities or warrants or rights to acquire debt) or enter
into any "keep well" or indemnity or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing other than (i) indebtedness or
guarantees or "keep well" or other agreements incurred in the ordinary course of
business consistent with past practice (including refinancings, the issuance of
commercial paper or the use of existing or replacement credit facilities or
hedging activities), (ii) arrangements between the Company and wholly owned
Company Subsidiaries or among wholly owned Company Subsidiaries, (iii) in
connection with the refunding or defeasance of existing indebtedness that
becomes due in accordance with its terms before the Effective Time, or (iv) as
may be necessary in connection with investments or acquisitions permitted by
Section 6.1(a).
(e) Compensation, Benefits. Except as may be required by applicable
law, as specifically set forth in Section 6.1(e) of the Company Disclosure
Schedule or as contemplated by this Agreement, the Company shall not, nor shall
the Company permit any of the Company Subsidiaries to, (i) enter into, adopt or
amend or increase the amount or accelerate the payment or vesting of any benefit
or amount payable under, any employee benefit plan or other contract, agreement,
commitment, arrangement, plan, trust, fund or policy maintained by, contributed
to or entered into by the Company or any of the Company Subsidiaries (including,
without limitation, the Company Benefit Plans set forth in Section 4.10(a) of
the Company Disclosure Schedule, as in effect on September 30, 1999) or
increase, or enter into any
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contract, agreement, commitment or arrangement to increase in any manner, the
compensation or fringe benefits, or otherwise to extend, expand or enhance the
engagement, employment or any related rights, of any director, officer or other
employee of the Company or any of the Company Subsidiaries, except pursuant to
binding legal commitments existing on September 30, 1999 and specifically
identified in Section 4.10(a) of the Company Disclosure Schedule and except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company or any of the Company
Subsidiaries; (ii) enter into or amend any employment, severance, pension,
deferred compensation or special pay arrangement with respect to the termination
of employment or other similar contract, agreement or arrangement with (A) any
director or officer or (B) other employee other than in the ordinary course of
business consistent with past practice; or (iii) deposit into any trust
(including any "rabbi trust") amounts in respect of any employee benefit
obligations or obligations to directors; provided that transfers into any trust,
other than a rabbi or other trust with respect to any non-qualified deferred
compensation, may be made in accordance with past practice or pursuant to
legally binding agreements in effect on September 30, 1999.
(f) 1935 Act. The Company shall not, nor shall the Company permit any
of the Company Subsidiaries to, except as required or contemplated by this
Agreement, engage in any activities (i) which would cause a change in its
status, or that of the Company Subsidiaries, under the 1935 Act, including any
action or inaction that would cause the prior approval of the SEC under the 1935
Act to be required for the consummation of the Merger and the other transactions
contemplated hereby, or (ii) that would impair the ability of the Company,
MidAmerican Funding, Parent or the Surviving Corporation or any Subsidiary of
Surviving Corporation to claim an exemption as of right under Rule 2 of the 1935
Act following the Merger or (iii) that would subject Parent or any affiliate
(within the meaning of Section 2(a)(11) of the 1935 Act) of Parent or any of the
Investor Entities (as defined in Section 6.2(b)) to regulation as a registered
holding company under such Act following the Merger.
(g) Tax-Exempt Status. The Company shall not, nor shall the Company
permit any Company Subsidiary to, take any action that would likely jeopardize
the qualification of the Company's or any Company Subsidiary's outstanding
revenue bonds which qualify as of the date hereof under Section 142(a) of the
Code as "exempt facility bonds" or as tax-exempt industrial development bonds
under Section 103(b)(4) of the Internal Revenue Code of 1954, as amended, prior
to the Tax Reform Act of 1986.
Section 6.2. Conduct of Business by Parent and Merger Sub Pending the
Merger. Each of Parent and Merger Sub covenant and agree that after the date of
this Agreement and prior to the Effective Time or earlier termination of this
Agreement, except as expressly contemplated or permitted in this Agreement, or
to the extent the Company shall have otherwise consented in writing, which
decision regarding consent shall be made as soon as reasonably practicable (it
being understood that if a particular activity is permissible as a result of its
being disclosed and, where applicable, approved in writing by the Company under
any
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one of the Section 6.2 subsections of the Parent Disclosure Schedule, that
activity will not be prohibited under any of the subsections of Section 6.2):
(a) Limited Business Activities. Except for obligations or liabilities
incurred in connection with the transactions contemplated by this Agreement or
in connection with their organization, neither Parent nor Merger Sub shall incur
any obligations or liabilities or engage in any business activities of any kind.
(b) 1935 Act. Neither Parent nor Merger Sub shall, except as required
or contemplated by this Agreement, engage in any activities (i) which would
cause a change in its status under the 1935 Act, including any action or
inaction that would cause the prior approval of the SEC under the 1935 Act to be
required for the consummation of the Merger and the other transactions
contemplated hereby, (ii) that would impair the ability of the Company,
MidAmerican Funding, Parent or Merger Sub to claim an exemption as of right
under Rule 2 of the 1935 Act following the Merger or (iii) that would subject
Parent or any affiliate (within the meaning of Section 2(a)(11) of the 1935 Act)
of Parent to regulation as a registered holding company under such Act following
the Merger; provided that, notwithstanding anything contained in this Agreement
to the contrary, in no event shall Parent or Merger Sub or any affiliate (within
the meaning of Section 2(a)(11) of the 1935 Act) of either such entity or any of
Berkshire Hathaway Inc., any subsidiary of Berkshire Hathaway Inc., any Scott
Family Entity or any entity controlled by either David L. Sokol or Walter Scott,
Jr. (all such persons and entities, collectively, the "Investor Entities") be
required to restructure their capitalization or amend any of their existing
shareholder arrangements in order to permit Parent and Merger Sub to qualify for
an exemption from the requirement to register as a holding company under such
Act following the Merger or in order to ensure that none of Parent, Merger Sub
or Parent's affiliates (within the meaning of Section 2(a)(11) of the 1935 Act)
or any Investor Entity will become subject to regulation as a registered holding
company under such Act following the Merger.
Section 6.3. Additional Covenants by the Company and Parent Pending the
Merger. Each of Parent and the Company covenants and agrees, each as to itself
and each of its Subsidiaries, that after the date of this Agreement and prior to
the Effective Time or earlier termination of this Agreement, except as expressly
contemplated or permitted in this Agreement, or to the extent the other parties
hereto shall otherwise consent in writing, which decision regarding consent
shall be made as soon as reasonably practicable:
(a) Cooperation, Notification. Each party shall (i) confer on a regular
and frequent basis with one or more representatives of the other party to
discuss, subject to applicable law, material operational matters and the general
status of the Company's ongoing operations, (ii) promptly advise the other party
of any change or event which has had, or would reasonably be expected to result
in, a Company Material Adverse Effect or a Parent Material Adverse Effect, as
the case may be, and (iii) pursuant to Section 7.3, promptly provide the other
party with copies of all filings made by such party or any of its Subsidiaries
with any state or federal court, administrative agency, commission or other
Governmental Authority. In addition, the
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Company shall promptly notify Parent of any significant changes in the Company's
business, properties, assets, financial condition or results of operations or in
the Company Prospects.
(b) No Breach, Etc. Each of the parties shall not, nor shall it permit
any of its Subsidiaries to, take any action that would or is reasonably likely
to result in a material breach of any provision of this Agreement or in any of
its representations and warranties set forth in this Agreement being untrue on
and as of the Closing Date.
ARTICLE VII.
ADDITIONAL AGREEMENTS
Section 7.1. Access to Information. Upon reasonable notice, the Company
shall, and shall cause the Company Subsidiaries to, afford to the officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors and other representatives of Parent (collectively, "Representatives")
reasonable access, during normal business hours throughout the period prior to
the Effective Time, to all of its properties, books, contracts, commitments,
records and other information (including, but not limited to, Tax Returns) and,
during such period, each of the parties hereto shall, and shall cause its
Subsidiaries to, furnish promptly to the other party access to each significant
report, schedule and other document filed or received by it or any of its
Subsidiaries pursuant to the requirements of federal or state securities laws or
filed with or sent to the SEC, the FERC, the public utility commission of any
State, the Nuclear Regulatory Commission, the Department of Labor, the
Immigration and Naturalization Service, the Environmental Protection Agency
(state, local and federal), the IRS, the Department of Justice, the Federal
Trade Commission, or any other federal, state or foreign regulatory agency or
commission or other Governmental Authority. In addition, during such period, the
Company shall, and shall cause the Company Subsidiaries to, furnish promptly to
Parent and Merger Sub access to all information concerning the Company, the
Company Subsidiaries, directors, officers and shareholders, properties,
facilities or operations owned, operated or otherwise controlled by the Company,
or if not so owned, operated or controlled, which properties, facilities or
operations that the Company may nonetheless obtain access to through the
exercise of reasonable diligence, and such other matters as may be reasonably
requested by Parent in connection with any filings, applications or approvals
required or contemplated by this Agreement or for any other reason related to
the transactions contemplated by this Agreement. Parent shall, and shall cause
its Subsidiaries and Representatives (other than its Representatives who have
entered into separate confidentiality agreements with the Company) to, hold in
strict confidence all documents and information concerning the Company furnished
to it in connection with the transactions contemplated by this Agreement in
accordance with the Confidentiality Agreement, dated as of October 1, 1999,
between David L. Sokol and the Company (the "Confidentiality Agreement").
Section 7.2. Proxy Statement and Schedule 13E-3.
(a) The Company shall prepare, in consultation with Parent, the Proxy
Statement and shall file the Proxy Statement with the SEC as soon as is
reasonably practicable after the
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date of this Agreement and shall use all reasonable efforts to respond to
comments from the SEC and to cause the Proxy Statement to be mailed to the
Company's shareholders at the earliest practicable time. The Company will not
mail, amend or supplement the Proxy Statement unless the Proxy Statement or any
amendment or supplement thereof is satisfactory in content to Parent in the
exercise of its reasonable judgment.
(b) As soon as practicable after the date of this Agreement, Parent and
the Company shall file with the SEC, and shall use all reasonable efforts to
cause any of their respective affiliates engaging in this transaction to file
with the SEC, a Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3 Transaction Statement") with respect to the Merger. Each of the
parties hereto agrees to use all reasonable efforts to cooperate and to provide
each other with such information as any of such parties may reasonably request
in connection with the preparation of the Proxy Statement and the Schedule 13E-3
Transaction Statement.
(c) Each party hereto agrees promptly to supplement, update and correct
any information provided by it for use in the Proxy Statement and the Schedule
13E-3 Transaction Statement if and to the extent that such information is or
shall have become incomplete, false or misleading.
Section 7.3. Regulatory Approvals and Other Matters.
(a) HSR Filings. Each party hereto shall file or cause to be filed with
the Federal Trade Commission and the Department of Justice any notifications
required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such parties
will use all reasonable efforts to coordinate such filings and any responses
thereto, to make such filings promptly and to respond promptly to any requests
for additional information made by either of such agencies.
(b) Other Approvals. Each party hereto shall cooperate and use all
reasonable efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all Governmental Authorities and all
other persons necessary or advisable to consummate the transactions contemplated
hereby, including, without limitation, the Company Required Statutory Approvals,
the Parent Required Statutory Approvals and the Company Required Consents (and
any concurrent or related rate filings, if any). Parent and the Company agree
that they will consult with each other with respect to the obtaining of all such
necessary or advisable permits, consents, approvals and authorizations of
Governmental Authorities; provided, however, that it is agreed that the Company
shall have primary responsibility for the preparation and filing of any
applications with state public utility commissions for approval of the Merger.
Each of Parent and the Company shall have the right to review and approve in
advance drafts of all such necessary applications, notices, petitions, filings
and other documents made or prepared in connection with the transactions
contemplated by this Agreement, which approval shall not be
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unreasonably withheld or delayed. The Company shall promptly notify Parent of
any failure or prospective failure to obtain any such consents and shall provide
copies of all Company Required Consents obtained by the Company to Parent.
Section 7.4. Shareholder Approval.
(a) Approval of Company Shareholders. The Company shall, as soon as
reasonably practicable after the date of this Agreement, (i) take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders (the "Company Meeting"), as promptly as practicable after the date
of this Agreement, for the purpose of securing the Company Shareholders'
Approval, (ii) distribute to its shareholders the Proxy Statement in accordance
with applicable federal and state law and with its articles of incorporation and
by-laws, (iii) subject to the fiduciary duties of its Board of Directors,
recommend to its shareholders the approval of the Merger, this Agreement and the
transactions contemplated hereby and (iv) cooperate and consult with Parent with
respect to each of the foregoing matters.
(b) Meeting Date. The Company shall duly call and give notice of the
Company Meeting, and shall commence distribution of the Proxy Statement to its
shareholders, within five business days after the clearance of the Proxy
Statement by the staff of the SEC (or after the expiration of the ten calendar
day period after filing the preliminary proxy statement with the SEC if the
staff of the SEC has not commented on or otherwise notified the Company within
such ten day period of the staff's intent to review and comment on the
preliminary proxy statement).
Section 7.5. Directors' and Officers' Indemnification.
(a) Indemnification. From and after the Effective Time, the Surviving
Corporation shall, to the fullest extent not prohibited by applicable law,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, an
officer or director of any of the parties hereto (each an "Indemnified Party"
and collectively, the "Indemnified Parties") against all losses, expenses
(including reasonable attorney's fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or prior to
the Effective Time that, in whole or in part, (i) are based on or arising out of
the fact that such person is or was a director or officer of such party or (ii)
arise out of or pertain to the transactions contemplated by this Agreement (the
"Indemnified Liabilities"). In the event of any such loss, expense, claim,
damage or liability (whether or not arising prior to the Effective Time), (i)
the Surviving Corporation shall pay the reasonable fees and expenses of counsel
for the Indemnified Parties selected by the Indemnified Parties, which counsel
may also serve as counsel to the Surviving Corporation (unless there is a
conflict between the positions of the Surviving Corporation and the Indemnified
Parties on any significant issue) and which counsel shall be reasonably
satisfactory to the Surviving Corporation (which consent shall not be
unreasonably withheld), promptly after statements therefor are received and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, in either case to the
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extent not prohibited by the Iowa Act, (ii) the Surviving Corporation will
cooperate in the defense of any such matter and (iii) any determination required
to be made with respect to whether an Indemnified Party's conduct complies with
the standards set forth under the Iowa Act and the articles of incorporation or
by-laws of the Company shall be made by independent counsel mutually acceptable
to the Surviving Corporation and the Indemnified Party (the "Independent
Counsel"); provided, however, that the Surviving Corporation shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld). The Indemnified Parties as a group may retain only
one law firm with respect to each related matter except to the extent there is,
in the opinion of the Independent Counsel, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
such Indemnified Party and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect policies of
directors' and officers' liability insurance maintained by the Company;
provided, that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms that are no less advantageous with
respect to matters occurring prior to the Effective Time to the extent such
liability insurance can be maintained annually at a cost to the Surviving
Corporation not greater than 200 percent of the current annual premiums for such
directors' and officers' liability insurance, which existing premium costs are
disclosed on Schedule 7.5(b) of the Company Disclosure Schedule; provided,
further, that if such insurance cannot be so maintained or obtained at such
cost, the Surviving Corporation shall maintain or obtain as much of such
insurance for the Company as can be so maintained or obtained at a cost equal to
200 percent of the current annual premiums of the Company for its directors' and
officers' liability insurance.
