EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
on this 1st day of September, 1998, by and between X.X. Xxxxxxx Residential,
Inc. (the "Company"), a subsidiary of MidAmerican Realty Services Company
("MRSC"), which is a subsidiary of MidAmerican Energy Holdings Company
("MidAmerican") and Xxxx Frost (the "Employee").
WHEREAS, the Company believes that the Employee's contribution to the
growth and success of the Company as a member of its management team will be
substantial and desires to employ the Employee in that role; and
WHEREAS, the Employee is desirous of serving the Company in said
capacity on the terms herein provided;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained, the
parties hereto agree as follows:
1. Employment and Term. The Company hereby agrees to employ the
Employee as a member of its management team and the Employee
hereby agrees to serve the Company in such capacity, on the
terms and conditions set forth herein for the period
commencing on the date of this Agreement and continuing
for a period of five (5) years from that date, unless
earlier terminated by the Employee or the Company in
accordance with paragraph 5 herein. Upon the expiration of
the initial term, this Agreement shall automatically be
extended for one-year periods, unless on or before the date
which is one year prior to the expiration of the initial term
of the Agreement or any subsequent one-year extension period,
either party has delivered to the other written notice of
intent to terminate this Agreement upon its next expiration
date. The purpose of the automatic extension is to assure
that the parties have at least one year prior notice of
termination of the Agreement. Irrespective of whether the
Agreement is in its initial term or a subsequent one-year
extension period, it is at all times subject to the
termination provisions of paragraph 5.
2. Duties. The Employee is engaged by the Company to be
responsible for oversight of Company's real estate operations
in the Greater
Kansas City Metropolitan area and for such duties related to
the Company's management as may from time to time be assigned
by its Board of Directors (the "Board"), and shall report to
the Board. The Employee will, during his term of employment
hereunder:
a. Faithfully and diligently do and perform all such
acts and duties and furnish such services for the
Company as the Board or its designated
representative shall direct from time to time;
b. Devote his full time, energy and skill to the
business of the Company and to the promotion of its
best interests, except for vacations, absences made
necessary because of illness, and service on other
corporate, civic, or charitable boards or
committees not significantly interfering with his
duties hereunder.
3. Compensation. During the initial term of this Agreement, the
Company shall pay the Employee base, and, when earned in
accordance with the provisions of this paragraph, incentive
compensation for the performance of his duties under this
Agreement, as follows:
a. The Company shall pay Employee a base salary at the
annual rate of $250,000, payable at the Company's
regular payroll intervals and in accordance to
Company's regular payroll procedures. If the
Agreement is extended following the initial period
of the Agreement, then the Chief Executive Officer
of MidAmerican Energy Holdings Company shall review
Employee's annual base salary and consider possible
increases, taking into account inflation factors,
performance of the Company, salaries paid for
positions of similar responsibility for other
companies, and other relevant factors, and shall
recommend such increases when deemed appropriate,
for approval of the Compensation Committee of the
Board of Directors of MidAmerican (the "Committee").
b. Short-term incentive compensation to be determined
as provided in Exhibit A attached hereto.
With respect to the calculation of short-term
incentives under this subparagraph, if it becomes
apparent that the stated earn-
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ings thresholds cannot be achieved for unforeseen
reasons and in spite of diligent management effort,
the Employee may nonetheless be awarded short-term
incentive payments, if approved by the Committee as
recommended by the Chief Executive Officer of
MidAmerican Energy Holdings Company, to reward
exemplary performance.
In the event the Company terminates the Employee's
employment for any reason other than Good Cause, as
defined in subparagraph 5(c) other than due to
Employee's death or disability, or the Employee
terminates his employment for Good Reason, as
defined in subparagraph 5(d), prior to the end of
any calendar year, he shall be entitled to a
short-term incentive payment if the earnings
thresholds described in Exhibit A have been achieved
as of the last day of the calendar year in which his
termination of employment occurs, provided, however,
that the amount of such payment shall be calculated
by multiplying the incentive amount that would have
been payable to the Employee pursuant to Exhibit A,
had his employment not terminated during the
calendar year, by a fraction, the numerator of
which is the number of full weeks of employment
completed by the Employee during such calendar year
and the denominator of which is 52. If the
Employee's employment is terminated for Good Cause,
as defined in subparagraph 5(c), other than due to
death or disability, or the Employee terminates his
employment for other than Good Reason, as defined
in subparagraph 5(d), prior to the end of any
calendar year, no short-term incentive shall be
payable for such year.
c. If the Employee's employment continues subsequent to
the fifth anniversary of the date of this Agreement,
the Employee and the Chief Executive Officer of
MidAmerican Energy Holdings Company shall negotiate
the amount of the Employee's future base salary and
the terms of any further short-term incentive
arrangements at that time, with all such compensation
to be subject to approval of the Committee.
