HOMESERVICES COM INC, S-1, 1999-07-16

HOMESERVICES COM INC
S-1, 1999-07-16

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1999.
REGISTRATION NO. 333-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

HOMESERVICES.COM INC.
(Exact Name of Registrant as Specified in Its Charter)

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<S> <C> <C>
DELAWARE 6531 APPLIED FOR
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>

HOMESERVICES.COM INC.
6800 FRANCE AVENUE SOUTH, SUITE 600
EDINA, MINNESOTA 55435
(612) 928-5900
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
HOMESERVICES.COM INC.
6800 FRANCE AVENUE SOUTH, SUITE 600
EDINA, MINNESOTA 55435
(612) 928-5900
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent for Service)

Copies to:

STACY J. KANTER, ESQ. CLAUDE S. SERFILIPPI, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP CHADBOURNE & PARKE LLP
919 THIRD AVENUE 30 ROCKEFELLER CENTER
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10112
(212) 735-3000 (212) 408-5100
(212) 735-2000 (FAX) (212) 541-5369 (FAX)

Approximate date of commencement of proposed sale to the public: soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

CALCULATION OF FILING FEE
- -----------------------------------------------------------------------------

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TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per
share ............................ $69,000,000 $19,182

</TABLE>

- -----------------------------------------------------------------------------
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.

<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
HOMESERVICES MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION RELATING TO THESE
SECURITIES IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE OR OTHER JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION DATED JULY 16, 1999

[LOGO FOR HOMESERVICES.COM INC.]

COMMON STOCK
$ PER SHARE

- -----------------------------------------------------------------------------

o HomeServices.Com Inc. is offering shares and the selling stockholder
is offering shares.
o HomeServices anticipates that the initial public offering price will be
between $ and $ per share.
o This is HomeServices' initial public offering and no public market
currently exists for its shares.
o HomeServices will apply to list the common stock on The Nasdaq Stock
Market's National Market under the proposed trading symbol "HOME."

THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 11.

- -----------------------------------------------------------------------------
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PER SHARE TOTAL
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Public offering price............... $ $
Underwriting discount............... $ $
Proceeds to HomeServices............ $ $
Proceeds to selling stockholder .... $ $
</TABLE>

- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

The underwriters have a 30-day option to purchase up to additional shares
of common stock to cover over-allotments, if any.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

U.S. BANCORP PIPER JAFFRAY CREDIT SUISSE FIRST BOSTON

THE DATE OF THIS PROSPECTUS IS , 1999.

<PAGE>
The following map illustrates the states in which the principal
subsidiaries of HomeServices.Com Inc. operate.

[MAP OF HOMESERVICES' 136 OFFICE LOCATIONS]

<PAGE>
HomeServices.Com Inc., a subsidiary of MidAmerican Energy Holdings
Company, is the second largest residential real estate brokerage firm in the
United States based on closed transaction sides on a pro forma basis.
HomeServices closed more than 79,000 transaction sides, representing an
aggregate of approximately $11.1 billion in closed transaction value, on a
pro forma basis in 1998. HomeServices also offers integrated real estate
services, including mortgage and title insurance services, and is developing
various related E-commerce services. HomeServices' combined real estate
operations serve customers in ten states. HomeServices currently employs
approximately 1,360 individuals and has more than 4,900 sales associates. As
used in this prospectus, unless the context otherwise requires, references to
"HomeServices" mean HomeServices.Com Inc. and its subsidiaries and
predecessor.

TABLE OF CONTENTS

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PAGE
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Prospectus Summary ...................................... 1
Risk Factors ............................................ 11
Special Note Regarding Forward-looking Statements ...... 18
Use of Proceeds ......................................... 18
Dividend Policy ......................................... 18
Dilution ................................................ 19
Capitalization .......................................... 20
Unaudited Pro Forma Condensed Consolidated Financial
Information ............................................ 21
Selected Consolidated Financial Data .................... 26
Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 29
Business ................................................ 40
Management .............................................. 55
Principal and Selling Stockholders ...................... 63
Certain Relationships and Related Transactions ......... 64
Description of Capital Stock ............................ 67
Description of Indebtedness ............................. 72
Shares Eligible for Future Sale ......................... 74
United States Federal Tax Considerations Relating to
Non-United States Holders .............................. 75
Underwriting............................................. 78
Legal Matters............................................ 80
Experts ................................................. 80
Additional Information .................................. 80
Index to Financial Statements............................ F-1
</TABLE>

You should rely only on the information contained in this prospectus.
HomeServices has not, and the underwriters have not, authorized any other
person to provide you with different information. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, these securities in any
state where the offer or sale is not permitted. The information in this
prospectus is complete and accurate as of the date on the front cover, but
the information may have changed since that date. Information contained on
HomeServices' and its real estate brokerage subsidiaries' websites is not
part of this prospectus.
<PAGE>
PROSPECTUS SUMMARY

The items in the following summary are described in more detail later in
this prospectus. This summary provides an overview of selected information
and does not contain all the information you should consider. Therefore, you
should read the entire prospectus, including the financial data and related
notes, before making an investment decision. Unless otherwise indicated, the
information contained in this prospectus:

o gives effect to a -for- split of HomeServices' common stock
that will occur immediately before the closing of the offering;

o assumes that the underwriters' over-allotment option is not exercised;
and

o assumes that all pro forma information is unaudited and gives effect to
historical acquisitions completed in the third and fourth quarters of
1998 and the third quarter of 1999 and the offering as if they were
consummated at the beginning of the earliest period presented.

Statistical information on the residential real estate brokerage industry has
been derived from publicly available sources, which HomeServices has not
independently verified but believes to be reliable.

HOMESERVICES.COM INC.

OVERVIEW

HomeServices.Com Inc. is the second largest residential real estate
brokerage firm in the United States based on closed transaction sides on a
pro forma basis. HomeServices also offers integrated real estate services,
including mortgage and title insurance services, and is developing various
related E-commerce services. HomeServices currently operates primarily under
the Edina Realty, Iowa Realty, J.C. Nichols, CBS HOME or Paul Semonin
Realtors brand names in the following ten states: Minnesota, Iowa, Kansas,
Missouri, Kentucky, Nebraska, Wisconsin, Indiana, North Dakota and South
Dakota. On a pro forma basis in 1998, HomeServices was the market leader in
the Midwestern residential real estate brokerage industry in terms of closed
transaction value. HomeServices occupies the number one or number two market
share position in each of its major markets. The real estate brokerage firms
that comprise HomeServices manage 136 branch offices, have more than 4,900
sales associates and have operated for an average of approximately 51 years.

On a pro forma basis for the year ended December 31, 1998, HomeServices
closed more than 79,000 transaction sides (with a transaction side being
either the buying side or selling side of any closed home purchase),
representing an aggregate of approximately $11.1 billion in closed
transaction value. Of these 79,000 transactions, HomeServices represented
approximately 40,000 buy-side transactions. On a pro forma basis for the year
ended December 31, 1998, HomeServices had total revenues of approximately
$357.8 million and EBITDA of approximately $29.4 million. Over the four-year
period ended December 31, 1998, HomeServices' total revenues on an historical
basis increased from approximately $71.1 million to $276.8 million and its
EBITDA increased from approximately $5.9 million to approximately $24.1
million.

1
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it to offer new products, services and referrals, including E-loans, and to
increase sales of its existing products and services. E-loans are mortgages
or home equity loans offered by means of the Internet. HomeServices has
established hyperlinks between its own website and leading Internet real
estate websites, such as Realtor.com, and the websites of local newspapers in
HomeServices' existing markets. In addition, HomeServices has established
hyperlinks between its own website and the separate websites maintained by
its real estate brokerage subsidiaries and promotes its website in all of its
marketing programs.

HomeServices believes that the strong relationships it develops with its
customers afford it a unique opportunity to expand its business by
maintaining and strengthening its customer relationships by offering, at no
cost to its customers, referrals for additional basic home services initiated
at closing and a variety of other products and services used after the
closing of a home purchase. HomeServices believes that by offering these
additional services to its customers, particularly by means of E-commerce, it
can assist its customers through each stage of the average seven-year home
ownership life cycle (i.e., buying a home, financing, basic home connection
services, home maintenance and repair, refinancing and eventually reselling
and purchasing a new home, including relocation) and maintain its customers
throughout the home ownership experience. HomeServices believes that the
customer knowledge that it gains during the sale and/or purchase process
allows it to target its particular services to the home buyer's specific
needs. HomeServices receives referral fees from the service providers under
contracts entered into with the service providers. In addition, HomeServices
believes it will be able to generate banner advertising revenues from its
E-commerce operations.

GROWTH STRATEGY

HomeServices' business objective is to become a seamless one-source
provider of a comprehensive menu of products and services for the total home
ownership experience. HomeServices believes that this goal will be achieved
particularly by means of E-commerce. HomeServices' growth strategy comprises
the following elements:

o Selective acquisitions and consolidations. HomeServices will continue
to seek acquisition and consolidation opportunities in the highly
fragmented United States residential real estate brokerage industry.
HomeServices has demonstrated its ability to successfully close and
integrate real estate brokerage acquisitions in the past. HomeServices
intends to enter new markets by acquiring high-quality, leading real
estate brokerage firms where it has the opportunity to create a leading
market share position with strong local brand name recognition. It also
intends to exploit opportunities through such brokerage firms to
increase revenues by cross selling its products and services.

o Expanding its presence in its existing markets. HomeServices is the
market leader in the Midwestern residential real estate brokerage
industry in terms of pro forma 1998 year-end closed transaction value,
occupying the number one or number two market share position in each of
its major markets. HomeServices believes that each of its real estate
brokerage firms has achieved brand recognition and a reputation among
consumers for quality and consistency. HomeServices also believes that
it is well positioned to expand the coverage of its existing markets
under the same brand names, primarily through opening additional
offices, hiring additional sales associates and the incremental
acquisition of operations adjacent to HomeServices' existing service
areas.

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o Offering referrals for various home care and other products and
services, particularly by means of E-commerce. HomeServices currently
offers to its existing realty customers referrals for certain home care
products and services and plans to significantly expand its referral
services to include various additional home care products and services
so that it will be able to serve the needs of homeowners throughout the
complete home ownership cycle. HomeServices provides these services to
its customers at no cost while generating referral fees from
third-party providers of such products and services. In addition,
HomeServices believes that it will be able to generate banner
advertising revenues from its E-commerce operations. Services to be
offered to new and existing customers, particularly through
HomeServices' developing E-commerce platform, are expected to include:

-- Concierge Services (which are referrals for basic services
initiated at closing, such as connections for local and
long-distance telephone service, Internet service, cable televison,
newspaper delivery, home security, home warranty, property and
casualty insurance, electricity and natural gas, waste disposal and
moving) for its existing realty customer base;

-- Home Dividends (which are referrals for products and services
related to home maintenance and repair throughout the home
ownership life cycle, such as roofing, siding, decking, remodeling,
windows, home equity loans and appliances and related warranties
and insurance) for its existing realty customer base;

-- Broad-based E-commerce services (such as E-loans and referrals for
other products and services offered as a part of HomeServices'
Concierge Services and Home Dividends) marketed beyond its existing
realty customer base to Internet customers generally; and

-- Nonrealty related services (such as referrals for entertainment,
leisure and recreational activities, and consumer products and
services of a more general nature) for its existing realty customer
base and for Internet customers generally.

While HomeServices currently provides some of these products and services
through traditional means, such as referrals for certain Concierge Services
(e.g., home warranty, home inspection and home security), it believes that
its developing E-commerce platform will enable it to significantly grow this
aspect of its business.

COMPETITIVE STRENGTHS

HomeServices believes that the following competitive strengths
differentiate it from its residential real estate brokerage competitors:

o Long-established presence in its markets with well-recognized brand
names and leading market shares. The real estate brokerage firms that
comprise HomeServices have an average operating history of
approximately 51 years. These companies command the number one or
number two position in each of HomeServices' major markets and enjoy
strong brand-name recognition, attributes from which HomeServices
expects to benefit as it expands its service offerings.

o Comprehensive range of services. HomeServices' current product
offerings position it as one of the few full-service providers in the
residential real estate industry. HomeServices' ability to offer
brokerage, preclosing and postclosing products and services in a
"one-stop shopping" experience preferred by customers differentiates it
from most of its competitors and enables it to generate incremental
revenues by cross selling services to its existing realty customer
base.

o Larger scale of operation than the competition. As one of the leading
companies in the industry, HomeServices enjoys certain economies of
scale and is able to spread costs and

3
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investments, such as marketing and technology, over a larger revenue
base. In addition, HomeServices' size permits it to offer and cross
sell efficiently a broader array of services than smaller firms and
enables it to take advantage of acquisition and consolidation
opportunities.

o Experienced management. The five chief executive officers of
HomeServices and its real estate brokerage subsidiaries have an average
of 27 years of experience in the real estate industry, including
leadership positions in national realty organizations. This senior
management team combines a deep knowledge of HomeServices' local
markets with an understanding of industry trends and a proven ability
to identify, effect and integrate acquisitions.

o Efficient sales associates. HomeServices is dedicated to the
recruitment, training and retention of both new and experienced sales
associates. HomeServices provides extensive programs aimed at improving
sales associates' marketing skills and increasing their knowledge and
awareness of the issues and laws affecting the real estate industry.
While industry results vary widely, the productivity of HomeServices'
sales associates has increased by 7.1% on a pro forma basis to an
average of 16.5 transaction sides per sales associate in 1998 from 15.4
transaction sides per sales associate in 1996. Based on information
provided by Real Trends, an industry publication, HomeServices
estimates that the average transaction sides per sales associate was
13.2 in 1998 for the top 500 (excluding HomeServices) residential real
estate brokerage firms (based on closed transaction sides).
HomeServices believes the productivity level of its sales associates is
among the highest in the industry.

INDUSTRY

HomeServices believes that the residential real estate industry has
undergone a period of continued growth which, combined with certain
characteristics and trends (the most important of which are discussed below)
creates an opportunity for HomeServices to leverage its strengths to its
competitive advantage.

o Fragmentation. The residential real estate brokerage industry remains
primarily a local and highly fragmented industry. According to Real
Trends, in 1998, the companies comprising HomeServices and the other
top four residential brokers accounted for only 6.0% of the total
national market based on closed transaction sides while the top 480
firms accounted for only 20.0%. HomeServices believes this
fragmentation presents it with numerous acquisition opportunities.

o Emergence of the Internet. In the real estate and mortgage business,
the Internet is fast becoming a major marketing tool. According to
industry analysts, mortgage originations over the Internet are expected
to grow from $4.0 billion in 1998 to nearly $100.0 billion by 2003 as
customers recognize the convenience and benefits of shopping for and
refinancing their mortgages and home equity loans on-line. HomeServices
believes that in addition to marketing its traditional residential
brokerage, mortgage and title services on-line, the Internet provides
it with significant opportunities to offer its Concierge Services and
Home Dividends services. As part of its strategy, HomeServices will
seek to attract Internet customers outside of its existing realty
customer base by providing a broad array of E-commerce offerings, which
may be tailored to the local or regional markets in which it operates
or provided on a more expansive basis.

4
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of existing single-family homes in the Midwest reached 1.2 million in
1998, which represents an average annual growth rate of 5.6% since
1990. In addition, the sales growth has accelerated in recent years, as
evidenced by average annual growth of 6.9% since 1995. In 1998, the
Midwest regional median price for existing single-family homes was
$114,300, which represents an annual increase of 6.8% from 1997 and
5.4% since 1990. Rising home prices, however, have apparently not
impaired home affordability, with the National Association of Realtors'
Housing Affordability Index remaining relatively stable since 1994.

BACKGROUND

HomeServices is a real estate brokerage holding company which is currently
95.0% owned by MidAmerican Energy Holdings Company, a large Midwestern
utility holding company (MEC:NYSE). In May 1998, HomeServices acquired Iowa
Realty Co. Inc. and Edina Realty Home Services of Minnesota, both formerly
part of AmerUs Home Services Inc. HomeServices expanded its real estate
brokerage business with the purchases in August 1998 of two real estate
brokerage firms in Omaha, Nebraska, HOME Real Estate Holdings Inc. and CBS
Real Estate Company, which were merged to form CBS HOME. In September 1998,
HomeServices acquired J.C. Nichols Residential, Inc. in Kansas City,
Missouri.

In July 1999, HomeServices acquired Paul Semonin Realtors, a Louisville,
Kentucky real estate brokerage firm with 11 offices and a leading market
share in Louisville, and also operates in Lexington, Kentucky and southern
Indiana.

After giving pro forma effect to these acquisitions, HomeServices is the
second largest residential real estate brokerage firm in the United States
and continues to be the market leader in the Midwestern residential real
estate brokerage industry, each in terms of closed transaction sides.

RELATIONSHIP WITH MIDAMERICAN ENERGY HOLDINGS COMPANY

MidAmerican Energy Holdings Company, headquartered in Des Moines, Iowa,
has approximately 9,700 employees and is the largest publicly traded company
in Iowa. Through its retail utility subsidiaries, MidAmerican Energy Company
in the United States and Northern Electric in the United Kingdom, MidAmerican
Holdings provides electric service to 2.2 million customers and natural gas
service to 1.2 million customers worldwide.

MidAmerican Holdings currently owns 95.0% of the common stock of
HomeServices. After giving effect to the offering, MidAmerican Holdings will
beneficially own % of HomeServices' common stock ( % if the
underwriters' over-allotment option is exercised in full). As a result,
MidAmerican Holdings will continue to have the power to elect the entire
board of directors and approve matters submitted to a vote of stockholders.

MidAmerican Holdings provides management assistance to HomeServices,
including financial, accounting, legal and human resources services, and will
continue to do so following the offering. MidAmerican Holdings provides these
services on an arm's-length basis. The costs for these services are charged
directly to HomeServices. In connection with the offering, HomeServices and
MidAmerican Holdings will enter into various intercompany agreements that are
described under "Certain Relationships and Related Transactions--Relationship
with MidAmerican Holdings."

* * * * *

HomeServices was incorporated in Delaware in July 1999. It is a newly
formed subsidiary of MidAmerican Holdings organized to effect the offering.
HomeServices' principal executive offices are located at 6800 France Avenue
South, Suite 600, Edina, Minnesota 55435 and its telephone number is (612)
928-5900. HomeServices maintains a website that is hyperlinked to the
separate websites maintained by its real estate brokerage subsidiaries. The
information contained in these websites is not part of this prospectus.

5
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THE OFFERING

Common stock offered by:

HomeServices ................ shares

MidAmerican Holdings ........ shares

Total ..................... shares

Common stock to be outstanding
after the offering .......... shares

Use of proceeds ............... HomeServices intends to use the net proceeds
of the offering for general corporate
purposes, which are expected to include
acquisitions and the continued development
of its E-commerce operations. HomeServices
will not receive any of the proceeds from
the sale of shares by MidAmerican Holdings.

Proposed Nasdaq National Market
trading symbol ................ HOME

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SUMMARY FINANCIAL AND OTHER DATA

The following tables present summary historical and pro forma financial
and other data for HomeServices. For additional information, you should refer
to "Selected Consolidated Financial Data," "Unaudited Pro Forma Condensed
Consolidated Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and related notes included elsewhere in this prospectus. The pro
forma data is provided for informational purposes only and is not necessarily
indicative of the financial position or the results of operations of
HomeServices had the events described below occurred on the dates specified.
In addition, the pro forma data is not indicative of HomeServices' future
financial condition or results of operations.

HISTORICAL DATA

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PREDECESSOR* AND HOMESERVICES
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THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------- -----------------------
1994 1995 1996(A) 1997(A) 1998(A)(B) 1998 1999
---------- ---------- ----------- ----------- ------------ ---------- -----------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
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STATEMENT OF INCOME DATA:
Commission revenue ................. $50,967 $58,409 $179,378 $191,083 $ 244,540 $39,387 $56,566
Title fees ......................... -- -- 14,821 16,203 21,729 4,134 4,269
Other (c) .......................... 15,050 12,672 22,092 7,410 10,559 2,044 3,850
Total revenues .................... 66,017 71,081 216,291 214,696 276,828 45,565 64,685
Commission expense ................. 30,792 35,433 115,331 125,148 162,332 26,223 39,107
Acquisition related costs .......... -- -- -- -- 18,271 -- --
Depreciation and amortization ...... 1,762 2,123 5,103 5,619 6,470 1,413 1,981
All other operating expenses (c) ... 28,769 29,767 85,162 72,808 90,391 18,620 25,141
Total operating expenses ......... 61,323 67,323 205,596 203,575 277,464 46,256 66,229
Operating income (loss) ............ 4,694 3,758 10,695 11,121 (636) (691) (1,544)
Interest expense ................... 920 1,745 3,632 1,536 2,192 174 1,064
Income (loss) before income taxes .. 4,370 2,816 8,113 10,218 (2,064) (762) (2,354)
Minority interest .................. -- -- 1,276 633 -- -- --
Net income (loss) .................. $ 2,517 $ 1,345 $ 3,574 $ 4,860 $ (1,481) $ (487) $ (1,427)
Earnings (loss) per share:
Basic ........................... $ $ $ $ (b) $ $
Diluted ......................... (b)
Weighted average shares
outstanding:
Basic ........................... (b)
Diluted .......................... (b)
OTHER DATA:
EBITDA (d) ......................... $ 6,456 $ 5,881 $ 15,798 $ 16,740 $ 24,105 $ 722 $ 437
Net cash provided by (used in)
operating activities .............. $ 68 $(2,503) $ 2,134 $ 5,297 $ 17,419 $(1,085) $ 2,184
Net cash used in investing
activities ........................ $(4,004) $(6,502) $ (8,874) $ (6,759) $(100,017) $ (336) $(2,223)
Net cash provided by (used in)
financing activities .............. $ 3,820 $ 9,571 $ 10,664 $ (1,575) $ 87,872 $ 1,701 $ (177)
</TABLE>

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* Predecessor refers to Iowa Realty and its consolidated subsidiaries
(which, at the time Iowa Realty and Edina Realty were acquired by
HomeServices in May 1998, included Edina Realty). Amounts for all
periods prior to May 28, 1998, relate to the predecessor, including the
portion of 1998 prior to such date. See notes (a) and (b) below.

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PREDECESSOR HOMESERVICES
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AS OF AS OF
AS OF DECEMBER 31, DECEMBER 31, MARCH 31,
---------------------------------------- -------------- -----------
1994 1995 1996 1997 1998 1999
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(IN THOUSANDS)
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BALANCE SHEET DATA:
Cash and cash equivalents ................ $ 871 $ 1,437 $ 5,627 $ 2,590 $ 3,114 $ 2,898
Total assets (c).......................... 52,782 68,341 95,504 62,346 128,520 125,537
Long-term debt, including current
portion.................................. 5,651 6,090 16,397 7,651 61,445 61,268
Stockholders' equity...................... 18,396 19,741 33,699 36,791 35,194 33,756
</TABLE>

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PREDECESSOR AND HOMESERVICES
------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-----------------------------------------------------------------
1994 1995 1996 1997 1998 1998 1999
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(DOLLARS IN THOUSANDS)
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OPERATING DATA:
Sides (e)................................... 15,726 16,233 47,836 48,631 60,158 9,815 13,353
Average home sales price.................... $ 104.7 $ 106.7 $ 120.9 $ 127.1 $ 136.3 $130.1 $ 133.7
Home sales volume (in millions)............. $ 1,671 $ 1,928 $ 5,783 $ 6,183 $ 8,199 $1,277 $ 1,786
Average sales commissions
as a percentage of home sales price (f) .. 3.1% 3.0% 3.1% 3.1% 3.0% 3.1% 3.2%
Number of branch offices (at period end) .. 31 32 103 98 126 103 125
Number of sales associates (at period end) 944 911 3,063 3,298 4,282 3,307 4,287
</TABLE>

PRO FORMA DATA

The following pro forma statements of income and balance sheet data give
effect to (1) the offering and the application of the estimated net proceeds
to HomeServices and (2) the acquisitions described under "Unaudited Pro Forma
Condensed Consolidated Financial Information."

<TABLE>
<CAPTION>
HOMESERVICES
-------------------------------------
PRO FORMA PRO FORMA
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------- ---------------------
1998 1998 1999
-------------- ---------- ---------
(DOLLARS IN THOUSANDS, EXCEPT AMOUNTS
PER SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue....................... $320,216 $ 54,556 $63,124
Title fees............................... 22,965 4,270 4,269
Other.................................... 14,656 3,327 4,028
Total revenues.......................... 357,837 62,153 71,421
Commission expense....................... 216,335 37,234 43,691
Acquisition related costs................ 19,971 19,971 --
Depreciation and amortization............ 8,521 2,430 2,195
All other operating expenses............. 112,149 23,411 27,185
Total operating expenses................ 356,976 83,046 73,071
Operating income (loss).................. 861 (20,893) (1,650)
Interest and other income (expense),
net..................................... (3,073) (973) (835)
Loss before income taxes................. (2,309) (21,866) (2,485)
Minority interest........................ (97) -- --
Net loss................................. (1,477) (13,020) (1,506)
</TABLE>

8
<PAGE>
<TABLE>
<CAPTION>
HOMESERVICES
----------------------------------
PRO FORMA PRO FORMA
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------- ------------------
1998 1998 1999
-------------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT
AMOUNTS PER SHARE)
<S> <C> <C> <C>
Earnings per share:
Basic .........................................
Diluted .......................................
Weighted average shares outstanding:
Basic .........................................
Diluted .......................................
OTHER DATA:
EBITDA (d)...................................... $29,353 $ 1,508 $ 545
OPERATING DATA:
Sides (e)....................................... 79,598 13,596 15,024
Average sales price per home.................... $ 138.9 $ 129.1 $ 134.4
Home sales volume (in millions)................. $11,053 $ 1,755 $ 2,019
Average sales commissions
as a percentage of average home sales price
(f)............................................ 2.9% 3.1% 3.1%
Number of branch offices (at period end) ....... 137 133 136
Number of sales associates (at period end) ..... 4,959 4,675 4,912
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------
HISTORICAL PRO FORMA
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ................ $ 2,898 $ --
Total assets (b).......................... 125,537 136,845
Long-term debt, including current
portion.................................. 61,268 61,832
Stockholders' equity...................... 33,756 42,256
</TABLE>

- ------------
(a) Results of operations for 1994 and 1995 reflect only the results of
Iowa Realty. In 1996, Edina Realty became a subsidiary of Iowa Realty
through a reorganization effected by their parent company. In July
1997, Iowa Realty acquired HOME Real Estate Holdings, Inc. Accordingly,
the results of operations of the predecessor for 1996, 1997 and 1998
include the results of Iowa Realty and Edina Realty and, from July 1,
1997 to May 7, 1998 (the day prior to the predecessor's sale of HOME
Real Estate to a third party), include the results of HOME Real Estate
as well.
(b) These amounts are twelve-month totals arrived at by summing the 1998
results of the predecessor and HomeServices as shown in the following
table. Amounts for the predecessor include entities as discussed in note
(a) above. Amounts for HomeServices include results of CBS HOME, J.C.
Nichols Residential, Inc. and Nebraska Land Title & Abstract after they
were acquired by HomeServices in the third and fourth quarters of 1998.
No amounts are reflected below for Paul Semonin Realtors (which was
acquired in July 1999).

9
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES COMBINED
JANUARY 1, 1998 MAY 28, 1998 TWELVE MONTHS
THROUGH THROUGH ENDED
MAY 27, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998
--------------- ----------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue................................... $74,893 $169,647 $ 244,540
Title fees .......................................... 7,575 14,154 21,729
Other ............................................... 3,769 6,790 10,559
Total revenues ..................................... 86,237 190,591 276,828
Commission expense .................................. 49,107 113,225 162,332
Acquisition related costs ........................... -- 18,271 18,271
Depreciation and amortization ....................... 2,293 4,177 6,470
All other operating expenses ........................ 31,126 59,265 90,391
Total operating expenses ........................... 82,526 194,938 277,464
Operating income (loss) ............................. 3,711 (4,347) (636)
Interest expense .................................... 263 1,929 2,192
Income (loss) before income taxes ................... 3,617 (5,681) (2,064)
Net income (loss).................................... $ 1,953 $ (3,434) $ (1,481)
Earnings (loss) per share:
Basic............................................... $ $ $
Diluted.............................................
Weighted average shares outstanding:
Basic...............................................
Diluted.............................................

OTHER DATA:
Net cash provided by operating activities .......... $ 4,991 $ 12,428 $ 17,419
Net cash used in investing activities ............... (891) (99,126) (100,017)
Net cash provided by (used in) financing activities (1,940) 89,812 87,872
</TABLE>

(c) Prior to 1997, the predecessor was also engaged in real estate
development operations in addition to real estate brokerage operations
in some of the periods presented. All real estate brokerage and
development activities were operated by the same corporate entity using
shared management, office space and other related services. At the
beginning of 1997, the majority of the assets associated with the
development operations was transferred to the parent company. These
development operations contributed only $0.4 million to the line item
"Other" revenues in 1997. Based on the way the brokerage and
development operations were managed, only certain revenues, expenses,
assets and liabilities can be specifically identified in the
predecessor's statements of income and balance sheets. Revenues from
the sale of real estate development projects of $13.9 million, $10.6
million and $14.0 million are included in the line item "Other"
revenues for the years ended December 31, 1994, 1995 and 1996,
respectively. Cost of real estate sales totaling $11.0 million, $7.4
million and $11.3 million are included in the line item "All other
operating expenses" for the years ended December 31, 1994, 1995 and
1996, respectively. Real estate contracts and real estate inventory of
$22.5 million, $29.4 million and $23.2 million are included in the line
item "Total assets" for the years ended December 31, 1994, 1995 and
1996, respectively. Since 1997, HomeServices has not been engaged in
real estate development operations to any significant degree.
(d) EBITDA is defined as operating income (loss) plus depreciation and
amortization of goodwill and other intangibles and acquisition related
costs. EBITDA is not intended to represent cash flows for the periods
presented, nor has it been presented as an alternative to operating
income or as an indicator of operating performance. EBITDA should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
(e) Each real estate transaction has two sides, the selling side and the
buying side. HomeServices may participate as broker on one or both
sides of a transaction.
(f) Represents the average sales commission received by HomeServices per
side in home sale transactions in which HomeServices participated as
broker as a percentage of the average home sales price.

10
<PAGE>
RISK FACTORS

Set forth below is a description of material risks to investors
considering an investment in the common stock. You should consider carefully
the following risks and other information in this prospectus before deciding
to invest in shares of common stock. HomeServices may also face some
nonmaterial risks which are not discussed below. HomeServices' business,
results of operations or financial condition could be materially adversely
affected if any of the following risks do occur. If HomeServices' business,
results of operations or financial condition were materially adversely
affected, the trading price of its common stock could decline, and you could
lose all or part of your investment.

HOMESERVICES CANNOT ASSURE YOU OF ITS ABILITY TO SUCCESSFULLY COMPLETE AND
INTEGRATE FUTURE ACQUISITIONS

HomeServices has pursued an active acquisition strategy to strengthen its
position within the Midwestern residential real estate markets by integrating
acquisitions into its operations to achieve economies of scale, and it
intends to continue to do so as part of its growth strategy. As a result,
HomeServices has derived a substantial portion of its revenues and profits
from acquired brokerages. The success of HomeServices' future acquisition
strategy will continue to depend upon its ability to find suitable
acquisition candidates on favorable terms and to finance and complete these
transactions despite increasing competition for acquisition candidates. After
completing an acquisition, HomeServices encounters risks related to its
possible inability to integrate the acquired business into its operations and
to retain key employees and sales associates. These risks may adversely
affect HomeServices' ability to realize anticipated cost savings and revenue
growth from its acquisitions. In addition, HomeServices' growth strategy
could be materially adversely affected if it is unable to complete realty
company acquisitions in general. By pursuing an active acquisition strategy,
HomeServices could also divert management's attention away from focusing on
its core business operations. Because HomeServices expects that its future
acquisitions will continue to be accounted for under the purchase method, its
goodwill amortization could increase significantly and have a material
adverse effect on its results of operations. In addition, depending on a
number of factors, including the then current market price of HomeServices'
common stock, HomeServices may decide to pay for these acquisitions in whole
or in part by issuing additional shares of common stock. The issuance of such
shares in an acquisition may result in dilution if the agreed upon per share
valuation for purposes of the acquisition is less than the fair market value
of the issued common stock.

THERE ARE RISKS ASSOCIATED WITH HOMESERVICES' PROPOSED REFERRAL STRATEGY

HomeServices plans to offer referral services for various additional
services, particularly by means of E-commerce, including Concierge Services
and Home Dividends. This is a new business for HomeServices and represents a
new means of offering traditional home services to homeowners. HomeServices
cannot assure you that this new way of offering traditional home services
will gain sufficient market acceptance. Furthermore, because many elements of
this business will be new to it, HomeServices' management may not have the
experience necessary to successfully introduce and operate this new business.
The lack of market acceptance of, or HomeServices' inability to generate
satisfactory revenues from, this new business could have a material adverse
effect on its business and results of operations.

HOMESERVICES' LIMITED OPERATING HISTORY MAKES EVALUATING ITS BUSINESS AND ITS
PROSPECTS DIFFICULT

While HomeServices' predecessors have operated real estate brokerage firms
for a significant period, as a combined organization, HomeServices has
operated only since May 1998, when HomeServices acquired the assets of Iowa
Realty Co. Inc. and Edina Realty Home Services. Including Iowa Realty and
Edina Realty, HomeServices has acquired six major residential real estate
businesses since May 1998. As a result, HomeServices and its acquired
operations have a limited combined operating history upon which you can
evaluate HomeServices and its prospects.

11
<PAGE>
HOMESERVICES MAY NOT BE ABLE TO SUSTAIN ITS RAPID GROWTH

HomeServices has grown significantly in recent years and intends to
continue to pursue an aggressive growth strategy by:

o completing selected acquisitions and consolidations;

o expanding its market presence in its existing markets;

o cross selling real estate related products and services; and

o offering referrals for various home care and other products and
services, particularly by means of E-commerce.

This historical growth and any significant future growth will continue to
place demands on HomeServices' resources. HomeServices' future success and
profitability will depend, in part, on its ability to enhance its operating,
accounting and management information systems and obtain financing for
capital expenditures and strategic acquisitions. HomeServices may not be able
to successfully manage any significant expansion or obtain adequate financing
on favorable terms.

SEASONAL FLUCTUATIONS IN THE RESIDENTIAL REAL ESTATE BROKERAGE BUSINESS COULD
ADVERSELY AFFECT HOMESERVICES

The residential real estate brokerage business is subject to seasonal
fluctuations. Historically, HomeServices' revenues have been strongest in the
second and third quarters of the calendar year. While HomeServices pays
commissions to its sales associates only upon the sale of a home, some of its
other expenses, such as rent, personnel and expenses incidental to being a
public company, are or will be fixed and cannot be reduced during a seasonal
slowdown. As a result, HomeServices may be required to borrow cash in order
to fund its operations during seasonal slowdowns or at other times.
HomeServices' inability to finance its funding needs during a seasonal
slowdown or at other times could have a material adverse effect on its
results of operations and financial condition.

CYCLICAL FLUCTUATIONS IN THE RESIDENTIAL REAL ESTATE BROKERAGE BUSINESS COULD
ADVERSELY AFFECT HOMESERVICES

The residential real estate brokerage industry tends to experience cycles
of greater and lesser activity and profitability and is typically affected by
changes in economic conditions which are beyond HomeServices' control. Any of
the following could have a material adverse effect on HomeServices' business
by causing a general decline in the number of home sales or sale prices and
the demand for Concierge Services or Home Dividends services which, in turn,
would adversely affect revenues and profitability:

o periods of economic slowdown or recession;

o natural disasters such as floods, hurricanes or tornadoes;

o rising interest or unemployment rates;

o decreasing home ownership rates; and

o declining demand for real estate.

HomeServices' current primary service area is Minnesota, Iowa, Kansas,
Missouri, Kentucky, Nebraska, Wisconsin, Indiana, North Dakota and South
Dakota. These states have enjoyed strong and relatively stable economies
during the 1990's compared to the Northeastern and West Coast markets, which
has been important to the stability of HomeServices' business. HomeServices
cannot assure you, however, that these states will continue to enjoy strong
and relatively stable economies. In addition, because HomeServices intends to
expand its operations beyond its existing service area as part of its
acquisition strategy, its future results of operations may be affected to a
larger extent than its past results of operations by changes in economic
conditions in its expansion markets. A downturn in residential real estate
markets or economic conditions in HomeServices' current markets or in
HomeServices' future markets could have a material adverse effect on it.

12
<PAGE>
HOMESERVICES' SUCCESS DEPENDS IN PART ON THE CONTINUED GROWTH OF INTERNET
COMMERCE AND ITS ABILITY TO SUCCESSFULLY IMPLEMENT CHANGING TECHNOLOGIES

HomeServices' ability to meet its expansion goals through E-commerce
depends substantially upon the widespread acceptance and use of the Internet
as an effective medium of commerce by consumers. Rapid growth in commercial
on-line businesses is a recent phenomenon and demand for recently introduced
services and products over the Internet is, accordingly, subject to a high
level of uncertainty. The development of the Internet as a viable means of
marketing products directly to consumers is subject to a number of factors,
including:

o continued growth in the number of users who purchase services over the
Internet;

o concerns about transaction security;

o continued development of the necessary technological infrastructure;
and

o the development of complementary services and products.

Failure of the Internet and on-line businesses to become a viable means of
marketing products directly to consumers would adversely affect HomeServices'
business and financial condition.

The development of on-line commerce using the Internet is characterized by
rapidly changing technologies, evolving industry standards, frequent new
product or service introductions and changing consumer preferences.
HomeServices' growth prospects and future success will depend, in part, on
its ability to successfully adapt to these rapidly changing technologies and
industry standards and to meet the changing demands of its customers.
HomeServices cannot assure you that it will be able to implement its strategy
in a successful and timely manner.

ON-LINE SECURITY RISKS MAY HARM HOMESERVICES' E-COMMERCE OPERATIONS

A significant barrier to on-line commerce is the secure transmission of
confidential information over public networks. HomeServices will rely on
technology from third parties to effectively secure transmission of
confidential information, such as that required on a mortgage loan
application. A compromise of HomeServices' on-line security could injure its
reputation and impact the success of its business.

HOMESERVICES FACES LEGAL UNCERTAINTIES ASSOCIATED WITH THE INTERNET AND
E-COMMERCE OPERATIONS

HomeServices' developing Internet operations are not currently subject to
direct regulation by any governmental agency in the United States beyond
mortgage-related regulations and regulations applicable to businesses
generally.

A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws
or regulations concerning various aspects of the Internet, including:

o on-line content;

o user privacy;

o taxation;

o access charges;

o liability for third-party activities; and

o jurisdiction.

In addition, the applicability to the Internet of existing laws is
uncertain. The adoption of new laws or the application of existing laws may
decrease the use of the Internet, which would decrease the demand for
HomeServices' E-commerce services, increase its cost of doing business or
otherwise have an adverse effect on its business.

13
<PAGE>
The tax treatment of the Internet and electronic commerce is currently
unsettled. A number of proposals have been made that could impose taxes on
the sale of goods and services and certain other Internet activities.
Recently, the Internet Tax Information Act was signed into law placing a
three-year moratorium on new state and local taxes on Internet commerce.
Nonetheless, HomeServices cannot assure you that future laws imposing taxes
or other regulations would not substantially impair the growth of its
business and its financial condition.

Certain local telephone carriers claim that the increasing popularity of
the Internet has burdened the existing telecommunications infrastructure and
that many areas with high Internet use are experiencing interruptions in
telephone service. These carriers have petitioned the Federal Communications
Commission to impose access fees on Internet service providers. If these
access fees are imposed, the cost of communicating on the Internet could
increase, which would decrease demand for HomeServices' Internet services and
increase its cost of doing business.

THERE ARE RISKS ASSOCIATED WITH CHANGES IN MORTGAGE RESALE MARKETS

HomeServices' business depends in part on selling to investors the
mortgage loans that it originates as a broker. Less than 1% of HomeServices'
revenues in 1998 was derived from its mortgage operations. As part of
HomeServices' growth strategy, it intends to increase its mortgage
origination business, particularly by offering E-loans. Accordingly, any
significant change in the secondary mortgage market, including the
operations, level of activity or underwriting criteria of Fannie Mae or the
Federal Home Loan Mortgage Corporation, could have an adverse effect on
HomeServices' business and results of operations.

Plaza Mortgage, a wholly owned subsidiary of J.C. Nichols, also
underwrites mortgage loans originated by it. In 1998, mortgages originated
and underwritten by Plaza Mortgage accounted for approximately 15% of
HomeServices' total mortgage operations. Plaza Mortgage's underwriting loan
commitments are contractual obligations in its own name to mortgage loan
applicants. Before underwriting the loan commitment, Plaza Mortgage performs
a credit analysis to confirm that the loan would meet the particular
guidelines established by several investors with whom Plaza Mortgage has
established relationships. Prior to closing with the mortgage applicant,
Plaza Mortgage obtains a commitment that an investor will purchase the loan
after the closing at an agreed upon price on the condition that the loan
meets the investor's particular investment guidelines. The investor's final
review is then typically conducted after the closing of the loan with the
mortgage loan applicant. As a result, if HomeServices subsequently fails to
satisfy the terms of the commitment made with such investor to purchase the
loan, then HomeServices would have to find another purchaser for the loan.
HomeServices may incur losses on the resale of such loan, particularly in
cases where mortgage interest rates for the kind of loan made to the mortgage
loan applicant rise after the commitment to the applicant is made.

THERE ARE RISKS ASSOCIATED WITH THE REPRESENTATIONS AND WARRANTIES THAT
HOMESERVICES MAKES IN ITS SALE OF MORTGAGES

In the ordinary course of business, HomeServices makes representations and
warranties to the purchasers and insurers of mortgage loans that it
originates, including representations and warranties as to compliance with
applicable underwriting guidelines. Any loss resulting from a material
inaccuracy in these representations and warranties could have an adverse
effect on HomeServices. From time to time, HomeServices may be obligated to
repurchase loans as a result of such representations and warranties and such
repurchases could adversely affect its results of operations or financial
condition. Although HomeServices has never been required to repurchase any
mortgage loan that it originated, it cannot assure you that it will not be
required to do so in the future.

THE LOSS OF KEY EMPLOYEES COULD ADVERSELY AFFECT HOMESERVICES

HomeServices' ability to continue to expand its business depends to a
significant extent on the experience and service of its senior management
team and key sales associates. HomeServices'

14
<PAGE>
management team is led by Ronald J. Peltier, its President and Chief
Executive Officer, and also consists of Dwayne J. Coben, Senior Vice
President and Chief Financial Officer; Jack W. Frost, President and Chief
Executive Officer of J.C. Nichols; R. Michael Knapp, President and Chief
Executive Officer of Iowa Realty; Arne M. Rovick, Vice Chairman and General
Counsel of Edina Realty; Joseph J. Valenti, President and Chief Executive
Officer of CBS HOME; and George E. Gans, President and Chief Executive
Officer of Paul Semonin Realtors. Each of Messrs. Peltier, Frost, Knapp and
Valenti has entered into an employment agreement with HomeServices for a
remaining term of four years. Mr. Rovick has entered into an employment
agreement with HomeServices for a term of four years. Mr. Gans has entered
into an employment agreement for a term of 18 months with an option for an
additional 18 months upon agreement by both parties. HomeServices does not,
however, carry any key man life insurance.

In addition, HomeServices' business strategy to grow through E-commerce
offerings depends highly on its ability to attract and retain employees with
highly developed information technology skills. Individuals with information
technology skills are in short supply and competition for qualified
information technology personnel is intense. The loss of the services of any
member of HomeServices' senior management or of a significant number of key
sales associates or the failure to attract new information technology
personnel could adversely affect its business and growth prospects.

CHANGES IN GOVERNMENT REGULATION COULD ADVERSELY AFFECT HOMESERVICES

HomeServices' business activities are subject to substantial regulation by
governmental authorities. The jurisdictions in which HomeServices does
business have established requirements governing the licensing and conduct of
real estate brokerage, mortgage and brokerage-related businesses. In
addition, the federal Real Estate Settlement Procedures Act and comparable
state statutes impose restrictions on how HomeServices may conduct its
business. More restrictive laws, regulations or interpretations could be
adopted in the future that could make HomeServices' ability to comply with
such regulations more difficult or expensive. Furthermore, regulatory
authorities have broad discretion to grant, renew and revoke licenses and
approvals and to implement regulations. Accordingly, these regulatory
authorities could prevent or temporarily suspend HomeServices from carrying
on some or all of its activities or otherwise penalize it if its practices
were found not to comply with the then current regulatory or licensing
requirements or any interpretation of these requirements by the regulatory
authority. HomeServices' failure to comply with any of these requirements or
interpretations could have a material adverse effect on its operations and
financial performance.

THE TERMS OF CERTAIN INDEBTEDNESS RESTRICT HOMESERVICES' BUSINESS ACTIVITIES

The terms and conditions of HomeServices' revolving credit facility and
7.12% senior notes restrict the ability of HomeServices and its subsidiaries
to incur debt, pay dividends and other distributions, create liens, sell
assets and make investments. The terms of the revolving credit facility also
require HomeServices to maintain specified financial ratios. Similar
provisions are also contained in debt agreements of MidAmerican Holdings,
HomeServices' parent. Although HomeServices and its subsidiaries are not a
party to such debt agreements, the restrictions contained in them apply to
HomeServices and its subsidiaries. These restrictive and financial
maintenance provisions could limit HomeServices' ability to obtain additional
funds for its operations or future acquisitions, which could have a material
adverse effect on its operations and acquisition strategy.

HOMESERVICES IS A HOLDING COMPANY AND DEPENDS ON DIVIDENDS AND DISTRIBUTIONS
FROM ITS OPERATING SUBSIDIARIES TO FUND ITS OPERATIONS

HomeServices is a holding company and its only assets are the capital
stock of its subsidiaries. As a holding company with no operating assets or
independent means of generating operating revenue, HomeServices will depend
on dividends and other payments from its subsidiaries to pay its obligations.
HomeServices' obligations may include salaries of its executive officers,
insurance, professional fees, expenses incidental to being a public company
and any debt and associated interest charges that it may incur from time to
time. Financial covenants under existing or future debt

15
<PAGE>
agreements entered into by HomeServices' subsidiaries or the laws of the
states of incorporation of those subsidiaries may limit the ability of its
subsidiaries to make sufficient dividend or other payments to permit it to
fund its obligations. Creditors of HomeServices' subsidiaries will have a
prior claim to the assets of its subsidiaries prior to the holders of its
common stock.

YEAR 2000 PROBLEMS COULD DISRUPT HOMESERVICES' BUSINESS

Many existing computer systems and software products are coded to accept
only two-digit entries in the date code field and cannot properly recognize
dates in the year 2000 and beyond. Consequently, these systems and software
products need to be either upgraded or replaced to function properly on and
after January 1, 2000.

If, due to hardware or software problems, HomeServices' systems were
unable to operate due to year 2000 problems, it would face the risks of
incurring additional costs to correct its year 2000 problems or losing
revenue due to its inability to deliver services to its customers. These
costs or losses, if incurred, could have a material adverse effect on
HomeServices. HomeServices believes, however, that it is taking the necessary
steps to eliminate or reduce these risks where possible and that year 2000
issues will not have a material effect on its financial condition or results
of operations. For a description of HomeServices' year 2000 readiness
efforts, you should refer to "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000 Compliance."

HomeServices is inquiring of its third-party vendors and service
providers, including multiple listing service providers, regarding their year
2000 readiness. HomeServices expects to have this assessment complete and a
contingency plan in place by August 1999. HomeServices' major software and
hardware vendors and service providers have indicated that their systems
currently are or will be year 2000 ready before December 31, 1999.
HomeServices cannot assure you, however, that the systems of those companies
will be converted in a timely manner or that the third parties will mitigate
the effects of non-readiness. Any failure by HomeServices' third-party
vendors and service providers to comply in a timely manner could have a
material adverse effect on its operations.

HOMESERVICES WILL CONTINUE TO BE CONTROLLED BY MIDAMERICAN HOLDINGS AFTER THE
OFFERING

Before the offering, HomeServices was a 95.0%-owned subsidiary of
MidAmerican Holdings. Immediately following the offering, MidAmerican
Holdings will continue to own % of its common stock ( % if the
underwriters' over-allotment option is exercised in full).

As a result of its common stock ownership, MidAmerican Holdings will
continue to have the power to elect HomeServices' entire board of directors
and approve other matters submitted to a vote of HomeServices' stockholders.
HomeServices may not engage in any consolidation, merger or other significant
corporate transaction, even if beneficial to the interests of its other
stockholders, without the approval of MidAmerican Holdings. This
concentration of ownership could also delay or impede a change of control,
even if a change of control would be beneficial to HomeServices' other
stockholders. In addition to a change of control, there may be other
instances in which the interests of HomeServices' public stockholders differ
from the interests of MidAmerican Holdings, which will have the ability to
control corporate policies by electing its directors and officers to serve as
directors and officers of HomeServices.

MidAmerican Holdings could decide to sell a substantial portion of its
remaining equity interest in HomeServices to a third-party. A sale involving
a change of control of HomeServices may adversely affect the market price of
the common stock and could affect HomeServices' business.

PROVISIONS OF HOMESERVICES' CHARTER AND BYLAWS COULD DETER TAKEOVER ATTEMPTS

Following the offering, provisions of HomeServices' articles of
incorporation and bylaws could delay or impede the removal of incumbent
directors or discourage a third-party from attempting to acquire control of
it, even if doing so would be beneficial to you as a common stockholder.

16
<PAGE>
THE INTERCOMPANY AGREEMENTS WITH MIDAMERICAN HOLDINGS MAY NOT BE THE RESULT
OF ARM'S-LENGTH NEGOTIATIONS

Before the closing of the offering, HomeServices will enter into several
intercompany agreements with MidAmerican Holdings, including a registration
rights agreement and a services agreement. Currently, HomeServices has an
existing credit agreement with MidAmerican Holdings pursuant to which
HomeServices had borrowed up to $54.2 million. Although the credit agreement
is primarily cost-based and the services agreement will be primarily
cost-based with a nominal monthly fee, they may not be the result of
arm's-length negotiations because HomeServices is a 95.0%-owned subsidiary of
MidAmerican Holdings. HomeServices believes that the terms of all of its
intercompany agreements will be no less favorable to it than those that could
be negotiated with unaffiliated third parties. However, HomeServices cannot
assure you that this will be the case. For a description of these
intercompany agreements, see "Certain Relationships and Related
Transactions--Relationship with MidAmerican Holdings."

THE ABSENCE OF A TRADING MARKET FOR THE COMMON STOCK COULD MAKE IT DIFFICULT
FOR INVESTORS TO RESELL THEIR SHARES AT OR ABOVE THE INITIAL PUBLIC OFFERING
PRICE

Before the offering, there was no trading market for the common stock.
Although HomeServices will apply to have the common stock approved for
quotation on the Nasdaq National Market, HomeServices does not know whether
its application for quotation will be approved or, if it is approved, whether
a liquid trading market for the common stock will develop. Investors may not
be able to resell their shares at or above the initial public offering price.
The initial public offering price for the shares of common stock will be
determined through negotiations among HomeServices, MidAmerican Holdings and
representatives of the underwriters. The initial public offering price may be
higher than the market price of the common stock after the offering.

NEW INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE VALUE
OF THEIR INVESTMENT

The initial public offering price of the common stock will be
substantially higher than the pro forma net tangible book value per share of
the outstanding common stock. As a result, HomeServices currently expects
that new investors will experience immediate dilution of $ per share in
the net tangible book value per share of the common stock from the initial
public offering price, assuming an initial public offering price of $ per
share, the midpoint of the estimated range of the initial public offering
price per share. If HomeServices issues additional shares of common stock in
the future, investors may experience further dilution. Any further dilution
could adversely affect the price of its common stock.

HOMESERVICES DOES NOT EXPECT TO PAY DIVIDENDS ON ITS COMMON STOCK

HomeServices does not anticipate paying any cash dividends on its common
stock in the foreseeable future. Any payment of future dividends and the
amounts thereof will depend upon HomeServices' earnings, financial
requirements and other factors deemed relevant by its board of directors.

THE AVAILABILITY OF A SIGNIFICANT NUMBER OF SHARES FOR FUTURE SALE BY
MIDAMERICAN HOLDINGS AND OTHER SHARES ELIGIBLE FOR PUBLIC SALE COULD
ADVERSELY AFFECT THE MARKET PRICE OF HOMESERVICES' COMMON STOCK

Immediately after the closing of the offering, HomeServices will
have shares of common stock issued and outstanding ( if the underwriters'
over-allotment option is exercised in full). Of these shares, all of the
shares sold in the offering will be freely tradeable without restrictions or
further registration under the Securities Act, except for any shares
purchased by HomeServices' affiliates as that term is defined in Rule 144
under the Securities Act. Any shares held by affiliates, whether purchased in
the offering or otherwise, will be eligible for sale subject to meeting the
volume and manner of sale limitations and other conditions contained in Rule
144 and the expiration of any lock-up agreements entered into with the
underwriters.

17
<PAGE>
In addition, after completing the offering, HomeServices intends to file a
registration statement on Form S-8 under the Securities Act covering the
shares of common stock reserved for issuance under HomeServices' employee
stock option plan. The registration statement on Form S-8 will automatically
become effective upon filing. Subject to vesting and the exercise of the
issued and outstanding options, shares registered under the registration
statement on Form S-8 will be freely tradeable and available for sale in the
open market.

Subject to applicable federal securities laws and restrictions contained
in the underwriting agreement with the underwriters, MidAmerican Holdings can
sell any or all of its shares of common stock. In addition, under the
registration rights agreement, MidAmerican Holdings has registration rights
with respect to the shares of its common stock, which would facilitate any
future disposition. Sales in the public market of substantial amounts of
common stock, or the perception that such sales could occur, could cause the
prevailing market price for HomeServices' common stock to decrease.
HomeServices cannot predict how long MidAmerican Holdings will maintain its
current majority ownership of common stock after the offering.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. These statements may be found under
"Prospectus Summary," "Risk Factors," "Unaudited Pro Forma Condensed
Consolidated Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."
Forward-looking statements contain the words "believes," "anticipates,"
"expects" and words of similar import. Because these statements involve risks
and uncertainties, actual results could differ materially from any future
results, levels of activity, performance or achievements expressed or implied
by these forward-looking statements. Factors that could cause these
differences include those discussed under "Risk Factors" in this prospectus.
The forward-looking statements are made as of the date of this prospectus.

USE OF PROCEEDS

HomeServices estimates that the net proceeds to it from the offering,
after deducting applicable underwriting discounts and commissions and
estimated offering expenses payable by it, will be approximately $
million. HomeServices expects to use the net proceeds of the offering for
general corporate purposes, which are expected to include acquisitions of
real estate brokerage firms and their related service businesses and the
continued development of its E-commerce operations. Pending such use,
HomeServices will invest the net proceeds from the offering in short-term
marketable securities.

HomeServices will not receive any proceeds from the sale of shares by
MidAmerican Holdings.

DIVIDEND POLICY

HomeServices does not anticipate paying cash dividends to its common
stockholders in the foreseeable future after the offering. The timing, amount
and form of future dividends, if any, will be at the discretion of
HomeServices' board of directors and will depend on HomeServices' results of
operations, financial condition, cash requirements and other factors
considered relevant by the board of directors.

Before the offering, HomeServices paid cash dividends on the common stock
of $0.39 per share in 1997. HomeServices did not pay any cash dividends on
the common stock during 1998 or 1999.

18
<PAGE>
DILUTION

At March 31, 1999, the net tangible book value of HomeServices, after
giving effect to the intended -for- split, was approximately $( )
million, or $( ) per share. Net tangible book value is defined as the book
value of all assets of HomeServices, less all liabilities and intangible
assets. HomeServices' intangible assets consist primarily of goodwill.
Without taking into account any changes in net tangible book value after
March 31, 1999, other than to give effect to the offering and the application
of the estimated net proceeds, the pro forma net tangible book value of
HomeServices' common stock as of March 31, 1999 would have been approximately
$( ) million, or $( ) per share. The following table gives effect to
the offering as if it had occurred on March 31, 1999 at an assumed initial
public offering price of $ per share (the midpoint of the estimated range
of the initial public offering price per share) before deduction of the
underwriting discount and commission and other expenses payable by
HomeServices. The table illustrates the immediate increase in net tangible
book value of $ per share to HomeServices' existing stockholders and an
immediate dilution of $ per share to new investors:

<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price per share ..................................... $
Net tangible book value per share as of March 31, 1999 ............. ($ )
Increase in net tangible book value per share attributable to the
offering ........................................................... $
Pro forma net tangible book value per share as of March 31, 1999,
after giving effect to the offering ................................ ($ )
----------
Immediate dilution per share to new investors ....................... $
==========
</TABLE>

The following table presents as of March 31, 1999, on a pro forma basis
after giving effect to the offering, the positions of existing common
stockholders and new investors with respect to the number of shares of common
stock purchased from HomeServices, the total consideration paid and the
average price paid per share, at an assumed initial public offering price of
$ per share (the midpoint of the estimated range of the initial public
offering price per share) before deduction of the underwriting discount and
commission and other expenses payable by HomeServices.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------------- -------------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
---------- -------------- ---------- -------------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
New investors ...................
Existing common stockholders ...
Total............................
</TABLE>

19
<PAGE>
CAPITALIZATION

The following table sets forth HomeServices' cash and cash equivalents and
capitalization as of March 31, 1999 on an actual basis and on a pro forma
basis after giving effect to:

o the offering and the application of the estimated net proceeds to
HomeServices;

o the -for- split of HomeServices' common stock that will occur
immediately before the closing of the offering;

o the amendment and restatement of HomeServices' certificate of
incorporation to increase the authorized shares of capital stock and
adopt a rights plan before the closing of the offering; and

o the acquisition of Paul Semonin Realtors.

You should read this table together with the consolidated financial
statements and the related notes, "Unaudited Pro Forma Condensed Consolidated
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------
ACTUAL PRO FORMA
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ........................................... $ 2,898 $
========= ===========
Long-term debt (including current portion):
Revolving credit facility (a) ...................................... $25,000 $25,000
7.12% senior notes ................................................. 35,000 35,000
Other .............................................................. 1,268 1,268
--------- -----------
Total long-term debt .............................................. 61,268 61,268
--------- -----------
Stockholders' equity:
Preferred stock, $0.01 par value, no shares authorized (actual);
shares authorized (pro forma); no shares issued and
outstanding (actual); shares issued and outstanding (pro forma) .. -- --
Common stock, $0.01 par value, shares authorized (actual);
shares authorized (pro forma); shares issued and
outstanding (actual); shares issued and outstanding (pro
forma)............................................................. 10
Additional paid-in capital.......................................... 39,505
Notes receivable (b)................................................ (882) (882)
Accumulated other comprehensive income (loss) ...................... (16) (16)
Retained earnings (accumulated deficit)............................. (4,861) (4,861)
--------- -----------
Total stockholders' equity......................................... 33,756
--------- -----------
Total capitalization............................................... $95,024 $
========= ===========
</TABLE>

- ------------
(a) At June 30, 1999, an aggregate of $23.5 million in borrowings were
outstanding under the revolving credit facility.
(b) Represents promissory notes issued by certain members of HomeServices'
management as consideration for their aggregate 5.0% ownership ( %
ownership on a pro forma basis) of the common stock of HomeServices.
See "Certain Relationships and Related Transactions--Management
Indebtedness."

20
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial
information of HomeServices presents the unaudited pro forma condensed
consolidated statements of income for the year ended December 31, 1998, and
the three months ended March 31, 1999, and March 31, 1998, and the pro forma
condensed consolidated balance sheet as of March 31, 1999.

The unaudited pro forma condensed consolidated statements of income for
the year ended December 31, 1998, and the three months ended March 31, 1998,
give effect to the following acquisitions completed during 1998 and 1999 as
if they occurred on January 1, 1998:

o Predecessor (consisting of Iowa Realty Co., Inc. and its consolidated
subsidiaries, which at the time of acquisition by HomeServices included
Edina Realty Home Services of Minnesota);

o J.C. Nichols Residential, Inc.;

o Other (consisting of CBS Real Estate Company, HOME Real Estate Holdings
Inc. and Nebraska Land Title & Abstract); and

o Paul Semonin Realtors.

The unaudited pro forma condensed consolidated statements of income for
the three months ended March 31, 1999 give effect to the acquisition of Paul
Semonin Realtors as if it occurred on January 1, 1999.

The pro forma statements of income do not give effect to the interest
income that would have been earned on proceeds of the offering that are not
used by HomeServices had such transaction occurred on January 1, 1998.

The unaudited pro forma condensed consolidated balance sheet as of March
31, 1999 gives effect to the following transactions as if they occurred on
March 31, 1999: (1) the offering, (2) the application of the estimated net
proceeds to HomeServices from the offering and (3) the acquisition of Paul
Semonin Realtors.

HomeServices' acquisitions have been accounted for using the purchase
method of accounting. Accordingly, assets acquired and liabilities assumed
have been recorded at their estimated fair values. Management does not expect
that the final allocations of the purchase prices for the acquisitions will
differ materially from the preliminary allocations.

The pro forma adjustments reflect HomeServices' determination of all
adjustments necessary to present fairly HomeServices' pro forma financial
position and results of operations. These adjustments are based on available
information and assumptions HomeServices considers reasonable under the
circumstances. The unaudited pro forma condensed consolidated financial
information is provided for informational purposes only. This information is
not necessarily indicative of the financial position or the results of
operations of HomeServices had the transactions referred to above occurred on
the dates specified. In addition, this information is not necessarily
indicative of the financial condition or results of operations which may
exist in the future. You should read the unaudited pro forma condensed
consolidated financial information together with the historical consolidated
financial statements of HomeServices, its predecessor and acquired companies
and the related notes included elsewhere in this prospectus.

21
<PAGE>
HOMESERVICES.COM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
PAUL OTHER
PREDECESSOR* HOMESERVICES J.C. NICHOLS SEMONIN ACQUISITIONS
(1)(2) (2)(3) (4) (5) (2)(6) ADJUSTMENTS PRO FORMA
------------ ------------ -------------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Revenues:
Commission revenue........... $74,893 $169,647 $25,715 $30,663 $19,298 $ -- $320,216
Title fees................... 7,575 14,154 -- -- 1,236 22,965
Other........................ 3,769 6,790 2,163 1,180 754 14,656
------------ ------------ -------------- --------- ------------ ----------- ---------
Total revenues.............. 86,237 190,591 27,878 31,843 21,288 -- 357,837
------------ ------------ -------------- --------- ------------ ----------- ---------
Operating expenses:
Commission expense........... 49,107 113,225 18,173 21,408 14,422 216,335
Acquisition related costs ... -- 18,271 -- -- -- 1,700 (7) 19,971
Depreciation and
amortization................ 2,293 4,177 292 501 228 1,030 (8) 8,521
All other operating expenses 31,126 59,265 7,266 8,126 6,366 112,149
------------ ------------ -------------- --------- ------------ ----------- ---------
Total operating expenses ... 82,526 194,938 25,731 30,035 21,016 2,730 356,976
------------ ------------ -------------- --------- ------------ ----------- ---------
Operating income (loss) ..... 3,711 (4,347) 2,147 1,808 272 (2,730) 861
Interest and other income
(expense), net............... (94) (1,334) 28 440 78 (2,191)(9) (3,073)
Minority interest............. -- -- (97) -- -- (97)
------------ ------------ -------------- --------- ------------ ----------- ---------
Income (loss) before income
taxes........................ 3,617 (5,681) 2,078 2,248 350 (4,921) (2,309)
Income taxes (benefit)........ 1,664 (2,247) 792 913 296 (2,250)(10) (832)
------------ ------------ -------------- --------- ------------ ----------- ---------
Net income (loss)............. $ 1,953 $ (3,434) $ 1,286 $ 1,335 $ 54 $(2,671) $ (1,477)
============ ============ ============== ========= ============ =========== =========
</TABLE>

- ------------
* Predecessor refers to Iowa Realty and its consolidated subsidiaries
(which, at the time Iowa Realty and Edina Realty were acquired in May
1998, included Edina Realty).
(1) Reflects the historical results of the predecessor for the period
from January 1, 1998 through May 27, 1998 (the day prior to the
predecessor's acquisition by HomeServices).
(2) Prior to HomeServices' acquisition of Iowa Realty, Iowa Realty sold
its subsidiary, HOME Real Estate Holdings Inc., to a third party. On
August 18, 1998, HomeServices acquired HOME Real Estate from the
third party in an unrelated transaction. Accordingly, the historical
results of HOME Real Estate are reflected as follows: (a) in
HomeServices' results for the period from August 19, 1998 (the date
following acquisition by HomeServices) to December 31, 1998, (b) in
the predecessor's results for the period from January 1, 1998 to May
7, 1998 (the day prior to the predecessor's sale of HOME Real Estate
to a third party) and (c) in the Other Acquisitions column for the
period from May 8, 1998 to August 18, 1998, which represents the
period during which HOME Real Estate was not owned by either
HomeServices or the predecessor.
(3) Reflects historical results of HomeServices for the period from May
28, 1998 (its inception date) to December 31, 1998 and includes the
historical results for the acquisitions completed in 1998 from their
respective dates of acquisition.
(4) Reflects the historical results of J.C. Nichols for the period from
January 1, 1998 through August 31, 1998 (the date of acquisition by
HomeServices).
(5) Reflects the historical results of Paul Semonin Realtors for the year
ended December 31, 1998.
(6) Reflects the historical results of the following companies acquired
by HomeServices: (a) CBS Real Estate Company for the period from
January 1, 1998 through August 17, 1998 (the date of acquisition by
HomeServices), (b) HOME Real Estate for the period from May 8, 1998
to August 18, 1998 (see note (2) above) and (c) Nebraska Land Title &
Abstract for the period from January 1, 1998 through December 16,
1998 (the date of acquisition by HomeServices).
(7) Reflects the value of real estate sales contracts that were pending
at the date of acquisition. The established asset is charged to
expense as the contracts close, based on HomeServices' estimate of
when contracts typically result in closed transactions.
(8) Reflects amortization of goodwill over a 30-year life specifically
related to the purchase of the acquired businesses along with the
amortization of non-compete agreements over the life of the
respective agreements.
(9) Reflects interest expense on the $25.0 million revolving credit
facility at the blended interest rate of 6.51% and annual interest
expense on $35.0 million of private placement notes at the stated
rate of 7.12%.
(10) Reflects the income tax benefit that would have been realized if the
acquired businesses had been combined at the beginning of the period.
Calculated as income before taxes adjusted for permanent book/tax
differences of approximately $258,000 at December 31, 1998. A
combined federal and state statutory tax rate of 40.59% was applied
in the calculation.

22
<PAGE>
HOMESERVICES.COM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
OTHER
PREDECESSOR* HOMESERVICES J.C. PAUL ACQUISITIONS
(1) (2) NICHOLS (3) SEMONIN (4) (5) ADJUSTMENTS PRO FORMA
-------------- -------------- ----------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
commission revenue . $39,387 $-- $6,182 $5,543 $3,444 $ --$ 54,556
Title fees.......... 4,134 -- -- -- 136 4,270
Other............... 2,044 -- 565 254 464 3,327
-------------- -------------- ----------- ----------- -------------- ------------- -----------
Total revenues .... 45,565 -- 6,747 5,797 4,044 62,153
-------------- -------------- ----------- ----------- -------------- ------------- -----------
Operating expenses:
commission expense . 26,223 -- 4,419 3,841 2,751 37,234
Acquisition related
costs ............. -- -- -- -- -- 19,971 (6) 19,971
Depreciation and
amortization....... 1,413 -- 520 132 94 271 (7) 2,430
All other operating
expenses .......... 18,620 -- 1,929 1,888 974 23,411
-------------- -------------- ----------- ----------- -------------- ------------- -----------
Total operating
expenses.......... 46,256 -- 6,868 5,861 3,819 20,242 83,046
-------------- -------------- ----------- ----------- -------------- ------------- -----------
Operating income
(loss) ............. (691) -- (121) (64) 225 (20,242) (20,893)
Interest and other
income (expense),
net ................ (71) -- (10) 130 8 (1,030)(8) (973)
-------------- -------------- ----------- ----------- -------------- ------------- -----------
Income (loss) before
income taxes........ (762) -- (131) 66 233 (21,272) (21,866)
Income taxes
(benefit)........... (275) -- 2 28 60 (8,661)(9) (8,846)
-------------- -------------- ----------- ----------- -------------- ------------- -----------
Net income (loss) ... $ (487) $ -- $ (133) $ 38 $ 173 $(12,611) $(13,020)
============== ============== =========== =========== ============== ============= ===========
</TABLE>

- ------------
* Predecessor refers to Iowa Realty and its consolidated subsidiaries
(which, at the time Iowa Realty and Edina Realty were acquired in May
1998, included Edina Realty).
(1) Reflects the historical results of the predecessor for the period
presented (including HOME Real Estate).
(2) HomeServices was not in existence during the three months ended March
31, 1998. Accordingly, no results of operations for HomeServices are
presented.
(3) Reflects the historical results of J.C. Nichols for the period
presented.
(4) Reflects the historical results of Paul Semonin Realtors for the period
presented.
(5) Reflects the historical results of CBS Real Estate Company and Nebraska
Land Title & Abstract for the period presented.
(6) Reflects the value of real estate sales contracts that were pending at
the date of acquisition. The established asset is charged to expense as
the contracts close, based on HomeServices' estimate of when contracts
typically result in closed transactions.
(7) Reflects amortization of goodwill over a 30-year life specifically
related to the purchase of the acquired businesses along with the
amortization of non-compete agreements over the life of the respective
agreements.
(8) Reflects interest expense on the $25.0 million revolving credit
facility at the blended interest rate of 6.51% and annual interest
expense on $35.0 million of private placement notes at the stated rate
of 7.12%.
(9) Reflects the income tax benefit that would have been realized if the
acquired businesses had been combined at the beginning of the period.
Calculated as income before taxes adjusted for permanent book/tax
differences of approximately $73,000 at March 31, 1998. A combined
federal and state statutory tax rate of 40.59% was applied in the
calculation.

