Exhibit 10.65

 

LG&E ENERGY CORP. LONG-TERM PERFORMANCE UNIT PLAN

 

Effective January 1, 2003

 

ARTICLE 1.  ESTABLISHMENT, PURPOSE, AND DURATION

 

1.1.         Establishment of the Plan.

 

LG&E Energy Corp, (hereinafter referred to as the “Company”) establishes as of
the date set forth above the “LG&E Energy Corp. Long-Term Performance Unit Plan”
(hereinafter referred to as the “Plan”), which permits the grant of Performance
Units, as hereinafter defined, to employees of LG&E Energy Corp. and its
Subsidiaries. The Plan was approved by the Board of Directors of the Company in
a consent resolution dated April 25, 2003.

 

1.2.         Purpose of the Plan.

 

The purpose of the Plan is to promote the success of the Company and its
Subsidiaries by providing incentives to Key Employees that will link their
personal interests to the long-term financial success of the Company and its
Subsidiaries and to growth in Parent shareholder value.  The Plan is designed to
provide flexibility to the Company and its Subsidiaries in their ability to
motivate, attract, and retain the services of Key Employees upon whose judgment,
interest, and special effort the successful conduct of their operations is
largely dependent.  Grants under the Plan may be made in conjunction with grants
of phantom options under the E.ON Phantom Option Plan in the case of certain Key
Employees.

 

1.3.         Duration of the Plan.

 

The Plan is effective as of January 1, 2003.  The Plan shall remain in effect,
subject to the right of the Board of Directors to terminate the Plan at any time
pursuant to Article 9 herein.

 

ARTICLE 2.  DEFINITIONS AND CONSTRUCTION

 

2.1.         Definitions.

 

Whenever used in the Plan, the following terms shall have the meanings set forth
below and, when the meaning is intended, the initial letter of the word is
capitalized:

 

(a)                                  “Award” means a grant under this Plan of
Performance Units.

 

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(b)                                 “Beneficial Ownership” shall have the
meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.

 

(c)                                  “Board” or “Board of Directors” means the
Board of Directors of the Company.

 

(d)                                 “Cause” shall mean the occurrence of any one
of the following:

 

(i)                                     The willful and continued failure by a
Participant to substantially perform his/her duties (other than any such failure
resulting from the Participant’s disability), after a written demand for
substantial performance is delivered to the Participant that specifically
identifies the manner in which the Company or any of its Subsidiaries, as the
case may be, believes that the Participant has not substantially performed
his/her duties, and the Participant has failed to remedy the situation within
ten (10) business days of receiving such notice; or

 

(ii)                                  the Participant’s conviction for
committing a felony in connection with the employment relationship; or

 

(iii)                               the willful engaging by the Participant in
gross misconduct materially and demonstrably injurious to the Company or any of
its Subsidiaries. However, no act, or failure to act, on the Participant’s part
shall be considered “willful” unless done, or omitted to be done, by the
Participant not in good faith and without reasonable belief that his/her action
or omission was in the best interest of the Company or any of its Subsidiaries.

 

(e)                                  “Change in Control” shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:

 

(i)                                     Parent is notified by a third party that
it has acquired 25 percent or more of the voting rights of Parent in accordance
with § 21 of the German Securities Trading Act (WpHG), or

 

(ii)                                  a third party on its own or together with
voting rights attributable to him in accordance with § 22 German Securities
Trading Act (WpHG) has acquired a share in voting rights which, at Parent’s
Annual Shareholders’ Meeting, would represent or which, at Parent’s last Annual
Shareholders’ Meeting, would have represented the majority of the voting rights
present at such a Meeting, or

 

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(iii)                               an affiliation agreement is concluded with
Parent as controlled company in accordance with §§ 291 ff. of the German Stock
Corporation Act (AktG), or

 

(iv)                              Parent is being integrated in accordance with
§§ 319 ff. of the German Stock Corporation Act (AktG), or

 

(v)                                 Parent changes its legal status in
accordance with §§ 190 ff. of the German Conversion Law (UmwG), or

 

(vi)                              Parent is being merged with another legal
entity, provided that the enterprise value of such legal entity is more than 20
percent of the enterprise value of Parent at the time of adopting the resolution
by Parent.  The methods of valuation acknowledged by the professional
association of qualified auditors (Stellungnahme des Hauptfachausschusses des
Instituts der Wirtschaftsprüfer HF 2/1983 = Grundsätze zur Durchführung von
Untemehmensbewertungen sowie die neueren Verlautbarungen des Berufsstandes)
shall be used to determine the value of both entities, to the extent that both
enterprise values will be determined according to said methods in connection
with the merger.  Otherwise, the market capitalization of both legal entities at
the time the resolution is adopted by Parent will be deemed as their respective
enterprise values.  If a market capitalization cannot be determined, the
enterprise values agreed upon by both legal entities will be deemed as their
respective values.

