Exhibit 10.4
                                                                 EXECUTION COPY

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

         This Amended and Restated Employment Agreement, originally entered into
as of August 6, 1996, as amended by Amendment No. 1, dated as of April 16, 1997,
as  amended  by  Amendment  No. 2, dated as of March 11,  1999,  is amended  and
restated as of May 10, 1999 by and between  MidAmerican  Energy Holdings Company
(formerly  CalEnergy  Company,  Inc.  ("CalEnergy")),  an Iowa  corporation (the
"Company"), and Steven A. McArthur (the "Executive").

                                    RECITALS

         The  Company  desires  to  employ  the  Executive  as its  Senior  Vice
President - Mergers & Acquisitions  and Secretary on the terms set forth in this
Agreement, and the Executive desires to accept such employment.

         Accordingly, the Company and the Executive agree as follows:

                                    AGREEMENT

          Section 1. Defined Terms. Terms used but not defined in this Agreement
will have the meanings ascribed to them in Exhibit A to this Agreement.

         Section 2.  Employment.

               (a) The Company will employ the  Executive  as, and the Executive
will act as, the Senior Vice President - Mergers & Acquisitions and Secretary of
the Company,  subject to and upon the terms set forth in this Agreement, for the
Term of Employment.

               (b) The  Executive's  primary place of employment  will be Omaha,
Nebraska or such other place as is determined,  prior to a Change in Control, in
good  faith by the  Chairman  of the Board and Chief  Executive  Officer  of the
Company  (hereinafter  referred to as the  "Chairman of the Board") to be in the
best interests of the Company.

         Section 3.  Duties.

               (a) The  Executive  (i) will  perform  and  discharge  the duties
incident to and  consistent  with his title of Senior Vice President - Mergers &
Acquisitions  and  Secretary,  and (ii) will  perform and  discharge  such other
duties,  and will have such  other  authority,  as are  delegated  to him by the
Chairman of the Board.  In performing  such duties,  the  Executive  will report
directly  to, and be subject to the  direction  of, the  Chairman  of the Board.
Prior to a Change in Control, the Executive's title and duties may in good faith
be modified by the Chairman of the Board.
<PAGE>

               (b) The Executive will act,  without any compensation in addition
to the compensation payable pursuant to this Agreement,  as an officer or member
of the board of directors of any  subsidiary of the Company,  if so appointed or
elected.

               (c) During the Term of Employment,  the Executive (i) will devote
his entire time,  attention  and energies  during normal  business  hours to the
business  of the  Company and its  subsidiaries  and (ii) will not,  without the
written consent of the Chairman of the Board, perform any services for any other
Person or engage in any other business or professional activity,  whether or not
performed or engaged in for profit.

               (d) Notwithstanding  subsection 3(c), the Executive,  without the
consent of the Chairman of the Board, may (i) purchase  securities issued by, or
otherwise  passively  invest his personal or family assets in, any other company
or business  within the  constraints  imposed by the Policy of Business  Conduct
referred to below,  and (ii) engage in governmental,  political,  educational or
charitable activities,  but only to the extent that those activities (A) are not
inconsistent with any direction of the Chairman of the Board or any duties under
this  Agreement,  and (B) do not interfere with the devotion by the Executive of
his entire time,  attention  and energies  during normal  business  hours to the
business of the Company.

         Section 4.  Compensation.

               (a)  During  the Term of  Employment,  the  Company  will pay the
Executive a base salary at an annual rate of $220,000,  in  substantially  equal
periodic  payments in  accordance  with the  Company's  practices  for executive
employees, as determined from time to time by the Chairman of the Board.

               (b) The  Chairman of the Board will review the salary  payable to
the Executive at least annually  beginning in the fourth fiscal quarter of 1999.
The  Chairman of the Board,  in his  discretion,  may increase the salary of the
Executive  from time to time,  but may not reduce  the  salary of the  Executive
below the amount set forth in subsection 4(a) above.
<PAGE>

               (c)  During  the  Term of  Employment,  the  Executive  shall  be
eligible  for  consideration  for an  annual  incentive  merit  bonus,  for  the
Executive's  performance  during the preceding  fiscal year of the Company in an
amount  determined by the Chairman of the Board in his discretion,  by reference
to the  accomplishment  by the Executive of goals established by the Chairman of
the Board for the related  fiscal year.  The annual bonus paid to the Executive,
however,  will not be less than the Minimum Bonus.  The Executive  shall also be
eligible to be paid other  bonuses for each  fiscal  year as  determined  by the
Chairman of the Board. The Executive's  annual  incentive merit bonus,  together
with all such other bonuses paid or payable for the fiscal year  (including  any
amounts  for  which  receipt  is  otherwise  deferred  pursuant  to  a  plan  or
arrangement  with  the  Company),   is  referred  to  herein  as  "Annual  Bonus
Compensation."