4. Additional Benefits.
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a. The Employee shall be eligible to participate in the
ERISA qualified retirement and welfare benefit plans
of the Company in accordance with the terms and
conditions of such plans. The Employee shall also be
entitled to paid vacations and holidays consistent
with the company's customary practice.
b. The Company shall promptly pay (or reimburse the
Employee for) all reasonable expenses incurred by
him in the performance of his duties hereunder in
accordance with policies from time to time adopted
by the Board, including business travel and
entertainment expenses. The Employee shall furnish
to the Company such receipts and records as the
Company may require to verify the foregoing expenses.
c. The Company shall provide Employee a vehicle with a
standard monthly lease rate of not more than
$1,200. In addition, the Company shall pay the
Employee's monthly membership dues at Indian Hills
Country Club ("Country Club") and reimburse him for
expenses incurred at the Country Club which are
related to conduct of Company business. The Employee
shall furnish to the Company such receipts and
records as the Company may require to verify the
foregoing expenses.
5. Termination.
a. The Employee may resign his employment with the
Company effective upon two months' advance written
notice to the Board. If the Employee resigns under
this paragraph, the Board (by the vote of a majority
of its members other than the resigning Employee, if
Employee is then a Board member, and other members
who have given notice of resignation as an employee)
retains the right to terminate the Employee's
employment, effective upon written notice to the
Employee, at any time during the notice period for
Good Cause, as defined in subparagraph 5(c).
b. The employment of the Employee with the Company may
be terminated, for other than Good Cause, as defined
in subpara-
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graph 5(c), by the Board directing such termination
(by the vote of a majority of its members other than
the Employee, if Employee is then a Board member,
and other members who have given notice of
resignation as an employee) and upon two months'
advance written notice to Employee, provided,
however, that Employee may be terminated, effective
upon written notice to Employee, for Good Cause
during the notice period. The Board may require
Employee to cease reporting to work during the
notice period, even without Good Cause.
c. The employment of the Employee may be terminated for
Good Cause by the Board directing such termination
(by the vote of a majority of its members, if
Employee is then a Board member, other than the
Employee and other members who have given notice of
resignation as an employee) and effective upon
written notice to the Employee. Good Cause shall
mean (1) the Employee's conviction of any gross
misdemeanor involving dishonesty, fraud or breach of
trust or a felony; (2) the Employee's engagement in
gross misconduct that materially injures the
Company, monetarily or otherwise; (3) the Employee's
gross neglect of his duties under this Agreement,
including Employee's failure to physically appear
for work; (4) the Employee's death or Disability; or
(5) the Employee's violation of paragraph 7 of this
Agreement. The Employee shall be considered to have
come under a Disability if he, by reason of physical
or mental disability, becomes unable to perform the
services required of him hereunder for more than
three (3) months during any 12-month period.
d. The Employee may terminate his employment with the
Company at any time for Good Reason, effective
immediately upon written notice to the Board. Good
Reason shall exist if the Employee terminates his
employment because (1) the Company has materially
breached any of the terms of this Agreement; (2)
the Employee is assigned duties which are materially
inconsistent with his position, duties,
responsibilities and status as a member of the
Company's management team; (3) the Company's
principal office or the Employee's office location
as assigned to him by the Company is relocated to a
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location more than 50 miles from the Greater Kansas
City Metropolitan area; or (4) within the three (3)
year period beginning on the effective date of this
Agreement, the Company is directly or indirectly
acquired by National Realty Trust, GMAC or Cendant
Corporation, its affiliates or other persons or
entities acting on its behalf and Employee acting in
good faith is unable to reach agreement on a modified
Employment Agreement within thirty (30) days
following acquisition.