23
<PAGE>
HOMESERVICES.COM INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
PAUL
HOMESERVICES SEMONIN (1) ADJUSTMENTS PRO FORMA
-------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Commission revenue...................... $56,566 $6,558 $ $63,124
Title fees.............................. 4,269 -- 4,269
Other................................... 3,850 178 4,028
-------------- ----------- ------------- -----------
Total revenues......................... 64,685 6,736 71,421
-------------- ----------- ------------- -----------
Operating expenses:
Commission expense...................... 39,107 4,584 43,691
Acquisition related costs............... -- -- -- --
Depreciation and amortization........... 1,981 129 85 (2) 2,195
All other operating expenses ........... 25,141 2,044 27,185
-------------- ----------- ------------- -----------
Total operating expenses............... 66,229 6,757 85 73,071
-------------- ----------- ------------- -----------
Operating loss .......................... (1,544) (21) (85) (1,650)
Interest and other income (expense),
net..................................... (810) (25) (835)
-------------- ----------- ------------- -----------
Loss before income taxes................. (2,354) (46) (85) (2,485)
Income taxes (benefit)................... (927) (17) (35)(3) (979)
-------------- ----------- ------------- -----------
Net income (loss)........................ $(1,427) $ (29) $(50) $(1,506)
============== =========== ============= ===========
</TABLE>

- ------------
(1) Reflects the historical results of Paul Semonin Realtors for the period
presented.
(2) Reflects amortization of goodwill over a 30-year life specifically
related to the purchase of the acquired businesses along with the
amortization of non-compete agreements over the life of the respective
agreements.
(3) Reflects the income tax benefit that would have been realized if the
acquired business had been combined at the beginning of the period.
Calculated as income before taxes adjusted for permanent book/tax
differences of approximately $73,000 at March 31, 1999. A combined
federal and state statutory tax rate of 40.59% was applied in the
calculation.

24
<PAGE>
HOMESERVICES.COM INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
PAUL PRO FORMA
SEMONIN BEFORE OFFERING
ASSETS HISTORICAL ACQUISITION(1) OFFERING ADJUSTMENTS PRO FORMA
------------ -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 2,898 $(2,898) $ --
Mortgage loans held for sale and other
receivables...................................... 13,482 1,700 15,182
Receivable from affiliates........................ 6 6
Cash held in trust................................ 8,797 8,797
Income taxes receivable........................... 2,899 2,899
Other current assets.............................. 2,077 15 2,092
------------ -------------- -----------
30,159 (1,183) 28,976
------------ -------------- -----------
Other assets:
Office property and equipment, net................ 15,704 1,337 17,041
Intangible assets, net of accumulated
amortization of $2,327........................... 75,005 10,196 85,201
Investment in 50% or less owned entities ......... 480 800 1,280
Held-to-maturity securities....................... 848 848
Available-for-sale securities .................... 272 272
Deferred taxes.................................... 2,945 2,945
Other assets...................................... 124 158 282
------------ -------------- -----------
95,378 12,491 107,869
------------ -------------- -----------
Total assets.................................... $125,537 $11,308 $136,845
============ ============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 4,012 $ -- $ 4,012
Accrued expenses.................................. 9,831 9,831
Payable to affiliates............................. 1,209 2,102 3,311
Cash held in trust................................ 8,797 8,797
Current portion of agent profit sharing ......... 433 433
Current portion of long-term debt................. 3,405 178 3,583
Other current liabilities......................... 1,404 1,404
------------ -------------- -----------
29,091 2,280 31,371
------------ -------------- -----------
Other liabilities:
Long-term debt.................................... 57,863 386 58,249
Agent profit sharing.............................. 4,738 4,738
Other noncurrent liabilities...................... 89 142 231
------------ -------------- -----------
62,690 528 63,218
------------ -------------- -----------
Total liabilities............................... 91,781 2,808 94,589
------------ -------------- -----------
Stockholders' equity:
Common stock, no par; 1,000,000 shares authorized
10,000 shares issued and outstanding............. 10 10
Additional paid-in capital........................ 39,505 8,500 48,005
Notes receivable.................................. (882) (882)
Accumulated other comprehensive loss.............. (16) (16)
Accumulated deficit .............................. (4,861) (4,861)
------------ -------------- -----------
Total stockholders' equity...................... 33,756 8,500 42,256
------------ -------------- -----------
Total liabilities and stockholders' equity ..... $125,537 $11,308 $136,845
============ ============== ===========
</TABLE>

- ------------
(1) The amounts shown in this column represent the fair value of assets and
liabilities received/assumed in the acquisition of Paul Semonin
Realtors, as well as the following adjustments to effect the
acquisition.

<TABLE>
<CAPTION>
LINE ITEM DESCRIPTION AMOUNT
- -------------------------------------------------- --------------------------------------------- ----------
<S> <C> <C>
Cash Cash on hand used $(2,898)
Mortgage loans held for sale and other receivables Receivable established for pending home sales 1,700
Intangible assets, net Goodwill 10,196
Payable to affiliates Loan from parent for purchase (2,102)
Additional paid-in capital Contribution from parent (8,500)
</TABLE>

25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below as of December
31, 1996, 1997 and 1998 and for the years ended December 31, 1996, 1997 and
1998 are derived from the audited consolidated financial statements of
HomeServices and its predecessor. The selected consolidated financial data
presented below as of December 31, 1994 and 1995 and for the year ended
December 31, 1994 and 1995 are derived from the unaudited consolidated
financial statements of the predecessor. The selected consolidated financial
data as of and for the three months ended March 31, 1999, are derived from
the unaudited consolidated financial statements of HomeServices and the
selected consolidated financial data as of and for the three months ended
March 31, 1998 are derived from the unaudited consolidated financial
statements of the predecessor. HomeServices' results for the three months
ended March 31, 1999 are not necessarily indicative of HomeServices' results
to be expected for the full year.

The operating results of HomeServices and its predecessor include the
results of operations of companies that were acquired in 1996, 1997 and 1998
and accounted for by the purchase method of accounting. Accordingly, the
results of operations of the acquired companies have been included in the
consolidated operating results of HomeServices only from their dates of
acquisition.

You should read the financial data presented below together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of HomeServices and its
predecessor and the related notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
PREDECESSOR* AND HOMESERVICES
-----------------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------------------------------
1994 1995 1996(a) 1997(a) 1998(a)(b) 1998 1999
--------- --------- ---------- ---------- ---------- --------- ----------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue ............... $50,967 $58,409 $179,378 $191,083 $244,540 $39,387 $56,566
Title fees ....................... -- -- 14,821 16,203 21,729 4,134 4,269
Other (c) ........................ 15,050 12,672 22,092 7,410 10,559 2,044 3,850
Total revenues .................. 66,017 71,081 216,291 214,696 276,828 45,565 64,685
Commission expense ............... 30,792 35,433 115,331 125,148 162,332 26,223 39,107
Acquisition related costs ........ -- -- -- -- 18,271 -- --
Depreciation and amortization ... 1,762 2,123 5,103 5,619 6,470 1,413 1,981
All other operating expenses (c) 28,769 29,767 85,162 72,808 90,391 18,620 25,141
Total operating expenses ........ 61,323 67,323 205,596 203,575 277,464 46,256 66,229
Operating income (loss) .......... 4,694 3,758 10,695 11,121 (636) (691) (1,544)
Interest expense ................. 920 1,745 3,632 1,536 2,192 174 1,064
Income (loss) before income
taxes............................ 4,370 2,816 8,113 10,218 (2,064) (762) (2,354)
Minority interest................. -- -- 1,276 633 -- -- --
Net income (loss)................. $ 2,517 $ 1,345 $ 3,574 $ 4,860 $ (1,481) $ (487) $(1,427)
Earnings (loss) per share:
Basic............................ $ $ $ $ (b) $ $
Diluted.......................... (b)
Weighted average shares
outstanding:
Basic............................ (b)
Diluted.......................... (b)
</TABLE>

26
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR AND HOMESERVICES
----------------------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------------------------------
1994 1995 1996 1997 1998(A) 1998 1999
---------- ---------- ---------- ---------- ------------ ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT AMOUNTS PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA (d) .................... $ 6,456 $ 5,881 $15,798 $16,740 $ 24,105 $ 722 $ 437
Net cash provided by (used in)
operating activities ......... $ 68 $(2,503) $ 2,134 $ 5,297 $ 17,419 $(1,085) $ 2,184
Net cash used in investing
activities ................... $(4,004) $(6,502) $(8,874) $(6,759) $(100,017) $ (336) $(2,223)
Net cash provided by (used in)
financing activities.......... $ 3,820 $ 9,571 $10,664 $(1,575) $ 87,872 $ 1,701 $ (177)
</TABLE>

<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES
------------------------------------- ---------------------------
AS OF AS OF
AS OF DECEMBER 31, DECEMBER 31, MARCH 31,
------------------------------------- -------------- -----------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ........ $ 871 $ 1,437 $ 5,627 $ 2,590 $ 3,114 $ 2,898
Total assets (c) ................. 52,782 68,341 95,504 62,346 128,520 125,537
Long-term debt, including current
portion ......................... 5,651 6,090 16,397 7,651 61,445 61,268
Stockholders' equity ............. 18,396 19,741 33,699 36,791 35,194 33,756
</TABLE>

<TABLE>
<CAPTION>
PREDECESSOR AND HOMESERVICES
------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-----------------------------------------------------------------
1994 1995 1996 1997 1998(a) 1998 1999
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Sides (e) ....................... 15,726 16,233 47,836 48,631 60,158 9,815 13,353
Average home sales price ........ $ 104.7 $ 106.7 $ 120.9 $ 127.1 $ 136.3 $130.1 $ 133.7
Home sales volume (in millions) $ 1,671 $ 1,928 $ 5,783 $ 6,183 $ 8,199 $1,277 $ 1,786
Average sales commissions as a
percentage of average home
sales price (f) ................ 3.1% 3.0% 3.1% 3.1% 3.0% 3.1% 3.2%
Number of branch offices (at
period end) .................... 31 32 103 98 126 103 125
Number of sales associates (at
period end) .................... 944 911 3,063 3,298 4,282 3,307 4,287
</TABLE>

- ------------
(a) Results of operations for 1994 and 1995 reflect only the results of
Iowa Realty. In 1996, Edina Realty became a subsidiary of Iowa Realty
through a reorganization effected by their parent company. In July
1997, Iowa Realty acquired HOME Real Estate Holdings, Inc. Accordingly,
the results of operations of the predecessor for 1996, 1997 and 1998
include the results of Iowa Realty and Edina Realty and, from July 1,
1997 to May 7, 1998 (the day prior to the predecessor's sale of HOME
Real Estate to a third party), include the results of HOME Real Estate
as well.
(b) These amounts are twelve-month totals arrived at by summing the 1998
results of Predecessor and HomeServices as shown in the following
table. Amounts for the predecessor include entities as discussed in
note (a) above. Amounts for HomeServices include results of the
nonpredecessor acquired entities after they were acquired by
HomeServices in the third and fourth quarters of 1998. No amounts are
reflected below for Paul Semonin Realtors (which was acquired in July
1999).

27
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR HOMESERVICES COMBINED
JANUARY 1, 1998 MAY 28, 1998 TWELVE MONTHS
THROUGH THROUGH ENDED
MAY 27, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998
--------------- ----------------- -----------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT AMOUNTS PER
SHARE)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Commission revenue................................... $74,893 $169,647 $ 244,540
Title fees .......................................... 7,575 14,154 21,729
Other ............................................... 3,769 6,790 10,559
Total revenues ..................................... 86,237 190,591 276,828
Commission expense .................................. 49,107 113,225 162,332
Acquisition related costs ........................... -- 18,271 18,271
Depreciation and amortization ....................... 2,293 4,177 6,470
All other operating expenses ........................ 31,126 59,265 90,391
Total operating expenses ........................... 82,526 194,938 277,464
Operating income (loss) ............................. 3,711 (4,347) (636)
Interest and other income (expense), net ............ 263 1,929 2,192
Income (loss) before income taxes ................... 3,617 (5,681) (2,064)
Net income (loss) ................................... $ 1,953 $ (3,434) $ (1,481)
Earnings (loss) per share:
Basic............................................... $ $ $
Diluted.............................................
Weighted average shares outstanding:
Basic...............................................
Diluted.............................................
OTHER DATA:
Net cash provided by operating activities .......... $ 4,991 $ 12,428 $ 17,419
Net cash used in investing activities ............... (891) (99,126) (100,017)
Net cash provided by (used in) financing activities (1,940) 89,812 87,872
</TABLE>

- ------------
(c) Prior to 1997, the predecessor was also engaged in real estate
development operations in addition to real estate brokerage operations
in some of the periods presented. All real estate brokerage and
development activities were operated by the same corporate entity using
shared management, office space and other related services. At the
beginning of 1997, the majority of the assets associated with the
development operations was transferred to the parent company. These
development operations contributed only $0.4 million to "Other"
revenues in 1997. Based on the way the brokerage and development
operations were managed, only certain revenues, expenses, assets, and
liabilities can be specifically identified in the predecessor's
statements of income and balance sheets. Revenues from the sale of real
estate development projects of $13.9 million, $10.6 million and $14.0
million are included in the line item "Other" revenues for the years
ended December 31, 1994, 1995 and 1996, respectively. Cost of real
estate sales totaling $11.0 million, $7.4 million and $11.3 million are
included in the line item "All other operating expenses" for the years
ended December 31, 1994, 1995 and 1996, respectively. Real estate
contracts and real estate inventory of $22.5 million, $29.4 million and
$23.2 million are included in the line item "Total assets" for the
years ended December 31, 1994, 1995 and 1996, respectively. Since 1997,
HomeServices has not been engaged in real estate development operations
to any significant degree.
(d) EBITDA is defined as operating income (loss) plus depreciation and
amortization of goodwill and other intangibles and acquisition related
costs. EBITDA is not intended to represent cash flows for the periods
presented, nor has it been presented as an alternative to operating
income or as an indicator of operating performance. EBITDA should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
(e) Each real estate transaction has two sides, the selling side and the
buying side. HomeServices may participate as broker on one or both
sides of a transaction.
(f) Represents the average sales commission received by HomeServices per
side in home sale transactions in which HomeServices participated as
broker as a percentage of the average home sales price.

28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read together with the
consolidated financial statements and related notes appearing elsewhere in
this prospectus.

ACQUISITION HISTORY

HomeServices entered the real estate brokerage business in May 1998 by
acquiring Iowa Realty Co. Inc. and Edina Realty Home Services of Minnesota,
both formerly part of AmerUs Home Services Inc. HomeServices expanded its
business with the purchases in August 1998 of two additional established real
estate brokerage firms in Omaha, Nebraska, HOME Real Estate Holdings Inc. and
CBS Real Estate Company, which were merged to form CBS HOME Real Estate
Company. In September 1998, HomeServices acquired J.C. Nichols Residential,
Inc., a brokerage firm operating in the greater Kansas City area. In December
1998, HomeServices acquired Nebraska Land Title & Abstract. In July 1999,
HomeServices acquired Paul Semonin Realtors, a Louisville, Kentucky real
estate brokerage firm operating in Kentucky and southern Indiana.

After giving pro forma effect to these acquisitions, HomeServices will be
the second largest residential real estate brokerage firm in the United
States and continues to be the market leader in the Midwestern residential
real estate brokerage industry, each in terms of closed transaction value.

OVERVIEW

Revenues

HomeServices' commission revenue consists of sales commissions earned by
providing real estate brokerage services to customers in the purchase and
sale of new and existing homes. Sales commissions typically range from
approximately 5% to 7% of the sales price and may be shared between the
seller's broker and the buyer's broker. In transactions in which HomeServices
is acting as a broker on one side of a transaction (either the buying side or
the selling side) and a third-party broker is acting as a broker on the other
side of the transaction, HomeServices will typically share approximately 50%
of the sales commission with the other broker. In transactions in which
HomeServices is acting as the sole broker, HomeServices receives 100% of the
sales commission. Commission revenue from sales commissions is recorded as
revenue upon the closing of the home sale transaction.

In addition, to a lesser extent, HomeServices earns fee revenue by
providing the following services:

o mortgage origination services for which HomeServices receives various
fees;

o title services for which HomeServices receives a fee from the title
insurance underwriters or from the home buyer;

o escrow and other closing administrative services for which HomeServices
typically receives a fee from home buyers;

o relocation services for which HomeServices receives fees from corporate
customers;

o a variety of preclosing and home care services for which HomeServices
generally receives referral fees from third-party providers; and

o franchise services whereby HomeServices provides third parties with the
right to use any one of HomeServices' brand names in connection with
the residential activities conducted by such third parties and for
which HomeServices receives a fee from such third parties.

Revenue derived from title and other services is recorded as revenue at
the time that the services are performed.

29
<PAGE>
To date a substantial portion of HomeServices' revenues have been derived
from traditional real estate brokerage services. As HomeServices expands its
E-commerce platform, it expects a larger portion of its revenues will be
derived from services other than traditional real estate brokerage services.

Expenses

Commission expense represents commissions paid to HomeServices' sales
associates and is based on a percentage of the sales commission earned by
HomeServices. Typically, the percentage of the sales commissions that is paid
to HomeServices' sales associates will vary based on such factors as sales
associate productivity and rates that are paid to competing associates in the
same local or regional market. The percentage of total commissions which
HomeServices has paid to sales associates has averaged approximately 65% over
the past three years. Similar to commission revenue, commission expense is
recorded as an expense upon the closing of the home sale transaction.

Acquisition related costs result from charges to expense for the value of
real estate sales contracts that are pending when real estate brokerage firms
are acquired. Upon the acquisition of real estate brokerage firms,
HomeServices establishes an asset for the value of pending real estate sales
contracts. HomeServices expensed pending real estate sales contracts for its
1998 acquisitions over three months, reflecting the period over which
HomeServices estimated that such contracts resulted in closed real estate
transactions.

HomeServices' office property and equipment are depreciated over their
estimated useful lives, which range from three to 33 years using
straight-line and accelerated methods. As of March 31, 1999, approximately
58.6% of total assets on HomeServices' balance sheet consisted of goodwill,
net of accumulated amortization. Goodwill represents the excess of the
purchase price that HomeServices paid for each business acquired over the
fair value of the net identifiable assets acquired. Goodwill is an
accumulation of various factors that HomeServices believes will lead to
profits above those that might normally be expected from just acquiring the
tangible assets of a business. It can reflect different things for each
business acquisition, including factors such as market share, name
recognition, competitive position and management. HomeServices amortizes
goodwill over its projected life of 30 years on a straight-line basis.

All other operating expenses consist primarily of the following: (1)
salaries and employee benefits paid to employees rather than sales
associates; (2) occupancy costs, such as rent and utilities; (3) business
promotion and advertising costs; and (4) other general and administrative
expenses, including telecommunications, office supplies, professional and
management fees, and corporate charges for services provided by MidAmerican
Holdings.

Income tax expense reflects the tax effect of book income and expense for
each period presented. Although HomeServices and its predecessor were owned
by different parents in each period presented, the amounts were calculated
for HomeServices as if it filed a separate return.

RESULTS OF OPERATIONS

The information presented below for 1997 and 1996 reflects the results of
operations of Iowa Realty and its subsidiaries, including Edina Realty, which
was a subsidiary of Iowa Realty at the time of their acquisition by
HomeServices in May 1998. Iowa Realty and its consolidated subsidiaries,
including Edina Realty, are referred to below as the predecessor of
HomeServices for periods prior to their acquisition by HomeServices on May
28, 1998.

The information presented below for the three months ended March 31, 1999
and the year ended December 31, 1998 reflects the results of operations of
the predecessor for the entire period and includes the results of operations
of the entities acquired by HomeServices after May 28, 1998, namely, CBS Real
Estate Company, HOME Real Estate Holdings Inc. and J.C. Nichols from their
respective acquisition dates in the third quarter of 1998 and Nebraska Land
Title & Abstract in the fourth quarter of 1998. CBS Real Estate Company, HOME
Real Estate Holdings Inc., J.C. Nichols

30
<PAGE>
and Nebraska Land Title & Abstract are referred to below as the
nonpredecessor acquired entities. Accordingly, the period-to-period
comparisons have been affected by HomeServices' acquisition activity.

THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998

The following table reflects selected information for the periods
indicated in dollars and as a percentage of total revenues. The amounts
reflected in the March 31, 1998 column reflect the results of operations of
the predecessor. The amounts reflected in the March 31, 1999 column reflect
the results of operations of consolidated HomeServices. Accordingly, no
amounts are reflected below for the nonpredecessor acquired entities in 1998.
Dollars are in thousands unless otherwise noted.

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------
1999 1998
---------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Commission revenue................ $56,566 87.4 % $39,387 86.4 %
Title fees........................ 4,269 6.6 4,134 9.1
Other............................. 3,850 6.0 2,044 4.5
---------- ---------- --------- ----------
Total revenues ................. 64,685 100.0 45,565 100.0
---------- ---------- --------- ----------
Commission expense................ 39,107 60.4 26,223 57.5
Depreciation and amortization .... 1,981 3.1 1,413 3.1
All other operating expenses ..... 25,141 38.9 18,620 40.9
---------- ---------- --------- ----------
Total operating expenses........ 66,229 102.4 46,256 101.5
---------- ---------- --------- ----------
Operating income (loss)........... (1,544) (2.4) (691) (1.5)
Other income (expense), net ...... (810) (1.2) (71) (0.2)
---------- ---------- --------- ----------
Income (loss) before income
taxes............................ (2,354) (3.6) (762) (1.7)
Income taxes...................... (927) (1.4) (275) (0.6)
---------- ---------- --------- ----------
Net income (loss)................. $(1,427) (2.2) $ (487) (1.1)
========== ========== ========= ==========
Selected Statistics:
Closed transaction sides.......... 13,353 9,815
Home sales volume (in millions) .. $ 1,786 $ 1,277
Average home sales price.......... $ 133.7 $ 130.1
</TABLE>

Seasonality

Some of HomeServices' real estate brokerage business is subject to
seasonal fluctuations because fewer home sale transactions tend to close
during the first and fourth quarters of the year. Accordingly, revenues of
some of HomeServices' operating subsidiaries have historically been weakest
in the first and fourth quarters. Although commission expense is variable
with closed transactions, many of HomeServices' other expenses, such as rent,
are fixed. On a consolidated basis, the relationship between HomeServices'
expenses and revenues may be subject to significant fluctuation on a
quarter-to-quarter basis. As a result, on a consolidated basis, HomeServices'
operating results and profitability are lower in the first and fourth
quarters relative to the remainder of the year. Accordingly, HomeServices
does not believe that its results of operations for the three months ended
March 31, 1999 will be indicative of its results of operations for the year
ending December 31, 1999.

Revenues

Total revenues for the first three months of 1999 were $64.7 million, an
increase of $19.1 million, or 42.0%, compared to the same period in 1998.
Commission revenue from the brokerage operations for the first three months
of 1999 was $56.6 million, an increase of $17.2 million, or 43.6%, compared
to the same period in 1998. The increase in total commission revenue of $17.2
million in the first three months of 1999 compared to the same period in 1998
was primarily a result of the increase in closed transaction sides of
HomeServices to 13,353, an increase of 3,538, or 36%, compared to the same

31
<PAGE>
period in 1998. The inclusion of the nonpredecessor acquired entities
accounted for 3,103, or 87.7%, of the increase in closed transaction sides.
Commission revenue also increased, to a lesser extent, as a result of the
increase in average home sales price of 2.8% in the first three months of
1999 compared to the same period in 1998.

Title fees for the first three months of 1999 were $4.3 million, an
increase of $0.2 million, or 3.3%, compared to same period in 1998. The
increase in title fees in the first three months of 1999 compared to the same
period in 1998 was due to an increase in title services provided as a result
of an increase in the number of brokerage transactions and the acquisition of
a title services company in December 1998, partially offset by a decrease in
the number of refinancing transactions. The number of refinancing
transactions in 1998 was unusually high primarily as a result of more
favorable interest rates.

Other revenues for the first three months of 1999 were $3.9 million, an
increase of $1.9 million, or 88.4%, compared to the same period in 1998. The
inclusion of the results of the nonpredecessor acquired entities accounted
for $1.4 million of the increase. In addition, Concierge Services revenues of
the predecessor increased $0.4 million in the first three months of 1999
compared to the same period in 1998.

Commission Expense

Commission expense from the real estate brokerage operations for the first
three months of 1999 was $39.1 million, an increase of $12.9 million, or
49.1%, compared to the same period in 1998. Of the total increase in
commission expense, $2.9 million was attributable to the predecessor and the
other $10.0 million was attributable to the nonpredecessor acquired entities.
Commission expense as a percentage of commission revenue increased from 66.6%
in the first three months of 1998 to 69.1% in the first three months of 1999
primarily due to higher commission pay schedules at the nonpredecessor
acquired entities.

Commission revenue less commission expense, or net commission revenue, for
the first three months of 1999 was $17.5 million, an increase of $4.3
million, or 32.6%, compared to the same period in 1998. Of this increase,
$3.5 million is attributable to the nonpredecessor acquired entities.

Depreciation and Amortization

Depreciation and amortization for the first three months of 1999 was $2.0
million, an increase of $0.6 million, or 40.2%, compared to the same period
1998, primarily as a result of increased fixed assets and amortization of
goodwill related to the acquisitions.

All Other Operating Expenses

All other operating expenses for the first three months of 1999 were $25.1
million, an increase of $6.5 million, or 35.0%, compared to the same period
in 1998. The inclusion of the nonpredecessor acquired entities in 1999
accounted for $3.7 million of this increase. The remaining increase in other
operating expenses resulted from increases in several areas, two of the more
significant being a $0.7 million increase in salaries and benefits and a $0.7
million increase in corporate overhead. The bonus portion of salaries and
benefits, and business promotion and advertising costs for the real estate
brokerage business were each affected by the increased transaction volume in
the first three months of 1999 compared to the same period in 1998. As a
percentage of total revenues, all other operating expenses decreased to 38.9%
from 40.9%.

Other Income (Expense), Net

Other income (expense) for the first three months of 1999 and 1998
consisted primarily of interest expense. Interest expense for the first three
months 1999 was $1.1 million, an increase of $0.9 million compared to the
same period in 1998. Interest expense increased in 1999 primarily because
HomeServices increased its outstanding indebtedness to finance the
acquisitions of the nonpredecessor acquired entities. Initial financing was
obtained through borrowings from MidAmerican Holdings. In

32
<PAGE>
the fourth quarter of 1998, most of those borrowings were refinanced with the
proceeds of a $35.0 million private placement of 7.12% senior notes and
borrowings of $25.0 million under a revolving credit facility. Other income
was primarily interest income.

Income Taxes (Benefit)

The increase in the income tax benefit reflected in the three months ended
March 31, 1999 as compared to the three months ended March 31, 1998 is
primarily caused by the increase in loss before income taxes between the same
periods.

Net Income (Loss)

The net loss for the first three months of 1999 was $1.4 million compared
to the $0.5 million net loss of the predecessor for the same period in 1998.
Net income from the nonpredecessor acquired entities was more than offset by
decreased operating income of the predecessor and increased interest expense
as more fully described above.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

The following table reflects selected information for the periods
indicated in dollars and as a percentage of total revenues. The amounts
reflected in the predecessor column reflect the results of operations of the
predecessor from January 1, 1998 to May 28, 1998. The amounts reflected in
the HomeServices column reflect the results of operations of the predecessor
from May 28, 1998 to December 31, 1998 and the results of operations of the
nonpredecessor acquired entities from their respective acquisition dates
through December 31, 1998. Accordingly, no amounts are reflected below for
the nonpredecessor acquired entities before they were acquired by
HomeServices in the third and fourth quarters of 1998. Dollars are in
thousands unless otherwise noted.

<TABLE>
<CAPTION>
1998
---------------------------------------------------------------
PREDECESSOR HOMESERVICES TOTAL 1997
------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commission revenue................. $74,893 86.8% $169,647 89.0% $244,540 88.4% $191,083 89.0%
Title fees ........................ 7,575 8.8 14,154 7.4 21,729 7.8 16,203 7.5
Other ............................. 3,769 4.4 6,790 3.6 10,559 3.8 7,410 3.5
--------- -------- ----------- -------- ----------- -------- ---------- --------
Total revenues ................... 86,237 100.0 190,591 100.0 276,828 100.0 214,696 100.0
--------- -------- ----------- -------- ----------- -------- ---------- --------
Commission expense ................ 49,107 56.9 113,225 59.4 162,332 58.6 125,148 58.3
Acquisition related costs ......... -- -- 18,271 9.6 18,271 6.6 -- --
Depreciation and amortization .... 2,293 2.7 4,177 2.2 6,470 2.3 5,619 2.6
All other operating expense ...... 31,126 36.1 59,265 31.1 90,391 32.7 72,808 33.9
--------- -------- ----------- -------- ----------- -------- ---------- --------
Total operating expenses ......... 82,526 95.7 194,938 102.3 277,464 100.2 203,575 94.8
--------- -------- ----------- -------- ----------- -------- ---------- --------
Operating income (loss) ........... 3,711 4.3 (4,347) (2.3) (636) (0.2) 11,121 5.2
Other income (expense), net ...... (94) (0.1) (1,334) (0.7) (1,428) (0.5) (903) (0.4)
--------- -------- ----------- -------- ----------- -------- ---------- --------
Income (loss) before income taxes 3,617 4.2 (5,681) (3.0) (2,064) (0.7) 10,218 4.8
Income taxes (benefit) ............ 1,664 1.9 (2,247) (1.2) (583) (0.2) 4,725 2.2
Minority interest.................. -- -- -- -- -- -- 633 0.3
--------- -------- ----------- -------- ----------- -------- ---------- --------
Net income (loss) ................. $ 1,953 2.3 $ (3,434) (1.8) $ (1,481) (0.5) $ 4,860 2.3
========= ======== =========== ======== =========== ======== ========== ========
Selected Statistics:
Closed transaction sides .......... 18,578 41,580 60,158 48,631
Home sales volume (in millions) .. $ 2,458 $ 5,741 $ 8,199 $ 6,183
Average home sales price .......... $ 132.3 $ 138.1 $ 136.3 $ 127.1
</TABLE>

Revenues

Total revenues for 1998 were $276.8 million, an increase of $62.1 million,
or 28.9%, compared to 1997. Commission revenue from the real estate brokerage
operations for 1998 was $244.5 million, an increase of $53.5 million, or
28.0%, compared to 1997. The increase in commission revenue for 1998

33
<PAGE>
was a result of an increase in closed transaction sides. Closed transaction
sides totaled 60,158 in 1998, an increase of 11,527, or 23.7%, compared to
1997, which includes the addition of the 6,136 closed transaction sides for
the nonpredecessor acquired entities from their respective acquisition dates
in 1998. The increase in commission revenue was also a result of the increase
in average home sales price, which increased 7.2% in 1998 compared to 1997.

Title fees for 1998 were $21.7 million, an increase of $5.5 million, or
34.1%, compared to 1997. The increase in the title fees in 1998 was due to an
increase in the number of brokerage transactions and an increase in the
number of refinancing transactions. The number of refinancing transactions
increased in 1998 compared to 1997 primarily as a result of more favorable
interest rates.

Other revenues for 1998 were $10.6 million, an increase of $3.1 million,
or 42.5%, compared to 1997, of which increase $1.2 million was attributable
to nonpredecessor companies. The increase in other revenues of the
predecessor was primarily a result of increased administrative fees,
franchise fees and referral fees.

Commission Expense

Commission expense from the real estate brokerage operations for 1998 was
$162.3 million, an increase of $37.2 million, or 29.7%, compared to 1997. Of
the total increase in commission expense, $19.4 million was attributable to
the predecessor and the other $17.8 million was attributable to the
nonpredecessor acquired entities. Commission expense as a percentage of
commission revenue increased from 64.9% in 1997 to 66.4% in 1998 primarily
due to a higher ratio of commission expense to commission revenue at the
nonpredecessor acquired entities.

Net commission revenue from the real estate brokerage operations for 1998
was $82.2 million, an increase of $16.3 million, or 24.7%, compared to 1997.
Of the total increase in net commission revenues, $9.1 million was
attributable to the predecessor and the other $7.2 million was attributable
to the nonpredecessor acquired entities.

Acquisition Related Costs

Upon acquiring the real estate brokerage companies, HomeServices
established an asset for the value of pending real estate sales contracts.
The value of these acquired contracts for 1998 was $18.3 million, compared to
none in 1997. The entire $18.3 million value of such contracts was expensed
in 1998. This was a noncash expense.

Depreciation and Amortization

Depreciation and amortization for 1998 was $6.5 million, an increase of
$0.9 million, or 15.1%, compared to 1997, primarily as a result of
amortization of goodwill related to business acquisitions.

All Other Operating Expenses

All other operating expenses for 1998 totaled $90.4 million, an increase
of $17.6 million, or 24.1%, compared to 1997. The inclusion of the
nonpredecessor acquired entities accounted for $7.3 million of this increase.
The remaining increase in other operating expenses resulted from a $5.2
million increase in salaries and benefits (including $3.0 million for
bonuses), a $2.3 million increase in business promotion and advertising
expenses and a $3.0 million increase in other general expenses with respect
to the predecessor. The bonus portion of salaries and benefits and business
promotion and advertising costs for the real estate brokerage business were
each affected by the increased transaction volume. As a percentage of total
revenue, all other operating expenses decreased to 32.7% from 33.9%.

Other Income (Expense), Net

Other income (expense) for 1998 and 1997 consisted primarily of interest
expense. Interest expense for 1998 was $2.2 million, an increase of $0.7
million, or 42.7%, compared to 1997. Interest expense increased in 1998
primarily because HomeServices increased its outstanding indebtedness to

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<PAGE>
finance the acquisitions of the nonpredecessor acquired entities. Initial
financing was obtained through borrowings from MidAmerican Holdings. In the
fourth quarter of 1998, most of those borrowings were refinanced with the
proceeds of a $35.0 million private placement of 7.12% senior notes and
borrowings of $25.0 million under a revolving credit facility. The other
income was primarily interest income.

Income Taxes (Benefit)

The income taxes (benefit) for 1998 is the summation of the income taxes
of HomeServices and the predecessor. The predecessor had a higher effective
tax rate because of amortization of goodwill that provided no tax deduction.

Net Income (Loss)

Net income for the predecessor for the period from January 1, 1998 through
May 27, 1998 (the date HomeServices acquired the predecessor) was $1.9
million. HomeServices reported a net loss of $3.4 million for the period from
May 28, 1998 through December 31, 1998. HomeServices' results of operations
for 1998 include the expensing of the value of real estate sales contracts
that were pending at the date of acquisition, which resulted in an
acquisition related noncash charge of $18.3 million that reduced 1998 net
income by $10.9 million on an after-tax basis. The entire balance of such
contracts was expensed as of December 31, 1998.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

The following table reflects selected information of the predecessor for
the periods indicated in dollars and as a percentage of total revenues.
Dollars are in thousands unless otherwise noted.

<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
Commission revenue ............. $191,083 89.0% $179,378 82.9%
Title fees ..................... 16,203 7.5 14,821 6.9
Other .......................... 7,410 3.5 22,092 10.2
---------- -------- ---------- --------
Total revenues ................ 214,696 100.0 216,291 100.0
---------- -------- ---------- --------
Commission expense ............. 125,148 58.3 115,331 53.3
Depreciation and amortization . 5,619 2.6 5,103 2.4
All other operating expenses .. 72,808 33.9 85,162 39.4
---------- -------- ---------- --------
Total operating expenses ..... 203,575 94.8 205,596 95.1
---------- -------- ---------- --------
Operating income (loss) ........ 11,121 5.2 10,695 4.9
Other income (expense), net ... (903) (0.4) (2,582) (1.2)
---------- -------- ---------- --------
Income before income taxes .... 10,218 4.8 8,113 3.8
Income taxes ................... 4,725 2.2 3,263 1.5
Minority interest .............. 633 0.3 1,276 0.6
---------- -------- ---------- --------
Net income...................... $ 4,860 2.3 $ 3,574 1.7
========== ======== ========== ========
Selected Statistics:
Closed transaction sides ...... 48,631 47,836
Home sales volume (in
millions)...................... $ 6,183 $ 5,783
Average home sales price ...... $ 127.1 $ 120.9

</TABLE>

Revenues

Total revenues for 1997 were $214.7 million, a decrease of $1.6 million,
or 0.7%, compared to 1996. Commission revenue for 1997 was $191.1 million, an
increase of $12.4 million, or 6.9%, compared to 1996. The acquisition by the
predecessor in July 1997 of HOME Real Estate accounted for approximately
$10.0 million of the increase. The number of brokerage transactions involving
the

35
<PAGE>
predecessor (excluding the July acquisition of HOME Real Estate) was 46,225
in 1997, a decrease of 1,611, or 3.4%, compared to 1996, primarily as a
result of a change in market conditions. The decrease in the predecessor's
transactions was more than offset by a 4.8% increase in the average home
sales price resulting in an overall increase of 1.3% in the total dollar
value of homes sold.

Title fees for 1997 were $16.2 million, an increase of $1.4 million, or
9.3%, compared to 1996. The increase in title fees in 1997 was due to an
overall increase in the number of brokerage transactions compared to 1996.

Other revenues for 1997 were $7.4 million in 1997, a decrease of $14.7
million, or 66.5%, compared to 1996. In 1996, the predecessor had real estate
development operations that contributed $14.0 million to other revenues. As
part of its strategy, the predecessor reduced the significance of this line
of business, which contributed only $0.4 million of other revenues in 1997.

Commission Expense

Commission expense from the real estate brokerage operations for 1997 was
$125.1 million, an increase of $9.8 million, or 8.5%, compared to 1996. Of
the total increase in commission expense, $7.7 million was attributable to
the acquisition of HOME Real Estate by the predecessor. Commission expense as
a percentage of commission revenue increased from 64.3% in 1996 to 64.9% in
1997.

Net commission revenue from the real estate brokerage operations for 1997
was $65.9 million, an increase of $1.9 million, or 2.9%, compared to 1996.

Depreciation and Amortization

Depreciation and amortization for 1997 was $5.6 million, an increase of
$0.5 million, or 10.1%, compared to 1996, primarily as a result of a $2.2
million increase in office property and equipment.

All Other Operating Expenses

All other operating expenses for 1997 were $72.8 million, a decrease of
$12.4 million, or 14.5%, compared to 1996. Although other operating expenses
increased in 1997 by $2.1 million due to the acquisition of HOME Real Estate
by the predecessor, these increases were more than offset by decreases
resulting from a decrease in real estate development related costs. Cost of
sales for the real estate development operations discussed under "Other"
revenues above totaled $11.3 million in 1996. Additionally, the decrease
resulted from the closure of seven offices in the Iowa area and the decrease
in related costs, and reduced activity levels for 1997 as compared to 1996.
As a percentage of total revenue, all other operating expenses decreased to
33.9% from 39.4%.

Other Income (Expense)

Other income (expense) for 1997 and 1996 consisted primarily of interest
expense. Interest expense for 1997 was $1.5 million, a decrease of $2.1
million, or 57.7%, compared to 1996. The decrease in interest expense is
attributable to a $20.8 million reduction in borrowings under the
predecessor's line of credit and the retirement of $4.0 million of subsidiary
subordinated notes.

Income taxes

The higher amount of income tax expense for the year ended December 31,
1997 as compared to the same period in 1996 is primarily the result of the
difference in income before income taxes between the periods.

Net Income

The predecessor's net income for 1997 was $4.9 million, an increase of
$1.3 million compared to 1996. The major reasons for the increase included
the acquisition of HOME Real Estate in July of 1997, decreased operating
expense, decreased interest expense and a reduction in the minority owners'
interest in its Edina Realty subsidiary.

36
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

HomeServices' capital requirements consist primarily of working capital,
capital expenditures and acquisitions. Historically, HomeServices has funded
its working capital and capital expenditures using cash and cash equivalents
on hand. Acquisitions have been financed through borrowings under its
revolving credit facility, the private placement of the 7.12% senior notes,
loans from MidAmerican Holdings and capital contributions. HomeServices' cash
and cash equivalents totaled $2.9 million at March 31, 1999, compared to $3.1
million and $2.9 million at December 31, 1998, and March 31, 1998,
respectively.

Cash provided by operating activities was $2.2 million for the three
months ended March 31, 1999, compared to cash used by operating activities of
$1.1 million for the three months ended March 31, 1998. Cash provided by
operating activities was $16.7 million for 1998, $5.3 million for 1997 and
$2.1 million for 1996. The cash provided from operating activities for the
year ended December 31, 1998 includes $4.3 million contributed by the
predecessor and $12.4 million contributed by HomeServices. Cash provided by
operating activities for the year ended December 31, 1998 was positively
affected by the improvement in earnings excluding the effect of the $18.3
million noncash charge to earnings for acquisition related costs of
HomeServices.

Cash used in investing activities was $2.2 million for the three months
ended March 31, 1999 compared to $0.3 million for the three months ended
March 31, 1998. Cash used in investing activities was $100.0 million for
1998, $6.8 million for 1997 and $8.9 million for 1996. In 1998, cash used in
investing activities was primarily a result of $74.4 million for the
acquisition of the predecessor and $22.1 million for the acquisitions of the
nonpredecessor acquired entities, net of cash received.

Cash used by financing activities was $0.2 million for the three months
ended March 31, 1999 compared to cash provided by financing activities of
$1.7 million for the three months ended March 31, 1998. Cash provided by
financing activities was $88.6 million for 1998 and $10.7 million for 1996,
while cash used by financing activities was $1.6 million in 1997. Cash
provided by financing activities in 1998 was primarily a result of capital
contributions, borrowings under HomeServices' revolving credit facility, the
issuance of its 7.12% senior notes and a loan from MidAmerican Holdings. Cash
used by financing activities in 1997 was primarily a result of the repayment
of certain indebtedness of the predecessor. In 1996, cash provided by
financing activities was primarily a result of an increase in notes and
contracts payable.

In May 1998, HomeServices entered into a revolving credit agreement with
MidAmerican Holdings to borrow funds from time to time, primarily to support
the acquisition of the predecessor and the nonpredecessor acquired companies.
The maximum indebtedness during the life of the agreement through March 31,
1999, was $54.2 million. The interest rate on borrowings is equal to the
30-day LIBOR rate plus 1% (5.96% at March 31, 1999). Interest expense
recorded on this agreement totaled $1.3 million through March 31, 1999. As of
December 31, 1998 and March 31, 1999, there were zero and $1.0 million,
respectively, of borrowings under this agreement. On June 24, 1999, the
revolving credit agreement with MidAmerican Holdings was amended to reduce
MidAmerican Holdings' total commitment and HomeServices' borrowing capacity
thereunder from $100.0 million to $10.0 million. Amounts borrowed are payable
upon demand from MidAmerican Holdings.

In November 1998, HomeServices obtained a $25.0 million, five year
revolving credit facility that was fully utilized as of March 31, 1999. The
credit availability under the revolving credit facility declines by $1.5
million every six months beginning in May 1999 through November 2003 with an
$11.5 million balloon payment due in November 2003. Also, in November 1998,
HomeServices issued $35.0 million of 7.12% senior notes due in annual
increments of $5.0 million starting in 2004, with the final payment due in
2010. Under the terms of the 7.12% senior notes and the revolving credit
facility, HomeServices may not issue, assume or guarantee debt that would
cause its total debt to exceed 65% of total capitalization and must maintain
equity capitalization of at least $25.5 million.

HomeServices believes that the net proceeds that it receives from the
offering, together with its cash flow from operations and borrowings under
the revolving credit facility, will be adequate to meet

37
<PAGE>
its needs for working capital, capital expenditures, debt service, planned
acquisitions and the continued development of its E-commerce platform. If,
however, net proceeds from the offering and cash flow from operations are
insufficient to satisfy HomeServices' liquidity requirements, it may need to
raise additional funds through public or private financings or the formation
of strategic joint ventures. HomeServices cannot assure you that such
additional funding, if needed, will be available on favorable terms, or at
all. If HomeServices raises additional funds in the future by issuing equity
securities, the percentage ownership of its then current stockholders would
be reduced, and those equity securities could be preferred securities having
rights senior to the common stock.

MARKET RISK

At March 31, 1999, HomeServices had $35.0 million of redeemable fixed-rate
long-term notes payable with a fair market value of $33.5 million. The notes
are fixed-rate and therefore do not expose HomeServices to the risk of
earnings loss due to changes in market interest rates. However, the fair
value of the notes would decrease by approximately $1.1 million if interest
rates on 10-year treasury notes were to increase by 100 basis points from
their levels on March 31, 1999. In general, such a decrease in fair value
would impact earnings and cash flows only if HomeServices were to reacquire
all or a portion of these instruments prior to their maturity.

At March 31, 1999, HomeServices had a $25.0 million floating-rate credit
facility which was fully utilized. HomeServices has entered into a 3-year
interest swap agreement covering $12.5 million of the credit facility, which
reduces the exposure to interest rate changes. The interest rate differential
from the swap agreement is reflected as an adjustment to interest expense
over the life of the agreement. If the floating rates on LIBOR were to
increase by 100 basis points from the March 31, 1999 levels, monthly interest
expense, after taking into consideration the impact of the rate swap
differential, would increase approximately $100,000. As of March 31, 1999,
HomeServices could terminate the swap agreement and receive proceeds of
$120,000. The termination costs of the swap agreement would impact
HomeServices' earnings only if all or a portion of the swap instruments were
terminated prior to their expiration or in the event of counterparty failure.

YEAR 2000 COMPLIANCE

What is generally known as the year 2000 computer issue arose because many
existing computer programs and embedded systems use only the last two digits
to refer to a year. Therefore, those computer programs do not properly
distinguish between a year that begins with "20" instead of "19". If not
corrected, many computer applications could fail or create erroneous results.
The failure to correct a material year 2000 item could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect HomeServices'
results of operations, liquidity and financial condition.

The year 2000 issue could potentially impact systems critical to
HomeServices including real estate listing, agent support, accounting, vendor
and agent payment processing, payroll, and loan origination systems.
HomeServices has performed an inventory of its potential year 2000 issues and
has verified the readiness of approximately 80-85% of its systems. Under the
current plan, HomeServices expects that all of its material systems will be
upgraded by September 30, 1999. To date, HomeServices has incurred $1.9
million in costs related to addressing the year 2000 issue. HomeServices does
not expect the total remaining cost of readiness to exceed $800,000.

Additionally, HomeServices' business operations are heavily dependent upon
service providers, most significantly communication providers. HomeServices
is inquiring of its third-party vendors and service providers, including
multiple listing service providers, regarding their year 2000 readiness.
HomeServices expects to have this assessment complete and a contingency plan
in place by August 1999. HomeServices' major software and hardware vendors
and service providers have indicated that their systems currently are or will
be year 2000 ready before December 31, 1999. HomeServices cannot assure you,
however, that the systems of those companies will be converted in a timely
manner or that the third parties will mitigate the effects of non-readiness.
Any failure by HomeServices' third-party vendors and service providers to
comply in a timely manner could have a material adverse effect on its
operations.

38
<PAGE>
In each of HomeServices' future acquisitions, HomeServices intends to
evaluate the systems of the acquired companies to determine whether their
systems are year 2000 ready. If an acquired company's systems are not year
2000 ready, HomeServices intends to prepare a plan to bring the systems into
a state of readiness. While HomeServices cannot guarantee you that all future
acquired companies will be year 2000 ready on a timely basis, the cost of
bringing such companies into a state of readiness is not expected to have a
material adverse effect on HomeServices' financial condition or results of
operations.

SEASONALITY

HomeServices' real estate brokerage business is subject to seasonal
fluctuations because fewer home sale transactions tend to close during the
first and fourth quarters of the year. Accordingly, revenues of some of
HomeServices' operating subsidiaries historically have been strongest in the
second and third quarters of the calendar year. While commissions are paid to
sales associates only upon the sale of a home, many of HomeServices' other
expenses, such as rent, are fixed. As a result, on a consolidated basis, the
relationship between HomeServices' expenses and revenues may be subject to
significant fluctuation on a quarter-to-quarter basis.

IMPACT OF INFLATION AND INTEREST RATE CHANGES

HomeServices' results of operations are sensitive to changes in the U.S.
economy and the economies of the markets in which it operates and, to a
lesser extent, interest rates, particularly home mortgage rates. During
periods of inflation, the value of residential real estate increases. While
increases in the value of residential real estate typically lead to
corresponding increases in HomeServices' commissions per transaction side,
inflation typically also causes mortgage interest rates to increase. As
mortgage interest rates increase, the level of residential transaction volume
declines, leading to decreased commission revenue and decreased revenue from
the related ancillary services. Additionally, HomeServices' title businesses
receive revenues from refinancing transactions that also decline during
periods of high interest rates.

39
<PAGE>
BUSINESS

OVERVIEW

In addition to providing traditional residential real estate brokerage
services, HomeServices also cross sells to its existing real estate customers
preclosing services, such as mortgage origination, closing administrative
services and title abstracting. On a pro forma basis for the year ended
December 31, 1998, HomeServices generated revenues from these services of
approximately $26.6 million. HomeServices also provides referrals for other
preclosing and postclosing services provided by third parties, such as home
warranty, home inspection, home security, property and casualty insurance,
home maintenance and home repair and intends to significantly expand these
services in the future, particularly through E-commerce. HomeServices
believes that it has established an on-line presence that will enable it to
capitalize on its brand awareness and existing customer relationships to
expand its developing E-commerce platform. HomeServices believes that its
E-commerce platform will enable it to offer new products, services and
referrals, including E-loans, and to increase sales of its existing products
and services. HomeServices has established hyperlinks between its own website
and leading Internet real estate websites, such as Realtor.com, and the
websites of local newspapers in HomeServices' existing markets. In addition,
HomeServices has established hyperlinks between its own website and the
separate websites maintained by its real estate brokerage subsidiaries and
promotes its website in all of its marketing programs.

According to industry sources, the average home ownership life cycle lasts
seven years. This seven-year cycle includes the process of buying a home,
maintaining and repairing the home over the years, and eventually reselling
and purchasing a new home. Of this seven-year cycle, the real estate broker's
relationship with its customer during the listing process and sale and
purchase transaction has typically lasted for 90-120 days. According to a
1997 survey conducted for the National Association of Realtors, 78% of the
recent home buyers who responded to the survey stated that the opportunity to
handle some or all of their home buying services through their real estate
company would be appealing to them, while 66% stated that if they had the
opportunity to redo their own home buying experience, they would choose a
real estate company that offers "one-stop shopping". HomeServices believes
that the strong relationships it develops with its customers afford it a
unique opportunity to expand its business by maintaining and strengthening
its customer relationships by offering, at no cost to its customers,
referrals for additional basic home services initiated at closing and a
variety of other products and services used after the closing of a home
purchase. HomeServices believes that by

40
<PAGE>
offering these additional services to its customers, particularly by means of
E-commerce, it can assist its customers through each stage of the average
seven-year home ownership life cycle and maintain its customers throughout
the home ownership experience. HomeServices believes that the customer
knowledge that it gains during the sale and/or purchase process allows it to
target its particular services to the home buyer's specific needs.
HomeServices receives referral fees from the service providers under
contracts entered into with the service providers. In addition, HomeServices
believes it will be able to generate banner advertising revenues from its
E-commerce operations.

HomeServices' consumer-centric business model of the typical home
ownership experience is illustrated by the diagram below which depicts the
stages of the average home ownership life cycle and the business
opportunities for HomeServices throughout the cycle:

CONSUMER-CENTRIC BUSINESS MODEL OF THE TYPICAL HOME OWNERSHIP EXPERIENCE

[DIAGRAM OF THE VARIOUS STAGES OF THE TYPICAL HOME OWNERSHIP LIFE CYCLE]

- ------------
* HomeServices plans to make these referral services available to
Internet customers generally by means of E-commerce at no cost to the
customer. HomeServices currently provides referrals for a variety of
Concierge Services and Home Dividends services to its existing
customers for no charge. HomeServices generates referral fees from
service providers pursuant to agreements with the service providers. In
addition, HomeServices believes that it will be able to generate banner
advertising revenues in the future as a result of its E-commerce
operations.

41
<PAGE>
HomeServices is a holding company and conducts all of its operations
through its real estate brokerage subsidiaries. The following chart is a
summary of HomeServices' organizational structure, including its principal
real estate brokerage subsidiaries, as of the offering. The chart also
includes the states in which each real estate brokerage subsidiary operates
and the year each real estate brokerage subsidiary began operations.

[ORGANIZATIONAL CHART]

- ------------
* CBS HOME Real Estate was formed in 1998 as a result of a merger between
HOME Real Estate Holdings Inc. (which began operations in 1987) and CBS
Real Estate Company (which began operations in 1964).

42
<PAGE>
The following chart lists the preclosing services and Concierge Services
currently being offered or referred by each of HomeServices' real estate
brokerage subsidiaries.

<TABLE>
<CAPTION>
EDINA REALTY IOWA REALTY J.C. NICHOLS CBS HOME PAUL SEMONIN
---------------- --------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Title ............................... [check] [check] [check] [check]
Escrow .............................. [check] [check] [check] [check]
Mortgage ............................ [check] [check] [check] [check] [check]
Property and casualty insurance .... [check] [check] [check]
Home warranty ....................... [check] [check] [check] [check] [check]
Home inspection ..................... [check] [check] [check]
Home security ....................... [check] [check] [check] [check]
</TABLE>

GROWTH STRATEGY

o Selective acquisitions and consolidations. HomeServices intends to
continue to expand into new geographic markets within the highly
fragmented United States residential real estate brokerage industry
through the acquisition of high quality, leading real estate brokerage
firms with local brand name recognition and significant market share in
their existing markets. HomeServices will also continue to pursue
opportunities to consolidate two or more acquired companies where such
consolidation would create a leading real estate brokerage firm within
its existing market while providing the new entity opportunities to
increase revenues through cross selling its products and services.
HomeServices has demonstrated its ability to successfully close and
integrate real estate brokerage acquisitions in the past. Since May
1998, HomeServices has acquired and integrated into its operations six
major residential real estate brokerage firms.

o Expanding its presence in its existing markets. HomeServices is the
market leader in the Midwestern residential real estate brokerage
industry in terms of pro forma 1998 year-end closed transaction value,
occupying the number one or number two market share position in each of
its major markets. HomeServices believes that each of its real estate
brokerage firms has achieved brand recognition and a reputation among
consumers for quality and consistency. HomeServices also believes that
it is well positioned to expand the coverage of its existing markets
under the same brand names primarily through opening additional
offices, hiring additional sales associates and the incremental
acquisition of operations adjacent to HomeServices' existing service
areas.

o Cross selling real estate related products and services. HomeServices
believes that the information it gathers about consumers through the
home purchasing transaction advantageously positions it to cross sell
its existing products and services and to generate referrals for new
products and services provided by third parties (including home
maintenance and repair) to its existing realty customer base. These
existing products and services include, most significantly, mortgage
origination, title insurance and escrow services, as well as referrals
for services such as property and casualty insurance, home warranty,
home inspection and home security. HomeServices earns fees from the
providers of these services for loans or sales originated by it at no
cost to the customer. As HomeServices acquires additional real estate
brokerage firms, it will expand the cross selling of such products to
the customers of the newly acquired companies, thereby further
maximizing revenue opportunities from its real estate buyers.

o Offering referrals for various home care and other products and
services, particularly by means of E-commerce. HomeServices currently
offers to its existing realty customers referrals for certain home care
products and services and plans to significantly expand its referral
services

43
<PAGE>
to include various additional home care products and services,
including Concierge Services, Home Dividends services, E-commerce
related services and nonrealty related services. HomeServices believes
that by offering these additional products and services, it will be
able to serve the needs of homeowners throughout the complete home
ownership cycle. HomeServices expects these referrals to be accessible
by telephone as well as the Internet. HomeServices will provide these
services to its customers at no cost while generating referral fees
from third-party service providers of such products and services. In
addition, HomeServices believes that it will be able to generate banner
advertising revenues from its E-commerce operations. HomeServices
expects to offer the following types of services to new and existing
customers, particularly through HomeServices' developing E-commerce
platform:

-- Concierge Services to assist home purchasers at and after
closing. Through its Concierge Services, HomeServices intends to offer
its home buyers the opportunity to obtain in a timely and efficient
manner the basic home services (which are initiated at closing)
necessary to operate a new home. These offerings generally include the
following services, some of which HomeServices currently provides
referrals for: local and long distance telephone service, Internet
service, cable television, newspaper delivery, home security, home
warranty, property and casualty insurance, electricity and natural
gas, waste disposal and moving. Since these services are necessary to
the home buyer and a consumer decision usually must be made by
closing, HomeServices believes that, given its strong relationship
with and access to its customers, there are significant opportunities
to earn revenues by offering referrals for such services to its
customers.

-- Home Dividends services to assist home purchasers with home
maintenance and repair. Through its Home Dividends services,
HomeServices plans to offer referrals for home maintenance and repair
products and services that home owners generally need shortly
following a home purchase and throughout the typical cycle of home
ownership. HomeServices intends to offer customers referrals for
quality products and services such as roofing, siding, decking,
remodeling, windows, landscaping, plumbing, electrical, heating,
ventilation and air conditioning and appliances.

-- Broad-based E-commerce services. Through its developing E-commerce
operations, HomeServices intends to offer E-loans to its existing real
estate customers and other Internet users, as well as provide
referrals for other products and services offered as part of
HomeServices' Concierge Services and Home Dividends operations.
HomeServices believes that it will have the capability to offer E-loan
services by the end of the third quarter of 1999.

-- Nonrealty related referrals. HomeServices believes that as an
extension of its Concierge Services and Home Dividends programs, it
will have the opportunity to offer referrals to vendors of products
and services that are not directly related to home ownership.
HomeServices believes that these referrals may include entertainment,
leisure and recreational activities and consumer products and services
of a more general nature for its existing realty customer base and for
Internet customers generally.

While HomeServices currently provides some of these products and services
through traditional means, such as referrals for certain Concierge
Services (e.g., home warranty, home inspection and home security), it
believes that its developing E-commerce platform will enable it to
significantly grow this aspect of its business.

COMPETITIVE STRENGTHS

HomeServices believes that the following competitive strengths
differentiate it from its real estate brokerage competitors:

44
<PAGE>
one or number two position in each of HomeServices' major markets and
enjoy strong brand-name recognition, attributes from which HomeServices
expects to benefit as it expands its service offerings.

o Larger scale of operation than the competition. As one of the leading
companies in the industry, HomeServices enjoys certain economies of
scale and is able to spread costs and investments, such as marketing
and technology, over a larger revenue base. In addition, HomeServices'
size permits it to offer and cross sell efficiently a broader array of
services than smaller firms and enables it to take advantage of
acquisition and consolidation opportunities.

o Efficient sales associates. HomeServices is dedicated to the
recruitment, training and retention of both new and experienced sales
associates. HomeServices provides extensive programs aimed at improving
sales associates' marketing skills and increasing their knowledge and
awareness of the issues and laws affecting the real estate industry.
While industry results vary widely, the productivity of HomeServices'
sales associates has increased by 7.1% on a pro forma basis to an
average of 16.5 transaction sides per sales associate in 1998 from 15.4
transaction sides per sales associate in 1996. Based on information
provided by Real Trends, an industry publication, HomeServices
estimates that the average transaction sides per sales associate was
13.2 in 1998 for the top 500 residential real estate brokerage firms
(based on closed transaction sides). HomeServices believes the
productivity level of its sales associates is among the highest in the
industry. HomeServices intends to continue to recruit additional highly
qualified sales associates, targeting, in particular, sales associates
with experience in the real estate industry and longstanding referral
relationships within the community. Since January 1, 1998, HomeServices
has added approximately 275 sales associates on a pro forma basis to
its branch network.

INDUSTRY

o Fragmentation. The residential real estate brokerage industry remains
primarily a local and highly fragmented industry. According to Real
Trends, in 1998, the companies comprising HomeServices and the other
top four residential brokers accounted for only 6.0% of the total
national market based on closed transaction sides, while the top 480
firms accounted for only 20.0%. HomeServices believes this
fragmentation presents it with numerous acquisition opportunities.

45
<PAGE>
marketing its traditional residential brokerage, mortgage and title
services on-line, the Internet provides it with significant
opportunities to offer its Concierge Services and Home Dividends
services. As part of its strategy, HomeServices will seek to attract
Internet customers outside of its existing realty customer base by
providing a broad array of E-commerce offerings, which may be tailored
to the local or regional markets in which it operates or provided on a
more expansive basis.

o Size and Recent Growth of Market. Based on information reported by the
National Association of Realtors and the United States Census Bureau,
the 1998 domestic residential real estate market for existing and new
home sales consisted of more than 11.7 million transaction sides,
representing more than $950.0 billion in closed transaction value. In
recent years, the overall domestic residential real estate market has
demonstrated continued growth in home sales and rising home prices.
According to the National Association of Realtors, sales of existing
single-family homes in the Midwest reached 1.2 million in 1998, which
represents an average annual growth rate of 5.6% since 1990. In
addition, the sales growth has accelerated in recent years, as
evidenced by average annual growth of 6.9% since 1995. In 1998, the
Midwest regional median price for existing single-family homes was
$114,300, which represents an annual increase of 6.8% from 1997 and
5.4% since 1990. Rising home prices, however, have apparently not
impaired home affordability, with the National Association of Realtors'
Housing Affordability Index remaining relatively stable since 1994.

REAL ESTATE BROKERAGE OPERATIONS

The following chart depicts the number of branch offices, sales associates
and employees as of May 31, 1999 and the number and volume of transactions
for 1998 for HomeServices. All figures are presented on a pro forma basis.

<TABLE>
<CAPTION>
PAUL HOMESERVICES
EDINA REALTY IOWA REALTY J.C. NICHOLS CBS HOME SEMONIN (TOTAL)
-------------- ------------- -------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Branch Offices ................. 70 30 16 9 11 136
Sales Associates ............... 2,143 965 700 497 658 4,963
Employees ...................... 664 301 165 125 103 1,358
Number of Transactions(1) for
1998........................... 31,000 20,000 10,000 10,000 8,000 79,000
Volume of Transactions for 1998
(in billions).................. $4.6 $2.4 $1.5 $1.5 $1.1 $11.1
</TABLE>

- ------------
(1) This figure includes the two sides of a home purchase transaction
(i.e., buying and selling). 79,000 represents the total number of
closed transaction sides, of which approximately 40,000 were buy side
transactions.

HomeServices acts as a broker or agent in residential real estate
transactions. In performing these residential real estate services,
HomeServices represents either the seller, as the listing broker, or the
buyer, as the buyer's agent, in the sale. When acting as a broker for the
seller, HomeServices provides its customers with the following services:

o assisting the seller in pricing the property and preparing it for sale;

o advertising the property and showing it to the buyer;

o assisting the seller in negotiating the terms of the sale;

o ensuring that the transaction is in compliance with any applicable
federal, state and local regulations; and

o closing the transaction.

In exchange for providing these services as the seller's broker, the
seller pays HomeServices a commission upon the closing of the real estate
transaction, which is generally a fixed percentage of the

46
<PAGE>
sales price. Gross listing commissions typically range from 5% to 7% of the
sales price and may be shared between the seller's broker and the buyer's
broker. When acting as the seller's broker, HomeServices enters into an
exclusive agency relationship with the seller, which means that HomeServices
is entitled to receive a sales commission upon the closing of the sale
transaction regardless of whether HomeServices, the seller or any other
person locates the buyer.

When acting as a broker for the buyer, HomeServices provides its customers
with the following services:

o assisting the buyer in locating properties that come within the buyer's
personal and financial specifications;

o showing properties to the buyer;

o assisting the buyer in negotiating the terms of the sale;

o monitoring compliance of the transaction and the property with any
applicable federal, state and local regulations; and

o closing the transaction.

In exchange for providing these services as the buyer's broker,
HomeServices receives a commission upon the closing of the real estate
transaction that is generally a fixed percentage of the purchase price. With
the consent of the seller's broker, this commission is usually payable from
the sales commission paid by the seller to the seller's broker.

In transactions in which HomeServices is acting as a broker on one side of
a transaction (either the buying side or the selling side) and a third-party
broker is acting as broker on the other side of the transaction, HomeServices
will typically share approximately 50% of the sales commission with the other
broker. In certain circumstances, and only with the consent of both the buyer
and seller, HomeServices may act as the buyer's broker and the seller's
broker in the same transaction. HomeServices receives 100% of the sales
commission in transactions in which it acts as the sole broker.

Typically, the percentage of the real estate commissions that is paid to
HomeServices' sales associates will vary based on factors determined by
HomeServices, such as sales associate productivity and rates that are paid to
competing associates in the same local or regional market. The percentage of
total commissions which HomeServices has paid to sales associates has
averaged approximately 65% over the past three years.

The following table sets forth the real estate sales commissions and
related data of HomeServices during the periods indicated below. These
results are shown on a pro forma basis, including all entities shown in the
March 31, 1999 unaudited pro forma financial statements.

<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-----------------------------------------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sides............................. 70,792 69,833 79,598 13,596 15,024
Average sales price per home ..... $ 122.3 $ 130.0 $ 138.9 $ 129.1 $ 134.4
Average commission rate per side 3.0% 3.0% 2.9% 3.1% 3.1%
Real estate sales commissions .... $263,805 $273,111 $320,216 $54,556 $63,124
</TABLE>

SALES ASSOCIATES

HomeServices had more than 4,900 sales associates as of May 31, 1999 after
giving effect to the Paul Semonin Realtors acquisition. Sales associates are
not employees of HomeServices, but operate under independent contractor
agreements. Each sales associate signs an independent contractor agreement
with HomeServices that establishes the relationship between the sales
associate and HomeServices as that of an independent contractor rather than
employee and employer. Under this

47
<PAGE>
agreement, HomeServices agrees that the sales associate may share with other
sales associates and sales assistants the use of HomeServices' offices and
facilities for the purposes of engaging in the real estate brokerage
business. The sales associate agrees to be responsible for his or her
personal business expenses and payment of all state and federal income taxes
and self-employment taxes. The sales associate further agrees that all
listings will remain the separate and exclusive property of HomeServices.
Either HomeServices or the sales associate can terminate the independent
contractor relationship at any time upon written notice given to the other.

As independent contractors, sales associates are paid solely by commission
on the basis of closed sales transactions and do not receive a salary or
benefits from HomeServices, although they may have access to certain benefits
through HomeServices' plans. Upon the consummation of the offering, sales
associates will be eligible to participate in HomeServices' non-employee
stock purchase plan. Sales associates have participated in prior stock
purchase plans maintained on their behalf. HomeServices maintains errors and
omissions insurance coverage, referred to herein as E&O insurance, for each
of its sales associates. Some of HomeServices' real estate brokerage
subsidiaries require their sales associates to contribute towards the
maintenance of such E&O insurance.

HomeServices is dedicated to the recruitment, training and retention of
its sales associates. HomeServices provides extensive training programs for
its new and experienced sales associates aimed at improving their marketing
skills and increasing their knowledge and awareness of the issues and laws
affecting the real estate industry and their productivity. New sales
associates attend a four-week training program which prepares them for entry
into the real estate brokerage industry. Additional training is provided
after sales associates have worked in the field. Finally, more seasoned sales
associates have access to an eight-week program which is structured to
improve their business and professional skills. While industry results vary
widely, the productivity of HomeServices' sales associates has increased by
7.1% on a pro forma basis to an average of 16.5 closed sides per sales
associate in 1998 from 15.4 closed sides per sales associate in 1996.
HomeServices believes the productivity level of its sales associates is among
the highest in the industry.

MORTGAGE OPERATIONS

HomeServices offers mortgage origination services, primarily for loans in
which it acted as the broker in the home purchase transaction. Originations
refer to the general process of arranging mortgage financing on behalf of the
customer for the purchase of property or for the refinancing of an existing
mortgage. HomeServices currently provides a substantial portion of these
mortgage origination services through a residential joint venture with
Norwest Mortgage Inc., a subsidiary of Norwest Bank and the largest mortgage
originator in the United States. The joint venture employs loan originators
and supervisory staff and purchases processing, underwriting and closing
services from Norwest Mortgage. Since Norwest Mortgage underwrites and
services the mortgages, HomeServices retains none of the servicing
responsibilities or liabilities for the mortgages it originates.

Plaza Mortgage, a wholly owned subsidiary of J.C. Nichols, also
originates, processes, underwrites and closes mortgages. Plaza Mortgage's
underwriting loan commitments are contractual obligations in its own name to
mortgage loan applicants. Before underwriting the loan commitment, Plaza
Mortgage performs a credit analysis to confirm that the loan would meet the
particular guidelines established by several investors with whom Plaza
Mortgage has established relationships. Prior to closing with the mortgage
applicant, Plaza Mortgage obtains a commitment that an investor will purchase
the loan after the closing at an agreed upon price on the condition that the
loan meets the investor's particular investment guidelines. Plaza Mortgage
then sells the mortgage, typically within two weeks, to the investor and,
after it is sold, retains no service rights or interest rate risk.

In 1998, HomeServices originated approximately $461.2 million in
mortgages, of which approximately 80% represented mortgages originated by
HomeServices through its joint venture with Norwest Mortgage Inc., 15%
represented mortgages originated and underwritten by Plaza Mortgage and
approximately 5% represented mortgages originated by Plaza Mortgage and
underwritten by loan

48
<PAGE>
providers other than Norwest Mortgage and Plaza Mortgage. On a pro forma
basis for the year ended December 31, 1998 and the three months ended March
31, 1999, approximately $2.2 million and $675,000 of HomeServices' revenues
were generated by its mortgage operations.