               (d)  The  Company  will  reimburse  the  Executive,   subject  to
compliance  by  the  Executive  with  the  Company's   customary   reimbursement
practices,  for all reasonable and necessary  out-of-pocket expenses incurred by
the Executive on behalf of the Company in the course of its business.

               (e) The Company  may reduce any  payments  made to the  Executive
under  this  Agreement  by any  required  federal,  state  or  local  government
withholdings or deductions for taxes or similar charges,  or otherwise  pursuant
to law, regulation or order.

               (f) Any base salary  payable to the  Executive  for any period of
employment of less than one year during the Term of  Employment  will be reduced
to reflect the actual number of days of  employment  during the period except as
provided in Sections 8(b) and 8(c).

         Section 5.  Other Benefits.

               (a)  During  the  Term  of  Employment,  the  Executive  and  his
dependents may  participate in and receive  benefits under any employee  benefit
plan which the Company  makes  generally  available to its  employees  and their
families,  including  any pension,  life  insurance,  medical  benefits,  dental
benefits or  disability  plan,  but only to the extent that the Executive or his
dependents  otherwise  satisfies the standards  established for participation in
the plan.  The terms of  Executive's  existing  option  agreements,  as amended,
remain unaffected hereby, except as set forth in Sections 8(b) and 8(c) hereof.

               (b) The  Executive  may take up to four weeks of vacation  during
each  full  calendar  year  during  the Term of  Employment  at a time  mutually
convenient  to the Executive and the Company,  without loss of  compensation  or
other benefits under this Agreement.
<PAGE>

         Section 5A.  Supplemental Retirement Benefits.

               (a)  Effective  as of March 12,  1999,  the  closing  date of the
merger between CalEnergy Company, Inc. and MidAmerican Energy Company, resulting
in the creation of MidAmerican  Energy Holdings Company (the "Merger Date"), the
Executive  shall  irrevocably  become a participant  in the  MidAmerican  Energy
Company Supplemental Retirement Plan for Designated Officers (the "SERP").

               (b)  The   Executive   shall   receive   fully  vested  years  of
participation  credit under the SERP (for all  purposes,  including  vesting and
benefit  accrual)  for all years of service (or portions  thereof)  performed at
CalEnergy prior to the Merger Date, as provided on Exhibit B attached hereto.

               (c) The  Executive  shall  be  entitled  to an  Early  Retirement
Benefit Payment Option under the SERP pursuant to which he may elect to commence
receiving benefits under the SERP after the Executive's retirement or disability
on or after attaining age 47, which payments shall be calculated pursuant to the
SERP but which shall be no less than as provided on Exhibit C hereto  (including
for purposes of the following sentence).  In the event of the Executive's death,
benefits shall be paid pursuant to Section 6.4 of the SERP;  provided,  however,
that any payment due under  Section  6.4(a) of the SERP shall  continue  for the
remaining  lifetime of the  Executive's  surviving  "Spouse"  (as defined in the
SERP) or for 360 months if the Executive  dies without a surviving  Spouse;  and
further provided, however, that any payment due under Section 6.4(b) of the SERP
shall be payable without regard to the two-thirds and fifty percent  limitations
contained therein.

               (d) In the event of a Triggering  Event (as defined  below),  the
Executive shall be entitled to the following under the SERP:

                            (i)   for   purposes   of   determining   years   of
                           participation credit, the Executive shall be credited
                           with additional years of  participation  (or portions
                           thereof) equal to the  difference  between age 65 and
                           the Executive's age (in years or portions thereof) on
                           the date of the Triggering Event, and

                           (ii) any benefits  under the SERP not fully vested on
                           the  date  of the  Triggering  Event  (including  the
                           benefits arising by the foregoing subparagraph) shall
                           become fully vested as of such date.
<PAGE>

For  purposes  of this  Section  5A(d),  a  Triggering  Event shall mean (x) the
termination of the Executive by the Company  without Cause;  (y) the resignation
by the Executive pursuant to Section 7(a)(vi) of this Agreement; or (z) a Change
in Control occurring after the Merger Date. All capitalized terms shall have the
meanings ascribed to them in Exhibit A of this Agreement.