6. Severance.
a. If the Employee's employment is terminated by the
Company for other than Good Cause or the Employee
terminates his employment with the Company for Good
Reason, the Company shall continue to pay the
Employee his base salary as in effect as of his
termination date at the Company's normal payroll
intervals during the Non-Competition Period, as
defined in subparagraph 7(a). In addition, during the
Non-Competition Period, the Company shall also pay
to the Employee annually a short-term incentive
payment as described in Exhibit A, equal to the
average annual short-term incentive payments made to
the Employee under this Agreement prior to the
Employee's termination. During this period, if the
Employee is eligible for and elects continuation
coverage under one or more group health plans
sponsored by the Company or its subsidiaries, the
Company shall pay the same portion of the premium
cost of such coverage, if any, as is paid by the
Company for members of its management team who are
actively employed.
b. If the Employee terminates his employment with the
Company for other than Good Reason, the Company
shall pay the Employee his base salary only through
his termination date and the Non-Competition Period
shall continue for the full period specified in
subparagraph 7(a) without additional consideration
other than payments made prior to the Employee's
termination date.
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c. If the Employee is terminated by the Company for
Good Cause, the Company shall pay the Employee his
base salary only through his termination date and
the Non-Competition Period shall continue for the
full period specified in subparagraph 7(a) without
additional consideration other than the payments
made prior to the Employee's termination date.
d. Except as provided in this paragraph 6 or in
subparagraph 3(b), or as otherwise required pursuant
to the laws applicable to the retirement and welfare
plans sponsored by the Company or its subsidiaries,
the Employee shall receive no compensation or
additional benefits following his termination date.
7. Non-Competition and Non-Solicitation.
a. Employee covenants and agrees that, during his
employment and from the date of his termination of
employment with the Company for any reason until the
third anniversary of such date (the "Non-Competition
Period"), he will not, directly or indirectly, own,
manage, operate, control, invest in, be employed by
or under contract with, participate in, consult with
or render services to, or be connected in any manner
with the operation, ownership, management or control
of any enterprise which competes with any business
engaged in by X.X. Xxxxxxx Residential, Inc. or its
affiliates during his employment and within the
states of Missouri and Kansas. Employee agrees that
he will promptly notify the Board of his employment
or other affiliation with any other business or
entity during the Non-Competition Period.
b. Employee also certifies that he is not currently
subject to a noncompetition agreement with a former
employer or any other person or entity which
prohibits him from working with the Company in the
capacity contemplated by this Agreement.
c. The Employee specifically acknowledges that he has
obtained and will, in the course of his employment,
continue to obtain and have access to confidential
data pertaining to customers and prospective
customers of the Company, that such data is a
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valuable and unique asset of Company's business and
that the success or failure of Company's specialized
business is dependent to a significant degree upon
the ability of Company to establish and maintain
close and continuing personal contacts and working
relationships with its customers and prospective
customers and to develop proposals which are
specifically devised, refined and adjusted to meet,
satisfy and coincide with the interests and
requirements of its customers and prospective
customers. Therefore, this paragraph is specifically
intended to prohibit, during the Non-Competition
Period, solicitation, either directly or indirectly,
of any or all of Company's customers and clients at
the time of the Employee's termination of employment
and prospective customers and clients of Company
with whom Employee had contact, or was in a position
to have contact with, during the two years preceding
his termination of employment.
d. Employee further agrees that during his employment
and during the Non-Competition Period, Employee will
not solicit on his own behalf or on behalf of any
other person, the services of any person who is an
employee or agent of Company or was an employee or
agent of Company during the two years preceding the
Non-Competition Period or solicit any of Company's
employees or agents to terminate their employment or
agency with Company, without advance written
approval of the Board of the Company.
e. Employee further acknowledges that he has obtained
and will, in the course of his employment, continue
to obtain and have access to confidential data
relating to Company's special vendors and procurers
and their representatives and that this information
is a valuable and unique asset of Company, also
developed over time. Employee agrees that, during
the Non-Competition Period, he will not solicit on
his own behalf or on behalf of any other person, any
such vendor, procurer or representative for the
purposes of either providing products or services or
terminating their relationship or agency with
Company. It is not the intent of this paragraph to
prohibit the solicitation of common vendors such as
vendors of telephone
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and electric services and such other vendors that
are common to the operation of any business.
f. Employee further agrees that, during the
Non-Competition Period, he will do nothing to
interfere with any of Company's business
relationships or its goodwill or reputation.
g. Employee hereby acknowledges and agrees that all
non-public information and data of Company,
including without limitation that related to
products, customers, pricing, sales and financial
results (collectively "Trade Secrets") are of
substantial value to Company, provide it with a
substantial competitive advantage in its business,
and are and have been maintained in strictest
confidence as trade secrets. Except as otherwise
approved in writing by the Board, the Employee shall
not divulge, furnish, or make accessible to anyone
(other than the Company, its directors and officers
or to others during the course of Employee's
employment with the Company if, in good faith, the
Employee determines that such disclosure is in the
best interest of the Company) any Trade Secrets.