TITLE, ESCROW AND CLOSING SERVICES

In all markets in which it operates other than Iowa and Kansas,
HomeServices performs abstracting, examination, search, endorsements,
recordation, preparation of title policy documents (as agent for Chicago
Title) and closing services as part of its title insurance services.
HomeServices acts as a title agent in such transactions and does not
underwrite the insurance. Iowa is the only state that does not authorize
residential title insurance. Instead, Iowa uses abstract companies to provide
the history (abstract) to lawyers for their review and warranty. In Iowa,
HomeServices prepares property abstracts for titles for real estate agencies,
attorneys, financial institutions and other parties involved in the selling
or financing of real estate. Kansas significantly restricts residential real
estate brokers from also performing title operations. HomeServices receives
fees for all of the above services in addition to retaining a substantial
portion of title insurance premiums in states other than Iowa and Kansas.

In addition, HomeServices owns an escrow services company which provides a
range of real estate closing services to home buyers and sellers, including
third-party closings in which HomeServices is not otherwise involved. These
services include escrowing funds and processing closing documents. Revenues
from title, escrow and closing services are generated by transaction fees,
which tend to fluctuate with HomeServices' brokerage revenues. A total of 32%
of title, escrow and closing revenues have come from transactions in which
HomeServices is not the real estate broker. On a pro forma basis for the year
ended December 31, 1998 and the three months ended March 31, 1999,
approximately $24.5 million and $4.6 million of HomeServices' revenues were
generated by its title, escrow and closing services.

RELOCATION SERVICES

HomeServices offers corporations a variety of specialized services
primarily concerned with facilitating the resettlement of transferred
employees. HomeServices believes that these relocation services minimize the
stress and inconvenience for the transferees and their families while
maximizing cost-effectiveness to the corporations. These relocation services
generally include:

o home-finding assistance;

o home-selling assistance;

o group-move coordination;

o inspection services;

o international relocation assistance;

o cost-of-living comparisons;

o school and neighborhood comparisons;

o moving services;

o mortgage services; and

o expense management.

HomeServices believes that it has established itself as a prominent
provider of relocation services, serving over 1,380 corporate clients and
their employees since 1995. Clients can select these programs and services on
a fee basis according to their needs. Representative clients for
HomeServices' relocation services include Damark International Inc., Land
O'Lakes Inc., National Car Rental System, Inc., Blue Cross Blue Shield of
Iowa, Continental Western Insurance Company, Mutual of Omaha Insurance
Company and the NCAA.

49
<PAGE>
HomeServices also maintains alliances with many major third-party
relocation companies, including Cendant Mobility Services, Prudential
Relocation, Associates Relocation Management Company, Inc., Relocation
Resources, MRI Relocation, Executive Relocation, Weichert Relocation
Services, Pinnacle Relocation Services, Paragon Relocation, Long & Foster
Relocation, DeWolfe Relocation, CTS Corporate Transfer Service and Plus
Relocation who retain HomeServices to provide relocation assistance to their
clients. In return for these referrals, HomeServices remits to the
third-party relocation companies a fixed percentage of its commissions from
any home sales.

HomeServices believes that the relocation services it provides to
corporate clients, directly or indirectly through major third-party
relocation companies, enable it to develop longstanding relationships with
the transferred employees themselves. HomeServices believes that these
transferred employees are particularly in need of Concierge Services and Home
Dividends services because they most likely would be relocating to areas
unfamiliar to them. In 1998, HomeServices generated approximately $365,000 in
fees for relocation services.

CONCIERGE SERVICES

HomeServices believes that it will be able to effectively provide its
customers, and particularly its buy-side customers, a broader and more
comprehensive range of services than its competitors by offering Concierge
Services, at no cost. Concierge Services arrange for the initiation at
closing of basic home services necessary to the home buyer (such as local and
long-distance telephone service, Internet service, cable television,
newspaper delivery, home security, home warranty, property and casualty
insurance, electricity, natural gas, waste disposal and moving). HomeServices
believes it is especially well-positioned to offer Concierge Services, on a
targeted basis, to its captive buy-side customers with whom it has developed
relationships during the home purchasing experience.

HomeServices has begun to offer referrals for a variety of these Concierge
Services through Edina Realty and certain other subsidiaries and intends to
commence offering these services on a company-wide basis in the fourth
quarter of 1999. HomeServices is currently offering referrals for the
following Concierge Services:

o local and long distance telephone service;

o Internet service account establishment;

o newspaper delivery;

o home security (including monthly monitoring);

o home warranty (provided by the seller to the buyer as to the
nonstructural condition of the home, such as the condition of the
heating and air conditioning units);

o home inspection;

o property and casualty insurance;

o waste disposal;

o lawn service;

o moving; and

o locksmith.

HomeServices currently provides referrals to its existing real estate
customers through traditional means. HomeServices intends to make these
Concierge Services available to its existing realty customer base and
Internet customers generally by means of E-commerce.

HomeServices continues to evaluate the types of Concierge Services that it
provides and opportunities for expansion. HomeServices receives third-party
referral fees for the services listed above from the service providers
pursuant to contracts that it has already entered into with the service
providers. On a pro forma basis for the year ended December 31, 1998 and the
three months ended

50
<PAGE>
March 31, 1999, approximately $764,000 and $522,000 of HomeServices' revenues
were generated by these Concierge Services. HomeServices plans to
significantly expand the types of Concierge Services that it provides and
expects to derive a greater percentage of its revenues in the future from
Concierge Services.

HOME DIVIDENDS SERVICES

As part of promoting a "one-stop shopping" experience for its customers at
closing and throughout the seven-year home ownership cycle, HomeServices
plans to provide to its existing customers and to Internet customers
generally, through E-commerce, at no cost, referrals for house maintenance
and repair related products and services. These products and services will be
provided by third-party providers. HomeServices believes that these Home
Dividends services will assist a new homeowner through each stage of the home
ownership cycle by simplifying their search process for third-party service
providers. HomeServices intends to screen and monitor these third-party
service providers to ensure that they meet pre-established quality
performance standards. These third-party providers will offer services such
as:

o roofing;

o siding;

o decking;

o remodeling;

o windows;

o landscaping;

o plumbing;

o electrical;

o heating, ventilation and air conditioning; and

o appliances.

In exchange for referring its existing customers to these third-party
providers, HomeServices will receive referral fees from the actual
third-party providers. HomeServices plans to make these Home Dividends
services accessible through the Internet as part of its E-commerce
operations. HomeServices believes it will generate revenues from banner
advertising on its websites in addition to the referral fees it receives.

E-LOANS

As a part of its E-commerce operations, HomeServices intends to offer to
its existing real estate customers and other Internet customers generally the
opportunity to originate and refinance mortgages and home equity loans
on-line. HomeServices currently provides mortgage origination services but
intends to transition these services on-line through E-loans. HomeServices
believes its E-commerce operations will position it to earn banner
advertising revenues from its websites in addition to the fee-based
origination and referral fees.

MARKETING

Real Estate

HomeServices markets its real estate brokerage, mortgage origination,
insurance and other ancillary services through a multimedia program. This
program includes advertising through major area and local newspapers, the
Internet, real estate publications, radio, television, catalogs and direct
mail. HomeServices also promotes its websites and E-commerce offerings
through these media outlets. HomeServices' advertising and marketing expenses
vary based on closed transaction volume and are

51
<PAGE>
funded both through commission revenue earned by HomeServices and a marketing
fee paid by sales associates to HomeServices. In 1998, HomeServices incurred
$13.8 million in business promotion and advertising expense.

HomeServices' individual sales associates also often market HomeServices'
business through similar marketing tools as HomeServices. Sales associates
are responsible for purchasing the marketing tools they use in their
business.

E-commerce Offerings to an Expanded Customer Base

HomeServices believes that it can attract Internet customers outside of
its existing realty customer base by providing a broad array of E-commerce
services. These E-commerce services will include E-loans and referrals for
products and services offered as a part of HomeServices' Concierge Services
and Home Dividends that may be tailored to the local or regional market in
which HomeServices operates or provided on a more expansive basis.
HomeServices intends to market its E-commerce service and product offerings,
particularly through on-line advertising and reciprocal hyperlinks to other
websites that are likely to attract potential home buyers. HomeServices
believes that it has already established an on-line presence through its own
website and the websites of its brokerage subsidiaries. HomeServices has
already established hyperlinks with leading Internet real estate websites,
such as Realtor.com, and with websites of local newspapers in HomeServices'
existing markets. These hyperlinks enable HomeServices to access both its
existing customers and Internet customers generally without having to incur
significant advertising expense.

COMPETITION

The residential real estate brokerage business throughout the United
States is highly competitive and is characterized by many small real estate
brokerage firms, a few major regional players and a multiregional player.
Despite the fragmented nature of the real estate brokerage business, each of
HomeServices' residential real estate brokerage firms commands the number one
or number two position in each of its respective major markets. The different
types of real estate operations include independent brokers, franchises and
co-owned stores.

In the residential real estate brokerage business, HomeServices' real
estate brokerage firms compete in their existing markets with regional
multioffice independent and franchise real estate organizations, such as
Coldwell Banker Burnet and J. D. Reece Realtors, as well as local single
office independent real estate organizations. HomeServices also competes
nationally with franchise real estate organizations, such as NRT Incorporated
(which operates a number of offices under the franchised Century-21, ERA and
Coldwell Banker brand names), RE/MAX franchises, GMAC and The Prudential.
Companies compete for real estate brokerage business primarily on the basis
of services offered, reputation, personal contacts, and, to some degree,
price. HomeServices believes that its major competitors in 1999 in the
acquisition of other real estate brokerage businesses will be franchise
organizations, such as NRT Incorporated and RE/MAX.

In the real estate brokerage business, companies also compete to obtain
the most qualified and experienced sales associates. Competition for these
sales associates is based on commission fee rates, services the company
offers, its reputation and personal contacts.

In its mortgage loan origination business, HomeServices competes with
other mortgage originators, such as mortgage bankers, state and national
banks, and thrift institutions, some of which have substantially greater
resources than HomeServices. HomeServices competes for loan origination
business based on services offered, price and available terms and its ability
to obtain referrals through its sales and marketing services. HomeServices
employs full-time mortgage consultants who are assigned to various real
estate brokerage offices and title offices. The mortgage consultants
currently originate mortgage loans primarily from HomeServices' real estate
customers. In the E-loans business, HomeServices will compete with other
mortgage originators providing services over the Internet. HomeServices
believes it will have a competitive advantage over these rivals because they
typically do not have a direct relationship with the customer.

52
<PAGE>
In the Concierge Services and Home Dividends business, HomeServices will
continue to compete with other referral services, such as other referral
companies or the yellow pages. However, these competitors, unlike
HomeServices, typically do not have a direct relationship with the customer.

In the E-commerce business, HomeServices will compete with other Internet
websites that provide similar products or services. HomeServices believes it
will have a competitive advantage over these competitors because these others
typically do not have a direct relationship with the customer.

EMPLOYEES AND SALES ASSOCIATES

As of May 31, 1999, HomeServices employed approximately 1,255 individuals,
including 360 part-time employees, and had more than 4,300 sales associates
(who are independent contractors, not employees). On a pro forma basis,
HomeServices employed approximately 1,360 individuals, including
approximately 380 part-time employees, and had more than 4,900 sales
associates. None of HomeServices' employees or sales associates is covered by
a collective bargaining agreement. Management believes that HomeServices'
relations with its employees and sales associates are good.

REGULATION

Real estate brokerage is regulated at both the state and federal levels in
the United States. HomeServices' real estate brokerage firms and all sales
associates are licensed by their respective state regulatory agencies. State
statutes contain general standards for and prohibitions on the conduct of
real estate brokers and sales associates and set standards in:

o disclosure when acting in an agency and dual agency capacity (i.e.,
representing a seller and a buyer in a transaction);

o collecting commissions;

o continuing broker and sales associate education;

o administering trust funds;

o advertising; and

o disclosing information in real estate forms.

Under state law, each of HomeServices' realty companies has a duty to
supervise and is responsible for the conduct of its sales associates. The
states enforce their regulatory authority by responding to consumer
complaints and, if appropriate, by taking action against the licensee. The
action may include a warning letter or reprimand, a temporary suspension of
license or a revocation of license with fines imposed. Each of HomeServices'
licensed realty companies strives to avert regulatory complaints by educating
its sales associates about state regulations with established training
programs. The relatively few regulatory complaints received by the realty
companies concerning their operations and sales associates are primarily
handled by HomeServices' in-house legal department. The majority of those
complaints do not result in any action being taken by the regulatory
authority. There are currently no regulatory investigations that, if found to
merit regulatory action, would adversely affect HomeServices' ability to
conduct business.

On the federal level, HomeServices' real estate brokerage activities are
subject to the Real Estate Settlement Procedures Act and the regulations
promulgated thereunder which prohibit discrimination and require the
disclosure of certain information to borrowers concerning settlement costs.

HomeServices mortgage loan organization activities are subject on the
federal level to the Real Estate Settlement Procedures Act, the Equal Credit
Opportunity Act, the Federal Truth-in-Lending Act and the regulations
promulgated thereunder which prohibit discrimination and require the
disclosure of certain information to borrowers concerning credit and
settlement costs. As an approved Fannie Mae and Federal Home Loan Mortgage
Corporation mortgage seller, HomeServices is required to comply with Fannie
Mae and Federal Home Loan Mortgage Corporation seller guidelines for
secondary sale of mortgages. Additionally, there are various state laws
affecting HomeServices'

53
<PAGE>
mortgage operations, including licensing requirements and substantive
limitations on the interest and fees that may be charged. States also have
the right to conduct financial and regulatory audits of the loans under their
jurisdiction. HomeServices, through its subsidiaries, is licensed to provide
mortgage origination services in the jurisdictions in which it operates.

HomeServices' title and escrow services are regulated by state regulatory
authorities that possess broad powers relating to the granting and revocation
of licenses. These state authorities also regulate insurance rates and the
form of policies.

HomeServices' business depends on the validity of, and HomeServices'
continued good standing under, the licenses and approvals under which it
operates and HomeServices' continued compliance with pertinent regulations.
HomeServices therefore devotes a significant amount of effort toward
maintaining its licenses and ensuring compliance with applicable regulations,
which efforts include maintaining a staff of in-house compliance officers.

LEGAL PROCEEDINGS

In the ordinary course of business, HomeServices and its subsidiaries are
involved in legal proceedings incidental to their operations. HomeServices
and its subsidiaries are not currently involved in any legal proceedings that
management believes would have a material adverse effect on the operations or
financial condition of HomeServices and its subsidiaries taken as a whole.

PROPERTIES

HomeServices' principal offices are located in Edina, Minnesota, where
HomeServices leases approximately 46,000 square feet of office space. This
lease expires in 2003. The rent under this lease is approximately $600,000
per year. In addition, HomeServices has a total of 136 branch offices,
substantially all of which are leased. HomeServices' office leases generally
have initial terms ranging from three to ten years, with an option to extend
the lease for additional periods. The leases are typically net leases, which
means that HomeServices is required to pay property taxes, utilities and
maintenance. HomeServices believes that its present facilities are adequate
for its current level of operations.

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<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth information concerning the executive
officers, directors and key employees of HomeServices (ages as of June 30,
1999). There are no family relationships among any of HomeServices' executive
officers, directors and key employees.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- ----- ------------------------------------------------------------------
<S> <C> <C>
David L. Sokol(1)(2) ........ 42 Chairman; Director
Ronald J. Peltier(1) ........ 49 President and Chief Executive Officer; Director
Dwayne J. Coben ............. 40 Senior Vice President and Chief Financial Officer
Jack W. Frost ............... 66 President and Chief Executive Officer of J.C. Nichols; Director
R. Michael Knapp ............ 48 President and Chief Executive Officer of Iowa Realty; Director
Steven A. McArthur(1)(2)(3) 41 Senior Vice President, General Counsel and Secretary; Director
Larry M. Smith............... 43 Controller
James L. Anderson ........... 39 Director of Information Technology
Arne M. Rovick .............. 55 Vice Chairman and General Counsel of Edina Realty
Joseph J. Valenti ........... 51 President and Chief Executive Officer of CBS HOME
George E. Gans .............. 60 President and Chief Executive Officer of Paul Semonin Realtors
Gregory E. Abel ............. 37 Director
Patrick J. Goodman .......... 32 Director
Richard R. Jaros(1)(2)(3) ... 47 Director
W. David Scott(2)(3)......... 37 Director
</TABLE>

- ------------
(1) Member of the executive committee.
(2) Member of the compensation committee.
(3) Member of the audit committee.

The following sets forth biographical information of HomeServices'
executive officers, directors and key employees:

DAVID L. SOKOL has been Chairman of HomeServices since its inception in
July 1999. He has also been the Chairman of MidAmerican Energy Company since
March 1999. Mr. Sokol has been Chairman of MidAmerican Holdings since May
1994 and Chief Executive Officer of MidAmerican Holdings since April 1993. He
has been a director of MidAmerican Holdings since 1991 and served as
President of MidAmerican Holdings from April 1993 to January 1995. Before his
service with MidAmerican Holdings, Mr. Sokol held a variety of senior
executive positions in the independent power industry.

RONALD J. PELTIER has been President and Chief Executive Officer of
HomeServices since its inception in July 1999. He was Chairman, President and
Chief Executive Officer of Edina Realty from 1992 to May 1999. Mr. Peltier
also serves as a director for the National Association of Realtors, a
director for the RELO Network and is a founder and director for the Realty
Alliance, a trade group consisting of the nation's leading brokers. Mr.
Peltier joined Edina Realty in 1977, became General Sales Manager in 1983,
and became Senior Vice President and General Manager in 1991, where he was
responsible for all sales operations and long-range planning for Edina
Realty.

DWAYNE J. COBEN has been Senior Vice President and Chief Financial Officer
of HomeServices since its inception in July 1999. He has also been the Vice
President, Utility Development of MidAmerican Energy Company since April
1999. He was a Director, Corporate Development from August 1997 to March 1998
and Corporate Development Vice President from April 1998 to March 1999.
Before joining MidAmerican Energy Company, Mr. Coben was Controller,
Marketing and Customer Services for BC Hydro from December 1994 to August
1997, and held various business development management positions with BC
Hydro from 1990 to 1994.

55
<PAGE>
JACK W. FROST has been a director of HomeServices since its inception in
July 1999 and President and Chief Executive Officer of J.C. Nichols since
February 1, 1990. In 1978, he sold Hardin Stockton, a residential real estate
brokerage firm, to Coldwell Banker and, five years later, became the
Executive Vice President and National General Manager for Coldwell Banker
Residential Group serving in that capacity until 1988. In 1990, Mr. Frost
purchased the 75-year-old residential brokerage operation of the J.C. Nichols
Company. Mr. Frost is a former Commissioner and Chairman of the Kansas Real
Estate Commission.

R. MICHAEL KNAPP has been a director of HomeServices since its inception
in July 1999 and President and Chief Executive Officer of Iowa Realty since
1991. Prior to 1991, Mr. Knapp held numerous positions at Iowa Realty
including General Sales Manager of the residential division and Senior Vice
President. Mr. Knapp is an active member of Pacesetters and the Vision Group,
two organizations comprised of the top real estate brokers and owners from
across the nation.

STEVEN A. MCARTHUR has been Senior Vice President, General Counsel,
Secretary and a director of HomeServices since its inception in July 1999. He
has been Senior Vice President, Mergers and Acquisitions of MidAmerican
Holdings since March 1999 and had previously served as Executive Vice
President and General Counsel of MidAmerican Holdings from February 1991 to
March 1999. Mr. McArthur joined MidAmerican Holdings in 1991. From 1988 to
1991, he was an attorney in the Corporate Finance Group at Shearman &
Sterling in San Francisco. From 1984 to 1988, Mr. McArthur was an attorney in
the Corporate Finance Group at Winthrop, Stimson, Putnam & Roberts in New
York.

LARRY M. SMITH has been Controller of HomeServices since its inception in
July 1999. He has been Vice President and Controller of MidAmerican Energy
Company since November 1996. Mr. Smith has previously served as Controller of
MidAmerican Energy Company or one of its predecessors since 1990.

JAMES L. ANDERSON has been the Director of Information Technology of
HomeServices since its inception in July 1999. He has been the Vice President
of Business Development for Northern Aurora since April 1998. From 1988 to
April 1998, Mr. Anderson held a variety of technology-related positions at
Sierra Pacific Power Company, a west coast investor-owned public utility
company, including project manager for commercial and industrial billing from
1996 to 1998 and senior systems analyst from 1991 to 1996.

ARNE M. ROVICK has been Vice Chairman and General Counsel of Edina Realty
since 1986. His other positions at Edina Realty include Chief Administrative
Officer, Senior Vice President and Secretary. Prior to such time, Mr. Rovick
practiced law in Phoenix, Arizona with the firm of Evans, Kitchel and
Jenckes, P.C. In 1986, Mr. Rovick returned to Minnesota as Vice President,
General Counsel for Edina Realty.

JOSEPH J. VALENTI has been President and Chief Executive Officer of CBS
HOME since its formation in August 1998. He was licensed in the real estate
business and worked as a sales associate and office manager from 1976 through
1985. In 1985, Mr. Valenti and two other individuals purchased Wurdeman of
Omaha and he became President of the company. In 1987, Wurdeman of Omaha was
merged with two other Omaha residential companies to form HOME Realty and he
became President of that entity. Upon the acquisition of HOME Realty and CBS
Realty by HomeServices, Mr. Valenti became the president of CBS HOME, the
merged entity. Mr. Valenti is a past President of the Omaha Area Board of
Realtors. He has also been a member and chairperson of multiple local and
state realtor committees from 1979 to the present. Mr. Valenti is active in
the Omaha Chamber of Commerce and several charities in the Omaha area.

GEORGE E. GANS has been President and Chief Executive Officer of Paul
Semonin Realtors since 1985. Mr. Gans also serves as a director for Realty
Alliance and the National Association of REALTORS, serves as a member of the
Board of Governors for Norton Health Care and for the Norton Hospital
Advisory Board and serves on the Advisory Board and Executive Committee for
Bank One, Kentucky, NA. Mr. Gans joined Paul Semonin Realtors in 1973 as a
sales associate, became an office manager in 1979 and Executive Vice
President in 1984.

56
<PAGE>
GREGORY E. ABEL has been a director of HomeServices since its inception in
July 1999. He has been Chief Executive Officer of MidAmerican Energy Company
since March 1999. Mr. Abel held various executive positions at MidAmerican
Holdings from 1992 to March 1999, including responsibility for engineering,
construction, accounting and various administrative functions. He has been
President and Chief Operating Officer of MidAmerican Holdings since March
1998. Mr. Abel is a Chartered Accountant and from 1984 to 1992 was employed
by Price Waterhouse in San Francisco, where he was responsible for clients in
the energy industry.

PATRICK J. GOODMAN has been a director of HomeServices since its inception
in July 1999. He has been Senior Vice President and Chief Financial Officer
of MidAmerican Holdings since April 1999. Mr. Goodman joined MidAmerican
Holdings in June 1995 and served in various financial management roles
including Manager of Consolidation Accounting, Controller and Senior Vice
President and Chief Accounting Officer. Before joining MidAmerican Holdings,
Mr. Goodman was a financial manager for National Indemnity Company and a
senior associate at Coopers & Lybrand.

RICHARD R. JAROS has been a director of HomeServices since its inception
in July 1999. Mr. Jaros has also been a director of MidAmerican Holdings
since March 1991. Mr. Jaros served as President and Chief Operating Officer
of MidAmerican Holdings from January 8, 1992 to April 19, 1993 and as
Chairman of the Board from April 19, 1993 to May 1994. Until July 1997, Mr.
Jaros was Executive Vice President and Chief Financial Officer of Peter
Kiewit Sons' Inc. and President of Kiewit Diversified Group, Inc. (now Level
(3) Communications). From 1990 until January 8, 1992, Mr. Jaros served as a
Vice President of Peter Kiewit Sons' Inc. Mr. Jaros serves as a director of
Commonwealth Telephone, RCN Corporation and Level (3).

W. DAVID SCOTT has been a director of HomeServices since its inception in
July 1999. Mr. Scott formed Magnum Resources, Inc., a commercial real estate
holding company, in October 1994 and has served as its President and Chief
Executive Officer since its inception. Mr. Scott has directed the development
and expansion of Magnum Resources and its primary commercial real estate
subsidiary, the Mega Corporation, through a series of acquisitions as well as
a merger of Magnum Resources and the Mega Corporation. Before forming Magnum
Resources, Mr. Scott worked for America First Companies, Cornerstone Banking
Group and the Kiewit Companies. Mr. Scott has been a director of America
First Mortgage Investments, Inc., a mortgage REIT, since 1998.

CLASSIFIED BOARD OF DIRECTORS

HomeServices' board of directors is divided into three classes of
directors serving staggered three-year terms. As a result, approximately
one-third of the board of directors will be elected each year. These
provisions, together with the provisions of the restated certificate of
incorporation that allow the board of directors to fill vacancies in or
increase the size of the board of directors, would prevent a stockholder from
removing incumbent directors and filling such vacancies with its nominees in
order to gain control of the board.

HomeServices' board has resolved that Messrs. Abel, Frost and Goodman will
serve as Class I Directors whose terms expire at the 2000 annual meeting of
stockholders. Messrs. Knapp, Scott and Peltier will serve as Class II
Directors whose terms expire at the 2001 annual meeting of stockholders.
Messrs. Sokol, McArthur and Jaros will serve as Class III Directors whose
terms expire at the 2002 annual meeting of stockholders.

COMMITTEES OF THE BOARD OF DIRECTORS

HomeServices' board of directors currently has three standing committees:
an executive committee, a compensation committee and an audit committee.

HomeServices' executive committee has certain selected powers and rights
to exercise the authority of the board of directors between meetings of the
board of directors. The current members of the executive committee are
Messrs. Sokol, Peltier, McArthur and Jaros.

HomeServices' compensation committee reviews and recommends to the board
of directors salaries, benefits and stock option grants for all employees,
consultants, directors and other

57
<PAGE>
individuals, such as sales associates. The compensation committee also
administers HomeServices' stock option and other employee benefits plans. The
compensation committee currently consists of Messrs. Sokol, McArthur, Jaros
and Scott.

HomeServices' audit committee reviews HomeServices' internal accounting
procedures and considers and reports to the board of directors of
HomeServices on other auditing and accounting matters, including the
selection of HomeServices' independent accountants, the scope of annual
audits, fees to be paid to HomeServices' independent accountants and the
performance of HomeServices' independent accountants. The audit committee
currently consists of Messrs. McArthur, Jaros and Scott.

COMPENSATION OF DIRECTORS

Nonemployee directors of HomeServices or directors of HomeServices who are
full-time employees of MidAmerican Holdings receive, as compensation for
their service as directors:

o an annual retainer of $10,000;

o $500 of committee fees for each committee meeting; and

o reimbursement for reasonable expenses incurred in connection with
attendance at board and committee meetings.

Each director of HomeServices will receive, as compensation for agreeing
to serve as a director, fully vested options to purchase 50,000 shares of
common stock at an exercise price equal to the book value of the common
stock.

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned for all services
rendered to HomeServices and its subsidiaries in all capacities during 1998
by the Chief Executive Officer of HomeServices and the four other most highly
compensated executive officers of HomeServices and its subsidiaries, who
earned more than $100,000 in 1998 and who were serving as executive officers
of HomeServices and its subsidiaries as of December 31, 1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------ ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(1)
- -------------------------------------- ------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Ronald J. Peltier, President and
Chief Executive Officer of
HomeServices.......................... 1998 $325,000 $123,500 $132,037
Jack W. Frost, President and Chief
Executive Officer of J.C. Nichols .... 1998 250,000 100,000 2,457
R. Michael Knapp, President and
Chief Executive Officer of Iowa
Realty................................ 1998 225,000 200,250 162,588
Arne M. Rovick, Vice Chairman and
General Counsel of Edina Realty ...... 1998 250,000 95,000 132,849
Joseph J. Valenti, President and Chief
Executive Officer of CBS HOME......... 1998 250,000 28,583 5,000
</TABLE>

- ------------
(1) Amounts for 1998 consist of (a) HomeServices' matching contributions to
a defined contribution plan of $4,188, $2,457 and $7,344 for Messrs.
Peltier, Frost and Knapp, respectively, and $5,000 for each of Messrs.
Rovick and Valenti; and (b) long-term compensation earned in the form
of a $127,849 credit towards payment of a promissory note for each of
Messrs. Peltier, Knapp and Rovick. In addition, the amount for Mr.
Knapp includes HomeServices' contributions totaling $18,886 to a
supplemental executive retirement plan, a $6,400 contribution to a
defined contribution plan and premiums on his behalf totaling $2,109
for long-term disability insurance.

EMPLOYMENT AGREEMENTS

In May 1998, HomeServices entered into employment agreements with each of
Messrs. Peltier, Knapp and Rovick. In August 1998, HomeServices entered into
an employment agreement with Mr. Valenti and in September 1998 it entered
into an employment agreement with Mr. Frost.

58
<PAGE>
The employment agreements provide for annual base salaries of $325,000,
$250,000, $225,000, $250,000 and $175,000 for each of Messrs. Peltier, Frost,
Knapp, Rovick and Valenti, respectively. In addition to their base salaries,
each of Messrs. Peltier, Frost, Knapp, Rovick and Valenti is also eligible to
receive a target award of 30%, 40%, 70%, 30% or 70%, respectively, of base
salary, with a maximum award equal to 45%, 60%, 100%, 45%, or 100%,
respectively, of base salary for each of the fiscal years during which such
executive is employed upon the achievement of certain performance criteria
and after the compensation committee of the board of directors approves the
incentive award computations, based upon the recommendation of the Chief
Executive Officer of MidAmerican Holdings.

In addition, Mr. Valenti receives an annual supplement of $75,000 and is
entitled under his employment agreement to receive minimum gross compensation
of $250,000 per year. Therefore, if the total of Mr. Valenti's annual base
salary ($175,000) and annual target awards does not exceed $250,000 for any
year, HomeServices will not pay to Mr. Valenti any incentive compensation for
that year. If the total of Mr. Valenti's annual base salary and target award
for any year exceeds $250,000, then HomeServices will pay Mr. Valenti the
excess as incentive compensation.

Each of Messrs. Peltier, Knapp, and Rovick has also entered into a long
term incentive compensation plan with HomeServices. Under this plan, each
executive purchased from HomeServices a total of 125 shares of HomeServices'
common stock (on a presplit basis) for a purchase price of $381,376, which
was payable to HomeServices contemporaneously with the execution of the
employment agreement by delivery of a promissory note in such amount. Each
promissory note will mature in May 2003. Principal and interest due on each
promissory note will be offset by the amount, if any, in an account balance
which was established by HomeServices for the benefit of each of Messrs.
Peltier, Knapp and Rovick for the purpose of establishing a credit towards
payment of their respective promissory notes. Each of Messrs. Peltier, Knapp
and Rovick is eligible for a credit for each of the fiscal years during which
he is employed upon the achievement of certain financial performance goals,
each as approved annually by the compensation committee of the board of
directors, and upon the recommendation of the Chief Executive Officer of
MidAmerican Holdings. The target credit for each fiscal year is 20% of the
amount due on the promissory note. The maximum credit for each fiscal year is
40%.

Under their employment agreements, HomeServices has agreed to reimburse
each of Messrs. Peltier and Rovick for up to $5,000 per year of the premium
cost of any life insurance maintained by them, and up to $2,000 per year of
the premium cost of any long term disability insurance maintained by them.
Each of Messrs. Peltier, Frost, Knapp, Rovick and Valenti is also eligible to
participate in the tax-qualified retirement plan and welfare benefit plans of
HomeServices in accordance with the terms and conditions of the plans.

If the employment of any of Messrs. Peltier, Frost, Knapp, Rovick or
Valenti is terminated by HomeServices for reasons other than good cause or if
any one of them should resign for good reason, such person will be entitled
to receive until the third anniversary of the termination date (1) his base
salary as in effect as of his termination date at HomeServices' normal
payroll intervals and (2) target awards equal to the average annual target
awards made to such person under the agreement prior to his termination. Each
of Messrs. Peltier, Knapp and Rovick's employment agreements terminate in May
2003. Mr. Frost's employment agreement terminates in September 2003, and Mr.
Valenti's employment agreement terminates in August 2002.

Prior to the closing of the offering, HomeServices intends to amend the
financial performance goals contained in the existing employment agreements
with Messrs. Peltier, Knapp and Rovick so that the goals reflect
HomeServices' business strategy.

In addition, Mr. Gans has entered into an employment agreement with
HomeServices for a term of 18 months with an option for an additional 18
months upon agreement by both parties.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee of the board of directors of HomeServices
consists of Messrs. Sokol, McArthur, Jaros and Scott. Mr. Sokol is Chairman
of the board of directors of HomeServices. Mr. McArthur is Senior Vice
President, General Counsel and Secretary of HomeServices.

59
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN

HomeServices has adopted (and MidAmerican Holdings, as the majority
shareholder of HomeServices, has approved) an employee stock purchase plan,
effective as of the consummation of the offering. The purpose of the employee
stock purchase plan is to align the interests of employees and stockholders
by encouraging participants to purchase shares of common stock. The employee
stock purchase plan is intended to comply with the requirements of Section
423 of the Internal Revenue Code of 1986, as amended, and to provide
participants with the tax advantages provided by Section 423. A total of
shares of common stock has been authorized for issuance under the employee
stock purchase plan, subject to adjustment in the event of a
recapitalization, stock split, stock dividend or other similar transaction.
The description of the employee stock purchase plan set forth herein is
qualified by reference to the form of employee stock purchase plan filed as
an exhibit to the registration statement that includes this prospectus.

The employee stock purchase plan will be administered by the compensation
committee. The compensation committee may make rules and regulations and
establish procedures for the administration of the employee stock purchase
plan as it deems appropriate.

Subject to certain procedural requirements, all employees of HomeServices
who have at least one year of service and work more than twenty hours per
week will be eligible to participate in the employee stock purchase plan,
except that employees who are "highly compensated" within the meaning of
Section 414(q) of the Code and employees who are five percent or more
stockholders of HomeServices or a subsidiary of HomeServices will not be
eligible to participate. Designations of corporations participating in the
employee stock purchase plan may be made from time to time by the
compensation committee from among the subsidiaries of HomeServices, including
corporations which become subsidiaries after approval and adoption of the
employee stock purchase plan.

Pursuant to the employee stock purchase plan, each eligible employee will
be permitted to purchase shares of common stock through regular payroll
deductions in an aggregate amount equal to % to % of the employee's base
pay. Under the employee stock purchase plan, a participant's right to
purchase shares of common stock cannot accrue at a rate which exceeds $25,000
of fair market value of common stock in any calendar year.

Participating employees will be able to purchase shares of common stock
with payroll deductions on the last day of each purchase period within each
cycle, at a purchase price equal to the lesser of:

o 85 percent of the fair market value of common stock on the date the
cycle begins; and

o 85 percent of the fair market value of common stock on the last day of
the purchase period.

A right to purchase shares of common stock which is granted to a
participant under the employee stock purchase plan is transferable only by
will or the laws of descent and distribution, and is exercisable, during the
participant's lifetime, only by the participant.

The compensation committee may from time to time amend or terminate the
employee stock purchase plan. No such amendment or termination may adversely
affect the rights of any participant without the consent of such participant
and, to the extent required by Section 423 of the Code or any other law,
regulation or stock exchange rule, no amendment will be effective without the
approval of stockholders entitled to vote on the amendment. Additionally, the
compensation committee may make such amendments as it deems necessary to
comply with applicable laws, rules and regulations.

Since the amount of benefits to be received by each participant is
determined by his or her elections, the amount of future benefits to be
allocated to any individual or group of individuals under the employee stock
purchase plan is not determinable.

NON-EMPLOYEE STOCK PURCHASE PLAN

HomeServices has adopted (and MidAmerican Holdings, as the majority
shareholder of HomeServices, has approved) a non-employee stock purchase
plan, effective as of the consummation of the offering. The non-employee
stock purchase plan will be made available to HomeServices' sales

60
<PAGE>
associates and . The purpose of the non-employee stock purchase plan is
to align the interests of sales associates, other key persons with whom
HomeServices has a strategic relationship and stockholders by encouraging
participants to purchase shares of common stock. The non-employee stock
purchase plan will operate substantially the same as the employee stock
purchase plan described above, except that non-employees will not be entitled
to any of the tax benefits afforded to employees. The description of the
non-employee stock purchase plan is qualified by reference to the form of
non-employee stock purchase plan filed as an exhibit to the registration
statement that includes this prospectus.

1999 EQUITY INCENTIVE PLAN

On , 1999, HomeServices adopted, and on , 1999, MidAmerican
Holdings, as its majority stockholder, approved, HomeServices' 1999 equity
incentive plan. A maximum of shares of common stock has been reserved for
issuance under the equity plan. The number of shares authorized is generally
subject to equitable adjustment upon the occurrence of any stock dividend or
other distribution, recapitalization, stock split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase or
share exchange, or other similar corporate transaction or event.

Pursuant to the equity plan, HomeServices may grant awards which may
consist of:

o stock options, including incentive stock options and nonqualified stock
options;

o restricted stock; and/or

o other stock-based awards.

From and after the consummation of the offering, the equity plan is
intended to satisfy any applicable requirements of Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934 and Section 162(m) of
the Code, and will be interpreted in a manner consistent with the
requirements of those rules and regulations.

Prior to completion of the offering, the equity plan will be administered
by a committee of the board of directors. Following the offering, the equity
plan will be administered by the compensation committee established by the
board of directors, which has been organized so as to satisfy the provisions
of Rule 16b-3 and Section 162(m). The compensation committee has full
authority, subject to the provisions of the equity plan, to, among other
things, determine the persons to whom awards will be granted, determine the
terms and conditions (including any applicable performance criteria) of the
awards, and prescribe, amend and rescind rules and regulations relating to
the equity plan.

Grants of awards may be made under the equity plan to selected employees,
independent contractors and directors of HomeServices.

Stock Options

Stock options may be either "incentive stock options," as such term is
defined in Section 422 of the Code, or nonqualified stock options.
Pre-offering option awards will be made at "book value" and post-offering
grants will be based upon the average of the high and low sales price of
HomeServices' stock at the date of grant. Options granted pursuant to the
equity plan will become exercisable at such times and under such conditions
as the compensation committee may prescribe. The option exercise price is
payable by any one of the following methods or a combination thereof: (1) in
cash or by personal check, certified check, bank cashier's check or wire
transfer; (2) in stock owned by the participant for at least six months prior
to the date of exercise and valued at its fair market value on the effective
date of such exercise; or (3) in such other manner as the compensation
committee may authorize. The compensation committee may also authorize
"reload options" (an option for the number of shares surrendered in
exercising a previously granted option). Generally, unless the optionee
voluntarily resigns or is fired for cause, previously vested options will
remain outstanding for the remainder of the option term.

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<PAGE>
No person may be granted stock options under the equity plan in any
calendar year representing an aggregate of more than shares of common
stock, which number shall be subject to equitable adjustment as described
above.

Restricted Stock

A restricted stock award is an award of common stock which is subject to
restrictions on transferability and other restrictions, if any, as the
compensation committee may impose at the date of grant. The restrictions may
lapse separately or in combination at such times, under such circumstances,
including, without limitation, a specified period of employment, or upon the
satisfaction of pre-established performance goals, as the compensation
committee may determine. These goals may be based upon one or more of the
following criteria: pretax or after-tax income; operating profit; return on
equity, assets, capital or investment; earnings or book value per share;
sales or revenues; operating expenses; stock price appreciation; and the
implementation or completion of critical projects or processes. Except to the
extent restricted under the award agreement relating to the restricted stock,
a participant granted restricted stock will have all of the rights of a
stockholder, including, without limitation, the right to vote and the right
to receive dividends on the restricted stock.

Upon termination of employment or termination of the independent
contractor relationship or termination of service as a director during the
applicable restriction period, restricted stock and any accrued but unpaid
dividends that are at that time subject to restrictions will be forfeited
unless the compensation committee provides otherwise. The compensation
committee can determine, by rule or regulation or in any award agreement, or
in any individual case, that restrictions or forfeiture conditions relating
to restricted stock will be waived in whole or in part in the event of
terminations resulting from specified causes. The compensation committee can
accelerate the lapsing of all or any portion of any outstanding restrictions
on the restricted stock.

No person may be granted restricted stock under the equity plan in any
calendar year representing an aggregate of more than shares of common
stock, subject to equitable adjustment as described above.

Other Awards; Change in Control

Other awards valued in whole or in part by reference to, or otherwise
based on, common stock may be granted either alone or in addition to other
awards under the equity plan. The compensation committee has the sole and
complete authority to determine the terms and conditions of these awards.

Upon the occurrence of a "change in control" (as defined in the equity
plan, which excludes a variety of transactions involving MidAmerican
Holdings' ownership) following the offering, all then outstanding options
will become fully exercisable and any restrictions or other conditions to the
vesting of restricted shares or other equity awards will be removed.

Transferability

Except as otherwise determined by the compensation committee, awards
granted under the equity plan may be transferred only by will or by the laws
of descent and distribution.

Amendment and Termination

The equity plan may, at any time and from time to time, be altered,
amended, suspended, or terminated by the board of directors or the
compensation committee, in whole or in part, except that no amendment that
requires stockholder approval in order for the equity plan to continue to
comply with Section 162(m), state law, stock exchange requirements or other
applicable law will be effective unless the amendment has received the
required stockholder approval. In addition, no amendment may be made which
adversely affects any of the rights of any award holder previously granted an
award, without the holder's consent.

Outstanding Awards

On , 1999, HomeServices granted to stock options to acquire
shares of common stock at an exercise price of $ . These stock options vest
.

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The table below presents information regarding the beneficial ownership of
the common stock as of July 15, 1999 and as adjusted to reflect the sale of
the shares of common stock offered hereby by:

o each person known by HomeServices to be the beneficial owner of five
percent or more of its outstanding common stock;

o each of the executive officers of HomeServices listed in the Summary
Compensation Table above;

o each of the directors of HomeServices; and

o all directors and executive officers of HomeServices as a group.

Unless otherwise indicated, HomeServices believes that each beneficial
owner below has sole voting and investment power over such shares.

<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON STOCK
STOCK BENEFICIALLY BENEFICIALLY OWNED
OWNED BEFORE THE OFFERING AFTER THE OFFERING
-------------------------- --------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
- --------------------------------------------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
MidAmerican Energy Holdings Company(1).............. 95.00%
Ronald J. Peltier................................... 1.25
Jack W. Frost....................................... --
R. Michael Knapp.................................... 1.25
Arne M. Rovick...................................... 1.25
Joseph J. Valenti................................... --
David L. Sokol...................................... --
Patrick J. Goodman.................................. --
Steven A. McArthur.................................. --
Gregory E. Abel..................................... --
Richard R. Jaros.................................... --
W. David Scott...................................... --
All executive officers and directors as a group (15
persons)........................................... 3.75
</TABLE>

- ------------
* Less than one percent.
(1) MidAmerican Holdings' address is 666 Grand Avenue, Des Moines, Iowa
50303.

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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH MIDAMERICAN HOLDINGS

MidAmerican Holdings currently owns 95.0% of the common stock of
HomeServices. After giving effect to the offering, MidAmerican Holdings will
beneficially own % of HomeServices' common stock ( % if the underwriters'
over-allotment option is exercised in full). As a result, MidAmerican
Holdings will continue to have the power to elect the entire board of
directors of HomeServices and approve matters submitted to a vote of
stockholders.

Before the offering, MidAmerican Holdings provided limited management
assistance to HomeServices including some financial, accounting, legal and
human resources services. MidAmerican Holdings provided these services
intermittently and at arm's length. HomeServices paid MidAmerican Holdings a
total of $1,552,000 during 1998 and $717,000 for the three months ended March
31, 1999 pursuant to this arrangement. The costs for these services are
charged directly to HomeServices.

In connection with the offering, HomeServices and MidAmerican Holdings
will enter into the registration rights and service agreements summarized
below. The agreements summarized below are included as exhibits to the
registration statement of which this prospectus forms a part. The following
summaries do not contain all of the information contained in the exhibits.

REGISTRATION RIGHTS AGREEMENT

Pursuant to a registration rights agreement, HomeServices will grant to
MidAmerican Holdings certain "demand" and "piggyback" registration rights for
the registration under the Securities Act of 1933 of the shares of common
stock MidAmerican Holdings owns as described below. Under the registration
rights agreement, upon MidAmerican Holdings' request, HomeServices is
required to use its best efforts to register the shares.

MidAmerican Holdings will be entitled to request two demand registrations
per year of all or any portion of its common stock for so long as it owns at
least 5.0% of the common stock of HomeServices. In addition, for so long as
MidAmerican Holdings owns at least 5.0% of the common stock of HomeServices,
MidAmerican Holdings may request HomeServices to use its reasonable efforts
to register shares of common stock held by it in other registrations
initiated by HomeServices on its own behalf or on behalf of any other
stockholder of HomeServices. All reasonable out-of-pocket costs and expenses
(other than underwriting discounts and commissions) of any registration under
the registration rights agreement will be paid by HomeServices. The
registration rights agreement will also contain customary provisions with
respect to registration procedures, underwritten offerings and
indemnification and contribution rights in connection with the registration
of common stock on behalf of MidAmerican Holdings.

SERVICES AGREEMENT

HomeServices and MidAmerican Holdings will enter into a services agreement
under which MidAmerican Holdings will provide management, advisory,
financial, accounting, legal, employee benefit plan administration and other
services to HomeServices. In consideration for these services, HomeServices
is required to pay MidAmerican Holdings a monthly fee in an amount equal to
$ , plus an amount for the reimbursement of out-of-pocket costs incurred by
MidAmerican Holdings.

MANAGEMENT INDEBTEDNESS

Certain officers and employees of HomeServices were issued shares of
common stock in HomeServices upon its formation, with a corresponding
receivable recorded for the fair value of the stock. The value of the issued
shares and corresponding receivable was $1.5 million. The shares carry the
same dividend and voting rights as the shares held by MidAmerican Holdings.
The officers and employees held a 5.0% ownership interest as of March 31,
1999. See "Management--Employment Agreements."

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As certain performance levels are achieved over a five-year period, a
portion of the receivable balance (which consists of principal and accrued
interest) is forgiven and considered compensation to the officers and
employees. The amount accrued to the allowance for estimated forgiveness and
expensed, as compensation, in 1998 was $693,000. The balance of the notes
receivable, net of the allowance, at March 31, 1999 was $882,000.
HomeServices charges interest on the outstanding receivable balance at a rate
equal to its average annual borrowing rate (6.87% for 1998). Interest income
recorded on this note was approximately $91,000 as of March 31, 1999.

INDEBTEDNESS WITH MIDAMERICAN HOLDINGS AND AFFILIATES

In May 1998, HomeServices entered into a revolving credit agreement with
MidAmerican Holdings to borrow funds from time to time, primarily to support
the acquisition of the predecessor and the nonpredecessor acquired companies.
The maximum indebtedness during the life of the agreement through March 31,
1999 was $54.2 million. The interest rate on borrowings is equal to the
30-day LIBOR rate plus 1.0% (5.96% at March 31, 1999). Interest expense
recorded on this agreement totaled $1.3 million through March 31, 1999. As of
December 31, 1998 and March 31, 1999, there were zero and $1.0 million,
respectively, of borrowings under this agreement. On June 24, 1999, the
revolving credit agreement with MidAmerican Holdings was amended to reduce
MidAmerican Holdings' total commitment and HomeServices' borrowing capacity
thereunder from $100.0 million to $10.0 million. Amounts borrowed are payable
upon demand from MidAmerican Holdings.

In May 1998, HomeServices also entered into a revolving credit agreement
with MidAmerican Holdings to advance HomeServices' excess funds to
MidAmerican Holdings. The maximum amount advanced during the life of the
agreement through June 18, 1999 was $3.3 million. Interest accrues daily at
LIBOR plus 0.25% (5.21% at March 31, 1999). As of June 18, 1999, no advances
were made under this agreement. Interest income recorded for advances under
this agreement totaled approximately $8,000 through March 31, 1999.

OTHER

HomeServices has the following leases with its directors or executive
officers, or their affiliated entities:

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<TABLE>
<CAPTION>
RELATIONSHIP TO HOMESERVICES'
LEASE INTERESTED PARTY HOMESERVICES 1998 RENT
- -------------- ------------------ -------------------- ---------------
<S> <C> <C> <C>
Office lease Ronald J. Peltier, President and Chief $277,560
expiring partner in lessor Executive Officer;
March 31, entity Director
2001
Office lease Ronald J. Peltier, President and Chief $165,200
expiring partner in lessor Executive Officer;
April 30, entity Director
2001
Office lease Ronald J. Peltier, President and Chief $ 76,077
expiring lessor Executive Officer;
Jan. 31, 2005 Director
Office lease Ronald J. Peltier, President and Chief $179,446
expiring partner in lessor Executive Officer;
June 30, 2006 entity Director
Office lease Jack W. Frost, President and Chief $143,813
expiring trustee of lessor Executive Officer of
March 31, trust J.C. Nichols;
2003 Director
Office lease Joseph J. Valenti, President and Chief $ 87,763
expiring partner in lessor Executive Officer of
Sept. 30, entity CBS HOME
1999
Office lease Joseph J. Valenti, President and Chief $ 20,706
expiring partner in lessor Executive Officer of
Nov. 30, 2003 entity CBS HOME
Office lease Joseph J. Valenti, President and Chief $ 16,346
expiring partner in lessor Executive Officer of
Aug. 31, 2002 entity CBS HOME
</TABLE>

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DESCRIPTION OF CAPITAL STOCK

Upon the closing of the offering, HomeServices will have

o shares of common stock authorized, of which shares of common
stock will be issued and outstanding ( if the underwriters'
over-allotment option is exercised in full); and

o shares of preferred stock authorized, of which none will be
issued and outstanding.

The following summary of the capital stock of HomeServices is qualified by
reference to HomeServices' restated certificate of incorporation and its
amended and restated bylaws, which will become effective before the closing
of the offering. Forms of HomeServices' restated certificate of incorporation
and amended and restated bylaws are filed as exhibits to the registration
statement that includes this prospectus.

COMMON STOCK

Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock
are entitled to receive dividends out of assets legally available for this
purpose at the times and in the amounts as the board of directors may from
time to time determine. Each stockholder is entitled to one vote for each
share of common stock held on all matters submitted to a vote of
stockholders. Cumulative voting for the election of directors is not provided
for in HomeServices' restated certificate of incorporation, which means that
the holders of a majority of the shares voted can elect all of the directors
then standing for election. The common stock is not entitled to preemptive
rights and is not subject to conversion or redemption. Upon the occurrence of
a liquidation, dissolution or winding-up of HomeServices, the holders of
shares of common stock would be entitled to share ratably in the distribution
of all of HomeServices' assets remaining available for distribution after
satisfaction of all its liabilities and the payment of the liquidation
preference of any outstanding preferred stock. Each outstanding share of
common stock is, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.

PREFERRED STOCK

The board of directors has the authority, within the limitations and
restrictions stated in HomeServices' restated certificate of incorporation,
to provide for the issuance of shares of preferred stock, in one or more
classes or series, and to fix the rights, preferences, privileges and
restrictions of this preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences and the
number of shares constituting any series or the designation of such series.
The issuance of preferred stock could have the effect of decreasing the
market price of the common stock and could adversely affect the voting and
other rights of the holders of common stock.

ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND HOMESERVICES'
RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED BYLAWS

Some provisions of HomeServices' restated certificate of incorporation and
amended and restated bylaws, which provisions are summarized in the following
paragraphs, may be deemed to have an antitakeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might
consider it its best interest, including those attempts that might result in
a premium over the market price for the shares held by stockholders.

Classified Board of Directors

HomeServices' board of directors is divided into three classes of
directors serving staggered three-year terms. As a result, approximately
one-third of the board of directors will be elected each year. These
provisions, when coupled with the provision of HomeServices' restated
certificate of incorporation authorizing the board of directors to fill
vacant directorships or increase the size of the

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board of directors, may deter a stockholder from removing incumbent directors
and simultaneously gaining control of the board of directors by filling the
vacancies created by such removal with its own nominees.

Cumulative Voting

HomeServices' restated certificate of incorporation expressly denies
stockholders the right to cumulate votes in the election of directors.

Stockholder Action; Special Meeting of Stockholders

HomeServices' restated certificate of incorporation eliminates the ability
of stockholders to act by written consent. HomeServices' amended and restated
bylaws provide that special meetings of HomeServices' stockholders may be
called only by the chairman of the board of directors, the president or a
majority of the board of directors.

Advance Notice Requirements for Stockholder Proposals and Director
Nominations

HomeServices' amended and restated bylaws provide that stockholders
seeking to bring business before an annual meeting of stockholders, or to
nominate candidates for election as directors at an annual meeting of
stockholders, must provide timely notice in writing. To be timely, a
stockholder's notice must be delivered to or mailed and received at
HomeServices' principal executive offices not less than 60 days nor more than
90 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders; provided, that in the event that the annual meeting
is called for a date that is not within 30 days before or after such
anniversary date, notice by the stockholder in order to be timely must be
received not later than the close of business on the tenth day following the
date on which notice of the date of the annual meeting was mailed to
stockholders or made public, whichever first occurs. In the case of a special
meeting of stockholders called for the purpose of electing directors, timely
notice by the stockholder must be received not later than the close of
business of the tenth day following the day on which notice of the date of
the special meeting was mailed or public disclosure of the date of the
special meeting was made, whichever first occurs. HomeServices' amended and
restated bylaws also specify certain requirements as to the form and content
of a stockholder's notice. These provisions may preclude stockholders from
bringing matters before an annual meeting of stockholders or from making
nominations for directors at an annual meeting of stockholders.

AUTHORIZED BUT UNISSUED SHARES

The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of HomeServices by means of a proxy contest, tender
offer, merger or otherwise.

AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS

The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter
is required to amend a corporation's certificate of incorporation or bylaws,
unless a corporation's certificate of incorporation or bylaws, as the case
may be, requires a greater percentage. HomeServices' restated certificate of
incorporation imposes supermajority vote requirements in connection with
business combination transactions and the amendment provisions of
HomeServices' restated certificate of incorporation and amended and restated
bylaws, including those provisions relating to the classified board of
directors, action by written consent and the ability of stockholders to call
special meetings.

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RIGHTS AGREEMENT

Under Delaware law, every corporation may create and issue rights
entitling the holders of such rights to purchase from the corporation shares
of its capital stock of any class or classes, subject to any provisions in
its certificate of incorporation. The price and terms of such shares must be
stated in the certificate of incorporation or in a resolution adopted by the
board of directors for the creation or issuance of such rights.

HomeServices has entered into a stockholder rights agreement. As with most
stockholder rights agreements, the terms of HomeServices' rights agreement
are complex and not easily summarized, particularly as they relate to the
acquisition of HomeServices' common stock and to exercisability. This summary
may not contain all of the information that is important to you. Accordingly,
you should carefully read HomeServices' rights agreement, which has been
filed as an exhibit to the registration statement of which this prospectus
forms a part.

HomeServices' rights agreement provides that each share of its prospective
common stock outstanding will have one right to purchase one one-hundredth of
a preferred share attached to it. The purchase price per one one-hundredth of
a preferred share under the stockholder rights agreement is four times the
average closing price of HomeServices' common stock for the first five days
of trading after the consummation of this offering.

Initially, the rights under HomeServices' rights agreement are attached to
outstanding certificates representing HomeServices' common stock and no
separate certificates representing the rights will be distributed. The rights
will separate from HomeServices' common stock and be represented by separate
certificates approximately 10 days after someone acquires or commences a
tender offer for 15% of HomeServices' outstanding common stock.

After the rights separate from HomeServices' common stock, certificates
representing the rights will be mailed to record holders of the common stock.
Once distributed, the rights certificates alone will represent rights.

All shares of HomeServices' common stock issued before the date the rights
separate from the common stock will be issued with the rights attached. The
rights are not exercisable until the date the rights separate from the common
stock. The rights will expire on the tenth anniversary of the date of the
completion of this offering unless earlier redeemed or exchanged by
HomeServices.

If an acquiror obtains or has the rights to obtain 15% or more of
HomeServices' common stock, then each right will entitle the holder to
purchase a number of shares of HomeServices' common stock equal to twice the
purchase price of each right.

Each right will entitle the holder to purchase a number of shares of
common stock of the acquiror having a then current market value of twice the
purchase price if an acquiror obtains 15% or more of HomeServices' common
stock and any of the following occurs:

o HomeServices merges into another entity;

o an acquiring entity merges into HomeServices; or

o HomeServices sells more than 50% of its assets or earning power;

provided, however, that the foregoing will not include any transaction or
series of transactions pursuant to which MidAmerican Holdings sells,
exchanges or otherwise disposes of all or any portion of its common stock of
HomeServices, including, but not limited to, any public offering of
HomeServices' common stock by MidAmerican Holdings or a disposition of
HomeServices' common stock by means of a spin-off or other distribution to
MidAmerican Holdings' stockholders.

Under HomeServices' rights agreement, any rights that are or were owned by
an acquiror of more than 15% of HomeServices' outstanding common stock will
be null and void.

HomeServices' rights agreement contains exchange provisions which provide
that after an acquiror obtains 15% or more, but less than 50%, of
HomeServices' respective outstanding common

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stock, HomeServices' board of directors may, at its option, exchange all or
part of the then outstanding and exercisable rights for common shares. In
such an event, the exchange ratio is one common share per right, adjusted to
reflect any stock split, stock dividend or similar transaction.

HomeServices' board of directors may, at its option, redeem all of the
outstanding rights under its rights agreement before the earlier of (1) the
time that an acquiror obtains 15% or more of HomeServices' outstanding common
stock or (2) the final expiration date of the rights agreement. The
redemption price under HomeServices' rights agreement is $0.01 per right,
subject to adjustment. The right to exercise the rights will terminate upon
the action of HomeServices' board ordering the redemption of the rights and
the only right of the holders of the rights will be to receive the redemption
price.

Holders of rights will have no rights as HomeServices' stockholders,
including the right to vote or receive dividends, simply by virtue of holding
the rights.

HomeServices' rights agreement provides that the provisions of the rights
agreement may be amended by the board of directors, without the approval of
the holders of the rights within the ten-day period after someone acquires or
commences a tender offer for 15% of HomeServices' outstanding common stock.
After this ten-day period, however, the rights agreement may not be amended
in any manner which would adversely affect the interests of the holders of
the rights, excluding the interests of an acquiror. In addition,
HomeServices' rights agreement provides that no amendment may be made to
adjust the time period governing redemption at a time when the rights are not
redeemable.

HomeServices' rights agreement contains rights that have antitakeover
effects. The rights may cause substantial dilution to a person or group that
attempts to acquire HomeServices without conditioning the offer on a
substantial number of rights being acquired. Accordingly, the existence of
the rights may deter acquirors from making takeover proposals or tender
offers. Nevertheless, the rights are not intended to prevent a takeover, but
rather are designed to enhance the ability of HomeServices' board to
negotiate with an acquiror on behalf of all its stockholders. In addition,
the rights should not interfere with a proxy contest.

DELAWARE BUSINESS COMBINATION STATUTE

Section 203 of the Delaware General Corporation Law imposes a three-year
moratorium on business combinations between a Delaware corporation and an
"interested stockholder" (in general, a stockholder owning 15% or more of a
corporation's outstanding voting stock) or an affiliate or associate thereof
unless:

o prior to an interested stockholder becoming an interested
stockholder, the board of directors of the corporation approved
either the business combination or the transaction resulting in the
interested stockholder becoming an interested stockholder;

o upon consummation of the transaction resulting in an interested
stockholder becoming an interested stockholder, the interested
stockholder owns 85% of the voting stock outstanding at the time
the transaction commenced (excluding, from the calculation of
outstanding shares, shares beneficially owned by directors who are
also officers and certain employee stock plans); or

o on or after an interested stockholder becomes an interested
stockholder, the business combination is approved by the board of
directors and holders of at least 66 2/3% of the outstanding shares
(other than those shares beneficially owned by the interested
stockholder) at a meeting of stockholders.

Section 203 of the Delaware General Corporation Law applies to any
corporation incorporated in the State of Delaware unless the corporation
expressly elects not to be governed by such legislation. HomeServices has not
made such an election and is therefore subject to Section 203.

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LIMITATIONS ON DIRECTORS' LIABILITY

HomeServices' restated certificate of incorporation provides that no
director of HomeServices shall be liable to HomeServices or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability:

o for any breach of the director's duty of loyalty to HomeServices or
its stockholders;

o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;

o in respect of certain unlawful dividend payments or stock
redemptions or repurchases; or

o for any transaction from which the director derived an improper
personal benefit.

The effect of these provisions is to eliminate the rights of HomeServices and
its stockholders (through stockholders' derivative suits on behalf of
HomeServices) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from grossly
negligent behavior), except in the situations described above. These
provisions do not limit the liability of directors under federal securities
laws.

LISTING

HomeServices will apply to have the common stock approved for quotation on
The Nasdaq Stock Market's National Market under the symbol "HOME".

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is Chase Mellon
Shareholder Services, L.L.C. Its address is 2323 Bryan Street, Suite 2300,
Dallas, Texas 75201-2656 and its telephone number is 1-800-635-9270.

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DESCRIPTION OF INDEBTEDNESS

The following is a summary of all material debt instruments of
HomeServices. The agreements summarized below are included as exhibits to the
registration statement of which this prospectus forms a part. The following
summaries do not contain all of the information contained in the exhibits.

REVOLVING CREDIT FACILITY

HomeServices is a party to an unsecured revolving credit facility with a
commercial bank. The following is a summary of the material terms and
conditions of HomeServices' existing revolving credit facility. Before the
completion of the offering, HomeServices intends to enter into a new
revolving credit facility.

Under the revolving credit facility, HomeServices may borrow up to the
maximum commitment. When HomeServices entered into the revolving credit
facility in November 1998, the maximum commitment was $25.0 million. The
maximum commitment declines by $1.5 million every six months throughout the
five-year term of the revolving credit facility. HomeServices may use
borrowings under the revolving credit facility to finance acquisitions and
for its general corporate needs in the ordinary course of business.

At the option of HomeServices, each individual borrowing under the
revolving credit facility may be designated and maintained as either a prime
rate loan or a LIBOR loan. Interest accrues on prime rate loans at the prime
lending rate. Interest accrues on LIBOR loans at a rate equal to the British
Bankers' Association interest settlement rate (or, if not available, by
reference to the London interbank market rate) for United States dollars plus
a fixed spread of 1.00% to 2.00%, that varies based on HomeServices' cash
flow leverage ratio (the ratio of debt then outstanding to EBITDA for the
preceding four fiscal quarters then ended). Interest is payable at the
earlier of the LIBOR loan maturity date or every 90 days. As of March 31,
1999, the blended average interest rate on the revolving credit facility
loans was 6.38%.

As of March 31, 1999, HomeServices had borrowed $25.0 million under the
revolving credit facility. HomeServices is obligated to reduce its borrowings
under the revolving credit facility whenever the amount borrowed is more than
the maximum commitment. On May 13, 1999, the maximum commitment under the
revolving credit facility was reduced to $23.5 million. In addition, the
maximum commitment gets reduced by the same percentage as any decrease in the
amount of 7.12% senior notes that are outstanding.

The credit facility contains a number of covenants, including limitations
on changes in lines of business, consolidations, mergers, asset dispositions,
liens, indebtedness, investments, loans and advances, payment of dividends,
transactions with affiliates and modifications of HomeServices' certificate
of incorporation. HomeServices is also required to maintain compliance with
financial performance covenants, including covenants containing a minimum
interest coverage ratio and a minimum consolidated net worth amount.

Events of default under the credit facility include nonpayment of
principal when due, nonpayment of interest or fees following a five business
day grace period, material inaccuracy of representations and warranties,
failure to comply with covenants following a 30-day grace period, default
under other agreements, bankruptcy events, ERISA events and judgments against
HomeServices or its subsidiaries.

7.12% SENIOR NOTES

In November 1998, HomeServices issued $35.0 million of 7.12% senior notes
due November 1, 2010 in a private placement. Interest is payable under the
7.12% senior notes semiannually on May 1 and November 1. HomeServices is
required to prepay principal in the amount of $5.0 million per year
commencing on November 1, 2004. At HomeServices' option, the 7.12% senior
notes may be redeemed at any time, in whole or in part (so long as the amount
being redeemed is at least 10.0% of the then outstanding aggregate amount),
at a redemption price equal to 100.0% of the principal amount plus a make
whole premium.

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The 7.12% senior notes are senior unsecured indebtedness of HomeServices
and rank on an equal basis with borrowings outstanding under the revolving
credit facility.

The notes purchase agreement governing the terms of the 7.12% senior notes
contains the same restrictive covenants and events of default as those
contained in the revolving credit facility that are discussed above.

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately after the closing of the offering, HomeServices will have
shares of common stock issued and outstanding ( shares if the underwriters'
over-allotment option is exercised in full). All of the shares of common
stock to be sold in the offering will be freely tradeable without
restrictions or further registration under the Securities Act, except that
shares purchased by an affiliate of HomeServices (as that term is defined in
Rule 144) will be subject to the resale limitations of Rule 144.

In general, under Rule 144, within any three-month period, no more than 1%
of HomeServices' common stock then outstanding or the average weekly trading
volume in the common stock during the four calendar weeks preceding the date
on which the required notice of such sale was filed, whichever is greater,
may be sold by the following classes of person:

o any person, or persons whose shares are required to be aggregated,
who owns shares of common stock which have been held for at least
one year since such shares were sold by HomeServices or by one of
its affiliates in a transaction or chain of transactions not
involving a public offering; or

o any of HomeServices' affiliates who holds shares of common stock
that are not restricted securities.

Sales under Rule 144 are also subject to provisions concerning the manner
and notice of sale and availability of current public information about
HomeServices. HomeServices' affiliates must comply with the requirements of
Rule 144, including the one-year holding period requirement, to sell shares
of common stock that are restricted securities. If at least two years have
elapsed from the date restricted securities were acquired from HomeServices
or one of its affiliates, a holder of such restricted securities who is not
its affiliate at the time of the sale and has not been an affiliate of
HomeServices at any time during the three months before such sale would be
entitled to sell such shares without regard to the volume limitation and
other conditions described above.

In addition, after completing the offering, HomeServices intends to file a
registration statement on Form S-8 under the Securities Act covering the
shares of common stock reserved for issuance under the employee stock
purchase plan. The registration statement on Form S-8 will automatically
become effective upon filing. Subject to vesting and the exercise of the
issued and outstanding options, shares registered under the registration
statement on Form S-8 will be freely tradeable and available for sale in the
open market.

Each of HomeServices, its executive officers and directors, and
MidAmerican Holdings has agreed not to offer, sell or otherwise dispose of
any shares of common stock, other than in the offering, or any security
convertible into or exchangeable or exercisable for shares of common stock,
without the prior written consent of U.S. Bancorp Piper Jaffray on behalf of
the underwriters for a period of 180 days after the date of this prospectus,
unless such offer, sale or disposition is expressly permitted by the
underwriting agreement. In addition, transfers of shares of common stock by
MidAmerican Holdings are also restricted by the provisions of the
stockholders agreement.

Before the offering, there was no public market for common stock. Although
HomeServices can make no prediction as to the effect, if any, that sales of
shares of common stock by MidAmerican Holdings would have on the market price
prevailing from time to time, sales of substantial amounts of common stock or
the availability of such shares for sale could adversely affect prevailing
market prices.

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UNITED STATES FEDERAL TAX
CONSIDERATIONS RELATING TO NON-UNITED STATES HOLDERS

The following is a general discussion of the material United States
federal income and estate tax consequences of the ownership and disposition
of the common stock applicable to Non-United States Holders of such common
stock. For the purpose of this discussion, a "Non-United States Holder" is
any holder who for United States federal income tax purposes is not a "United
States person" (as defined below). This discussion does not address all
aspects of United States federal income and estate taxation that may be
relevant in light of such Non-United States Holder's particular facts and
circumstances (such as being a U.S. expatriate) and does not address any tax
consequences arising under the laws of any state, local or non-United States
taxing jurisdiction. Furthermore, the following discussion is based on
current provisions of the Internal Revenue Code of 1986, as amended, and
administrative and judicial interpretations thereof, all as in effect on the
date hereof, and all of which are subject to change, possibly with
retroactive effect. HomeServices has not and will not seek a ruling from the
Internal Revenue Service with respect to the United States Federal income and
estate tax consequences described below, and as a result, there can be no
assurance that the IRS will not disagree with or challenge any of the
conclusions set forth in this discussion. For purposes of this discussion,
the term "United States person" means:

o a citizen or resident of the United States;

o a corporation, partnership, or other entity created or organized in
the United States or under the laws of the United States or of any
political subdivision thereof;

o an estate whose income is included in gross income for United
States federal income tax purposes regardless of its source; or

o a trust whose administration is subject to the primary supervision
of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions
of the trust.

DIVIDENDS

If HomeServices pays a dividend, any dividend paid to a Non-United States
Holder of common stock generally will be subject to United States withholding
tax either at a rate of 30% of the gross amount of the dividend or such lower
rate as may be specified by an applicable tax treaty. Dividends received by a
Non-United States Holder that are effectively connected with a United States
trade or business conducted by such Non-United States Holder are exempt from
such withholding tax. However, such effectively connected dividends, net of
certain deductions and credits, are taxed at the same graduated rates
applicable to United States persons.

In addition to the graduated tax described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a
United States trade or business of the corporate Non-United States Holder may
also be subject to a branch profits tax at a rate of 30% or such lower rate
as may be specified by an applicable tax treaty.

A Non-United States Holder of common stock that is eligible for a reduced
rate of withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund
with the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-United States Holder generally will not be subject to United States
federal income tax on any gain realized upon the sale or other disposition of
his common stock unless:

o such gain is effectively connected with a United States trade or
business of the Non-United States Holder (which gain, in the case
of a corporate Non-United States Holder, must also be taken into
account for branch profits tax purposes);

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o the Non-United States Holder is an individual who holds such common
stock as a capital asset (within the meaning of Section 1221 of the
Code) and who is present in the United States for a period or
periods aggregating 183 days or more during the calendar year in
which such sale or disposition occurs and certain other conditions
are met; or

o HomeServices is or has been a "United States real property holding
corporation" for federal income tax purposes at any time within the
shorter of the five-year period preceding such disposition or such
holder's holding period. HomeServices has determined that it was
not, is not and does not believe that it will become a "United
States real property holding corporation" for United States federal
income tax purposes.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, HomeServices must report annually to the IRS the amount of
dividends paid, the name and address of the recipient, and the amount, if
any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or other agreements, the IRS may make its reports available to tax
authorities in the recipient's country of residence.