               (e)  Notwithstanding  anything  herein  or in  the  SERP  to  the
contrary, for purposes of determining any benefit payable to Executive under the
SERP,  Executive's  annual base salary and annual bonus shall never be less than
the base salary referenced in Section 4(a) hereof and that portion of the Annual
Bonus Compensation earned by Executive for the 1998 calendar year which the SERP
Committee has determined  shall be included for purposes of calculating the SERP
benefit (i.e., $500,000).

               (f)  Within 30 days  prior to a Change in  Control,  the  Company
shall (i)  establish a rabbi trust or an  irrevocable  standby  letter of credit
with a U.S.  Bank rated A or better,  in each case  naming  the  Executive  as a
beneficiary and having terms  reasonably  satisfactory to the Executive in order
to provide  security  for the payment of benefits to  Executive  pursuant to the
SERP, and (ii) if a rabbi trust is established,  deposit into the rabbi trust an
amount which,  with the expected  earnings  thereon from reasonably  prudent and
conservative investments (as confirmed by a certificate of a national accounting
firm of  recognized  standing  which is  independent  of the  Company)  shall be
sufficient to satisfy the ultimate benefit  obligations to Executive pursuant to
the SERP.

               (g) A  general  release  of claims  under  the SERP  shall not be
required of the Executive in order to receive benefits thereunder.

               (h) The Executive's  entitlement to benefits under the SERP shall
be  nonforfeitable  and, Section 6.5 of the SERP  notwithstanding,  shall not be
adversely affected in any way upon termination of the Executive's employment for
Cause.

         Section 6. Confidentiality and Post-Employment Restrictions.

               (a)  The  Executive   acknowledges   that  the  Company  and  its
Affiliates have confidential  information and trade secrets,  whether written or
unwritten,  with  respect to carrying  on their  business,  including  sensitive
marketing, bidding, technological and engineering information and data, names of
past, present and prospective  customers or partners of and vendors or suppliers
to the Company  and its  Affiliates,  working  relationships  with  governmental
agencies and  officials,  methods of pricing  contracts  and income and expenses
associated therewith,  the international  business strategy and relative ranking

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of opportunities in various countries, negotiated prices and offers outstanding,
credit  terms and  status of  accounts  and the  terms or  circumstances  of any
current  or  prospective  business  arrangements  between  the  Company  and its
Affiliates and any third parties ("Confidential Information and Trade Secrets").
As used in this Agreement,  the term Confidential  Information and Trade Secrets
does not include (i) information which becomes generally available to the public
other than as a result of a disclosure by the Executive,  (ii) information which
becomes  available  to the  Executive on a  nonconfidential  basis from a source
other than the  Company or its  Affiliates,  or (iii)  information  known to the
Executive prior to any disclosure to him by the Company or its  Affiliates.  The
Executive  further  acknowledges  that the Executive  possesses a high degree of
knowledge of the independent  energy industry and, in particular,  has committed
to a  long-standing  relationship  with the  Company  and its  Affiliates  as an
employee and officer,  which has allowed, and will continue to allow, him access
to the Company's Confidential  Information and Trade Secrets.  Accordingly,  any
employment  by the Executive  with another  employer in the  independent  energy
industry or participation by him as a substantial  investor in any such industry
may necessarily involve disclosure of the Company's Confidential Information and
Trade  Secrets.  Consequently,  the  Executive  agrees that,  if he  voluntarily
resigns his  employment  with the Company for any reason other than (i) a breach
of this Agreement by the Company,  or (ii) for Good Reason,  he shall not at any
time during the two-year period after such  resignation,  directly or indirectly
accept  employment  by or invest in  (except as a passive  investor  in a public
corporation or in a publicly issued partnership interest which, in either event,
would not  exceed  an  ownership  interest  of 2% of the  outstanding  equity or
partnership  interest)  in any person,  firm,  corporation,  partnership,  joint
venture or business which is primarily engaged in the production or marketing of
steam  or  electrical  energy  or which  otherwise  directly  competes  with the
business of the Company or its controlled Affiliates and, further, the Executive
agrees that, to avoid the risk of disclosing  or improperly  using  Confidential
Information or Trade  Secrets,  he shall not directly,  or  indirectly,  provide
consulting or advisory  services to any of such independent  energy  businesses.
The preceding sentence  notwithstanding,  if the Executive's  resignation occurs
upon or after a Change in  Control,  he shall not be  precluded  from  accepting
employment or providing  services to Peter Kiewit  Sons',  Inc. or any Affiliate
thereof.