(c) Successors. In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in either such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this Section
7.5.
(d) Survival of Indemnification. To the fullest extent not prohibited
by law, from and after the Effective Time, all rights to indemnification as of
the date hereof in favor of the employees, agents, directors and officers of
Parent, the Company and its Subsidiaries with respect to their activities as
such prior to the Effective Time, as provided in their respective articles of
incorporation and by-laws in effect on the date of this Agreement, shall survive
the Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time.
Section 7.6. Disclosure Schedules. On or before the date hereof, (i)
Parent has delivered to the Company the Parent Disclosure Schedule, accompanied
by a certificate signed by an officer of Parent stating the Parent Disclosure
Schedule has been delivered pursuant to
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this Section 7.6 and (ii) the Company has delivered to Parent the Company
Disclosure Schedule, accompanied by a certificate signed by the chief financial
officer of the Company stating the Company Disclosure Schedule has been
delivered pursuant to this Section 7.6. The Parent Disclosure Schedule and the
Company Disclosure Schedule are collectively referred to herein as the
"Disclosure Schedules." The Disclosure Schedules shall be deemed to constitute
an integral part of this Agreement and to modify the respective representations,
warranties, covenants or agreements of the parties hereto contained herein to
the extent that such representations, warranties, covenants or agreements
expressly refer to the Disclosure Schedules. Anything to the contrary contained
herein or in the Disclosure Schedules notwithstanding, any and all statements,
representations, warranties or disclosures set forth in the Disclosure Schedules
delivered on or before the date hereof shall be deemed to have been made on and
as of the date hereof. From time to time prior to the Closing, the parties shall
promptly supplement or amend the Disclosure Schedules with respect to any
matter, condition or occurrence hereafter arising affecting the representations
and warranties contained herein which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in the
Disclosure Schedules pertaining to the parties' representations and warranties
contained herein. No supplement or amendment shall be deemed to cure any breach
of any representation or warranty made in this Agreement or have any effect for
the purpose of determining satisfaction of the conditions set forth in Section
8.2(b) or 8.3(b).
Section 7.7. Public Announcements. Subject to each party's disclosure
obligations imposed by law or regulation, Parent and the Company will cooperate
with each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement or any of
the transactions contemplated hereby and shall not issue any public announcement
or statement with respect hereto or thereto without the consent of the other
party (which consent shall not be unreasonably withheld and which decision
regarding consent shall be made as soon as reasonably practicable).
Section 7.8. No Solicitations. From and after the date hereof, the
Company will not, and will not authorize or permit any of its Representatives
to, directly or indirectly, (i) solicit, initiate or encourage (including by way
of furnishing information) or take any other action to facilitate any inquiries
or the making of any proposal which constitutes or may reasonably be expected to
lead to an Acquisition Proposal (as defined below), (ii) enter into any
agreement with respect to any Acquisition Proposal or (iii) in the event of an
unsolicited written Acquisition Proposal, engage in negotiations or discussions
with, or provide any information or data to, any Person (other than to Parent,
any of its affiliates or Representatives and except for information which has
been previously publicly disseminated by the parties) relating to any
Acquisition Proposal; provided, however, that nothing contained in this Section
7.8 or any other provision hereof shall prohibit the Company or its Board of
Directors from (i) taking and disclosing to its shareholders a position with
respect to a tender or an exchange offer by a third party pursuant to Rules
14d-9 and 14e-2 promulgated under the Exchange Act or (ii) making such
disclosure to its shareholders as, in good faith judgment of its Board of
Directors, after consultation with outside counsel, is required under applicable
law.
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Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by an executive officer of
the Company or any investment banker, attorney or other Representative of the
Company, whether or not such person is purporting to act on behalf of the
Company or otherwise, shall be deemed to be a breach of this Section 7.8 by the
Company. Notwithstanding any other provision hereof, the Company may (i) at any
time prior to the time its shareholders shall have voted to approve this
Agreement, engage in discussions or negotiations with a third party who (without
any solicitation, initiation, encouragement, discussion or negotiation (except
as permitted by Section 7.8), directly or indirectly, by or with the Company or
its Representatives after the date hereof) seeks to initiate such discussions or
negotiations and may furnish such third party information concerning the Company
and its business, properties and assets if, and only if, (A)(w) the third party
has first made an Acquisition Proposal that is reasonably expected to be more
favorable to the Company's shareholders than the Merger, taking into account all
legal, regulatory, timing and financial aspects of the Merger and of the
Acquisition Proposal, including the degree of certainty of financing therefor,
(x) the Acquisition Proposal is reasonably capable of being completed (as
determined in good faith by the Company's Board of Directors after consultation
with its financial advisors and outside counsel), (y) the third party has
demonstrated that financing for the Acquisition Proposal is reasonably likely to
be obtained (as determined in good faith by the Company's Board of Directors
after consultation with its financial advisors) and (z) its Board of Directors
shall have concluded in good faith, after considering applicable provisions of
state law and after consultation with outside counsel, that a failure to do so
could reasonably be expected to constitute a breach by its Board of Directors of
its fiduciary duties to its shareholders under applicable law and (B) prior to
furnishing such information to or entering into discussions or negotiations with
such person or entity, the Company (x) provides prompt notice to Parent to the
effect that it is furnishing information to or entering into discussions or
negotiations with such person or entity and (y) receives from such person an
executed confidentiality agreement substantially similar to the Confidentiality
Agreement, together with its written acknowledgment and agreement to pay at
closing the termination and other fees set forth in Section 9.3 if such
Acquisition Proposal is consummated or any other Acquisition Proposal is
consummated with such party or any of its affiliates, and (ii) comply with Rule
14e-2 promulgated under the Exchange Act with regard to a tender or exchange
offer. The Company shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by the Company or its Representatives with
respect to the foregoing. The Company shall notify Parent hereto orally and in
writing of any such inquiries, offers or proposals (including, without
limitation, the material terms and conditions of any such proposal and the
identity of the person making it), within 24 hours of the receipt thereof, shall
keep Parent informed of the status and details of any such inquiry, offer or
proposal, and shall give Parent three business days' advance notice of any
agreement (specifying the material terms and conditions thereof) to be entered
into with or any information to be supplied to any person making such inquiry,
offer or proposal.
The term "Acquisition Proposal" shall mean a written proposal or offer
(other than by Parent or Merger Sub) for a tender or exchange offer, merger,
consolidation or other business combination involving the Company or any
material Company Subsidiary or any proposal to
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acquire in any manner a substantial equity interest in or a substantial portion
of the assets of the Company or any material Company Subsidiary, other than the
transactions contemplated by this Agreement. As used in this Section, "Board of
Directors" includes any committee thereof.
Section 7.9. Expenses. Subject to Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
Section 7.10. Third Party Standstill Agreements. During the period from
the date of this Agreement through the Effective Time, neither the Company nor
any of its Subsidiaries shall terminate, amend, modify or waive any material
provision of any confidentiality or standstill agreement to which it is a party.
During such period, the Company and its Subsidiaries shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including, but not limited to, by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court having jurisdiction.
Section 7.11. Takeover Statutes. If any "business combination," "fair
price," "moratorium," "control stock acquisition" or other form of antitakeover
statute or regulation shall become applicable to the Merger or the transactions
contemplated hereby, the Company and the members of the Board of Directors of
the Company shall grant such approvals and take such actions as are reasonably
necessary so that the Merger or the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the Merger or the transactions contemplated hereby.
Section 7.12. Subscription Agreements. Parent and Merger Sub agree that
they will not, without the prior consent of the Company, enter into any
amendment to, or modification or waiver of, any of the Subscription Agreements
if such amendment, modification or waiver would (i) reduce the aggregate amount
of funds committed under the Subscription Agreements, (ii) add additional
conditions to the consummation of the transactions contemplated by the
Subscription Agreements or (iii) have a material adverse effect on or delay the
receipt of any of the Parent Statutory Approvals or the consummation of the
Merger. Parent and Merger Sub shall enforce to the fullest extent permitted
under applicable law, the provisions of Subscription Agreements, including but
not limited to obtaining injunctions to enforce specifically the terms and
provisions thereof in any court having jurisdiction. Parent and Merger Sub shall
use all reasonable efforts to fulfill all of their obligations under the
Subscription Agreements and to cause all conditions to funding under the
Subscription Agreements (other than conditions to funding that are conditions to
consummation of the Merger under this Agreement) to be fulfilled as promptly as
reasonably practicable. Parent and Merger Sub shall give the Company prompt
written notice of (i) any material breach or threatened material breach by any
party of the terms or provisions of the Subscription
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Agreements, (ii) any termination or threatened termination of any of the
Subscription Agreements or (iii) any exercise or threatened exercise of any
condition under any of the Subscription Agreements.
Section 7.13. Employee Benefits Matters. (a) Except to the extent
necessary to avoid duplication of benefits, the Surviving Corporation shall give
Company Employees full credit for purposes of eligibility and vesting under any
employee benefit plans or arrangements maintained by the Surviving Corporation
or any of its Subsidiaries in which such employees are eligible to participate
for such employees' service with the Company and its Subsidiaries to the same
extent recognized by the Company and its Subsidiaries immediately prior to the
Effective Time. The Surviving Corporation shall (i) waive all limitations as to
preexisting conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to Company Employees under
any welfare plan that such employees may be eligible to participate in after the
Effective Time, other than limitations or waiting periods that are already in
effect with respect to such employees and that have not been satisfied as of the
Effective Time under any welfare plan maintained for the Company Employees
immediately prior to the Effective Time, and (ii) provide each Company Employee
with credit for any co-payments and deductibles paid prior to the Effective Time
in satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time.
(b) The Surviving Corporation shall comply with the terms of all
Company Benefit Plans.
(c) The Company shall take all such steps as may be reasonably required
to cause the transactions contemplated by Article II hereof and any other
dispositions of the Company equity securities (including derivative securities)
in connection with this Agreement by each individual who is a director or
officer of the Company to be exempt under Rule 16b-3 promulgated under the
Exchange Act, such steps to be taken in accordance with the No-Action Letter
dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher &
Flom LLP.
ARTICLE VIII.
CONDITIONS
Section 8.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions, except, to the extent permitted by applicable law, that such
conditions may be waived in writing pursuant to Section 9.5 by the joint action
of the parties hereto:
(a) Shareholder Approval. The Company Shareholders' Approval shall have
been obtained.
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(b) No Injunction. No temporary restraining order or preliminary or
permanent injunction or other order by any federal or state court preventing
consummation of the Merger or the other transactions contemplated hereby shall
have been issued and be continuing in effect, and the Merger and the other
transactions contemplated hereby shall not have been prohibited under any
applicable federal or state law or regulation; provided, however, that the
parties hereto shall use all reasonable efforts to have any such order,
injunction, or prohibition vacated.
(c) Statutory Approvals. The Company Required Statutory Approvals and
the Parent Required Statutory Approvals shall have been obtained at or prior to
the Effective Time, such approvals shall have become Final Orders (as defined
below) and such Final Orders shall not impose terms or conditions which, in the
aggregate, would have, or could reasonably be expected to have, a Company
Material Adverse Effect or a Parent Material Adverse Effect, or which would be
materially inconsistent with the agreements of the parties contained herein. The
term "Final Order" shall mean action by the relevant regulatory authority which
has not been reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
(d) HSR Act. All applicable waiting periods under the HSR Act shall
have expired or been terminated.
Section 8.2. Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be further
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by the Company in writing pursuant to
Section 9.5:
(a) Performance of Obligations of Parent and Merger Sub. Parent and
Merger Sub will have performed in all material respects their agreements and
covenants contained in or contemplated by this Agreement, which are required to
be performed by them at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in Article V of this Agreement shall be true
and correct, unless the failure of such representations and warranties to be so
true and correct, in the aggregate, have not had and would not reasonably be
expected to have a Parent Material Adverse Effect (ignoring, for purposes of
this Section 8.2(b), any materiality standard expressly included in such
representations or warranties) as of the date hereof (or, to the extent such
representations and warranties speak as of an earlier or later date, as of such
earlier or later date) and as of the Closing Date (except to the extent such
representations and warranties speak as of an earlier or later date) as if made
on and as of the Closing Date, except as otherwise contemplated by this
Agreement.
(c) Closing Certificates. The Company shall have received a certificate
signed by the managing member of Parent, dated the Closing Date, to the effect
that, to the best of such
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person's knowledge, the conditions set forth in Section 8.2(a) and Section
8.2(b) have been satisfied.
(d) Legal Opinions as to Corporate and Regulatory Matters. The Company
shall have received the opinions of (i) Willkie Farr & Gallagher, Parent's
special counsel, in form and substance customary for transactions of this type
and reasonably satisfactory to the Company, dated the Effective Time, as to the
authorization, validity and enforceability of this Agreement and (ii) LeBoeuf,
Lamb, Greene & MacRae, L.L.P., Parent's special regulatory counsel, in form and
substance customary for transactions of this type and reasonably satisfactory to
the Company, dated the Effective Time, as to certain regulatory matters,
including that all regulatory approvals, permits and consents have been
obtained; provided, that such firms may reasonably rely on local counsel
(including local counsel as to local regulatory matters) as to matters of local
law.
Section 8.3. Conditions to Obligation of Parent and Merger Sub to
Effect the Merger. The obligation of Parent and Merger Sub to effect the Merger
shall be further subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, except as may be waived by Parent in writing
pursuant to Section 9.5:
(a) Performance of Obligations of the Company. The Company (and/or
appropriate Company Subsidiaries) will have performed in all material respects
its agreements and covenants contained in or contemplated by this Agreement
which are required to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct, unless the
failure of such representations and warranties to be so true and correct, in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect (ignoring, for purposes of this Section 8.3(b), any
materiality standard expressly included in such representations or warranties)
as of the date hereof (or, to the extent such representations and warranties
speak as of an earlier or later date, as of such earlier or later date) and as
of the Closing Date (except to the extent such representations and warranties
speak as of an earlier or later date) as if made on and as of the Closing Date,
except as otherwise contemplated by this Agreement.
(c) Company Material Adverse Effect. No Company Material Adverse Effect
shall have occurred and there shall exist no fact or circumstance that would or,
insofar as reasonably can be foreseen, could have a Company Material Adverse
Effect.
(d) Company Required Consents. The Company Required Consents shall have
been obtained.
(e) Insurance Matters. The condition regarding certain insurance
matters set forth in Section 8.3(e) of the Parent Disclosure Schedule shall have
been satisfied.
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(f) Closing Certificates. Parent shall have received a certificate
signed by the chief executive officer and the chief financial officer of the
Company, dated the Closing Date, to the effect that, to the best of such
officers' knowledge, the conditions set forth in Sections 8.3(a), (b), (c), (d)
and (e) have been satisfied.