Dividends paid to a Non-United Sates Holder at an address within the
United States may be subject to backup withholding at a rate of 31% if the
Non-United States Holder fails to establish that it is entitled to an
exemption or fails to provide a correct taxpayer identification number and
certain other information to the payer. Backup withholding will generally not
apply to dividends paid to Non-United States Holders at an address outside
the United States on or prior to December 31, 1999 (unless the payer has
knowledge that the payee is a United States person). Under recently finalized
Treasury Regulations regarding withholding and information reporting (the
"Final Regulations"), payment of dividends to Non-United States Holders at an
address outside the United States after December 31, 1999 may be subject to
backup withholding at a rate of 31% unless such Non-United States Holder
satisfies certain certification requirements.

Under current Treasury Regulations, the payment of the proceeds of the
disposition of common stock to or through the United States office of a
broker is subject to information reporting and backup withholding at a rate
of 31% unless the holder certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption. Generally, the
payment of the proceeds of the disposition by a Non-United States Holder of
common stock outside the United States to or through a foreign office of a
broker will not be subject to backup withholding but will be subject to
information reporting requirements if the broker is:

o a United States person;

o a "controlled foreign corporation" for United States tax purposes;
or

o a foreign person, 50% or more of whose gross income for certain
periods is from the conduct of a United States trade or business,
unless such broker has documentary evidence in its files of the
holder's non-United States status and certain conditions are met or
the holder otherwise establishes an exemption.

In general, the recently promulgated Final Regulations, described above,
do not significantly alter the substantive withholding and information
reporting requirements but would alter the procedures for claiming the
benefits of an income tax treaty and change the certification procedures
relating to the receipt by intermediaries of payments on behalf of the
beneficial owner of shares of common stock. Non-United States Holders should
consult their tax advisors regarding the effect, if any, of the Final
Regulations on an investment in the common stock. The Final Regulations are
generally effective for payments made after December 31, 1999.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the IRS.

76
<PAGE>
ESTATE TAX

An individual Non-United States Holder who owned common stock at the time
of his death or had made certain lifetime transfers of an interest in common
stock will be required to include the value of such common stock in such
holder's gross estate for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.

The foregoing discussion is a summary of the principal federal income and
estate tax consequences of the ownership, sale or other disposition of common
stock by Non-United States Holders. Accordingly, investors are urged to
consult their own tax advisors with respect to the income tax consequences of
the ownership and disposition of common stock, including the application and
effect of the laws of any state, local, foreign or other taxing jurisdiction.

77
<PAGE>
UNDERWRITING

The underwriters named below have agreed to buy, subject to the terms of
the purchase agreement, the number of shares listed opposite their names
below. The underwriters are committed to purchase and pay for all the shares
if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------------------------------------ ---------------
<S> <C>
U.S. Bancorp Piper Jaffray Inc.............
Credit Suisse First Boston Corporation ....

---------------
Total......................................
</TABLE>

The underwriters have advised HomeServices and MidAmerican Holdings that
they propose to offer the shares to the public at $ per share. The
underwriters propose to offer the shares to certain dealers at the same price
less a concession of not more that $ per share. The underwriters may
allow and the dealers may reallow a concession of not more than $ per
share on sales to certain other brokers and dealers. After the offering,
these figures may be changed by the underwriters.

HomeServices has granted to the underwriters an option to purchase up to
an additional shares of common stock and MidAmerican Holdings has
granted to the underwriters an option to purchase up to an additional
shares of common stock, at the same price to the public, and with the same
underwriting discount, as set forth in the table above. The underwriters may
exercise this option any time during the 30-day period after the date of this
prospectus, but only to cover over-allotments, if any. To the extent the
underwriters exercise the option, each underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of the additional shares as it was obligated to purchase under the purchase
agreement.

The following table shows the underwriting fees to be paid to the
underwriters in connection with this offering. These amounts are shown
assuming both no exercise and full exercise of the over-allotment option.

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
--------------- -----------------
<S> <C> <C>
Per share ..... $ $
Total ......... $ $
</TABLE>

HomeServices and MidAmerican Holdings have agreed to indemnify the
underwriters against certain liabilities, including civil liabilities under
the Securities Act, or contribute to payments that the underwriters may be
required to make in respect of those liabilities. Such indemnification and
contribution by MidAmerican Holdings relates only to information in this
prospectus provided by MidAmerican Holdings.

The underwriters have informed HomeServices and MidAmerican Holdings that
they do not expect discretionary sales to exceed 5.0% of the shares of common
stock being offered.

HomeServices and each of its directors and executive officers and
MidAmerican Holdings have agreed to certain restrictions on their ability to
sell additional shares of our common stock for a period of 180 days after the
date of this prospectus. HomeServices has agreed not to directly or
indirectly offer for sale, sell, contract to sell, grant any option for the
sale of, or otherwise issue or dispose of, any shares of common stock,
options or warrants to acquire shares of common stock, or any related
security or instrument, without the prior written consent of U.S. Bancorp
Piper Jaffray on behalf of the underwriters. The agreements provide
exceptions for (1) sales to underwriters pursuant to the purchase agreement,
(2) sales in connection with the exercise of options granted and the granting
of options under HomeServices' stock option plan and sales of common stock
under HomeServices' stock purchase plans and (3) certain other exceptions.

78
<PAGE>
The underwriters have reserved for sale, at the initial public offering
price, up to shares of common stock for employees, directors and
certain other persons associated with HomeServices who have expressed an
interest in purchasing common stock in the offering. The number of shares
available for sale to the general public in the offering will be reduced to
the extent such persons purchase such reserved shares. Any reserved shares
not so purchased will be offered by the underwriters to the general public on
the same terms as the other shares.

HomeServices will apply to list its shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "HOME".

Each of U.S. Bancorp Piper Jaffray and Credit Suisse First Boston
Corporation and their affiliates has provided customary financial advisory
services to HomeServices and MidAmerican Holdings and certain of their
affiliates, for which they have received customary compensation and
indemnification, and in the future may provide such services.

Prior to this offering, there has been no public market for the common
stock. The initial public offering price for the shares of common stock
offered by this prospectus was negotiated among HomeServices, MidAmerican
Holdings and the underwriters. The factors considered in determining the
initial public offering price include the history of and the prospects for
the industry in which HomeServices competes, HomeServices' past and present
operations, HomeServices' historical results of operations, HomeServices'
prospects for future earnings, the recent market prices of securities of
generally comparable companies, the general condition of the securities
markets at the time of the offering and other relevant factors. There can be
no assurance that the initial public offering price of the common stock will
correspond to the price at which the common stock will trade in the public
market subsequent to this offering or that an active public market for the
common stock will develop and continue after this offering.

To facilitate the offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock
during and after the offering. Specifically, the underwriters may over-allot
or otherwise create a short position in the common stock for their own
account by selling more shares of common stock than have been sold to them by
HomeServices and MidAmerican Holdings. The underwriters may elect to cover
any such short position by purchasing shares of common stock in the open
market or by exercising the over-allotment option granted to the
underwriters. In addition, the underwriters may stabilize or maintain the
price of the common stock by bidding for or purchasing shares of common stock
in the open market and may impose penalty bids. If penalty bids are imposed,
selling concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if shares of common stock
previously distributed in the offering are repurchased, whether in connection
with stabilization transactions or otherwise. The effect of these
transactions may be to stabilize or maintain the market price of the common
stock at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of the common stock
to the extent that it discourages resales of the common stock. The magnitude
or effect of any stabilization or other transactions is uncertain. These
transactions may be effected on The Nasdaq Stock Market's National Market or
otherwise and, if commenced, may be discontinued at any time.

79
<PAGE>
LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for HomeServices by Skadden, Arps, Slate, Meagher & Flom LLP, New York,
New York. Legal matters in connection with the sale of shares of common stock
in the offering will be passed upon for the underwriters by Chadbourne &
Parke LLP. Legal matters in connection with the sale of shares by MidAmerican
Holdings in the offering will be passed upon by Steven A. McArthur, Senior
Vice President, Mergers and Acquisitions of MidAmerican Holdings. Skadden,
Arps, Slate, Meagher & Flom LLP has from time to time represented, currently
represents and may continue to represent MidAmerican Holdings, the
underwriters and their respective affiliates in connection with legal
matters. Chadbourne & Parke LLP has from time to time represented and may
continue to represent MidAmerican Holdings and its affiliates in connection
with legal matters. As of May 31, 1999, Mr. McArthur beneficially owned
approximately 300,000 shares of the common stock of MidAmerican Holdings.

EXPERTS

The consolidated financial statements of HomeServices.Com Inc. and
subsidiaries (including the predecessor) as of December 31, 1998 and for the
periods ended May 27, 1998 and December 31, 1998 included in this prospectus
have been audited by PricewaterhouseCoopers LLP, independent accountants, as
stated in their report appearing in this prospectus and have been so included
in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

The consolidated financial statements of J.C. Nichols Real Estate (now
known as J.C. Residential Inc.) and subsidiaries as of December 31, 1997 and
for the years ended December 31, 1997 and 1996, and the eight months ended
August 31, 1998, included in this prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their
report appearing in this prospectus and have been so included in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.

The consolidated financial statements of Iowa Realty Co., Inc. and
subsidiaries as of December 31, 1997 and for the years ended December 31,
1997 and 1996, have been included in this prospectus and in the registration
statement in reliance upon the report of KPMG LLP, independent certified
public accountants, appearing elsewhere herein and upon the authority of said
firm as experts in accounting and auditing.

The financial statements of Paul Semonin Company (now known as Paul
Semonin Realtors) as of December 31, 1998 and 1997, and for the periods ended
December 31, 1998 and 1997, included in this prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants, as stated in their
report appearing in this prospectus and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.

The financial statements of HOME Real Estate Company of Omaha for the
period May 8, 1998 through August 18, 1998, included in this prospectus have
been audited by PricewaterhouseCoopers LLP, independent accountants, as
stated in their report appearing in this prospectus and have been so included
in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

ADDITIONAL INFORMATION

HomeServices has filed with the SEC a registration statement on Form S-1
under the Securities Act with respect to the common stock to be sold in the
offering. This prospectus is a part of the registration statement and does
not contain all the information in the registration statement, as permitted
by the rules and regulations of the SEC. Statements contained in this
prospectus as to the content of any contract, agreement or other document are
not necessarily complete. With respect to each contract, agreement or other
document filed as an exhibit to the registration statement, you should refer
to the copy of such contract, agreement or other document filed as an exhibit
to the registration statement. The registration statement, and the reports
and other information to be filed by

80
<PAGE>
HomeServices with the SEC following the offering in accordance with the
Securities Exchange Act of 1934, can be inspected and copied at the principal
office of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street N.W.,
Washington, D.C. 20549, and at the following regional offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of these materials may be obtained from the SEC's
website, http://www.sec.gov, and from the Public Reference Room of the SEC at
its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the fees required by the SEC. Investors may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.

After the closing of the offering, HomeServices will be subject to the
informational requirements of the Securities Exchange Act of 1934 and will
file reports, proxy and information statements and other information with the
SEC. These reports, proxy and information statements and other information
can be inspected and copied at the addresses described above. HomeServices
intends to furnish to its stockholders annual reports containing audited
consolidated financial statements, including an opinion on the audited
financial statements expressed by HomeServices' independent auditors.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF HOMESERVICES.COM INC.
AND SUBSIDIARIES (INCLUDING PREDECESSOR)
Report of Independent Accountants ..................................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and March 31, 1999 (unaudited)..... F-3
Consolidated Statements of Income for the periods ended December 31, 1998 and
May 27, 1998 and the three months ended March 31, 1999 and 1998 (unaudited) .......... F-4
Consolidated Statements of Changes in Stockholders' Equity for the periods ended
May 27, 1998 and December 31, 1998 and the three months ended March 31, 1999
(unaudited) .......................................................................... F-5
Consolidated Statements of Cash Flows for the periods ended December 31, 1998 and
May 27, 1998 and the three months ended March 31, 1999 and 1998 (unaudited)........... F-6
Notes to Consolidated Financial Statements ............................................ F-7

CONSOLIDATED FINANCIAL STATEMENTS OF J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES
Report of Independent Accountants ..................................................... F-21
Consolidated Balance Sheet as of December 31, 1997 .................................... F-22
Consolidated Statements of Income for the eight months ended August 31, 1998 and
the years ended December 31, 1997 and 1996 ........................................... F-24
Consolidated Statements of Changes in Partners' Capital for the years ended
December 31, 1996 and 1997 and the eight months ended August 31, 1998 ................ F-25
Consolidated Statements of Cash Flows for the eight months ended August 31, 1998
and the years ended December 31, 1997 and 1996 ....................................... F-26
Notes to Consolidated Financial Statements ............................................ F-27

CONSOLIDATED FINANCIAL STATEMENTS OF IOWA REALTY CO., INC. AND SUBSIDIARIES
(INCLUDING EDINA REALTY HOME SERVICES)
Independent Auditors' Report .......................................................... F-33
Consolidated Balance Sheet as of December 31, 1997 .................................... F-34
Consolidated Statements of Income for the years ended December 31, 1997 and 1996 ...... F-35
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1997 and 1996 ........................................................... F-36
Consolidated Statements of Cash Flows for the years ended December 31, 1997 and 1996 .. F-37
Notes to Consolidated Financial Statements ............................................ F-38

FINANCIAL STATEMENTS OF PAUL SEMONIN COMPANY
Report of Independent Accountants ..................................................... F-48
Balance Sheets as of December 31, 1998 and 1997 ....................................... F-49
Statements of Income for the years ended December 31, 1998 and 1997 ................... F-50
Statements of Changes in Stockholders' Equity for the years ended December 31, 1998
and 1997 ............................................................................. F-51
Statement of Cash Flows for the years ended December 31, 1998 and 1997 ................ F-52
Notes to Financial Statements ......................................................... F-53

FINANCIAL STATEMENTS OF HOME REAL ESTATE COMPANY OF OMAHA
Report of Independent Accountants ..................................................... F-60
Statement of Income for the period from May 8, 1998 through August 18, 1998 ........... F-61
Statement of Changes in Stockholders' Equity for the period from May 8, 1998 through
August 18, 1998 ...................................................................... F-62
Statement of Cash Flows for the period from May 8, 1998 through August 18, 1998 ....... F-63
Notes to Financial Statements ......................................................... F-64
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
HomeServices.Com Inc.

In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in stockholders' equity,
and of cash flows present fairly, in all material respects, the financial
position of HomeServices.Com Inc. and its subsidiaries (the "Company") at
December 31, 1998 and the results of its operations and its cash flows for the
periods ended May 27, 1998 (Predecessor) and December 31, 1998 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 1 to the consolidated financial statements, the
Company was formed on April 6, 1998. The Company had no substantive operations
prior to the acquisition of Iowa Realty Co., Inc. ("Iowa Realty") on May 27,
1998 and commenced operations on May 28, 1998. The results of operations,
changes in stockholders' equity and cash flows of Iowa Realty from January 1,
1998 through its acquisition by the Company are presented in the consolidated
financial statements and are designated as "Predecessor".

Kansas City, Missouri, /s/ PricewaterhouseCoopers LLP
May 28, 1999

F-2
<PAGE>

HOMESERVICES.COM INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 1999
1998 (UNAUDITED)
ASSETS -------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................... $ 3,114 $ 2,898
Mortgage loans held for sale and other receivables, net of allowance of
$1,346 and $1,349...................................................... 17,320 13,482
Receivable from affiliates .............................................. 69 6
Cash held in trust ...................................................... 7,932 8,797
Income taxes receivable ................................................. 3,902 2,899
Other current assets .................................................... 2,074 2,077
-------- --------
34,411 30,159
-------- --------
Other assets:
Office property and equipment, net ...................................... 15,453 15,704
Intangible assets, net of accumulated amortization of $1,568 and $2,327.. 75,122 75,005
Investment in 50% or less owned entities ................................ 269 480
Held-to-maturity securities ............................................. 651 848
Available-for-sale security ............................................. 297 272
Deferred taxes .......................................................... 2,148 2,945
Other assets ............................................................ 169 124
-------- --------
94,109 95,378
-------- --------
Total assets ......................................................... $128,520 $125,537
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................ $ 5,448 $ 4,012
Accrued expenses ........................................................ 11,345 9,831
Payable to affiliates ................................................... 367 1,209
Cash held in trust ...................................................... 7,932 8,797
Current portion of agent profit sharing ................................. 433 433
Current portion of long-term debt ....................................... 3,436 3,405
Other current liabilities ............................................... 1,191 1,404
-------- --------
30,152 29,091
-------- --------
Other liabilities:
Long-term debt .......................................................... 58,009 57,863
Agent profit sharing .................................................... 5,074 4,738
Other noncurrent liabilities ............................................ 91 89
-------- --------
63,174 62,690
-------- --------
Total liabilities .................................................... 93,326 91,781
-------- --------
Commitments and contingencies (note 13) .................................. -- --
Stockholders' equity:
Common stock, no par; 1,000,000 shares authorized, 10,000 shares issued
and outstanding ....................................................... 10 10
Additional paid-in capital .............................................. 39,505 39,505
Notes receivable ........................................................ (896) (882)
Accumulated other comprehensive income (loss) ........................... 9 (16)
Accumulated deficit ..................................................... (3,434) (4,861)
-------- --------
Total stockholders' equity .............................................. 35,194 33,756
-------- --------
Total liabilities and stockholders' equity .............................. $128,520 $125,537
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>

HOMESERVICES.COM INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

HOMESERVICES.COM INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARES)

<TABLE>
<CAPTION>
ACCUMULATED RETAINED
COMMON STOCK ADDITIONAL OTHER EARNINGS
---------------------- PAID-IN NOTES COMPREHENSIVE (ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE INCOME (LOSS) DEFICIT) TOTAL
------------- -------- ------------ ------------ --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Predecessor:
Balance, January 1, 1998 .............. 4,758,850 $48 $31,664 $ -- $ -- $ 5,079 36,791
Net income ............................ -- -- -- -- -- 1,953 1,953
Distribution to parent ................ -- -- -- -- -- (1,961) (1,961)
Share acquisition ..................... (64,692) (1) (699) -- -- -- (700)
Dividends ............................. -- -- -- -- -- (3,699) (3,699)
Capital contribution .................. -- -- 9,150 -- -- -- 9,150
--------- ----- ------- --------- ----- -------- ------
Balance, May 27, 1998 ................. 4,694,158 $47 $40,115 $ -- $ -- $ 1,372 $ 41,534
========= ===== ======= ========= ===== ======== ========

=================================================================================================================================

Company:
Balance, May 28, 1998 ................. -- $-- $ -- $ -- $ -- $ -- $ --
Comprehensive income (loss):
Net loss ............................. -- -- -- -- -- (3,434) (3,434)
Unrealized gain on
investments ......................... -- -- -- -- 9 -- 9
--------- ----- ------- --------- ----- -------- --------
Total comprehensive income
(loss) ............................... -- -- -- -- -- -- (3,425)
Initial capitalization ................ 10,000 10 30,505 (1,525) -- -- 28,990
Capital contribution .................. -- -- 9,000 -- -- -- 9,000
Allowance for forgiveness of
notes receivable, net of
accrued interest ..................... -- -- -- 629 -- -- 629
--------- ----- ------- --------- ----- -------- --------
Balance, December 31, 1998 ............ 10,000 10 39,505 (896) 9 (3,434) 35,194
========= ===== ======= ========= ===== ======== ========
Comprehensive income (loss):
Net loss (unaudited) ................. -- -- -- -- -- (1,427) (1,427)
Unrealized loss on
investments (unaudited) ............. -- -- -- -- (25) -- (25)
--------- ----- ------- --------- ----- -------- --------
Total comprehensive income
(loss) (unaudited) ................... -- -- -- -- -- -- (1,452)
Allowance for forgiveness of
notes receivable, net of
accrued interest (unaudited) ......... -- -- -- 14 -- -- 14
--------- ----- ------- --------- ----- -------- --------
Balance, March 31, 1999
(unaudited) .......................... 10,000 $10 $39,505 $ (882) $ (16) $ (4,861) $ 33,756
========= ===== ======= ========= ===== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

HOMESERVICES.COM INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMPANY PREDECESSOR COMPANY PREDECESSOR
-------------- ----------------- ---------------- ---------------
MAY 28, 1998 THREE MONTHS THREE MONTHS
THROUGH JANUARY 1, 1998 ENDED ENDED
DECEMBER 31, THROUGH MARCH 31, 1999 MARCH 31, 1998
1998 MAY 27, 1998 (UNAUDITED) (UNAUDITED)
-------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................... $ (3,434) $ 1,953 $(1,427) $ (487)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ...................... 4,177 2,293 1,981 1,413
Acquisition related costs .......................... 18,271 -- --
Loss (gain) on sale of office property &
equipment ......................................... 197 (6) (2) --
Decrease in notes receivable ....................... 630 -- 14 --
Deferred income taxes .............................. (336) 79 (797) (221)
Change in assets and liabilities net of effects
from purchase of subsidiaries:
Decrease (increase) in income taxes receivable..... (1,893) -- 1,003 --
Decrease (increase) in mortgage loans held for
sale and other receivables ...................... (7,287) (281) 3,901 1,021
Decrease (increase) in other assets ............... 728 1,252 (256) (149)
Increase (decrease) in accounts payable ........... (929) (315) (594) (1,036)
Increase (decrease) in accrued expenses ........... 922 (261) (1,514) (1,329)
Increase (decrease) in agent profit sharing ....... 1,169 (164) (336) (207)
Increase (decrease) in other liabilities .......... 213 441 211 (90)
--------- --------- --------- --------
Net cash provided by (used in) operating
activities ..................................... 12,428 4,991 2,184 (1,085)
--------- --------- --------- --------
Cash flows from investing activities:
Purchase of subsidiaries, net of cash acquired ....... (96,478) -- (800) --
Proceeds from sale of subsidiary ..................... -- -- 70 --
Proceeds from sale of property and equipment ......... 2 9 10 --
Purchase of property and equipment ................... (2,650) (900) (1,306) (336)
Purchase of investments .............................. -- -- (197) --
--------- --------- --------- --------
Net cash used in investing activities ........... (99,126) (891) (2,223) (336)
--------- --------- --------- --------
Cash flows from financing activities:
Payment on long-term debt ............................ (7,753) (872) (177) 1,701
Proceeds from issuance of private placement notes..... 35,000 -- -- --
Net change in revolving credit facility .............. 25,000 -- -- --
Proceeds from capital transactions ................... 37,990 -- -- --
Distributions and dividends to parent ................ -- (1,068)
Loan costs ........................................... (425) -- -- --
--------- --------- --------- --------
Net cash provided by (used in) financing
activities ..................................... 89,812 (1,940) (177) 1,701
--------- --------- --------- --------
Net increase (decrease) in cash and cash
equivalents .................................... 3,114 2,160 (216) 280
Cash and cash equivalents at beginning of period ...... -- 2,590 3,114 2,590
--------- --------- --------- --------
Cash and cash equivalents at end of period ............ $ 3,114 $ 4,750 $ 2,898 $ 2,870
========= ========= ========= ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6

<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF BUSINESS ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES AND
PRACTICES

CORPORATE OVERVIEW

HomeServices.Com Inc. (the Company), formerly known as MidAmerican Realty
Services Company (MidAmerican), is a majority owned subsidiary of MidAmerican
Energy Holdings Company (Parent). The Company was formed on April 6, 1998, to
operate primarily as a home services company specializing in real estate
brokerage and complimentary products. These complimentary products and services
include mortgage origination, title insurance, abstracting services, escrow
services, home warranty coverage, as well as property and casualty insurance
products. The Company operates in the eight contiguous midwest states of
Minnesota, Iowa, Kansas, Missouri, Nebraska, Wisconsin, North Dakota and South
Dakota. The Company entered into the real estate brokerage business in May
1998, with the acquisition of Iowa Realty Co., Inc. The Company has
approximately 4,300 agents under contract across the eight contiguous states.
See note 2 on acquisitions.

The accompanying financial statements include the operations of Iowa
Realty Co., Inc., including Edina Realty Home Service, prior to being acquired
by MidAmerican on May 27, 1998 and are referred to as the Predecessor.
MidAmerican had no substantive operations prior to the acquisition of Iowa
Realty Co., Inc. and the financial statements of MidAmerican reflect its
operations from May 28, 1998, the date it commenced operations.

CONSOLIDATION AND BASIS OF PRESENTATION

The consolidated financial statements include HomeServices.Com Inc. and
its active, wholly or majority owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

INTERIM FINANCIAL DATA

The interim financial data is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position,
results of operations and cash flows for the interim periods.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
cash and interest-bearing deposits in depository institutions purchased with
maturity of three months or less, excluding cash held in trust.

Supplemental disclosure of cash flow information (in thousands) --

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- --------
<S> <C> <C>
Cash paid for interest .......... $ 695 $1,292
Cash paid for taxes ............. $1,648 $4,258
</TABLE>

F-7
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Supplemental schedule of noncash investing and financing activities (in
thousands) --

<TABLE>
<CAPTION>
COMPANY
--------
<S> <C>
Acquisition payment in accounts payable ............... $ 919
Common stock issued to minority shareholders .......... $1,525
</TABLE>

The Company purchased the stock of various subsidiaries during 1998 for
$106,732. In conjunction with the acquisitions, liabilities were assumed as
follows:

<TABLE>
<S> <C>
Fair value of assets acquired ........... $ 146,664
Cash paid for the capital stock ......... (106,732)
----------
Liabilities assumed ..................... $ 39,932
==========
</TABLE>

INVESTMENTS

50 Percent or less owned entities

The Company accounts for its investment in 50 percent or less owned
entities using the equity method unless the Company does not have the ability
to exercise significant influence over the invested operating and financial
policies, in which case the investment is accounted for using the cost method.

Investment securities

Marketable debt securities are classified as available-for-sale or
held-to-maturity. Management determines the appropriate classification of debt
securities at the time of purchase. Debt securities classified as
available-for-sale are stated at fair value, with unrealized gains and losses
reported in a separate component of stockholders' equity. Realized gains and
losses on sales of investments are included in other revenues. Debt securities
are classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at amortized cost. Interest on debt securities is included in interest
income.

Certain investments in equity securities are accounted for as
available-for-sale securities and adjusted to market value with unrealized
gains or (losses) reported as a separate component of stockholders' equity.

OFFICE PROPERTY AND EQUIPMENT

Property and equipment is carried at cost less accumulated depreciation.
Major renewals and betterments are capitalized, while maintenance and repairs
that do not improve or extend the life of the respective assets are charged
against earnings in the current period.

Depreciation and amortization are provided on straight-line and
accelerated methods over the following estimated useful lives:

<TABLE>
<S> <C>
Buildings ...................... 18-31 years
Furniture and fixtures ......... 3-10 years
Leasehold improvements ......... Shorter of the life of the underlying
lease or the estimated useful life of the
improvement.
</TABLE>

INTANGIBLE ASSETS

Intangible assets consist of the excess cost over acquired net assets
(goodwill) which has been capitalized and is being amortized on a straight line
basis over 30 years. Whenever events or changes

F-8
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

in circumstances indicate that the carrying amount of goodwill may not be
recoverable, the Company reviews the carrying value of goodwill for impairment
based on the undiscounted operating cash flows of the related business unit.
Non-compete agreements are stated at cost and amortized over the lives of the
agreements.

FUNDS HELD IN TRUST AND REFUNDABLE DEPOSITS

The Company maintains separately designated trust accounts for home
buyers' earnest money and other deposits. The Company holds such funds until
sold properties are closed and subsequently disburses amounts in accordance
with the settlement instructions. At December 31, 1998, the Company held
approximately $7.9 million of funds in trust.

INCOME TAXES

Income taxes are accounted for using the asset and liability method, which
requires deferred taxes to be recognized by applying enacted statutory rates
applicable to future years to the differences between the carrying amounts and
the tax basis of existing assets and liabilities.

The Company files a consolidated income tax return with its Parent and
calculates its income tax provision as if it filed a separate return. The
Company remits to its Parent all current tax expense and receives from its
Parent the benefit of current income deductions and credits utilized.

REVENUE RECOGNITION

Commission income from real estate brokerage transactions and related
amounts due to agents are recognized when title has transferred from seller to
buyer.

Fees related to loan originations are recognized when the related loan is
delivered to the third party purchasers. At December 31, 1998, the Company had
$13.4 million in mortgage loans held for sale and other receivables related to
undelivered loans for which purchase commitments had been received.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
Because no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgements regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgement and,
therefore, cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.

The Company discloses the estimated fair value for its financial
instruments using the methods and assumptions set forth below:

Cash and cash equivalents

The carrying amount approximates the estimated fair value due to the
short-term nature of the investments.

F-9

<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Securities

Fair values of securities available for sale are based on quoted market
prices where available. If quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments.

Mortgage loans held for sale and other receivables

Mortgage loans held for sale are carried at the lower of cost or market,
computed on the aggregate basis. Market value is computed using the outstanding
commitment price from the investors. The carrying amount approximates the
estimated fair value.

The carrying amount of other receivables approximates the estimated fair
value due to the short-term nature of the investments.

Long-term debt

Rates currently available to the Company for such borrowings with similar
terms and remaining maturities are used to discount the future cash flows to
estimate fair value for notes payable. The fair value of the private placement
notes was approximately $36 million at December 31, 1998. The carrying value of
the revolving credit facility at December 31, 1998 approximated fair value as
the facility has a floating rate based upon the current interest rate. The fair
value of the interest rate swap at December 31, 1998 was $10,000.

Derivative Financial Instruments

The Company uses interest rate swaps to reduce the impact of changes in
interest rates on variable-rate debt. The net effect of these agreements is
recorded as interest expense. Interest rates swap agreements effectively fix
the interest rates on a portion of the Company's variable-rate debt. These
agreements are not adjusted to market value as they are used only to manage
interest expense and the intent is to hold them until their termination date.

BRANDING AGREEMENTS

The Company entered into an agreement with a third party providing for
such party to use the Company's name in conjunction with the residential and
commercial activities conducted by the third party. The agreement also provides
the Company with a 60-day right of first refusal to purchase a controlling
interest in the third party's operation should a sale be initiated. The Company
has agreed to pay $10,000 monthly for these rights. The agreement was dated
October 13, 1998, and has a term of five years with an additional five-year
renewal option by the third party.

A subsidiary of the Company entered into an agreement with a third party
allowing the subsidiary's tradename and logo to be associated with the
activities conducted by the third party. The subsidiary entered into this
agreement, which has a 50-year term unless terminated earlier, on December 28,
1988. The third party paid a total of $100,000 for the right to use the
subsidiary's tradename and logo. As a part of this agreement, the subsidiary
and third party agreed to form a new corporation for the purpose of granting
sublicenses to other real estate brokers within the state and use the
subsidiary's tradename for a fee. These sublicenses have a term of 30 years
unless terminated earlier under provisions of the agreement.

FRANCHISE SALES

The Company sells real estate brokerage franchises. In exchange for
certain fees, the Company provides the right to use certain names and related
trademarks. In addition, the Company provides brand marketing, operational
guidelines, sales and promotion materials and training. In 1998, the
F-10
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company recognized net revenue of $602,000 related to the franchise operation.
Through May 28, 1998, the Predecessor had recognized net revenues of $282,000
related to the franchise operation.

NEW ACCOUNTING PRONOUNCEMENTS

In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) No. 98-5, Reporting on the Costs of Start-Up
Activities. SOP No. 98-5 requires that the cost of start-up activities
previously capitalized be charged against income and reported as a cumulative
effect of a change in accounting principle, and further requires that such
costs subsequent to adoption be expensed as incurred. The Company adopted this
standard in 1999 and expensed applicable unamortized costs of $145,000
previously capitalized in connection with the start-up of all acquired
companies in the first quarter of 1999. As this amount is immaterial, the
cumulative effect of the change is included in depreciation and amortization
expense on the statement of income.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation. The statement will become effective for the Company in fiscal
2001. Adoption of this statement is not expected to have a material impact on
the Company's financial position, results of operations or cash flows.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS 131), Disclosures About Segments
of an Enterprise and Related Information, which establishes standards for the
way companies report information about operating segments in annual financial
statements. It also establishes standards for related disclosure about products
and services, geographic areas and major customers. The Company conducts its
business activity in a single operating segment. Commission revenue from real
estate brokerage services comprised approximately 87% and 89% of total revenue
for the predecessor and the Company, respectively. The Company has no other
single source of revenue greater than 7%.

(2) ACQUISITIONS

Each acquisition was accounted for as a purchase business combination. All
identifiable assets acquired and liabilities assumed were assigned a portion of
the acquisition price equal to their fair value at the date of acquisition. The
capitalized goodwill associated with the acquisitions in 1998 totaled $74,738.

Upon the acquisition of real estate brokerage companies, the Company
established an asset for the value of pending real estate sales contracts. In
the accompanying statement of income, the asset, referred to as acquisition
related costs, is charged to income in the period in which the related revenues
are reflected. The value of these contracts for 1998 business acquisitions was
$18.3 million. As of December 31, 1998, the entire value of the pending real
estate sales contracts has been charged to income.

F-11
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In 1998, MidAmerican purchased the following companies:

<TABLE>
<CAPTION>
PURCHASE PRICE
ACQUISITION DATE COMPANY LOCATION (IN THOUSANDS)
- ------------------- -------------------------- ----------------- ---------------
<S> <C> <C> <C>
May 27, 1998 Iowa Realty Co., Inc., Des Moines, IA $78,300
including Edina Realty Minneapolis MN
Home Services of Springfield, MO
Minnesota
(Predecessor)
August 18, 1998 HOME Real Estate Omaha, NE $ 5,200
Company of Omaha.
August 18, 1998 CBS Real Estate Omaha, NE $ 5,300
Company
September 1, 1998 J.C. Nichols Real Estate Kansas City, MO $16,800
December 18, 1998 Nebraska Land Title & Omaha, NE $ 800
Abstract
</TABLE>

On May 8, 1998, the predecessor sold 80% of its 100% interest in HOME Real
Estate Holdings, Inc. (formerly Home Real Estate Company), valued at $3 million,
to its minority shareholders. In addition, 64,692 shares of common stock of the
predecessor held by the minority shareholders and valued at $700,000, were
exchanged for the remaining 20% of HOME Real Estate Holdings, Inc. The proceeds
from the sale of the 80% interest were received by the predecessor's parent
company and are reflected as a dividend in the statement of changes in
shareholders' equity.

Immediately prior to the acquisition of the predecessor by the Company,
the predecessor liquidated a joint venture with an investment balance of
approximately $3.1 million (the investment balance at December 31, 1997 was
$2.6 million). In connection with the liquidation, $1,168,000 was included in
assets purchased by the Company and $1,961,000 was transferred to the
predecessor's parent as reflected on the statement of changes in stockholder's
equity. Income of $477,000 was recorded for this investment in 1998 by the
predecessor and is included in other revenue on the statement of income.

Additionally, immediately prior to the acquisition of the predecessor by
the Company, the predecessor's parent acquired the $2,815,000 minority interest
in Edina Financial Services (a subsidiary of Edina Realty Home Services)
resulting in a capital contribution of $9,150,000 and additional goodwill of
$6,335,000.

The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisitions had been
completed on January 1, 1998, after giving effect to certain adjustments
including increased amortization of goodwill generated from the acquisitions.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which would have been
achieved had these acquisitions been completed as of January 1, 1998, nor are
the results indicative of the Company's future results of operations.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
(IN THOUSANDS)
-------------------
<S> <C>
Revenues ................... $326,491
Operating expenses ......... 325,349
Net (loss) ................. (1,591)
</TABLE>

F-12
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The acquisitions were partially funded through the issuance of 10,000
shares of common stock to its parent, valued at approximately $29 million.
Additional financing was provided through a $9 million capital contribution,
the issuance of private placement notes and a revolving credit facility
provided by third party lenders.

(3) SALE-LEASEBACK TRANSACTIONS

The Company is party to sale-leaseback transactions for certain brokerage
offices. The leases are classified as operating leases, and gains realized on
the sales transactions were deferred and are being credited to income as
occupancy expense adjustments over the lease terms. At December 31, 1998,
deferred income related to these transactions was $14,000.

(4) LONG-TERM DEBT

Long-term debt consisted of the following at December 31, 1998 (in
thousands):

<TABLE>
<S> <C>
7.12% Private placement notes ......... $35,000
Revolving credit facility ............. 25,000
Other ................................. 1,445
-------
61,445
Less current portion .................. 3,436
-------
$58,009
=======
</TABLE>

PRIVATE PLACEMENT NOTES

In November 1998, the Company issued $35 million of 7.12% fixed rate
private placement senior notes due in annual increments of $5 million beginning
in 2004. Cash interest is due semi-annually on May 1 and November 1 of each
year. The notes are collateralized by all assets of the Company.

REVOLVING CREDIT FACILITY

In November 1998, the Company obtained a $25 million, 5-year credit
facility of which the Company had drawn down the entire amount as of December
31, 1998. The credit availability declines $1.5 million every six months for
five years, and a commitment fee of 0.3% is charged on any unused portion of
the facility. The credit agreement has a variable interest rate (LIBOR) plus a
credit spread based on certain financial ratios. The Company entered into a
3-year interest swap agreement covering $12.5 million of the credit facility,
which effectively fixed the interest rate on this portion at 6.3%. As of
December 31, 1998, the blended interest rate on the entire facility was 6.51%.
Interest is payable every 90 days. The notes are collateralized by all assets
of the Company.

The private placement notes and credit facility agreement contain various
financial covenants, including among other things, a minimum net worth of $25
million plus 25% of consolidated net earnings, maintenance of certain operating
ratios, 75% dividend payment restriction, and maximum allowable indebtedness to
net worth of 65% to 35%.

F-13
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Aggregate maturities of notes payable for the next five years and
thereafter are as follows (in thousands):

<TABLE>
<S> <C>
1999 .................... $ 3,436
2000 .................... 3,242
2001 .................... 3,261
2002 .................... 3,281
2003 .................... 3,225
Thereafter .............. 45,000
-------
$61,445
=======
</TABLE>

(5) MORTGAGE LOANS HELD FOR SALE AND OTHER RECEIVABLES

Mortgage loans held for sale and other receivables consisted of the
following at December 31, 1998 (in thousands):

<TABLE>
<S> <C>
Mortgage loans held for sale ......... $13,384
Other ................................ 5,282
-------
18,666
Less allowance ....................... 1,346
-------
$17,320
=======
</TABLE>

(6) OFFICE PROPERTY AND EQUIPMENT

Office property and equipment consisted of the following at December 31,
1998 (in thousands):

<TABLE>
<S> <C>
Land .................................. $ 219
Buildings ............................. 3,929
Furniture and equipment ............... 13,914
-------
18,062
Less accumulated depreciation ......... 2,609
-------
$15,453
=======
</TABLE>

Depreciation expense for the Company in 1998 totaled $2,609,000 while the
predecessor charged $1,488,000 against income for depreciation through May 27,
1998.

F-14

<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company rents office space for its various brokerage offices. Future
minimum rental payments under noncancelable operating leases at December 31,
1998, were as follows (in thousands):

<TABLE>
<CAPTION>
TO RELATED TO THIRD
PARTIES PARTIES TOTAL
------------ --------- ----------
<S> <C> <C> <C>
Year ending December 31:
1999 ........................ $ 3,181 $ 8,443 $11,624
2000 ........................ 2,809 7,034 9,843
2001 ........................ 1,579 5,429 7,008
2002 ........................ 1,269 4,519 5,788
2003 ........................ 980 3,082 4,062
Thereafter .................. 1,301 4,486 5,787
------- ------- -------
$11,119 $32,993 $44,112
======= ======= =======
</TABLE>

Total occupancy expense under noncancelable operating leases during 1998
was $4.9 million for the predecessor and $8.9 million for the Company.

(7) INTANGIBLE ASSETS

Intangible assets consisted of the following at December 31, 1998 (in
thousands):

<TABLE>
<S> <C>
Goodwill .............................. $74,738
Non-compete agreements ................ 1,350
Other intangibles ..................... 602
-------
76,690
Less accumulated amortization ......... 1,568
-------
$75,122
=======
</TABLE>

The Company amortized $1,568,000 in 1998 while the predecessor recorded
amortization of $805,000 for intangible assets through May 27, 1998.

(8) INVESTMENTS IN 50 PERCENT OR LESS OWNED ENTITIES

Condensed unaudited financial information for entities accounted for under
the equity method is as follows at December 31, 1998 (in thousands):

<TABLE>
<S> <C>
Total assets .............. $1,633
======
Total liabilities ......... $ 364
======
Net income ................ $ 521
======
</TABLE>

Net earnings in entities accounted for under the equity method were $-0-
and $260,000 for the predecessor and the Company, respectively.

(9) EMPLOYEE BENEFIT PLANS

CONTRIBUTION PLAN

The Company maintains various defined contribution salary deferral plans
covering substantially all employees under section 401(k) of the Internal
Revenue Code. The plans allow for matching and employer contributions not to
exceed the maximum allowable for tax purposes. The Company match

F-15
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ranges from 50 to 125 percent of the employee contribution for the first 4 to 6
percent of the employee's annual compensation depending upon the specific plan.
Additionally, one plan provides for a Company contribution equal to a percent
of annual compensation for each active, eligible employee on December 31 of
each year. Two other plans provide for additional Company contributions at the
discretion of the Company. For the period ended December 31, 1998, the Company
recognized expense of $1.2 million for the plans, while the predecessor
recognized expense of $100,000 through May 27, 1998.

POST-RETIREMENT BENEFITS OTHER THAN PENSIONS

The Company offered a post-retirement benefit plan, which provided certain
eligible participants with medical, dental and life insurance benefits. The
plan was terminated effective January 1, 1999. The plan was unfunded, and the
benefits were generally based on a combination of age and years of service at
retirement. The plan provided no vesting rights for participants. Upon
termination of the plan, there was one retiree collecting benefits. The medical
and dental insurance plan was contributory, with retirees' contributions
adjusted annually, and contained other cost sharing features such as a
deductible limit and coinsurance. The life insurance plan was reduced by 4
percent each month on a straight-line basis, upon retirement of the
participant, to a $10,000 minimum level. At December 31, 1998, the Company has
accrued $467,000 related to this plan. The Company had net post-retirement
benefit plan expense of $59,000 for the period from May 28, 1998 to December
31, 1998, while the predecessor recognized an expense of $55,000 through May
27, 1998.

DEFERRED COMPENSATION PLAN

Two subsidiaries of the Company provide a nonqualified deferred
compensation plan for certain sales agents. Under one plan, adopted in 1985 by
a prior owner, the board of directors of the subsidiary determines annually
which agents shall be entitled to participate, the benefit amount (based upon a
percentage of annual commissions paid to the participants) and the benefit
payment date. The plan is not funded. At December 31, 1998, the Company has
accrued approximately $4.7 million for estimated future payments to qualifying
sales agents. For 1998, the Company incurred expenses of $969,000 for the sales
agents' deferred compensation plan, while the predecessor recognized expenses
of $136,000 for this plan.

The second plan, adopted in 1994 by a prior owner, provides for a benefit
based on profits generated by participating agents. Benefits are payable after
ten years of continuous licensed contract with the subsidiary. At December 31,
1998, the Company has accrued $851,000 for estimated future payments to
qualifying sales agents. The Company holds U.S. Treasury Strips (principal
only) to fund this obligation. For 1998, the Company incurred expenses of
$200,000 for the sales agents' deferred compensation plan.

(10) INCOME TAXES

Income taxes for the year ended December 31, 1998, were as follows (in
thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- -----------
<S> <C> <C>
Current .......................... $1,585 $ (23)
Deferred ......................... 79 (2,224)
------ --------
Total expense (benefit) .......... $1,664 $ (2,247)
====== ========
</TABLE>

F-16
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax asset and deferred tax liabilities as of December
31, 1998 were as follows (in thousands):

Deferred tax assets related to:

<TABLE>
<S> <C>
NOL carryforward ........................... $1,888
Bad debt reserves .......................... 334
Employee benefits .......................... 2,275
Self-insurance reserves .................... 377
Deferred gain on real estate sales ......... 87
Other ...................................... 83
------
Total deferred tax asset .................. 5,044
------
</TABLE>

Deferred tax liabilities related to:

<TABLE>
<S> <C>
Intangibles ............................. 2,824
Depreciable property .................... 72
-----
Total deferred tax liabilities ......... 2,896
-----
Net deferred tax asset ................. $2,148
======
</TABLE>

The Company has a net operating loss carryforward at December 31, 1998 of
$4,651 which will expire commencing in 2019 and is available to offset future
taxable income.

The following table is a reconciliation between the effective income tax
rate indicated by the Consolidated Statement of Income and the statutory
federal income tax rate for the year ended December 31, 1998:

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- ----------
<S> <C> <C>
Statutory federal income tax rate ....................... 35.0% 35.0%
State income tax, net of federal income tax benefit ..... 7.0 5.4
Amortization of acquisition costs ....................... -- 0.3
Other ................................................... 4.0 (1.1)
---- ----
Effective federal and state income tax rate ............. 46.0% 39.6%
==== ====
</TABLE>

The Company is required to establish a "valuation allowance" for any
portion of the deferred tax assets that management believes will not be
realized. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment. In order to fully realize the deferred tax assets, the
Company will need to generate future taxable income. Based upon the levels of
historical taxable income and projections for future taxable income, management
believes it is more likely than not the Company will realize the benefits of
the deferred tax assets and, therefore, no such valuation allowance has been
established.

F-17
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(11) RELATED-PARTY TRANSACTIONS

Related parties consist of entities associated by common ownership or
controlled by officers or directors of the Company. The Company had the
following balances and transactions with related parties during the year ended
December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- -----------
<S> <C> <C>
Assets:
Advances receivable ...................... $ 69
======
Liabilities:
Accounts payable ......................... $ 354
Accrued expenses ......................... 13
------
$367
======
Stockholders' equity:
Notes receivable for shares sold ......... $896
======
Revenues:
Title fees ............................... $ 387 $ --
Other .................................... 11 --
------ ------
$ 398 $ --
====== ======
Expenses:
Occupancy ................................ $ 292 $ 913
Corporate allocations .................... 359 1,552
------ ------
$ 651 $ 2,465
====== ======
Other income (expense):
Interest income .......................... $ 25 $ 64
Interest expense ......................... (485) (1,246)
------ ------
$ (460) $(1,182)
====== ======
</TABLE>

Certain officers and employees of the Company were issued shares of common
stock in the Company upon its formation, with a corresponding receivable
recorded for the fair value of the stock. The value of the 500 issued shares
and corresponding receivables was $1.5 million. The shares carry the same
dividend and voting rights as the shares held by the Parent. The officers and
employees held a 5% ownership interest as of December 31, 1998.

As certain performance levels are achieved over a five-year period, a
portion of the receivable balance is forgiven and considered compensation to
the officers and employees. In 1998, the amount accrued to the allowance for
estimated forgiveness and expensed as compensation was $693,000. The balance of
the notes receivable at December 31, 1998 was $896,000. The Company charges
interest on the outstanding receivable balance at a rate equal to its average
annual borrowing rate (6.87% at December 31, 1998). Interest income recorded on
the notes was $64,000 in 1998.

As of December 31, 1998, the Company had advanced its excess funds to
affiliated companies. Interest accrues daily at LIBOR plus 25 basis points
(6.62% at December 31, 1998) and is receivable upon demand.

In May 1998, the Company entered into a revolving credit agreement with
its parent to borrow funds from time to time. The interest rate on borrowings
is equal to the 30-day LIBOR rate plus 1%. Interest expense recorded on this
agreement totaled $1.2 million through December 31, 1998. No outstanding debt
remained at December 31, 1998.

F-18
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(12) INVESTMENT SECURITIES

The investment securities held at December 31, 1998 were (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ------------ ------------ ------
<S> <C> <C> <C> <C>
Available-for-sale:
Highwoods Properties Inc. ......... $288 $ 9 $ -- $297
==== ==== ====== ====
Held-to-maturity:
U.S. Treasury Strips (principal
only) ............................ $364 $ 90 $ -- $454
Agency obligation .................. 287 10 -- 297
---- ---- ------ ----
$651 $100 $ -- $751
==== ==== ====== ====
</TABLE>

The maturities of held-to-maturity investment securities and their
approximate fair value at December 31, 1998 were as follows (in thousands):

<TABLE>
<CAPTION>
FAIR
COST VALUE
------ ------
<S> <C> <C>
Due in one year or less ........................ $ -- $ --
Due after one through five years ............... 287 297
Due after five years through ten years ......... 364 454
</TABLE>

(13) COMMITMENTS AND CONTINGENCIES

The Company is a party to a number of lawsuits, claims and assessments
arising from the operation of its business. While the results of lawsuits or
other matters against the Company cannot be predicted with certainty,
management, in consultation with legal counsel, does not expect these matters
to have a material adverse effect on the financial position, results of
operations or cash flows of the Company.

The Company has employment agreements and arrangements with its executive
officers and certain management personnel. The agreements generally continue
for a period of one month to four years, and provide for severance payments
under certain circumstances. The agreements include a covenant against
competition with the Company, which extends for a period of time after
termination for any reason. As of December 31, 1998, if all employees under
contract were to be terminated by the Company without good cause, the Company's
liability would be approximately $9.6 million.

The Company assumed an outstanding contingent obligation as part of the
J.C. Nichols Real Estate asset purchase. The obligation related to an
acquisition of a residential real estate brokerage operation by J.C. Nichols
Real Estate Co. on May 14, 1998. The purchase agreement requires certain
installment payments to be made based on revenue, net of commission expense,
generated by real estate agents of the acquired brokerage. The agreement
provides for a payment of 15% of revenue, net of commission expense, generated
during the initial year after acquisition, 10% in the second year, and 5% in
the third year. An initial payment of $463,000 was made at the date of
acquisition with subsequent payments due June 1999 and monthly thereafter,
through May 2001.

The CBS Real Estate Company stock purchase agreement requires certain
installment and retention payments after the closing date based on agent
retention and profitability levels. These payments are required 60 days, 120
days and 17 months after the close date. A $250,000 installment payment was
made in late 1998, with subsequent net installment payments of $200,000 made in
early 1999. A final retention payment not to exceed $100,000 is due 17 months
from the closing date based on certain levels of retained agent profitability.

F-19
<PAGE>

HOMESERVICES.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The J.C. Nichols Real Estate asset purchase agreement also requires certain
installment payments be made, after the closing date, based on certain
profitability levels achieved. The payments are required 60 days after the
close of calendar year 1998, 1999 and 2000. The maximum amount payable under
the agreement is $500,000 per year.

Commitments to sell mortgage loans to investors are contracts in which the
Company agrees to deliver mortgage loans at specific future dates at specified
prices or yields. Risks may arise from the possible inability of counterparties
to meet the terms of their contracts.

(14) SUBSEQUENT EVENT (UNAUDITED)

On June 15, 1999, a payment in the amount of $736,522 was distributed to
two employees in satisfaction of a portion of the amounts owed to such
employees under the original employment agreements entered into at the time of
acquisition.

In June 1999, HomeServices signed a purchase agreement to acquire Paul
Semonin Company, a Louisville, Kentucky real estate brokerage firm with 11
offices and a leading market share in Louisville, and also operates in
Lexington, Kentucky and southern Indiana. This transaction closed on July 8,
1999.

The following pro forma financial information represents the unaudited pro
forma results of operations as if the aforementioned acquisition, and the
acquisitions described in note 2, had been completed on January 1, 1998, after
giving effect to certain adjustments including increased amortization of
goodwill generated from the acquisitions. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
the results of operations which would have been achieved had these acquisitions
been completed as of January 1, 1998, nor are the results indicative of the
Company's future results of operations.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
(IN THOUSANDS)
-------------------
<S> <C>
Revenues .......................... $357,837
Operating expenses ................ 356,976
Net (loss) ........................ (1,477)
</TABLE>

F-20

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
J.C. Nichols Real Estate

In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in partners' capital, and
of cash flows present fairly, in all material respects, the financial position
of J.C. Nichols Real Estate and its subsidiaries (the "Company") at December
31, 1997 and the results of its operations and its cash flows for the eight
months ended August 31, 1998 and the years ended December 31, 1997 and 1996 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

Kansas City, Missouri /s/ PricewaterhouseCoopers LLP
June 30, 1999

F-21
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
1997
ASSETS -------------
<S> <C>
Current assets:
Cash and cash equivalents ....................................................... $ 542
Cash held in trust .............................................................. 781
Commission revenue receivable ................................................... 197
Mortgage loans held for sale .................................................... 4,952
Other accounts receivable, net of allowance for uncollectible accounts of $3..... 95
Notes receivable, net of allowance for uncollectible notes of $4................. 109
Current portion of held-to-maturity securities .................................. 147
Prepaid expenses ................................................................ 147
------
Total current assets ......................................................... 6,970
------
Property and equipment:
Furniture and fixtures .......................................................... 1,740
Computers and electronic equipment .............................................. 851
Leasehold improvements .......................................................... 127
------
2,718
Less accumulated depreciation ................................................... 1,493
------
Net property and equipment ................................................... 1,225
------
Other assets:
Held-to-maturity securities ..................................................... 364
Available-for-sale security ..................................................... 369
Investment in less than 50% owned entity ........................................ 30
Other noncurrent assets ......................................................... 18
------
Total other assets ........................................................... 781
------
Total assets ................................................................. $8,976
======
</TABLE>

F-22
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET, CONTINUED
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
1997
LIABILITIES AND PARTNERS' CAPITAL -------------
<S> <C>
Current liabilities:
Short-term bank borrowings ........................ $4,409
Cash overdraft .................................... 132
Accounts payable .................................. 227
Accrued commissions ............................... 135
Accrued expenses .................................. 501
Deposits on loans in process ...................... 97
Cash held in trust ................................ 781
Current portion of long-term debt ................. 88
Other current liabilities ......................... 7
------
Total current liabilities ...................... 6,377
------
Long-term liabilities:
Long-term debt .................................... 421
Deferred compensation ............................. 651
------
Total long-term liabilities .................... 1,072
------
Commitments and contingencies (note 10) ............ --
Minority interest in subsidiaries .................. 55
------
Partners' capital:
Partners' capital ................................. 1,211
Accumulated other comprehensive income ............ 261
------
Total partners' capital ........................ 1,472
------
Total liabilites and partners' capital ......... $8,976
======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-23
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED YEAR ENDED
AUGUST 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------- -------------- -------------
<S> <C> <C> <C>
Revenues:
Commission revenue ....................................... $25,715 $27,860 $25,538
Other .................................................... 2,163 2,314 1,655
------- ------- -------
Total revenues ......................................... 27,878 30,174 27,193
------- ------- -------
Operating expenses:
Commission expense ....................................... 18,173 19,738 17,805
Salaries and employee benefits ........................... 3,227 3,982 3,378
Occupancy ................................................ 962 1,117 1,331
Business promotion and advertising ....................... 1,291 1,409 1,268
Depreciation and amortization ............................ 292 344 227
Operating, administrative and other ...................... 1,786 1,967 1,353
------- ------- -------
Total operating expenses .............................. 25,731 28,557 25,362
------- ------- -------
Other income (expense):
Interest income .......................................... 40 91 72
Other income ............................................. 32 7 --
Interest expense ......................................... (44) (103) (63)
Other expense ............................................ -- (4) --
Minority interest ........................................ (97) (60) (15)
------- -------- -------
Net other expense ..................................... (69) (69) (6)
------- -------- -------
Net income ............................................ $ 2,078 $1,548 $1,825
======= ======== =======
Income before income taxes ............................... $ 2,078 $1,548 $1,825
Pro forma provision for income taxes (unaudited) ......... 792 598 704
------- -------- -------
Pro forma net income (unaudited) ...................... $ 1,286 $ 950 $1,121
======= ======== =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-24
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
OTHER
PARTNER'S PARTNER'S COMPREHENSIVE
CAPITAL-JCN CAPITAL-NM INCOME TOTAL
------------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 ............... $ 221 $ 330 $ 14 $ 565
--------
Comprehensive income:
Net income ............................ 730 1,095 1,825
Unrealized gain on investment ......... 48 48
--------
Total comprehensive income ............ 1,873
Capital distributions .................. (400) (600) (1,000)
------ -------- ---------- --------
Balance, December 31, 1996 ............. 551 825 62 1,438
--------
Comprensive income:
Net income ............................ 619 929 1,548
Unrealized gain on investment ......... 199 199
--------
Total comprehensive income ............ 1,747
Capital contributions .................. 187 187
Capital distributions .................. (760) (1,140) (1,900)
------ -------- ---------- --------
Balance, December 31, 1997 ............. 410 801 261 1,472
--------
Comprehensive income:
Net income ............................ 831 1,247 2,078
Unrealized loss on investment ......... (81) (81)
--------
Total comprehensive income ............ 1,997
Capital distributions .................. (837) (1,255) (2,092)
------ -------- --------- --------
Balance, August 31, 1998 ............... $ 404 $ 793 $ 180 $ 1,377
====== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-25
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
EIGHT MONTHS YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31,
AUGUST 31, 1998 1997 1996
----------------- -------------- -------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .............................................. $ 2,078 $ 1,548 $ 1,825
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ......................... 292 344 227
Minority interest in subsidiaries ..................... 97 60 15
Noncash compensation expense .......................... -- 187 --
Deferred compensation expense ......................... -- 171 185
Change in current assets and liabilities (net of
acquisition):
(Increase) decrease in:
Commission revenue receivable ...................... (453) (197) 107
Mortgage loans receivable .......................... 927 (855) (1,722)
Other accounts receivable .......................... 24 22 (8)
Prepaid expenses ................................... (38) -- (15)
Other assets ....................................... 7 (14) --
Increase (decrease) in:
Accounts payable ................................... 2,398 (35) 105
Accrued commissions ................................ 354 104 14
Accrued expenses ................................... (416) (25) (228)
Deposits on loans in process ....................... (49) (85) (40)
Other current liabilities .......................... (7) 5 (4)
---------- -------- ----------
Net cash provided by (used in) operating
activities ...................................... 5,214 1,230 917
--------- -------- ----------
Cash flows from investing activities:
Purchases of property and equipment ..................... (337) (564) (471)
Disposal of property and equipment ...................... 4 -- 52
Acquisition of business ................................. (463) -- --
Proceeds from notes receivable .......................... 58 52 (102)
Purchase of investments ................................. (140) (61) (319)
--------- -------- ----------
Net cash used in investing activities ................. (878) (573) (840)
--------- -------- ----------
Cash flows from financing activities:
Payments on long-term debt .............................. (95) (51) (62)
Net increase in short-term bank borrowings .............. (3,201) 2,075 766
Change in cash overdraft ................................ (132) (1,344) 1,167
Distributions to partners ............................... (1,213) (1,900) (1,000)
Distributions to minority interest shareholders ......... (9) (27) (56)
---------- -------- ----------
Net cash provided by (used in) financing
activities ........................................... (4,650) (1,247) 815
--------- -------- ----------
Net decrease in cash ............................... (314) (590) 892
Cash and cash equivalents at beginning of period ......... 542 1,132 240
--------- -------- ----------
Cash and cash equivalents at end of period ............... $ 228 $ 542 $ 1,132
========= ======== ==========
Supplemental cash flow information:
Interest paid ............................................ $ 44 $ 103 $ 60
========= ======== ==========
Noncash investing activity:
Capital lease obligations ............................... $ -- $ -- $ 23
========= ======== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-26

<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) THE COMPANY AND BASIS OF PRESENTATION

J.C. Nichols Real Estate (the Company) operates primarily as a home
services company specializing in residential real estate brokerage, specialized
services for building new homes, and complimentary products, which include
mortgage origination, home inspection/warranty assistance and relocation
assistance. The Company has over 650 sales associates working from 16 branch
offices located in Kansas and Missouri.

The consolidated financial statements include the accounts, after
inter-company eliminations, of J.C. Nichols Real Estate, its majority owned
subsidiary, Plaza Financial Services (which owns 90% of Plaza Mortgage
Services), and its majority owned subsidiary, J.C. Nichols Alliance. J.C.
Nichols Alliance markets J.C. Nichols Real Estate franchises to cities in
Missouri and Kansas.

On August 31, 1998, the Company sold all of its assets to MidAmerican
Realty Services for $16,500,000. The asset purchase agreement also requires
certain installment payments be made after the closing date based on certain
profitability levels achieved. The payments are required 60 days after the
close of calendar years 1998, 1999 and 2000. The maximum amount payable under
the agreement is $500,000 per year. In February 1999, a $500,000 installment
was made to J.C. Nichols in accordance with the purchase agreement.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
cash and interest-bearing deposits in depository institutions purchased with a
maturity of three months or less, excluding cash held in trust.

CASH HELD IN TRUST

Balances of $781,000 at December 31, 1997 are restricted from use for
general operations and are held in a trust as escrow funds from real estate
transactions.

PROPERTY AND EQUIPMENT

Property and equipment is carried at cost less accumulated depreciation.
Major renewals and betterments are capitalized, and maintenance and repairs
which do not improve or extend the life of the respective assets are charged
against earnings in the current period.

Depreciation and amortization are provided on straight-line and
accelerated methods over the following estimated useful lives:

<TABLE>
<S> <C>
Furniture and fixtures ..................... 5-10 years
Computers and electronic equipment ......... 3-5 years
Leasehold improvements ..................... 5-10 years
</TABLE>

F-27
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INVESTMENTS

Less Than 50 Percent Owned Entity

The investment in Reliance Relocation Services consists of a small common
stock interest in a broker-to-broker real estate referral network specializing
in relocation services. The investment is carried at cost, which approximates
market value.

Investment Securities

Marketable debt securities are classified as available-for-sale or
held-to-maturity. Management determines the appropriate classification of debt
securities at the time of purchase. Debt securities classified as
available-for-sale are stated at fair value, with unrealized gains and losses
reported in a separate component of partners' capital. Realized gains and
losses on sales of investments are included in other revenues. Debt securities
are classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at amortized cost. Interest on debt securities is included in interest
income.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
Where no market exists for financial instruments, fair value estimates are
based on judgements regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgement and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

The Company discloses the estimated fair value for its financial
instruments using the methods and assumptions set forth below:

Cash and cash equivalents

The carrying amount approximates the estimated fair value due to the
short-term nature of the investments.

Securities

Mortgage loans held for sale

Short-term borrowings

The carrying amount of short-term bank borrowings approximates the
estimated fair value.

Long-term debt

Rates currently available to the Company for such borrowings with similar
terms and remaining maturities are used to discount the future cash flows to
estimate fair value for debt.

F-28
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INTANGIBLES

Costs associated with the organization of the Company are being amortized
over 5 years, and are included in other assets. At December 31, 1997, the book
value was $4,000, net of accumulated amortization of $20,000.

Goodwill of $240,000 resulting from a business acquisition in May 1998 is
being amortized over 15 years (see note 9).

DEPOSITS ON LOANS IN PROGRESS

Deposits on loans in progress consist of funds to be paid for loan
origination fees, appraisal fees, title fees and processing fees on behalf of
the buyer. These funds are disbursed at closing or at the time of funding.

REVENUE RECOGNITION

Commission income from real estate brokerage transactions and related
amounts due to agents are recognized when title has transferred from seller to
buyer.

Income from underwriting and sales of residential mortgages is recognized
when such mortgages are sold to designated investors and funds have been
received from the respective investors.

In exchange for fees, the Company provides the right to use certain names
and related trademarks. This franchise revenue is recognized upon receipt.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

INCOME TAXES

The Company has elected under the Internal Revenue Code to be taxed as a
partnership. The Company's subsidiary, Plaza Financial Services, is a limited
liability company and is taxed as a partnership. The partners/members are taxed
on their proportionate share of the Company's taxable income, and accordingly,
no provision for federal or state income taxes has been made. Pro forma income
taxes are calculated at a combined federal and state statutory rate of 38%. The
income tax provision for J.C. Nichols Alliance, a corporation, is included in
other expenses on the statement of income.

(3) INVESTMENT SECURITIES

The investment securities held at December 31, 1997 were (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ------------ ------------ ------
<S> <C> <C> <C> <C>
Available-for-sale:
J.C. Nichols Co. common stock ................. $108 $261 $ -- $369
Held-to-maturity:
U.S. Treasury Strips (principal only) ......... $511 $ 36 $ -- $547
</TABLE>

F-29
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The maturities of marketable debt securities and their approximate market
value at December 31, 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
----------- -------
<S> <C> <C>
Due in one year or less ........................ $147 $147
Due after one year through five years .......... -- --
Due after five years through ten years ......... $364 $400
</TABLE>

(4) SHORT-TERM BORROWINGS

Short-term borrowings consist of two line of credit agreements. The first
agreement is a $2,000,000 line of credit due June 30, 1999, collateralized by
the Company's portion of commissions on pending transactions. The borrowings
are payable at a fixed rate of 8.0%. There were no amounts outstanding on the
line of credit at December 31, 1997.

The second agreement is a $7,000,000 line of credit due April 30, 1999,
collateralized by the underlying mortgages. The borrowings are payable at a
fixed rate of 8.5%. The line of credit balance at December 31, 1997 was
$4,409,000. The loan is subject to a financial covenant requiring tangible net
worth of at least $150,000 in Plaza Mortgage Services.

(5) LONG-TERM DEBT

Long-term debt at December 31, 1997 consists of the following (in
thousands):

<TABLE>
<S> <C>
Note payable to J.C. Nichols Company, interest at 8.5%, payable
in monthly installments of $10 including interest, until
maturity in April 2003 .......................................... $490
Capital lease obligations, collateralized by equipment, payable in
monthly installments of $1 including interest, through January
2000 ............................................................ 19
----
509
Less current maturities .......................................... 88
----
Total long-term debt .......................................... $421
====
</TABLE>

As of December 31, 1997, scheduled maturities of long-term debt during the
next five years ending December 31, are as follows (in thousands):

<TABLE>
<S> <C>
1998 ....................... $ 88
1999 ....................... 89
2000 ....................... 90
2001 ....................... 98
2002 ....................... 106
Thereafter ................. 38
----
$509
====
</TABLE>

(6) RELATED PARTY TRANSACTIONS

As discussed in note 5, the Company has a note payable to one of its
partners, J.C. Nichols Company, in the amount of $490,000 at December 31, 1997.
In addition, as discussed in note 3, the Company had an investment in the
common stock of J.C. Nichols Company.

F-30
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has a license agreement with J.C. Nichols Company to use the
"J.C. Nichols" tradename and servicemark for a royalty equal to $120,000 of net
income per year. Royalty expense for the year ended December 31, 1996, 1997,
and the eight months ended August 31, 1998, totaled $120,000, $120,000 and
$80,000, respectively.

The Company recognized expense in the amount of $18,000 and $12,000 for
the year ended December 31, 1997 and the eight months ended August 31, 1998,
respectively, to reimburse J.C. Nichols Company for the services of one of its
employees.

The Company leases office space from J.C. Nichols Company. Total rent
expense for the years ended December 31, 1996, 1997 and the eight months ended
August 31, 1998 was $374,000, $407,000 and $330,000, respectively.

The Company leases office space from an officer and owner of the Company.
Total rent expense for 1996, 1997 and the first eight months of 1998 was
$87,000, $98,000 and $94,000, respectively.

(7) RETIREMENT AND PROFIT SHARING PLANS

The Company maintains a 401(k) plan for the benefit of its employees. The
plan allows for matching and discretionary employer contributions not to exceed
the maximum allowable for tax purposes. Contributions are determined annually
by the Company. The consolidated statements of income for 1996, 1997 and for
the first eight months of 1998 reflect an expense of $46,000, $70,000 and
$41,000, respectively, for the employer match for the periods, based on
budgeted profits and contribution levels for the current plan years.

The Company has a nonqualified deferred compensation plan which covers
real estate agents licensed with the Company. The plan, adopted in 1994,
provides for a benefit based on profits generated by participating agents.
Benefits are payable after ten years of continuous licensed association with
the Company. The Company holds U.S. Treasury Strips (principal only) to fund
this obligation. Contributions to the plan are discretionary and are determined
annually by the Company. The Company expensed $167,000 and $140,000 in 1996 and
1997, respectively.

(8) LEASES

OPERATING

The Company leases certain equipment and office space under noncancelable
operating leases. The following is a schedule of future minimum rental payments
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
RELATED
PARTY OTHER TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Year ending December 31:
1998 ........................ $144 $1,389 $1,533
1999 ........................ 154 1,522 1,676
2000 ........................ 160 1,367 1,527
2001 ........................ 165 1,186 1,351
2002 ........................ 171 1,104 1,275
---- ------ ------
$794 $6,568 $7,362
==== ====== ======
</TABLE>

Total rent expense under operating leases for 1996, 1997 and the first
eight months of 1998 was $906,000, $1,116,000 and $962,000, respectively.

F-31
<PAGE>

J.C. NICHOLS REAL ESTATE AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CAPITAL

Cost of leased property under capital leases at December 31, 1997 includes
(in thousands):

<TABLE>
<S> <C>
Equipment ............................. $39
Less accumulated amortization ......... 11
---
$28
===
</TABLE>

Minimum future obligations on capital leases at December 31, 1997 are as
follows (in thousands):

<TABLE>
<S> <C>
Year ending December 31:
1998 ....................................... $14
1999 ....................................... 7
2000 ....................................... --
---
21
Less amount representing interest ........... (2)
---
Present value of minimum obligation ......... $19
===
</TABLE>

Total payments under capital leases for 1996, 1997 and the first eight
months of 1998 was $51,000, $24,000 and $11,000, respectively.