 

(vii)                           Company ceases to be an affiliated company of
Parent as defined in § 15 of the German Stock Corporation Act or where the
following apply:

 

(a)                                  A complete liquidation or dissolution of
the Company unless, the Parent continues to own directly or indirectly all or
substantially all of the Company’s assets;

 

(b)                                 An agreement for the sale or other
disposition of all or substantially all of the assets of the Company to any
person or entity (other than a subsidiary of the Parent);

 

(c)                                  A merger or other combination involving the
Company as a result of which Parent ceases to beneficially own more that 50% of
the outstanding Voting Stock, of the successor to the Company, unless the Parent
or its subsidiary continues to own directly or indirectly all or substantially
all of the Company’s assets; or

 

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(d)                                 Any person or entity acquires Beneficial
Ownership of a greater percentage of the Voting Stock of the Company than the
percentage or such Voting Stock then held, directly or indirectly by Parent.

 

(f)                                    “Committee” means the Senior Vice
President, Group Corporate Officer Resources -of the Parent and any other
person, if any, designated by the Chairman and Chief Executive Officer of the
Parent to administer the Plan pursuant to Article 3 herein.

 

(g)                                 “Company” means LG&E Energy Corp., a
Kentucky corporation, or any successor thereto as provided in Article 11 herein.

 

(h)                                 “Exchange Act” means the Securities Exchange
Act of 1934, as amended from time to time.

 

(i)                                     “Key Employee” means (i) an employee of
the Company or any of its Subsidiaries, including an employee who is an officer
or a director of the Company or any of its Subsidiaries, who, in the opinion of
the Committee, can contribute significantly to the growth and profitability of
the Company and its Subsidiaries, (ii) may include employees who are members of
the Board who are employees, or (iii) any other employee, identified by the
Committee, in special situations involving extraordinary performance, promotion,
retention, or recruitment.  The granting of an Award under this Plan shall be
deemed a determination by the Committee that such employee is a Key Employee,
but shall not create a right to remain a Key Employee.

 

(j)                                     “Parent” means E.ON AG, an
anktiengesellschaft formed under the Federal Republic of Germany, or any
successor thereto as provided in Article 11 herein.

 

(k)                                  “Participant” means a Key Employee who has
been granted an Award under the Plan.

 

(l)                                     “Performance Unit” means an Award,
designated as a performance unit, granted to a Participant pursuant to Article 5
herein.

 

(m)                               “Person” shall have the meaning ascribed to
such term in Section 3(a) (9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including a “group” as defined in Section 13(d) thereof.

 

(n)                                 “Plan” means this LG&E Energy Corp.
Long-Term Performance Unit Plan, as herein described and as hereafter from time
to time amended.

 

(o)                                 “Subsidiary” shall mean any corporation of
which more than 50% (by number of votes) of the Voting Stock at the time
outstanding is owned, directly or indirectly,

 

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by the Company.

 

(p)                                 “Voting Stock” shall mean securities of any
class or classes of stock of a corporation, the holders of which are ordinarily,
in the absence of contingencies, entitled to elect a majority of the corporate
directors.

 

2.2.         Gender and Number.

 

Except where otherwise indicated by the context, any masculine term used herein
also shall include the feminine, the plural shall include the singular, and the
singular shall include the plural.

 

2.3.         Severability.

 

In the event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.

 

 

ARTICLE 3.  ADMINISTRATION

 

3.1.         The Committee.

 

The Plan shall be administered by the Committee as permitted by law and Article
3.5.

 

3.2.         Authority of the Committee.

 

Subject to the provisions of the Plan, the Committee shall have full power to
construe and interpret the Plan; to establish, amend or waive rules and
regulations for its administration; to accelerate the end of a performance
period or the termination of any award agreement; and (subject to the provisions
of Article 9 herein) to amend the terms and conditions of any outstanding Award
to the extent such terms and conditions are within the discretion of the
Committee as provided in the Plan. The Committee shall not have authority to
resolve disputed claims under the Plan.

 

3.3.         Selection of Participants.

 

The Committee shall have the authority to grant Awards under the Plan, from time
to time, to such Key Employees (including officers and directors who are
employees) as may be selected by it.  The Committee shall select Participants
from among those whom they have identified as being Key Employees.

 

3.4.         Decisions and Appeals.

 

All determinations and decisions made by Committee pursuant to the provisions of
the Plan may be reviewed by the Chairman and Chief Executive Officer of the
Parent, upon

 

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the written request of either the Committee or a Participant.  Any determination
made by the Chairman and Chief Executive Officer of the Parent, pursuant to this
section shall be final, conclusive and binding on all persons, including the
Company and its Subsidiaries, its shareholders, employees, and Participants and
their estates and beneficiaries, and such determinations and decisions shall not
be subject to review.