(g) 1935 Act Status. The Investors shall have received evidence
reasonably satisfactory to them that neither they nor any of their affiliates
(within the meaning of Section 2(a)(11) of the 1935 Act) nor any other of the
Investor Entities will be subject to regulation as a registered holding company
under the 1935 Act following the Merger; provided, that the Investors shall have
used all commercially reasonable efforts to obtain such evidence, subject to the
proviso in Section 6.2(b).
(h) Legal Opinions as to Corporate and Regulatory Matters. Parent shall
have received the opinions of (i) Dorsey and Whitney LLP, the Company's special
Iowa counsel, in form and substance customary for transactions of this type and
reasonably satisfactory to Parent, dated the Effective Time, as to the
authorization, validity and enforceability of this Agreement and (ii) LeBoeuf,
Lamb, Greene & MacRae, L.L.P., the Company's special regulatory counsel, in form
and substance customary for transactions of this type and reasonably
satisfactory to Parent, dated the Effective Time, as to certain regulatory
matters, including that all regulatory approvals, permits and consents have been
obtained; provided, that LeBoeuf, Lamb, Greene & MacRae, L.L.P. may reasonably
rely on local counsel (including local counsel as to local regulatory matters)
as to matters of local law.
(i) Company Options. Except as otherwise agreed by Parent in writing as
provided in Section 2.4, all Company Options under the Company Stock Plans shall
have been validly cancelled and none shall remain outstanding no later than the
Effective Time, and no holder of Company Options or any participant in the
Company Stock Plans or any other Company Benefit Plan shall have any right
thereunder to acquire any equity securities or interests therein of the Company,
the Surviving Corporation or any of their respective Subsidiaries.
(j) Dissenting Shares. Holders of not more than ten percent (10%) of
the outstanding shares of Company Common Stock shall have perfected such
holder's right to dissent in accordance with the applicable provisions of the
Iowa Act and shall not have withdrawn or lost such rights.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after the Company Shareholders'
Approval has been obtained:
(a) by mutual written consent of Parent and the Board of Directors of
the Company;
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(b) by any party hereto, by written notice to the other, if the
Effective Time shall not have occurred on or before April 30, 2000; provided,
that such date shall automatically be changed to July 31, 2000 if on April 30,
2000 the conditions set forth in Section 8.1(c) and/or 8.3(g) have not been
satisfied or waived and the other conditions to the consummation of the
transactions contemplated hereby are then capable of being satisfied, and the
approvals required by Section 8.1(c) and/or 8.3(g), as the case may be, which
have not yet been obtained are being pursued with diligence; and provided,
further, that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
(c) by any party hereto, by written notice to the other party, if the
Company Shareholders' Approval shall not have been obtained at a duly held the
Company Meeting, including any adjournments thereof;
(d) by any party hereto, after consultation with outside counsel, if
any state or federal law, order, rule or regulation is adopted or issued, which
has the effect of prohibiting the Merger, or by any party hereto, if any court
of competent jurisdiction in the United States or any State shall have issued an
order, judgment or decree permanently restraining, enjoining or otherwise
prohibiting the Merger, and such order, judgment or decree shall have become
final and nonappealable; provided, that such terminating party shall have
complied with its obligations pursuant to Section 10.8.
(e) by the Company, upon three business days' prior notice to Parent
if, as a result of an Acquisition Proposal described in clauses (A)(w), (x) and
(y) of the second paragraph of Section 7.8, (i) the Board of Directors of the
Company shall have concluded in good faith, after considering applicable
provisions of state law and after consultation with outside counsel, that their
fiduciary duties could reasonably require that such Acquisition Proposal be
accepted; (ii) the Company shall have complied with all its obligations under
Sections 7.4 and 7.8; (iii) the person making the Acquisition Proposal shall
have acknowledged and agreed in writing to pay or cause to be paid the
termination and other fees set forth in Section 9.3 if such Acquisition Proposal
is consummated or any other Acquisition Proposal is consummated with such person
or any of its affiliates and (iv) during the three business days prior to any
such termination, the Company shall, and shall cause its respective financial
and legal advisors to, in good faith seek to negotiate with Parent to make such
adjustments in the terms and conditions of this Agreement as would enable the
Company to proceed with the transactions contemplated herein;
(f) by Parent, by written notice to the Company, if (i)(A) there shall
have been any breach of any representation or warranty, or any non-willful
breach of any covenant or agreement, of the Company hereunder, other than such
breaches, which, together with any other such breaches, has not had and would
not reasonably be expected to have a Company Material Adverse Effect, or (B)
there shall have been any material breach (if willful) of any covenant or
agreement of the Company hereunder and, in case of each of clauses (A) and (B)
above, such breach shall not have been remedied within twenty days after receipt
by the
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Company of notice in writing from Parent, specifying the nature of such breach
and requesting that it be remedied and provided, that, any materiality standard
expressly included in such representations, warranties, covenants or agreements
shall be ignored for purposes of this Section 9.1(f)(i); or (ii) the Board of
Directors of the Company (A) shall withdraw or modify in any manner adverse to
Parent its approval of this Agreement and the transactions contemplated hereby
or its recommendation to its shareholders regarding the approval of this
Agreement, (B) shall fail to reaffirm such approval or recommendation within
five business days after a written request therefor of Parent (unless such
request is made during the last seven business days immediately prior to the
Company Meeting, in which case, such reaffirmation shall fail to be made within
two business days after the request), (C) shall approve or recommend any
Acquisition Proposal or (D) shall resolve to take any of the actions specified
in clause (A), (B) or (C);
(g) by the Company, by written notice to Parent, if (A) there shall
have been any breach of any representation or warranty, or any non-willful
breach of any covenant or agreement, of Parent or Merger Sub hereunder, other
than such breaches, which, together with any other such breaches, has not had
and would not reasonably be expected to have a Parent Material Adverse Effect,
or (B) there shall have been any material breach (if willful) of any covenant or
agreement of Parent or Merger Sub hereunder (which shall be deemed to include,
for this purpose only, the failure of Parent and Merger Sub to deposit, or cause
to be deposited (including from available cash balances at the Company), the
cash to the Exchange Agent required pursuant to Section 2.3(a), assuming all
other conditions to Closing have been satisfied or otherwise waived in writing
by Parent), and, in case of each of clauses (A) and (B) above, such breach shall
not have been remedied within twenty days after receipt by Parent of notice in
writing from the Company, specifying the nature of such breach and requesting
that it be remedied and provided, that, any materiality standard expressly
included in such representations, warranties, covenants or agreements shall be
ignored for purposes of this Section 9.1(g);
(h) by the Company if any of the Subscription Agreements shall have
been terminated at any time when Parent would not be entitled to terminate this
Agreement pursuant to Section 9.1(b), (c), (d) or (f) and, within ten (10)
business days after any such termination, such Subscription Agreement shall not
have been replaced with another Subscription Agreement with such Investor or
another Investor and containing terms at least as favorable to Merger Sub as the
terminated Subscription Agreement; provided, that, following any such
replacement, Berkshire Hathaway Inc. shall own (including ownership through one
or more subsidiaries of Berkshire Hathaway Inc. which are consolidated with
Berkshire Hathaway Inc. for financial accounting purposes) at least 70% of the
equity (determined by reference to economic interest) in the Surviving
Corporation upon consummation of the Merger.
Section 9.2. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent pursuant to Section 9.1, there shall
be no liability on the part of either Parent or the Company or their respective
officers, members or directors hereunder, except as provided in Section 7.9 and
9.3 and except that the agreement contained in the last sentence of Section 7.1
shall survive the termination.
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Section 9.3. Termination Fee; Expenses.
(a) Termination and Expense Fees. If this Agreement (i) is terminated
by Parent pursuant to Section 9.1(f)(ii), or (ii) is terminated by the Company
pursuant to Section 9.1(e), then the Company shall pay to Parent promptly (but
not later than five business days after such notice is given or received by the
Company pursuant to Section 9.1(f)(ii) or 9.1(e)) a termination fee equal to $40
million in cash plus an additional $8 million in cash (the "Expense Amount")
constituting reimbursement of expenses and fees incurred or to be incurred by
Parent or Merger Sub in connection with or related to the Merger and the
transactions contemplated by this Agreement, without any requirement that Parent
or Merger Sub account for actual expenses. If (i) this Agreement is terminated
pursuant to Section 9.1(b), 9.1(c) or 9.1(f)(i) and (ii) at the time of such
termination, there shall have been an Acquisition Proposal made by a third party
which, at the time of such termination, shall not have been (x) rejected by the
Company and its Board of Directors and (y) withdrawn by the third party and
(iii) within eighteen months of any such termination, the Company or its
affiliate becomes a subsidiary or part of such third party or a subsidiary or
part of an affiliate of such third party, or merges with or into the third party
or a subsidiary or affiliate of the third party or enters into a definitive
agreement to consummate an Acquisition Proposal with such third party or
affiliate thereof, then the Company shall pay to Parent, at the closing of the
transaction (and as a condition to the closing) in which the Company or its
affiliate becomes such a subsidiary or part of such other person or the closing
of such Acquisition Proposal occurs, a termination fee equal to $40 million in
cash plus (unless the Expense Amount is paid pursuant to the following sentence)
the Expense Amount. If this Agreement is terminated pursuant to (i) Section
9.1(b) due to any failure to satisfy any of the conditions set forth in Sections
8.1(b), 8.1(c) or 8.3 (other than 8.3(g)), or (ii) Section 9.1(d) or Section
9.1(f)(i), the Company shall pay to Parent promptly (but not later than five
business days after such notice of termination is given or received by the
Company) the Expense Amount.
(b) If this Agreement is terminated by the Company, by written notice
to Parent, due to the failure of Parent and Merger Sub to deposit, or cause to
be deposited (including from available cash balances at the Company), the cash
to the Exchange Agent required pursuant to Section 2.3(a) at a time when all
conditions to Parent's obligation to close have been satisfied or otherwise
waived in writing by Parent, then Parent shall pay to the Company a termination
fee of $40 million, plus additional damages (but only if and to the extent
proven) in an amount not to exceed $40 million.
(c) Expenses. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. Notwithstanding
anything to the contrary contained in this Section 9.3, if one party fails to
promptly pay to the other any fee or expense due under this Section 9.3, in
addition to any amounts paid or payable pursuant to such Section, the defaulting
party shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Citibank, N.A. from the date
such fee was required to be paid.
43
<PAGE>
(d) Limitation Of Fees. Notwithstanding anything herein to the
contrary, if any Investor (x) would, upon consummation of the Merger, become
subject to regulation as a public utility holding company required to register
under the 1935 Act and (y) solely as a result thereof, this Agreement is
terminated, then no fees under this Section 9.3 shall be payable by the Company.
Section 9.4. Amendment. This Agreement may be amended by Parent and the
Boards of Directors of the Company and Merger Sub, at any time before or after
the Company Shareholders' Approval has been obtained and prior to the Effective
Time, but after such Approval has been obtained, no such amendment shall (a)
alter or change the Per Share Amount or (b) alter or change any of the terms and
conditions of this Agreement if any of the alterations or changes, alone or in
the aggregate, would materially adversely affect the rights of holders of
Company Common Stock. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 9.5. Waiver. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein, to the extent permitted by applicable
law. Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X.
GENERAL PROVISIONS
Section 10.1. Non-Survival; Effect of Representations and Warranties.
No representations or warranties in this Agreement shall survive the Effective
Time, except as otherwise provided in this Agreement.
Section 10.2. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (a) when delivered personally, (b)
when sent by reputable overnight courier service or (c) when telecopied (which
is confirmed by copy sent within one business day by a reputable overnight
courier service) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) If to Parent or Merger Sub, to:
Teton Formation L.L.C.
c/o MidAmerican Energy Holdings Company
666 Grand Avenue
Des Moines, Iowa 50309
Attn: Chief Executive Officer
Telecopy: (515) 242-4031
Telephone: (515) 242-4300
44
<PAGE>
with copies to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attn: Peter J. Hanlon
Telecopy: (212) 728-8111
Telephone: (212) 728-8000
Munger, Tolles & Olson LLP
355 South Grand Avenue
Los Angeles, CA 90071,
Attn: Robert E. Denham
Telecopy: (213) 687-3702
Telephone: (213) 683-9100
Fraser, Stryker, Vaughn, Meusey, Olson,
Boyer & Bloch, P.C.
500 Energy Plaza
409 South 17th Street
Omaha, Nebraska 68102
Attn: John K. Boyer
Telecopy: (402) 341-8290
Telephone: (402) 341-6000
and
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attn: Douglas W. Hawes
Telecopy: (212) 424-8500
Telephone: (212) 424-8000
(ii) if to the Company, to:
MidAmerican Energy Holdings Company
666 Grand Avenue
Des Moines, Iowa 50309
Attn: General Counsel
Telecopy: (515) 242-4080
Telephone: (515) 242-4300
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
45
<PAGE>
New York, New York 10022
Attn: Alan C. Myers
Telecopy: (212) 735-2000
Telephone: (212) 735-3000
Section 10.3. Miscellaneous. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof (other than the Confidentiality Agreement), (b) shall not be
assigned by operation of law or otherwise and (c) shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts executed in and to be fully performed in such State, without giving
effect to its conflicts of law rules or principles and except to the extent the
provisions of this Agreement (including the documents or instruments referred to
herein) are expressly governed by or derive their authority from the Iowa Act.
Section 10.4. Interpretation. When a reference is made in this
Agreement to Sections or Exhibits, such reference shall be to a Section or
Exhibit of this Agreement, respectively, unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 10.5. Counterparts; Effect. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
Section 10.6. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal or state court sitting in the State
of New York.
Section 10.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties as set forth in Section 7.5, nothing in this Agreement,
express or implied, is intended to confer upon
46
<PAGE>
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 10.8. Further Assurances. Each party will execute such further
documents and instruments and take such further actions as may reasonably be
requested by any other party in order to consummate the Merger in accordance
with the terms hereof.
Section 10.9. Waiver Of Jury Trial. Each party to this Agreement
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any action, suit or proceeding arising out of
or relating to this Agreement.
Section 10.10. Certain Definitions. The term "affiliate," except where
otherwise defined herein, shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. The term "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
47
<PAGE>
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement as of the date first written above to be signed by their respective
officers thereunto duly authorized.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ Steven A. McArthur
---------------------------------
Name: Steven A. McArthur
Title: Senior Vice President
TETON FORMATION L.L.C.
By: /s/ David L. Sokol
---------------------------------
Name: David L. Sokol
Title: Managing Member
TETON ACQUISITION CORP.