8. Remedies. Employee acknowledges that the restrictions set
forth in paragraph 7 are reasonably necessary to protect a
legitimate business interest of the Company. It is understood
that if the Employee violates his obligations under any of
these paragraphs, Company would suffer irreparable harm for
which a recovery of money damages would be an incomplete and
inadequate remedy. It is therefore agreed that in the case of
any violation or threatened violation of paragraph 7 of this
Agreement, Company may apply for and secure injunctive
relief, temporary or provisional, in court, without bond but
upon due notice, pending final resolution on the merits
pursuant to arbitration as set forth in paragraph 15 below.
No waiver of any violation of this Agreement shall be implied
from any failure by Company to take action under this
paragraph.
9. Severability. The parties intend that the covenants and
agreements contained herein shall be deemed to be a series of
separate covenants and agreements, one for each and every
state of the United States and political subdivision outside
the United States when the business
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described is conducted. If, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants
deemed included in such action, then such unenforceable
covenants shall be deemed eliminated from the provisions of
this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining covenants to be
enforced in such proceeding. Further, in the event that any
provision is held to be over broad as written, such provision
shall be deemed amended to narrow its application to the
extent necessary to make the provision enforceable according
to applicable law and enforced as amended.
10. Binding Effect. The covenants and agreements of paragraph 7
shall survive the termination of this Agreement for any
reason and shall not be terminated by the voluntary
dissolution of the Company (or any parent, subsidiary or
successor of the Company) or merger whereby the Company (or
such parent, subsidiary or successor of the Company) is not
the surviving or resulting corporation, or any transfer of
substantially all the assets of the Company, unless no
transferee or successor continues to carry on the business
activities of the Company. In the event of any such merger
or consolidation or transfer of assets, the provisions of
this Agreement shall inure to the benefit of and shall be
binding upon the surviving or resulting corporation or the
corporation to which such assets shall be transferred.
11. Entire Agreement. From and after the date of this Agreement,
the terms and provisions of this Agreement constitute the
entire agreement between the parties. This Agreement
supersedes any previous oral or written communications,
representations, or agreements with respect to any subject,
including the subject matter of compensation, incentive,
participation and profit sharing and termination
compensation.
12. Waiver. No waiver by either party at any time of any breach
by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by the other
party shall be deemed a waiver of any other provisions or
conditions at the same time or at any prior or subsequent
time.
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13. Applicable Law. All questions pertaining to the validity,
construction, execution and performance of this Agreement
shall be construed and governed in accordance with the laws
of the State of Iowa. The parties consent to the personal
jurisdiction of the State of Iowa, waive any argument that
such a forum is not convenient, and agree that any litigation
or arbitration relating to this Agreement shall be venued in
Polk County, Iowa.
14. Tax Withholding. The Company may withhold from any payment of
benefits under this Agreement (and forward to the appropriate
taxing authority) any taxes required to be withheld under
applicable law.