 

3.5.         Delegation of Certain Responsibilities.

 

The Committee may delegate to an appropriate party any of its responsibilities
under the Plan.

 

3.6.         Procedures of the Committee.

 

To the extent the Committee is comprised of more than one member, all
determinations of the Committee or any delegates shall be made by not less than
a majority of members present at any meeting (in person or otherwise) at which a
quorum is present.  A majority of the entire Committee or the number of
delegates at a given time shall constitute a quorum for the transaction of
business.  Any action required or permitted to be taken at a meeting of the
Committee or the delegates may be taken without a meeting if a unanimous written
consent, which sets forth the action, is signed by each member of the Committee
and filed with the minutes for proceedings of the Committee or delegates.

 

3.7.         Award Agreements.

 

Each Award under the Plan shall be evidenced by an award agreement which shall
be signed by an authorized officer of the Company and by the Participant, and
shall contain such terms and conditions as may be approved by the Committee. 
Such terms and conditions need not be the same in all cases.

 

ARTICLE 4.  ELIGIBILITY AND PARTICIPATION

 

4.1.         Eligibility.

 

Persons eligible to participate in this Plan include all employees of the
Company and its Subsidiaries who, in the opinion of the Committee, are Key
Employees.

 

4.2.         Actual Participation.

 

Subject to the provisions of the Plan, the Committee may from time to time
select those Key Employees to whom Awards shall be granted and determine the
nature and amount of each Award.  No employee shall have any right to be granted
an Award under this Plan even if previously granted an Award.

 

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ARTICLE 5.  PERFORMANCE UNITS

 

5.1.         Grant of Performance Units.

 

Subject to the terms and provisions of the Plan, Performance Units may be
granted to Participants at any time and from time to time as shall be determined
by the Committee or any delegate who shall have complete discretion in
determining the number of Performance Units granted to each Key Employee.

 

5.2.         Value of Performance Units .

 

The Committee shall set performance goals over certain periods to be determined
in advance by the Committee (“Performance Periods”).  The initial value for each
Performance Unit shall be one dollar.  With regard to each grant of Performance
Units, the Committee in consultation with the Senior Vice President Controlling
of the Parent shall set the performance goals that will be used to determine the
extent to which the Participant receives a payment of the value of the
Performance Units awarded for such Performance Period.  These goals will be
based on the attainment, by the Parent, Company, or its Subsidiaries, of certain
objective performance measures.  With respect to each such performance measure
utilized during a Performance Period, the Committee shall assign percentages to
various levels of performance which shall be applied to determine the extent to
which the Participant shall receive a payout of the value of Performance Units.

 

5.3.         Payment of Performance Units.

 

After a Performance Period has ended, the holder of a Performance Unit shall be
entitled to receive the value thereof as determined by the Committee.  The
Committee shall make this determination by first determining the extent to which
the performance goals set pursuant to Section 5.2 have been met.  It will then
determine the applicable percentage (which may be greater or lesser than 100%)
to be applied to, and will apply such percentage to, the value of Performance
Units to determine the payout to be received by the Participant.  In addition,
with respect to Performance Units granted to any Key Employee, no payout shall
be made hereunder except upon written certification by the Committee that the
applicable performance goal or goals have been satisfied to a particular extent.

 

5.4.         Discretion to Adjust Awards.

 

The Committee shall have the authority to modify, amend, or adjust the terms and
conditions of any Performance Unit award, at any time or from time to time,
including but not limited to the performance goals.

 

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5.5.         Form and Timing of Payment.

 

The payment described in Section 5.3 herein shall be made in a cash lump sum as
soon as administratively practical upon the determination by the Committee
provided for in Section 5.3, unless the Participant has previously elected to
defer such payment in a manner prescribed by the Committee.  If any payment is
permitted by the Committee to be made on a deferred basis, the Committee may
provide for earnings to be credited on such amount in a manner they determine.

 

5.6.         Termination of Employment Due to Death, Disability, or Retirement.

 

In the case of death, disability, or retirement (each of disability and
retirement as defined under the established rules of the Company or any of its
Subsidiaries, as the case may be), the holder of a Performance Unit shall
receive a prorated payment based on the Participant’s number of full months of
service during the Performance Period, further adjusted based on the achievement
of the performance goals during the entire Performance Period, as computed by
the Committee.  Payment shall be made at the time payments are made to
Participants who did not terminate service during the Performance Period.