By: /s/ David L. Sokol
---------------------------------
Name: David L. Sokol
Title: Chief Executive Officer
and President
48
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
1935 Act..........................................................................................................7
Acquisition Proposal.............................................................................................35
affiliate........................................................................................................47
Agreement.........................................................................................................1
Board of Directors...............................................................................................36
Closing...........................................................................................................6
Closing Agreement................................................................................................13
Closing Date......................................................................................................6
Code.............................................................................................................13
Company Benefit Plans............................................................................................15
Company Common Stock..............................................................................................3
Company Disclosure Schedule.......................................................................................7
Company Financial Statements.....................................................................................10
Company Joint Venture.............................................................................................7
Company Material Adverse Effect...................................................................................7
Company Meeting..................................................................................................32
Company Options...................................................................................................5
Company Prospects.................................................................................................7
Company Required Consents.........................................................................................9
Company Required Statutory Approvals..............................................................................9
Company Rights....................................................................................................3
Company Rights Agreement.........................................................................................22
Company SEC Reports..............................................................................................10
Company Shareholders' Approval...................................................................................21
Company Stock Plans...............................................................................................8
Company Subsidiary................................................................................................7
Confidentiality Agreement........................................................................................30
control..........................................................................................................47
CSFB.............................................................................................................24
Dillon Read......................................................................................................21
Disclosure Schedules.............................................................................................34
Dissenting Shares.................................................................................................3
Effective Time....................................................................................................1
Environmental Claim..............................................................................................18
Environmental Laws...............................................................................................19
<PAGE>
Environmental Permits............................................................................................20
ERISA............................................................................................................15
Excess Parachute Payments........................................................................................17
Exchange Act.....................................................................................................10
Exchange Agent....................................................................................................4
Expense Amount...................................................................................................43
FERC.............................................................................................................10
Final Order......................................................................................................38
GAAP.............................................................................................................11
Governmental Authority............................................................................................9
Hazardous Materials..............................................................................................19
HSR Act..........................................................................................................31
Indemnified Liabilities..........................................................................................32
Indemnified Parties..............................................................................................32
Indemnified Party................................................................................................32
Independent Counsel..............................................................................................33
Investor Entities................................................................................................29
Investors........................................................................................................24
Iowa Act..........................................................................................................1
IRS..............................................................................................................14
Joint Venture.....................................................................................................7
Lehman...........................................................................................................21
Merger............................................................................................................1
Merger Sub........................................................................................................1
MidAmerican Funding...............................................................................................7
MidAmerican Utility...............................................................................................7
Parent............................................................................................................1
Parent Disclosure Schedule.......................................................................................24
Parent Material Adverse Effect...................................................................................24
Parent Required Statutory Approvals..............................................................................24
PBGC.............................................................................................................16
Per Share Amount..................................................................................................3
Power Act........................................................................................................10
Proxy Statement..................................................................................................12
PURPA............................................................................................................10
Release..........................................................................................................19
Representatives..................................................................................................30
<PAGE>
Schedule 13E-3 Transaction Statement.............................................................................31
Scott Family Entities............................................................................................25
SEC..............................................................................................................10
Securities Act...................................................................................................10
Shares............................................................................................................3
Subscription Agreements..........................................................................................24
Subsidiary........................................................................................................7
Surviving Corporation.............................................................................................1
Tax Return.......................................................................................................12
Tax Ruling.......................................................................................................13
Taxes............................................................................................................12
the...............................................................................................................1
Violation.........................................................................................................9
Voting Debt.......................................................................................................8
Year 2000 Compliant..............................................................................................22
</TABLE>
<PAGE>
AMENDED AND RESTATED BERKSHIRE HATHAWAY INC.
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 (i) common stock, no par value ("Common Stock"),
and Preferred Stock (as defined below) of Teton Acquisition Corp. (the
"Company"), an Iowa corporation wholly owned by Teton Formation L.L.C. (the
"Parent"), an Iowa limited liability company, and (ii) Trust Securities (as
defined below) of the Trust (as defined below). 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.
On the terms and subject to the conditions of this Agreement, the
undersigned hereby irrevocably subscribes for and the Company hereby irrevocably
agrees to sell:
(a) such number of shares of Common Stock representing 9.9% of the
outstanding voting stock of the Company (after giving effect to
the purchases under the other Subscription Agreements (as defined
herein)) for a purchase price of $35.05 per share;
(b) such number of shares of Zero Coupon Convertible Preferred Stock
("Preferred Stock") of the Company (the terms of which are
described on the form of Articles of Amendment to the Amended
and Restated Articles of Incorporation of the Company attached
as Schedule I hereto) equal to the Preferred Stock
<PAGE>
Share Amount (as defined below), for a purchase price of
$35.05 (the "Preferred Stock Purchase Price") per share; and
(c) 32,000,000 11% Trust Issued Preferred Securities (liquidation
amount $25 per security) (the "Trust Securities") of MidAmerican
Capital Trust, a statutory business trust to be formed by the
Company under the laws of the State of Delaware (the "Trust"),
having the terms, limitations and relative rights and preferences
described on Schedule II hereto, for an aggregate purchase price
of $800 million.
The "Preferred Stock Share Amount" shall equal the quotient
obtained by dividing (A) the Net Merger Consideration Amount (as defined below)
less (i) $280,400,000, representing the aggregate subscription price for shares
of Common Stock to be paid by Walter Scott, Jr. pursuant to the Scott
Subscription Agreement (as defined below), (ii) $17,478,900, representing the
aggregate subscription price for shares of Common Stock and options to purchase
shares of Common Stock to be paid by David L. Sokol pursuant to the Sokol
Subscription Agreement (as defined below), (iii) the aggregate subscription
price (up to $12,521,100) for shares of Common Stock and/or options to purchase
Common Stock to be paid by members of management of MidAmerican other than David
L. Sokol pursuant to the Management Subscription Agreements (as defined below),
(iv) the aggregate purchase price for the shares of Common Stock to be purchased
by the undersigned under Section 1(a) and (v) $800 million, representing the
aggregate purchase price for the Trust Securities to be purchased by the
undersigned under Section 1(c), by (B) the Preferred Stock Purchase Price.
For purposes of the preceding paragraph, (i) the value per share
of MidAmerican common stock paid as part of the purchase price under the
Management Subscription Agreements shall equal the amount per share of
MidAmerican common stock to be paid pursuant to the Merger Agreement (the "Per
Share Amount"), and (ii) the value of the options to purchase MidAmerican common
stock paid as part of the purchase price under the Management Subscription
Agreements shall equal the product of (A) the excess, if any, for each such
option, of the Per Share Amount over the per share exercise price thereof and
(B) the number of shares of MidAmerican common stock subject to the option.
The "Net Merger Consideration Amount" shall equal (A) the sum of
(i) the aggregate cash consideration to be paid to the holders of MidAmerican
common stock and/or options to purchase MidAmerican common stock pursuant to the
Merger Agreement (assuming that all shares of MidAmerican common stock and
options to purchase MidAmerican common stock are cashed out in the Merger), (ii)
the aggregate cash consideration to be paid to holders of trust preferred
securities of MidAmerican Capital Trust II and/or MidAmerican Capital Trust III
(together referred to as "TIDES"), with respect to which securities conversion
rights are exercised, and (iii) other transaction costs of up to $25 million,
less (B) the amount of cash on MidAmerican's balance sheet on the Closing Date
(including cash received by MidAmerican upon the exercise of options and certain
asset sales); provided, that, in no event shall the Net Merger Consideration
Amount exceed $2,352,000,000.
-2-
<PAGE>
To the extent that TIDES have not been converted into MidAmerican
common stock as of the Closing Date, the number of shares of Preferred Stock
purchased pursuant to Section 1(b) above at the Closing Date will be reduced,
and additional shares of Preferred Stock will be purchased over the period of up
to 180 days following the Closing Date at the Preferred Stock Purchase Price, as
and to the extent that TIDES are converted, with the total number of shares of
Preferred Stock purchased at the Closing Date and over the succeeding six months
not to exceed the Preferred Stock Share Amount. Following the close of business
on the day that is 180 days after the Closing Date, or the date on which all of
the TIDES have been converted, whichever is earlier, provided all shares of
Preferred Stock required up to that time to be purchased hereunder have been
duly purchased, there shall be no further obligation to purchase shares of
Preferred Stock.
The shares of Common Stock and Preferred Stock to be purchased
pursuant to Sections 1(a) and (b) are herein referred to, collectively, as the
"Shares," and the Shares, together with the Trust Securities to be purchased
pursuant to Section 1(c), are herein referred to, collectively, as the
"Securities." The purchase price for such Securities is payable, at the option
of the undersigned, in cash, in shares of MidAmerican common stock (which shall
be valued at the Per Share Amount), or any combination thereof. The undersigned
may assign its subscription rights hereunder to one or more of its consolidated
subsidiaries; provided, however, that the undersigned shall remain fully liable
for all of its obligations hereunder, including, without limitation, the payment
of the purchase price for all of the Securities. As a condition to such
subscription, each consolidated subsidiary of the undersigned purchasing
Securities shall execute and deliver to the Company a counterpart of this
Agreement, and shall be bound by the terms and conditions of this Agreement (but
with its obligations limited to the Securities being purchased by it) as if such
person was the original signatory hereto.
2. Other Subscription Agreements. The Company is entering into,
concurrently with the execution of this Agreement, (i) a subscription agreement
with David L. Sokol (the "Sokol Subscription Agreement"), pursuant to which
David L. Sokol has agreed to purchase, on the terms and subject to the
conditions stated therein, shares of Common Stock and/or options to purchase
Common Stock, and (ii) 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. The Company may also enter into subscription agreements with
other members or former members of MidAmerican management (any such agreements,
together with the Sokol Subscription Agreement, the "Management Subscription
Agreements" and the Management Subscription Agreements, together with this
Agreement and the Scott 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/or options to purchase Common Stock. 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 that:
-3-
<PAGE>
(a) Organization and Qualification. The Company is duly formed,
validly existing and in good standing under the laws of the State of Iowa. On
the Closing Date (as defined below), the Trust will be a statutory business
trust duly organized, validly existing and in good standing under the laws of
the State of Delaware. 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 their organization, on the Closing Date
neither the Company nor the Trust will have incurred any obligations or
liabilities or engaged in any business activities of any kind.
(b) Authority. Subject to the filing of the Amendment (as defined
below), 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 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). On the Closing Date, the issuance and delivery of the Trust
Securities in accordance with this Agreement will have been authorized by the
Trust.
(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. On the Closing Date, the Trust
Securities to be issued and sold by the Trust pursuant to this Agreement, when
issued in accordance with the provisions hereof, will be validly issued, fully
paid and nonassessable undivided beneficial interests in the assets of the
Trust, and no holder of interests in the Trust will have any preemptive rights
to subscribe for any such Trust Securities. 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 this Agreement.
On the Closing Date, the only securities which will be authorized for issuance
by the Trust are the Trust Securities to be issued and sold by the Company
pursuant to this Agreement.
(d) Approvals and Consents; Non-Contravention. The creation,
authorization, issuance, offer and sale of the Securities do not require any
consent, approval or
-4-
<PAGE>
authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Company or the Trust (other than as
will be described in the Merger Agreement, the filing of the Amendment (as
defined below) with the Iowa Secretary of State and filings with the Delaware
Secretary of State with respect to the organization of the Trust) 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 (as amended by the
Amendment) 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) Organization and Qualification. The undersigned is duly
organized or formed, validly existing and in good standing under the laws of the
state of its organization or formation.
(b) 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. The execution, delivery and
performance of this Agreement by the undersigned and the consummation by the
undersigned of the transactions contemplated hereby have been duly and validly
approved by all necessary action, and no other proceedings on the part of the
undersigned are necessary to authorize the execution, delivery and performance
of this Agreement by the undersigned and the consummation by the undersigned of
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).
(c) Approvals and Consents; Non-Contravention. Except as set forth
on Schedule 4(c), or 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
-5-
<PAGE>
the performance by the undersigned of its obligations hereunder will not violate
(i) the terms and conditions of the certificate of incorporation, or other
applicable formation document, or the bylaws of the undersigned, or any
agreement to which the undersigned is a party or by which it is bound or (ii)
any federal or state law. Notwithstanding any other provision of this Section
4(c), no representation or warranty is made as to whether the undersigned or any
of its affiliates, as a result of the transactions contemplated by this
Agreement or the Merger Agreement would be subject to regulation as a registered
holding company under the 1935 Act. The undersigned would not intend to register
as such a holding company if that were a required condition of the transaction.
(d) 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.
(e) 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 Securities 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 Securities and that it is unlikely that any
public market for the Securities will develop for at least five years. The
undersigned will not offer, sell, transfer or assign its Securities or any
interest therein in contravention of this Agreement, the Act or any state or
federal law.
(f) 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.
(g) 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 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.
-6-
<PAGE>
(h) 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.
(i) Plan Assets.
(i) By checking below, the undersigned has indicated whether or not
it is, or is acting on behalf of, a "benefit plan investor", as defined in
29 C.F.R. ss. 2510.3-101. The undersigned acknowledges that (A) a benefit
plan investor includes (x) an "employee benefit plan" within the meaning of
Section 3(3) of the U.S. Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not such plan is subject to ERISA, or (y)
a plan or arrangement subject to Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code") or (iii) an entity which is deemed to hold
the assets of any such employee benefit plan, plan or arrangement described
in (x) or (y) above pursuant to 29 C.F.R. ss. 2510.3-101 or otherwise, (B)
a plan which is maintained by a foreign corporation, governmental entity or
church, a Keogh plan covering no common-law employees and an individual
retirement account would each be a benefit plan investor for this purpose,
even though they are generally not subject to ERISA and (C) a foreign or
U.S. entity which is not an operating company and which is not publicly
traded or registered as an investment company under the Investment Company
Act of 1940, as amended, and in which 25% or more of the value of any class
of equity interests is held by benefit plan investors, would be deemed to
hold the assets of one or more employee benefit plans pursuant to 29 C.F.R.
2510.3-101. The undersigned further understands that for purposes of
determining whether this 25% threshold has been met or exceeded, the value
of any equity interests held by a person (other than a benefit plan
investor) who has discretionary authority or control with respect to the
assets of the entity, or any person who provides investment advice for a
fee (direct or indirect) with respect to such assets, or any affiliate of
such a person, is disregarded:
[ ] Yes [X] No
(ii) By checking below, the undersigned has indicated whether it is,
or is acting on behalf of, such an employee benefit plan, plan or
arrangement described in the preceding question, or is an entity deemed to
hold the assets of any such employee benefit plan, plan or arrangement that
is subject to ERISA and/or Section 4975 of the Code.
[ ] Yes [X] No
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(iii) By checking below, the undersigned has indicated whether it is
an insurance company using assets of its general account.
[ ] Yes [X] No
If the answer to the above question is yes, please indicate the percentage of
the general account that is attributable to benefit plan investors subject to
ERISA and/or Section 4975 of the Code: %.
(j) 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.
(k) Ownership. At the Closing Date, the undersigned or any of its
consolidated subsidiaries that subscribe for Securities hereunder 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, if any, to be exchanged for Securities pursuant to
this Agreement.
(l) Assignment. The undersigned will only assign its subscription
rights hereunder to one or more of its consolidated subsidiaries who are capable
of making the representations and warranties contained in this Section 4 and of
performing the obligations they undertake hereunder.
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, provided that,
as and to the extent set forth in Section 1, additional shares of Preferred
Stock may be purchased and sold hereunder for a period of up to six months
following the Closing Date.
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
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<PAGE>
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.
(iv) Stockholders Agreement. The Stockholders Agreement (having
terms substantially the same as those set forth on Schedule III 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.
(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.
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<PAGE>
(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.