(9) BUSINESS ACQUISITION

In May 1998, the Company acquired certain assets of Eugene D. Brown
Company (the Seller). The acquisition was accounted for using the purchase
method. The purchase price was $703,000. The Company paid $463,000 cash at
closing and is to pay $20,000 per month for a period of twelve months beginning
July 1, 1998 (in the form of a note payable), for the balance of the purchase
price. Assets acquired included furniture, office equipment and leasehold
improvements with a fair value of $463,000, with the balance ($240,000)
allocated to goodwill. Under the terms of the agreement, the Company is to pay,
as a monthly referral fee, a percentage of gross profit generated by sales
agents of the Seller who join the Company. Sales generated by these agents
during the thirty-nine months after the date of the purchase are subject to the
following referral fee on gross profit:

15% of the closed transactions within the first 12 months
10% of the closed transactions within the next 12 months
5% of the closed transactions within the last 15 months

The Company has guaranteed that the referral fees will be no less than
$204,000.

The monthly referral fees are reduced to the extent of the $20,000 monthly
note payments for the acquisition. Any balance due shall be paid to the Seller
at the end of the first year. If note payments exceed the amount of the
referral fees during the first twelve months, the excess will be carried
forward to apply to referral fees due in subsequent months.

In connection with the acquisition, the Company entered into a five year
non-compete agreement with the Seller valued at $300,000.

(10) COMMITMENTS AND CONTINGENCIES

The Company is a party to lawsuits, claims and assessments arising during
the normal course of business. While the results of lawsuits or other matters
against the Company cannot be predicted with certainty, management, in
consultation with legal counsel, does not expect these matters to have a
material adverse effect on the consolidated financial position or results of
operations of the Company.

At August 31, 1998, the Company had capital distributions payable of
$878,000.

F-32

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Iowa Realty Co., Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheet of Iowa Realty Co.,
Inc. and subsidiaries as of December 31, 1997, and the related consolidated
statements of income, changes in stockholder's equity and cash flows for the
years ended December 31, 1997 and 1996. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Iowa Realty Co., Inc. and
subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for the years ended December 31, 1997 and 1996 in conformity
with generally accepted accounting principles.

/s/ KPMG LLP
KPMG, LLP
Des Moines, Iowa

February 3, 1998, except for note 15
which is as of April 3, 1998

F-33
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997
ASSETS ---------
<S> <C>
Cash and cash equivalents .............................................................. $ 2,590
Real estate contracts, net (note 2) .................................................... 361
Real estate ............................................................................ 964
Office property and equipment, net (note 3) ............................................ 14,061
Investments in 50% or less owned entities (note 4) ..................................... 2,651
Other assets (note 6) .................................................................. 41,719
-------
$62,346
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and contracts payable (note 7) .................................................. $ 7,651
Accrued expenses and other liabilities ................................................ 13,717
Income taxes payable primarily to parent company ...................................... 1,307
-------
Total liabilities ................................................................... 22,675
-------
Minority interest ...................................................................... 2,880
-------
Stockholders' equity:
Serial preferred stock, $.01 par value;
2,000,000 shares authorized; no shares issued and outstanding ....................... --
Common stock, $.01 par value; 23,000,000 shares authorized; 4,758,850 shares issued
and outstanding at December 31, 1997 ................................................ 47
Additional paid-in capital ............................................................ 31,665
Retained earnings ..................................................................... 5,079
-------
Total stockholders' equity .......................................................... 36,791
-------
Commitment and contingencies (notes 3, 6, 7, 8, and 14) ................................
$62,346
=======
</TABLE>

See accompanying notes to consolidated financial statements.

F-34
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1997 AND 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1996
------------------------- ------------------------
<S> <C> <C> <C> <C>
Revenues:
Commissions revenue ....................... $191,083 179,378
Title fees ................................ 16,203 14,821
Real estate sales ......................... 449 14,022
Other ..................................... 6,961 8,070
-------- -------
Total revenues .......................... 214,696 216,291
Operating expenses:
Commission expense ........................ $125,148 115,331
Salaries and employee benefits ............ 33,688 35,296
Occupancy ................................. 13,091 12,377
Advertising ............................... 10,565 10,192
Depreciation and amortization ............. 5,619 5,103
Cost of real estate sales ................. 191 11,281
Other ..................................... 15,273 16,016
======== =======
Total operating expenses ................ 203,575 205,596
Other income (expense):
Interest income ........................... 633 1,050
Interest expense .......................... (1,536) (3,632)
======== =======
Net other income (expense) .............. (903) (2,582)
-------- -------
Income before income taxes and
minority interest ...................... 10,218 8,113
Income taxes (note 9) ...................... 4,725 3,263
-------- -------
Income before minority interest ......... 5,493 4,850
Minority interest .......................... 633 1,276
-------- -------
Net income .............................. $ 4,860 3,574
======== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-35
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1997 AND 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 ............................. $ 6 12,862 10,874 23,742
Capital contributions, net ............................... -- 7,028 -- 7,028
Net income ............................................... -- -- 3,574 3,574
Dividends ................................................ -- -- (645) (645)
--- ------ ------ ------
Balance at December 31, 1996 ............................. 6 19,890 13,803 33,699
Capital contributions, net ............................... -- 11,116 -- 11,116
Net income ............................................... -- -- 4,860 4,860
Dividends ................................................ -- -- (13,584) (13,584)
Common stock issued in acquisition of subsidiary ......... 1 699 -- 700
Restructure of authorized classes of stock ............... 40 (40) -- --
--- ------ ------- -------
Balance at December 31, 1997 ............................. $47 31,665 5,079 36,791
=== ====== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-36
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1997 AND 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income .............................................................. $ 4,860 3,574
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ......................................................... 3,737 3,450
Amortization ......................................................... 2,009 1,653
Deferred income taxes ................................................ 706 386
Loss in undistributed earning of 50% or less owned entities .......... 240 179
Loss on sale of office property and equipment ........................ 260 413
Deferred gains on real estate sales .................................. (130) (203)
Increase in other assets ............................................. (1,672) (13,208)
Increase (decrease) in accrued expense and other liabilities ......... (6,441) 7,950
Increase (decrease) in income taxes payable .......................... 1,095 (3,336)
Minority interest earnings ........................................... 633 1,276
--------- -------
Net cash provided by operating activities .......................... 5,297 2,134
--------- -------
Cash flows from investing activities:
Cash used in acquisition ................................................ (2,800) --
Cash received from acquisition .......................................... 502 --
Proceeds from sale of office property and equipment ..................... 222 599
Purchases of office property and equipment .............................. (3,669) (9,102)
Net decrease (increase) in real estate contracts receivable ............. 1,842 (1,589)
Proceeds from sale of real estate ....................................... 1,035 1,218
Advances to affiliates (net) ............................................ (3,891) --
--------- -------
Net cash used in investing activities .............................. (6,759) (8,874)
--------- -------
Cash flows from financing activities:
Proceeds from notes and contracts payable ............................... 62,964 42,459
Repayments on notes and contracts payable ............................... (66,461) (31,907)
Subsidiaries' dividends to parent ....................................... (878) (645)
Capital contribution .................................................... 2,800 757
--------- -------
Net cash provided by (used in) financing activities ................ (1,575) 10,664
--------- -------
Net increase (decrease) in cash and cash equivalents ............... (3,037) 3,924
Cash and cash equivalents at beginning of year ........................... 5,627 1,703
--------- -------
Cash and cash equivalents at end of year ................................. $ 2,590 5,627
========= =======
Supplemental disclosure of cash flow information --
Cash paid for:
Interest .............................................................. $ 408 4,022
Income taxes .......................................................... 3,282 5,289
========= =======
Supplemental schedule of noncash investing and financing activities:
Noncash asset dividends ............................................... $ 12,706 --
Stock issued in acquisition ........................................... 700 --
Noncash assets contributed by parent .................................. 8,316 6,271
========= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-37

<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

(1) SUMMARY OF BUSINESS ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES AND
PRACTICES

DESCRIPTION OF THE BUSINESS

Iowa Realty Co., Inc., headquartered in Des Moines, Iowa, is a wholly
owned subsidiary of AmerUs Group Co. AmerUs Group Co. is a wholly owned
subsidiary of American Mutual Holding Company (AMHC), headquartered in Des
Moines, Iowa. Iowa Realty Co., Inc. is primarily engaged in real estate
brokerage.

As part of a corporate reorganization during 1997, Iowa Realty Co., Inc.
contributed its investments in the following companies to AmerUs Group Co.;
AmerUs Mortgage, Inc.; Sunset Homes, Inc. (f/k/a Midland Homes Inc.); Iowa
Realty Development Co.; and Central Realty Advisors, Inc. Due to the common
ownership and control of the contributed companies, prior periods have been
restated except as follows:

The predecessor company was active in both real estate development
operations and real estate brokerage operations in 1996. The development and
brokerage activities were conducted by the company using shared management,
office space and related services. Effective January 1, 1997, the assets and
liabilities associated with the development operations were transferred to the
parent company.

Development assets and liabilities transferred effective January 1, 1997
included (in thousands):

<TABLE>
<S> <C>
Real estate ....................................... $16,416
Real estate contracts receivable .................. 6,808
Investments in 50% or less owned entities ......... 5,810
Other assets ...................................... 1,300
Notes and contracts payable ....................... 18,355
</TABLE>

Development operations for 1996 included the following direct revenue and
expense (in thousands):

<TABLE>
<S> <C>
Real estate sales ................................. $14,022
Costs of sales .................................... 11,281
Interest income ................................... 498
Interest expense .................................. 1,036
</TABLE>

CONSOLIDATION AND BASIS OF PRESENTATION

The consolidated financial statements include Iowa Realty, Co., and its
wholly or majority owned subsidiaries (collectively the Company):

<TABLE>
<S> <C>
Iowa Realty Co. Edina Realty, Inc.
IMO Co., Inc. HOME Real Estate Company (note 12)
Midland Inspection Services, Inc. First Realty, Ltd.
AmerUs Insurance, Inc. Midland Escrow Services, Inc.
Edina Financial Services, Inc. (74.5% owned) Iowa Title Company
Edina Realty Title Services, Inc. Referral Company
</TABLE>

F-38
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

All significant intercompany balances and transactions have been
eliminated in consolidation.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
cash and interest-bearing deposits in depository institutions with maturity of
three months or less, excluding cash held in trust.

INVESTMENT IN 50 PERCENT OR LESS OWNED ENTITIES

The Company accounts for its investment in 50 percent or less owned
entities using the equity method, unless the Company does not have the ability
to exercise significant influence over the investee's operating and financial
policies, in which case the investment is accounted for using the cost method.

OFFICE PROPERTY AND EQUIPMENT

Office property and equipment are stated at cost less depreciation.
Depreciation is calculated over the estimated useful lives of the assets, which
range from 18-31 years for buildings and from 3-7 years for furniture,
fixtures, and equipment, primarily using accelerated depreciation methods.

INTANGIBLE ASSETS

Intangible assets primarily consist of the purchase price in excess of the
fair market value of net assets acquired, organizational costs, and noncompete
agreements and are being amortized on a straight-line basis over 5-25 years.

INCOME TAXES

The Company files a consolidated income tax return with its ultimate
parent company, AMHC, and calculates its income tax provision as if it filed a
separate return. The Company's share of the consolidated tax liability is
payable to AMHC upon demand.

REVENUE RECOGNITION

Commission income from real estate brokerage transactions and related
amounts paid to agents are recognized when title has transferred from buyer to
seller.

Revenue resulting from the sale of real estate inventory is recognized
when the Company receives a sufficient down payment, and the buyer is required
to maintain a continuing investment in the property. When these conditions are
not satisfied, the gain (or a portion thereof) on the sale of real estate
inventory is deferred.

F-39
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company discloses the estimated fair value for its financial
instruments using the methods and assumptions set forth below:

CASH AND CASH EQUIVALENTS

The carrying amount approximates the estimated fair value due to the
short-term nature of the investments.

REAL ESTATE CONTRACTS RECEIVABLE

The fair value of real estate contracts receivable is calculated by
discounting cash flows through the estimated maturity using estimated market
discount rates that reflect the credit risk inherent in the real estate
contract.

NOTES AND CONTRACTS PAYABLE

LIMITATIONS

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instruments.
Because no market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

(2) REAL ESTATE CONTRACTS

Real estate contracts receivable are secured by developed land and bear
interest at rates ranging from 8 percent to 12 percent, with maturities
extending to August 2008. The land which secures the contracts is primarily
concentrated in central Iowa. At December 31, 1997, the allowance for doubtful
accounts was approximately $12,000.

(3) OFFICE PROPERTY AND EQUIPMENT

Office property and equipment consisted of the following at December 31,
1997 (in thousands):

<TABLE>
<S> <C>
Land .................................. $ 233
Buildings ............................. 6,387
Furniture and equipment ............... 21,229
-------
27,849
Less accumulated depreciation ......... 13,788
-------
$14,061
=======
</TABLE>

F-40
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

The Company rents office space for its various brokerage offices. Future
minimum rental payments under noncancelable operating leases at December 31,
1997, were as follows (in thousands):

<TABLE>
<CAPTION>
TO RELATED TO THIRD
PARTIES PARTIES TOTAL
------------ --------- --------
<S> <C> <C> <C>
Year ending December 31:
1998 ........................ $1,353 6,747 8,100
1999 ........................ 1,337 5,849 7,186
2000 ........................ 1,337 4,544 5,881
2001 ........................ 394 3,002 3,396
2002 ........................ 241 2,350 2,591
Thereafter .................. 885 4,867 5,752
------ ----- -----
Total ..................... $5,547 27,359 32,906
====== ====== ======
</TABLE>

Total rent expense under noncancelable operating leases during 1997 and
1996 was approximately $8,543,000 and $7,940,000, respectively.

(4) INVESTMENTS IN 50% OR LESS OWNED ENTITIES

The investment in unconsolidated entities are accounted for using the
equity method. Condensed unaudited financial information for such entities
follows (in thousands):

<TABLE>
<S> <C>
Total assets .............. $6,776
======
Total liabilities ......... $1,473
======
Net income (loss) ......... $ (148)
======
</TABLE>

(5) SALE-LEASEBACK TRANSACTIONS

The Company is party to sale-leaseback transactions for certain brokerage
offices. The leases are classified as operating leases, and gains realized on
the sales transactions were deferred and are being credited to income as rent
expense adjustments over the lease terms. At December 31, 1997 and 1996,
deferred income related to these transactions was $228,000 and $403,000,
respectively.

(6) OTHER ASSETS

Other assets at December 31, 1997 were as follows (in thousands):

<TABLE>
<S> <C>
Intangible assets, net of accumulated amortization of
approximately $7,671 and $3,362 in 1997 and 1996, respectively $27,938
Cash held in trust ............................................. 1,782
Fees and other receivables ..................................... 3,566
Net deferred income tax asset (note 9) ......................... 2,068
Advances to affiliates ......................................... 3,891
Other .......................................................... 2,474
-------
$41,719
=======
</TABLE>

F-41
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

As described in note 7 (A), the Company participates in a line of credit
with affiliates. As of December 31, 1997, the Company has advanced their excess
funds to affiliated companies through the line of credit agreement. Interest
accrues daily at 6.90 percent and is receivable upon demand.

(7) NOTES AND CONTRACTS PAYABLE

Notes and contracts payable, net of original discount of $740,000 at
December 31, 1997 consisted of the following (in thousands):

<TABLE>
<S> <C> <C>
Borrowings on line of credit ................. (A) $ --
Subsidiary senior term note .................. (B) 5,643
Subsidiary junior subordinated notes ......... (C) --
Various notes and contracts payable .......... (D) 2,008
------
$7,651
======
</TABLE>

(A) The Company and its subsidiaries participate in a $30 million line of
credit agreement with other affiliated companies. Interest rate was 7.56
percent at December 31, 1997. The line of credit is due in 1998.

(B) The Company issued a senior term note in the amount of $7,978,000 in
connection with the acquisition of two subsidiaries. The note has an interest
rate of 1.25 percent over prime and is payable in quarterly installments from
September 30, 1996 to December 31, 2003. The balance is net of original issue
discount of $740,000 remaining at December 31, 1997.

(C) The Company issued a junior subordinated note in the amount of
$4,000,000 in connection with the acquisition of two subsidiaries. The note had
an interest rate of 12 percent, with principal and interest payable in
quarterly installments. During 1997, the note was extinguished prior to
maturity and without penalty.

(D) The Company has issued various notes and contracts payable primarily
for the purchase of real estate brokerage operations. Interest rates range from
7 percent to 9 percent; due annually through 2003.

In addition, a subsidiary of the Company has a $3.5 million secured line
of credit for operating purposes that is unused as of December 31, 1997. The
line of credit expires December 31, 1999; its interest rate is the prime rate;
and it is secured by assets of the subsidiary.

Aggregate maturities of notes and contracts payable, including aggregate
original issue discount of $740,000 at December 31, 1997, for the next five
years and thereafter are as follows:

<TABLE>
<S> <C>
1998 .................... $2,058
1999 .................... 1,353
2000 .................... 1,227
2001 .................... 1,238
2002 .................... 1,251
Thereafter .............. 1,264
------
Total ................... $8,391
======
</TABLE>

F-42
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

(8) EMPLOYEE BENEFIT PLANS

CONTRIBUTION PLANS

The Company has a defined contribution salary deferral plan covering
substantially all employees under section 401(k) of the Internal Revenue Code.
The Plan allows eligible employees to contribute up to 15 percent of their
annual compensation. The Company matches 125 percent of employee contributions
up to 4 percent of their annual compensation. Additionally, the Company
contributes 4 percent of annual compensation for each active employee on
December 31 of each year. For the years ended December 31, 1997 and 1996, the
Company incurred expenses of $693,000 and $670,000, respectively, for the Plan.

A subsidiary of the Company has a defined contribution salary deferral
plan covering substantially all employees under Section 401(k) of the Internal
Revenue Code. The plan allows eligible employees to contribute up to 15 percent
of their annual compensation. The Company matches 50 percent of employee
contributions up to 6 percent of their annual compensation. The Company
recognized expense for contributions to the plan of $299,000 and $279,000
during 1997 and 1996, respectively.

POST-RETIREMENT BENEFITS OTHER THAN PENSIONS

The Company participated in an affiliated company's post-retirement
benefit plan, which provides certain eligible participants with medical,
dental, and life insurance benefits. The plan is unfunded, and the benefits are
generally based on a combination of age and years of service at retirement. The
medical and dental insurance plan is contributory, with retiree contributions
adjusted annually, and contains other cost sharing features such as deductibles
and coinsurance. The accounting for the medical and dental insurance plan
anticipates future cost sharing changes to the written plan that are consistent
with the Company's expressed intent to increase the retiree contribution rate
annually for the expected inflation rate for that year. The life insurance plan
is reduced by 4 percent each month on a straight-line basis, upon retirement of
the participant. The actuarial present values of the accumulated plan benefits
and net assets available for benefits relating to the participants are
accounted for on a group basis and are not available at the Company level. The
Company had net post-retirement benefit plan expense of $279,574 and $-0- for
the years ended December 31, 1997 and 1996, respectively.

DEFERRED COMPENSATION PLAN

A nonqualified deferred compensation plan is provided for sales agents.
The board of directors annually determines which agents shall be entitled to
participate, the benefit amount (based upon a percentage of annual commissions
paid to the participants), and the benefit payment date. The plan is not
funded. At December 31, 1997 and 1996, the Company has accrued approximately
$3,854,000 and $3,569,000, respectively, for estimated future payments to
qualifying sales agents. For 1997 and 1996, the Company has incurred expenses
of $658,000 and $358,000, respectively, for the sales agents' deferred
compensation under the plan.

(9) INCOME TAXES

Income taxes for the years ended December 31, 1997 and 1996, were as
follows (in thousands):

F-43
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Current ................ $4,019 2,877
Deferred ............... 706 386
------ -----
Total .................. $4,725 3,263
====== =====
</TABLE>

F-44

<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

The following is a reconciliation of the effective income tax rate
indicated by the Consolidated Statements of Income for the years ended December
31, 1997 and 1996:

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Statutory federal income tax rate .......... 35.0% 35.0%
Amortization of Goodwill ................... 7.2% 6.8%
Other ...................................... 4.0% (1.6)%
---- -----
46.2% 40.2%
===== =====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of December
31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
Deferred income tax assets:
Employee benefits ............................... $2,293
Deferred gains on real estate sales ............. 144
Valuation reserves .............................. 195
Self-insurance reserves ......................... 103
Other ........................................... 145
------
Total deferred income tax asset ............... 2,880
Deferred income tax liabilities:
Office property and equipment ................... 791
Other ........................................... 21
------
Total deferred income tax liabilities ......... 812
------
Net deferred income tax asset ................. $2,068
======
</TABLE>

The Company is required to establish a "valuation allowance" for any
portion of the deferred tax asset that management believes will not be
realized. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. In order to fully realize the deferred tax asset, the
Company will need to generate future taxable income. Based upon the levels of
historical taxable income and projections for future taxable income, management
believes it is more likely than not the Company will realize the benefits of
the deferred tax assets and, therefore, no such valuation allowance has been
established.

(10) FUNDS HELD IN TRUST AND REFUNDABLE DEPOSITS

The Company maintains a separately designated trust account for home
buyers' earnest money and other deposits. The Company holds such funds until
sold properties are closed and then disburses amounts in accordance with the
settlement instructions. At December 31, 1997, the Company held approximately
$1.8 million of funds in trust and deposits, which are included in accrued
expenses and other liabilities.

(11) RELATED-PARTY TRANSACTIONS

F-45
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Assets
Accounts and other receivables ........... $ 94 172
Advances to affiliates ................... 3,891 --
------ ---
$3,985 172
====== ===
Liabilities -- accounts payable and accrued
expenses ................................. $ 192 115
====== ===
Revenues:
Interest ................................. $ 998 138
Brokerage commissions .................... 113 39
Other .................................... 1,262 407
------ ---
$2,373 584
====== ===
Expenses:
Occupancy ................................ $1,384 1,280
Interest ................................. 228 1,210
Data processing .......................... 11 14
Other expenses ........................... 659 644
------ -----
$2,282 3,148
====== =====
</TABLE>

(12) BUSINESS COMBINATIONS

In July 1997, the Company acquired all of the common stock of a real
estate brokerage operation located in Omaha, Nebraska for approximately
$2,800,000 cash, stock of $700,000, and liabilities assumed of $533,000. The
acquisition was accounted for using the purchase method, with results of
operations included in the financial statements from the acquisition date. The
fair value of the assets acquired, excluding goodwill, was approximately
$983,000.

(13) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of the Company's financial instruments (as
described in note 1) at December 31, 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
RECORDED FAIR
AMOUNT VALUE
---------- --------
<S> <C> <C>
Financial assets:
Cash and cash equivalents ........... $2,590 2,540
Real estate contracts ............... 361 361
Financial liabilities --
Notes and contracts payable ......... 7,651 7,651
====== =====
</TABLE>

(14) COMMITMENTS AND CONTINGENCIES

A subsidiary of the Company has guaranteed repayment of borrowings of a
general partnership, solely owned by the subsidiary's former shareholders, in
the amount of approximately $3.7 million at December 31, 1997.

F-46
<PAGE>

IOWA REALTY CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996 (CONTINUED)

The Company acts as escrow agent in connection with the performance of its
real estate services. Accordingly, the Company held escrow funds totaling
approximately $1.1 million at December 31, 1997. These funds are not recorded
in the Company's consolidated financial statements.

The Company has guaranteed the repayment of approximately $1.7 million in
construction loans for various builders at December 31, 1997. The guarantees
are secured by the land and improvements made under the construction loan.

The Company is a party to a number of lawsuits, claims, and assessments
arising from the operation of its business. While the results of lawsuits or
other matters against the Company cannot be predicted with certainty,
management, in consultation with legal counsel, does not expect these matters
to have a material adverse effect on the consolidated financial position or
results of operations of the Company.

One of the Company's subsidiaries has employment and severance agreements
with key management members which expire on January 1, 1999.

(15) PROPOSED ACQUISITION OF THE COMPANY

On April 3, 1998, the Company's parent company, AmerUs Group Co., executed
a letter of intent where MidAmerican Energy Holdings Company will acquire all
of the shares of the Company's common stock. The proposed acquisition is
subject to regulatory and certain other conditions.

F-47

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Paul Semonin Company

In our opinion, the accompanying balance sheets and the related statements
of income, of changes in stockholders' equity, and of cash flows present
fairly, in all material respects, the financial position of Paul Semonin
Company (the Company) at December 31, 1998 and 1997 and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

New York, New York
July 14, 1999

F-48
<PAGE>
PAUL SEMONIN COMPANY
Balance Sheets
(in thousands except shares)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $1,116 $1,179
Cash held in trust............................................... 722 452
Receivables, net of allowance for doubtful accounts of $15 and
$28............................................................. 192 210
Receivable from affiliate........................................ 28 200
Other current assets............................................. 18 11
-------------- --------------
Total current assets............................................ 2,076 2,052
-------------- --------------
Property and equipment:
Furniture and equipment.......................................... 2,788 2,472
Leasehold improvements........................................... 954 762
-------------- --------------
3,742 3,234
Less accumulated depreciation.................................... 2,255 1,866
-------------- --------------
Net property and equipment...................................... 1,487 1,368
-------------- --------------
Other assets:
Available-for-sale securities.................................... -- 1,227
Investments in less than 50% owned entities...................... 30 41
Restricted investments........................................... 125 103
Other noncurrent assets.......................................... 35 58
-------------- --------------
Total other assets.............................................. 190 1,429
-------------- --------------
Total assets...................................................... $3,753 $4,849
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 225 $ 326
Accrued expenses................................................. 518 370
Cash held in trust............................................... 722 452
Commissions payable.............................................. 802 688
Dividends payable................................................ -- 885
Current maturities of long-term debt............................. 455 390
-------------- --------------
Total current liabilities....................................... 2,722 3,111
-------------- --------------
Long-term liabilities:
Long-term debt................................................... 825 800
Deferred compensation............................................ 188 122
-------------- --------------
Total long-term liabilities..................................... 1,013 922
-------------- --------------
Commitments and contingencies (note 11)........................... -- --
Stockholders' equity:
Common stock, stated value $.0273 per share; 1,000,000 shares
authorized; 301,459 shares issued and outstanding............... 8 8
Accumulated other comprehensive income........................... -- 196
Retained earnings ............................................... 10 612
-------------- --------------
Total stockholders' equity...................................... 18 816
-------------- --------------
Total liabilities and stockholders' equity........................ $3,753 $4,849
============== ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-49
<PAGE>
PAUL SEMONIN COMPANY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Revenues:
Commission revenue.............................. $30,663 $25,707
Other........................................... 1,180 975
--------- ---------
Total revenues................................. 31,843 26,682
--------- ---------
Operating expenses:
Commission expense.............................. 21,408 17,885
Salaries and employee benefits.................. 3,626 3,182
Occupancy....................................... 1,620 1,549
Business promotion and advertising.............. 1,441 1,177
Depreciation and amortization................... 501 527
Operating, administrative and other............. 1,439 1,271
--------- ---------
Total operating expenses....................... 30,035 25,591
--------- ---------
Other income (expense):
Interest and dividend income.................... 46 145
Other income, net............................... 499 174
Interest expense................................ (105) (140)
--------- ---------
440 179
--------- ---------
Net income....................................... $ 2,248 $ 1,270
========= =========
Income before income taxes....................... $ 2,248 $ 1,270
Pro forma provision for income taxes
(unaudited)..................................... 913 514
--------- ---------
Pro forma net income (unaudited)................ $ 1,335 $ 756
========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-50
<PAGE>
PAUL SEMONIN COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK
OTHER
------------------- COMPREHENSIVE RETAINED
SHARES AMOUNT INCOME EARNINGS TOTAL
--------- -------- --------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1996...................... 301,459 $ 8 $ 49 $ 449 $ 506
---------
Comprehensive income:
Net income................ -- -- -- 1,270 1,270
Unrealized gain on
investments.............. -- -- 147 -- 147
---------
Total comprehensive
income.................... -- -- -- -- 1,417
Dividends.................. -- -- -- (1,107) (1,107)
--------- -------- --------------- ---------- ---------
Balance, December 31,
1997...................... 301,459 8 196 612 816
---------
Comprehensive income:
Net income................ -- -- -- 2,248 2,248
Unrealized gain on
investments.............. -- -- (196) -- (196)
---------
Total comprehensive
income.................... -- -- -- -- 2,052
Dividends.................. -- -- -- (2,850) (2,850)
--------- -------- --------------- ---------- ---------
Balance, December 31,
1998...................... 301,459 $ 8 $ -- $ 10 $ 18
========= ======== =============== ========== =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-51
<PAGE>
PAUL SEMONIN COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income.................................................... $ 2,248 $ 1,270
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization................................ 501 527
Gain on sale of land......................................... (18) --
Loss on investments.......................................... 11 --
Realized gain on available-for-sale securities............... (269) (1)
Change in assets and liabilities:
(Increase) decrease in:
Receivables................................................ 18 (40)
Receivable from affiliate.................................. 172 (63)
Other assets............................................... (6) 111
Increase (decrease) in:
Accounts payable........................................... (101) 65
Accrued expenses........................................... 148 (81)
Commissions payable........................................ 114 261
Dividends payable.......................................... (885) 727
Deferred compensation...................................... 66 1
--------- ---------
Net cash provided by operating activities.................... 1,999 2,777
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment........................... (528) (645)
Proceeds from sale of property and equipment.................. -- 1
Proceeds from sale of land.................................... 20 --
Proceeds from sale of available-for-sale securities .......... 1,516 403
Purchase of available-for-sale securities..................... (216) (726)
--------- ---------
Net cash provided by (used in) investing activities ......... 792 (967)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt...................... 1,210 1,813
Payments on long-term debt.................................... (1,214) (1,543)
Dividends declared............................................ (2,850) (1,107)
--------- ---------
Net cash used in financing activities........................ (2,854) (837)
--------- ---------
Net (decrease) increase in cash and cash equivalents .......... (63) 973
Cash and cash equivalents at beginning of year................. 1,179 206
--------- ---------
Cash and cash equivalents at end of year....................... $ 1,116 $ 1,179
========= =========
Cash paid during the year for interest......................... $ 110 $ 141
========= =========
Non-cash additions to property and equipment for capital
leases........................................................ $ 94 $ 173
========= =========
Non-cash additions to long term debt for capital leases ....... $ 94 $ 173
--------- ---------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-52
<PAGE>
PAUL SEMONIN COMPANY
NOTES TO FINANCIAL STATEMENTS

(1) THE COMPANY AND BASIS OF PRESENTATION

Paul Semonin Company (the Company) operates as a residential real estate
broker with operations in central Kentucky and southern Indiana. The Company
has approximately 658 sales associates working from eleven branch offices.

In July 1999, the Company was purchased by HomeServices.Com, Inc. Home
Services.Com, Inc. is the second largest residential real estate brokerage
firm in the United States, and is based out of Edina, Minnesota.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents include
cash and interest-bearing deposits in depository institutions purchased with
a maturity of three months or less, excluding cash held in trust.

RESTRICTED INVESTMENTS

Restricted investments is an investment account funded by the Company for
a deferred compensation agreement with an independent contractor. The
investment is stated at market value with the unrealized gain or loss
included in the deferred compensation liability.

CASH HELD IN TRUST

Balances of $570,000 and $367,000 at December 31, 1998 and 1997,
respectively, represent cash maintained in a separately designated trust
account for home buyers' ernest money. The Company holds such funds until
properties are closed and subsequently disburses amounts in accordance with
settlement instructions.

In 1997, the Company created a legal defense fund whereby agents make
nonrefundable payments to an escrow trust fund on deposit in a special bank
account. The fund will be used to settle potential lawsuits. The deposit and
related liability as of December 31, 1998 and 1997 totaled $152,000 and
$85,000, respectively.

PROPERTY AND EQUIPMENT

Depreciation and amortization are provided on straight-line and
accelerated methods over the following estimated useful lives:

Furniture and equipment 5-10 years
Leasehold improvements Shorter of the life of the underlying
lease or the
estimated useful life of the improvement.

F-53
<PAGE>
PAUL SEMONIN COMPANY
NOTES TO FINANCIAL STATEMENT (CONTINUED)

Impairment losses on long lived assets are recognized when expected
future cash flows are less than the asset carrying value. When indicators of
impairment are present, the Company evaluates the carrying value of the long
lived assets in relation to the operating performance and expected future
undiscounted cash flows and adjusts net book value if appropriate. There was
no impairment for the years ended December 31, 1998 and 1997.

INVESTMENTS

Securities

Marketable securities are classified as available-for-sale. Management
determines the appropriate classification of investments in debt and equity
securities at the time of purchase. Securities classified as
available-for-sale are stated at fair value, with unrealized holding gains
and losses reported in a separate component of stockholders' equity. Mutual
fund investments expose the Company to market risk in the form of equity
price risk; that is, the potential future loss of value that would result
from a decline in the fair values of the mutual funds. Each fund and its
underlying net assets are also subject to market risk which may arise from
changes in equity prices, credit ratings, and interest rates.

Less Than 50 Percent Owned Entities

The Company has a 2% common stock interest in a broker-to-broker real
estate referral network specializing in relocation services. The investment
is carried at cost, which approximates market value.

At December 31, 1997, the Company held an investment in a broker-to-broker
real estate referral network. The investment was carried at cost and was
written off at December 31, 1998. An $11,000 loss was recorded in other
income, net on the statement of income.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
Where no market exists for financial instruments, fair value estimates are
based on judgments regarding future expected loss experience, current
economic conditions, risk characteristics of various financial instruments
and other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly affect
the estimates.

The Company discloses the estimated fair value for its financial
instruments using the methods and assumptions set forth below:

Cash and cash equivalents

The carrying amount approximates the estimated fair value due to the
short-term nature of the investments.

Securities

Fair values of securities available for sale are based on quoted market
prices where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.

Receivables

The carrying amount of other receivables approximates the estimated fair
value due to the short-term nature of the receivables.

Long-term debt

Rates currently available to the Company for such borrowings with similar
terms and remaining maturities are used to discount the future cash flows to
estimate fair value for debt. The notes payable balances reported at December
31, 1998 and 1997 approximate fair value.

F-54
<PAGE>
PAUL SEMONIN COMPANY
NOTES TO FINANCIAL STATEMENT (CONTINUED)

INTANGIBLE ASSETS

Non-compete agreements are amortized over the life of the related
agreements using the straight-line method. At December 31, 1998 the
non-compete agreements were fully amortized. At December 31, 1997, the book
value of the non-compete agreement included in noncurrent other assets was
$33,000, net of accumulated amortization of $342,000.

REVENUE RECOGNITION

Commission revenue from real estate brokerage transactions and related
amounts due to agents are recognized when title has transferred from seller
to buyer.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

INCOME TAXES

The Company has elected to be taxed as an S Corporation under the Internal
Revenue Code. The stockholders are taxed on their proportionate share of the
Company's taxable income, and accordingly, no provision for federal or state
income taxes has been made. Pro forma income taxes are calculated at a
combined federal and state statutory rate of 40.4% and are reported on the
statements of income.

NEW PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the
instruments measured at fair value. The accounting for change in the fair
value of a derivative depends on the intended use of the derivative and the
resulting designation. The statement will become effective for the Company in
fiscal 2001; however, adoption of this statement is not expected to have a
material impact on the Company's financial position, results of operations or
cash flows.

(3) INVESTMENT SECURITIES

The investment securities classified as available-for-sale at December 31,
1997 were sold and paid out as a dividend in 1998. The securities were as
follows at December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ------------ ------------ -------
<S> <C> <C> <C> <C>
The One Group Large Company Growth Fund $ 345 $ 84 $-- $ 429
The One Group Growth Opportunities Fund 136 -- (1) 135
The One Group Growth Equity Index Fund . 184 52 -- 236
The One Group Large Company Value Fund . 251 43 -- 294
The One Group Small Capitalization Fund 115 18 -- 133
----------- ------------ ------------ -------
Total available-for-sale securities ... $1,031 $197 $(1) $1,227
=========== ============ ============ =======
</TABLE>

Unrealized holding gains and losses on available-for-sale securities are
reported on the balance sheet in a separate component of stockholders'
equity.

F-55
<PAGE>
PAUL SEMONIN COMPANY
NOTES TO FINANCIAL STATEMENT (CONTINUED)

(4) LONG-TERM DEBT

Long-term debt at December 31 consists of the following (in thousands):

<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Notes Payable
Tom Helm, Inc. (a related party)--monthly payments of $1,997 including
interest at a rate of 10.5%; due March 31, 1999; unsecured. ............ $ 6 $ 28
Bank One--monthly payments of $6,944 plus interest at the bank's index
rate*; due December 30, 2000; collateralized by various fixed assets. .. 167 250
Bank One--monthly payments of $3,525 including interest at a rate of
7.772%; due November 1, 2003; collateralized by various fixed assets. .. 172 --
Fenley Office, LLC--monthly payments of $4,821 including interest at
rates ranging from 8.85% to 9.50%; due August 6, 2003; unsecured. ...... 219 255
Bank One--monthly payments of $5,512 including interest at the bank's
index rate*; due September 30, 1999; collateralized by various fixed
assets ................................................................. 76 133
Robert Jones--monthly payments of $1,353 including interest at a rate of
8.5%; due December 1, 1999, unsecured................................... 15 30
Bank One--monthly payments of $6,759 including interest at a rate of
8.06%; due December 21, 2001............................................ 215 --
------ ------
870 696
Less current portion..................................................... 315 214
------ ------
Total long-term notes payable............................................ 555 482
------ ------
*The index rate at Bank One at December 31, 1998 and 1997 was 8.25%.
Capital Lease Obligations
Various capital lease obligations with imputed interest rates ranging
from 3.86% to 11.42% and maturities extending through October 31,
2003.................................................................... 410 494
Less current portion..................................................... 140 176
------ ------
Total long-term capital lease obligations................................ 270 318
------ ------
Total long-term debt..................................................... $825 $800
------ ------
</TABLE>

Maturities on long-term debt for each of the five years succeeding
December 31, 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31:
- --------------------------
<S> <C>
1999 ..................... $315
2000 ..................... 232
2001 ..................... 161
2002 ..................... 90
2003 ..................... 72
------
$870
======
</TABLE>

F-56
<PAGE>
PAUL SEMONIN COMPANY
NOTES TO FINANCIAL STATEMENT (CONTINUED)

(5) CURRENT NOTES PAYABLE

The Company has a $1,500,000 line of credit with Bank One which matures
August 31, 1999. Interest is incurred at the bank's index rate. The line of
credit is cosigned by the Company's president. There was no outstanding
balance on this line of credit at December 31, 1998 or 1997.

(6) RELATED PARTY TRANSACTIONS

Since 1994, the Company has provided bookkeeping services to Semonin
Mortgage Services, Inc., a related party. Income under this arrangement
included in the 1997 statement of income is $18,000. There was no income from
this arrangement in 1998.

The Company pays certain expenses on behalf of Semonin Mortgage Services,
Inc. At December 31, 1998 and 1997, the Company had a receivable of $28,000
and $200,000, respectively, related to these expenses.

The Company's president is a member of Bank One's Advisory Board and
Executive Committee. The Company has investments held at Bank One as well as
debt outstanding with the bank.

The Company has a note payable to a former employee in the amount of
$6,000 and $28,000 at December 31, 1998 and 1997, respectively.

(7) RETIREMENT PLAN

The Company has a defined contribution retirement plan under section
401(k) of the Internal Revenue Code which covers substantially all employees.
In 1998 and 1997, the Company matched 25% of employees'contributions. The
matching applies only to the first 4% of compensation for non-highly
compensated employees. Employer contributions for the years ended December
31, 1998 and 1997 totaled $14,000 and $8,000, respectively.

(8) LEASES

OPERATING

The Company leases office space and equipment at various locations under
non-cancelable operating lease agreements which expire at various dates
through 2005. Future minimum lease payments for these leases are as follows
(in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31:
- --------------------------
<S> <C>
1999 ..................... $ 814
2000 ..................... 708
2001 ..................... 687
2002 ..................... 590
2003 ..................... 569
Thereafter ................ 1,084
-------
Total .................... $4,452
=======
</TABLE>

Total rent expense under operating leases was $927,000 and $827,000 for
the years ended December 31, 1998 and 1997, respectively.

F-57
<PAGE>
PAUL SEMONIN COMPANY
NOTES TO FINANCIAL STATEMENT (CONTINUED)

CAPITAL

Cost of leased property under capital leases includes:

<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Equipment..................... $909 $854
Less accumulated
depreciation................. 302 222
------ ------
$607 $632
====== ======
</TABLE>

Payments on capital leases for the next five years are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------------------------------
<S> <C>
1999................................ $159
2000................................ 106
2001................................ 94
2002................................ 76
2003................................ 17
------
Total................................ 452
Less interest........................ 42
------
Present value of future payments..... 410
Less current portion................. 140
------
Long-term portion.................... $270
======
</TABLE>

(9) INTANGIBLE ASSETS

In 1992, the Company was a party in an asset purchase agreement which
resulted in a five-year non-compete agreement. The Company paid $250,000 for
this asset, which was fully amortized in 1997.

In 1996, the Company entered into a non-compete agreement with a former
employee whereby he agreed not to compete with the Company for a period of
two years. The Company agreed to pay the employee the sum of $125,000, as
follows:

$40,000 paid in 1996
$25,000 paid on July 15,1998; and
$60,000 paid in 24 monthly installments of $2,500 each,
commencing on August 15, 1998

The amount charged to expense for amortization of intangible assets in
1998 and 1997 was $33,000 and $81,000, respectively.

(10) OFF-BALANCE SHEET RISK

The Company has extended unsecured credit to agents and third parties
amounting to $189,000 and $237,000 at December 31, 1998 and 1997,
respectively.

The Company's primary business is the brokerage of residential real estate
within the states of Kentucky and Indiana and thus its business is dependent
on the real estate market and general economics of those states.

Financial instruments which potentially subject the Company to credit risk
include cash on deposit with one financial institution amounting to
$1,224,000 and $627,000 at December 31, 1998 and 1997, respectively.

F-58
<PAGE>
PAUL SEMONIN COMPANY
NOTES TO FINANCIAL STATEMENT (CONTINUED)

(11) COMMITMENTS AND CONTINGENCIES

The Company has an arrangement with the stockholders of record to pay
minimum dividends amounting to the federal taxable income multiplied by the
highest individual federal income tax rate including surtax. This arrangement
will continue as long as the Company remains an Internal Revenue Code
sub-chapter S Corporation.

In 1994, the Company entered into a deferred compensation agreement with
an independent contractor associated with the Company. The agreement requires
the Company to credit 5% of commissions paid to the Company on sales
activities generated by the contractor on behalf of the Company. The Company
currently makes quarterly payments of the estimate due to the contractor, to
a separately maintained investment account. Quarterly payments will be made
to the contractor from this account for five years, beginning 90 days after
the contractor's association with the Company terminates. Expense under this
agreement was $29,000 and $24,000 in 1998 and 1997, respectively. The total
amount funded as of December 31, 1998 and 1997 was $125,000 and $103,000,
respectively, held as restricted investments.

Effective July 12, 1996, an employee terminated his employment with the
Company and exercised his rights under a Phantom Stock Agreement dated
January 1, 1994. The amount due to the employee under this agreement was
$13,000 as of December 31, 1997. This liability is recorded in accrued
expenses at December 31, 1997.

In April 1996, the Company purchased certain assets of Steve Hall &
Associates, Inc. No money exchanged hands at the time of purchase, however,
the Company agreed to pay Steve Hall 10% of profits earned by Hall associates
on a quarterly basis up to a maximum of $100,000 as long as Steve Hall is
employed by the Company. In exchange, Steve Hall has agreed not to compete
with the Company for five years after the date of his termination. The
Company recognized expenses of $8,000 and $11,000 in 1998 and 1997,
respectively, for this agreement.

On June 1, 1998, the Company entered into a phantom stock agreement with
an employee of the Company, as a deferred compensation arrangement. Effective
June 1, 1998, the Company granted the employee 6,030 shares of phantom stock
and agreed to grant the employee additional shares of phantom stock on July 1
of each of the years 1998 through 2000 at 1% of the issued and outstanding
common stock as of such date. Each share of phantom stock shall have a value
as agreed upon in the phantom stock agreement. Deferred compensation under
this agreement of $50,000 was charged to expense in 1998.

F-59

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
HOME Real Estate Company of Omaha

In our opinion, the accompanying statements of income, changes in
stockholders' equity, and cash flows present fairly, in all material respects,
the results of operations and cash flows of HOME Real Estate Company of Omaha
for the period from May 8, 1998 through August 18, 1998 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards, which require that we perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.

Kansas City, Missouri /s/ PricewaterhouseCoopers LLP
July 2, 1999

F-60

<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

STATEMENT OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
MAY 8, 1998
THROUGH
AUGUST 18,
1998
------------
<S> <C>
Revenues:
Commission revenues ......................... $8,751
Other ....................................... 37
------
Total revenues .............................. 8,788
------
Operating expenses:
Commission expense .......................... 6,470
Salaries and employee benefits .............. 1,211
Occupancy ................................... 240
Business promotion and advertising .......... 242
Depreciation and amortization ............... 63
Operating, administrative and other ......... 247
------
Total operating expenses .................... 8,473
------
Other income:
Interest income ............................. 16
------
Other income ................................ 16
------
Income before income taxes ................ 331
Income taxes ................................. 132
------
Net income .................................. $ 199
======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-61

<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
------------------- PAID IN RETAINED COMPREHENSIVE
SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
-------- -------- ----------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 8, 1998 ............. -- $-- $ -- $ -- $-- $ --
Initial capitalization ........... 85 85 3,515 -- -- 3,600
Comprehensive income:
Net income ...................... -- -- -- 199 -- 199
-- --- ------ ---- --- ------
Balance, August 18, 1998 ......... 85 $85 $3,515 $199 $-- $3,799
== === ====== ==== === ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-62

<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
MAY 8, 1998
THROUGH
AUGUST 18,
1998
------------
<S> <C>
Cash flows from operating activities:
Net income .................................................................... $ 199
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation ................................................................ 30
Amortization ................................................................ 33
Change in current assets and liabilities:
(Increase) decrease in:
Receivables ................................................................ (20)
Prepaid expenses ........................................................... 40
Increase (decrease) in:
Accounts payable ........................................................... (11)
Accrued commissions ........................................................ (74)
Accrued expenses ........................................................... (39)
Income taxes payable ....................................................... 132
------
Net cash provided by operating activities ................................ 290
Net cash provided by (used in) investing activities ...................... --
Net cash provided by (used in) financing activities ...................... --
Net increase in cash ..................................................... 290
Cash and cash equivalents at beginning of period ............................... 144
------
Cash and cash equivalents at end of period ..................................... $ 434
======
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................................ $ --
Cash paid for taxes ........................................................... --
Supplemental schedule of noncash investing activities:
Contribution of assets to HOME Real Estate Company of Omaha by parent ......... $3,600
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-63

<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS)

(1) THE COMPANY AND BASIS OF PRESENTATION

HOME Real Estate Company of Omaha (the Company), a subsidiary of Home Real
Estate Holdings, Inc., operates primarily as a home services company
specializing in residential real estate brokerage, specialized services for
building new homes, and complimentary products, which include mortgage
origination, home inspection/warranty assistance and relocation assistance. The
Company has over 260 sales associates working from 5 branch offices in Omaha,
Nebraska.

The Company was formed on September 14, 1987. Effective July 31, 1997, the
Company was sold to AmerUs Home Services, Inc. On May 8, 1998, the original
owners repurchased the Company from AmerUs Home Services, Inc. for total
consideration of $3,600 and contributed the assets purchased to the Company. On
August 18, 1998, the Company sold all of its assets to MidAmerican Realty
Services Company, a wholly owned subsidiary of MidAmerican Energy Holdings
Company, for $5,217. These financial statements for the Company are presented
for the period May 8, 1998 through August 18, 1998 at which time the Company
was independent. The Company's fiscal year end is December 31.

The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

PROPERTY AND EQUIPMENT

Depreciation and amortization are provided on the straight-line method
over the following estimated useful lives:

<TABLE>
<S> <C>
Furniture and fixtures ......... 5-10 years
Leasehold improvements ......... Term of lease
</TABLE>

INTANGIBLES

Goodwill of $3,088 resulting from the acquisition is being amortized over
25 years.

REVENUE RECOGNITION

Commission income from real estate brokerage transactions and related
amounts due to agents are recognized when title has transferred from seller to
buyer.

BUSINESS PROMOTION AND ADVERTISING

Advertising and promotion costs are expensed as incurred.

INCOME TAXES

F-64
<PAGE>

HOME REAL ESTATE COMPANY OF OMAHA

NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED)

(3) LEASES

<TABLE>
<CAPTION>
RELATED
PARTY OTHER TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Period from August 19, 1998 to December 31, 1998 ......... $ 74 $ 225 $ 299
Year ended December 31:
1999 .................................................... 253 479 732
2000 .................................................... 170 408 578
2001 .................................................... 170 295 465
2002 .................................................... 164 156 320
Thereafter .............................................. 125 -- 125
---- ------ ------
$956 $1,563 $2,519
==== ====== ======
</TABLE>

Total rent expense under operating leases for the period was $240,
including $38 to related parties.

(4) RETIREMENT AND PROFIT SHARING PLANS

The Company maintains a 401(k) plan for the benefit of its employees.
Under the plan, the Company matches up to 50% of the first 6% of an employee's
salary. The statement of income reflects an expense of $26 for the employer
match for the period.

(5) INCOME TAXES

Income taxes for the period ended August 18, 1998 were as follows:

<TABLE>
<S> <C>
Current ......... $132
----
</TABLE>

For the period ended August 18, 1998, deferred taxes were not significant.
Therefore, the Company did not record a deferred tax expense or a deferred tax
benefit.

The following table is a reconciliation between the effective income tax
rate indicated by the statement of income and the statutory federal income tax
rate for the period ended August 18, 1998:

<TABLE>
<S> <C>
Statutory federal income tax rate ................................ 35.0%
State income tax rate, net of federal income tax benefit ......... 4.9
----
Effective federal and state income tax rate ...................... 39.9%
====
</TABLE>

(6) COMMITMENTS AND CONTINGENCIES

F-65

<PAGE>
SHARES
HOMESERVICES.COM INC.
COMMON STOCK

[LOGO FOR HOMESERVICES.COM INC.]

P R O S P E C T U S

Until , 1999 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.

U.S. BANCORP PIPER JAFFRAY
CREDIT SUISSE FIRST BOSTON

, 1999
<PAGE>
PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table indicates the estimated expenses to be incurred in
connection with the offering, all of which will be paid by HomeServices.

<TABLE>
<CAPTION>
<S> <C>
SEC registration fee..................................... $ 19,182
------------
NASD fee................................................. 7,400
Nasdaq National Market listing fee ...................... *
Accounting fees and expenses ............................ *
Legal fees and expenses ................................. *
Printing and engraving .................................. *
Transfer agent's fees ................................... *
Blue sky fees and expenses (including counsel fees) .... *
Miscellaneous expenses................................... *
------------
Total.................................................. *
============
</TABLE>

- ------------
* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by Section 102(b)(7) of the General Corporation Law of the
State of Delaware, the restated certificate of incorporation of HomeServices
(to be filed as Exhibit 3.3) provides that no director shall be liable to
HomeServices or its stockholders for monetary damages for breach of fiduciary
duty as a director other than for (i) breaches of the directors' duty of
loyalty to HomeServices and its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) the unlawful payment of dividends or unlawful stock purchases or
redemptions under Section 174 of the Delaware General Corporation Law and
(iv) any transaction from which the director derived an improper personal
benefit.

Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines or amounts paid in settlement actually and
reasonably incurred by them in connection with the defense of any action by
reason of being or having been directors or officers, if such person shall
have acted in good faith in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful, except that if such action shall be in the
right of the corporation, no such indemnification shall be provided as to any
claim, issue or matter as to which such person shall have been adjudged to
have been liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which the action was brought shall
determine upon application that, in view of all of the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or other court shall deem proper.

The restated certificate of incorporation and the amended and restated
bylaws of HomeServices (to be filed as Exhibit 3.4) provide for
indemnification of officers and directors of HomeServices, both past and
present, to the fullest extent permitted by the Delaware General Corporation
law, and allow HomeServices to advance or reimburse litigation expenses upon
submission by the director or officer

II-1
<PAGE>
of an undertaking to repay such advances or reimbursements if it is
ultimately determined that indemnification is not available to such director
or officer pursuant to the amended and restated bylaws. The amended and
restated bylaws also authorize HomeServices to purchase and maintain
insurance on behalf of an officer or director, past or present, against any
liability asserted against him in any such capacity whether or not
HomeServices would have the power to indemnify him against such liability
under the provisions of its certificate of incorporation or Section 145 of
the Delaware General Corporation Law.

HomeServices intends to provide liability insurance for each of its
directors and officers against certain losses arising from claims made
against them while acting in their capacities as directors or officers of
HomeServices, whether or not HomeServices would have the power to indemnify
such person against such losses, as permitted by law.

The form of Underwriting Agreement filed herewith as Exhibit 1.1 provides,
among other things, for the indemnification by the underwriters of directors
and certain officers of HomeServices against certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On July , 1999, HomeServices issued 1,000 shares of common stock to
MidAmerican Energy Holdings Company for consideration of $1,000.

The foregoing transaction was exempt from the registration requirements of
the Securities Act of 1933, as amended, in reliance on Section 4(2) of the
Securities Act on the basis that such transaction did not involve a public
offering.

Prior to the offering, HomeServices intends to merge with MidAmerican
Realty Services Company, which is a 95.0% owned subsidiary of MidAmerican
Energy Holdings Company, with HomeServices being the surviving corporation in
the merger. In connection with such merger, HomeServices intends to issue
shares of its common stock in consideration of the existing shares of
MidAmerican Realty Services Company to each of MidAmerican Energy Holdings
Company, R. Michael Knapp, James Koolhof, Ronald J. Peltier and Arne M.
Rovick.

The foregoing transaction will be exempt from the registration
requirements of the Securities Act of 1933, as amended, in reliance on
Section 4(2) of the Securities Act on the basis that such transaction will
not involve a public offering.

ITEM 16. EXHIBITS

(A) EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of HomeServices.Com Inc.
3.2 Bylaws of HomeServices.Com Inc.
3.3* Form of Restated Certificate of Incorporation of HomeServices.Com Inc.
3.4* Form of Amended and Restated Bylaws of HomeServices.Com Inc.
4.1* Specimen of Common Stock Certificate.
4.2* Form of Rights Agreement.
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, regarding legality of securities
being registered.
10.1 Credit Agreement, dated as of November 12, 1998, between MidAmerican Realty Services
Company and LaSalle National Bank.
10.2 Note Purchase Agreement dated as of November 1, 1998 between MidAmerican Realty Services
Company and the purchasers listed in Schedule A thereto.

II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------------------
10.3* Form of Registration Rights Agreement.
10.4* Form of Services Agreement.
10.5* Form of Stock Option Plan.
21.1 Subsidiaries of HomeServices.Com Inc.
23.1* Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of KPMG LLP.
24.1 Power of Attorney (included on page II-4).
27.1 Financial Data Schedule.
</TABLE>

- ------------
* To be filed by amendment.

(b) FINANCIAL STATEMENT SCHEDULES:

None.

ITEM 17. UNDERTAKINGS

(a) HomeServices hereby undertakes to provide to the underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of HomeServices by HomeServices pursuant to the
Underwriting Agreement, the restated certificate of incorporation, the
amended and restated bylaws, the Delaware General Corporation Law or
otherwise, HomeServices has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by HomeServices of expenses incurred or paid by a director,
officer or controlling person of HomeServices in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
HomeServices will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed
by the adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by HomeServices pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed tobe the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN EDINA, MINNESOTA, ON JULY 15,
1999.

HomeServices.Com Inc.

By: /s/ Ronald J. Peltier
-------------------------------
Name: Ronald J. Peltier
Title: President and Chief
Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Steven A. McArthur and Dwayne J. Coben, and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
amendments) to this Registration Statement and any additional Registration
that is filed pursuant to Rule 462(b) under the Securities Act of 1933, as in
connection therewith, with the Securities and Exchange Commission, and hereby
grants to such attorney-in-fact and agent full power and authority to do
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney in-fact and agent or his
substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ------------------------------------- -----------------
<S> <C> <C>
/S/ DAVID L. SOKOL CHAIRMAN AND DIRECTOR JULY 15, 1999
- ---------------------------
DAVID L. SOKOL

/S/ RONALD J. PELTIER PRESIDENT, CHIEF EXECUTIVE OFFICER JULY 15, 1999
- --------------------------- AND DIRECTOR
RONALD J. PELTIER

/s/ Dwayne J. Coben Senior Vice President and Chief July 15, 1999
- --------------------------- Financial Officer
Dwayne J. Coben (principal financial officer)

/s/ Larry M. Smith Controller (principal accounting July 15, 1999
- --------------------------- officer)
Larry M. Smith

II-4
<PAGE>
SIGNATURE TITLE DATE
- -------------------------- ------------------------------------- -----------------

/s/ Jack W. Frost Director July 15, 1999
- ---------------------------
Jack W. Frost

/s/ R. Michael Knapp Director July 15, 1999
- ---------------------------
R. Michael Knapp

/s/ Steven A. McArthur Director July 15, 1999
- ---------------------------
Steven A. McArthur

/s/ Gregory E. Abel Director July 15, 1999
- ---------------------------
Gregory E. Abel

/s/ Patrick J. Goodman Director July 15, 1999
- ---------------------------
Patrick J. Goodman

/s/ Richard R. Jaros Director July 15, 1999
- ---------------------------
Richard R. Jaros

/s/ W. David Scott Director July 15, 1999
- ---------------------------
W. David Scott
</TABLE>

II-5

<PAGE>

CERTIFICATE OF INCORPORATION

HOMESERVICES.COM INC.

FIRST: The name of the Corporation is HomeServices.Com Inc. (hereinafter
the "Corporation").

SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"GCL").

FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,000 shares of Common Stock, each having a par value
of $0.01, and 1,000 shares of Preferred Stock, each having a par value of $0.01.

The Board of Directors is expressly authorized to provide for the issuance
of all or any shares of the Preferred Stock in one or more classes or series,
and to fix for each such class or series such voting powers, full or limited, or
no voting powers, and such distinctive designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors providing for the
issuance of such class or series and as may be permitted by the GCL, including,
without limitation, the authority to provide that any such class or series may
be (i) subject to redemption at such time or times and at such price or prices;
(ii) entitled to receive dividends (which may be cumulative or non-cumulative)
at such rates, on such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or classes
or any other series; (iii) entitled to such rights upon the dissolution of, or
upon any distribution of the assets of, the Corporation; or (iv) convertible
into, or exchangeable for, shares of any other class or classes of stock, or of
any other series of the same or any other class or classes of stock, of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments; all as may be stated in such resolution or resolutions.

<PAGE>

FIFTH: The name and mailing address of the Sole Incorporator is as follows:

Name Address
---- -------
Deborah M. Reusch P.O. Box 636
Wilmington, Delaware 19899

SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:

(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.

(2) The directors shall have concurrent power with the stockholders to
make, alter, amend, change, add to or repeal the Bylaws of the Corporation
except as otherwise provided therein.

(3) The number of directors of the Corporation shall be as from time to
time fixed by, or in the manner provided in, the Bylaws of the Corporation.
Election of directors need not be by written ballot unless the Bylaws so
provide.

(4) No director shall be personally liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Any repeal or modification of this Article SIXTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.

(5) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Certificate of Incorporation, and any Bylaws
adopted by the stockholders; provided, however, that no Bylaws hereafter
adopted

<PAGE>

by the stockholders shall invalidate any prior act of the directors which
would have been valid if such Bylaws had not been adopted.

SEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation.

EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.

I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the GCL, do make this Certificate,
hereby declaring and certifying that this is my act and deed and the facts
herein stated are true, and accordingly have hereunto set my hand this 13th day
of July, 1999.

/s/ Deborah M. Reusch
---------------------------
Deborah M. Reusch
Sole Incorporator

<PAGE>

BYLAWS

HOMESERVICES.COM INC.

(hereinafter called the "Corporation")

ARTICLE I

OFFICES
-------

Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS
------------------------

Section 1. Place of Meetings. Meetings of the stockholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.

Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect a Board of Directors, and transact such
other business as may properly be brought

<PAGE>

before the meeting. Written notice of the Annual Meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.

Section 3. Special Meetings. Unless otherwise prescribed by law or by the
Certificate of Incorporation (including any certificate of designation for any
series of preferred stock), Special Meetings of Stockholders, for any purpose or
purposes, may be called by either (i) the Chairman, if there be one, or (ii) the
President, (iii) any Vice President, if there be one, (iv) the Secretary or (v)
any Assistant Secretary, if there be one, and shall be called by any such
officer at the request in writing of a majority of the Board of Directors or at
the request in writing of stockholders owning a majority of the capital stock of
the Corporation issued and outstanding and entitled to vote. In addition,
Special Meetings of Stockholders of any class of capital stock may be called by
stockholders owning a majority of capital stock of such class. Such request
shall state the purpose or purposes of the proposed meeting. At a Special
Meeting of Stockholders, only such business shall be conducted as shall be
specified in the notice of meeting (or any supplement thereto). Written notice
of a Special Meeting stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.

Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall

<PAGE>

constitute a quorum at all meetings of the stockholders for the transaction of
business. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.

Section 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these Bylaws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the vote
of the holders of a majority of the total number of votes of the capital stock
represented and entitled to vote thereat. Each stockholder represented at a
meeting of stockholders shall be entitled to cast one vote for each share of the
capital stock entitled to vote thereat held by such stockholder. Such votes may
be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in such officer's discretion, may require that any
votes cast at such meeting shall be cast by written ballot.

<PAGE>

Section 6. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the Corporation,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder who
signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated consent delivered in the manner required by this Section 8 to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the state of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing and who, if the action
had been taken at a meeting, would have been entitled to notice of the meeting
if the record date for such meeting had been the date that

<PAGE>

written consents signed by a sufficient number of holders to take the action
were delivered to the Corporation as provided above in this section.

Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.

Section 8. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.

Section 9. Conduct of Meetings. The Board of Directors of the Corporation
may adopt by resolution such rules and regulations for the conduct of the
meeting of the stockholders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the

<PAGE>

stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) the determination of when the polls shall open and close for any
given matter to be voted on at the meeting; (iii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iv)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (v) restrictions
on entry to the meeting after the time fixed for the commencement thereof; and
(vi) limitations on the time allotted to questions or comments by participants.

ARTICLE III

DIRECTORS
---------

Section 1. Number and Election of Directors. The Board of Directors shall
consist of not less than one nor more than fifteen members, the exact number of
which shall be fixed from time to time by the Board of Directors. Except as
provided in Section 2 of this Article III, directors shall be elected by a
plurality of the votes cast at the Annual Meeting of Stockholders, and each
director so elected shall hold office until the next Annual Meeting and until
such director's successor is duly elected and qualified, or until such
director's earlier death, resignation or removal. Any director may resign at any
time upon notice to the Corporation. Directors need not be stockholders.

<PAGE>

Section 2. Vacancies. Unless otherwise required by law or the Certificate
of Incorporation, vacancies arising through death, resignation, removal, an
increase in the number of directors or otherwise may be filled only by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and qualified,
or until their earlier death, resignation or removal.

Section 3. Duties and Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.

Section 4. Meetings. The Board of Directors may hold meetings, both regular
and special, either within or without the State of Delaware. Regular meetings of
the Board of Directors may be held without notice at such time and at such place
as may from time to time be determined by the Board of Directors. Special
meetings of the Board of Directors may be called by the Chairman, if there be
one, the President, or by any director. Notice thereof stating the place, date
and hour of the meeting shall be given to each director either by mail not less
than forty-eight (48) hours before the date of the meeting, by telephone or
telegram on twenty-four (24) hours' notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances.

<PAGE>

Section 5. Inclusion of Business. Any director may require that any one or
more proposals of such director shall be discussed at any meeting of the Board
of Directors by delivering notice as provided in Article VI hereof to each
director and the Corporation either within one day after such director receives
notice of such meeting or in the notice by such director calling a special
meeting of the Board of Directors.

Section 6. Quorum. Except as may be otherwise specifically provided by law,
the Certificate of Incorporation or these Bylaws, at all meetings of the Board
of Directors, a majority of the entire Board of Directors shall constitute a
quorum for the transaction of business. The act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.

Section 7. Actions of Board. Unless otherwise provided by the Certificate
of Incorporation or these Bylaws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.

Section 8. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may

<PAGE>

participate in a meeting of the Board of Directors or such committee by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 8 shall constitute presence in person at such
meeting.

Section 9. Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to the
extent permitted by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Each committee shall keep regular minutes and report to the
Board of Directors when required.

Section 10. Compensation. The directors shall be paid their reasonable
out-of-pocket expenses, if any, of attendance at each meeting of the Board of
Directors and each meeting of any committee thereof and may be paid a fixed sum
for attendance at each

<PAGE>

meeting of the Board of Directors or a stated salary as director, payable
in cash or securities. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.

Section 11. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because the director or
officer's vote is counted for such purpose if (i) the material facts as to the
director or officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to the director or officer's relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee thereof
or the stockholders. Common or interested

<PAGE>

directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.

ARTICLE IV

OFFICERS
--------

Section 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a Chairman of the Board
of Directors (who must be a director), a Chief Executive Officer and one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers.
Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these Bylaws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.

Section 2. Election. The Board of Directors at its first meeting held after
each Annual Meeting of Stockholders (or action by written consent of
stockholders in lieu of the Annual Meeting of Stockholders), shall elect the
officers of the Corporation who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors; and all officers of the Corporation
shall hold office until their successors are chosen and qualified, or until
their earlier death, resignation or removal. Any officer elected by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any

<PAGE>

vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.

Section 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice President or any other
officer authorized to do so by the Board of Directors and any such officer may,
in the name of and on behalf of the Corporation, take all such action as any
such officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.

Section 4. Chairman of the Board of Directors. The Chairman of the Board of
Directors, if there be one, shall preside at all meetings of the stockholders
and of the Board of Directors. The Chairman of the Board of Directors shall be
the Chief Executive Officer of the Corporation, unless the Board of Directors
designates the President as the Chief Executive Officer, and except where by law
the signature of the President is required, the Chairman of the Board of
Directors shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized by
the Board of Directors. During the absence or disability of the President, the

<PAGE>

Chairman of the Board of Directors shall exercise all the powers and discharge
all the duties of the President. The Chairman of the Board of Directors shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him by these Bylaws or by the Board of Directors.

Section 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect.
The President shall execute all bonds, mortgages, contracts and other
instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these Bylaws, the Board of Directors or
the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings of
the stockholders and the Board of Directors. If there be no Chairman of the
Board of Directors, or if the Board of Directors shall otherwise designate the
President shall be the Chief Executive Officer of the Corporation. The President
shall also perform such other duties and may exercise such other powers as from
time to time may be assigned to him by these Bylaws or by the Board of
Directors.

Section 6. Vice Presidents. At the request of the President or in the
President's absence or in the event of the President's inability or refusal to
act (and if there be no Chairman of the Board of Directors), the Vice President
or the Vice Presidents if there is more than one (in the order designated by the
Board of Directors) shall perform the duties

<PAGE>

of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Each Vice President shall
perform such other duties and have such other powers as the Board of Directors
from time to time may prescribe. If there be no Chairman of the Board of
Directors and no Vice President, the Board of Directors shall designate the
officer of the Corporation who, in the absence of the President or in the event
of the inability or refusal of the President to act, shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President.

Section 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for committees of the Board of Directors when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board of Directors or the President, under whose supervision the
Secretary shall be. If the Secretary shall be unable or shall refuse to cause to
be given notice of all meetings of the stockholders and special meetings of the
Board of Directors, and if there be no Assistant Secretary, then either the
Board of Directors or the President may choose another officer to cause such
notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such

<PAGE>

Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing by
such officer's signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to be
kept or filed are properly kept or filed, as the case may be.

Section 8. Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all transactions as Treasurer and
of the financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of the office of the Treasurer and for
the restoration to the Corporation, in case of the Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the Treasurer's possession or under
the Treasurer's control belonging to the Corporation.

Section 9. Assistant Secretaries. Assistant Secretaries, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Secretary,

<PAGE>

and in the absence of the Secretary or in the event of the Secretary's
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.

Section 10. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of the Treasurer's disability or refusal to act, shall perform the duties
of the Treasurer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of Assistant
Treasurer and for the restoration to the Corporation, in case of the Assistant
Treasurer's death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in the Assistant
Treasurer's possession or under the Assistant Treasurer's control belonging to
the Corporation.

Section 11. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.

<PAGE>

ARTICLE V

STOCK
-----

Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board of Directors, the President or a Vice President
and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
such stockholder in the Corporation.

Section 2. Signatures. Any or all of the signatures on a certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.

Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corpora-

<PAGE>

tion with respect to the certificate alleged to have been lost, stolen or
destroyed or the issuance of such new Certificate.

Section 4. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these Bylaws. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate or
by such person's attorney lawfully constituted in writing and upon the surrender
of the certificate therefor, which shall be cancelled before a new certificate
shall be issued. No transfer of stock shall be valid as against the Corporation
for any purpose until it shall have been entered in the stock records of the
Corporation by an entry showing from and to whom transferred.

Section 5. Record Date.

(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date shall not be more than sixty
nor less than ten days before the date of such meeting. If no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; providing, however, that the Board of Directors may
fix a new record date for the adjourned meeting.

<PAGE>

(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in this State, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board of Directors adopts the resolutions taking such
prior action.

(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may

<PAGE>

fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.

In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

Section 6. Record Owners. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person,

<PAGE>

whether or not it shall have express or other notice thereof, except as
otherwise required by law.

ARTICLE VI

NOTICES
-------

Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable.

Section 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Attendance of a person at a
meeting, present in person or represented by proxy, shall constitute a waiver of
notice of such meeting, except where the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.

<PAGE>

ARTICLE VII

GENERAL PROVISIONS
------------------

Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the requirements of the DGCL and provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting of the Board of Directors (or any action by written consent
in lieu thereof in accordance with Section 6 of Article III hereof), and may be
paid in cash, in property, or in shares of the Corporation's capital stock.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for any proper purpose, and the
Board of Directors may modify or abolish any such reserve.

Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.

Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.

Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.

<PAGE>

ARTICLE VIII

INDEMNIFICATION
---------------

Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.

<PAGE>

Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation;
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

Section 3. Authorization of Indemnification. Any indemnification under this
Article VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because such person has
met the applicable standard

<PAGE>

of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case
may be. Such determination shall be made with respect to a person who is a
director or officer at the time of such determination, (i) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (ii) by a committee of such directors designated
by a majority vote of such directors, even though less than a quorum, or (iii)
if there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (iv) by the stockholders. Such
determination shall be made, with respect to former directors and officers, by
any person or persons having the authority to act on the matter on behalf of the
Corporation. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity of authorization in the specific case.

Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe such person's conduct
was unlawful, if such person's action is based on the records or books of
account of the Corporation or another enterprise, or on information supplied to
such person by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or

<PAGE>

on information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.

Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Sections 1 or 2 of this Article VIII, as the case may
be. Neither a contrary determination in the specific case under Section 3 of
this Article VIII nor the absence of any determination thereunder shall be a
defense to such application or create a presumption that the director or officer
seeking indemnification has not met any applicable standard of conduct. Notice
of any application for indemnification pursuant to this Section 5 shall be given
to the Corporation promptly upon the filing of such application. If success-

<PAGE>

ful, in whole or in part, the director or officer seeking indemnification shall
also be entitled to be paid the expense of prosecuting such application.

Section 6. Expenses Payable in Advance. Expenses incurred by a director or
officer in defending or investigating a threatened or pending action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that such person is not entitled to be indemnified by the
Corporation as authorized in this Article VIII.

Section 7. Nonexclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
the Certificate of Incorporation, any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Sections 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.

Section 8. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director or officer of the Corporation,
or

<PAGE>

is or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power or the obligation to indemnify such
person against such liability under the provisions of this Article VIII.

Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted

<PAGE>

in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article VIII.

Section 10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.

Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.

Section 12. Indemnification of Employees and Agents. The Corporation may,
to the extent authorized from time to time by the Board of Directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the Corporation similar to those conferred in this Article VIII to
directors and officers of the Corporation.

<PAGE>

ARTICLE IX

AMENDMENTS
----------

Section 1. Amendments. These Bylaws may be altered, amended or repealed, in
whole or in part, or new Bylaws may be adopted by the stockholders or by the
Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new Bylaws be contained in the notice of such
meeting of stockholders or Board of Directors as the case may be. All such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.

Section 2. Entire Board of Directors. As used in this Article IX and in
these Bylaws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.

<PAGE>

$25,000,000

CREDIT AGREEMENT

BY AND BETWEEN

MIDAMERICAN REALTY SERVICES COMPANY

AS BORROWER

AND

LA SALLE NATIONAL BANK

AS LENDER

DATED AS OF NOVEMBER 12, 1998

===============================================================================

<PAGE>

TABLE OF CONTENTS

SECTION 1. THE REVOLVING CREDIT
Section 1.1. Reducing Revolving Credit
Section 1.2. Loans
Section 1.3. Manner and Disbursement of Borrowing

SECTION 2. INTEREST ON LOANS AND CHANGE IN CIRCUMSTANCE
Section 2.1. Interest Rate Options
Section 2.2. Minimum Amounts
Section 2.3. Computation of Interest
Section 2.4. Manner of Rate Section
Section 2.5. Change of Law
Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR
Section 2.7. Taxes and Increased Costs
Section 2 8. Change in Capital Adequacy Requirements
Section 2.9. Funding Indemnity
Section 2.10. Lending Branch
Section 2.11. Discretion of Lender as to Manner of Funding
Section 2.12. Lender's Duty to Mitigate

SECTION 3. FEES, PREPAYMENTS AND PAYMENTS
Section 3.1. Closing Fee
Section 3.2. Commitment Fee
Section 3.3. Mandatory Prepayments
Section 3.4. Voluntary Prepayments
Section 3.5. Commitment Reduction
Section 3.6. Place and Application of Payments and Collections
Section 3.7. Notations

SECTION 4. DEFINITIONS, INTERPRETATION
Section 4.1. Definitions
Section 4.2. Interpretation

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1. Organization ; Power and Authority
Section 5.2. Authorization, Etc.
Section 5.3. Disclosure
Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates
Section 5.5. Financial Statements
Section 5.6. Compliance with Laws, Other Instruments, Etc.
Section 5.7. Governmental Authorizations, Etc.
Section 5.8. Litigation; Observance of Agreements; Statutes and
Orders
Section 5.9. Taxes
Section 5.10. Title to Property Leases.

ii
<PAGE>

Section 5.11. Licenses, Permits, Etc.
Section 5.12. Compliance with ERISA
Section 5.13. Existing Debt; Future Liens
Section 5.14. Foreign Assets Control Regulations, Etc.
Section 5.15. Status under Certain Statutes
Section 5.16. Environmental Matters
Section 5.17. Issuance of Senior Note
Section 5.18. Full Disclosure
Section 5.19. Margin Stock
Section 5.20. Year 2000

SECTION 6. CONDITIONS PRECEDENT
Section 6.1. All Advances
Section 6.2. Initial Advance

SECTION 7. COVENANTS
Section 7.1. Financial and Business Information
Section 7.2. Officer's Certificate
Section 7.3. Inspection
Section 7.4. Compliance with Law
Section 7.5. Insurance
Section 7.6. Maintenance of Properties
Section 7.7. Payment of Taxes
Section 7.8. Corporate Existence, Etc.
Section 7.9. Consolidated Net Worth
Section 7.10. Interest Charges Coverage Ratio
Section 7.11. Incurrence of Debt
Section 7.12. Priority Debt
Section 7.13. Restricted Payments and Restricted Investments
Section 7.14. Liens
Section 7.15. Mergers, Consolidations, Etc.
Section 7.16. Sale of Assets, Etc.
Section 7.17. Line of Business
Section 7.18. Transactions with Affiliates
Section 7.19. Amendment to Certificate of Incorporation
Section 7.20. Use of Proceeds
Section 7.21. Pari Passu Rank with other Senior Debt

SECTION 8. EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default
Section 8.2. Non-Bankruptcy Default Remedies
Section 8.3. Bankruptcy Default Remedies

SECTION 9. MISCELLANEOUS
Section 9.1. Holidays

iii
<PAGE>

Section 9.2. No Waiver, Cumulative Remedies
Section 9.3. Waivers, Modifications and Amendments
Section 9.4. Costs and Expenses
Section 9.5. Documentary Taxes
Section 9.6. Survival of Representations
Section 9.7. Survival of Indemnities
Section 9.8. Notices
Section 9.9. Headings
Section 9.10. Severability of Provisions
Section 9.11. Counterparts
Section 9.12. Binding Nature, Governing Law, Etc.
Section 9.13. Entire Understanding
Section 9.14. Participation
Section 9.15. Confidentiality
Section 9.17. Waiver of Jury Trial

iv
<PAGE>

CREDIT AGREEMENT

TO: La Salle National Bank, as Lender

Ladies and Gentlemen:

The undersigned, an Iowa corporation (the "Company"), applies to the
Lender for your commitment, subject to all the terms and conditions hereof and
on the basis of the representations and warranties hereinafter set forth, to
make credit accommodations available to the Company, all as more fully
hereinafter set forth.

SECTION 1. THE REVOLVING CREDIT.

Section 1.1. Reducing Revolving Credit. Subject to the terms and
conditions hereof, the Lender agrees to extend a reducing revolving credit (the
"Reducing Revolving Credit") to the Company which may be availed of by the
Company from time to time during the period from and including the date hereof
to but not including the Termination Date, at which time the commitment of the
Lender to extend credit under the Revolving Credit shall expire. The maximum
amount of Reducing Revolving Credit which the Lender agrees to extend to the
Company shall be the amount set forth opposite each respective period of time
under the definition "Reducing Revolving Credit Commitment," as such amount may
be further reduced pursuant to Section 3.5 hereof. During the period from and
including the date hereof to but not including the Termination Date, the Company
may use the Reducing Revolving Credit Commitment by borrowing, repaying and
reborrowing Loans in whole or in part. The Lender shall not under any
circumstances be obligated to extend credit under the Revolving Credit in excess
of the Reducing Revolving Credit Commitment then in effect.

Section 1.2. Loans. Subject to the terms and conditions hereof, the
Reducing Revolving Credit may be availed of by the Company in the form of loans
(individually a "Loan" and collectively the "Loans"). Each Loan shall be in a
minimum amount of $100,000 (subject to the provisions of Section 2 hereof which
require different minimum amounts in the case of Loans bearing interest with
reference to Adjusted LIBOR). Each advance made by the Lender of a Loan shall be
made against and evidenced by a Reducing Revolving Credit Note of the Company in
the form (with appropriate insertions) attached hereto as Exhibit A (the "Note")
payable to the order of the Lender in the principal amount of the Reducing
Revolving Credit Commitment. The Note shall be dated the date of issuance
thereof, be expressed to bear interest as set forth in Section 2 hereof, and be
expressed to mature on the Termination Date. Without regard to the principal
amount of the Note stated on its face, the actual principal amount at any time
outstanding and owing by the Company on account of any Note shall be the sum of
all advances theretofore made under this Section less all payments of principal
actually received.

Section 1.3. Manner and Disbursement of Borrowing. The Company shall
give written or telephonic notice to the Lender (which notice shall be
irrevocable once given and, if given by telephone, shall be promptly confirmed
in writing) by no later than 11:00 a.m. (Des Moines time) on the date the
Company requests that any Loan be made to it under the Reducing Revolving Credit
Commitment. Each such notice shall specify the date of the Loan requested (which
shall

1
<PAGE>

be a Business Day) and the amount of such Loan. Each Loan shall initially
constitute part of the applicable Domestic Rate Portion except to the extent the
Company has otherwise timely elected a LIBOR Portion as provided in Section 2
hereof. The Company agrees that the Lender may rely upon any written or
telephonic notice given by any person the Lender in good faith believes is an
Authorized Representative without the necessity of independent investigation
(other than reference to the list provided to the Lender pursuant to Section 6.2
hereof or any update or notice with respect thereto) and in the event any
telephonic notice conflicts with any written confirmation, such notice shall
govern if the Lender has acted in reliance thereon. Not later than 2:30 p.m.
(Des Moines time) on the date specified for any Loan to be made by the Lender
hereunder, subject to the provisions of Section 6 hereof, the proceeds of each
Loan shall be made available to the Company at the principal office of the
Lender in Chicago, Illinois, in immediately available funds.

SECTION 2. INTEREST ON LOANS AND CHANGE IN CIRCUMSTANCE.

Section 2.1. Interest Rate Options.

(a) Subject to all of the terms and conditions of this Section 2,
portions of the principal indebtedness evidenced by the Note (all of the
indebtedness evidenced by the Note bearing interest at the same rate for the
same period of time being hereinafter referred to as a "Portion") may, at the
option of the Company, bear interest with reference to the Domestic Rate
("Domestic Rate Portions") or with reference to the Adjusted LIBOR ("LIBOR
Portions"), and Portions may be converted from time to time from one basis to
another. Anything contained herein to the contrary notwithstanding, the
obligation of the Lender to create, maintain or effect by conversion a LIBOR
Portion shall be conditioned upon the fact that at the time no Default or Event
of Default shall have occurred and be continuing. The Company promises to pay
interest on each Portion at the rates and times specified in this Section 2.

(b) Domestic Rate Portion. Each Domestic Rate Portion applicable to the
Note shall bear interest (which the Company promises to pay at the times herein
provided) at the rate per annum equal to the Domestic Rate as in effect from
time to time plus the Domestic Rate Margin; provided that if any Domestic Rate
Portion or any part thereof is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest (which the Company
promises to pay at the times herein provided), whether before or after judgment,
until payment in full thereof at the rate per annum determined by adding two
percent (2%) per annum to the interest rate which would otherwise be applicable
thereto from time to time. Interest on each Domestic Rate Portion shall be
payable monthly on the last day of each month (commencing November 30, 1998) and
at maturity of the Note (whether by lapse of time, acceleration or otherwise).
Interest after maturity shall be due and payable upon demand. Any change in the
interest rate on any Domestic Rate Portion resulting from a change in the
Domestic Rate shall be effective as of the date of the relevant change in the
Domestic Rate. Lender shall not be obligated to give notice to Company of any
change in the Domestic Rate.

(c) LIBOR Portions. Each LIBOR Portion shall bear interest (which the
Company promises to pay at the times herein provided) for each Interest Period
selected therefor at a rate per annum determined by adding the then applicable
LIBOR MARGIN determined at the rates and times specified in Section 2.4(b) to
the Adjusted LIBOR for such Interest Period, provided

2
<PAGE>

that if any LIBOR Portion is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest (which the Company
promises to pay at the times herein provided), whether before or after judgment,
until payment in full thereof through the end of the Interest Period then
applicable thereto at the rate per annum determined by adding two percent (2%)
per annum to the interest rate which would otherwise be applicable thereto, and
effective at the end of such Interest Period such LIBOR Portion shall
automatically be converted into and added to the Domestic Rate Portion of the
applicable Note and shall thereafter bear interest at the interest rate
applicable to the Domestic Rate Portion of the applicable Note after default.
Interest on each LIBOR Portion shall be due and payable on the last day of each
Interest Period applicable thereto and at maturity (whether by lapse of time,
acceleration or otherwise), and with respect to any Interest Period applicable
to a LIBOR Portion in excess of three (3) months, then on the date occurring
every three (3) months after the date such Interest Period began and at the end
of such Interest Period, and interest after maturity shall be due and payable
upon demand. The Company shall notify the Lender on or before 11:00 a.m. (Des
Moines time) on the third Business Day preceding the end of an Interest Period
applicable to a LIBOR Portion whether such LIBOR Portion is to continue as a
LIBOR Portion, in which event the Company shall notify the Lender of the new
Interest Period selected therefor, and in the event the Company shall fail to so
notify the Lender, such LIBOR Portion shall automatically be converted into and
added to the Domestic Rate Portion of the applicable Note as of and on the last
day of such Interest Period.

(d) Conversion to Fixed Rate. The Company may convert, at any time and
from time to time, all or any portion of the outstanding Loans to a fixed rate,
for a term not extending beyond the Termination Date for all or any portion of
the period ending on or before the Termination Date pursuant to a Swap
Transaction and on terms and conditions acceptable to the Lender (including a
prepayment penalty if any). Lender acknowledges that $12,500,000 of the Loans
are presently subject to a Swap Transaction with the Lender. The Lender agrees
that so long as any Swap Transaction between the Company and the Lender provides
for payments of interest to the Company based on LIBOR that is not adjusted by
the Reserve Percentage, then to the extent of the LIBOR Portion of Loans not in
excess of the dollar amount of such Swap Transaction, no adjustment for the
Reserve Percentage to LIBOR under this agreement shall be made for the purpose
of determining the interest rate under Section 2.1 (c) and no increased costs
shall be payable with respect to such LIBOR Portion of Loans under Section 2.7
resulting from any changes affecting the Reserve Percentage.

Section 2.2. Minimum Amounts. Each LIBOR Portion shall be in a minimum
amount of $250,000 or such greater amount, which is an integral multiple of
$50,000.

Section 2.3. Computation of Interest. All interest on the Note shall be
computed on the basis of a year of 360 days for the actual number of days
elapsed.

Section 2.4. Manner of Rate Selection.

(a) The Company shall notify the Lender (i) by 11:00 a.m. (Des Moines
time) at least two (2) Business Days prior to the date upon which it requests
that any LIBOR Portion be created or that any part of the Domestic Rate Portion
be converted into a LIBOR Portion (each such notice to specify in each instance
the amount thereof and the Interest Period selected therefor). If any

3
<PAGE>

request is made to convert a LIBOR Portion into the Domestic Rate Portion
available hereunder, such conversion shall only be made so as to become
effective as of the last day of the Interest Period applicable thereto. All
requests for the creation, continuance or conversion of Portions under this
Agreement shall be irrevocable. Such requests shall be written and may be given
by facsimile.

(b) The applicable LIBOR Margin shall be the per annum percentage
amount set forth opposite the then current Cash Flow Leverage Ratio of the
Company at the time the Company provides its notice to the Lender pursuant to
subparagraph (a) above:

Cash Flow Leverage Ratio LIBOR Margin
------------------------ ------------

Less than 2.00:1 1.00%

2.00:1 and greater, but not greater than 2.5:1 1.25%

Greater than 2.5:1 but not greater than 2.75:1 1.375%

Greater than 2.75:1 but not greater than 3.00:1 1.625%

Greater than 3.00:1 but not greater than 3.5:1 1.75%

Greater than 3.5:1 2.00%

The LIBOR Margin so determined shall remain the same throughout the
Interest Period selected notwithstanding any subsequent change in the Cash Flow
Leverage Ratio. The Cash Flow Leverage Ratio shall be calculated by the Company
as of the last day of each fiscal quarter and shall remain in effect until
thirty days after the end of the next fiscal quarter, or if sooner, the date
Company furnishes its certified calculation of the Cash Flow Leverage Ratio as
at the fiscal quarter then ended pursuant to Section 7.2 hereof.

Section 2.5. Change of Law. Notwithstanding any other provisions of
this Agreement or of the Note, if at any time the Lender shall determine in good
faith that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for such Lender to create or continue
to maintain any LIBOR Portion, it shall promptly so notify the Company and the
obligation of the Lender to create or continue to maintain such LIBOR Portion
under this Agreement shall terminate on the last day of the then current
applicable Interest Period or Periods (or, if earlier, the last day on which the
Lender can lawfully create or continue to maintain any LIBOR Portion) until it
is no longer unlawful for the Lender to create or continue to maintain such
LIBOR Portion. The Company, on demand, shall, if the continued maintenance of
any LIBOR Portion is unlawful, thereupon prepay the outstanding principal amount
of the affected LIBOR Portion, together with all interest accrued thereon and
all other amounts payable to the Lender with respect thereto under this
Agreement; provided, however, that the Company may elect to convert the
principal amount of the affected LIBOR Portion into the Domestic Rate Portion
available hereunder, subject to the terms and conditions of this Agreement and
no

4
<PAGE>

prepayment of principal or other payment with respect thereto (other than
payment of interest on the regularly scheduled interest payment date or dates)
shall be required.

Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provisions of this Agreement or of the
Note, if prior to the commencement of any Interest Period:

(a) the Lender shall determine that deposits in the amount of any LIBOR
Portion scheduled to be outstanding during such Interest Period are not
readily available to the Lender; or

(b) the Lender shall determine that by reason of circumstance beyond
the Lender's reasonable control adequate and reasonable means do not
exist for ascertaining Adjusted LIBOR, or

(c) the Lender in good faith shall determine that the Company shall
have failed to comply with requirements of Section 2.4 (b) and Section
7.2 (b) regarding the certification or calculation of the LIBOR MARGIN.

then the Lender shall promptly give notice thereof to the Company and the
obligations of the Lender to create, continue or effect by conversion any LIBOR
Portion, in such amount and for such Interest Period shall terminate until
deposits in such amount and for the Interest Period selected by the Company
shall again be readily available in the relevant market, adequate and reasonable
means exist for ascertaining Adjusted LIBOR, or the Company shall have complied
with the requirements of Section 2.4 (b) and Section 7.2 (b) hereof.

Section 2.7. Taxes; Increased Costs. With respect to any LIBOR Portion,
if the Lender shall determine in good faith that any change in any applicable
law, treaty, regulation or guideline (including, without limitation, Regulation
D of the Board of Governors of the Federal Reserve System) or any new law,
treaty, regulation or guideline, or any interpretation of any of the foregoing
by any governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority having jurisdiction
over the Lender or its lending branch or the LIBOR Portion contemplated by this
Agreement (whether or not having the force of law), in each case after the date
hereof, shall:

(i) impose, increase, or deem applicable any reserve, special deposit
or similar requirement against assets, held by, or deposits in or for
the account of, or loans by, or any other acquisition of funds or
disbursements by, such Lender which is not in any instance already
accounted for in computing the interest rate applicable to such LIBOR
Portion; or

(ii) subject the Lender, any LIBOR Portion or the Note to the extent it
evidences such Portion to any tax (including, without limitation, any
United States interest equalization tax or similar tax however named
applicable to the acquisition or holding of debt obligations), duty,
charge, stamp tax, fee, deduction or withholding in respect of this
Agreement, any LIBOR Portion or the Note to the extent it evidences
such Portion, except any franchise tax or any taxes as may be measured
by the overall net income or

5
<PAGE>

gross receipts of the Lender or its lending branches and imposed by the
jurisdiction, or any political subdivision or taxing authority thereof,
in which the Lender or its lending branch is located, or taxes in
substitution thereof .

And the Lender shall reasonably determine that the result of any of the
foregoing is to increase the cost (whether by incurring a cost or adding to a
cost) to such Lender of creating or maintaining any LIBOR Portion hereunder or
to reduce the amount of principal or interest received or receivable by the
Lender (without benefit of, or credit for, any prorations, exemption, credits or
other offsets available under any such laws, treaties, regulations, guidelines
or interpretations thereof), then within fifteen (15) days after demand by the
Lender, the Company shall pay to the Lender from time to time as specified by
such Lender such additional amounts as the Lender shall reasonably determine are
sufficient to compensate and indemnify it for such increased cost or reduced
amount; provided, however, that the Company shall not be required to pay such
additional amounts in respect of any such change for any period ending prior to
the date that is 90 days prior to the giving of the notice of the determination
of such additional amounts (unless such period shall have commenced after the
date that the Lender notified the Company of the possibility that additional
amounts may be payable as a result of such change), except, if such change shall
have been imposed retroactively, for the period from the effective date of such
change to the date that is 90 days after the first date on which the Lender
reasonably should have had knowledge of such change. If the Lender makes such
demand for compensation, it shall provide to the Company a certificate setting
forth the computation of the increased cost or reduced amount as a result of any
event mentioned herein in reasonable detail and such certificate shall be deemed
conclusive if reasonably determined. If any changes giving rise to Lender's
demand for compensation are subsequently modified, amended or repealed with
effect of reducing or eliminating the increased costs to Lender or the reduction
in interest or principal received or receivable by Lender, then Lender shall
promptly give notice thereof to the Company.

Section 2.8. Change in Capital Adequacy Requirements. If the Lender shall
determine that the adoption after the date hereof of any applicable law, rule or
regulation regarding capital adequacy, or any change in any existing law, rule
or regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender (or any of
its branches or any corporation having control of the Lender) with any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the Lender's capital as a consequence
of its obligations hereunder or for the credit which is the subject matter
hereof to a level below that which the Lender could have achieved but for such
adoption, change or compliance (taking into consideration the Lender's policies
with respect to liquidity and capital adequacy) by an amount deemed by the
Lender to be material, then from time to time, within fifteen (15) days after
demand by the Lender, the Company shall pay to the Lender such additional amount
or amounts reasonably determined by the Lender as will compensate the Lender for
the reduction; provided, however, that the Company shall not be required to pay
such additional amounts in respect of any such adoption or change for any period
ending prior to the date that is 90 days prior to the giving of the notice of
the determination of such additional amounts (unless such period shall have
commenced after the date that the Lender notified the Company of the possibility
that additional amounts may be

6
<PAGE>

payable as a result of such adoption or change), except, if such adoption or
change shall have been imposed retroactively, for the period from the effective
date of such adoption or change to the date that is 90 days after the first date
on which the Lender reasonably should have had knowledge of such adoption or
change. If the Lender makes such a claim for compensation, it shall provide to
the Company a certificate setting forth the computation of the reduction as a
result of any event mentioned herein in reasonable detail and such certificate
shall be deemed conclusive if reasonably determined. If any changes giving rise
to Lender's demand for compensation are subsequently modified, amended or
repealed with effect of reducing or eliminating the increased costs to Lender or
the reduction in interest or principal received or receivable by Lender, then
Lender shall promptly give notice thereof to the Company.

Section 2.9. Funding Indemnity. In the event the Lender shall incur any
loss, cost or expense (including, without limitation, any loss (excluding loss
of profit), cost or expense incurred by reason of the liquidation or
re-employment of deposits or other funds acquired or contracted to be acquired
by the Lender to fund or maintain any LIBOR Portion or the relending or
reinvesting of such deposits or other funds or amounts paid or prepaid to the
Lender) as a result of:

(i) any payment of a LIBOR Portion on a date other than the last day of
the then applicable Interest Period for any reason, whether before or
after default, and whether or not such payment is required by any
provision of this Agreement; or

(ii) any failure by the Company to create, borrow, continue or effect
by conversion a LIBOR Portion on the date specified in a notice given
pursuant to this Agreement;

then upon demand of the Lender, the Company shall pay to the Lender such amount
as will reimburse the Lender for such reasonable loss, cost or expense (such
loss, cost or expense will not include any allocated salary of employees of the
Lender). If the Lender requests such a reimbursement it shall provide the
Company with a certificate setting forth the computation of the loss, cost or
expense giving rise to the request for reimbursement in reasonable detail and
such certificate shall be deemed conclusive if reasonably determined.

Section 2.10. Lending Branch. The Lender may, at its option, elect to
make, fund or maintain Portions of the Loans hereunder at such branches or
offices as such Lender may from time to time elect; provided, however, that the
designation of a new lending office or branch by the Lender shall not make
operable the provisions of Section 2.7 or entitle the Lender to make a claim
under Sections, 2.5, 2.6, 2.7 or 2.8 if such operability of such clause or such
claim results solely from such designation and not from any adoption or change
specified in the applicable section subsequent to such designation.

Section 2.11. Discretion of Lender as to Manner of Funding
Notwithstanding any provision of this Agreement to the contrary, the Lender
shall be entitled to fund and maintain its funding of all or any part of its
Note in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including, without
limitation, determinations under Sections 2.7, 2.8 and 2.9 hereof) shall be made
as if such Lender had actually funded and maintained each LIBOR Portion during
each Interest Period applicable thereto through the purchase of deposits in the
relevant market in the amount of such LIBOR

7
<PAGE>

Portion, having a maturity corresponding to such Interest Period and bearing an
interest rate equal to the LIBOR for such Interest Period.

Section 2.12. Lender's Duty to Mitigate. Lender agrees that, as
promptly as practicable after it becomes aware of the occurrence of an event or
the existence of a condition that would cause it to be affected under Section
2.5, 2.6 or 2.7 hereof, the Lender will, after notice to the Company, to the
extent not inconsistent with the Lender's internal policies and customary
business practices, use its best efforts to make, fund or maintain the affected
LIBOR Portion, through another lending office of the Lender if as a result
thereof the unlawfulness which would otherwise require payment of such Portion
pursuant to Section 2.5 hereof would cease to exist or the circumstances which
would otherwise terminate the Lender's obligation to make such Portion under
Section 2.6 hereof would cease to exist or the increased costs which would
otherwise be required to be paid in respect of such Portion pursuant to Section
2.7 hereof would be materially reduced, and if determined by the Lender, in its
sole discretion, the making, funding or maintaining of such Portion through such
other lending office would not otherwise adversely affect such Portion.

SECTION 3. FEES. PREPAYMENTS AND PAYMENTS

Section 3.1. Closing Fee. On the date of this Agreement the Company
shall pay to the Lender a one time non-refundable fee equal to $75,000, as and
for a closing fee.

Section 3.2. Commitment Fee. For the period commencing on the date of
this Agreement to and including the Termination Date, the Company shall pay to
the Lender a commitment fee at a rate per annum equal to three-tenths percent
(0.30%) per annum on the average daily unused amount of the Reducing Revolving
Credit Commitment hereunder, such fee to be payable on December 31, 1998 and on
the last day of March, June, September, and December thereafter to and
including, and on, the Termination Date.

Section 3.3. Mandatory Prepayments. Borrower shall repay (which, for
purposes of this Agreement shall be prepayment) immediately, without notice or
demand, the principal of the Note to the extent that the Loans then outstanding
exceed the Reducing Revolving Credit Commitment as so reduced on such date.

Section 3.4. Voluntary Prepayments.

(a) The Company shall have the privilege of prepaying, and in whole or
in part (but, if in part, then in an amount not less than $100,000) the Domestic
Rate Portion of the Note at any time upon notice to the Lender prior to 11:00
a.m. (Des Moines time) on the date fixed for prepayment, such prepayment to be
made by the payment of the principal amount to be prepaid and accrued interest
thereon to the date of prepayment.

(b) The Company may prepay any LIBOR Portion of the Note only on the
last date of the then applicable Interest Period, in whole or in part (but, if
in part, then in an amount not less than $250,000 or such greater amount which
is an integral multiple of $50,000) upon two (2) Business Days' prior written
notice to the Lender (which notice shall be irrevocable once given, must be
received by the Lender no later than 11:00 a.m. (Des Moines time) on the second
Business Day

8
<PAGE>

preceding the date of such prepayment and shall specify the amount to be
prepaid); provided, however, that the outstanding principal amount of any LIBOR
Portion applicable to the Note prepaid in part shall not be less than $50,000
after giving effect to such prepayment. Any such prepayment shall be effected by
payment of the principal amount to be prepaid and accrued interest thereon to
the end of the applicable Interest Period.

Section 3.5. Commitment Reductions.

(a) Optional Reduction. The Company shall have the right as of the end
of any monthly accounting period, upon five (5) Business Days' prior notice to
the Lender, to terminate without premium or penalty and in whole or in part
(but, if in part, then in an amount not less than $1,000,000) the Reducing
Revolving Credit Commitment, provided that the Reducing Revolving Credit
Commitment may not be reduced to an amount less than the aggregate principal
amount of the Loans then outstanding. Any termination of the Revolving Credit
Commitment pursuant to this Section may not be reinstated.

(b) Mandatory Reduction. The Reducing Revolving Credit Commitment shall
be permanently reduced on the date of any principal payment made by the Company
on the Senior Notes, including any optional or required prepayment, or any
purchase of the Senior Notes by the Company or it Subsidiaries, by an amount
that equals a product of (i) a fraction, the numerator of which is the principal
amount of Senior Notes so paid or purchased, and the denominator of which is the
total principal amount of the Senior Notes then outstanding immediately prior to
such payment or purchase, times (ii) the Reducing Revolving Credit Commitment
then in effect.

Section 3.6. Place and Application of Payments and Collections. All
payments of principal, interest, and all other Obligations payable hereunder
shall be made to the Lender at its principal office in Chicago, Illinois, no
later than 1:00 p.m. (Des Moines time) on the date any such payment is due and
payable. Payments received by the Lender after 1:00 p.m. shall be deemed
received as of the opening of business on the next Business Day. All such
payments shall be made in lawful money of the United States of America, in
immediately available funds at the place of payment, without set-off or
counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties, fees, charges, deductions, withholdings,
restrictions or conditions of any nature imposed by any government or any
political subdivision or taxing authority thereof (but excluding any taxes
imposed or measured by the net income of the Lender). Unless the Company
otherwise directs, principal payments shall be first applied to the Domestic
Rate Portion of the Note until payment in full thereof, with any balance applied
to the LIBOR Rate Portions of the Note in the order in which their Interest
Periods expire. All payments (whether voluntary or required) shall be
accompanied by any amount due the Lender under Section 2.9 hereof, but no
acceptance of such a payment without requiring payment of amounts due under
Section 2.9 shall preclude a later demand by the Lender for any amount due them
under Section 2.9 in respect of such payment. Anything contained herein to the
contrary notwithstanding, all payments and collections received in respect of
the indebtedness evidenced by the Note shall be applied as follows:

(a) first, to the payment of any outstanding costs and expenses
reasonably incurred by the Lender in protecting, preserving or enforcing rights
under this Agreement, or the Note and in any

9
<PAGE>

event including all costs and expenses of a character which the Company has
agreed to pay under Section 9.4 hereof;

(b) second, to the payment of any outstanding interest or other fees or
amounts due under the Note or this Agreement;

(d) forth, to the Lender in accord with the amounts of any other
indebtedness, obligations or liabilities of the Company owing to the Lender
unless and until all such indebtedness, obligations and liabilities have been
fully paid and satisfied; and

(e) fifth, to the Company or whoever may be lawfully entitled thereto.

Section 3.7. Notations. All advances made against the Note, the status
of all amounts evidenced by the Note as constituting part of a Domestic Rate
Portion or LIBOR Portion and the rates of interest and Interest Periods
applicable to such Portions shall be recorded by the Lender on its books or, at
its option in any instance, endorsed on the reverse side of the Note and the
unpaid principal balances and status, rates and Interest Periods so recorded or
endorsed by the Lender shall be prima facie evidence in any court or other
proceeding brought to enforce the Note of the principal amount remaining unpaid
thereon, the status of the borrowings evidenced thereby and the interest rates
and Interest Periods applicable thereto. Prior to any negotiation of the Note,
the Lender shall endorse thereon the status of all amounts evidenced thereby as
constituting part of a Domestic Rate Portion or LIBOR Portion and the rates of
interest and Interest Periods applicable thereto.

SECTION 4. DEFINITIONS, INTERPRETATION.

Section 4.1. Definitions The following terms when used herein shall
have the following meanings:

"Adjusted LIBOR" means a rate per annum determined by the Lender
pursuant to the following formula:

Adjusted LIBOR= LIBOR

-------------------------
100% - Reserve Percentage

"Reserve Percentage" means, for the purpose of computing Adjusted
LIBOR, the maximum rate of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental or other special
reserves) imposed by the Board of Governors of the Federal Reserve
System (or any successor) under Regulation D on Eurocurrency
liabilities (as such term is defined in Regulation D) for the
applicable Interest Period as of the first day of such Interest Period,
which shall remain the same throughout the Interest Period
notwithstanding any amendments to such reserve requirement by such
Board or its successor. For

10
<PAGE>

purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D. "LIBOR" means, for
each Interest Period (a) the LIBOR Index Rate for such Interest Period,
if such rate is available, and (b) if the LIBOR Index Rate cannot be
determined the arithmetic average of the rate of interest per annum
(rounded upward, if necessary, to nearest 1/100 of 1%) at which
deposits in U.S. Dollars in immediately available funds are offered to
the Lender at 11:00 a.m. (London, England time) two (2) Business Days
before the beginning of such Interest Period by three (3) or more major
banks in the London interbank eurodollar market selected by the Lender
for a period equal to such Interest Period and in an amount equal or
comparable to the applicable LIBOR Portion scheduled to be outstanding
from the Lender during such Interest Period . "LIBOR Index Rate" means,
for any Interest Period, the rate per annum (rounded upwards, if
necessary, to the next higher one hundred-thousandth of a percentage
point) for deposits in U.S. Dollars for a period equal to such Interest
Period, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the day two (2) Business Days before the
commencement of such Interest Period. "Telerate Page 3750" means the
display designated as "Page 3750" on the Telerate Service (or such
other page as may replace Page 3750 on that service or such other
service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for U.S. Dollar deposits. Each
determination of LIBOR made by the Lender shall be conclusive and
binding absent manifest error.

"Affiliate" means, at any time, and with respect to any Person, (a) any other
Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.

"Agreement" means this Credit Agreement, as the same may be amended, modified or
restated from time to time in accordance with the terms hereof.

"Asset Disposition" means any Transfer except:

(a) any

(i) Transfer from a Subsidiary to the Company or a
Wholly-Owned Subsidiary;

(ii) Transfer from the Company to a Wholly-Owned
Subsidiary; and

11
<PAGE>

(iii) Transfer from the Company to a Subsidiary
(other than a Wholly-Owned Subsidiary) or from a Subsidiary to
another Subsidiary (other than a Wholly-Owned Subsidiary),
which in either case is for Fair Market Value, so long as
immediately before and immediately after the consummation of
any such Transfer and after giving effect thereto, no Default
or Event of Default exists; and

(b) any Transfer made in the ordinary course of business other
than any Transfer of accounts receivable.

"Authorized Representative" means those persons shown on the list of officers
provided by the Company pursuant to Section 6.2 hereof, or on any update of any
such list provided by the Company to the Lender, or any further or different
officer of the Company so named by any Authorized Representative of the Company
in a written notice to the Lender.

"Business Day" means a day (other than a Saturday or Sunday) on which the Lender
is not authorized or required to close, and, when used with respect to LIBOR
Portions, a day when the Lender is also dealing in United States Dollar deposits
in London, England or Nassau, Bahamas.

"Capital Lease" means, at any time, a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

"Cash Flow Leverage Ratio" means, as of any time the same is to be determined,
the ratio of Debt of the Company then outstanding to EBITDA of the Company for
the preceding four fiscal quarters of the Company then ended.

"Change in Control" means any of the following events or circumstances:

(i) the failure of MidAmerican Energy Holdings
Company, or after the consummation of the Merger, CalEnergy
Company, Inc., or its successors or ultimate parent, to own
and control (directly or indirectly) (A) prior to an IPO,
greater than 50% (in the aggregate) of the Company's shares of
voting stock outstanding, or (B) on or after the consummation
of an IPO, at least 25% (in the aggregate) of the Company's
shares of voting stock outstanding, or

(ii) any Person, on or after the consummation of an
IPO, owns or controls (directly or indirectly) more shares of
the outstanding voting stock of the Company than is owned or
controlled (directly or indirectly) by MidAmerican Energy
Holdings Company or, after consummation of the Merger,
CalEnergy Company, Inc. "IPO" means the initial public
offering by the Company of its voting shares of common stock.

"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.

"Company" is defined in the introductory paragraph hereof.

12
<PAGE>

"Consolidated Net Income" means, with reference to any period, the net income
(or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP.

"Consolidated Net Worth" means, at any time,

(a) the sum of (i) the par value (or value stated on the books
of the corporation) of the capital stock (but excluding treasury stock
and capital stock subscribed and unissued) of the Company and its
Subsidiaries plus (ii) the amount of the paid-in capital and retained
earnings of the Company and its Subsidiaries, in each case as such
amounts would be shown on a consolidated balance sheet of the Company
and its Subsidiaries as of such time prepared in accordance with GAAP,
minus

(b) to the extent included in clause (a), all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.

"Consolidated Total Assets" means, at any time, the total assets of the Company
and its Subsidiaries which would be shown as assets on a consolidated balance
sheet of the Company and its Subsidiaries as of such time prepared in accordance
with GAAP, after eliminating all amounts properly attributable to minority
interests, if any, in the stock and surplus of Subsidiaries.

"Consolidated Total Capitalization" means, at any time, the sum of Consolidated
Net Worth and Consolidated Total Debt.

"Consolidated Total Debt" means, as of any date of determination, the total of
all Debt of the Company and its Subsidiaries outstanding on such date, after
eliminating all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP.

"Control Event" means (i) the execution by the Company or any of its
Subsidiaries or Affiliates of any agreement or letter of intent with respect to
any proposed transaction or event or series of transactions or events which,
individually or in the aggregate, may reasonably be expected to result in a
Change in Control,

(ii) the execution of any written agreement which, when fully performed
by the parties thereto, would result in a Change of Control, or

(iii) on or after the consummation of an IPO, the making of any written
offer by any person (as such term is used in section 13(d) and section 14(d)(2)
of the Exchange Act as in effect on the date on the date hereof) or related
persons constituting a group (as such term is used in Rule 13d-5 under the
Exchange Act as in effect on the date hereof) to the holders of the

13
<PAGE>

common stock of the Company, which offer, if accepted by the requisite number of
holders, would result in a Change in Control.

"Debt" with respect to any Person means, at any time, without duplication,

(a) its liabilities for borrowed money;

(b) its liabilities determined in accordance with GAAP for the
deferred purchase price of property acquired by such Person (excluding
any part of such deferred purchase price payable in equity interest of
such Person and excluding accounts payable arising in the ordinary
course of business but including all liabilities created or arising
under any conditional sale or other title retention agreement with
respect to any such property);

(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);

(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money);

(f) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (e) hereof; and

(g) any liabilities of a type described in any of clauses (a)
through (f) hereof of such Person resulting from such Person being a
general partner or member of a joint venture, whether by provision of
applicable law, contract or otherwise.

"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

"Disposition Value" means, at any time, with respect to any property

(a) in the case of property that does not constitute
Subsidiary Stock, the book value thereof, valued at the time of such
disposition in good faith by the Company, and

(b) in the case of property that constitutes Subsidiary Stock,
an amount equal to that percentage of book value of the assets of the
Subsidiary that issued such stock as is equal to the percentage that
the book value of such Subsidiary Stock represents of the book value of
all of the outstanding capital stock of such Subsidiary (assuming, in
making such calculations, that all Securities convertible into such
capital stock are so converted and giving full effect to all
transactions that would occur or be required in connection

14
<PAGE>

with such conversion) determined at the time of the disposition
thereof, in good faith by the Company.

"Distribution" means, in respect of any corporation, association or other
business entity:

(a) dividends or other distributions or payments on capital
stock or other equity interest of such corporation, association or
other business entity (except distributions in such stock or other
equity interest); and

(b) the redemption or acquisition of such stock or other
equity interests or of warrants, rights or other options to purchase
such stock or other equity interests (except when solely in exchange
for such stock or other equity interests) unless made,
contemporaneously, from the net proceeds of a sale of such stock or
other equity interests.

"Domestic Rate" means, for any day, the rate most recently published as the
"prime rate" in The Wall Street Journal as being the base rate on corporate
loans posted by at least 75% of the nation's 30 largest bank (or the average, if
more than one rate is published) or as that computation of "prime rate" may be
reformulated by The Wall Street Journal in the future, any such reformulation,
however, being subject to the approval thereof by the Lender. In the event such
prime rate ceases to be published or in the event the Lender does not approve a
reformulation, the "Domestic Rate" shall mean the rate of interest announced by
the Lender from time to time as its prime commercial rate or most closely
equivalent publicly announced rate, as in effect on such day.

"Domestic Rate Margin" means zero percent (0%) per annum.

"EBITDA" means, with respect to any period, Consolidated Net Income for such
period plus all amounts deducted in the computation thereof on account of all
(a) Interest Charges during such period, (b) income taxes of the Company and its
Subsidiaries during such period, and (c) amortization and depreciation expense
of the Company and its Subsidiaries during such period, all determined on a
consolidated basis in accordance with GAAP.

"Environmental Laws" means any and all Federal, state, local and foreign laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.

"ERISA Affiliate" means any trade or business (whether or not incorporated) that
is treated as a single employer together with the Company under Section 414 of
the Code.

15
<PAGE>

"European Community Countries" means Belgium, Denmark, France, Germany, Ireland,
Luxembourg, Netherlands, Spain and the United Kingdom.

"Event of Default" means any event or condition identified in Section 8 hereof.

"Fair Market Value" means, at any time and with respect to any property, the
sale value of such property that would be realized in an arm's-length sale at
such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell).

"GAAP" means generally accepted accounting principles as in effect from time to
time in the United States of America.

"Governmental Authority" means

(a) the government of the United States of America or any
State or other political subdivision thereof, or

(b) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts jurisdiction
over any properties of the Company or any Subsidiary, or

(c) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.

"Hazardous Material" means any and all pollutants, toxic or hazardous wastes or
any other substances that might pose a hazard to health or safety, the removal
of which may be required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage, or filtration of which is or
shall be restricted, prohibited or penalized by any applicable law (including,
without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

"Interest Charges" means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP): (a) all interest in respect of Debt of the Company and its Subsidiaries
(including imputed interest on Capital Lease Obligations) deducted in
determining Consolidated Net Income for such period, and (b) all debt discount
and expense amortized or required to be amortized in the determination of
Consolidated Net Income for such period, all determined in accordance with GAAP.

"Interest Charges Coverage Ratio" means, at any time, the ratio of (a) EBITDA
for the period of four consecutive fiscal quarters ending on, or most recently
ended prior to, such time to (b) Interest Charges for such period.

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<PAGE>

"Interest Period means, with respect to any LIBOR Portion, the period commencing
on, as the case may be, the creation, continuation or conversion date with
respect to such LIBOR Portion and ending one (1), two (2), three (3) or six (6)
months thereafter as selected by the Company in its notice as provided herein;
provided that, the foregoing provision relating to Interest Period is subject to
the following:

(i) if any Interest Period would otherwise end on a day which is not a
Business Day that Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business day;

(ii) no Interest Period may extend beyond the final maturity date of
the applicable Note;

(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and

(iv) no Interest Period may be selected if after giving effect thereto
the Company will be unable to make a principal payment scheduled to be
made during Interest Period without paying part of a LIBOR Portion on a
date other than the last day of the Interest Period applicable thereto.

For purposes of determining an Interest Period, a month means a period starting
on one day in a calendar month and ending on a numerically corresponding day in
the next calendar month, provided, however, if an Interest Period begins on the
last day of a month or if there is no numerically corresponding day in the month
in which an Interest Period is to end, then such Interest Period shall end on
the last Business Day of such month.

"Investment" means any investment, made in cash or by delivery of property, by
the Company or any of its Subsidiaries (i) in any Person, whether by acquisition
of stock, indebtedness or other obligation or Security, or by loan, Guaranty,
advance, capital contribution or otherwise, or (ii) in any property.

"Lender" means La Salle National Bank, and any of its successors or assigns.

"LIBOR MARGIN" means the then applicable per annum percentage calculated at the
times and in the manner described in Section 2.4(b) hereof.

"Lien" means, with respect to any Person, any mortgage, lien, pledge, charge,
security interest or other encumbrance, or any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale or other title retention agreement or Capital Lease, upon or with respect
to any property or asset of such Person (including in the case of stock,
stockholder agreements, voting trust agreements and all similar arrangements).

"Loan Documents" means this Agreement and the Note.

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<PAGE>

"Loans" is defined in Section 1.2 hereof.

"Material" means material in relation to the business, operations, affairs,
financial condition, assets, properties or prospects of the Company and its
Subsidiaries taken as a whole.

"Material Adverse Effect" means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets, profits, prospects or
properties of the Company and its Subsidiaries taken as a whole, or (b) the
ability of the Company to perform its obligations under this Agreement, the Note
and any other Loan Document, or (c) the validity or enforceability of this
Agreement, the Note or any other Loan Document.

"Merger" means the contemplated merger between MidAmerican Energy Holdings
Company and CalEnergy Company, Inc. described in MidAmerican Energy Holdings
Company's Current Report on Form 8-K dated August 11, 1998 pursuant to which,
among other things, CalEnergy Company, Inc. will reincorporate in the State of
Iowa and change its name to MidAmerican Energy Holdings Company. The Merger
shall not constitute or be deemed to be a Change in Control under this
Agreement.

"MidAmerican Energy Holdings Company" means MidAmerican Energy Holdings Company,
an Iowa corporation, the beneficial owner of 100% of the outstanding capital
stock of the Company.

"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term
is defined in Section 4001(a)(3) of ERISA).

"Net Proceeds Amount" means, with respect to any Transfer of any Property by any
Person, an amount equal to the difference of

(a) the aggregate amount of the consideration (valued at the
Fair Market Value of such consideration at the time of the consummation
of such Transfer) received by such Person in respect of such Transfer,
minus

(b) all ordinary and reasonable out-of-pocket costs and
expenses actually incurred by such Person in connection with such
Transfer.

"Net Proceeds of Capital Stock" means, with respect to any period, cash proceeds
(net of all costs and out-of-pocket expenses in connection therewith, including,
without limitation, placement, underwriting and brokerage fees and expenses),
received by the Company and its Subsidiaries during such period, from the sale
of all capital stock (other than Redeemable capital stock) of the Company.

"Note" means the Revolving Credit Note.

"Obligations" means all obligations of the Company to pay principal and interest
on the Loans and all fees and charges payable hereunder, and all other payment
obligations of the Company arising under or relating to any Loan Document, in
each case, whether direct or indirect absolute

18
<PAGE>

or contingent, due or to become due, and whether now existing or hereafter
arising and howsoever held, evidenced or acquired.

"Officer's Certificate" means a certificate of a Senior Financial Officer or of
any other officer of the Company whose responsibilities extend to the subject
matter of such certificate.

"PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA or any successor thereto.

"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.

"Plan" means an "employee benefit plan" (as defined in Section 3(3) of ERISA)
that is or, within the preceding five years, has been established or maintained,
or to which contributions are or, within the preceding five years, have been
made or required to be made, by the Company or any ERISA Affiliate or with
respect to which the Company or any ERISA Affiliate may have any liability.

"Priority Debt" means, without duplication, the sum of (a) all Debt of the
Company secured by any Lien with respect to any property owned by the Company or
any of its Subsidiaries, (b) all Debt of Subsidiaries (except Debt owed to the
Company or a Wholly-Owned Subsidiary).

"property" or "properties" means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.

"Property Reinvestment Application" means, with respect to any Transfer of
property, the application of an amount equal to the Net Proceeds Amount with
respect to such Transfer to the acquisition by the Company or any Subsidiary of
long-term assets of a similar nature.

"Redeemable" means, with respect to the capital stock of any Person, each share
of such Person's capital stock that is:

(a) redeemable, payable or required to be purchased or
otherwise retired or extinguished, or convertible into Debt of such
Person (i) at a fixed or determinable date, whether by operation of
sinking fund or otherwise, (ii) at the option of any Person other than
such Person, or (iii) upon the occurrence of a condition not solely
within the control of such Person; or

(b) convertible into other Redeemable capital stock.

"Reducing Revolving Credit" is defined in Section 1.1 hereof.

"Reducing Revolving Credit Commitment" shall mean the commitment of the Lender
to make loans under the Reducing Revolving Credit in the respective amount set
opposite the applicable time period, which amounts may be further reduced
pursuant to Section 3.5 hereof:

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<PAGE>

Reducing Revolving Time Period
Credit Commitment -----------------------
- ------------------ (Dates are inclusive)

$25,000,000 Commencing day of Close and ending May 12, 1999

$23,500,000 Commencing May 13, 1999 and ending November 12, 1999

$22,000.000 Commencing November 13, 1999 and ending May 12, 2000

$20,500,000 Commencing May 13, 2000 and ending November 12, 2000

$19,000,000 Commencing November 13, 2000 and ending May 12, 2001

$17,500,000 Commencing May 13, 2001 and ending November 12, 2001

$16,000.000 Commencing November 13, 2001 and ending May 12, 2002

$14,500,000 Commencing May 13, 2002 and ending November 12, 2002

$13,000,000 Commencing November 13, 2002 and ending May 12, 2003

$11,500,000 Commencing May 13, 2003 and ending November 12, 2003

"Responsible Officer" means any Senior Financial Officer and any other officer
of the Company with responsibility for the administration of the relevant
portion of this Agreement.

"Restricted Investments" means all Investments except the following:

(a) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by the
Company or any Subsidiary, is accorded the highest rating by Standard &
Poor's Corporation, Moody's Investors Service, Inc. or other nationally
recognized credit rating agency of similar standing;

(b) Investments in direct obligations of the United States of
America or any agency or instrumentality of the United States of
America, the payment or guarantee of which constitutes a full faith and
credit obligation of the United States of America, in either case,
maturing in twelve months or less from the date of acquisition thereof,
excluding, however, Investments which constitute derivative securities
such as mortgage-backed "Ios" or "Pos" and mortgage pass-through
certificates or Investments of a similar nature or type;

(c) Investments in certificates of deposit or similar
instruments maturing within one year from the date of issuance thereof,
issued by a bank or trust company organized under the laws of the:

20
<PAGE>

(i) United States or any state thereof, having
capital, surplus and undivided profits aggregating at least
$1,000,000,000 and whose long-term certificates of deposit or
similar instruments are, at the time of acquisition thereof by
the Company or a Subsidiary, rated A or better by S&P, Duff &
Phelps or Fitch Investors' Service Incorporated or A2 or
better by Moody's; or

(ii) Canada, any European Community Country, Japan or
any other country, having capital, surplus and undivided
profits aggregating at least $1,000,000,000 and whose
commercial paper is, at the time of acquisition thereof by the
Company or a Subsidiary, rated a-1 or better by S&P or P1 or
better by Moody's or whose long-term certificates of deposit
or similar instruments are, at the time of acquisition thereof
by the Company or a Subsidiary, rated AA or better by S&P or
Aa2 or better by Moody's;

(d) Investments in master note or deposit arrangements or
money market programs which invest solely in Securities of the type
described in the subparagraphs (a), (b) or (c) hereof;

(e) Investments in money market programs of Investment
Companies which, at the time of acquisition by the Company or any
Subsidiary, are rated A-1 or better by S&P or P-1 or better by Moody's
or, if such money market programs are not rated, a substantial majority
of the Investments of such money market programs are rated A-1 or
better by S&P or P-1 or better by Moody's;

(f) Investments by the Company and its Subsidiaries in and to
Subsidiaries, including any Investment in a Person which, after giving
effect to such Investment, will become a Subsidiary;

(g) loans or advances of sales commissions and expenses in
the usual and ordinary course of business to real estate sales agents
which are incidental to carrying on the business of the Company or any
Subsidiary;

(h) Investments existing on the date of the Closing and
disclosed in Schedule 7.13;

(i) Investments in Repurchase Agreements;

(j) loans or advances to MidAmerican Energy Holdings Company
or any of its Affiliates, provided that the aggregate principal amount
of all such loans or advances shall not exceed $10,000,000, and
provided further that any such loans or advances constituting daily
sweeps of any bank accounts of the Company or any Subsidiary solely for
cash management purposes shall not be subject to such $10,000,000
limit.

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<PAGE>

amount of such Debt, or (ii) fluctuations in the value of Investments
in fixed-rate Securities resulting from a change in interest rates, in
each case entered into in the ordinary course of business and not for
speculation, provided that the long-term senior unsecured debt
obligations of the counterparty to such Investments are rated, at the
time of the making of such Investments, A- or better by S&P or A3 or
better by Moody's; and

(l) Investments in joint ventures or other entities engaged
in the same business as the Company and its Subsidiaries in which the
Company and its Subsidiaries shall have an equity ownership interest of
less than a majority of all outstanding equity ownership interests of
such entities, provided that the aggregate amount of all such
Investments shall not at any time exceed $10,000,000.

As of any date of determination, each Restricted Investment shall be
valued at the greater of:

(x) the amount at which such Restricted Investment is shown
on the books of the Company or any of its Subsidiaries (or zero if such
Restricted Investment is not shown on any such books); and

(y) either

(i) in the case of any Guaranty of the obligation of any
Person, the amount which the Company or any of its Subsidiaries has
paid on account of such obligation less any recoupment by the Company
or such Subsidiary of any such payments, or

(ii) in the case of any other Restricted Investment, the
excess of (x) the greater of (A) the amount originally entered on the
books of the Company or any of its Subsidiaries with respect thereto
and (B) the cost thereof to the Company or its Subsidiary over (y) any
return of capital (after income taxes applicable thereto) upon such
Restricted Investment through the sale or other liquidation thereof or
part thereof or otherwise.

As used in this definition of "Restricted Investments":

"Acceptable Bank" means any bank or trust company (i) which is
organized under the laws of the United States of America or any State
thereof, (ii) which has capital, surplus and undivided profits
aggregating at least $1,000,000, and (iii) whose long-term unsecured
debt obligations (or the long-term unsecured debt obligations of the
bank holding company owning all of the capital stock of such bank or
trust company) shall have been given a rating of "A" or better by S&P,
"A2" or better by Moody's or an equivalent rating by any other credit
rating agency of recognized national standing.

22
<PAGE>

S&P, "A2" or better by Moody's or an equivalent rating by any other
credit rating agency of recognized national standing.

"Moody's" means Moody's Investors Service, Inc.

"Repurchase Agreement" means any written agreement

(a) That provides for (i) the transfer of one or more United
States Governmental Securities in an aggregate principal amount at
least equal to the amount of the Transfer Price (defined below) to the
Company or any of its Subsidiaries from an Acceptable Bank or an
Acceptable Broker-Dealer against a transfer of funds (the "Transfer
Price") by the Company or such Subsidiary to such Acceptable Bank or
Acceptable Broker-Dealer, and (ii) a simultaneous agreement by the
Company or such Subsidiary, in connection with such transfer of funds,
to transfer to such Acceptable Bank or Acceptable Broker-Dealer the
same or substantially similar United States Governmental Securities for
a price not less than the Transfer Price plus a reasonable return
thereon at a date certain not later than 365 days after such transfer
of funds,

(b) in respect of which the Company or such Subsidiary shall
have the right, whether by contract or pursuant to applicable law, to
liquidate such agreement upon the occurrence of any default thereunder,
and

(c) in connection with which the Company or such Subsidiary,
or an agent thereof, shall have taken all action required by applicable
law or regulations to perfect a Lien in such United States Governmental
Securities.

"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.

"United States Governmental Security" means any direct obligation of,
or obligation guaranteed by, the United States of America, or any
agency controlled or supervised by or acting as an instrumentality of
the United States of America pursuant to authority granted by the
Congress of the United States of America, so long as such obligation or
guarantee shall have the benefit of the full faith and credit of the
United States of America which shall have been pledged pursuant to
authority granted by the Congress of the United States of America.

"Restricted Payment" means

(a) any Distribution in respect of the Company or any
Subsidiary of the Company (other than on account of capital stock or
other equity interests of a Subsidiary of the Company owned legally and
beneficially by the Company or another Subsidiary of the Company),
including, without limitation, any Distribution resulting in the
acquisition by the Company of Securities which would constitute
treasury stock, and

(b) any payment, repayment, redemption, retirement,
repurchase or other acquisition, direct or indirect, by the Company or
any Subsidiary of, on account of, or in

23
<PAGE>

respect of, the principal of any Subordinated Debt (or any installment
thereof) prior to the regularly scheduled maturity date thereof (as in
effect on the date such Subordinated Debt was originally incurred.

For purposes of this Agreement, the amount of any Restricted Payment made in
property shall be the greater of (x) the Fair Market Value of such property (as
determined in good faith by the board of directors (or equivalent governing
body) of the Person making such Restricted Payment) and (y) the net book value
thereof on the books of such Person, in each case determined as of the date on
which such Restricted Payment is made.

"Revolving Credit Note" is defined in Section 1.2 hereof.

"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

"Senior Notes" means the 7.12% Senior Notes due November 1, 2010, issued under
that certain Note Purchase Agreement dated as of November 1, 1998 between the
Company and the purchasers parties thereto.

"Subordinated Debt" means any Debt that is in any manner subordinated in right
of payment or security in any respect to Debt evidenced by the Note.

"Subsidiary" means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.

"Subsidiary Stock" means, with respect to any Person, the stock (or any options
or warrants to purchase stock or other Securities exchangeable for or
convertible into stock) of any Subsidiary of such Person.

"Swaps" means, with respect to any Person, payment obligations with respect to
interest rate swaps and similar obligations obligating such Person to make
payments, whether periodically or upon the happening of a contingency.

"Swap Transaction" means the Swap Transaction No. INF 8479, between the Company
and the Lender, and any renewals, extensions and modifications thereof, and any
future Swap Transaction between the Company and the Lender.

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<PAGE>

"Termination Date" means (i) November 12, 2003, or (ii) such earlier date on
which the Revolving Credit is terminated pursuant to Section 8 hereof.

"Transfer" means, with respect to any Person, any transaction in which such
Person sells, conveys, transfers or leases (as lessor) any of its property,
including, without limitation, Subsidiary Stock. For purposes of determining the
application of the Net Proceeds Amount in respect of any Transfer, the Company
may designate any Transfer as one or more separate Transfers each yielding a
separate Net Proceeds Amount.

"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent
(100%) of all of the equity interests (except directors' qualifying shares) and
voting interests of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Subsidiaries at such time.

Section 4.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. All
references to time of day herein are references to Des Moines, Iowa, time unless
otherwise specifically provided. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
specific provisions of this Agreement.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to the Lender as follows:

Section 5.1. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the corporate power and authority to own or hold under lease the properties
it purports to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and the Note and
to perform the provisions hereof and thereof.

Section 5.2. Authorization, Etc. This Agreement, the Note and the other
Loan Documents have been duly authorized by all necessary corporate action on
the part of the Company, and this Agreement and the Note constitute, a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

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<PAGE>

Section 5.3. Disclosure. The Company, through its agent, Warburg Dillon
Read LLC, has delivered to the Lender a copy of a Private Placement Memorandum,
dated August, 1998 (the "Memorandum"), relating to certain transactions. The
Memorandum fairly describes, in all material respects, the general nature of the
business and principal properties of the Company and of its Subsidiaries. This
Agreement, the Memorandum, the documents, certificates or other writings,
delivered to the Lender by or on behalf of the Company in connection with the
transactions contemplated hereby and the financial statements listed in Schedule
5.5, taken as a whole, do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. In addition
to the Memorandum and the other documents listed in Schedule 5.3 hereto, the
Company has delivered to the Lender, MidAmerican Energy Holdings Company's
Current Report on Form 8-K, dated August 11, 1998, describing the Merger. Since
June 30, 1998, there has been no change in the financial condition, operations,
business, properties or prospects of the Company or any of its Subsidiaries
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to the Lender by or on behalf of the
Company specifically for use in connection with the transactions contemplated
hereby.

Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary, (ii) of
the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers.

(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).

(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.

(d) No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any

26
<PAGE>

of its Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.

Section 5.5. Financial Statements. The Company has delivered to the
Lender copies of the financial statements listed on Schedule 5.5. All of said
financial statements (including in each case the related schedules and note)
fairly present in all material respects the consolidated financial position of
the respective companies and their subsidiaries as of the respective dates
specified in such financial statements and the consolidated results of their
operations and cash flows for the respective periods so specified and have been
prepared in accordance with GAAP consistently applied throughout the periods
involved except as set forth in the note thereto; provided, however, that the
financial statements titled "AmerUS Home Service, Inc. and Subsidiaries" contain
the financial information of Home Real Estate Company of Omaha and First Edina
Realty Mortgage L.L.C., entities which were a subsidiary or joint venture of
AmerUs Home Services, Inc. or its subsidiaries on December 31, 1997 but which
are not a subsidiary or joint venture on the date hereof; and provided further
that the financial statements of AmerUs Home Service, Inc. reflect minority
interests which were redeemed prior to the date hereof; and provided further
that the financial statements of AmerUs Home Services, Inc. include revenues
from the management of real estate development operations which have been
discontinued; and provided further that the financial statements of CBS Real
Estate Co. include investments in Georgetowne Development, Ltd., ComFed-Dodge
Fund VII Ltd. Partnership and Plum Creek L.L.C. which were owned by CBS Real
Estate Co. on December 31, 1997 but were disposed of prior to the date hereof;
and provided further that the effect of the foregoing changes on the financial
statements listed on schedule 5.5 are excluded from the representations and
warranties made herein.

Section 5.6. Compliance with Laws, Other Instruments, Etc. The
execution, delivery and performance by the Company of this Agreement, the Note
and the other Loan Documents will not (a) contravene, result in any breach of,
or constitute a default under, or result in the creation of any Lien in respect
of any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (b) conflict with or result in a
breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary or (c) violate any provision of any statute or
other rule or regulation of any Governmental Authority applicable to the Company
or any Subsidiary.

Section 5.7. Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Note.

27
<PAGE>

any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.

(b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

Section 5.9. Taxes. The Company and its Subsidiaries have filed all tax
returns (individually or on a consolidated basis) that are required to have been
filed in any jurisdiction, and have paid all taxes shown to be due and payable
on such returns (individually or on a consolidated basis), individually or on a
consolidated basis, and all other taxes and assessments levied upon them or
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (a) the amount of which is not individually
or in the aggregate Material or (b) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The Company knows of no
basis for any other tax or assessment that could reasonably be expected to have
a Material Adverse Effect. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of Federal, state or other taxes for
all fiscal periods are adequate. The Company does not have any income tax
liabilities for any fiscal year ending on or prior to December 31, 1997. The
Federal income tax liabilities of the Company's Subsidiaries have been
determined by the Internal Revenue Service and paid for all fiscal years up to
and including the fiscal year ended December 31, 1994.

Section 5.10. Title to Property Leases. The Company and its Subsidiaries
have good and sufficient title to their respective properties that individually
or in the aggregate are Material, including all such properties reflected in the
most recent audited balance sheet referred to in Section 5.5 or purported to
have been acquired by the Company or any Subsidiary after said date (except as
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.

Section 5.11. Licenses, Permits, Etc. Except as disclosed in Schedule
5.11,

(a) the Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict
with the rights of others;

(b) to the best knowledge of the Company, no product of the
Company or any of its Subsidiaries infringes in any material respect
any license, permit, franchise,

28
<PAGE>

authorization, patent, copyright, service mark, trademark, trade name
or other right owned by any other Person; and

(c) to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company or any of
its Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or
any of its Subsidiaries.

Section 5.12. Compliance with ERISA. (a) The Company and each ERISA
Affiliate have operated and administered each Plan in compliance with all
applicable laws except for such instances of noncompliance as have not resulted
in and could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant
to Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.

(b) For each Plan that is a pension plan within the meaning of Section
3(2) of ERISA, the accumulated benefit obligation did not exceed the fair market
value of the Plan's assets. For this purpose, "Accumulated benefit obligation"
shall have the meaning given to that term in paragraph 18 of Statement of
Financial Accounting Standards No. 87.

(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.

(d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Subsidiaries is not Material.

(e) The execution and delivery of this Agreement and the issuance of
the Note hereunder will not involve any transaction that is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code.

Section 5.13. Existing Debt; Future Liens. (a) Schedule 5.13 sets forth
a complete and correct list of all outstanding Consolidated Debt and Priority
Debt of the Company and its Subsidiaries as of August 31, 1998, since which date
there has been no Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Debt of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver
of default is currently in effect, in the payment of any principal or interest
on any Debt of

29
<PAGE>

the Company or such Subsidiary that could be reasonably be expected to result in
a Material Adverse Effect and no event or condition exists with respect to any
Debt of the Company or any Subsidiary that would permit (or that with notice or
the lapse of time, or both, would permit) one or more Persons to cause such Debt
to become due and payable before its stated maturity or before its regularly
scheduled dates of payment.

(b) Except as disclosed in Schedule 5.13, neither the Company
nor any Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 7.14.

Section 5.14. Foreign Assets Control Regulations, Etc. Neither the
issuance of the Note by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.

Section 5.15. Status under Certain Statutes. Neither the Company nor any
Subsidiary is an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, or is subject to
regulation under the Public Utility Holdings Company Act of 1935, as amended,
the ICC Termination Act of 1995, as amended, or the Federal Power Act, as
amended.

Section 5.16. Environmental Matters. Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed to the Lender in writing:

(a) neither the Company nor any Subsidiary has knowledge of
any facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets or
their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;

(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them or has disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in
each case in any manner that could reasonably be expected to result in
a Material Adverse Effect; and

(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental

30
<PAGE>

Laws, except where failure to comply could not reasonably be expected
to result in a Material Adverse Effect.

Section 5.17. Issuance of Senior Note. The issuance of the Senior Notes
by the Company has been consummated in accordance with the provisions of the
Note Purchase Agreement dated as of November 1, 1998 between the Company and the
purchasers parties thereto and all statutory, corporate and contractual
conditions and requirements relating to or arising therefrom have been
satisfied.

Section 5.18. Full Disclosure. The statements and other information
furnished to the Lender in connection with the negotiation of this Agreement and
the other Loan Documents and the commitment by the Lender to provide all or part
of the financing contemplated hereby do not contain any untrue statements of a
material fact or omit a material fact necessary to make the material statements
contained herein or therein not misleading in light of the circumstances under
which they were made, the Lender acknowledging that as to any projections
furnished to the Lender, the Company only represents that the same were prepared
on the basis of information and estimates the Company believed to be reasonable.

Section 5.19. Margin Stock. Neither the Company nor any Subsidiary is
engaged in the business of extending credit for the purpose of purchasing or
carrying Margin Stock (within the meaning of Regulation of the Board of
Governors of the Federal Reserve System), and not part of the proceeds of any
Loan hereunder will be used to purchase or carry any such Margin Stock or extend
credit to others for the purpose of purchasing or carrying any such Margin
Stock.

Section 5.20. Year 2000. The Company and its Subsidiaries have reviewed
the areas within their business and operations which could be adversely affected
by, and have developed or are developing a program to address on a timely basis,
the "Year 2000 Problem" (that is, the risk that computer applications used by
the Company and its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date on or
after December 31, 1999), and have made related appropriate inquiry of material
suppliers and vendors. Based on such review and program, the Company believes
that the "Year 2000 Problem" will not have a Material Adverse Effect on the
Company. From time to time, at the request of the Bank, the Company and its
Subsidiaries shall provide to the Bank such updated information or documentation
as is reasonably requested regarding the status of their efforts to address the
"Year 2000 Problem".

SECTION 6. CONDITIONS PRECEDENT.

The obligation of the Lender to make any Loan pursuant hereto shall be
subject to the following conditions precedent:

Section 6.1. All Advances. As of the time of the making of each Loan
(including the initial Loan):

(a) each of the representations and warranties set forth in Section 5
hereof (except those set forth in Sections 5.2 through 5.5, 5.13, 5.14, 5.17 and
5.18) and in the other Loan Documents shall be true and correct as of said time,
except that the representations and warranties made

31
<PAGE>

under Section 5.5 shall be deemed to refer to the most recent financial
statements of the Company furnished to the Lender pursuant to Section 7.1
hereof;

(b) the Company and each Subsidiary shall be in full compliance with
all of the terms and conditions hereof and of the other Loan Documents, and no
Default or Event of Default shall have occurred and be continuing;

(c) after giving effect to the making of such Loan the aggregate
principal amount of all Loans shall not exceed the Reducing Revolving Credit
Commitment then in effect;

(d) such extension of credit shall not violate any order, judgment or
decree of any court or other authority or any provision of law or regulation
applicable to the Lender (including, without limitation, Regulation U of the
Board of Governors of the Federal Reserve System) as then in effect.

The execution and delivery of the Note or the request for any Loan pursuant
hereto shall be and constitute the Company's warranty as to the foregoing
effects.