 

5.7.         Termination of Employment for Other Reasons.

 

In the event that a Participant terminates employment with the Company or any of
its Subsidiaries for any reason other than death, disability, or retirement,
prior to the end of the Performance Period all Performance Units shall be
forfeited; provided however, in the case of any termination not for Cause, the
Committee in its sole discretion may waive the automatic forfeiture provisions
and make a prorated payment to the holder of a Performance Unit.  Payment made
pursuant to this Section shall be made at the time payments are made to
Participants who did not terminate service during the Performance Period.  In
the event of a Participant’s termination of employment pursuant to this Section
after completion of the respective Performance Period of a Performance Unit, but
prior to payment pursuant to Section 5.5, the Participant shall be entitled to
payment without proration.

 

5.8.         Nontransferability.

 

No Performance Units granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution until the termination of the applicable
performance period.  All rights with respect to Performance Units granted to a
Participant under the Plan shall be exercisable during his lifetime only by such
Participant.

 

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ARTICLE 6.  BENEFICIARY DESIGNATION

 

Each Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively and who may include
a trustee under a will or living trust) to whom any benefit under the Plan is to
be paid in case of his death before he receives any or all of such benefit. 
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during his lifetime.  In
the absence of any such designation or if all designated beneficiaries
predecease the Participant, benefits remaining unpaid at the Participant’s death
shall be paid to the Participant’s estate.

 

ARTICLE 7.  RIGHTS OF EMPLOYEES

 

7.1.         Employment.

 

Nothing in the Plan shall interfere with or limit in any way the right of the
Company or any of its Subsidiaries to terminate any Participant’s employment at
any time, nor confer upon any Participant any right to continue in the employ of
the Company or any of its Subsidiaries.

 

7.2.         Participation.

 

No employee shall have a right to be selected as a Participant, or, having been
so selected, to be selected again as a Participant.

 

7.3.         No Implied Rights; Rights on Termination of Service.

 

Neither the establishment of the Plan nor any amendment thereof shall be
construed as giving any Participant, beneficiary, or any other person any legal
or equitable right unless such right shall be specifically provided for in the
Plan or conferred by specific action of the Committee in accordance with the
terms and provisions of the Plan.  Except as expressly provided in this Plan,
neither the Company nor any of its Subsidiaries shall be required or be liable
to make any payment under the Plan.

 

7.4.         No Right to Company Assets.

 

Neither the Participant nor any other person shall acquire, by reason of the
Plan, any right in or title to any assets, funds or property of the Parent,
Company or any of its Subsidiaries whatsoever including, without limiting the
generality of the foregoing, any specific funds, assets, or other property which
the Parent, Company or any of its Subsidiaries, in its sole discretion, may set
aside in anticipation of a liability hereunder.  Any benefits which become
payable hereunder shall be paid from the general assets of the Parent, Company
or the applicable subsidiary.  The Participant shall have only a contractual
right to the amounts, if any, payable hereunder unsecured by any asset of the
Company or any of its Subsidiaries.  Nothing contained in the Plan constitutes a
guarantee by the Company or any of its Subsidiaries that the assets of the
Company or the applicable subsidiary shall be sufficient to pay any benefit to
any person.

 

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ARTICLE 8.  CHANGE IN CONTROL

 

Notwithstanding any other provisions of the Plan, in the event of a Change in
Control, all Performance Unit awards granted under this Plan shall be
immediately paid out in cash.  The amount of the payout shall be based on the
higher of:

 

(i)            the extent, as determined by the Committee, to which performance
goals, established for the Performance Period then in progress have been met up
through and including the effective date of the Change in Control or

 

(ii)           100% of the value on the date of grant of the Performance Units.

 

ARTICLE 9.  AMENDMENT, MODIFICATION, AND TERMINATION

 

9.1.         Amendment, Modification, and Termination.

 

At any time and from time to time, the Board, upon recommendation by the
Committee, may terminate, amend, or modify the Plan.

 

9.2.         Awards Previously Granted.

 

No termination, amendment, or modification of the Plan shall in any manner
adversely affect any Award theretofore granted under the Plan, without the
written consent of the Participant.

 

ARTICLE 10.  TAX WITHHOLDING

 

The Company and any of its Subsidiaries shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company or any of
its Subsidiaries, an amount sufficient to satisfy taxes (including the
Participant’s FICA obligation) required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan.

 

ARTICLE 11.  PARENT AND SUCCESSORS

 

All obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on the Parent and any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or substantially all of the
business and/or assets of the Company.

 

ARTICLE 12.  REQUIREMENTS AND GOVERNING LAW

 

12.1.       Requirements of Law.

 

The granting of Awards under this Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.

 

12.2.       Governing Law.

 

The Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the Commonwealth of Kentucky.

 

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