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) Amendment of Articles of Incorporation and Formation of Trust.
The Company shall take all actions necessary to amend its Articles of
Incorporation to authorize the issuance of the Preferred Stock under this
Agreement (the "Amendment"). The Company shall take all actions necessary to
organize the Trust, to issue its subordinated debentures to the Trust, and to
cause the Trust to perform its obligations in accordance with the terms, and
subject to the conditions, of this Agreement.
(b) 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.
(c) 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
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<PAGE>
this Agreement as if the same were made on or as of the date of such event,
transaction or circumstance.
(d) 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.
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.
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., 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
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<PAGE>
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.
(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 party at its addresses 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;
provided, however, that, notwithstanding any other provisions of this Agreement,
this Agreement and all rights, interests and obligations of the undersigned
hereunder (or, at the option of the undersigned, the right and obligation to
purchase some, but not all, of the Securities) may be assigned by the
undersigned to one or more subsidiaries of the undersigned which are
consolidated with the undersigned for financial accounting purposes, without
obtaining the consent of any other party hereto. 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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<PAGE>
16. Standby Credit Commitment. The undersigned will, subject to the terms
and conditions set forth below, lend the Company an amount equal to the
difference, if any, between (i) $2,351,524,400 and (ii) the sum of (x) the
investments by Walter Scott, Jr., David L. Sokol and management of MidAmerican
under their respective subscription agreements and (y) the investment made on
the Closing Date by the undersigned (or its subsidiaries) pursuant to this
Subscription Agreement; provided, however, that the amount outstanding under
such loan will not in any event exceed $180,000,000, and such loan will be
subject to the following terms and conditions:
(a) Such loan will be drawable only on the Closing Date, immediately
prior to the effective time of the Merger, and subject to fulfillment of all the
conditions set forth in Section 6(a) hereof;
(b) MidAmerican's existing revolving credit agreement shall not
permit borrowing for the purpose that this loan would be made;
(c) The obligations of the surviving corporation in the Merger in
connection with this loan will rank pari passu with all of its public debt;
(d) This loan will be due and payable on that date which is 180 days
after the Closing Date, or if such date is not a business day, on the next
business day, and shall be required to be paid before that date as and to the
extent cash is available for payment;
(e) This loan will be prepayable at any time without penalty, and
amounts prepaid may not be reborrowed;
(f) The interest rate for such loan will be determined from the
formula identified by David L. Sokol to the undersigned no later than October
26, 1999, with David L. Sokol specifying either the formula applicable to
"Eurodollar Rate Loans" or the formula applicable to "Base Rate Loans" as
provided in the credit agreement for MidAmerican's current revolving credit
facility led by Credit Suisse First Boston;
(g) The loan shall be documented and evidenced by a note, all in
accordance with normal commercial practice for loans of this type, and the loan
documents and note, in addition to the terms set forth herein, shall contain
such other commercially reasonable terms and provisions, not inconsistent with
those specified herein, as would accord with normal commercial practice for
loans of this type.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Subscription Agreement on this 24th day of October 1999.
BERKSHIRE HATHAWAY INC. ---------------------------
Mailing Address
By: /s/ Warren E. Buffett
----------------------------- ---------------------------
Name: Warren E. Buffett City State Zip Code
Title: Chairman
---------------------------
Tax Identification Number
SUBSCRIPTION ACCEPTED AS OF THE ABOVE DATE
TETON ACQUISITION CORP.
By: /s/ David L. Sokol
----------------------------------
Name: David L. Sokol
Title: Chairman, Chief Executive
Officer and President
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<PAGE>
Schedule 4(c)
Although the transactions contemplated by the Agreement may require
the consent, approval and/or authorization of, or filings with, certain state
insurance regulatory authorities, the failure to obtain any such consent,
approval or authorization or to make any such filing would not materially affect
the ability of the undersigned to consummate such transactions.
<PAGE>
Schedule I
FORM OF
ARTICLES OF AMENDMENT
to
AMENDED AND RESTATED ARTICLES OF INCORPORATION
of
TETON ACQUISITION CORP.
(Pursuant to Section 490.602 of the Iowa Business Corporation Act)
Teton Acquisition Corp., a corporation organized and existing
under the Iowa Business Corporation Act (hereinafter called the "Corporation")
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section490.602 of the Iowa Business
Corporation Act at a meeting duly called and held on
, .
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Articles of
Incorporation, the Board of Directors hereby creates a series of preferred
stock, no par value (the "Preferred Stock"), of the Corporation and hereby
states the designation and number of shares, and fixes the relative rights,
preferences, and limitations thereof as follows:
ZERO COUPON CONVERTIBLE PREFERRED STOCK
I. DESIGNATION AND AMOUNT
The shares of such series (the "Preferred Shares") shall be designated
as "Zero Coupon Convertible Preferred Stock" and the number of shares
constituting such Preferred Stock shall be .
II. DIVIDENDS AND DISTRIBUTIONS
In case the Corporation shall at any time or from time to time declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Corporation or any of its
subsidiaries by way of a dividend, distribution or spin-off) on its Common
Stock, other than (i) a distribution made in compliance with the provisions of
Section VI or (ii) a dividend or distribution made in Common Stock, the holders
of the Preferred Shares shall be entitled (unless such right shall be waived by
the affirmative vote or consent of the holders of at least two-thirds
<PAGE>
of the number of the then outstanding Preferred Shares) to receive from the
Corporation with respect to each Preferred Share held, any dividend or
distribution that would be received by a holder of the number of shares
(including fractional shares) of Common Stock into which such Preferred Share is
convertible on the record date for such dividend or distribution, with
fractional shares of Common Stock deemed to be entitled to the corresponding
fraction of any dividend or distribution that would be received by a whole
share. Any such dividend or distribution shall be declared, ordered, paid or
made at the same time such dividend or distribution is declared, ordered, paid
or made on the Common Stock.
III. CONVERSION RIGHTS
Each Preferred Share is convertible at the option of the holder thereof
into one Conversion Unit at any time upon the occurrence of a Conversion Event.
A Conversion Unit will initially be one share of Common Stock of the Corporation
adjusted as follows:
(i) Stock splits, combinations, reclassifications etc. In case
the Corporation shall at any time or from time to time declare a
dividend or make a distribution on the outstanding shares of Common
Stock payable in Common Stock or subdivide or reclassify the outstanding
shares of Common Stock into a greater number of shares or combine or
reclassify the outstanding shares of Common Stock into a smaller number
of shares of Common Stock, then, and in each such event, the number of
shares of Common Stock into which each Preferred Share is convertible
shall be adjusted so that the holder thereof shall be entitled to
receive, upon conversion thereof, the number of shares of Common Stock
which such holder would have been entitled to receive after the
happening of any of the events described above had such share been
converted immediately prior to the happening of such event or the record
date therefor, whichever is the earlier. Any adjustment made pursuant to
this clause (i) shall become effective (I) in the case of any such
dividend or distribution on the record date for the determination of
holders of shares of Common Stock entitled to receive such dividend or
distribution, or (II) in the case of any such subdivision,
reclassification or combination, on the day upon which such corporate
action becomes effective.
(ii) Issuances of Additional Shares below Fair Value Price. In
case the Corporation shall issue shares of Common Stock (or rights or
warrants or other securities exercisable or convertible into or
exchangeable (collectively, a "conversion") for shares of Common Stock)
(collectively, "convertible securities") (other than in Permitted
Transactions) at a price per share (or having a conversion price per
share) less than the Fair Value Price as of the date of issuance of such
shares (or of such convertible securities), then, and in each such
event, the number of shares of Common Stock into which each Preferred
Share is convertible shall be adjusted so that the holder thereof shall
be entitled to receive, upon conversion thereof, the number of shares of
Common Stock determined by multiplying the number of shares of Common
Stock into which such share was convertible immediately prior to such
date of issuance by a fraction, (I) the numerator of which is the sum of
(1) the number of shares of Common Stock outstanding on such date and
(2) the number of additional shares of Common Stock issued (or into
which the
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<PAGE>
convertible securities may convert), and (II) the denominator of
which is the sum of (1) the number of shares of Common Stock
outstanding on such date and (2) the number of shares of Common
Stock which the aggregate consideration receivable (including any
amounts payable upon conversion of convertible securities) by the
Corporation for the total number of additional shares of Common
Stock so issued (or into which the convertible securities may
convert) would purchase at the Fair Value Price on such date. For
purposes of the foregoing, "Permitted Transactions" shall include
issuances (i) as consideration for the acquisition of businesses
and/or related assets, and (ii) in connection with employee benefit
plans and any other transaction approved by the Board of Directors
of the Corporation (including the approval of the directors elected
by the holders of the Preferred Shares), and "Fair Value Price"
shall mean the average of the closing prices on the principal stock
exchange or over-the-counter quotation system on which the Common
Stock is then listed or quoted, or if not then listed or quoted, the
fair value of the Corporation's Common Stock as determined in good
faith by the Board of Directors. Although Permitted Transactions do
not require adjustment of a Conversion Unit, the issuance of equity
and equity-linked securities in a Permitted Transaction remains
subject to the vote of the Preferred Shares as provided in Section
IV. Any adjustment made pursuant to this clause (ii) shall become
effective immediately upon the date of such issuance.
(iii) Mergers, Consolidations, Sales of Assets etc. In case the
Corporation shall be a party to any transaction (including a merger,
consolidation, sale of all or substantially all of the Corporation's
assets, liquidation or recapitalization of the Corporation, but
excluding any transaction described in clause (i) or (ii) above) in
which the previously outstanding Common Stock shall be changed into or,
pursuant to the operation of law or the terms of the transaction to
which the Corporation is a party, exchanged for different securities of
the Corporation or common stock or other securities or interests in
another Person or other property (including cash) or any combination of
the foregoing, then, as a condition of the consummation of such
transaction, lawful and adequate provision shall be made so that each
holder of Preferred Shares shall be entitled, upon conversion, to an
amount per share equal to (A) the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged times (B) the number of shares of Common Stock into which such
share was convertible immediately prior to the consummation of such
transaction. Any adjustment made pursuant to this clause (iii) shall
become effective immediately upon the consummation of such transaction.
In calculating the adjustments provided in clauses (i), (ii) and (iii)
above, a Conversion Unit shall include any fractional share resulting from the
calculation.
A "Conversion Event" includes (i) any conversion of Preferred Shares
that would not cause the holder of the shares of Common Stock issued upon
conversion (or any affiliate of such holder) or the Corporation to become
subject to regulation as a registered holding company, or as a subsidiary of a
registered holding company, under the Public Utility Holding Company Act of 1935
("PUHCA") either as a result of the repeal or amendment of PUHCA, the number of
shares involved or the identity of the holder of such shares and (ii) a Company
Sale. A Company Sale
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<PAGE>
includes any involuntary or voluntary liquidation, dissolution,
recapitalization, winding-up or termination of the Corporation and any merger,
consolidation or sale of all or substantially all of the assets of the
Corporation.
The holder of any Preferred Shares may exercise such holder's right to
convert each such share into a Conversion Unit by surrendering for such purpose
to the Corporation, at its principal office or at such other office or agency
maintained by the Corporation for that purpose, a certificate or certificates
representing the Preferred Shares to be converted accompanied by a written
notice stating that such holder elects to convert all or a specified whole
number of such shares in accordance with the provisions of this Section III and
specifying the name or names in which such holder wishes the certificate or
certificates for securities included in the Conversion Unit or Units to be
issued. In case such notice shall specify a name or names other than that of
such holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of securities included in the Conversion Unit or Units
in such name or names. Other than such taxes, the Corporation will pay any and
all issue and other taxes (other than taxes based on income) that may be payable
in respect of any issue or delivery of the securities and other property then
included in a Conversion Unit or Units upon conversion of Preferred Shares
pursuant hereto. As promptly as practicable, and in any event within three
Business Days after the surrender of such certificate or certificates and the
receipt of such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Corporation that
such taxes have been paid), the Corporation shall deliver or cause to be
delivered (i) certificates representing the number of validly issued, fully paid
and nonassessable shares of Common Stock (or other securities included in the
Conversion Unit or Units) to which the holder of Preferred Shares so converted
shall be entitled and (ii) if less than the full number of Preferred Shares
evidenced by the surrendered certificate or certificates are being converted, a
new certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificate or certificates less the number of
shares converted. Such conversion shall be deemed to have been made at the close
of business on the date of giving of such notice and such surrender of the
certificate or certificates representing the Preferred Shares to be converted so
that the rights of the holder thereof as to the shares being converted shall
cease except for the right to receive the securities and other property included
in the Conversion Unit or Units in accordance herewith, and the Person entitled
to receive the securities and other property included in the Conversion Unit or
Units shall be treated for all purposes as having become the record holder of
such securities and other property included in the Conversion Unit or Units at
such time. No holder of Preferred Shares shall be prevented from converting
Preferred Shares, and any conversion of Preferred Shares in accordance with the
terms of this Section III shall be effective upon surrender, whether or not the
transfer books of the Corporation for the Common Stock are closed for any
purpose.
The Corporation shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all then
outstanding Preferred Shares. The Corporation shall from time to time, subject
to and in accordance with the Iowa Business Corporation Act, increase the
authorized amount of Common Stock if at any time the number of authorized shares
of Common Stock
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<PAGE>
remaining unissued shall not be sufficient to permit the conversion at such time
of all then outstanding Preferred Shares.
The Corporation at all times shall maintain stated capital allocated to
the Preferred Shares sufficient in amount such that the shares of Common Stock
issuable upon conversion of all outstanding Preferred Shares pursuant to the
terms of this Section III shall be upon issuance lawfully issued, fully paid and
nonassessable under the Iowa Business Corporation Act.
Whenever the number of shares of Common Stock and other property
comprising a Conversion Unit into which each Preferred Share is convertible is
adjusted as provided in this Section III, the Corporation shall promptly mail to
the holders of record of the outstanding Preferred Shares at their respective
addresses as the same shall appear in the Corporation's stock records a notice
stating that the number of shares of Common Stock and other property comprising
a Conversion Unit into which each Preferred Share is convertible has been
adjusted and setting forth the new number of shares of Common Stock (or
describing the new stock, securities, cash or other property) into which each
Preferred Share is convertible, as a result of such adjustment, a brief
statement of the facts requiring such adjustment and the computation thereof,
and when such adjustment became effective.