               (b) Without the written consent of the Chairman of the Board, the
Executive will not, during and for three years after the Term of Employment, (i)
disclose any  Confidential  Information  and Trade Secrets of the Company or any

<PAGE>

Affiliate  of the  Company to any Person  (other  than the  Company,  directors,
officers or employees of the Company,  its Affiliates or duly authorized agents,
attorneys or other  representatives  thereof), or (ii) otherwise make use of any
Confidential  Information  and  Trade  Secrets  other  than in  connection  with
authorized dealings with or by the Company and its Affiliates.

               (c) For a period of three years after the Term of Employment, the
Executive shall neither  directly nor indirectly  solicit,  on behalf of another
employer,  the  employment  of, or hire or cause another  employer to hire,  any
person who is then currently employed by the Company or an Affiliate thereof, or
otherwise  induce,  on  behalf of  another  employer,  such  person to leave the
employment  of the Company or an  Affiliate  thereof  without the prior  written
approval of the Chairman of the Board.

               (d) The  Executive  will hold,  on behalf of the  Company and its
Affiliates and as the property of the Company and its Affiliates, all memoranda,
manuals,  books, papers, letters,  documents,  computer discs, data and software
and other similar  property  obtained during the course of his employment by the
Company or its  Affiliates  and  relating  to the  Company's  or its  Affiliates
business,  and will return such property to the Company or its Affiliates at any
time upon demand by the  Chairman  of the Board and,  in any event,  within five
calendar days after the end of the Term of Employment.

               (e) During the Term of Employment,  Executive agrees to comply in
all material respects with the Company's Policy of Business Conduct as in effect
on the date hereof.

               (f) If any of the provisions of, or covenants  contained in, this
Section  6 are  hereafter  construed  to be  invalid  or  unenforceable  in  any
jurisdiction,  the same shall not affect the remainder of the  provisions or the
enforceability  thereof  in any other  jurisdiction,  which  shall be given full
effect,  without  regard to the  invalidity  or  unenforceability  in such other
jurisdiction.  If any of the  provisions  of, or  covenants  contained  in, this
Section  6 are  held to be  unenforceable  in any  jurisdiction  because  of the
duration or geographical scope thereof,  the parties agree that the court making
such  determination  shall have the power to reduce the duration or geographical
scope of such provision or covenant and, in its reduced form,  such provision or
covenant shall be enforceable; provided, however, that the determination of such
court  shall  not  affect  the  enforceability  of this  Section  6 in any other
jurisdiction.

         Section 7.  Termination of Employment.
<PAGE>

               (a) The  employment of the Executive  under this  Agreement  will
terminate  on the  earliest  of:  (i)  written  notice by the  Executive  of his
resignation  other than for Good Reason;  (ii) the day the Company  gives to the
Executive written notice of termination without Cause; (iii) the day the Company
gives to the  Executive  written  notice  of  termination  for  Cause;  (iv) the
Permanent Disability of the Executive;  (v) the death of the Executive;  or (vi)
written notice by the Executive of his resignation for Good Reason.

               (b) If the  employment of the Executive is terminated  under this
Agreement for any reason  whatsoever,  the  obligations  of the Executive  under
Section 6 will remain in full force and effect to the extent  provided  therein,
and the  termination  will not abrogate any rights or remedies of the Company or
the Executive with respect to any breach of the  Agreement,  except as expressly
provided in Section 8.

         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, any base salary and reimbursable  expenses  pursuant to
Section  4(a) and  Section  4(d)  which  are  accrued  but  unpaid  through  the
Termination Date.