Section 6.2. Initial Advance. At or prior to the making of the initial
Loan hereunder, the following conditions precedent shall also have been
satisfied:

(a) the Lender shall have received the following (each to be properly
executed and completed) and the same shall have been approved as to form and
substance by the Lender and the Lender:

(i) the Note;

(ii) an incumbency certificate containing the name, title and
genuine signatures of each of the Company's Authorized
Representatives;

(iii) copies (executed or certified, as may be appropriate) of
all legal documents or proceedings taken in connection with
the execution and delivery of this Agreement and the other
Loan Documents to the extent the Lender or its counsel may
reasonably request;

(iv) an opinion of Borrower's counsel in a form satisfactory
to the Lender and its counsel.

(b) legal matters incident to the execution and delivery of this
Agreement, the other Loan Documents and to the transactions contemplated hereby
and thereby shall be satisfactory to the Lender and its counsel;

(c) the Lender shall have received such valuations and certifications
as it may require in order to satisfy itself as to the financial condition of
the Company and its Subsidiaries, and the lack of material contingent
liabilities of the Company;

(d) the Lender shall have received a certificate of existence for the
Company (dated as of the date no earlier than fifteen (15) days prior to the
date hereof) from the Office of the Secretary

32
<PAGE>

of State of Iowa and each state in which it is qualified to do business as a
foreign corporation; and

(e) the Lender shall have received such other agreements; instruments
documents, certificates and opinions as the Lender may reasonably request.

SECTION 7. COVENANTS.

The Company agrees that, so long as any amount remains unpaid on the
Note or any credit is available to or in use by the Company hereunder, except to
the extent compliance in any case is waived in writing by the Lender:

Section 7.1.Financial and Business Information. The Company shall deliver to the
Lender:

(a) Quarterly Statements -- within 60 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,

(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarter, and

(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending
with such quarter,

setting forth in each case commencing with the quarter ended September
30, 1999 in comparative form the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements
generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash
flows, subject to changes resulting from normal, recurring year-end
adjustments, provided that delivery within the time period specified
above of copies of the Company's Quarterly Report on Form 10-Q, if any,
prepared in compliance with the requirements therefor and filed with
the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a);

(b) Annual Statements -- within 105 days after the end of
each fiscal year of the Company, duplicate copies of,

(i) a consolidated balance sheet of the Company and
its Subsidiaries, as at the end of such year, and

(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,

33
<PAGE>

setting forth in each case, commencing with the year ended December 31,
1999, in comparative form the figures for the previous fiscal year, all
in reasonable detail, prepared in accordance with GAAP, and accompanied
by

(A) an opinion thereon of independent
certified public accountants of recognized national
standing, which opinion shall state that such
financial statements present fairly, in all material
respects, the financial position of the companies
being reported upon and their results of operations
and cash flows and have been prepared in conformity
with GAAP, and that the examination of such
accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the
circumstances, and

(B) a certificate of such accountants
stating that they have reviewed this Agreement and
stating further whether, in making their audit, they
have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if
they are aware that any such condition or event then
exists, specifying the nature and period of the
existence thereof (it being understood that such
accountants shall not be liable, directly or
indirectly, for any failure to obtain knowledge of
any Default or Event of Default unless such
accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted
auditing standards or did not make such an audit),

provided that the delivery within the time period specified above of
the Company's Annual Report on Form 10-K, for such fiscal year
(together with the Company's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements therefor and filed with the Securities
and Exchange Commission, together with the accountant's certificate
described in clause (B) above, shall be deemed to satisfy the
requirements of this Section 7.1(b);

(c) SEC and Other Reports, if any, -- promptly upon their
becoming available, one copy of (i) each financial statement, report,
notice or proxy statement sent by the Company or any Subsidiary to
public securities holders generally, and (ii) each regular or periodic
report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Subsidiary to
the public concerning developments that are Material;

(d) Notice of Default or Event of Default -- promptly, and in
any event within five days after a Responsible Officer becoming aware
of the existence of any Default or Event of Default or that any Person
has given any notice or taken any action with respect to a claimed
default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
Section 8.1(f), a written notice

34
<PAGE>

specifying the nature and period of existence thereof and what action
the Company is taking or proposes to take with respect thereto;

(e) ERISA Matters -- promptly, and in any event within five
days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:

(i) with respect to any Plan, any reportable event,
as defined in section 4043(c) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof;
or

(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or

(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;

(f) Notices from Governmental Authority -- promptly, and in
any event within 30 days of receipt thereof, copies of any notice to
the Company or any Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect; and

(g) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Note as from time to
time may be reasonably requested by the Lender.

Section 7.2. Officer's Certificate. Each set of financial statements
delivered to the Lender pursuant to Section 7.1(a) or Section 7.1(b) hereof
shall be accompanied by a certificate of a Senior Financial Officer setting
forth:

(a) Covenant Compliance - the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the

35
<PAGE>

requirements of Section 10.1 through Section 10.8 hereof, inclusive,
during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or percentage then
in existence); and

(b) Cash Flow Leverage Ratio - the information (including
detailed calculations) required in order to establish the Cash Flow
Leverage Rate for the preceding four fiscal quarters then ended.

(c) Event of Default - a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not
have disclosed the existence during such period of any condition or
event that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company
or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.

Section 7.3. Inspection. The Company shall permit the representatives
of the Lender:

(a) No Default - if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing
so long as such representatives are bound to the provisions of Section
9.15 hereof; and

(b) Default - if a Default or Event of Default then exists,
at the expense of the Company, to visit and inspect any of the offices
or properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.

Section 7.4. Compliance with Law. The Company will, and will cause each
of its Subsidiaries to, comply with all laws, ordinances or governmental rules
or regulations to which

36
<PAGE>

each of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

Section 7.5. Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.

Section 7.6. Maintenance of Properties. The Company will, and will
cause each of its Subsidiaries to, maintain and keep, or cause to be maintained
and kept, their respective properties in good repair, working order and
condition (other than ordinary wear and tear), so that the business carried on
in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Subsidiary from discontinuing
the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

Section 7.7. Payment of Taxes. The Company will, and will cause each of
its Subsidiaries to, file all tax returns, individually or on a consolidated
basis, required to be filed in any jurisdiction and to pay and discharge,
individually or on a consolidated basis, all taxes shown to be due and payable
on such returns and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent and all claims for which sums have become due and
payable that have or might become a Lien on properties or assets of the Company
or any Subsidiary, provided that neither the Company nor any Subsidiary need pay
any such tax or assessment or claims if (i) the amount, applicability or
validity thereof is contested by the Company or such Subsidiary on a timely
basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with GAAP on
the books of the Company or such Subsidiary or (ii) the nonpayment of all such
taxes and assessments in the aggregate could not reasonably be expected to have
a Material Adverse Effect.

Section 7.8. Corporate Existence, Etc. Subject to Sections 7.15 and
7.16, the Company will at all times preserve and keep in full force and effect
its corporate existence, and the Company will at all times preserve and keep in
full force and effect the corporate existence of each of its Subsidiaries
(unless merged into the Company or a Wholly-Owned Subsidiary) and all rights and
franchises of the Company and its Subsidiaries unless, in the good faith
judgment of the Company, the termination of or failure to preserve and keep in
full force and effect such

37
<PAGE>

corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.

Section 7.9. Consolidated Net Worth. The Company will maintain, at the
end of each fiscal quarter, Consolidated Net Worth at an amount not less than
the sum of (a) $25,500,000, plus (b) an aggregate amount equal to 25% of its
Consolidated Net Income (but, in each case, only if a positive number) for each
completed fiscal year beginning with the fiscal year ended December 31, 1998.

Section 7.10. Interest Charges Coverage Ratio. The Company will not at
any time permit the Interest Charges Coverage Ratio for any period of four
consecutive fiscal quarters ending during the periods specified below to be less
than the ratio set forth opposite such period:

PERIOD RATIO

From the date of the Closing through June 30, 1999 2.25 to 1

From July 1, 1999 and thereafter 2.50 to 1

Section 7.11. Incurrence of Debt. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become directly or indirectly liable with respect to,
any Debt, unless on the date the Company or such Subsidiary becomes liable with
respect to any such Debt and immediately after giving effect thereto and the
concurrent retirement of any other Debt,

(a) no Default or Event of Default exists, and

(b) Consolidated Total Debt does not exceed 65% of
Consolidated Total Capitalization.

For the purposes of this Section 7.11, any Person becoming a Subsidiary after
the date hereof shall be deemed, at the time it becomes a Subsidiary, to have
incurred all of its then outstanding Debt, and any Person extending, renewing or
refunding any Debt shall be deemed to have incurred such Debt at the time of
such extension, renewal or refunding.

Section 7.12. Priority Debt. The Company will not at any time permit
Priority Debt to exceed the greater (a) $7,500,000, or (b) 15% of Consolidated
Net Worth.

Section 7.13. Restricted Payments and Restricted Investments.

(a) Limitation. The Company will not, and will not permit any of its
Subsidiaries to, declare, make or incur any liability to make any Restricted
Payment or make or authorize any Restricted Investment unless immediately after
giving effect to such action:

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<PAGE>

(i) the sum of (x) the aggregate value of all Restricted
Investments of the Company and its Subsidiaries (valued immediately
after such action), plus (y) the aggregate amount of Restricted
Payments of the Company and its Subsidiaries declared or made during
the period commencing on June 30, 1998 and ending on the date such
Restricted Payment or Restricted Investment is declared or made,
inclusive, would not exceed the sum of

(A) $5,000,000, plus

(B) 75% of Consolidated Net Income for such period
(or minus 100% of Consolidated Net Income for such period if
Consolidated Net Income for such period is a loss), plus

(ii) no Default or Event of Default would exist.

(b) Time of Payment. The Company will not, nor will it permit
any of its Subsidiaries to, authorize a Restricted Payment that is not payable
within 60 days of authorization.

Section 7.14. Liens. The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly create, incur, assume or permit to
exist (upon the happening of a contingency or otherwise) any Lien on or with
respect to any property or asset (including, without limitation, any document or
instrument in respect of goods or accounts receivable) of the Company or any
such Subsidiary, whether now owned or held or hereafter acquired, or any income
or profits therefrom or assign or otherwise convey any right to receive income
or profits (unless it makes, or causes to be made, effective provision whereby
the Note will be equally and ratably secured with any and all other obligations
thereby secured, such security to be pursuant to an agreement reasonably
satisfactory to the Lender and, in any such case, the Note shall have the
benefit, to the fullest extent that, and with such priority as, the holders of
the Note may be entitled under applicable law, of an equitable Lien on such
property), except:

(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen incurred in the ordinary course of business, provided
payment thereof is not at the time required by Section 7.7;

(b) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Subsidiary shall at
any time in good faith be prosecuting an appeal or proceeding for a
review and in respect of which a stay of execution pending such appeal
or proceeding for review shall have been secured, provided that the
Company or such

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Subsidiary maintains any and all reserves which may be required under
GAAP in connection with any claims secured by such Liens described in
this Section 7.14 (b);

(c) Minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Company and its Subsidiaries or which customarily
exist on properties of corporations engaged in similar activities and
similarly situated and which do not materially impair their use in the
operation of the business of the Company and its Subsidiaries;

(d) Liens existing as of the date hereof and reflected in
Schedule 7.14 hereto;

(e) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in connection with
worker's compensation, unemployment insurance and other like laws,
warehousemen's and attorneys' liens and statutory landlords' liens) and
Liens to secure the performance of bids, tenders or trade contracts, or
to secure statutory obligations, surety or appeal bonds or other Liens
of like general nature incurred in the ordinary course of business and
not in connection with the borrowing of money; provided in each case,
the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings and for
which appropriate reserves have been establish;

(f) Liens incurred after the date hereof given to secure the
payment of the purchase price of fixed assets acquired or purchased in
the ordinary course of business by the Company or any Subsidiary to be
used in carrying on the business of the Company or a Subsidiary,
provided that (i) the Lien shall attach solely to the fixed assets
purchased or acquired, (ii) at the time of the purchase or acquisition
of such fixed assets, the aggregate amount remaining unpaid on all Debt
secured by Liens on such fixed assets shall not exceed an amount equal
to 100% of the lesser of the total purchase price or Fair Market Value
at the time of purchase or acquisition of such fixed assets (as
determined in good faith by the Board of Directors of the Company), and
(iii) the aggregate principal amount of Debt secured by such Lien is
permitted by Sections 7.10 and 7.11; and

(g) any Lien extending, renewing or replacing any Lien
permitted by the immediately preceding subparagraphs (a) through (f),
inclusive, of this Section 7.14, provided that (i) the aggregate
principal amount of Debt secured by such Lien immediately prior to such
extension, renewal or replacement is not increased or the maturity
thereof reduced, (ii) such Lien is not extended to any other property,
except for the substitution of property of a similar nature and equal
or lesser value than the property securing the Lien immediately prior
to such extension, renewal or replacement, and (iii) the aggregate
principal amount of Debt being extended, renewed or replaced is
permitted by Sections 7.10 and 7.11;

For the purposes of this Section 7.14, any Person becoming a Subsidiary after
the date of this Agreement shall be deemed to have incurred all of its then
outstanding Liens at the time it

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becomes a Subsidiary, and any Person extending, renewing or refunding any Debt
secured by any Lien shall be deemed to have incurred such Lien at the time of
such extension, renewal or refunding.

Section 7.15. Merger, Consolidation, etc. The Company will not, and will
not permit any of its Subsidiaries to, consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person (except that a
Subsidiary of the Company may (x) consolidate with or merge with, or convey,
transfer or lease substantially all of its assets in a single transaction or
series of transactions to, the Company or a Wholly-Owned Subsidiary or Affiliate
of the Company and (y) convey, transfer or lease all of its assets in compliance
with the provisions of Section 7.16, provided that the foregoing restriction
does not apply to the consolidation or merger of the Company with, or the
conveyance, transfer or lease of substantially all of the assets of the Company
in a single transaction or series of transactions to, any Person so long as:

(a) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the Company as an
entirety, as the case may be (the "Successor Corporation"), shall be a
solvent corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia;

(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to the holder of the Note
its assumption of the due and punctual performance and observance of
each covenant and condition of this Agreement and the Note (pursuant to
such agreements and instruments as shall be reasonably satisfactory to
the Lender), and the Company shall have caused to be delivered to the
holder of the Note an opinion of nationally recognized independent
counsel, or other independent counsel reasonably satisfactory to the
Lender, to the effect that all agreements or instruments effecting such
assumption are enforceable in accordance with their terms and comply
with the terms hereof; and

(i) no Default or Event of Default would exist, and

(ii) the Successor Corporation would be permitted by
the provisions of Section 7.11 hereof to incur at least $1.00
of additional Debt owing to a Person other than a Subsidiary
of the Successor Corporation.

No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any Successor
Corporation from its liability under this Agreement or the Note.

Section 7.16. Sale of Assets, etc. Except as permitted under Section
7.15, the Company will not, and will not permit any of its Subsidiaries to, make
any Asset Disposition unless:

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(a) in the good faith opinion of the Company, the Asset
Disposition is in exchange for consideration having a Fair Market Value
at least equal to that of the property exchanged and is in the best
interest of the Company or such Subsidiary; and

(b) immediately after giving effect to the Asset Disposition,
no Default or Event of Default would exist; and

(i) the Disposition Value of all property that was
the subject of any Asset Disposition occurring in the period
of 12 calendar months then next ended would not exceed 10% of
Consolidated Total Assets as at the end of the most recently
ended fiscal quarter of the Company: and

(ii) the Disposition Value of all property that was
the subject of any Asset Disposition occurring on or after the
date of Closing would not exceed 25% of Consolidated Total
Assets as at the end of the most recently ended fiscal quarter
of the Company.

If the Net Proceeds Amount for any Transfer is
applied to a Property Reinvestment Application within 12
months before or after such Transfer, then such Transfer, only
for the purpose of determining compliance with subsection (c)
of this Section 7.16 as of any date on or after the date of
such Transfer, shall be deemed not to be an Asset Disposition.

Section 7.17. Line of Business. The Company will not, and will not
permit any of its Subsidiaries to, engage in any business if, as a result, the
general nature of the business in which the Company and its Subsidiaries, taken
as a whole, would then be engaged would be materially changed from the general
nature of the business in which the Company and its Subsidiaries, taken as a
whole, are engaged on the date of this Agreement as described in the Memorandum.

Section 7.18. Transactions with Affiliates. The Company will not and
will not permit any Subsidiary to enter into directly or indirectly any
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the Company or
another Subsidiary), except in the ordinary course and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would be obtainable in a comparable arm's-length transaction with a Person
not an Affiliate.

Section 7.19. Amendment to Certificate of Incorporation The Company
will not and will not permit any Subsidiary to amend its certificate of
incorporation, articles of incorporation or bylaws if any such amendment alone
or in conjunction with any other amendment or amendments would have a material
adverse affect on the ability of the Company to discharge its obligations to
Lender or on the ability of Lender to collect, realize upon, or enforce payment
of any obligation to the Company to Lender.

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Section 7.20. Use of Proceeds. The proceeds of the Loans will be used
to finance acquisitions and otherwise for the general corporate needs of the
Company in the ordinary course of business.

Section 7.21. Pari Passu Rank with Other Senior Debt

(a) The Obligations hereunder shall at all times rank pari passu with
the Senior Notes and any other existing or future senior debt of the Company.

(b) If the Company issues any additional senior debt it shall provide a
copy of the applicable indenture or agreement and note to the Lender. If the
Company enters into a supplemental indenture or similar agreement with respect
to the Senior Notes, then the Company shall provide a copy of such agreement to
the Lender.

SECTION 8. EVENTS OF DEFAULT AND REMEDIES

Section 8.1. Events of Default. An "Event of Default" shall exist if
any one or more of the following shall occur or be continuing:

(a) the Company defaults in the payment of any principal on
the Note when the same becomes due and payable, whether at maturity or
at a date fixed for prepayment or by declaration or otherwise; or

(b) the Company defaults in the payment of any interest on
the Note or any fee or other Obligation payable by the Company
hereunder, under any other Loan Document or under any Swap Transaction
for more than five Business Days after the same becomes due and
payable; or

(c) the Company defaults in the performance of or compliance
with any term contained in Section 7.9 through 7.18, inclusive; or

(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 8) or any other Loan
Document or Swap Transaction and such default is not remedied within 30
days after the earlier of (i) a Responsible Officer obtaining actual
knowledge of such default and (ii) the Company receiving written notice
of such default from the Lender (any such written notice to be
identified as a "notice of default" and to refer specifically to this
paragraph (d) of Section 8); or

(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or

(f) (i) the Company or any Subsidiary is in default (as
principal or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Debt that is
outstanding in an aggregate principal amount of at least $3,000,000

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<PAGE>

beyond any period of grace provided with respect thereto, or (ii) the
Company or any Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Debt in an aggregate
outstanding principal amount of at least $3,000,000 or of any mortgage,
indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Debt has
become, or has been declared, due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii)
as a consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder of
Debt to convert such Debt into equity interest) the Company or any
Subsidiary has become obligated to purchase or repay Debt before its
regular maturity or before its regularly scheduled dates of payment in
an aggregate outstanding principal amount of at least $3,000,000; or

(g) the Company or any Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or

(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Company
or any of its Subsidiaries, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief
or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any of its
Subsidiaries, or any such petition shall be filed against the Company
or any of its Subsidiaries and such petition shall not be dismissed
within 60 days; or

(i) a final judgment or judgments for the payment of money
aggregating in excess of $3,000,000 (to the extent such judgement or
judgments are not covered by an insurance policy underwritten by a
solvent insurer who has accepted in writing responsibility for such
judgment or judgments) are rendered against one or more of the Company
and its Subsidiaries and which judgments are not, within 30 days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 30 days after the expiration of such stay; or

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<PAGE>

of ERISA to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a
Plan may become a subject of any such proceedings, (iii) with respect
to Plans that are pension plans within the meaning of Section 3(2) of
ERISA whose accumulated benefit obligation (determined in accordance
with Statement of Financial Accounting Standards No. 87) exceeds the
fair market value of Plan assets, the aggregate shortfall shall exceed
$3,000,000, (iv) the Company or any ERISA Affiliate shall have incurred
or is reasonably expected to incur any liability pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, (v) the Company or any ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or
any Subsidiary establishes or amends any employee welfare benefit plan
that provides post-employment welfare benefits in a manner that would
increase the liability of the Company or any Subsidiary thereunder; and
any such event or events described in clauses (i) through (vi) above,
either individually or together with any other such event or events,
could reasonably be expected to have a Material Adverse Effect.

As used in Section 8(j), the terms "employee benefit plan" and "employee welfare
benefit plan" shall have the respective meanings assigned to such terms in
Section 3 of ERISA.

Section 8.2. Non-Bankruptcy Default Remedies. When an Event of Default
described in Section 8.1 has occurred and is continuing (other than Event of
Default described in clauses (g) and (h)), the Lender may, in each case, by
notice to the Company, take either or both of the following actions:

(a) terminate the obligation of the Lender to extend any
further credit hereunder on the date (which may be the date thereof)
stated in such notice; and

(b) declare the principal of and the accrued interest on the
Note then outstanding to be forthwith due and payable and thereupon the
Note, including both principal and interest and all fees, charges and
other amounts payable hereunder and under the other Loan Documents,
shall be and become immediately due and payable without further demand,
presentment, protest or notice of any kind.

Section 8.3. Bankruptcy Default Remedies. When any Event of Default
described in clauses (g) or (h) of Section 8.1 has occurred and is continuing,
then the Note then outstanding, including both principal and interest and all
fees and charges payable hereunder and under the other Loan Documents, shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, and the obligation of the Lender to extend further credit
pursuant to any of the terms hereof shall immediately terminate.

SECTION 9. MISCELLANEOUS.

Section 9.1. Holidays. If any payment of principal or interest on the
Note or any fee hereunder shall fall due on day which is not a Business Day,
principal together with interest at the rate the Note bears for the period prior
to maturity or any fee at the rate such fees accrues shall continue to accrue
from the stated due date thereof to and including the next succeeding Business
Day, on which the same is payable.

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<PAGE>

Section 9.2. No Waiver, Cumulative Remedies. No delay or failure on the
part of the Lender in the exercise of any owner or right shall operate as a
waiver thereof, nor as an acquiescence in any default, nor shall any single or
partial exercise of any owner or right preclude any other or further exercise
thereof, or the exercise of any other power or right, and the rights and
remedies hereunder of the Lender are cumulative to, and not exclusive of, any
rights or remedies which any of them would otherwise have.

Section 9.3. Waivers, Modifications and Amendments. Any provision
hereof or of the Loan Documents may be amended, modified, waived or released and
any Default or Event of Default and its consequences may be rescinded and
annulled upon the written consent of the Lender. No amendment, modification or
waiver of the Loan Documents shall be effective without the prior written
consent of the Lender.

Section 9.4. Costs and Expenses. The Company agrees to pay on demand
the reasonable costs and expenses of the Lender in connection with the
negotiation, preparation, execution and delivery of this Agreement, the other
Loan Documents and the other instruments to be delivered hereunder or thereunder
or in connection with the transactions contemplated hereby or thereby or in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including the reasonable fees and expenses of counsel for the Lender,
with respect to all of the foregoing (whether or not the transactions
contemplated hereby are consummated), and all costs and expenses (including
reasonable attorneys' fees), if any, incurred by the Lender in connection with a
default under or the enforcement of this Agreement, any other Loan Documents or
any other instrument or document to be delivered hereunder or thereunder.
Provided, however, the foregoing shall not include salaries, travel expenses and
other-overhead of Lenders' employees. The Company agrees to indemnify and save
the Lender harmless from any and all direct liabilities, losses, costs and
expenses (collectively, "indemnified liabilities") incurred by the Lender in
connection with any action, suit or proceeding brought against the Lender by any
Person other than the Company (but excluding attorneys' fees for litigation
solely between the Lender and any successor or nominee of the Lender or any
other lender which may participate in any Loans or the Reducing Revolving Credit
Commitment to which the Company is not a party) which arises out of the
transactions contemplated or financed hereby or out of any action or inaction by
the Lender hereunder or thereunder, except for such thereof as is caused by the
negligence or willful misconduct of the party seeking to be indemnified. The
provisions of this Section hereof shall survive payment of the Obligations.

Section 9.5. Documentary Taxes. The Company agrees to pay on demand any
documentary, stamp or similar taxes payable in respect of this Agreement, or the
Loan Documents, including interest and penalties, in the event any such taxes
are assessed, irrespective of when such assessment is made and whether or not
any credit is then in use or available hereunder.

Section 9.6. Survival of Representations. All representations and
warranties made herein or in any other Loan Documents or in certificates given
pursuant hereto or thereto shall survive the execution and delivery of this
Agreement and the other Loan Documents and shall continue in full force and
effect with respect to the date as of which they were made as long as any Loans
or the Reducing Revolving Credit Commitment are in use or available hereunder.

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<PAGE>

Section 9.7. Survival of Indemnities. All indemnities shall survive the
termination of this Agreement and the payment of the Obligations.

Section 9.8. Notices. Except as otherwise specified herein, all notices
hereunder shall be in writing (including cable or telecopy) and shall be given
to the relevant party at its address or telecopier number set forth below, or
such other address or telecopier number as such party may hereafter specify by
notice to the other given by United States certified or registered mail, by
telecopy or by other telecommunication device capable of creating a written
record of such notice and its receipt. Notices hereunder shall be addressed:

To the Company at:

Mid American Realty Services Company
666 Grand Avenue
Des Moines, Iowa 50303
Attention: Paul J. Leighton, Secretary and Assistant Treasurer
Telephone: (515) 281-4099
Facsimile: (515) 242-4080

To the Lender at:

La Salle National Bank
135 S. La Salle
Chicago, Illinois 60603
Attention: Kurt Gibson, Vice President
Telephone: (312) 904-2633
Facsimile: (312) 904-1338

With a copy to:

La Salle National Bank
801 Grand, Suite 3150
Des Moines, Iowa 50309
Attention: Kurt Gibson, Vice President
Telephone: (515) 698-8001
Facsimile: (515) 698-8017

Each such notice, request or other communication shall be effective (i) if given
by facsimile, when such facsimile is transmitted to the facsimile number
specified in this Section and a confirmation of such facsimile has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section.

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Section 9.9. Headings. Section headings used in this Agreement are for
convenience of reference only and are not a part of this Agreement for any other
purpose.

Section 9.10. Severability of Provisions. Any provision of this
Agreement, which is unenforceable in any jurisdiction, shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. All rights, remedies
and powers provided in this Agreement, the Note and other Loan Documents may be
exercised only to the extent that the exercise thereof does not violate any
applicable mandatory provisions of law, and all the provisions of this
Agreement, the Note and other Loan Documents are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this Agreement, the
Note or other Loan Documents invalid or unenforceable.

Section 9.11. Counterparts. This Agreement may be executed in any
number of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.

Section 9.12. Binding Nature, Governing Law, Etc. This Agreement shall
be binding upon the Company and to successors and assigns, and shall inure to
the benefit of the Lender and the benefit of its successors and assigns,
including any subsequent holder of an interest in the Note. This Agreement and
the rights and duties of the parties hereto shall be governed by, and construed
in accordance with the internal laws of the State of Iowa without regard to
principles of conflicts of laws. The Company may not assign its rights hereunder
without the written consent of the Lender.

Section 9.13. Entire Understanding. This Agreement, together with the
Note and other Loan Documents, constitutes the entire understanding of the
parties with respect to the subject matter hereof and any prior agreements,
whether written or oral, with respect thereto are superseded hereby.

Section 9.14. Participation. The Lender may grant participation in its
extensions of credit hereunder to any other bank or other lending institution.

Section 9.15. Confidentiality. The Lender shall hold in confidence any
material information delivered or made available to them by the Company that is
proprietary or confidential in nature. The foregoing to the contrary
notwithstanding, nothing herein shall prevent the Lender from disclosing any
information delivered or made available to it by the Company (i) to any other
Person if reasonably incidental to the administration of the credit contemplated
hereby, (ii) upon the order of any court or administrative agency, (iii) upon
the request or demand of any regulatory agency or authority, (iv) which has been
publicly disclosed other than as result of a disclosure by the Lender which is
not permitted by this Agreement, (v) in connection with any litigation to which
the Lender, or any of their respective Affiliates may be a party, along with the
Company, or any of their respective Affiliates, (vi) to the extent reasonably
required in connection with the exercise of any right or remedy under this
Agreement, the other Loan Documents or otherwise, ,(vii) to such Lender's legal
counsel and financial consultants and independent auditors, and (viii) to any
actual or proposed participant or assignee of all or part of

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its rights under the credit contemplated hereby provided such participant or
assignee agrees in writing to be bound by the duty of confidentiality under this
Section to the same extent as if it were a Lender hereunder. If the Lender
receives a request or is aware of any requirement to turn over confidential or
proprietary information pursuant to any order applicable to Lender or in
response to any subpoena or other legal process or in connection with any
litigation to which the Lender is a party, the Lender, to the extent permitted
by law, will use reasonable efforts to notify the Company of any request or
requirement prior to disclosing such confidential or proprietary information.

Section 9.16. Change in Control. (a) Notice of Change in Control or
Control Event. The Company will, within 1 Business Day after any Responsible
Officer has knowledge of the occurrence of any Change in Control or Control
Event, give written notice of such Change in Control or Control Event to the
Lender unless notice in respect of such Change in Control (or the Change in
Control contemplated by such Control Event) shall have been given pursuant to
subparagraph (b) of this Section 9.16. If a Change in Control has occurred, such
notice shall contain and constitute an offer to prepay the Note as described in
subparagraph (c) of this Section 9.16 and shall be accompanied by the
certificate described in subparagraph (g) of this Section 9.16. Any notice
provided under this Section 9.16 shall at all times remain subject to the
provisions of Section 9.15 hereof.

(b) Condition to Company Action. The Company will not take any action
that consummates or finalizes a Change in Control unless (i) at least 30 days
prior to such action it shall have given to the Lender written notice containing
and constituting an offer to prepay the Note as described in subparagraph (c) of
this Section 9.16, accompanied by the certificate described in subparagraph (g)
of the Section 9.16, and (ii) contemporaneously with such action, it prepays the
Note.

(c) Offer to Prepay the Note. The offer to prepay the Note contemplated
by subparagraphs (a) and (b) of this Section 9.16 shall be an offer to prepay on
a date specified in such offer (the "Proposed Prepayment Date"). If such
Proposed Prepayment Date is in connection with an offer contemplated by
subparagraph (a) of this Section 9.16, such date shall be not less than 10
Business Days and not more than 20 Business Days after the date of such offer
(if the Proposed Prepayment Date shall not be specified in such offer, the
Proposed Prepayment Date shall be the 15th Business day after the date of such
offer).

(d) Acceptance. The Lender may accept the offer to prepay made pursuant
to this Section 9.16 by causing a notice of such acceptance to be delivered to
the Company at least 3 Business Days prior to the Proposed Prepayment Date. A
failure by the Lender to respond to an offer to prepay made pursuant to this
Section 9.16 shall be deemed to constitute an acceptance of such offer by the
Lender.

(e) Prepayment. Prepayment of the Note to be prepaid pursuant to this
Section 9.16 shall be at 100% of the principal amount of the Loans outstanding
under such Note, plus the accrued interest on such Loans then outstanding, plus
all fees, charges and other amounts payable hereunder and under the other Loan
Documents, plus amounts payable under Section 2.9, if any. On the Business Day
preceding the date of prepayment, the Company shall deliver to the Lender a
statement showing the principal, interest, fees and charges due in connection
with such

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prepayment and setting forth the details of the computation of such amount. The
prepayment shall be made on the Proposed Prepayment Date except as provided in
subparagraph (f) of this Section 9.16.

(f) Deferral Pending Change in Control. The obligation of the Company
to prepay Note pursuant to the offers required by subparagraph (b) and accepted
in accordance with subparagraph (d) of this Section 9.16 is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control does
not occur on the Proposed Prepayment Date in respect thereof, the prepayment
shall be deferred until and shall be made on the date on which such Change in
Control occurs. The Company shall keep the Lender reasonably and timely informed
of (i) any such deferral of the date of prepayment, (ii) the date on which such
Change in Control and the prepayment are expected to occur, and (iii) any
determination by the Company that efforts to effect such Change in Control have
ceased or been abandoned (in which case the offers and acceptances made pursuant
to this Section 9.16 in respect of such Change in Control shall be deemed
rescinded).

(g) Officer's Certificate. Each offer to prepay the Note pursuant to
this Section 9.16 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this
Section 9.16; (iii) the principal amount of the Note offered to be prepaid; (iv)
the fees and charges due in connection with such prepayment (calculated as if
the date of such notice were the date of the prepayment), setting forth the
details of such computation; (v) the interest that would be due on the Note
offered to be prepaid, accrued to the Proposed Prepayment Date; (vi) that the
conditions of this Section 9.16 have been fulfilled; and (vii) in reasonable
detail, the nature and date or proposed date of the Change in Control.

(h) Termination of Credit. Upon a Change in Control, the Lender may, by
notice to the Company, terminate the obligation of the Lender to extend any
further credit hereunder on the date (which may be the date thereof) stated in
such notice. If the Lender shall terminate the credit hereunder and shall elect
to accept the offer to prepay under (d) above, then this Agreement, the Reducing
Revolving Credit and the other Loan Documents shall terminate effective upon
such prepayment without further payment or liability on the part of the Company.

SECTION 9.17. WAIVER OF JURY TRIAL. THE LENDER AND THE COMPANY, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, THE RIGHT TO TRIAL
BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER OBLIGATIONS, OR
ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH
THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE
LENDER AND THE COMPANY ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO THE COMPANY.

50
<PAGE>

IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE
READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO
OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY
BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY
ANOTHER WRITTEN AGREEMENT.

Upon your acceptance hereof in the manner hereinafter set forth. This
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.

Dated in Des Moines, Iowa as of the 12th day of November, 1998.

MidAmerican Realty Services Company

By: /s/ Ronald J. Giaier
-----------------------------
Its: Treasurer
----------------------------

Accepted and agreed to at Des Moines, Iowa as of the day and year last
above written.

LA SALLE NATIONAL BANK

135 N. LaSalle
Chicago, Illinois 60603

By: /s/ Kurt A. Gibson
-----------------------------
Its: Vice President
----------------------------

<PAGE>

Schedule 5.4(a)(i)
Organization and Ownership of Shares of Subsidiaries

<TABLE>
<CAPTION>
Subsidiary Name State of Organization Percent Owned Owner
<S> <C> <C> <C>
CBS HOME Real Estate Company Nebraska 100% Company

CBS Brokerage Systems, Inc. Nebraska 96.45% CBS HOME Real Estate Company

Select Relocation Services, Inc. Nebraska 100% CBS HOME Real Estate Company

Real Estate Referral Network, Inc. Nebraska 100% CBS HOME Real Estate Company

Leasing Associates, Inc. Nebraska 100% CBS HOME Real Estate Company

MRT, Inc. Nebraska 100% CBS HOME Real Estate Company

J.C. Nichols Residential, Inc. Iowa 100% Company

Plaza Financial Services, L.L.C. Kansas 100% J.C. Nichols Residential, Inc.

Plaza Mortgage Services, L.L.C. Kansas 100% Plaza Financial Service

J.C. Nichols Alliance, Inc. Kansas 100% J.C. Nichols Residential, Inc.

Iowa Realty, Co., Inc. Iowa 100% Company

Iowa Title Company Iowa 100% Iowa Realty Co., Inc.

Iowa Realty Insurance Agency, Inc. Iowa 100% Iowa Realty Co., Inc.

<PAGE>

IMO Co., Inc. Missouri 100% Iowa Realty Co., Inc.

Midland Escrow Services, Inc. Iowa 100% Iowa Realty Co., Inc.

The Referral Co. Iowa 100% Iowa Realty Co., Inc.

First Realty, Ltd. Iowa 100% Iowa Realty Co., Inc.

Edina Financial Services, Inc. Minnesota 100% Iowa Realty Co., Inc.

Edina Realty, Inc. Minnesota 100% Edina Financial Services, Inc.

Edina Realty Title, Inc. Minnesota 100% Edina Financial Services, Inc.

Edina Realty Insurance Agency, Inc. Minnesota 100% Edina Financial Services, Inc.

Edina Realty Mortgage, Inc. Minnesota 100% Edina Financial Services, Inc.

Edina Realty Inc. Wisconsin 100% Edina Realty, Inc., a Minnesota Corporation
</TABLE>

<PAGE>

Schedule 5.4(a)(ii)
Affiliates (Other than Subsidiaries)

A/C Security, Inc.
AmGas, Inc.
Bettendorf Lock & Security Services, Inc.
CBEC Railway Inc.
CHRS Inc.
Cimmred Leasing Company
Dakota Dunes Development Company
DCCO, Inc.
Diversified Electronics, Ltd.
Edina Realty Mortgage, L.L.C.
Home Real Estate, Inc. (Nebraska)
InterCoast Capital Company
InterCoast Energy Company
InterCoast Global Management, Inc.
InterCoast Power Company
InterCoast Power Marketing Company
InterCoast Sierra Power Company
InterCoast Trade & Resources Inc.
IWG Co. 8
MHC Investment Company
MidAmerican Capital Company
MidAmerican Energy Company
MidAmerican Energy Funding Company
MidAmerican Energy Holdings Company
MidAmerican Rail Inc.
MidAmerican Security Company
MidAmerican Services Company
Midwest Capital Group Inc.
MRT, Inc.
MWR Capital Inc.
Pro-Tec Alarm Systems & Service, Inc.
Sutton Security, Inc.
The Mortgage Group, L.L.C.
Title Information Services, L.L.C.
TTP, Inc. of South Dakota

<PAGE>

Schedule 5.4(a)(iii)
Officers and Directors

Officers
Stanley J. Bright President and Chief Executive Officer
R. Michael Knapp Senior Vice President - Operations
Ronald J. Peltier Senior Vice President - Operations
Alan L. Wells Vice President and Chief Financial Officer
John A. Rasmussen, Jr. Vice President and General Counsel
Ronald J. Giaier Treasurer and Assistant Secretary
Larry M. Smith Controller
Paul J. Leighton Secretary and Assistant Treasurer

Directors
Stanley J. Bright
R. Michael Knapp
Ronald J. Peltier
John A. Rasmussen, Jr.
Alan L. Wells

<PAGE>

Schedule 5.5
Financial Statements

Audited Consolidated Financial Statements and Consolidating Schedules of AmerUs
Home Services, Inc. and Subsidiaries, December 31, 1997.

J.C. Nichols Real Estate and Subsidiary. Consolidated Financial Statements, June
30, 1998 and December 31, 1997.

CBS Real Estate Co. Financial Statements and Accountants Report for the Years
Ended December 31, 1997, and 1996.

Home Real Estate Company of Omaha Financial Statements with Accountants Review
Report for the Years Ended December 31, 1997 and 1996.

<PAGE>

Schedule 5.11
Licenses, Permits, Etc.

None

<PAGE>

SCHEDULE 5.13
PRIORITY DEBT AND TOTAL CONSOLIDATED DEBT
(All figures as of 8/31/98)

CONSOLIDATED DEBT

THE COMPANY

Revolving Line of Credit owing to $46,862,000
MidAmerican Energy Holding Company
from the Company
Purchase Price contingency re: CBS Real $1,000,000
Estate Company and J.C. Nichols Real Estate
owed by the Company

PRIORITY DEBT

IOWA REALTY CO., INC. AND SUBSIDIARIES
Byers Non-Compete Agreement $766,392
Stacy Non-Compete Agreement $165,756

CBS HOME REAL ESTATE COMPANY
Revolving Line of Credit, Nebraska State Bank of $577,850
Omaha. Debtor: The Mortgage Group, L.L.C. (50%
Owned by CBS Home Real Estate Company)
Guaranteed by CBS HOME Real Estate Company

J.C. NICHOLS RESIDENTIAL, INC.
Mercantile Bank, $2,000,000 line of credit $0
Eugene D. Brown Company $200,000
Highwoods, Inc. $440,347
Capitalized Leases described on Schedule 7.14 $ 56,204

PLAZA MORTGAGE SERVICES
Mercantile Bank, $7,000,000 Line of Credit $1,212,769

TOTAL CONSOLIDATED DEBT $51,281,318

TOTAL SUBSIDIARY (PRIORITY) DEBT $ 3,419,318

<PAGE>

Schedule 7.13
INVESTMENTS

J.C. Nichols Residential, Inc.
Reliance Relocation Services, Inc. 3,000 shares common stock

Edina Realty, Inc.
The Realty Alliance, Inc. 10,000 shares common stock
Reliance Relocation Services, Inc. 3,000 shares Common Stock

Edina Realty Title, Inc.
Title Information Services, L.L.C. 20% member

Iowa Title Company
Silver Screen Partners IV LP 10 Units
Senior Income Fund, LP 5,000 Units

IMO Co., Inc.
3600 S. National, Springfield, MO.

CBS HOME Real Estate Company
Home Real Estate, Inc. (Nebraska) 25 shares
Realty Alliance, Inc. 10,000 shares
Reliance Relocation Services, Inc. 3000 shares
NewCo. Investments, Inc. 600 shares
The Mortgage Group, L.L.C. 50% member

Edina Financial Services, Inc.
Edina Realty Mortgage, L.L.C. 50% member
Unit 105, 40005 85th Ave. Onamia
Lot 2, block 1, Crossroads Center,
2nd Addition, Scott County
3706 Logan Ave. N.
214 3rd Ave. NE
1045 Pike Lake Dr.
1271 Marion St.

Iowa Realty Co., Inc.
727 18th St.
2108 E. 25th St.
9611 Alpine St.

<PAGE>

Schedule 7.14
Liens

Debtor: Plaza Mortgage Services L.L.C.
Secured Party: Mercantile Bank ($7,000,000 line of credit)
Collateral: Residential first mortgages
Amount of Debt Secured: $1,212,769 (8/31/98)

Debtor: J.C. Nichols Residential, Inc.
Secured Party: Mercantile Bank ($2,000,000 line of credit)
Collateral: Pending sales
Amount of Debt Secured: $0 (8/31/98)

Debtor: J.C. Nichols Residential, Inc.
Creditor: Clune Equipment
Collateral: Various office equipment (capitalized lease)

Debtor: J.C. Nichols Residential, Inc. and Plaza Mortgage Services L.L.C.
Creditor: Mid-Continent Leasing Service (lease sold to Peoples National Bank)
Collateral: Ricoh Copier (capitalized lease)

Debtor: J.C. Nichols Residential, Inc. and Plaza Mortgage Services, L.L.C.
Creditor: Allied Capital/College Leasing
Collateral: Konica Copier/Canon Fax (capitalized lease)

Debtor: J.C. Nichols Residential, Inc.
Creditor: Mid-Continent Leasing Service (lease sold to Mercantile Bank)
Collateral: Copiers (capitalized lease)

Debtor: Plaza Mortgage Services L.L.C.
Creditor: Aaron Rents
Collateral: Bookcase, file (capitalized lease)

Debtor: Plaza Mortgage Services L.L.C.
Creditor: Aaron Rents
Collateral: Executive desk, chairs, file (capitalized lease)

<PAGE>

===============================================================================

MIDAMERICAN REALTY SERVICES COMPANY

$35,000,000

7.12% Senior Notes due November 1, 2010

----------------

NOTE PURCHASE AGREEMENT

----------------

DATED AS OF NOVEMBER 1, 1998

===============================================================================

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C> <C>
SECTION 1. AUTHORIZATION OF NOTES................................................1

SECTION 2. SALE AND PURCHASE OF NOTES............................................1

SECTION 3. CLOSING...............................................................1

SECTION 4. CONDITIONS TO CLOSING.................................................2

Section 4.1. Representations and Warranties........................................2
Section 4.2. Performance; No Default...............................................2
Section 4.2. Performance; No Default...............................................2
Section 4.3. Compliance Certificates...............................................2
Section 4.4. Opinions of Counsel...................................................2
Section 4.5. Purchase Permitted by Applicable Law, Etc.............................3
Section 4.6. Related Transactions..................................................3
Section 4.7. Payment of Special Counsel Fees.......................................3
Section 4.8. Private Placement Number..............................................3
Section 4.9. Changes in Corporate Structure........................................3
Section 4.10. Proceedings and Documents.............................................3

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................4

Section 5.1. Organization; Power and Authority.....................................4
Section 5.2. Authorization, Etc....................................................4
Section 5.3. Disclosure............................................................4
Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates......5
Section 5.5. Financial Statements..................................................5
Section 5.5. Financial Statements..................................................5
Section 5.6. Compliance with Laws, Other Instruments, Etc..........................6
Section 5.7. Governmental Authorizations, Etc......................................6
Section 5.8. Litigation; Observance of Agreements; Statutes and Orders.............6
Section 5.9. Taxes.................................................................6
Section 5.10. Title to Property Leases..............................................7
Section 5.11. Licenses, Permits, Etc................................................7
Section 5.12. Compliance with ERISA.................................................7
Section 5.13. Private Offering by the Company.......................................8
Section 5.14. Use of proceeds; Margin Regulations...................................8
Section 5.15. Existing Debt; Future Liens...........................................9
Section 5.16. Foreign Assets Control Regulations, Etc...............................9
Section 5.17. Status under Certain Statutes.........................................9
Section 5.18. Environmental Matters.................................................9

<PAGE>

SECTION 6. REPRESENTATIONS OF THE PURCHASER.....................................10

Section 6.1. Purchase for Investment..............................................10
Section 6.2. Source of Funds......................................................10

SECTION 7. INFORMATION AS TO COMPANY............................................12

Section 7.1. Financial and Business Information...................................12
Section 7.2. Officer's Certificate................................................14
Section 7.3. Inspection...........................................................15

SECTION 8. PREPAYMENT OF THE NOTES..............................................15

SECTION 8.1. REQUIRED PREPAYMENTS.................................................15

Section 8.2. Optional Prepayments with Make-Whole Amount..........................16
Section 8.3. Allocation of Partial Prepayments....................................16
Section 8.4. Maturity; Surrender, Etc.............................................16
Section 8.5. Purchase of Notes....................................................16
Section 8.6. Make-Whole Amount....................................................17

SECTION 9. AFFIRMATIVE COVENANTS................................................20

Section 9.1. Compliance with Law..................................................20
Section 9.2. Insurance............................................................21
Section 9.3. Maintenance of Properties............................................21
Section 9.4. Payment of Taxes.....................................................21
Section 9.5. Corporate Existence, Etc.............................................21

SECTION 10. NEGATIVE COVENANTS...................................................22

Section 10.1. Transactions with Affiliates.........................................26

SECTION 11. EVENTS OF DEFAULT....................................................26

SECTION 12. REMEDIES ON DEFAULT, ETC.............................................29

Section 12.1. Acceleration.........................................................29
Section 12.2. Other Remedies.......................................................29
Section 12.3. Rescission...........................................................29
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc....................30

SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................30

Section 13.1. Registration of Notes................................................30
Section 13.2. Transfer and Exchange of Notes.......................................30
Section 13.3. Replacement of Notes.................................................31

SECTION 14. PAYMENTS ON NOTES....................................................31

-ii-
<PAGE>

Section 14.1. Place of Payment.....................................................31
Section 14.2. Home Office Payment..................................................31

SECTION 15. EXPENSES, ETC........................................................32

Section 15.1. Transaction Expenses.................................................32
Section 15.2. Survival.............................................................32

SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.........32

SECTION 17. AMENDMENT AND WAIVER.................................................32

Section 17.1. Requirements.........................................................32
Section 17.2. Solicitation of Holders of Notes.....................................33
Section 17.3. Binding Effect, Etc..................................................33
Section 17.4. Notes Held by Company, Etc...........................................33

SECTION 18. NOTICES..............................................................34

SECTION 19. REPRODUCTION OF DOCUMENTS............................................34

SECTION 20. CONFIDENTIAL INFORMATION.............................................35

SECTION 21. SUBSTITUTION OF PURCHASER............................................36

SECTION 22. MISCELLANEOUS........................................................36

Section 22.1. Successors and Assigns...............................................36
Section 22.2. Payments Due on Non-Business Days....................................36
Section 22.3. Severability.........................................................36
Section 22.4. Construction.........................................................36
Section 22.5. Counterparts.........................................................36
Section 22.6. Governing Law........................................................37

Signature............................................................................................38

</TABLE>

-iii-
<PAGE>

SCHEDULE A -- INFORMATION RELATING TO PURCHASERS

SCHEDULE B -- DEFINED TERMS

SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary
Stock

SCHEDULE 5.5 -- Financial Statements

SCHEDULE 5.11 -- Patents, etc.

SCHEDULE 5.15 -- Existing Consolidated Debt and Priority Debt

SCHEDULE 10.5 -- Existing Investments

SCHEDULE 10.6 -- Existing Liens

EXHIBIT 1 -- Form of 7.12% Senior Note due November 1, 2010

EXHIBIT 4.4(a) -- Form of Opinion of In-House Counsel of the Company

EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Company

EXHIBIT 4.4(c) -- Form of Opinion of Special Counsel for the Purchasers

-iv-
<PAGE>

MIDAMERICAN REALTY SERVICES COMPANY
666 Grand Avenue
Des Moines, Iowa 50303

7.12% SENIOR NOTES DUE NOVEMBER 1, 2010

Dated as of
November 1, 1998

TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:

Ladies and Gentlemen:

MIDAMERICAN REALTY SERVICES COMPANY, an Iowa corporation (the
"Company"), agrees with the Purchasers listed in the attached Schedule A as
follows:

SECTION 1. AUTHORIZATION OF NOTES

The Company will authorize the issue and sale of $35,000,000 aggregate
principal amount of its 7.12% Senior Notes due November 1, 2010 (the "Notes",
such term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement (as hereinafter defined)). The Notes shall be
substantially in the form set out in Exhibit 1, with such changes therefrom, if
any, as may be approved by each Purchaser and the Company. Certain capitalized
terms used in this Agreement are defined in Schedule B; references to a
"Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an
Exhibit attached to this Agreement.

SECTION 2. SALE AND PURCHASE OF NOTES

Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each Purchaser and each Purchaser will purchase from the
Company, at the Closing provided for in Section 3, Notes in the principal amount
specified opposite such Purchaser's name in Schedule A at the purchase price of
100% of the principal amount thereof. The obligations of each Purchaser
hereunder are several and not joint obligations and each Purchaser shall have no
obligation and no liability to any Person for the performance or nonperformance
by any other Purchaser hereunder.

SECTION 3. CLOSING.

The sale and purchase of the Notes to be purchased by each
Purchaser shall occur at the offices of Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, at 10:00 A.M. Chicago time, at a closing (the
"Closing") on November 4, 1998 or on such other Business Day thereafter on or
prior to November 6, 1998 as may be agreed upon by the Company and the
Purchasers. At the Closing, the Company will deliver to each Purchaser the Notes
to be

<PAGE>

purchased by such Purchaser in the form of a single Note (or such greater
number of Notes in denominations of at least $100,000 as such Purchaser may
request) dated the date of the Closing and registered in such Purchaser's name
(or in the name of such Purchaser's nominee), against delivery by such Purchaser
to the Company or its order of immediately available funds in the amount of the
purchase price therefor by wire transfer of immediately available funds for the
account of the Company to account number 064807 at Bankers Trust Company, ABA
#073000642. If, at the Closing, the Company shall fail to tender such Notes to
any Purchaser as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to any Purchaser's
reasonable satisfaction, such Purchaser shall, at such Purchaser's election, be
relieved of all further obligations under this Agreement, without thereby
waiving any rights such Purchaser may have by reason of such failure or such
nonfulfillment.

SECTION 4. CONDITIONS TO CLOSING

The obligation of each Purchaser to purchase and pay for the Notes to
be sold to such Purchaser at the Closing is subject to the fulfillment to such
Purchaser's reasonable satisfaction, prior to or at the Closing, of the
following conditions:

Section 4.1 The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing.

Section 4.2 The Company shall have performed and complied in all
material respects with all agreements and conditions contained in this Agreement
required to be performed or complied with by it prior to or at the Closing, and
after giving effect to the issue and sale of the Notes (and the application of
the proceeds thereof as contemplated by Section 5.14), no Default or Event of
Default shall have occurred and be continuing. Neither the Company nor any
Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by the covenants contained in Section
10 hereof had such covenants applied since such date.

Section 4.3. Compliance Certificates

(a) Officer's Certificate. The Company shall have delivered to
such Purchaser an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 4.1, 4.2 and 4.9
have been fulfilled.

(b) Secretary's Certificate. The Company shall have delivered
to such Purchaser a certificate certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and this Agreement.

Section 4.4 Such Purchaser shall have received opinions in form and
substance satisfactory to such Purchaser, dated the date of the Closing (a) John
A. Rasmussen, Jr., Esq., in-house counsel of the Company, (b) from Winthrop,
Stimson, Putnam & Roberts counsel for the Company, covering the matters set
forth in Exhibits 4.4(a) and 4.4(b), respectively, and covering such other
matters incident to the transactions contemplated hereby as

-2-
<PAGE>

such Purchaser or such Purchaser's counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to such Purchaser)
and (c) from Chapman and Cutler, the Purchasers' special counsel in connection
with such transactions, substantially in the form set forth in Exhibit 4.4(c)
and covering such other matters incident to such transactions as such Purchaser
may reasonably request.

Section 4.5 On the date of the Closing each purchase of Notes shall (a)
be permitted by the laws and regulations of each jurisdiction to which each
Purchaser is subject, without recourse to provisions (such as Section 1405(a)(8)
of the New York Insurance Law) permitting limited investments by insurance
companies without restriction as to the character of the particular investment,
(b) not violate any applicable law or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve System)
and (c) not subject any Purchaser to any tax, penalty or liability under or
pursuant to any applicable law or regulation, which law or regulation was not in
effect on the date hereof. If requested by any Purchaser, such Purchaser shall
have received an Officer's Certificate certifying as to such matters of fact as
such Purchaser may reasonably specify to enable such Purchaser to determine
whether such purchase is so permitted.

Section 4.6 The Company shall have consummated the sale of the entire
principal amount of the Notes scheduled to be sold on the date of Closing
pursuant to this Agreement.

Section 4.7 Without limiting the provisions of Section 15.1, the
Company shall have paid on or before the Closing the reasonable fees, charges
and disbursements of the Purchasers' special counsel referred to in Section 4.4
to the extent reflected in a statement of such counsel rendered to the Company
at least three Business Days prior to the Closing.

Section 4.8 A Private Placement Number issued by Standard & Poor's
CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
the Notes.

Section 4.9 The Company shall not have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial statements referred
to in Schedule 5.5. The Purchasers are aware of the contemplated merger between
MidAmerican Energy Holdings Company and CalEnergy Company, Inc. as described in
MidAmerican Energy Holdings Company's Current Report on Form 8-K, dated August
11, 1998, previously provided to the Purchasers.

Section 4.10 All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to such Purchaser and such
Purchaser's special counsel in their reasonable judgment, and such Purchaser and
such Purchaser's special counsel shall have received all such counterpart
originals or certified or other

-3-
<PAGE>

copies of such documents as such Purchaser or such Purchaser's special counsel
may reasonably request.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to each Purchaser that, as of the
date of this Agreement and the date of Closing:

Section 5.1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the corporate power
and authority to own or hold under lease the properties it purports to own or
hold under lease, to transact the business it transacts and proposes to
transact, to execute and deliver this Agreement and the Notes and to perform the
provisions hereof and thereof.

Section 5.2. This Agreement and the Notes have been duly authorized by
all necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

Section 5.3. The Company, through its agent, Warburg Dillon Read LLC,
has delivered to each Purchaser a copy of a Private Placement Memorandum, dated
August, 1998 (the "Memorandum"), relating to the transactions contemplated
hereby. The Memorandum fairly describes, in all material respects, the general
nature of the business and principal properties of the Company and of its
Subsidiaries. This Agreement, the Memorandum, the documents, certificates or
other writings delivered to each Purchaser by or on behalf of the Company in
connection with the transactions contemplated hereby and the financial
statements listed in Schedule 5.5, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. In addition, the Company has delivered to each Purchaser,
and each Purchaser acknowledges receipt of, MidAmerican Energy Holdings
Company's Current Report on Form 8-K, dated August 11, 1998, describing the
contemplated merger between MidAmerican Energy Holdings Company and CalEnergy
Company, Inc. (the "Merger") pursuant to which, among other things, CalEnergy
Company, Inc. will reincorporate in the State of Iowa and change its name to
MidAmerican Energy Holdings Company. Since June 30, 1998, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or any of its Subsidiaries except changes that individually or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be expected
to have a

-4-
<PAGE>

Material Adverse Effect that has not been set forth herein or in the Memorandum
or in the other documents, certificates and other writings delivered to each
Purchaser by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.

Section 5.4. (a) Schedule 5.4 contains (except as noted therein)
complete and correct lists (i) of the Company's Subsidiaries, showing, as to
each Subsidiary, the correct name thereof, the jurisdiction of its organization,
and the percentage of shares of each class of its capital stock or similar
equity interests outstanding owned by the Company and each other Subsidiary,
(ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the
Company's directors and senior officers.

Section 5.5. Financial Statments The Company has delivered to each
Purchaser copies of the financial statements listed on Schedule 5.5. All of said
financial statements (including in each case the related schedules and notes)
fairly present in all material respects the consolidated financial position of
the respective companies and their subsidiaries as of the respective dates
specified in such financial statements and the consolidated results of their
operations and cash flows for the respective periods so specified and have been
prepared in accordance with GAAP consistently applied throughout the periods
involved except as set forth in the notes thereto; provided, however, that the
financial statements titled "AmerUs Home Service, Inc. and Subsidiaries" contain
the financial information of Home Real Estate Company of Omaha and First Edina
Realty Mortgage L.L.C., entities which were a subsidiary or joint venture of
AmerUs Home Services, Inc. or its subsidiaries on December 31, 1997 but which
are not a subsidiary or joint venture on the date hereof; and

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<PAGE>

provided further that the financial statements of AmerUs Home Service, Inc.
reflect minority interests which were redeemed prior to the date hereof; and
provided further that the financial statements of AmerUs Home Services, Inc.
include revenues from the management of real estate development operations which
have been discontinued; and provided further that the financial statements of
CBS Real Estate Co. include investments in Georgetowne Development, Ltd.,
ComFed-Dodge Fund VII Ltd. Partnership and Plum Creek L.L.C. which were owned by
CBS Real Estate Co. on December 31, 1997 but were disposed of prior to the date
hereof; and provided further that the effect of the foregoing changes on the
financial statements listed on Schedule 5.5 are excluded from the
representations and warranties made herein.

Section 5.6. Compliance with Laws, Other Instruments, Etc. The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Company or any Subsidiary is bound or by
which the Company or any Subsidiary or any of their respective properties may be
bound or affected, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (c) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.

Section 5.7. Governmental Authorization, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes.

Section 5.8. Litigation; Observance of Agreements; Statutes and Orders.
(a) There are no actions, suits or proceedings pending or, to the knowledge of
the Company, threatened against or affecting the Company or any Subsidiary or
any property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

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<PAGE>

or validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Company does not have any
income tax liabilities for any fiscal year ending on or prior to December 31,
1997. The Federal income tax liabilities of the Company's Subsidiaries have been
determined by the Internal Revenue Service and paid for all fiscal years up to
and including the fiscal year ended December 31, 1994. For all fiscal years
ending on or prior to December 31, 1997, the Company has received indemnities
for the income tax liabilities of its Subsidiaries.

Section 5.10. The Company and its Subsidiaries have good and sufficient
title to their respective properties that individually or in the aggregate are
Material, including all such properties reflected in the most recent audited
balance sheet referred to in Section 5.5 or purported to have been acquired by
the Company or any Subsidiary after said date (except as sold or otherwise
disposed of in the ordinary course of business), in each case free and clear of
Liens prohibited by this Agreement. All leases that individually or in the
aggregate are Material are valid and subsisting and are in full force and effect
in all material respects.

Section 5.11. Licenses, Permits, Etc. Except as disclosed in Schedule 5.11,

(b) to the best knowledge of the Company, no product of the
Company or any of its Subsidiaries infringes in any material respect
any license, permit, franchise, authorization, patent, copyright,
service mark, trademark, trade name or other right owned by any other
Person; and

(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or
any of its Subsidiaries.

Section 5.12. (a) The Company and each ERISA Affiliate have operated
and administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and could not reasonably
be expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in

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<PAGE>

either case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate Material.

(b) For each Plan that is a pension plan within the meaning of Section
3(2) of ERISA, the accumulated benefit obligation did not exceed the fair market
value of the Plan's assets. For this purpose, "accumulated benefit obligation"
shall have the meaning given to that term in paragraph 18 of Statement of
Financial Accounting Standards No. 87.

(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of each Purchaser's representation in Section
6.2 as to the sources of the funds to be used to pay the purchase price of the
Notes to be purchased by such Purchaser, and, to the extent applicable, each
Purchaser's compliance with the disclosure requirements of Section 6.2.

Section 5.13. Neither the Company nor anyone acting on its behalf has
offered the Notes or any similar securities for sale to, or solicited any offer
to buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any Person other than the Purchasers and not more than 38 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of Section 5 of the Securities Act.

Section 5.14. The Company will apply the proceeds of the sale of the
Notes to refinance existing indebtedness the proceeds of which were used to
acquire all of the capital stock of Iowa Realty Co., Inc. and Edina Financial
Services, Inc. No part of the proceeds from the sale of the Notes hereunder will
be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). The Company
does not own, or presently intend to carry or purchase, any margin stock. As
used in this Section, the terms

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<PAGE>

"margin stock" and "purpose of buying or carrying" shall have the meanings
assigned to them in said Regulation U.

Section 5.15. Existing Debt; Future Liens. (a) Schedule 5.15 sets forth
a complete and correct list of all outstanding Consolidated Debt and Priority
Debt of the Company and its Subsidiaries as of August 31, 1998, since which date
there has been no Material change in the amounts, interest rates, sinking funds,
installment payments or maturities of the Debt of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver
of default is currently in effect, in the payment of any principal or interest
on any Debt of the Company or such Subsidiary and no event or condition exists
with respect to any Debt of the Company or any Subsidiary that would permit (or
that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Debt to become due and payable before its stated maturity
or before its regularly scheduled dates of payment.

(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by Section 10.5.

Section 5.16. Foreign Assets Control Regulations, Etc. Neither the sale
of the Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.

Section 5.17. Status under Certain Statutes. Neither the Company nor
any Subsidiary is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or is subject
to regulation under the Public Utility Holding Company Act of 1935, as amended,
the ICC Termination Act of 1995, as amended, or the Federal Power Act, as
amended.

Section 5.18. Neither the Company nor any Subsidiary has knowledge of
any claim or has received any notice of any claim, and no proceeding has been
instituted raising any claim against the Company or any of its Subsidiaries or
any of their respective real properties now or formerly owned, leased or
operated by any of them or other assets, alleging any damage to the environment
or violation of any Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise disclosed to each Purchaser in writing:

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<PAGE>

(b) neither the Company nor any of its Subsidiaries has stored
any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them or has disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws in each case
in any manner that could reasonably be expected to result in a Material
Adverse Effect; and

(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse
Effect.

SECTION 6. REPRESENTATIONS OF THE PURCHASER

Section 6.1. Each Purchaser represents that it is purchasing the Notes
for its own account or for one or more separate accounts maintained by it or for
the account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of such Purchaser's or such
pension or trust funds' property shall at all times be within such Purchaser's
or such pension or trust funds' control. Each Purchaser understands that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.

Section 6.2. Each Purchaser represents that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by it to pay the purchase price of the Notes to be
purchased by it hereunder:

(a) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee
benefit plan, treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the
amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan, exceeds ten percent (10%)
of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth
in the NAIC Annual Statement for such Purchaser most recently filed
with such Purchaser's state of domicile; or

(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as such Purchaser has
disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same employer
or employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund; or

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<PAGE>

(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (c); or

(d) the Source is a governmental plan; or

(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e); or

(f) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA; or

(g) the Source is an insurance company separate account
maintained solely in connection with the fixed contractual obligations
of the insurance company under which the amounts payable, or credited,
to any employee benefit plan (or its related trust) and to any
participant or beneficiary of such plan (including any annuitant) are
not affected in any manner by the investment performance of the
separate account.

If any Purchaser or any subsequent transferee of the Notes indicates that such
Purchaser or such transferee is relying on any representation contained in
paragraph (b), (c) or (e) above, the Company shall deliver on the date of
Closing and on the date of any applicable transfer a certificate, which shall
either state that (i) the Company is neither a party in interest nor a
"disqualified person" (as defined in Section 4975(e)(2) of the Code), with
respect to any plan identified pursuant to paragraphs (b) or (e) above, or (ii)
with respect to any plan, identified pursuant to paragraph (c) above, neither
the Company nor any "affiliate" (as defined in Section V(c) of the QPAM
Exemption) has at such time, and during the immediately preceding one year,
exercised the authority to appoint or terminate said QPAM as manager of any plan
identified in writing pursuant to paragraph (c) above or to negotiate the terms
of said QPAM's management agreement on behalf of any such identified plan. As
used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.

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<PAGE>

SECTION 7. INFORMATION AS TO COMPANY

Section 7.1. The Company shall deliver to each holder of Notes that is
an Institutional Investor:

(a) Quarterly Statements-- within 60 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,

(i) a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such quarter, and

setting forth in each case in comparative form, commencing with the
fiscal quarter ending September 30, 1999, the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from normal,
recurring year-end adjustments, provided that delivery within the time
period specified above of copies of the Company's Quarterly Report on
Form 10-Q prepared in compliance with the requirements therefor and
filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this Section 7.1(a);

(b) Annual Statements-- within 105 days after the end of each
fiscal year of the Company, duplicate copies of,

(i) a consolidated balance sheet of the Company and
its Subsidiaries, as at the end of such year, and

(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,

setting forth in each case in comparative form, commencing with the
fiscal year ending December 31, 1999, the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with
GAAP, and accompanied by

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<PAGE>

GAAP, and that the examination of such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards, and
that such audit provides a reasonable basis for such opinion
in the circumstances, and

(B) a certificate of such accountants stating that
they have reviewed this Agreement and stating further whether,
in making their audit, they have become aware of any condition
or event that then constitutes a Default or an Event of
Default, and, if they are aware that any such condition or
event then exists, specifying the nature and period of the
existence thereof (it being understood that such accountants
shall not be liable, directly or indirectly, for any failure
to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted auditing
standards or did not make such an audit),

provided that the delivery within the time period specified above of
the Company's Annual Report on Form 10-K for such fiscal year (together
with the Company's annual report to shareholders, if any, prepared
pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
with the requirements therefor and filed with the Securities and
Exchange Commission, together with the accountant's certificate
described in clause (B) above, shall be deemed to satisfy the
requirements of this Section 7.1(b);

(c) SEC and Other Reports, if any-- promptly upon their
becoming available, one copy of (i) each financial statement, report,
notice or proxy statement sent by the Company or any Subsidiary to
public securities holders generally, and (ii) each regular or periodic
report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Subsidiary to
the public concerning developments that are Material;

(d) Notice of Default or Event of Default-- promptly, and in
any event within five days after a Responsible Officer becoming aware
of the existence of any Default or Event of Default or that any Person
has given any notice or taken any action with respect to a claimed
default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
Section 11(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to
take with respect thereto;

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<PAGE>

(i) with respect to any Plan, any reportable event, as defined
in section 4043(c) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or

(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or

(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
could reasonably be expected to have a Material Adverse Effect;

(f) Notices from Governmental Authority-- promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or any
Subsidiary from any Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect; and

(g) Requested Information-- with reasonable promptness, such other data
and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries or
relating to the ability of the Company to perform its obligations hereunder and
under the Notes as from time to time may be reasonably requested by any such
holder of Notes.

Section 7.2. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b)
hereof shall be accompanied by a certificate of a Senior Financial Officer
setting forth:

(a) Covenant Compliance-- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Section 10.1 through Section 10.8
hereof, inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and

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<PAGE>

(b) Event of Default-- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Subsidiaries from the beginning of
the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not
have disclosed the existence during such period of any condition or
event that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company
or any Subsidiary to comply with any Environmental Law), specifying the
nature and period of existence thereof and what action the Company
shall have taken or proposes to take with respect thereto.

Section 7.3. The Company shall permit the representatives of each
holder of Notes that is an Institutional Investor:

(a) No Default-- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its
independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing
and so long as such representatives are bound to the provisions of
Section 20 hereof; and

(b) Default-- if a Default or Event of Default then exists, at
the expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the
Company and its Subsidiaries), all at such times and as often as may be
requested.

SECTION 8. PREPAYMENT OF THE NOTES

Section 8.1. Required Prepayments. On November 1, 2004 and on each
November 1 thereafter to and including November 1, 2009 the Company will prepay
$5,000,000 principal amount (or such lesser principal amount as shall then be
outstanding) of the Notes at par and without payment of the Make-Whole Amount or
any premium, provided that upon any partial prepayment of the Notes pursuant to
Section 8.7 or purchase of the Notes permitted by Section 8.5, the principal
amount of each required prepayment of the Notes becoming due under this Section
8.1 on and after the date of such prepayment or purchase shall be reduced in the
same proportion as the aggregate unpaid principal amount of the Notes is reduced
as a result of such prepayment or purchase. For purposes of this Section 8.1,
any prepayment of less than all

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<PAGE>

of the outstanding Notes pursuant to Section 8.2 shall be deemed to be applied
first to the amount of principal scheduled to be repaid on November 1, 2010, and
then to the remaining scheduled principal payments, if any, in inverse
chronological order. The entire outstanding principal amount of the Notes shall
become due and payable on November 1, 2010.

Section 8.2. Optional Prepayments with Make-Whole Amount. The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the Notes, in an amount not less than 10% of the
aggregate principal amount of the Notes then outstanding in the case of a
partial prepayment, at 100% of the principal amount so prepaid, together with
interest accrued thereon to the date of such prepayment, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal amount.
The Company will give each holder of Notes written notice of each optional
prepayment under this Section 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
such date, the aggregate principal amount of the Notes to be prepaid on such
date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.3), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.

Section 8.3. Allocationof Partial Prepayments. Except if any holder of
a Note declines to accept an offer of prepayment pursuant to Section 8.7, in the
case of each partial prepayment of the Notes, the principal amount of the Notes
to be prepaid shall be allocated among all of the Notes at the time outstanding
in proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for prepayment.