IV. VOTING RIGHTS
The holders of the Preferred Shares shall have the following voting
rights:
(A) The holders of the then-outstanding Preferred Shares shall be
entitled to elect, as a class, two (out of a total of ten) directors to the
Corporation's Board of Directors, to elect the replacement for any director
elected by them who for any reason ceases to serve as a director and to vote, as
a separate class, on any amendment of the provisions of the Articles of
Incorporation of the Corporation in any manner which would alter or change the
powers, preferences or special rights of the Preferred Shares or that would
otherwise adversely affect the rights of the holders of the Preferred Shares. In
addition the Corporation will not effect any Fundamental Transaction without
first obtaining the consent or approval of the holders of a majority of the
then-outstanding Preferred Shares. A "Fundamental Transaction" includes the
following (in each case referring to a single transaction or series of related
transactions): (i) the sale, lease, exchange, mortgage or other disposition
(including any spin-off or split-up) of any business or assets having a fair
market value of 25% or more of the fair market value of the business or assets
of the Corporation and its subsidiaries taken as a whole, the merger or
consolidation of the Corporation with any other Person, a Liquidation of the
Corporation or any recapitalization or reclassification of the securities of the
Corporation; (ii) the acquisition of any business or assets (by way of merger,
acquisition of stock or assets or otherwise) or the making of capital
expenditures not included in the applicable annual budget approved by the
Corporation's Board of Directors, in each case for a consideration or involving
expenditures in excess of $50,000,000; (iii) the issuance, grant or sale, or the
repurchase, of any equity securities (or any equity linked securities or
obligations) of the Corporation (or securities convertible into or exchangeable
or exercisable for any such equity securities); (iv) transactions with officers,
directors, stockholders and affiliates of the Corporation except (x) to the
extent effectuated on terms no less favorable to the Corporation than those
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<PAGE>
obtainable in an arms' length transaction with an unaffiliated Person or (y) in
the case of cash compensation arrangements, which are approved by the entire
Board of Directors of the Corporation (without regard to the directors elected
by the holders of the Preferred Shares); (v) the removal as chief executive
officer of the Corporation of the person occupying that position on the date of
original issuance of the Preferred Shares (the "Initial CEO") and (vi) the
appointment or removal of any person as chief executive officer of the
Corporation after the removal, resignation, death or disability of the Initial
CEO (the consent of the holders of the Preferred Stock as to the matters set
forth in this clause (vi) not to be unreasonably withheld).
(B) Except as set forth herein, or as otherwise provided by law, holders
of the Preferred Shares shall have no voting rights.
V. REACQUIRED SHARES
Any Preferred Shares converted, purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Articles of Incorporation, or
in any other Articles of Amendment creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
VI. LIQUIDATION, DISSOLUTION OR WINDING UP
Upon any involuntary or voluntary liquidation, dissolution,
recapitalization, winding-up or termination of the Corporation, the assets of
the Corporation available for distribution to the holders of the Corporation's
capital stock shall be distributed in the following priority, with no
distribution pursuant to the second priority until the first priority has been
fully satisfied and no distribution pursuant to the third priority until the
first and second priorities have both been fully satisfied, First, to the
holders of the Preferred Shares for each Preferred Share, a liquidation
preference of $1.00 per share, Second, to the holders of Common Stock, ratably,
an amount equal to (i) $1.00 divided by the number of shares of Common Stock
then comprising a Conversion Unit, multiplied by (ii) the number of shares of
Common Stock then outstanding, and Third, to the holders of the Preferred Shares
and the Common Stock (ratably, on the basis of the number of shares of Common
Stock then outstanding and, in the case of the Preferred Shares, the number of
shares of Common Stock then comprising a Conversion Unit multiplied by the total
number of Preferred Shares outstanding), all remaining assets of the Corporation
available for distribution to the holders of the Corporation's capital stock.
Neither the consolidation, merger or other business combination of the
Corporation with or into any other Person or Persons nor the sale, lease,
exchange or conveyance of all or any part of the property, assets or business of
the Corporation to a Person or Persons, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Section VI.
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<PAGE>
VII. REDEMPTION
The Preferred Shares are not subject to redemption at the option of the
Corporation nor subject to any sinking fund or other mandatory right of
redemption accruing to the holders thereof.
VIII. DEFINED TERMS
"Business Day" means any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York or the State of Iowa
are authorized or obligated by law or executive order to close.
"Person" shall mean any person or entity of any nature
whatsoever, specifically including an individual, a firm, a company, a
corporation, a partnership, a trust or other entity.
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<PAGE>
IN WITNESS WHEREOF, these Articles of Amendment are executed on
behalf of the Corporation by its Secretary this day of , .
--------------------------------
David A. Sokol
Secretary
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<PAGE>
Schedule II
TETON
TRUST PREFERRED SECURITIES TERM SHEET
Securities....................... [32,000,000] 11% Trust Issued Preferred
Securities (liquidation amount $25 per
Security) (the "Trust Securities").
Issuer........................... Monarch Capital Trust, a statutory business
trust formed under the laws of the State of
Delaware (the "Trust").
Issue Price...................... [$800,000,000] ($25 per Trust Security).
Distributions.................... Holders of the Trust Securities will be
entitled to receive cumulative cash
distributions at an annual rate of 11% of
the liquidation amount of $25 per Trust
Security, accumulating from the date of
original issuance and payable semi-annually
in arrears (on the 6-month and 12-month
anniversary dates of the date of issuance),
commencing on the first such date after
issuance ("Payment Dates").
Guarantee........................ The payment of distributions out of moneys
held by the Trust and payments on
liquidation of the Trust or the redemption
of Trust Securities are guaranteed (the
"Guarantee") by Monarch Holdings Company
(the "Company"), but only to the extent that
the Trust has funds available therefor,
which will not be the case unless the
Company has made payments of principal,
interest or other payments on the
Subordinated Debentures held by the Trust as
its sole asset. The obligations of the
Company under the Guarantee will be
subordinate and junior in right of payment
to all liabilities of the Company (other
than any similar guarantees) and rank pari
passu with the most senior preferred stock
issued, from time to time, if any, by the
Company and such similar guarantees. The
Guarantee, when taken together with the
Company's obligations under the Subordinated
Debentures, the Indenture and the
Declaration forming the Trust, including its
covenant in the Indenture to pay costs,
expenses, debts and obligations (including
taxes and other governmental charges) of the
Trust (other than with respect to the Trust
Securities), will provide a full and
unconditional guarantee of amounts due on
the Trust Securities.
Subordinated Debentures.......... The Trust will invest the proceeds of the
Trust Securities in an equivalent amount of
the Company's 11% Junior Subordinated
<PAGE>
Deferrable Interest Debentures (the
"Subordinated Debentures"). The Subordinated
Debentures will mature in ten equal
semi-annual principal installments payable
on the Payment Date which is 5 1/2 years
after the date of issue and on each Payment
Date thereafter ("Mandatory Redemption
Dates") and at maturity (the tenth
anniversary of the date of issuance -
"Stated Maturity"). The obligations of the
Company under the Subordinated Debentures
will be subordinate and junior in right of
payment to all present and future Senior
Indebtedness of the Company (i.e.,
indebtedness for money borrowed, evidenced
by notes or similar obligations,
reimbursement obligations, deferred purchase
price of property or services (other than
trade payables), capital leases and
guaranties of similar obligations of and
dividends of others) and rank pari passu
with other junior subordinated debt
securities of the Company and obligations
to, or rights of, the Company's other
general unsecured creditors. No payments of
principal or interest on the Subordinated
Debentures may be made if, at the time of
such payment, a payment default exists on
any Senior Indebtedness or if the maturity
of any Senior Indebtedness has been
accelerated as a consequence of a default
thereon. Under the Indenture the Company
will agree to certain dividend and
distribution limitations in respect of its
capital stock during an Extension Period or
if an Indenture Event of Default exists.
(see Interest Deferral, below) The Company
will also agree to pay costs, expenses,
debts and obligations (including taxes and
other governmental charges) of the Trust
(other than with respect to the Trust
Securities). No provisions of the Indenture
will limit or restrict the business or
operations of the Company and its
subsidiaries, the pledging of their assets
or the incurrence of indebtedness or other
liabilities.
Interest Deferral; Interest Rate
Increases........................ So long as no Indenture Event of Default (a
payment default on the Subordinated
Debentures, bankruptcy events affecting the
Company, a liquidation of the Trust except
where Subordinated Debentures are
distributed in connection therewith, failure
to perform other covenants after notice) has
occurred and is continuing, the Company has
the right under the Indenture to defer
payments of interest on the Subordinated
Debentures by extending the interest payment
period on the Subordinated Debentures at any
time for up to 10 consecutive six-month
payment periods (an "Extension Period"),
provided that an Extension Period may not
extend
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<PAGE>
beyond the Stated Maturity of the
Subordinated Debentures or, as to any
Subordinated Debentures redeemed, beyond the
Mandatory Redemption Date or Special Event
redemption date for such Subordinated
Debentures. If interest payments are so
deferred, distributions on the Trust
Securities will also be deferred. During
such Extension Period, or during any period
when redemption payments on the Subordinated
Debentures have not been made as provided,
interest on the Subordinated Debentures and
distributions on the Trust Securities will
continue to accumulate with interest thereon
(to the extent permitted by applicable law)
at an annual rate of 13% per annum
compounded semi-annually to the date of
payment. During any Extension Period,
holders of Trust Securities will be required
to accrue deferred interest as OID, and to
include such OID in their gross income from
United States federal income tax purposes in
advance of the receipt of the cash
distributions with respect to such deferred
interest payments. There could be multiple
Extension Periods of varying lengths
throughout the term of the Subordinated
Debentures.
If the Company exercises the right to extend
an interest payment period, the Company
shall not during such Extension Period (i)
declare or pay any dividends or
distributions on, or redeem, purchase,
acquire or make a liquidation payment with
respect to, any of its capital stock or (ii)
make any payment of principal of, or
interest or premium, if any, on or repay,
repurchase or redeem, or make any sinking
fund payment with respect to, any
indebtedness for money borrowed of the
Company (including other junior subordinated
debt securities) that ranks pari passu with
or junior in right of payment to the
Subordinated Debentures or make any
guarantee payments with respect to the
foregoing.
Relationship Among the Trust
Securities, the Subordinated
Debentures and the Guarantee..... The distribution rate and the distribution
and other payment dates for the Trust
Securities will correspond to the interest
rate and the interest and other payment
dates on the Subordinated Debentures, which
will be the sole assets of the Trust. As a
result, if principal or interest is not paid
on the Subordinated Debentures, no amounts
will be paid on the Trust Securities. If the
Company does not make principal or interest
payments on the Subordinated Debentures, the
Trust will not have sufficient funds to make
distributions on the Trust Securities, in
which event the Guarantee will not apply
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<PAGE>
to such distributions until the Trust has
sufficient funds available therefor. In such
event, the remedy of a holder of Trust
Securities is to enforce the Subordinated
Debentures.
Redemption of the Subordinated
Debentures and the Trust
Securities ....................... The Subordinated Debentures will be redeemed
in ten equal semi-annual principal
installments to be paid on each Mandatory
Redemption Date and at Stated Maturity at a
price equal to the principal amount thereof
to be redeemed, plus accrued and unpaid
interest thereon to the date of payment (the
"Debenture Redemption Price"). The
Subordinated Debentures are redeemable at
the option of the Company at any time in
whole upon the occurrence of a Special Event
(see Special Event, below) at the Debenture
Redemption Price. The Subordinated
Debentures are not otherwise redeemable at
the option of the Company. When the Company
redeems Subordinated Debentures, the Trust
must redeem Trust Securities having an
aggregate liquidation amount equal to the
aggregate principal amount of the
Subordinated Debentures so redeemed at a
price of $25 per Trust Security plus
accumulated and unpaid distributions thereon
(including interest thereon) to the date
fixed for redemption (the "Redemption
Price").
Distribution of the Subordinated
Debentures....................... The Company will have the right at any time
to liquidate the Trust and cause the
Subordinated Debentures to be distributed to
the holders of the Trust Securities.
Liquidation of the Trust......... In the event of any involuntary or voluntary
liquidation, dissolution, winding-up or
termination of the Trust (each, a
"Liquidation"), the holders of the Trust
Securities will be entitled to receive for
each Trust Security, after satisfaction to
creditors of the Trust, if any, a
liquidation amount of $25 plus accumulated
and unpaid distributions thereon (including
interest thereon) to the date of payment,
unless, in connection with such Liquidation,
the Subordinated Debentures are distributed
to the holders of the Trust Securities.
Transfer Restrictions............ The Trust Securities (and any Subordinated
Debentures distributed in a Liquidation)
will not be transferable except within the
Teton group (i.e., Teton and its
consolidated subsidiaries), and except that
transfer will be permitted following an
Indenture Event of Default.
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<PAGE>
Voting Rights.................... The holders of the Trust Securities will
not have any voting rights.
Special Event.................... A "Special Event" is the occurrence of an
Investment Company Act Event or a Tax Event.
An "Investment Company Act Event" means
receipt by the Trust or the Company of an
opinion of a nationally recognized
independent counsel experienced in such
matters to the effect that, as a result of a
change in law or regulation or a written
change in interpretation or application of
law or regulation by any legislative body,
court, governmental agency or regulatory
authority after the date of issuance of the
Trust Securities, there is more than an
insubstantial risk that the Trust is or will
be considered an investment company under
the Investment Company Act of 1940, as
amended.
A "Tax Event" means receipt by the Trust or
the Company of an opinion of a nationally
recognized independent counsel experienced
in such matters to the effect that, as a
result of (i) any amendment to, or change
(including any announced prospective change)
in, the laws (or any regulations thereunder)
of the United States or any political
subdivision or taxing authority thereof or
therein, (ii) any amendment to or change in
an interpretation or application of such
laws or regulations by any legislative body,
court, governmental agency or regulatory
authority (including the enactment of any
legislation and the publication of any
judicial decision or regulatory
determination on or after the date of
issuance of the Trust Securities), (iii) any
interpretation or pronouncement by any such
body, court, agency or authority that
provides for a position with respect to such
laws or regulations that differs from the
theretofore generally accepted position or
(iv) any action taken by any governmental
agency or regulatory authority, which
amendment or change is enacted, promulgated
or effective, or which interpretation or
pronouncement is issued or announced, or
which action is taken, in each case on or
after the date of issuance of the Trust
Securities, there is more than an
insubstantial risk that (a) the Trust is, or
within 90 days of the date thereof will be,
subject to United States federal income tax
with respect to income accrued or received
on the Subordinated Debentures, (b) interest
payable by the Company on the Subordinated
Debentures would not be deductible by the
Company for United States federal income tax
purposes or (c) the Trust is, or within 90
days of the date thereof will be, subject to
more than a de minimis amount of other
taxes, duties or other governmental charges.
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<PAGE>
Schedule III
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
<PAGE>
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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<PAGE>
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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<PAGE>
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
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<PAGE>
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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<PAGE>
AMENDED AND RESTATED WALTER SCOTT, JR. 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") 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 sell, 8,000,000 shares of Common Stock for a purchase
price of $35.05 per share. The shares of Common Stock to be purchased pursuant
to this Section 1(a) are herein referred to, collectively, as the "Shares."
(b) The purchase price for the Shares is payable, at the option of the
undersigned, in cash, in shares of MidAmerican common stock (which shall be
valued, for purposes of this Agreement, based on the amount per share of
MidAmerican common stock to be paid pursuant to the Merger Agreement), or any
combination thereof.
(c) The number of Shares to be purchased by the undersigned pursuant to
this Agreement shall be reduced by the number of Shares (up to 3,000,000)
purchased by certain persons, whose names or descriptions are set forth on
Schedule 1(c) hereto (the "Scott Family Entities"). If any one or more of the
Scott Family Entities so elect, they may subscribe for up to 3,000,000 of the
Shares on the same terms and conditions as contained
<PAGE>
herein. As a condition to such subscription, each Scott Family Entity making
such election shall execute and deliver to the Company a counterpart of this
Agreement, and shall be bound by the terms and conditions of this Agreement as
if such Scott Family Entity was the original signatory hereto.