               (b) If the employment of the Executive is terminated  pursuant to
subsections (ii), (iv) or (v) of Section 7(a) prior to a Change in Control,  the
Company will pay the  Executive,  subject to the  Executive's  compliance in all
material  respects with his  post-termination  obligations  under Section 6, (i)
within 30 calendar  days,  any base salary and  reimbursable  expenses which are
accrued and unpaid through such date,  (ii) commencing one month after the month
of his Termination  Date, 24 monthly  payments each equal to 1/24 of a sum equal
to twice his annual base  salary then in effect  pursuant to Section 4 and (iii)
commencing  one month  after  the  month of his  Termination  Date,  24  monthly
payments  each equal to 1/24 of a sum equal to two times the  greater of (x) the
Minimum  Bonus or (y) the  average  Annual  Bonus  Compensation  payable  to the
Executive in respect of the two fiscal years  immediately  preceding the year in
which the Executive's employment with the Company terminates (with any such year
for which no bonus was payable  included in such two year average as a zero). In
addition,  in the  event of any such  termination,  subject  to the  Executive's
compliance in all material respects with his post-termination  obligations under
Section 6, the  Company  agrees that (x) the Company  stock  options  previously
granted to Executive  will continue to vest according to their terms within such
next 24  months  (beginning  with the  month  following  the  month in which the

<PAGE>

Termination Date occurs, after which time the unvested remainder will lapse) and
such vested  options may be exercised  within the remaining term of such options
as provided  in the  respective  option  agreements,  and (y) the Company  shall
continue in effect for  Executive,  for a period of 24 months  after the date of
any such termination,  the life insurance benefits,  medical benefits and dental
benefits,  the disability  plan,  the tax  preparation  and investment  advisory
services and any other  employee  benefits  made  generally  available to senior
executives  of the Company on and after the date  hereof  through the end of the
24-month  post-termination  period,  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.  To the degree that any of the above employee benefit programs are not
available  to  Executive  on  account  of his  status  as a  non-employee  after
termination of employment, the Company shall provide for economically equivalent
programs  during the 24-month  period or pay to executive a lump sum cash amount
designed to allow him to obtain  economically  equivalent benefits or put him in
the same economic position on an after tax basis.

               (c) If the  employment of the Executive is terminated on or after
a Change in Control  pursuant to subsections  (ii), (iv), (v) or (vi) of Section
7(a), the Executive shall receive the same payments,  additional  option vesting
and benefits  continuation  described  in Section  8(b) hereof,  except that the
monthly  payments  described in clauses (ii) and (iii) of the first  sentence of
Section  8(b) shall be  aggregated  and paid to  Executive  in a single lump sum
without any discount to reflect present value.

               (d) If the employment of the Executive is terminated  pursuant to
subsections (ii), (iv), (v) or (vi) of Section 7(a), all Performance Accelerated
Stock  Options  ("PASOs")  held by the  Executive on the  Termination  Date will
become vested and  immediately  exercisable on such  Termination  Date and shall
otherwise  remain  exercisable  for  their  term in  accordance  with the  terms
thereof.

               (e) If the employment of the Executive is terminated  pursuant to
subsections  (iv) or (v) at any time  prior to a Change  in  Control  or for any
reason after a Change in Control,  then without  further  action by the Company,
the Board or any committee thereof,  the Executive may exercise any vested stock
options  (including  vested  PASOs) held by the  Executive  pursuant to existing
procedures  approved by the Stock Option  Committee  for cashless  exercise,  by
surrendering  previously  owned  shares,  electing to have the Company  withhold

<PAGE>

shares otherwise  deliverable upon exercise of such options,  or by providing an
irrevocable direction to a broker to sell shares and deliver all or a portion of
the  proceeds to the Company,  in any case in an amount  equal to the  aggregate
exercise price and any tax withholding obligation attendant to the exercise.

         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 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

<PAGE>

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,
<PAGE>

                  (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.
<PAGE>

         Section 9.  Remedies.

                    (a) The Company  will be entitled,  if it elects,  to enjoin
any breach or threatened breach of, or enforce the specific  performance of, the
obligations of the Executive  under Sections 3 or 6, without  showing any actual
damage or that monetary  damages would be inadequate.  Any such equitable remedy
will not be the sole and exclusive  remedy for any such breach,  and the Company
may pursue other remedies for such a breach.

                    (b) Any court  proceeding  to enforce this  Agreement may be
commenced in federal courts, or in the absence of federal jurisdiction the state
courts,  located in Omaha,  Nebraska.  The parties submit to the jurisdiction of
such courts and waive any  objection  which they may have to pursuit of any such
proceeding in any such court.

