-7-
Execution Copy
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN
CALENERGY COMPANY, INC.
(formerly known as "CALIFORNIA ENERGY COMPANY, INC.")
AND
DAVID L. SOKOL
This Amendment No. 1 (the "Amendment") to the Amended and
Restated Employment Agreement dated August 21, 1995 (the
"Employment Agreement") by and between CalEnergy Company, Inc., a
Delaware Corporation (the "Company"), and David L. Sokol (the
"Executive"), is entered into as of August 28, 1996.
WHEREAS, the Company and the Executive are presently parties
to the Employment Agreement; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement as set forth herein;
NOW, THEREFORE, the Employment Agreement is hereby amended
as follows:
(1) By deleting from the first sentence of Section 3(b) of
the Employment Agreement the words "except pursuant to Section
7".
(2) By deleting from the first sentence of Section 4(e) of
the Employment Agreement from parenthetical "(i)".
(3) By deleting Section 4(g) of the Employment Agreement in
its entirety, and redesignating Section 4(h) as Section 4(g).
(4) By amending and restating Section 8 of the Employment
Agreement to read in its entirety as follows:
"Section 8. Payment Upon Termination.
(a) If the employment of the Executive is terminated
pursuant to subsections (i) or (iii) of Section 7(a), the
Company will pay to the Executive, within 30 calendar days,
(x) any salary pursuant to Section 4(a) which is accrued but
unpaid through the Termination Date, and (y) a bonus
payment, in an amount determined by the Board by reference
to the performance of the Executive for a portion of the
fiscal year of the Company before the Termination Date,
which is not less than a pro rata share (determined by
reference to the portion of the fiscal year before the
Termination Date) of the Minimum Bonus.
(b) If the employment of the Executive is terminated
pursuant to subsections (ii), (iv), (v) or (vi) of Section
7(a), the Company will pay the Executive, on or before the
related Termination Date, an amount equal to three times the
sum of the annual salary and Minimum Bonus then in effect
pursuant to Section 4. In addition, (x) any portion of the
options granted to the Executive which would become vested
within the next 36 months (beginning with the month
following the month in which the Termination Date occurs)
will vest immediately and may be exercised within the
remaining term of the options as provided in the applicable
option agreements, and (y) the Company shall continue in
effect for Executive and his dependents, for a period of 36
months after the Termination Date, the life insurance,
medical benefits, dental benefits and disability plan
available to the Executive and his dependents immediately
prior to the Termination Date, subject to such employee
contributions and other terms and conditions as are
applicable to active employees generally and subject to
subsequent modification or termination of such plans to the
extent such subsequent actions are also applicable to active
employees generally; provided that such plan benefits shall
terminate earlier on the date, if any, that comparable
benefits are made available to the Executive by any new
employer."
(5) By inserting immediately following Section 8 new
Section 8A, which shall read in its entirety as follows:
"Section 8A. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that
any payment, distribution, waiver of Company rights,
acceleration of vesting of any stock options or restricted
stock, or any other payment or benefit in the nature of
compensation to or for the benefit of the Executive, alone
or in combination (whether such payment, distribution,
waiver, acceleration or other benefit is made pursuant to
the terms of this Agreement or any other agreement, plan or
arrangement providing payments or benefits in the nature of
compensation to or for the benefit of the Executive, but
determined without regard to any additional payments
required under this Section 8A) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986 (the "Code") (or any successor
provision) or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes with
respect to the Gross-Up Payment (including any interest or
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8A(c), all
determinations required to be made under this Section 8A,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by Deloitte and Touche LLP, or such other nationally
recognized accounting firm then auditing the accounts of the
Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event
that the Accounting Firm is unwilling or unable to perform
its obligations pursuant to this Section 8A, the Executive
shall appoint another nationally recognized accounting firm
to make the determinations required hereunder (which
accounting firm shall then be referred to hereunder as the
Accounting Firm). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up
Payment, determined pursuant to this Section 8A, shall be
paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon
the Company and the Executive. The parties hereto
acknowledge that, as a result of the potential uncertainty
in the application of Section 4999 of the Code (or any
successor provision) at the time of the initial
determination by the Accounting Firm hereunder, it is
possible that the Company will not have made Gross-Up
Payments which should have been made consistent with the
calculations required to be made hereunder (an
"Underpayment"). In the event that the Company exhausts its
remedies pursuant to Section 8A(c) and the Executive
thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit
of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 20 business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-
day period following the date on which he gives such notice
to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing
provisions of this Section 8A(c), the Company shall control
all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and
shall indemnify and hold the Executive harmless, on an after-
tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed
income with respect to such advance; and further provided
that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore,
the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 8A(c),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 8A(c))
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 8A(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required
to be paid."
Except as provided herein and to the extent necessary to
give full effect to the provisions of this Amendment, the terms
of the Employment Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have entered into
this Amendment as of August 28, 1996.
CALENERGY COMPANY, INC.
By: /S/__________________________
Name: Steven A. McArthur
Title: Senior Vice President
EXECUTIVE
/S/_________________________________
David L. Sokol