(d) The undersigned may purchase the Shares on his own behalf or for
the benefit of personal trusts under his control.
2. Other Subscription Agreements. The Company is entering into,
concurrently with the execution of this Agreement, (i) a subscription agreement
with David L. Sokol (the "David L. Sokol Subscription Agreement"), pursuant to
which David L. Sokol has agreed to purchase, on the terms and subject to the
conditions stated therein, shares of Common Stock and/or options to purchase
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 shares of 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 David L. Sokol
Subscription Agreement, the "Management Subscription Agreements" and the
Management Subscription Agreements, together with this 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/or options to
purchase Common Stock. Each of the Subscription Agreements are separate and
several agreements, and the sales of Shares 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 their
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
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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 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 Shares. 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. 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 Shares 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 Shares. 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).
(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
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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) the terms and conditions of the
certificate of incorporation, or other applicable formation document, or the
bylaws of the undersigned, or 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 Shares 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 Shares 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 Shares. The
undersigned understands and agrees that the Shares 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 Shares or any interest
therein in contravention of this Agreement, the Act or any state or federal law.
(e) Purchase for Investment. Except for Shares as are subscribed for by
Scott Family Entities (other than the undersigned), the Shares 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 except as indicated above 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 Shares, 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 Shares 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 answers to
any questions relating to the investment in the Shares, the Merger Agreement and
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the transactions contemplated thereby. The undersigned understands and has
evaluated the risks of a purchase of the Shares.
(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) 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, if any, to be exchanged for Shares pursuant to this
Agreement.
(i) 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.
5. Closing. The closing (the "Closing") of the purchase and sale of the
Shares 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
Shares 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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<PAGE>
(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) Required Equity Interest. The Shares (after giving effect to the
other Subscription Agreements) shall represent, at and as of the Closing,
not less than eighty-seven percent (87%) of the outstanding voting stock of
the Company.
(b) The Company's obligation to sell the Shares 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 have occurred and be continuing under any
of the Subscription Agreements, and closings under all of the Subscription
Agreements shall be effected concurrently.
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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.
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
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<PAGE>
contained in any document furnished by the undersigned in connection with the
offering and sale of the Shares, 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.
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 Shares 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., 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.
(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 party 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
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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. Except as provided herein, 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.
--------------------------------------
Mailing Address
/s/ Walter Scott, Jr.
- ----------------------------------- --------------------------------------
Walter Scott, Jr. City State Zip Code
--------------------------------------
Tax Identification Number
SUBSCRIPTION ACCEPTED AS OF THE ABOVE DATE
TETON ACQUISITION CORP.
By: /s/ David L. Sokol
--------------------------------------
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
<PAGE>
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
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<PAGE>
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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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
<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
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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<PAGE>
(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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<PAGE>
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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<PAGE>
(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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<PAGE>
(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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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Subscription Agreement on this 24th day of October 1999.
------------------------------------
Mailing Address
/s/ David L. Sokol
- ------------------------------- ------------------------------------
David L. Sokol City State Zip Code
------------------------------------
Tax Identification Number
SUBSCRIPTION ACCEPTED AS OF THE ABOVE DATE
TETON ACQUISITION CORP.
By: /s/ David L. Sokol
-----------------------------------------------
Name: David L. Sokol
Title: Chairman, Chief Executive
Officer and President
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<PAGE>
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
<PAGE>
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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<PAGE>
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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<PAGE>
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
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<PAGE>
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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<PAGE>
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
<PAGE>
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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<PAGE>
OPERATING AGREEMENT
OF
TETON FORMATION L.L.C.
AN IOWA LIMITED LIABILITY COMPANY
OPERATING AGREEMENT of Teton Formation L.L.C., an Iowa limited
liability company (the "COMPANY"), dated as of October 14, 1999 by and among the
persons and entities listed on EXHIBIT A hereto (the "MEMBERS").
W I T N E S S E T H:
--------------------
WHEREAS, the Members desire to form a limited liability company
pursuant to the provisions of the Limited Liability Company Act of the State of
Iowa, as amended from time to time (the "ACT");
WHEREAS, the Members hereby constitute themselves a limited liability
company for the purposes and on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
INTRODUCTORY PROVISIONS
SECTION 1.1. CERTAIN DEFINITIONS. As used herein:
"ACT" shall have the meaning specified in the recitals hereto.
"AFFILIATE" shall mean, with respect to any Person, any other Person
who controls, is controlled by or is under common control with such Person.
"ARTICLES" shall mean the Articles of Organization of the Company as
filed with the Secretary of State of Iowa, as they shall be amended from time to
time.
"BOOK VALUE" shall have the meaning specified in SECTION 2.2.
"CAPITAL ACCOUNT" shall have the meaning specified in SECTION 4.1.
"CAPITAL CONTRIBUTION" shall mean a contribution by a Member to the
capital of the Company pursuant to this Agreement.
<PAGE>
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement, dated as of October 1, 1999, by and between David L. Sokol and
MidAmerican.
"CODE" shall mean the Internal Revenue Code of 1986, as amended. Any
reference to a section of the Code shall include a reference to any amendatory
or successor provision thereto.
"CONTRIBUTION PERCENTAGE" shall mean the percentage that is equal to
the Capital Contribution made by a Member expressed as a percentage of all the
Capital Contributions made by the Members, or such percentages as specified in
EXHIBIT A hereto, as such Exhibit may be amended from time to time.
"DISSOLUTION EVENT" shall have the meaning specified in SECTION 7.1.
"EXPENSES" shall have the meaning specified in SECTION 2.1.
"FISCAL YEAR" shall have the meaning specified in SECTION 4.4.
"INDEMNIFIED PERSONS" shall have the meaning specified in SECTION 3.3.
"INTEREST" shall mean the proportionate interest of a Member in the
Company based on such Member's Capital Account relative to the Capital Accounts
of all Members.
"MANAGING MEMBER" shall mean a Member of the Company who is also the
manager of the Company which shall initially be David L. Sokol, and when David
L. Sokol is no longer the Managing Member, a successor appointed by a
Majority-in-Interest of the Members.
"MAJORITY-IN-INTEREST OF THE MEMBERS" shall mean any one or more
Members having more than fifty percent (50%) in the aggregate of the Interests
of all Members.
"MEMBER EXPENSES" shall mean personal expenses incurred by the Members
in connection with the formation of the Company or the consummation of the
MidAmerican Merger.
"MERGER AGREEMENT" shall mean the merger agreement to be entered into
among MidAmerican, the Company and Merger Sub relating to the MidAmerican
Merger.
"MIDAMERICAN" shall mean MidAmerican Energy Holdings Company.
"MIDAMERICAN MERGER" shall have the meaning specified in SECTION 1.4.
"MERGER SUB" shall mean Teton Acquisition Corp., an Iowa corporation
and a wholly owned subsidiary of the Company.
"NET PROFITS" and "NET LOSSES" shall mean the income and loss of the
Company as determined in accordance with the accounting methods followed by the
Company for
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Federal income tax purposes including income exempt from tax and described in
Code Section 705(a)(1)(B), treating as deductions items of expenditure described
in, or under Treasury Regulations deemed described in, Code Section 705(a)(2)(B)
and treating as an item of gain (or loss) the excess (deficit), if any, of the
fair market value of distributed property over (under) its Book Value.
Depreciation, depletion, amortization, income and gain (or loss) with respect to
Company assets shall be computed with reference to their Book Value rather than
to their adjusted bases.
"NOTICES" shall have the meaning specified in SECTION 8.2(A).
"PERSON" shall mean an individual, corporation, association, limited
liability company, limited liability partnership, partnership, estate, trust,
unincorporated organization or a government or any agency or political
subdivision thereof.
"SUBSCRIPTION AGREEMENTS" shall mean those certain subscription
agreements by and between the Company and each of the Members and certain other
parties.
"TRANSFER" shall mean any direct or indirect sale, assignment, gift,
hypothecation, pledge or other disposition, whether voluntary or by operation of
law, by sale of stock or partnership interests, or otherwise, of an Interest or
of any entity which directly or indirectly through one or more intermediaries
holds an Interest.
"TREASURY REGULATIONS" shall mean the regulations promulgated by the
U.S. Department of the Treasury under the Code.
SECTION 1.2. NAME. The name of the Company shall be "Teton Formation
L.L.C."
SECTION 1.3. PRINCIPAL PLACE OF BUSINESS. The Company's principal
place of business shall be at such place as the Managing Member shall designate
from time to time.
SECTION 1.4. PURPOSES. The purpose of the Company is to consummate a
transaction with MidAmerican by forming Merger Sub, which shall be merged with
and into MidAmerican (the "MIDAMERICAN MERGER") pursuant to the Merger
Agreement. The Company shall not engage in any act or activity requiring the
consent or approval of any state official, department, board, agency or other
body, without such consent or approval first being obtained. The Company shall
have the power to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment of
such purposes, including, without limitation, relating to the financing of the
MidAmerican Merger.
SECTION 1.5. DURATION. The Company shall be formed upon the filing of
the Articles with the Office of the Secretary of State of Iowa pursuant to the
Act and shall continue until dissolved pursuant to SECTION 7.1.
3
<PAGE>
SECTION 1.6. LIMITATION OF LIABILITY. The liability of each Member and
each employee of the Company to third parties for obligations of the Company
shall be limited to the fullest extent provided in the Act and other applicable
law.
ARTICLE II.
CAPITAL CONTRIBUTIONS; OTHER FINANCING;
INTERESTS IN THE COMPANY
SECTION 2.1. CAPITAL CONTRIBUTIONS. Each Member has made an initial
Capital Contribution in cash as of the date hereof in the respective amount
specified opposite its name on EXHIBIT A and shall have Contribution Percentages
as set forth on such EXHIBIT A, which Contribution Percentages shall be adjusted
on EXHIBIT A from time to time to properly reflect the admission of new Members
or any other event having an effect on a Member's Contribution Percentage. At
the request of the Managing Member, subsequent contributions shall be made in
cash within five (5) business days to the Company by the Members for the payment
of (A) out-of-pocket expenses (the "EXPENSES") incurred by the Company (and not
Member Expenses) in connection with (i) obtaining insurance for the Company;
(ii) leasing office space for the Managing Member, and reasonable overhead
expenses in connection therewith; (iii) advisory fees, including, without
limitation, fees and expenses of counsel to the Company and its financial
advisor; and (iv) governmental and regulatory fees and filings; and (B)
obligations of the Company under the Merger Agreement, including, without
limitation, termination or "break-up" fees, but excluding payments of the
aggregate merger consideration payable thereunder. Unless each of the Members
have consented in writing, such subsequent contributions shall be made in
accordance with the Members' Contribution Percentages and the aggregate amount
of such subsequent contributions for Expenses shall not exceed $9,999,999.
SECTION 2.2. DETERMINATION OF BOOK VALUE OF COMPANY ASSETS.
(a) Book Value. Except as set forth below, Book Value of any Company
asset is its adjusted basis for federal income tax purposes.
(b) Initial Book Value. The initial Book Value of any assets
contributed by a Member to the Company shall be the gross fair market value
of such assets at the time of such contribution.
(c) Adjustments. The Book Values of all of the Company's assets may be
adjusted by the Company to equal their respective gross fair market values,
as determined by the Members, as of the following times: (a) the admission
of a new Member to the Company or the acquisition by an existing Member of
an additional interest in the Company from the Company; (b) the
distribution by the Company of money or property to a retiring or
continuing Member in consideration for the retirement of all or a portion
of such Member's interest in the Company; (c) the termination of the
Company for Federal income tax purposes pursuant to Section 708(b)(1)(B) of
the Code; and (d) such other times as determined by the Members.
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<PAGE>
(d) Depreciation and Amortization. The Book Value of a Company asset
shall be adjusted for the depreciation and amortization of such asset taken
into account in computing Net Profits and Net Losses and for Company
expenditures and transactions that increase or decrease the asset's Federal
income tax basis.
SECTION 2.3. WITHDRAWAL OF CAPITAL; LIMITATION ON DISTRIBUTIONS. No
Member shall be entitled to withdraw any part of its Capital Contributions to,
or to receive any distributions from, the Company except as provided in SECTION
6.1 and SECTION 7.2. No Member shall be entitled to demand or receive (i)
interest on its Capital Contributions or (ii) any property from the Company
other than cash except as provided in SECTION 7.2(A).
SECTION 2.4. ALLOCATION OF NET PROFITS AND NET LOSSES.
(a) (i) Net Profits shall be allocated in proportion to, and to the
extent of, the excess of prior allocations of Net Losses under SECTION
2.4(B)(II) below over prior allocations of Net Profits under this SECTION
2.4(A)(I) and, then, (ii) among the Members in proportion to their
Contribution Percentages.
(b) (i) Net Losses shall first be allocated among the Members in
proportion to their Contribution Percentages until the Capital Account of
any Member is reduced to zero, then (ii) among the Members in proportion
to, and to the extent of, their positive Capital Account balances and,
finally, (iii) to the Members in proportion to their Contribution
Percentages.
(c) Tax credits shall be allocated among the Members in proportion to
their Contribution Percentages.
(d) When the Book Value of a Company asset differs from its basis for
Federal or other income tax purposes, solely for purposes of the relevant
tax and not for purposes of computing Capital Account balances, income,
gain, loss, deduction and credit shall be allocated among the Members under
the traditional method with curative allocations under Treasury Regulation
Section 1.704-3(c).
SECTION 2.5. RESTRICTIONS ON TRANSFERS.
(a) Required Consent. No Member may Transfer any Interest without the
prior written consent of all Members (excluding the proposed transferor and
transferee). Upon any approved Transfer, EXHIBIT A hereto shall be amended
accordingly.
(b) Compliance with Securities Laws. No Interest has been registered
under the Securities Act of 1933, as amended, or under any applicable state
securities laws. No Member may Transfer all or any portion of its Interest,
except upon compliance with the applicable federal and state securities
laws. The Company shall have no obligation to register any Member's
Interests under the Securities Act of 1933, as amended, or under any
applicable state securities laws, or to make any exemption therefrom
available to any Member.
5
<PAGE>
ARTICLE III.
RIGHTS AND DUTIES OF MEMBERS AND MANAGING MEMBER
SECTION 3.1. MANAGEMENT RIGHTS. Management of the Company shall be
vested in the Managing Member, who shall manage the Company subject to the terms
of this Agreement. The following actions shall require the consent of the
Managing Member and each of the other Members:
(i) an amendment to this Agreement or to the Articles (including an
amendment to add an additional Member);
(ii) any amendment to the Merger Agreement that adversely affects the
interests of the Company or any of the Members;
(iii) the waiver by the Company or Merger Sub of any material term or
condition of the Merger Agreement;
(iv) the merger or consolidation of the Company with any other Person;
and
(v) the continuation of the Company after a Dissolution Event.
The termination of the Merger Agreement shall require the consent of
one or more Members having at least ninety percent (90%) in the aggregate of the
Interests of all Members.