15. Disputes. Any and all claims or disputes between Employee and
Company (including the validity, scope, and enforceability of
this paragraph), except as otherwise provided under paragraph
8 herein, shall be submitted for arbitration and resolution
to an arbitrator. No demand for arbitration may be made after
the date when the institution of legal or equitable
proceedings based on such claim or dispute would be barred by
the applicable statute of limitation. The arbitrator shall be
selected by mutual agreement of the parties. Unless otherwise
provided for in this Agreement, the Expedited Labor
Arbitration Rules of the American Arbitration Association
shall apply. If the parties are unable to agree upon an
arbitrator, any such dispute shall be solely and finally
settled by arbitration in accordance with the Expedited labor
Arbitration Rules of the American Arbitration Association
("AAA"), except (1) the arbitrator shall be selected by the
AAA as follows: (a) the AAA shall submit a list of names of
five arbitrators with significant experience in arbitrating
executive employment disputes; (b) each party shall have the
right to exercise unlimited challenges to said named
arbitrators for cause, the AAA to determine, if disputed,
whether any such challenge for cause is justifiable and to
replace any such stricken arbitrator name with another name
so that the parties are presented with five names, none of
which can be stricken for cause; (c) each party hereto may
exercise up to two peremptory challenges to names on the
submitted list of five names; and (d) the AAA shall selected
the arbitrator from the remaining names; and (2) the
arbitrator shall render an Award in writing with sufficient
detail to determine the arbitrator's decision on each issue
submitted to arbitration. The parties agree that no punitive
damages
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shall be awarded hereunder. The parties also agree that all
awards, decisions and remedies in favor of a winning party
hereunder with respect to any issue shall be proportional to
the violation caused by the losing party with respect to that
issue. All costs in conducting the arbitration, including but
not limited to the arbitration filing fee, the arbitrator's
fees and expenses, and the reasonable attorney's fees and
expenses of the prevailing party (including the attorney's
fees and costs incurred by the prevailing party in seeking or
resisting temporary or provisional court relief as set out
in paragraph 8 above), shall be the responsibility of the
losing party. In the event there is more than one issue in
dispute and there is no one prevailing party with respect to
all issues in dispute, costs and attorneys' fees shall be
prorated by the arbitrator according to the relative dollar
value of each issue. The arbitrator's Award shall be final
and binding. In the event either party must resort to the
judicial process to enforce the provisions of this
Agreement, the award of an arbitrator or equitable relief
granted by an arbitrator, the party seeking enforcement shall
be entitled to recover from the other party all costs of
litigation including, but not limited to, reasonable
attorney's fees and court costs. The arbitration proceedings
and Award shall be maintained by both parties as strictly
confidential, except as otherwise required by court order and
with respect to the parties' attorneys and tax advisors, and,
with respect to Company, members of its management, and, with
respect to Employee, his family and close confidants.
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IN WITNESS WHEREOF, the parties have executed this Employment
Agreement effective as of the day and year first above written.
X.X. XXXXXXX RESIDENTIAL, INC.
By:
------------------------------
/s/
Title:
------------------------------
XXXX FROST
/s/ Xxxx Xxxxx
-------------------------------------
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EXHIBIT A
Short-Term Incentive Compensation Plan for Xxxx Frost
Start Date: September 1, 1998
Term of Plan: Five (5) years
Award Opportunity: Target award of 40% of base salary, with a
maximum award equal to 60% of base salary
Definition of EBITDA: MidAmerican Realty Services Company's
profit before depreciation; amortization of
transaction costs and goodwill; interest income
or expense; income taxes and unusual
non-recurring gains or expenses (e.g., legal settle-
ments, provisions for contingencies, effect of
accounting changes and severance costs).
Payment: Payment of the award will be made upon
achievement of the performance criteria and
after the Compensation Committee of the
Board of Directors of MidAmerican Energy
Holdings Company (the "Committee") approves the
incentive award computations, based upon the
recommendation of the Chief Executive Officer ("CEO")
of MidAmerican Energy Holdings Company. In making
recommendation to the Committee, the CEO will
consider the award proposed by Xxxx Xxxxx and any
other factors that the CEO in the CEO's sole discre-
tion deems relevant.
Purpose: The intent of the incentive award and its underlying
formula is to focus senior executives on maximizing
"enterprise value".
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Award Determination: Award to be recommended to the Committee
will be determined by the CEO and based upon
objective performance criteria to be established
at the beginning of each calendar year. Such
criteria will also be recommended by the CEO
to the Committee for approval. For 1998, the
performance criteria in effect will be based
upon "EBITDA" level, which will be established by
the CEO following acquisition of X.X. Xxxxxxx
Real Estate by MidAmerican Realty Services Company.
During a calendar year, performance criteria may be
adjusted at the sole discretion of the CEO, with the
concurrence of the Committee, to reflect
modifications to MidAmerican Realty Services
Company's operations, resulting from items such as
acquisitions or other items such as acquisitions or
other items for which an adjustment is deemed
appropriate. The CEO and the Committee will be
under no obligation to make any such adjustments
to the performance criteria.
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