Section 8.4. Maturity; Surrender, Etc In the case of each prepayment of
Notes pursuant to this Section 8, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such date
and the applicable Make-Whole Amount, if any. From and after such date, unless
the Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.

Section 8.5. Purchase of Notes. The Company will not and will not
permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the outstanding Notes except upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement and the
Notes. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to
any provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.

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<PAGE>

Section 8.6. Make-Whole Amount. The term "Make-Whole Amount" means,
with respect to any Note, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called
Principal of such Note over the amount of such Called Principal, provided that
the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following
meanings:

"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2 or
Section 8.7 or has become or is declared to be immediately due and
payable pursuant to Section 12.1, as the context requires.

"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.

"Reinvestment Yield" means, with respect to the Called
Principal of any Note, .50% plus the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "PX1" on the Bloomberg
Financial Market Services Screen (or such other display as may replace
PX1 on the Bloomberg Financial Market Services Screen) for actively
traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date, or (ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day
preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with the maturity closest to and
greater than the Remaining Average Life and (2) the actively traded
U.S. Treasury security with the maturity closest to and less than the
Remaining Average Life.

"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.

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"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2, Section 8.7 or 12.1.

"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or Section 8.7 or has become or is declared to
be immediately due and payable pursuant to Section 12.1, as the context
requires.

Section 8.7. Change in Control. (a) Notice of Change in Control or
Control Event. The Company will, within 1 Business Day after any Responsible
Officer has knowledge of the occurrence of any Change in Control or Control
Event, give written notice of such Change in Control or Control Event to each
holder of Notes unless notice in respect of such Change in Control (or the
Change in Control contemplated by such Control Event) shall have been given
pursuant to subparagraph (b) of this Section 8.7. If a Change in Control has
occurred, such notice shall contain and constitute an offer to prepay Notes as
described in subparagraph (c) of this Section 8.7 and shall be accompanied by
the certificate described in subparagraph (g) of this Section 8.7. Any notice
provided under this Section 8.7 shall at all times remain subject to the
provisions of Section 20 hereof.

(b) Condition to Company Action. The Company will not take any action
that consummates or finalizes a Change in Control unless (i) at least 30 days
prior to such action it shall have given to each holder of Notes written notice
containing and constituting an offer to prepay Notes as described in
subparagraph (c) of this Section 8.7, accompanied by the certificate described
in subparagraph (g) of this Section 8.7, and (ii) contemporaneously with such
action, it prepays all Notes required to be prepaid in accordance with this
Section 8.7.

(c) Offer to Prepay Notes. The offer to prepay Notes contemplated by
subparagraphs (a) and (b) of this Section 8.7 shall be an offer to prepay, in
accordance with and subject to this Section 8.7, all, but not less than all, the
Notes held by each holder (in this case only, "holder" in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) on a date specified in such offer (the "Proposed
Prepayment Date"). If such Proposed Prepayment Date is in connection with an
offer contemplated by subparagraph (a) of this Section 8.7, such date shall be
not less than 10 Business days and not more than 20 Business days after the date
of such offer (if the Proposed Prepayment Date shall not be specified in such
offer, the Proposed Prepayment Date shall be the 15th Business day after the
date of such offer).

(d) Acceptance. A holder of Notes may accept the offer to prepay made
pursuant to this Section 8.7 by causing a notice of such acceptance to be
delivered to the Company at least 3 Business days prior to the Proposed
Prepayment Date. A failure by a holder of Notes to respond

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to an offer to prepay made pursuant to this Section 8.7 shall be deemed to
constitute an acceptance of such offer by such holder.

(e) Prepayment. Prepayment of the Notes to be prepaid pursuant to this
Section 8.7 shall be at a price of 100% of the principal amount of such Notes,
plus the Make-Whole Amount determined in Section 8.6 for the date of prepayment
with respect to such principal amount, together with interest on such Notes
accrued to the date of prepayment. On the Business Day preceding the date of
prepayment, the Company shall deliver to each holder of Notes being prepaid a
statement showing the Make-Whole Amount due in connection with such prepayment
and setting forth the details of the computation of such amount. The prepayment
shall be made on the Proposed Prepayment Date except as provided in subparagraph
(f) of this Section 8.7.

(f) Deferral Pending Change in Control. The obligation of the Company
to prepay Notes pursuant to the offers required by subparagraph (b) and accepted
in accordance with subparagraph (d) of this Section 8.7 is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in Control does
not occur on the Proposed Prepayment Date in respect thereof, the prepayment
shall be deferred until and shall be made on the date on which such Change in
Control occurs. The Company shall keep each holder of Notes reasonably and
timely informed of (i) any such deferral of the date of prepayment, (ii) the
date on which such Change in Control and the prepayment are expected to occur,
and (iii) any determination by the Company that efforts to effect such Change in
Control have ceased or been abandoned (in which case the offers and acceptances
made pursuant to this Section 8.7 in respect of such Change in Control shall be
deemed rescinded).

(g) Officer's Certificate. Each offer to prepay the Notes pursuant to
this Section 8.7 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this
Section 8.7; (iii) the principal amount of each Note offered to be prepaid; (iv)
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation; (v) the interest that would be
due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date;
(vi) that the conditions of this Section 8.7 have been fulfilled; and (vii) in
reasonable detail, the nature and date or proposed date of the Change in
Control.

(h) Effect on Required Payments. The amount of each payment of the
principal of the Notes made pursuant to this Section 8.7 shall be applied
against and reduce each of the then remaining principal payments due pursuant to
Section 8.1 by a percentage equal to the aggregate principal amount of the Notes
so paid divided by the aggregate principal amount of the Notes outstanding
immediately prior to such payment.

(i) "Change in Control" Defined. "Change in Control" means any of the
following events or circumstances:

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(i) the failure of MidAmerican Energy Holdings Company, or
after the consummation of the Merger, the failure of CalEnergy Company,
Inc., or its successors and ultimate parent, to own and control
(directly or indirectly) (A) prior to an IPO, greater than 50% (in the
aggregate) of the Company's shares of voting stock outstanding, or (B)
on or after the consummation of an IPO, at least 25% (in the aggregate)
of the Company's shares of voting stock outstanding, or

(ii) the failure of the Company to be an Affiliate of the
company that owns and controls (directly or indirectly) the Iowa
Electric Retail Distribution Business at any time during the period
beginning on the date of Closing and ending on the fifth anniversary
date of the Closing, or

(iii) any Person, on or after the consummation of an IPO, owns
or controls (directly or indirectly) more shares of the outstanding
voting stock of the Company than is owned and controlled (directly or
indirectly) by MidAmerican Energy Holdings Company or, after the
consummation of the Merger, CalEnergy Company, Inc.

"Control Event" means:

(i) the execution by the Company or any of its Subsidiaries or
Affiliates of any agreement or letter of intent with respect to any
proposed transaction or event or series of transactions or events
which, individually or in the aggregate, may reasonably be expected to
result in a Change in Control,

(ii) the execution of any written agreement which, when fully
performed by the parties thereto, would result in a Change in Control,
or

(iii) on or after the consummation of an IPO, the making of
any written offer by any person (as such term is used in section 13(d)
and section 14(d)(2) of the Exchange Act as in effect on the date of
the Closing) or related persons constituting a group (as such term is
used in Rule 13d-5 under the Exchange Act as in effect on the date of
the Closing) to the holders of the common stock of the Company, which
offer, if accepted by the requisite number of holders, would result in
a Change in Control.

(k) "IPO" means the initial public offering by the Company of its
voting shares of common stock.

SECTION 9. AFFIRMATIVE COVENANTS

The Company covenants that so long as any of the Notes are outstanding:

Section 9.1. Compliance with Law. The Company will, and will cause each
of its Subsidiaries to, comply with all laws, ordinances or governmental rules
or regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their

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<PAGE>

respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

Section 9.2. Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.

Section 9.3. Maintenance of Properties. The Company will, and will
cause each of its Subsidiaries to, maintain and keep, or cause to be maintained
and kept, their respective properties in good repair, working order and
condition (other than ordinary wear and tear), so that the business carried on
in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Subsidiary from discontinuing
the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

Section 9.4. Payment of Taxes. The Company will, and will cause each of
its Subsidiaries to, file all tax returns, individually or on a consolidated
basis, required to be filed in any jurisdiction and to pay and discharge all
taxes, individually or on a consolidated basis, shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.

Section 9.5. Corporate Existence, Etc. Subject to Sections 10.7 and
10.8, the Company will at all times preserve and keep in full force and effect
its corporate existence, and the Company will at all times preserve and keep in
full force and effect the corporate existence of each of its Subsidiaries
(unless merged into the Company or a Wholly-Owned Subsidiary) and all rights and
franchises of the Company and its Subsidiaries unless, in the good faith
judgment of the Company, the termination of or failure to preserve and keep in
full force and effect such corporate existence, right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.

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SECTION 10. NEGATIVE COVENANTS.

The Company covenants that so long as any of the Notes are outstanding:

Section 10.1. Consolidated Net Worth. The Company will maintain, at the
end of each fiscal quarter, Consolidated Net Worth at an amount not less than
the sum of (a) $25,500,000, plus (b) an aggregate amount equal to 25% of its
Consolidated Net Income (but, in each case, only if a positive number) for each
completed fiscal year beginning with the fiscal year ended December 31, 1998.

Section 10.2. Interest Charges Coverage Ratio. The Company will not at
any time permit the Interest Charges Coverage Ratio for any period of four
consecutive fiscal quarters ending during the periods specified below to be less
than the ratio set forth opposite such period:

PERIOD RATIO

From the date of the Closing through June 30, 1999 2.25 to 1

From July 1, 1999 and thereafter 2.50 to 1

Section 10.3. Incurrence of Debt. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become directly or indirectly liable with respect to,
any Debt, unless on the date the Company or such Subsidiary becomes liable with
respect to any such Debt and immediately after giving effect thereto and the
concurrent retirement of any other Debt,

(a) no Default or Event of Default exists, and

(b) Consolidated Total Debt does not exceed 65% of
Consolidated Total Capitalization.

For the purposes of this Section 10.3, any Person becoming a Subsidiary after
the date hereof shall be deemed, at the time it becomes a Subsidiary, to have
incurred all of its then outstanding Debt, and any Person extending, renewing or
refunding any Debt shall be deemed to have incurred such Debt at the time of
such extension, renewal or refunding.

Section 10.4. Priority Debt. The Company will not at any time permit
Priority Debt to exceed the greater (a) $7,500,000, or (b) 15% of Consolidated
Net Worth.

Section 10.5. Restricted Payments and Restricted Investments.

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<PAGE>

(A) $5,000,000, plus

(B) 75% of Consolidated Net Income for such period (or minus
100% of Consolidated Net Income for such period if Consolidated Net
Income for such period is a loss), plus

(ii) no Default or Event of Default would exist.

(b) Time of Payment. The Company will not, nor will it permit any of
its Subsidiaries to, authorize a Restricted Payment that is not payable within
60 days of authorization.

Section 10.6. Liens. The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly create, incur, assume or permit to
exist (upon the happening of a contingency or otherwise) any Lien on or with
respect to any property or asset (including, without limitation, any document or
instrument in respect of goods or accounts receivable) of the Company or any
such Subsidiary, whether now owned or held or hereafter acquired, or any income
or profits therefrom or assign or otherwise convey any right to receive income
or profits (unless it makes, or causes to be made, effective provision whereby
the Notes will be equally and ratably secured with any and all other obligations
thereby secured, such security to be pursuant to an agreement reasonably
satisfactory to the Required Holders and, in any such case, the Notes shall have
the benefit, to the fullest extent that, and with such priority as, the holders
of the Notes may be entitled under applicable law, of an equitable Lien on such
property), except:

(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Subsidiary shall at
any time in good faith be prosecuting an appeal or proceeding for a
review and in respect of which a stay of execution pending such appeal
or proceeding for review shall have been secured, provided that the
Company or such

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Subsidiary maintains any and all reserves which may be required under
GAAP in connection with any claims secured by such Liens described in
this Section 10.6 (b);

(c) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, which are necessary for the conduct of the
activities of the Company and its Subsidiaries or which customarily
exist on properties of corporations engaged in similar activities and
similarly situated and which do not materially impair their use in the
operation of the business of the Company and its Subsidiaries;

(d) Liens existing as of the date of Closing and reflected in
Schedule 10.6 hereto;

(f) Liens incurred after the date of Closing given to secure
the payment of the purchase price of fixed assets acquired or purchased
in the ordinary course of business by the Company or any Subsidiary to
be used in carrying on the business of the Company or a Subsidiary,
provided that (i) the Lien shall attach solely to the fixed assets
purchased or acquired, (ii) at the time of the purchase or acquisition
of such fixed assets, the aggregate amount remaining unpaid on all Debt
secured by Liens on such fixed assets shall not exceed an amount equal
to 100% of the lesser of the total purchase price or Fair Market Value
at the time of purchase or acquisition of such fixed assets (as
determined in good faith by the Board of Directors of the Company), and
(iii) the aggregate principal amount of Debt secured by such Lien is
permitted by Sections 10.2 and 10.3; and

(g) any Lien extending, renewing or replacing any Lien
permitted by the immediately preceding subparagraphs (a) through (f),
inclusive, of this Section 10.6, provided that (i) the aggregate
principal amount of Debt secured by such Lien immediately prior to such
extension, renewal or replacement is not increased or the maturity
thereof reduced, (ii) such Lien is not extended to any other property,
except for the substitution of property of a similar nature and equal
or lesser value than the property securing the Lien immediately prior
to such extension, renewal or replacement, and (iii) the aggregate
principal amount of Debt being extended, renewed or replaced is
permitted by Sections 10.2 and 10.3;

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For the purposes of this Section 10.6, any Person becoming a Subsidiary after
the date of this Agreement shall be deemed to have incurred all of its then
outstanding Liens at the time it becomes a Subsidiary, and any Person extending,
renewing or refunding any Debt secured by any Lien shall be deemed to have
incurred such Lien at the time of such extension, renewal or refunding.

Section 10.7. Merger, Consolidation, etc. The Company will not, and
will not permit any of its Subsidiaries to, consolidate with or merge with any
other corporation or convey, transfer or lease substantially all of its assets
in a single transaction or series of transactions to any Person (except that a
Subsidiary of the Company may (x) consolidate with or merge with, or convey,
transfer or lease substantially all of its assets in a single transaction or
series of transactions to, the Company or a Wholly-Owned Subsidiary of the
Company and (y) convey, transfer or lease all of its assets in compliance with
the provisions of Section 10.8), provided that the foregoing restriction does
not apply to the consolidation or merger of the Company with, or the conveyance,
transfer or lease of substantially all of the assets of the Company in a single
transaction or series of transactions to, any Person so long as:

(a) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety, as
the case may be (the "Successor Corporation"), shall be a solvent
corporation organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia;

(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes
its assumption of the due and punctual performance and observance of
each covenant and condition of this Agreement and the Notes (pursuant
to such agreements and instruments as shall be reasonably satisfactory
to the Required Holders), and the Company shall have caused to be
delivered to each holder of Notes an opinion of nationally recognized
independent counsel, or other independent counsel reasonably
satisfactory to the Required Holders, to the effect that all agreements
or instruments effecting such assumption are enforceable in accordance
with their terms and comply with the terms hereof; and

(i) no Default or Event of Default would exist, and

(ii) the Successor Corporation would be permitted by
the provisions of Section 10.3 hereof to incur at least $1.00
of additional Debt owing to a Person other than a Subsidiary
of the Successor Corporation.

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<PAGE>

Section 10.8. Sale of Assets, etc. Except as permitted under Section
10.7, the Company will not, and will not permit any of its Subsidiaries to, make
any Asset Disposition unless:

(b) immediately after giving effect to the Asset Disposition,
no Default or Event of Default would exist; and

(i) the Disposition Value of all property that was
the subject of any Asset Disposition occurring in the period
of 12 calendar months then next ended would not exceed 10% of
Consolidated Total Assets as of the end of the then most
recently ended fiscal quarter of the Company; and

(ii) the Disposition Value of all property that was
the subject of any Asset Disposition occurring on or after the
date of Closing would not exceed 25% of Consolidated Total
Assets as of the end of the then most recently ended fiscal
quarter of the Company.

If the Net Proceeds Amount for any Transfer is applied to a Property
Reinvestment Application within 12 months before or after such Transfer, then
such Transfer, only for the purpose of determining compliance with subsection
(c) of this Section 10.8 as of any date on or after the date of such Transfer,
shall be deemed not to be an Asset Disposition.

Section 10.9. Line of Business. The Company will not, and will not
permit any of its Subsidiaries to, engage in any business if, as a result, the
general nature of the business in which the Company and its Subsidiaries, taken
as a whole, would then be engaged would be materially changed from the general
nature of the business in which the Company and its Subsidiaries, taken as a
whole, are engaged on the date of this Agreement as described in the Memorandum.

Section 10.10. Transactions with Affiliates. The Company will not and
will not permit any Subsidiary to enter into directly or indirectly any
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than the Company or
another Subsidiary), except in the ordinary course and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would be obtainable in a comparable arm's-length transaction with a Person
not an Affiliate.

SECTION 11. EVENTS OF DEFAULT.

An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:

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<PAGE>

(a) the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or

(b) the Company defaults in the payment of any interest on any Note for
more than five Business Days after the same becomes due and payable; or

(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b) and
(c) of this Section 11) and such default is not remedied within 30 days after
the earlier of (i) a Responsible Officer obtaining actual knowledge of such
default and (ii) the Company receiving written notice of such default from any
holder of a Note (any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (d) of Section 11); or

(e) any representation or warranty made in writing by or on behalf of
the Company or by any officer of the Company in this Agreement or in any writing
furnished in connection with the transactions contemplated hereby proves to have
been false or incorrect in any material respect on the date as of which made; or

(f) (i) the Company or any Subsidiary is in default (as principal or as
guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Debt that is outstanding in an aggregate
principal amount of at least $3,000,000 beyond any period of grace provided with
respect thereto, or (ii) the Company or any Subsidiary is in default in the
performance of or compliance with any term of any evidence of any Debt in an
aggregate outstanding principal amount of at least $3,000,000 or of any
mortgage, indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Debt has become,
or has been declared, due and payable before its stated maturity or before its
regularly scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the passage of
time or the right of the holder of Debt to convert such Debt into equity
interests), the Company or any Subsidiary has become obligated to purchase or
repay Debt before its regular maturity or before its regularly scheduled dates
of payment in an aggregate outstanding principal amount of at least $3,000,000;
or

(g) the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with

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respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or

(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any of its Subsidiaries,
a custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, or constituting
an order for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of its Subsidiaries, or any such
petition shall be filed against the Company or any of its Subsidiaries and such
petition shall not be dismissed within 60 days; or

(i) a final judgment or judgments for the payment of money aggregating
in excess of $3,000,000 (to the extent such judgement or judgments are not
covered by an insurance policy underwritten by a solvent insurer who has
accepted in writing responsibility for such judgment or judgments) are rendered
against one or more of the Company and its Subsidiaries and which judgments are
not, within 30 days after entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within 30 days after the expiration of such stay;
or

(j) If (i) any Plan shall fail to satisfy the minimum funding standards
of ERISA or the Code for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under
Section 412 of the Code, (ii) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC or the PBGC shall
have instituted proceedings under Section 4042 of ERISA to terminate or appoint
a trustee to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such proceedings,
(iii) with respect to Plans that are pension plans within the meaning of Section
3(2) of ERISA whose accumulated benefit obligation (determined in accordance
with Statement of Financial Accounting Standards No. 87) exceeds the fair market
value of Plan assets, the aggregate shortfall shall exceed $3,000,000, (iv) the
Company or any ERISA Affiliate shall have incurred or is reasonably expected to
incur any liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans, (v) the Company
or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the
Company or any Subsidiary establishes or amends any employee welfare benefit
plan that provides post-employment welfare benefits in a manner that would
increase the liability of the Company or any Subsidiary thereunder; and any such
event or events described in clauses (i) through (vi) above, either individually
or together with any other such event or events, could reasonably be expected to
have a Material Adverse Effect.

As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.

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<PAGE>

SECTION 12. REMEDIES ON DEFAULT, ETC.

Section 12.1. Acceleration. (a) If an Event of Default with respect to
the Company described in paragraph (g) or (h) of Section 11 (other than an Event
of Default described in clause (i) of paragraph (g) or described in clause (vi)
of paragraph (g) by virtue of the fact that such clause encompasses clause (i)
of paragraph (g)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.

(b) If any other Event of Default has occurred and is continuing, any
holder or holders of at least 33% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.

(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.

Upon any Note's becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of such Note, plus (i) all accrued and unpaid
interest thereon and (ii) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

Section 12.2. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1, the holder of
any Note at the time outstanding may proceed to protect and enforce the rights
of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.

Section 12.3. Rescission. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of Section 12.1, the
holders of not less than 67% in principal amount of the Notes then outstanding,
by written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and

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<PAGE>

Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.

Section 12.4. No Waivers or Election of Remedies, Expenses, Etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.

SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES

Section 13.1. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.

Section 13.2. Transfer and Exchange of Notes. Upon surrender of any
Note at the principal executive office of the Company for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or its attorney duly authorized
in writing and accompanied by the address for notices of each transferee of such
Note or part thereof), the Company shall execute and deliver, at the Company's
expense (except as provided below), one or more new Notes (as requested by the
holder thereof) in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially in
the form of Exhibit 1. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered Note or dated
the date of the surrendered Note if no interest shall have been paid thereon.
The Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Notes
shall not be transferred in denominations of less than $100,000, provided that
if necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $100,000. Any

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<PAGE>

transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be deemed to have made the representation set forth in
Section 6.2.

Section 13.3. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and

(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another holder of a
Note with a minimum net worth of at least $50,000,000, such Person's
own unsecured agreement of indemnity shall be deemed to be
satisfactory), or

(b) in the case of mutilation, upon surrender and cancellation
thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.

SECTION 14. PAYMENTS ON NOTES

Section 14.1. Place of Payment. Subject to Section 14.2, payments of
principal, Make-Whole Amount, if any, and interest becoming due and payable on
the Notes shall be made in New York, New York at the principal office of The
Chase Manhattan Bank in such jurisdiction. The Company may at any time, by
notice to each holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal office of the
Company or the principal office of a bank or trust company in such jurisdiction.

Section 14.2. HomeOffice Payment. So long as any Purchaser or such
Purchaser's nominee shall be the holder of any Note, and notwithstanding
anything contained in Section 14.1 or in such Note to the contrary, the Company
will pay all sums becoming due on such Note for principal, Make-Whole Amount, if
any, and interest by the method and at the address specified for such purpose
for such Purchaser on Schedule A, or by such other method or at such other
address as such Purchaser shall have from time to time specified to the Company
in writing for such purpose, without the presentation or surrender of such Note
or the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, such Purchaser shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by any Purchaser or such Purchaser's nominee such Purchaser
will, at its election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the

-31-
<PAGE>

direct or indirect transferee of any Note purchased by any Purchaser under this
Agreement and that has made the same agreement relating to such Note as such
Purchaser has made in this Section 14.2.

SECTION 15. EXPENSES, ETC.

Section 15.1. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all reasonable
out-of-pocket costs and expenses (including reasonable attorneys' fees) incurred
by each Purchaser or holder of a Note in connection with such transactions and
in connection with any amendments, waivers or consents under or in respect of
this Agreement or the Notes (whether or not such amendment, waiver or consent
becomes effective), including, without limitation: (a) the costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement or the Notes or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the Notes, or by reason of being a holder of
any Note, and (b) the costs and expenses, including financial advisors' fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will also pay,
and will save each Purchaser and each other holder of a Note harmless from, all
claims in respect of any fees, costs or expenses if any, of brokers and finders
(other than those retained by such Purchaser or holder).

Section 15.2. Survival. The obligations of the Company under this
Section 15 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the Notes, and the
termination of this Agreement.

SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by any Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of such
Purchaser or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence, this Agreement
and the Notes embody the entire agreement and understanding between each
Purchaser and the Company and supersede all prior agreements and understandings
relating to the subject matter hereof.

SECTION 17. AMENDMENT AND WAIVER.

Section 17.1. Requirements. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5,

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<PAGE>

6 or 21 hereof, or any defined term (as it is used therein), will be effective
as to any Purchaser unless consented to by such Purchaser in writing, and (b) no
such amendment or waiver may, without the written consent of the holder of each
Note at the time outstanding affected thereby, (i) subject to the provisions of
Section 12 relating to acceleration or rescission, change the amount or time of
any prepayment or payment of principal of, or reduce the rate or change the time
of payment or method of computation of interest or of the Make-Whole Amount on,
the Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.

Section 17.2. Solicitation of Holders of Notes.

(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.

(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to or compensation for or otherwise in
connection with the consideration of the entering into by any holder of Notes of
any waiver or amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted, on the
same terms, ratably to each holder of Notes then outstanding even if such holder
did not consent to such waiver or amendment.

Section 17.3. Building Effect, Etc. Any amendment or waiver consented
to as provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.

Section 17.4. Notes Held by Company, Etc. Solely for the purpose of
determining whether the holders of the requisite percentage of the aggregate
principal amount of Notes then outstanding approved or consented to any
amendment, waiver or consent to be given under this Agreement or the Notes, or
have directed the taking of any action provided herein or in the Notes to be
taken upon the direction of the holders of a specified percentage of the
aggregate principal

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<PAGE>

amount of Notes then outstanding, Notes directly or
indirectly owned by the Company or any of its Affiliates shall be deemed not to
be outstanding.

SECTION 18. NOTICES

All notices and communications provided for hereunder shall be in
writing and sent (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:

(i) if to a Purchaser or such Purchaser's nominee, to such
Purchaser or such Purchaser's nominee at the address specified for such
communications for such Purchaser on Schedule A, or at such other
address as such Purchaser or such Purchaser's nominee shall have
specified to the Company in writing,

(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing, or

(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Chief Financial
Officer, or at such other address as the Company shall have specified
to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

SECTION 19. REPRODUCTION OF DOCUMENTS

This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by each Purchaser at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to each Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.

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<PAGE>

SECTION 20. CONFIDENTIAL INFORMATION

For the purposes of this Section 20, "Confidential Information" means
information delivered to any Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary or confidential in nature,
provided that such term does not include information that (a) was publicly known
or otherwise known to such Purchaser prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by such Purchaser
or any Person acting on such Purchaser's behalf, (c) otherwise becomes known to
such Purchaser other than through disclosure by the Company or any Subsidiary or
(d) constitutes financial statements delivered to such Purchaser under Section
7.1 that are otherwise publicly available. Each Purchaser will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by such Purchaser in good faith to protect confidential information of
third parties delivered to such Purchaser, provided that such Purchaser may
deliver or disclose Confidential Information to (i) such Purchaser's directors,
trustees, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by such Purchaser's Notes), (ii) such Purchaser's financial advisors
and other professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20, (iii)
any other holder of any Note, (iv) any Institutional Investor to which such
Purchaser sells or offers to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section
20), (v) any Person from which such Purchaser offers to purchase any Security of
the Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20), (vi)
any federal or state regulatory authority having jurisdiction over such
Purchaser, (vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that requires
access to information about such Purchaser's investment portfolio, or (viii) any
other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, Rule, regulation or order
applicable to such Purchaser, (x) in response to any subpoena or other legal
process, (y) in connection with any litigation to which such Purchaser is a
party or (z) if an Event of Default has occurred and is continuing, to the
extent such Purchaser may reasonably determine such delivery and disclosure to
be necessary or appropriate in the enforcement or for the protection of the
rights and remedies under such Purchaser's Notes and this Agreement. If any
Purchaser receives a request or is aware of any requirement to turn over
Confidential Information pursuant to any order applicable to such Purchaser or
in response to any subpoena or other legal process or in connection with any
litigation to which such Purchaser is a party, such Purchaser, to the extent
permitted by law, will use reasonable efforts to notify the Company of any
request or requirement prior to disclosing such Confidential Information. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 20 as though it
were a party to this Agreement. On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.

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<PAGE>

SECTION 21. SUBSTITUTION OF PURCHASER

Each Purchaser shall have the right to substitute any one of such
Purchaser's Affiliates as the purchaser of the Notes that such Purchaser has
agreed to purchase hereunder, by written notice to the Company, which notice
shall be signed by both such Purchaser and such Purchaser's Affiliate, shall
contain such Affiliate's agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it of
the representations set forth in Section 6. Upon receipt of such notice,
wherever the word "Purchaser" is used in this Agreement (other than in this
Section 21), such word shall be deemed to refer to such Affiliate in lieu of
such Purchaser. In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to such Purchaser
all of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "Purchaser" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer to
such Affiliate, but shall refer to such Purchaser, and such Purchaser shall have
all the rights of an original holder of the Notes under this Agreement.

SECTION 22. MISCELLANEOUS.

Section 22.1.Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.

Section 22.2. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or Make-Whole Amount or interest on any Note that is due on a date other than
a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.

Section 22.3. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

Section 22.4. Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.

Section 22.5. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.

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<PAGE>

Section 22.6. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of New York excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.

* * * * *

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<PAGE>

The execution hereof by the Purchasers shall constitute a contract
among the Company and the Purchasers for the uses and purposes hereinabove set
forth. This Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one
agreement.

Very truly yours,

MIDAMERICAN REALTY SERVICES COMPANY

By /s/ Alan L. Wells
--------------------------------
Name: Alan L. Wells
---------------------------
Title: Vice President, Chief
Financial Officer
--------------------------

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<PAGE>

Accepted as of the first
date written above.

MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY

By /s/ Mark A. Ahmed
------------------------------
Its Managing Director
---------------------------

CM LIFE INSURANCE COMPANY

By /s/ Mark A. Ahmed
------------------------------
Its Investment Officer
---------------------------

THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA

By/s/ Thomas M. Dawkins
------------------------------
Its Vice President
---------------------------

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<PAGE>
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED

MASSACHUSETTS MUTUAL LIFE INSURANCE $13,200,000
COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Securities Investment Division

Payments

All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
MidAmerican Realty Services Company, 7.12% Senior Notes due 2010, PPN 59562# AA
0, principal, premium or interest") to:

Citibank, N.A. (ABA #021000089)
111 Wall Street
New York, New York 10043

for credit to: MassMutual's Long-Term Pool Account Number 4067-3488
Re: Description of security, principal and interest split

with telephone advice of payment to the Securities Custody and Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3878,
Facsimile: (413) 744-6263.

Notices

All notices and communications to be addressed as first provided above, except
notices with respect to payments, to be addressed Attention: Securities Custody
and Collection Department, F 381.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 04-1590850

SCHEDULE A
(to Note Purchase Agreement)
<PAGE>

PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED

MASSACHUSETTS MUTUAL LIFE INSURANCE $2,700,00
COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Securities Investment Division

Payments

Chase Manhattan Bank, N.A. (ABA #021000021)
4 Chase MetroTech Center
New York, New York 10081

for credit to: MassMutual Pension Management Account Number 910-2594018
Re: Description of security, principal and interest split

with telephone advice of payment to the Securities Custody and Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3878,
Facsimile: (413) 744-6263.

Notices

All notices and communications to be addressed as first provided above, except
notices with respect to payments, to be addressed Attention: Securities Custody
and Collection Department, F 381.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 04-1590850

A-2
<PAGE>

PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED

MASSACHUSETTS MUTUAL LIFE INSURANCE $3,600,000
COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Securities Investment Division

Payments

Chase Manhattan Bank, N.A. (ABA #021000021)
4 Chase MetroTech Center
New York, New York 10081

for credit to: MassMutual IFM Non-Traditional Account Number 910-2509073
Re: Description of security, principal and interest split

with telephone advice of payment to the Securities Custody and Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3878,
Facsimile: (413) 744-6263.

Notices

All notices and communications to be addressed as first provided above, except
notices with respect to payments, to be addressed Attention: Securities Custody
and Collection Department, F 381.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 04-1590850

A-3
<PAGE>

PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED

CM LIFE INSURANCE COMPANY $500,000
C/O MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
1295 State Street
Springfield, Massachusetts 01111
Attention: Securities Investment Division

Payments

Citibank, N.A. (ABA #021000089)
111 Wall Street
New York, New York 10043

for credit to: Segment 43 - Universal Life Account Number 4068-6561
Re: Description of security, principal and interest split

with telephone advice of payment to the Securities Custody and Collection
Department of Massachusetts Mutual Life Insurance Company at (413) 744-3878,
Facsimile: (413) 744-6263.

Notices

All notices and communications to be addressed as first provided above, except
notices with respect to payments, to be addressed Attention: Securities Custody
and Collection Department, F 381.

Name of Nominee in which Notes are to be issued: None

Taxpayer I.D. Number: 06-1041383

A-4
<PAGE>

PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED

THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA $15,000,000
201 Park Avenue South
New York, New York 10003
Attention: Mr. Thomas Donahue, Investment Department 7B
Fax Number:(212) 777-6715

Payments

The Chase Manhattan Bank
FED ABA #021000021
CHASE/NYC/CTR/BNF
A/C 900-9-000200

for credit to: Account #G05978 The Guardian

Notices

All notices of payments, on or in respect of the Notes and written confirmation
of each such payment to:

The Guardian Life Insurance Company of America
201 Park Avenue South
New York, New York 10003
Attention: Investment Accounting M-1A
Fax Number: (212) 777-9023

A-5
<PAGE>

All notices and communications other than those in respect to payments to be
addressed as first provided above.

Name of Nominee in which Notes are to be issued: CUDD & CO.

Taxpayer I.D. Number: 13-602-2143

A-6
<PAGE>

DEFINED TERMS

As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:

"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.

"Asset Disposition" means any Transfer except:

(a) any

(i) Transfer from a Subsidiary to the Company or a Wholly-Owned
Subsidiary;

(ii) Transfer from the Company to a Wholly-Owned Subsidiary; and

(iii) Transfer from the Company to a Subsidiary (other than a
Wholly-Owned Subsidiary) or from a Subsidiary to another Subsidiary (other than
a Wholly-Owned Subsidiary), which in either case is for Fair Market Value, so
long as immediately before and immediately after the consummation of any such
Transfer and after giving effect thereto, no Default or Event of Default exists;
and

(b) any Transfer made in the ordinary course of business other than any
Transfer of accounts receivable.

"Business Day" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Des Moines, Iowa or New York, New York are
required or authorized to be closed.

"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

"Change in Control" has the meaning set forth in Section 8.7

SCHEDULE B
(to Note Purchase Agreement)

<PAGE>

"Closing" is defined in Section 3.

"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

"Company" means MidAmerican Realty Services Company, an Iowa
corporation.

"Confidential Information" is defined in Section 20.

"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP.

"Consolidated Net Worth" means, at any time,

(b) to the extent included in clause (a), all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.

"Consolidated Total Assets" means, at any time, the total assets of the
Company and its Subsidiaries which would be shown as assets on a consolidated
balance sheet of the Company and its Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly attributable to
minority interests, if any, in the stock and surplus of Subsidiaries.

"Consolidated Total Capitalization" means, at any time, the sum of
Consolidated Net Worth and Consolidated Total Debt.

"Consolidated Total Debt" means, as of any date of determination, the
total of all Debt of the Company and its Subsidiaries outstanding on such date,
after eliminating all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP.

"Debt" with respect to any Person means, at any time, without
duplication,

(a) its liabilities for borrowed money;

B-2
<PAGE>

(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);

(f) any Guaranty of such Person with respect to liabilities of
a type described in any of clauses (a) through (e) hereof; and

"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.

"Default Rate" means that rate of interest that is the greater of (i)
9.12% per annum or (ii) 2% over the rate of interest publicly announced by The
Chase Manhattan Bank in New York, New York as its "base" or "prime" rate.

"Disposition Value" means, at any time, with respect to any property

(a) in the case of property that does not constitute
Subsidiary Stock, the book value thereof, valued at the time of such
disposition in good faith by the Company, and

B-3
<PAGE>

"Distribution" means, in respect of any corporation, association or
other business entity:

"EBITDA" means, with respect to any period, Consolidated Net Income for
such period plus all amounts deducted in the computation thereof on account of
all (a) Interest Charges during such period, (b) income taxes of the Company and
its Subsidiaries during such period, and (c) amortization and depreciation
expense of the Company and its Subsidiaries during such period, all determined
on a consolidated basis in accordance with GAAP.

"Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.

"European Community Countries" means Belgium, Denmark, France, Germany,
Ireland, Luxembourg, Netherlands, Spain and the United Kingdom.

"Event of Default" is defined in Section 11.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Fair Market Value" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).

"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.

B-4
<PAGE>

"Governmental Authority" means

(a) the government of the United States of America or any
State or other political subdivision thereof, or

(b) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts jurisdiction
over any properties of the Company or any Subsidiary, or

(c) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.

"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt, dividend or other obligation of any other Person in any manner, whether
directly or indirectly, including (without limitation) obligations incurred
through an agreement, contingent or otherwise, by such Person:

(a) to purchase such Debt or obligation or any property
constituting security therefor;

(b) to advance or supply funds (i) for the purchase or payment
of such Debt or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such Debt or obligation;

(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Debt or
obligation of the ability of any other Person to make payment of the
Debt or obligation; or

(d) otherwise to assure the owner of such Debt or obligation
against loss in respect thereof.

In any computation of the Debt or other liabilities of the obligor
under any Guaranty, the Debt or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.

B-5
<PAGE>

"Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 5% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.

"Interest Charges Coverage Ratio" means, at any time, the ratio of (a)
EBITDA for the period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such time to (b) Interest Charges for such period.

"Investment" means any investment, made in cash or by delivery of
property, by the Company or any of its Subsidiaries (i) in any Person, whether
by acquisition of stock, indebtedness or other obligation or Security, or by
loan, Guaranty, advance, capital contribution or otherwise, or (ii) in any
property.

"Investment Company" means any investment company registered under the
Investment Company Act of 1040, as amended.

"Iowa Electric Retail Distribution Business" means all or substantially
all the portion of the non-wholesale, non-industrial electric distribution
business located in Iowa which is currently owned and operated by MidAmerican
Energy Company, a wholly-owned Subsidiary of MidAmerican Energy Holdings
Company.

"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).

"Make-Whole Amount" is defined in Section 8.6.

"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, profits or prospects of the
Company and its Subsidiaries taken as a whole.

B-6
<PAGE>

"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets, profits, prospects
or properties of the Company and its Subsidiaries taken as a whole, or (b) the
ability of the Company to perform its obligations under this Agreement and the
Notes, or (c) the validity or enforceability of this Agreement or the Notes.

"Memorandum" is defined in Section 5.3.

"Merger" is defined in Section 5.3.

"MidAmerican Energy Holdings Company" means MidAmerican Energy Holdings
Company, an Iowa corporation, the beneficial owner of 100% of the outstanding
capital stock of the Company.

"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).

"Net Proceeds Amount" means, with respect to any Transfer of any
Property by any Person, an amount equal to the difference of

(b) all ordinary and reasonable out-of-pocket costs and
expenses actually incurred by such Person in connection with such
Transfer.

"Net Proceeds of Capital Stock" means, with respect to any period, cash
proceeds (net of all costs and out-of-pocket expenses in connection therewith,
including, without limitation, placement, underwriting and brokerage fees and
expenses), received by the Company and its Subsidiaries during such period, from
the sale of all capital stock (other than Redeemable capital stock) of the
Company.

"Notes" is defined in Section 1.

"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.

"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

B-7
<PAGE>

"Plan" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

"Priority Debt" means, without duplication, the sum of (a) all Debt of
the Company secured by any Lien with respect to any property owned by the
Company or any of its Subsidiaries, (b) all Debt of Subsidiaries (except Debt
owed to the Company or a Wholly-Owned Subsidiary).

"property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.

"Property Reinvestment Application" means, with respect to any Transfer
of property, the application of an amount equal to the Net Proceeds Amount with
respect to such Transfer to the acquisition by the Company or any Subsidiary of
long-term assets of a similar nature.

"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.

"Redeemable" means, with respect to the capital stock of any Person,
each share of such Person's capital stock that is:

(b) convertible into other Redeemable capital stock.

"Restricted Investments" means all Investments except the following:

B-8
<PAGE>

(c) Investments in certificates of deposit or similar instruments
maturing within one year from the date of issuance thereof, issued by a bank or
trust company organized under the laws of the:

(i) United States or any state thereof, having capital,
surplus and undivided profits aggregating at least $1,000,000,000 and
whose long-term certificates of deposit or similar instruments are, at
the time of acquisition thereof by the Company or a Subsidiary, rated A
or better by S&P, Duff & Phelps or Fitch Investors' Service
Incorporated or A2 or better by Moody's; or

(ii) Canada, any European Community Country, Japan or any
other country, having capital, surplus and undivided profits
aggregating at least $1,000,000,000 and whose commercial paper is, at
the time of acquisition thereof by the Company or a Subsidiary, rated
a-1 or better by S&P or P1 or better by Moody's or whose long-term
certificates of deposit or similar instruments are, at the time of
acquisition thereof by the Company or a Subsidiary, rated AA or better
by S&P or Aa2 or better by Moody's;

(d) Investments in master note or deposit arrangements or money market
programs which invest solely in Securities of the type described in the
subparagraphs (a), (b) or (c) hereof;

(e) Investments in money market programs of Investment Companies which,
at the time of acquisition by the Company or any Subsidiary, are rated A-1 or
better by S&P or P-1 or better by Moody's or, if such money market programs are
not rated, a substantial majority of the Investments of such money market
programs are rated A-1 or better by S&P or P-1 or better by Moody's;

(f) Investments by the Company and its Subsidiaries in and to
Subsidiaries, including any Investment in a Person which, after giving effect to
such Investment, will become a Subsidiary;

(g) loans or advances of sales commissions and expenses in the usual
and ordinary course of business to real estate sales agents which are incidental
to carrying on the business of the Company or any Subsidiary;

(h) Investments existing on the date of the Closing and disclosed in
Schedule 10.5;

(i) Investments in Repurchase Agreements;

(j) loans or advances to MidAmerican Energy Holdings Company or any of
its Affiliates, provided that the aggregate principal amount of all such loans
or advances shall not exceed $10,000,000;

B-9
<PAGE>

(k) Investments in Swaps or interest rate agreements designed
to protect the Company and its Subsidiaries against (i) fluctuations in
interest rates in respect of Debt incurred or to be incurred, which
obligations do not exceed the aggregate principal amount of such Debt,
or (ii) fluctuations in the value of Investments in fixed-rate
Securities resulting from a change in interest rates, in each case
entered into in the ordinary course of business and not for
speculation, provided that the long-term senior unsecured debt
obligations of the counterparty to such Investments are rated, at the
time of the making of such Investments, A- or better by S&P or A3 or
better by Moody's; and

(l) Investments in joint ventures or other entities engaged in
the same business as the Company and its Subsidiaries in which the
Company and its Subsidiaries shall have an equity ownership interest of
less than a majority of all outstanding equity ownership interests of
such entities, provided that the aggregate amount of all such
Investments shall not at any time exceed $10,000,000.

As of any date of determination, each Restricted Investment shall be
valued at the greater of:

(x) the amount at which such Restricted Investment is shown on
the books of the Company or any of its Subsidiaries (or zero if such
Restricted Investment is not shown on any such books); and

(y) either

(i) in the case of any Guaranty of the obligation of
any Person, the amount which the Company or any of its
Subsidiaries has paid on account of such obligation less any
recoupment by the Company or such Subsidiary of any such
payments, or

(ii) in the case of any other Restricted Investment,
the excess of (x) the greater of (A) the amount originally
entered on the books of the Company or any of its Subsidiaries
with respect thereto and (B) the cost thereof to the Company
or its Subsidiary over (y) any return of capital (after income
taxes applicable thereto) upon such Restricted Investment
through the sale or other liquidation thereof or part thereof
or otherwise.

As used in this definition of "Restricted Investments":

"Acceptable Bank" means any bank or trust company (i) which is
organized under the laws of the United States of America or any State thereof,
(ii) which has capital, surplus and undivided profits aggregating at least
$1,000,000, and (iii) whose long-term unsecured debt obligations (or the
long-term unsecured debt obligations of the bank holding company owning all of
the capital stock of such bank or trust company) shall have been given a rating
of "A" or better by S&P, "A2" or better by Moody's or an equivalent rating by
any other credit rating agency of recognized national standing.

B-10
<PAGE>

"Acceptable Broker-Dealer" means any Person other than a natural person
(i) which is registered as a broker or dealer pursuant to the Exchange Act and
(ii) whose long-term unsecured debt obligations shall have been given a rating
of "A" or better by S&P, "A2" or better by Moody's or an equivalent rating by
any other credit rating agency of recognized national standing.

"Moody's" means Moody's Investors Service, Inc.

"Repurchase Agreement" means any written agreement

(a) that provides for (i) the transfer of one or more United States
Governmental Securities in an aggregate principal amount at least equal to the
amount of the Transfer Price (defined below) to the Company or any of its
Subsidiaries from an Acceptable Bank or an Acceptable Broker-Dealer against a
transfer of funds (the "Transfer Price") by the Company or such Subsidiary to
such Acceptable Bank or Acceptable Broker-Dealer, and (ii) a simultaneous
agreement by the Company or such Subsidiary, in connection with such transfer of
funds, to transfer to such Acceptable Bank or Acceptable Broker-Dealer the same
or substantially similar United States Governmental Securities for a price not
less than the Transfer Price plus a reasonable return thereon at a date certain
not later than 365 days after such transfer of funds,

(b) in respect of which the Company or such Subsidiary shall have the
right, whether by contract or pursuant to applicable law, to liquidate such
agreement upon the occurrence of any default thereunder, and

(c) in connection with which the Company or such Subsidiary, or an
agent thereof, shall have taken all action required by applicable law or
regulations to perfect a Lien in such United States Governmental Securities.

"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc.

"United States Governmental Security" means any direct obligation of,
or obligation guaranteed by, the United States of America, or any agency
controlled or supervised by or acting as an instrumentality of the United States
of America pursuant to authority granted by the Congress of the United States of
America, so long as such obligation or guarantee shall have the benefit of the
full faith and credit of the United States of America which shall have been
pledged pursuant to authority granted by the Congress of the United States of
America.

"Restricted Payment" means

(a) any Distribution in respect of the Company or any Subsidiary of the
Company (other than on account of capital stock or other equity interests of a
Subsidiary of the Company owned legally and beneficially by the Company or
another Subsidiary of the Company), including, without limitation, any
Distribution resulting in the acquisition by the Company of Securities which
would constitute treasury stock, and

B-11
<PAGE>

(b) any payment, repayment, redemption, retirement, repurchase or other
acquisition, direct or indirect, by the Company or any Subsidiary of, on account
of, or in respect of, the principal of any Subordinated Debt (or any installment
thereof) prior to the regularly scheduled maturity date thereof (as in effect on
the date such Subordinated Debt was originally incurred).

For purposes of this Agreement, the amount of any Restricted Payment
made in property shall be the greater of (x) the Fair Market Value of such
property (as determined in good faith by the board of directors (or equivalent
governing body) of the Person making such Restricted Payment) and (y) the net
book value thereof on the books of such Person, in each case determined as of
the date on which such Restricted Payment is made.

"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).

"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.

"Securities Act" means the Securities Act of 1933, as amended from time
to time.

"Security" has the meaning set forth in section 2(1) of the Securities
Act of 1933, as amended.

"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.

"Subordinated Debt" means any Debt that is in any manner subordinated
in right of payment or security in any respect to Debt evidenced by the Notes.

"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.

"Subsidiary Stock" means, with respect to any Person, the stock (or any
options or warrants to purchase stock or other Securities exchangeable for or
convertible into stock) of any Subsidiary of such Person.

B-12
<PAGE>

"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps and similar obligations obligating such Person to
make payments, whether periodically or upon the happening of a contingency.

"Transfer" means, with respect to any Person, any transaction in which
such Person sells, conveys, transfers or leases (as lessor) any of its property,
including, without limitation, Subsidiary Stock. For purposes of determining the
application of the Net Proceeds Amount in respect of any Transfer, the Company
may designate any Transfer as one or more separate Transfers each yielding a
separate Net Proceeds Amount.

"Wholly-Owned Subsidiary" means, at any time, any Subsidiary one
hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company's other Wholly-Owned Subsidiaries at such time.

B-13
<PAGE>

SCHEDULE 5.4(A)(i)
ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES

<TABLE>
<CAPTION>
SUBSIDIARY NAME STATE OF ORGANIZATION PERCENT OWNED OWNER
<S> <C> <C> <C>
CBS HOME Real Estate Company Nebraska 100% The Company
CBS Brokerage Systems, Inc. Nebraska 96.45% CBS HOME Real Estate Company
Select Relocation Services, Inc. Nebraska 100% CBS HOME Real Estate Company
Real Estate Referral Network, Inc. Nebraska 100% CBS HOME Real Estate Company
Leasing Associates, Inc. Nebraska 100% CBS HOME Real Estate Company
MRT. Inc. Nebraska 100% CBS HOME Real Estate Company
J.C. Nichols Residential, Inc. Iowa 100% The Company
Plaza Financial Service L.L.C. Kansas 100% J.C. Nichols Residential, Inc.
Plaza Mortgage Services L.L.C. Kansas 100% Plaza Financial Service
J.C. Nichols Alliance, Inc. Kansas 100% J.C. Nichols Residential, Inc.
Iowa Realty Co., Inc. Iowa 100% The Company
Iowa Title Company Iowa 100% Iowa Realty Co., Inc.
Iowa Realty Insurance Agency, Inc. Iowa 100% Iowa Realty Co., Inc.
IMO Co., Inc. Missouri 100% Iowa Realty Co., Inc.
Midland Escrow Services, Inc. Iowa 100% Iowa Realty Co., Inc.
The Referral Co. Iowa 100% Iowa Realty Co., Inc.
First Realty, Ltd. Iowa 100% Iowa Realty Co., Inc.
Edina Financial Services, Inc. Minnesota 100% Iowa Realty Co., Inc.
Edina Realty, Inc. Minnesota 100% Edina Financial Services, Inc.

SCHEDULE 5.4
(to Note Purchase Agreement)

<PAGE>

SUBSIDIARY NAME STATE OF ORGANIZATION PERCENT OWNED OWNER

Edina Realty Title, Inc. Minnesota 100% Edina Financial Services, Inc.
Edina Realty Insurance Agency, Inc. Minnesota 100% Edina Financial Services, Inc.
Edina Realty Mortgage, Inc. Minnesota 100% Edina Financial Services, Inc.
Edina Realty Inc. Wisconsin 100% Edina Realty, Inc., a Minnesota corporation

</TABLE>

<PAGE>

SCHEDULE 5.4(A)(ii)
AFFILIATES (OTHER THAN SUBSIDIARIES)

A/C Security, Inc.
AmGas, Inc.
Bettendorf Lock & Security Services, Inc.
CBEC Railway Inc.
CHRS Inc.
Cimmred Leasing Company
Dakota Dunes Development Company
DCCO, Inc.
Diversified Electronics, Ltd.
Edina Realty Mortgage, L.L.C.
Home Real Estate, Inc. (Nebraska)
InterCoast Capital Company
InterCoast Energy Company
InterCoast Global Management, Inc.
InterCoast Power Company
InterCoast Power Marketing Company
InterCoast Sierra Power Company
InterCoast Trade & Resources Inc.
IWG Co. 8
MHC Investment Company
MidAmerican Capital Company
MidAmerican Energy Company
MidAmerican Energy Funding Company
MidAmerican Energy Holdings Company
MidAmerican Rail Inc.
MidAmerican Security Company
MidAmerican Services Company
Midwest Capital Group, Inc.
MRT, Inc.
MWR Capital Inc.
Pro-Tec Alarm Systems & Service, Inc.
Sutton Security, Inc.
The Mortgage Group, LLC
Title Information Services, L.L.C.
TTP, Inc. of South Dakota

<PAGE>

SCHEDULE 5.4(A)(iii)
COMPANY'S DIRECTORS AND SENIOR OFFICERS

Stanley J. Bright, President and CEO, Chairman of the Board
R. Michael Knapp, Senior Vice President -- Operations and Director
Ronald J. Peltier, Senior Vice President -- Operations and Director
Alan L. Wells, Vice President, CFO and Director
John A. Rasmussen, Jr., Vice President, General Counsel and Director
Ronald J. Giaier, Treasurer and Assistant Secretary
Larry M. Smith, Controller
Paul J. Leighton, Secretary and Assistant Treasurer
John J. Cappello, Director

<PAGE>

FINANCIAL STATEMENTS

Audited Consolidated Financial Statements and Consolidating Schedules of AmerUs
Home Services, Inc. and Subsidiaries, December 31, 1997.

J.C. Nichols Real Estate and Subsidiary. Consolidated Financial Statements, June
30, 1998 and December 31, 1997.

CBS Real Estate Co. Financial Statements and Accountant's Report for the Years
Ended December 31, 1997 and 1996.

Home Real Estate Company of Omaha Financial Statements with Accountant's Review
Report for the Years Ended December 31, 1997 and 1996.

SCHEDULE 5.5
(to Note Purchase Agreement)
<PAGE>

PATENTS, ETC.

None

SCHEDULE 5.11
(to Note Purchase Agreement)
<PAGE>

SCHEDULE 5.15
CONSOLIDATED DEBT AND PRIORITY DEBT

<TABLE>
<CAPTION>
<S> <C>
CONSOLIDATED DEBT 8/31/98

THE COMPANY

Revolving Line of Credit owing to $46,862,000
MidAmerican Energy Holdings Company
Purchase Price contingency re: CBS Real Estate Company $ 1,000,000
and J.C. Nichols Real Estate
PRIORITY DEBT
IOWA REALTY CO., INC. AND SUBSIDIARIES:

Byers' Non-Compete Agreement $ 766,392
Stacy Non-Compete Agreement $ 165,756
CBS HOME REAL ESTATE COMPANY:

Revolving Line of Credit, Nebraska State Bank of Omaha. $ 577,850
Debtor: The Mortgage Group, LLC (50% owned by CBS
HOME Real Estate Company)
Guaranteed by CBS HOME Real Estate Company
J.C. NICHOLS RESIDENTIAL, INC.:

Mercantile Bank -
$2,000,000 line of credit $ 0
Eugene D. Brown Company $ 200,000
Highwoods, Inc. $ 440,347
Capitalized Leases described on Schedule 10.6 $ 56,204
PLAZA MORTGAGE SERVICES

Mercantile Bank Loan

$7,000,000 line of credit $ 1,212,769

TOTAL CONSOLIDATED DEBT $51,281,318
===========

PRIORITY DEBT $ 3,419,318
===========
</TABLE>

SCHEDULE 5.15
(to Note Purchase Agreement)
<PAGE>

EXISTING INVESTMENTS

J.C. NICHOLS RESIDENTIAL, INC.
Reliance Relocation Services, Inc. 3000 shares common stock

EDINA REALTY, INC.
The Realty Alliance, Inc. 10,000 shares common stock
Reliance Relocation Services, Inc. 3,000 shares Common Stock

EDINA REALTY TITLE, INC. 20% member
Title Information Services, L.L.C.

IOWA TITLE COMPANY
Silver Screen Partners IV LP 10 Units
Senior Income Fund, LP 5,000 Units

IMO CO., INC.
3600 S. National, Springfield, MO

CBS HOME REAL ESTATE COMPANY
Home Real Estate, Inc. (Nebraska) 25 shares
Realty Alliance, Inc. 10,000 shares
Reliance Relocation Services, Inc. 3000 shares
NewCo. Investments, Inc. 600 shares
The Mortgage Group, L.L.C. 50% member

EDINA FINANCIAL SERVICES, INC. 50% member (as of 11/1/98)
Edina Realty Mortgage, L.L.C.
Unit 105, 40005 85th Ave. Onamia
Lot 2, block 1, Crossroads Center,
2nd Addition, Scott County
3706 Logan Ave. N.
214 3rd Ave. NE
1045 Pike Lake Dr.
1271 Marion St.

IOWA REALTY CO., INC.
727 18th St.
2108 E. 25th St.
9611 Alpine St.

SCHEDULE 10.5
(to Note Purchase Agreement)
<PAGE>

SCHEDULE 10.6(e)
LIENS

<TABLE>
<CAPTION>
<S> <C>
Debtor: Plaza Mortgage Services
Secured Party: Mercantile Bank ($7,000,000 line of credit)
Collateral: Residential first mortgages
Debt: $1,212,769 (August 31, 1998)

Debtor: J.C. Nichols Residential, Inc.
Secured Party: Mercantile Bank ($2,000,000 line of credit)
Collateral: Pending sales
Debt: $0 (August 31, 1998)

Debtor: J.C. Nichols Residential, Inc.
Creditor: Clune Equipment
Collateral: Various office equipment (capitalized lease)

Debtor: J.C. Nichols Residential, Inc. and Plaza Mortgage Service L.L.C.
Creditor: Mid-Continent Leasing Service (lease sold to People's National Bank)
Collateral: Ricoh Copier (capitalized lease)

Debtor: J.C. Nichols Residential, Inc. and Plaza Mortgage Service L.L.C.
Creditor: Allied Capital/College Leasing
Collateral: Konica Copier/Canon Fax (capitalized lease)

Debtor: J.C. Nichols Residential, Inc.
Creditor: Mid-Continent Leasing Service (lease sold to Mercantile Bank)
Collateral: Copiers (capitalized lease)

Debtor: Plaza Mortgage Services L.L.C.
Creditor: Aaron Rents
Collateral: Bookcase, file (capitalized lease)

Debtor: Plaza Mortgage Services L.L.C.
Creditor: Aaron Rents
Collateral: Executive desk, chairs, file (capitalized lease)
</TABLE>

SCHEDULE 10.6
(to Note Purchase Agreement)
<PAGE>

[FORM OF NOTE]

MIDAMERICAN REALTY SERVICES COMPANY

7.12% SENIOR NOTE DUE NOVEMBER 1, 2010

No. [_______] [Date]
$[__________] PPN 59562# AA 0

FOR VALUE RECEIVED, the undersigned, MIDAMERICAN REALTY SERVICES
COMPANY (herein called the "Company"), a corporation organized and existing
under the laws of the State of Iowa, hereby promises to pay to
[_____________________] or registered assigns, the principal sum of
[______________] DOLLARS on November 1, 2010 with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 7.12% per annum from the date hereof, payable
semiannually, on the first day of May and November in each year, commencing with
the May 1 or November 1 next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) to the extent permitted by law
on any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Make-Whole Amount (as
defined in the Note Purchase Agreement referred to below), payable semiannually
as aforesaid (or, at the option of the registered holder hereof, on demand), at
a rate per annum from time to time equal to the greater of (i) 9.12% or (ii) 2%
over the rate of interest publicly announced by The Chase Manhattan Bank from
time to time in New York, New York as its "base" or "prime" rate.

Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at The Chase Manhattan Bank in New York, New York or at such other place
as the Company shall have designated by written notice to the holder of this
Note as provided in the Note Purchase Agreement referred to below.

This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to the Note Purchase Agreement, dated as of November 1,
1998 (as from time to time amended, the "Note Purchase Agreement"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.

This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.

EXHIBIT 1
(to Note Purchase Agreement)
<PAGE>

The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.

If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.

This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.

MIDAMERICAN REALTY SERVICES COMPANY

By
--------------------------------
[Title:]

<PAGE>

FORM OF OPINION OF IN-HOUSE COUNSEL
OF THE COMPANY

The closing opinion of John A. Rasmussen, Jr., Esq., in-house counsel
of the Company, which is called for by Section 4.4 of the Note Purchase
Agreement, shall be dated the date of Closing and addressed to the Purchasers,
shall be satisfactory in scope and form to each Purchaser and shall be to the
effect that:

1. The Company is a corporation, duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation, has
the corporate power and the corporate authority to execute and perform the Note
Purchase Agreement and to issue the Notes and has the full corporate power and
the corporate authority to conduct the activities in which it is now engaged and
is duly licensed or qualified and is in good standing as a foreign corporation
in each jurisdiction in which the character of the properties owned or leased by
it or the nature of the business transacted by it makes such licensing or
qualification necessary except in jurisdictions where the failure to be so
qualified or licensed would not have a material adverse affect on the business
of the Company.

2. Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and is
duly licensed or qualified and is in good standing in each jurisdiction in which
the character of the properties owned or leased by it or the nature of the
business transacted by it makes such licensing or qualification necessary except
in jurisdictions where the failure to be so qualified or licensed would not have
a material adverse affect on the business of such Subsidiary, and all of the
issued and outstanding shares of capital stock of each such Subsidiary have been
duly issued, are fully paid and non-assessable and are owned by the Company, by
one or more Subsidiaries, or by the Company and one or more Subsidiaries.

3. The Note Purchase Agreement has been duly authorized by all
necessary corporate action on the part of the Company, has been duly executed
and delivered by the Company and constitutes the legal, valid and binding
contract of the Company enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law).

4. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered by the
Company and

EXHIBIT 4.4(a)
(to Note Purchase Agreement)

<PAGE>

constitute the legal, valid and binding obligations of the Company enforceable
in accordance with their terms, subject to bankruptcy, insolvency, fraudulent
conveyance and similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such principles
is considered in a proceeding in equity or at law).

5. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any state governmental body is
necessary in connection with the execution and delivery of the Note Purchase
Agreement or the Notes.

6. The issuance and sale of the Notes and the execution, delivery and
performance by the Company of the Note Purchase Agreement do not conflict with
or violate any provision of any law, statute, rule or regulation applicable to
the Company or conflict with or result in any breach of any of the provisions of
or constitute a default under or result in the creation or imposition of any
Lien upon any of the property of the Company pursuant to the provisions of the
Articles of Incorporation or By-laws of the Company or any agreement or other
instrument known to such counsel to which the Company is a party or by which the
Company may be bound.

7. There are no actions, suits or proceedings pending or, to the
knowledge of such counsel after due inquiry, threatened against or affecting the
Company or any Subsidiary in any court or before any governmental authority or
arbitration board or tribunal which, if adversely determined, would have a
Materially Adverse Effect. To the knowledge of such counsel, neither the Company
nor any Subsidiary is in default with respect to any court or governmental
authority, or arbitration board or tribunal.

The opinion of John A. Rasmussen, Jr., Esq. shall cover such other
matters relating to the sale of the Notes as each Purchaser may reasonably
request. With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and other officers of the Company.

EXHIBIT 4.4(a)-2
(to Note Purchase Agreement)

<PAGE>

FORM OF OPINION OF COUNSEL
TO THE COMPANY

The closing opinion of Winthrop, Stimson, Putnam & Roberts, counsel to
the Company, which is called for by Section 4.4 of the Note Purchase Agreement,
shall be dated the date of Closing and addressed to the Purchasers, shall be
satisfactory in scope and form to each Purchaser and shall be to the effect
that:

1. The Note Purchase Agreement has been duly authorized by all
necessary corporate action on the part of the Company, has been duly executed
and delivered by the Company and constitutes the legal, valid and binding
contract of the Company enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law).

2. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and delivered by the
Company and constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting creditors' rights generally,
and general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).

3. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any Federal governmental body is
necessary in connection with the execution and delivery of the Note Purchase
Agreement or the Notes.

4. The issuance and sale of the Notes and the execution, delivery and
performance by the Company of the Note Purchase Agreement do not conflict with
or violate any provision of any law, statute, rule or regulation applicable to
the Company or conflict with or result in any breach of any of the provisions of
or constitute a default under or result in the creation or imposition of any
Lien upon any of the property of the Company pursuant to the provisions of the
Articles of Incorporation or By-laws of the Company.

5. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreement do not, under existing
law, require the registration of the Notes under the Securities Act of 1933, as
amended, or the qualification of an indenture under the Trust Indenture Act of
1939, as amended.

6. Neither the issuance of the Notes nor the application of the
proceeds of the

EXHIBIT 4.4(b)
(to Note Purchase Agreement)

<PAGE>

sale of the Notes will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulation issued pursuant
thereto, including, without limitation, Regulation U, T or X of the Board of
Governors of the Federal Reserve System.

7. The Company is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.

8. The Company is a "subsidiary" of MidAmerican Energy Holdings
Company ("MEHC"), which is a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935. MEHC is exempt from regulation under
such Act pursuant to Section 3(a)(1) thereof (other than Section 9(a)(2)
thereof) and the rules and regulations thereunder promulgated by the Commission
and the Company is similarly exempt from such regulation.

The opinion of Winthrop, Stimson, Putnam & Roberts shall cover such
other matters relating to the sale of the Notes as each Purchaser may reasonably
request. With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and other officers of the Company.

EXHIBIT 4.4(b)-2

<PAGE>

FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS

The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by Section 4.4 of the Note Purchase Agreement, shall be
dated the date of Closing and addressed to each Purchaser, shall be satisfactory
in form and substance to each Purchaser and shall be to the effect that:

1. The Company is a corporation, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the corporate power
and the corporate authority to execute and deliver the Note Purchase Agreement
and to issue the Notes.

2. The Note Purchase Agreement has been duly authorized by all
necessary corporate action on the part of the Company, has been duly executed
and delivered by the Company and constitutes the legal, valid and binding
contract of the Company enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law).

3. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, and the Notes being delivered on the date
hereof have been duly executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law).

4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreement do not, under existing
law, require the registration of the Notes under the Securities Act of 1933, as
amended, or the qualification of an indenture under the Trust Indenture Act of
1939, as amended.

The opinion of Chapman and Cutler shall also state that the opinion of
Winthrop, Stimson, Putnam & Roberts, counsel to the Company, is satisfactory in
scope and form to Chapman and Cutler and that, in their opinion, the Purchasers
are justified in relying thereon.

With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials and
officers of the Company and upon representations of the Company and the
Purchasers delivered in connection with the issuance and sale of the Notes.

EXHIBIT 4.4(c)
(to Note Purchase Agreement)

<PAGE>

In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely, as to matters referred to in paragraph 1, solely upon an
examination of the Articles of Incorporation certified by, and a certificate of
good standing of the Company from, the Secretary of State of the State of Iowa
the By-laws of the Company and the general business corporation law of the State
of Iowa. The opinion of Chapman and Cutler is limited to the laws of the State
of Illinois, the general business corporation law of the State of Iowa and the
Federal laws of the United States.

<PAGE>

HOMESERVICES.COM INC. SUBSIDIARIES

SUBSIDIARIES:

COMPANY NAME STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION
- --------------------------------------------------------------------------------

CBS Brokerage Systems, Inc. Nebraska
CBS HOME Real Estate Company Nebraska
Edina Corporate Services, Inc. Minnesota
Edina Financial Services, Inc. Minnesota
Edina Realty Foundation Minnesota
Edina Realty, Inc. Minnesota
Edina Realty Insurance Agency, Inc. Minnesota
Edina Realty Mortgage, Inc. Minnesota
Edina Realty Mortgage, LLC Delaware
Edina Realty of Wisconsin, Inc. Wisconsin
Edina Realty Title, Inc. Minnesota
First Realty, Ltd. Iowa
IMO Co., Inc. Missouri
Iowa Realty Co., Inc. Iowa
Iowa Realty Insurance Agency, Inc. Iowa
Iowa Title Company Iowa
J.C. Nichols Alliance, Inc. Kansas
J.C. Nichols Residential, Inc. Iowa
J.C. Nichols Residential Peculiar, LLC Missouri
Leasing Associates, Inc. Nebraska
MidAmerican Commercial Real Estate
Services, Inc. Kansas
MidAmerican Home Services Mortgage,
LLC Delaware
Midland Escrow Services, Inc. Iowa
MRSCB, Inc. Kentucky
MRSCM, Inc. Kentucky
MRSCT, Inc. Kentucky
Nebraska Land Title and Abstract Co. Nebraska
Plaza Financial Services, L.L.C. Kansas
Plaza Mortgage Services, L.L.C. Kansas
Real Estate Referral Network, Inc. Nebraska
Select Relocation Services, Inc. Nebraska
The Referral Co. Iowa

- --------------------------------------------------------------------------------

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated May 28, 1999, relating to the consolidated financial statements
of HomeServices.Com Inc., of our report dated June 30, 1999, relating to the
financial statements of J.C. Nichols Real Estate, of our report dated July 2,
1999, relating to the financial statements of HOME Real Estate Company of Omaha,
and of our report dated July 14, 1999, relating to the financial statements of
Paul Semonin Company, which appear in such Registration Statement. We also
consent to the references to us under the heading "Experts" in such Registration
Statement.

Kansas City, Missouri
July 15, 1999 /s/ PricewaterhouseCoopers LLP

<PAGE>

Consent of Independent Auditors
-------------------------------

The Board of Directors
MidAmerica Realty Services Company:

We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

/s/ KPMG LLP
Des Moines, Iowa
July 13, 1999

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
HOMESERVICES.COM INC.'S CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998, AND
MARCH 31, 1999, AND ITS CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS ENDED
DECEMBER 31, 1998, AND MARCH 31, 1999, AS INDICATED BELOW, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> OTHER 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> MAY-28-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 3,114 2,898
<SECURITIES> 948 1,120
<RECEIVABLES> 18,666 14,831
<ALLOWANCES> (1,346) (1,349)
<INVENTORY> 0 0
<CURRENT-ASSETS> 34,411 30,159
<PP&E> 18,062 15,704
<DEPRECIATION> (2,609) 0
<TOTAL-ASSETS> 128,520 125,537
<CURRENT-LIABILITIES> 30,152 29,091
<BONDS> 58,009 57,863
0 0
0 0
<COMMON> 10 10
<OTHER-SE> 35,184 33,746
<TOTAL-LIABILITY-AND-EQUITY> 128,520 125,537
<SALES> 0 0
<TOTAL-REVENUES> 190,591 64,685
<CGS> 0 0
<TOTAL-COSTS> 113,225 39,107
<OTHER-EXPENSES> 81,713 27,122
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,929 1,064
<INCOME-PRETAX> (5,681) (2,354)
<INCOME-TAX> (2,247) (927)
<INCOME-CONTINUING> (3,434) (1,427)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,434) (1,427)
<EPS-BASIC> (343.30) (142.70)
<EPS-DILUTED> (343.40) (142.70)

</TABLE>