                    (c) Except to the  extent  that the  Company  elects to seek
injunctive  relief in accordance with subsection  9(a), any controversy or claim
arising out of or relating to this  Agreement or the  validity,  interpretation,
enforceability  or breach of this  Agreement will be submitted to arbitration in
Omaha,  Nebraska,  in accordance  with the then  existing  rules of the American
Arbitration  Association,  and  judgment  upon the  award  rendered  in any such
arbitration may be entered in any court having jurisdiction.

         Section 10. Assignment. Neither the Company nor the Executive may sell,
transfer or otherwise assign their rights, or delegate their obligations,  under
this Agreement,  provided that the Company shall require any successor to all or
substantially  all of the business,  stock or assets of the Company to expressly
assume the Company's rights and obligations hereunder.

         Section 11.  Unfunded  Benefits.  All  compensation  and other benefits
payable to the Executive under this Agreement will be unfunded,  and neither the
Company nor any  Affiliate of the Company will  segregate  any assets to satisfy
any  obligation  of the Company under this  Agreement.  The  obligations  of the
Company to the Executive are not the subject of any guarantee or other assurance
of any Person other than the Company.
<PAGE>

         Section 12. Severability.  Should any provision,  paragraph,  clause or
portion  thereof of this  Agreement be declared or be determined by any court or
arbitrator of competent  jurisdiction to be illegal,  unenforceable  or invalid,
the validity or enforceability of the remaining parts, terms or provisions shall
not be affected  thereby and said  illegal or invalid  part,  term or  provision
shall be deemed not to be a part of this Agreement.  Alternatively, the court or
arbitrator  having  jurisdiction  shall have the power to modify  such  illegal,
unenforceable  or invalid  provision  so that it will be valid and  enforceable,
and, in any case,  the remaining  provisions of this  Agreement  shall remain in
full force and effect.

         Section 13.  Miscellaneous.

                    (a) This  Agreement  may be  amended or  modified  only by a
writing executed by the Executive and the Company.

                    (b) This  Agreement  will be  governed by and  construed  in
accordance with the internal laws of the State of Nebraska.

                    (c) This Agreement  constitutes the entire  agreement of the
Company  and the  Executive  with  respect  to the  matters  set  forth  in this
Agreement and  supersedes any and all other  agreements  between the Company and
the Executive relating to those matters.

                    (d)  Any  notice  required  to be  given  pursuant  to  this
Agreement  will be deemed  given (i) when  delivered  in person or by courier or
(ii) on the third  calendar  day  after it is sent by  facsimile,  with  written
confirmation  of receipt,  if to the Company or to the  Executive,  at 302 South
36th Street,  Suite 400, Omaha,  Nebraska 68131, fax number (402) 231-1658 or to
such  other  address as may be  subsequently  designated  by the  Company or the
Executive in writing to the other party.

                    (e) A waiver by a party of a breach of this  Agreement  will
not  constitute  a waiver  of any other  breach,  prior or  subsequent,  of this
Agreement.

         IN WITNESS  WHEREOF,  the Company and the  Executive  have entered into
this Agreement as of May 10, 1999.

                                      MIDAMERICAN ENERGY HOLDINGS COMPANY



                                      By:____________________________

                                                 Gregory E. Abel
                                                 President and Chief
                                                 Operating Officer

                                       EXECUTIVE:


                                       By:____________________________

                                                 Steven A. McArthur

<PAGE>

                                    EXHIBIT A

                                  Defined Terms

         "Affiliate" means, with respect to a Person, (a) any Person directly or
indirectly  owning,  controlling,  or  holding  power to vote 10% or more of the
outstanding voting securities of the Person; (b) any Person 10% or more of whose
outstanding  voting securities are directly or indirectly  owned,  controlled or
held with power to vote by the Person;  (c) any Person  directly  or  indirectly
controlling, controlled by or under common control with, the Person; and (d) any
officer or  director  of the Person,  or of any Person  directly  or  indirectly
controlling  the Person,  controlled by the Person or under common  control with
the Person. 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.

         "Agreement" means this Employment Agreement dated as of August 6, 1996,
by and between the Company and the Executive,  as it may be amended from time to
time in accordance with its terms.

         "Board" means the Board of Directors of the Company.