SECTION 3.2. LIABILITY OF MEMBERS. No Member shall be liable as such
for the liabilities of the Company.
SECTION 3.3. INDEMNIFICATION. Each Member shall indemnify the Company
and each other Member for any costs or damages incurred by the Company or each
other Member as a result of any unauthorized action or a failure to take a
required action by such Member, or by its Affiliates, under this Agreement or
such Member's Subscription Agreement and or as a result of breaches by David L.
Sokol under the Confidentiality Agreement resulting from any action or a failure
to take a required action by such Member or its representatives, provided,
however, the aggregate amount for which David L. Sokol shall have to indemnify
the Company, the other Members, or any Person shall not exceed the fair market
value of David L. Sokol's equity ownership (including options) 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.
SECTION 3.4. REPRESENTATIONS AND WARRANTIES. Each Member, and in the
case of a trust or other entity, the Person(s) executing this Agreement on
behalf of the entity, hereby represents and warrants to the Company and each
other Member that: (a) if that
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<PAGE>
Member is an entity, it has power to enter into this Agreement and to perform
its obligations hereunder and that the Person(s) executing this Agreement on
behalf of the entity has the power to do so; and (b) the Member is acquiring its
interest in the Company for the Member's own account as an investment and
without an intent to distribute the interest. The Members acknowledge that their
interests in the Company have not been registered under the Securities Act of
1933, as amended, or any state securities laws, and may not be resold or
transferred without appropriate registration or the availability of an exemption
from such requirements.
SECTION 3.5. MANAGING MEMBER'S STANDARD OF CARE. The Managing Member
shall discharge its duties to the Company and the Members in good faith and with
that degree of care that an ordinarily prudent person in a similar position
would use under similar circumstances. In discharging its duties, the Managing
Member and its officers, directors and employees shall be fully protected in
relying in good faith upon the records required to be maintained under Article
IV and upon such information, opinions, reports or statements by any Person as
to matters the recipient reasonably believes to be within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Company, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the Company or any other facts pertinent to the existence and amount
of assets from which Distributions to Members might properly be paid. The
Company shall indemnify and hold harmless each Member against any loss, damage
or expense (including attorneys' fees) incurred by the Member as a result of any
act performed or omitted on behalf of the Company or in furtherance of the
Company's interests without, however, relieving the Member of liability for
failure to perform his duties in accordance with the standards set forth herein.
The satisfaction of any indemnification and any holding harmless shall be from
and limited to Company property and the other Members shall not have any
personal liability on account thereof.
ARTICLE IV.
BOOKS; ADJUSTMENT OF CAPITAL ACCOUNTS; TAXES; FISCAL YEAR
SECTION 4.1. ADMINISTRATIVE SERVICES, BOOKS, RECORDS AND REPORTS. The
Managing Member shall cause to be performed all general and administrative
services on behalf of the Company in order to assure that complete and accurate
books and records of the Company are maintained at the Company's principal place
of business, including a copy of the Articles and all amendments thereto, and
this Agreement and all amendments thereto and showing the names, addresses and
Interests of each of the Members, all receipts and expenditures, assets and
liabilities, profits and losses, and all other records necessary for recording
the Company's business and affairs, including a capital account for each Member
(a "CAPITAL ACCOUNT").
7
<PAGE>
SECTION 4.2. ADJUSTMENT OF CAPITAL ACCOUNTS.
(a) Increases. Each Member's Capital Account shall be increased by:
(i) the amount of any money contributed by the Member to the
Company;
(ii) the fair market value of any property contributed by the
Member to the Company;
(iii) the amount of Net Profits allocated to the Member; and
(iv) the amount of any Company liabilities assumed by such Member
(or taken subject to) if property is distributed to the Member by the
Company.
(b) Decreases. Each Member's Capital Account shall be decreased by:
(i) the amount of any money distributed to the Member by the
Company;
(ii) the fair market value of any property distributed to the
Member by the Company;
(iii) the amount of Net Losses allocated to the Member; and
(iv) the amount of any Member liabilities assumed by the Company
(or taken subject to) if property is contributed to the Company by the
Member.
(c) Section 704(b). The foregoing provisions and the other provisions
of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Treasury Regulations under Section 704(b) of the
Code and, to the extent not inconsistent with the provisions of this
Agreement, shall be interpreted and applied in a manner consistent with
such Treasury Regulations.
(d) No Obligation to Restore Deficit Balance. No Member shall be
required to restore any deficit balance in its Capital Account.
(e) No Personal Liability. No Member shall have any personal liability
for the repayment of the Capital Contribution of any Member.
SECTION 4.3. TAXES.
(a) Tax Matters Partner. David L. Sokol shall be the Tax Matters
Partner of the Company pursuant to Section 6231(a)(7) of the Code. Such
Member shall not resign as the Tax Matters Partner unless, on the effective
date of such resignation, the Company has designated another Member as Tax
Matters Partner and such Member has given its consent in writing to its
appointment as Tax Matters Partner. The Tax
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<PAGE>
Matters Partner shall receive no additional compensation from the Company
for its services in that capacity, but all expenses incurred by the Tax
Matters Partner in such capacity shall be borne by the Company. The Tax
Matters Partner is authorized to employ such accountants, attorneys and
agents as it, in its sole discretion, determines is necessary to or useful
in the performance of its duties. In addition, such Member shall serve in a
similar capacity with respect to any similar tax related or other election
provided by state or local laws.
(b) Section 754 Election. Upon a Transfer by a Member of an interest
in the Company, which Transfer is permitted by the terms of this Agreement,
or upon the death of a Member or the distribution of any Company property
to one or more Members, the Manager, upon the request of one or more of the
transferees or distributees, may, in its sole discretion cause the Company
to file an election on behalf of the Company, pursuant to Section 754 of
the Code, to cause the basis of the Company's property to be adjusted for
federal income tax purposes in the manner prescribed in Section 734 or
Section 743 of the Code, as the case may be. The cost of preparing such
election, and any additional accounting expenses of the Company occasioned
by such election, shall be borne by any such transferees.
SECTION 4.4. FISCAL YEAR. The fiscal year of the Company (the "FISCAL
YEAR") shall end on December 31.
ARTICLE V.
INDEMNIFICATION
SECTION 5.1. INDEMNIFICATION. Any Person made, or threatened to be
made, a party to any action or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such Person is or
was (i) a Member, or (ii) an employee, officer, director, shareholder or partner
of a Member, or (iii) such other Persons (including employees of the Company) as
the Managing Member may designate from time to time (collectively, the
"INDEMNIFIED PERSONS"), shall be indemnified by the Company for any losses or
damage sustained with respect to such action or proceeding, and the Company
shall advance such Indemnified Person's reasonable related expenses to the
fullest extent permitted by law. The Company shall have the power to purchase
and maintain insurance on behalf of the Indemnified Persons against any
liability asserted against or incurred by them. The duty of the Company to
indemnify the Indemnified Persons under this SECTION 5.1 shall not extend to
actions or omissions of any Indemnified Person which are grossly negligent or
which involve fraud, misrepresentation, bad faith, or other willful misconduct
by such Indemnified Person or which are in material breach or violation by such
Indemnified Person of this Agreement or which are in derogation of the fiduciary
duties owed by such Indemnified Person to the Company and the Members, in each
case as determined by a court of competent jurisdiction. No Indemnified Person
shall be liable to the Company or any other Member for actions taken in good
faith. The duty of the Company to indemnify the Indemnified Persons under this
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SECTION 5.1 shall be limited to the assets of the Company, and no recourse shall
be available against any Member for satisfaction of such indemnification
obligations of the Company.
ARTICLE VI.
DISTRIBUTIONS
SECTION 6.1. DISTRIBUTIONS. Distributions resulting from the payment
of any amounts to the Company under the Merger Agreement, including, without
limitation, termination or "break-up" fees, shall be made at such time and in
such amounts as determined by the Managing Member and shall be made among the
Members in cash, first, in amounts to reimburse each Member for its Member
Expenses, and, second, in proportion to their Contribution Percentages;
provided, however, that no distribution will be made to any Member that has
failed to make all contributions required of it by SECTION 2.1.
SECTION 6.2. RESTORATION OF FUNDS. Except as otherwise provided by
law, no Member shall be required to restore to the Company any funds properly
distributed to it pursuant to SECTION 6.1.
ARTICLE VII.
DISSOLUTION AND LIQUIDATION
SECTION 7.1. DISSOLUTION. The Company shall be dissolved upon the
occurrence of any of the following (each, a "DISSOLUTION EVENT"):
(a) the unanimous decision of the Members to dissolve the Company;
(b) the effective time of the MidAmerican Merger;
(c) if the Merger Agreement is not executed and delivered by the
parties thereto on or before 11:59 p.m. on October 24, 1999;
(d) the bankruptcy, death, dissolution, expulsion, incapacity, or
withdrawal of any Member, unless within ninety (90) days after such event
the Company is continued by the vote or written consent of each of the
other Members; or
(e) the entry of a decree of judicial dissolution under Section
490A.1302 of the Act.
SECTION 7.2. WINDING UP AFFAIRS AND DISTRIBUTION OF ASSETS.
(a) Upon dissolution of the Company, and in the absence of an election
to continue the business of the Company pursuant to SECTION 7.1(B), David
L. Sokol shall be the liquidating Member (the "LIQUIDATING MEMBER") and
shall proceed to wind up
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the affairs of the Company, liquidate the remaining property and assets of
the Company and wind-up and terminate the business of the Company. The
Liquidating Member shall cause a full accounting of the assets and
liabilities of the Company to be taken and shall cause the assets to be
liquidated and the business to be wound up as promptly as possible by
either or both of the following methods: (1) selling the Company assets and
distributing the net proceeds therefrom (after the payment of Company
liabilities) to each Member in satisfaction of its Capital Account; or (2)
if all Members shall agree, distributing the Company assets to the Members
in kind and debiting the Capital Account of each Member with the fair
market value of such assets, each Member accepting an undivided interest in
the Company assets (subject to their liabilities) in proportion to and to
the extent of each Member's positive Capital Account balance after
allocating and crediting to the Capital Accounts the unrealized gain or
loss to the Members as if such gain or loss had been recognized and
allocated pursuant to SECTION 2.4.
(b) If the Company shall employ method (1) as set forth in SECTION
7.2(A) in whole or part as a means of liquidation, then the proceeds of
such liquidation shall be applied in the following order of priority: (i)
first, to the expenses of such liquidation; (ii) second, to the debts and
liabilities of the Company (including debts of the Company to the Members
or their Affiliates and any fees and reimbursements payable under this
Agreement), in the order of priority provided by law; (iii) third, a
reasonable reserve shall be set up to provide for any contingent or
unforeseen liabilities or obligations of the Company to third parties (to
be held and disbursed, at the discretion of the Liquidating Member or
Members, by an escrow agent selected by the Liquidating Member or Members)
and at the expiration of such period as the Liquidating Member or Members
may deem advisable, the balance remaining in such reserve shall be
distributed as provided herein; (iv) fourth, to the Members in accordance
with and in proportion to their Capital Accounts.
(c) In connection with the liquidation of the Company, the Members
severally, jointly, or in any combination upon which they may agree, shall
have the first opportunity to make bids or tenders for all or any portion
of the assets of the Company, and such assets shall not be sold to an
outsider except only for a price higher than the highest and best bid of a
single Member, the Members jointly, or a combination of Members.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1. ARTICLES REQUIREMENTS. From time to time the Members
shall sign and acknowledge all such writings as are required to amend the
Articles or for the carrying out of the terms of this Agreement or, upon
dissolution of the Company, to cancel such Articles. Each Member is hereby
designated as an authorized person to sign the
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Company's Articles and any other documents that are appropriate and
necessary to effectuate the purpose of this Agreement.
SECTION 8.2. NOTICES.
(a) All Notices, consents, approvals, reports, designations, requests,
waivers, elections and other communications (collectively, "NOTICES")
authorized or required to be given pursuant to this Agreement shall be
given in writing and either personally delivered to the Member to whom it
is given or delivered by an established delivery service by which receipts
are given or mailed by registered or certified mail, postage prepaid, or
sent by telex or telegram or electronic telecopier, addressed to the Member
at its address listed on EXHIBIT A hereto.
(b) All Notices shall be deemed given (i) when delivered personally to
the recipient, (ii) when sent to the recipient (with receipt confirmed by
sender's machine) by telecopy if during normal business hours of the
recipient, otherwise on the next business day, or (iii) one (1) business
day after the date sent to the recipient (three (3) business days in the
case of international delivery) by reputable express courier service
(charges prepaid). Any Member may change its address for the receipt of
Notices at any time by giving Notice thereof to all of the other Members,
in which event EXHIBIT A hereto shall be amended accordingly.
Notwithstanding the requirement in SECTION 8.2(a) as to the use of
registered or certified mail, any routine reports required by this
Agreement to be submitted to Members at specified times may be sent by
first-class mail.
SECTION 8.3. PARTIES IN INTEREST; THIRD-PARTY BENEFICIARIES.
(a) Neither this Agreement nor any of the rights, duties, or
obligations of any party hereunder may be transferred or assigned by a
party hereto, except in connection with a Transfer of Interests as
specified in SECTION 2.5. Subject to the foregoing, this Agreement shall be
binding upon, and inure to the benefit of the parties hereto and their
respective successors and assigns.
(b) This Agreement shall not confer any rights or remedies upon any
person or entity other than the parties hereto, the Indemnified Persons,
and their respective permitted successors and assigns.
SECTION 8.4. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
and supersedes all prior agreements and understandings among the Members with
respect to the subject matter hereof.
SECTION 8.5. MODIFICATION. No change or modification of this Agreement
shall be of any force unless such change or modification is in writing and has
been signed by all of the Members. No waiver of any breach of any of the terms
of this Agreement shall be effective unless such waiver is in writing and signed
by the Member against whom such waiver
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is claimed. No waiver of any breach shall be deemed to be a waiver of any other
or subsequent breach.
SECTION 8.6. SEVERABILITY. If any provision of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. Furthermore, in lieu of any such invalid, illegal or
unenforceable term or provision, the parties hereto intend that there shall be
added as a part of this Agreement a provision as similar in terms to such
invalid, illegal or unenforceable provision as may be possible and be valid,
legal and enforceable.
SECTION 8.7. FURTHER ASSURANCES. Each Member shall execute such deeds,
assignments, endorsements, evidences of Transfer and other instruments and
documents and shall give such further assurances as shall be necessary to
perform its obligations hereunder.
SECTION 8.8. GOVERNING LAW. This Agreement shall be governed by and be
construed in accordance with the laws of the State of Iowa.
SECTION 8.9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
SECTION 8.10. WAIVER OF PARTITION. Each Member hereby waives its right
to bring an action for partition of any of the property owned by the Company.
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IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the day and date first set forth above.
/s/ David L. Sokol
-----------------------------
DAVID L. SOKOL
/s/ Walter Scott, Jr.
-----------------------------
WALTER SCOTT, JR.
BERKSHIRE HATHAWAY INC.
By: /s/ Warren E. Buffet
--------------------------
Name: Warren E. Buffet
Title: Chairman
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