         "Cause" means any or all of the following:

          (a) the  willful and  continued  failure by the  Executive  to perform
          substantially  the services and duties  contemplated by this Agreement
          (other than any such failure resulting from the Executive's incapacity
          due to disability);

          (b) the willful engaging by the Executive in gross misconduct which is
          injurious to the business or reputation of the Company in any material
          respect;

          (c) the gross  negligence of the Executive in performing  the services
          contemplated  by this Agreement  which is injurious to the business or
          reputation of the Company in any material respect; or

          (d) Executive's  conviction of, or pleading guilty or no contest to, a
          felony involving moral turpitude.

         "Change in Control" means (i) approval by the Company's stockholders of
(A) the dissolution of the Company, (B) a merger or consolidation of the Company
where the Company is not the surviving corporation, except for a transaction the
principal  purpose  of which is to  change  the state in which  the  Company  is
incorporated,  (C) a reverse  merger in which the Company  survives as an entity
but in which  securities  possessing  more than 50 percent of the total combined

<PAGE>

voting power of the Company's  securities are transferred to a person or persons
different from those who hold such securities immediately prior to the merger or
(D) the sale or other  disposition of all or substantially  all of the Company's
assets;  (ii) the direct or indirect  acquisition by any Person or related group
of  Persons  (other  than  an  acquisition  from  or  by  the  Company  or  by a
Company-sponsored  employee  benefit  plan  or  by a  Person  that  directly  or
indirectly  controls,  is controlled  by, or is under common  control with,  the
Company)  of  beneficial  ownership  (within  the  meaning  of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities  possessing more than
50 percent  of the total  combined  voting  power of the  Company's  outstanding
voting  securities;  or (iii) a change in the  composition  of the Board  over a
period of  thirty-six  (36)  months or less  such that a  majority  of the Board
members cease, by reason of one or more contested elections for Board membership
or by one or more actions by written consent of stockholders, to be comprised of
individuals  who  either  (A) have been  Board  members  continuously  since the
beginning of such period or (B) have been  elected or nominated  for election as
Board  members  during such  period by at least a majority of the Board  members
described  in clause (A) who were still in office at the time such  election  or
nomination was approved by the Board.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Company"  means   MidAmerican   Energy  Holdings   Company,   an  Iowa
corporation, and any successor or assign permitted under the Agreement.

         "Disability"  means, with respect to the Executive,  that the Executive
has become  physically  or mentally  incapacitated  or disabled so that,  in the
reasonable  judgment of the  Chairman of the Board,  he is unable to perform his
duties under this Agreement and such other services as he performed on behalf of
the Company before incurring such incapacity or disability.

         "Good  Reason"  means  any of the  following  events,  but only if such
event(s)  occur on,  after or in  connection  with a Change in Control:  (i) the
failure by the Company to pay to the  Executive,  for a material  period of time
and in a material  amount,  compensation  due and payable by the  Company  under
Section 4(a) of this Agreement;  (ii) any reduction by the Company of the title,
office,  duties or authority of the Executive in any material respect;  or (iii)
any relocation of the Executive's primary place of employment to a location more
than 25 miles from Omaha, Nebraska.
<PAGE>

         "Minimum Bonus" means, with respect to a fiscal year, $200,000.

         "Permanent  Disability"  means a Disability  which has continued for at
least six consecutive calendar months.

         "Person"  means  any  natural  person,  general  partnership,   limited
partnership, corporation, joint venture, trust, business trust, or other entity.

         "Term of  Employment"  means the period of time  beginning on August 6,
1996,  and  ending  on the  eighth  anniversary  of such  date,  unless  earlier
terminated  pursuant to Section 7(a) or automatically  extended  pursuant to the
following  sentence.  The Term of Employment will be automatically  extended for
one year on each  anniversary  of the date of this  Agreement  beginning  on the
fifth anniversary unless the Executive has given the Company, or the Company has
given  the  Executive,  a notice  declining  automatic  extension  at least  365
calendar days before the anniversary.

         "Termination  Date" means the date of  termination of employment of the
Executive pursuant to Section 7 of this Agreement.


<PAGE>

                                    EXHIBIT B

Steven A. McArthur

Credited Years of Service as of March 12, 1999: 8 years, 1 month


<PAGE>

                                    EXHIBIT C

Steven A. McArthur

Minimum Annual SERP benefit  payment for retirement or disability  payable on or
after attaining age 47: $233,662.