EXHIBIT 10.77

 

CONTRACT OF EMPLOYMENT

 

 

THIS AGREEMENT is made the   22    day of June    1999 B E T W E E N:

 

(1)                                  POWERGEN UK PLC of 53 New Broad Street,
London, EC2M 1JJ (“the Company”)

 

- and -

 

(2)                                  RICHARD AITKEN-DAVIES of 131 Durham Road,
London SW20 ODF (“the Executive”)

 

IT IS HEREBY AGREED as follows:

 

1.                                       The Executive will hereafter be
employed by the Company on the Terms and Conditions of Employment set out in the
Appendices and the Schedule hereto.

 

2.                                       This Agreement is governed by and shall
be construed in accordance with the Laws of England.

 

3.                                       This Agreement supersedes all previous
agreements and arrangements relating to the Executive’s employment by the
Company or by any of the Company’s predecessors in business (which shall be
deemed to have been terminated by mutual consent).

 

IN WITNESS WHEREOF this Agreement has been entered into the day and year first
before written.

 

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THE APPENDICES

 

TERMS AND CONDITIONS OF EMPLOYMENT

 

 

Set out in the following Appendix I, Appendix II and the Schedule are the terms
and conditions of your employment with the Company.

 

Copies of the Company’s Bonus Scheme, Car Scheme, Private Health Scheme and
relevant pension schemes referred to in Appendix I and the Company’s Sick Leave
Rules referred to in Appendix II will all be available from the Company’s Group
Personnel Director.

 

References to “associated company” and “associated companies” in the Appendices
or the Schedule mean:-

 

(a)                                  any subsidiary company, as defined in
Section 736 of the Companies Act 1985 (as substituted by Section 144 of the
Companies Act 1989), of the Company and

 

(b)                                 any company having an ordinary share capital
(as defined in Section 832 of the Income and Corporation Taxes Act 1988) of
which not less than 25 per cent is owned directly or indirectly by the Company
(applying the provisions of Section 838 of the Income and Corporation Taxes Act
1988 in the determination of ownership).

 

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APPENDIX I

 

 

1.                                       Pay and Benefits

 

1.1                                 Salary

 

(A)                                   Your salary will initially be at the rate
of £140,000 per annum.

 

(B)                                     Your salary will be payable by equal
monthly instalments in arrears on or about the 24th day of each month, and will
be deemed to accrue from day to day.  It will be reviewed from time to time
during your employment at the discretion of the Company.

 

(C)                                     Your salary will be inclusive of any
other remuneration to which you may be entitled as a Director of the Company or
of any associated company, and to give effect to this you will pay over, or
procure to be paid over, to the Company all such fees or other remuneration
received by you.

 

2.                                       Bonus Scheme

 

You will be paid a bonus in accordance with the terms of the Company’s Executive
Bonus Scheme and such other performance-related payments or incentives, all as
may be agreed from time to time.

 

3.                                       Company Car

 

You will be paid an annual payment of £9,504 by monthly instalments of £792 in
lieu of an Executive level car under the PowerGen Contract Hire Scheme.

 

This payment will not be superannuable and will be liable to tax. It will be
subject to review once a benchmark has been established for the cash equivalent
benefit under the Executive car scheme and you will be notified of any changes.

 

4.                                       Private Health Care

 

You will receive free cover for yourself and your spouse and for any dependant
children during the period of your employment with the Company under the
Company’s Private Health Scheme subject to and in accordance with the rules of
the Scheme from time to time.

 

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5.                                       Pension

 

5.1                                 You will be entitled to membership of the
Electricity Supply Pension Scheme (“the ESPS”) and you will be entitled to
become a member of such other schemes as the Company may introduce subject to,
and in accordance with, the terms of the ESPS and such other schemes from time
to time.

 

5.2                                 While you are a member of the ESPS your
employment will be contracted out for the purposes of the Social Security
Pensions Act 1975.

 

5.3                                 You will be required to make contributions
in accordance with the terms of the ESPS and the terms of such other relevant
schemes as may be introduced in relation to which such contributions are
payable.

 

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APPENDIX II

 

 

1                                          Title and Duties

 

1.1                                 You will be employed by the Company as
Director – Group Performance.

 

1.2                                 As an employee you will perform such duties
and exercise such powers as may from time to time be assigned to you by the
Company.  You will devote the whole of your attention and skill to your duties.

 

1.3                                 You may be required by the Company, as part
of your employment, to have responsibilities for, and to carry out duties on
behalf of, any of its associated companies, to act as an officer, or consultant
of any such associated company and to carry out the duties relating to such an
appointment.

 

2.                                       Places of work

 

You will be based at the Company’s office at New Broad Street, but the Company
has the right to transfer you to other locations in the United Kingdom after
consultation with you.  If any transfer necessitates moving house you will be
reimbursed for reasonable expenses you may so incur.

 

3.                                       Hours of Work

 

You will work such hours as may be necessary or appropriate from time to time to
carry out your duties properly and effectively.

 

4.                                       Notice periods and retirement

 

4.1                                 Subject to Clause 12 below your employment
will continue unless or until terminated by either the Company giving to you or
by you giving to the Company not less than 12 months notice in writing.

 

4.2                                 Your employment will, in any event,
automatically terminate (if not already terminated) upon your 63rd birthday or
on your retirement at any earlier time.

 

5.                                       Holidays

 

5.1                                 You will be entitled to 25 days annual
holiday on full salary between 1 April and 31 March in each year (the “Holiday
Year”), to be taken at such time or times as may be approved by the Company. 
You may not carry over any holiday entitlement not taken in one Holiday Year to
the next, except at the discretion of the Company.

 

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5.2                                 Upon the termination of your employment
(except pursuant to Sub-Clause 12.1 below) you will be entitled to a payment in
lieu of any annual holiday which has accrued due since the beginning of the then
current Holiday Year and which you have not taken at the date of termination. 
If on termination of employment you have taken holidays in excess of the annual
holiday which had accrued due by the date of termination you shall pay forthwith
to the Company, or that the Company may deduct from any sums payable to you, an
amount that is equal to the salary you have been paid in respect of excess days
of holiday taken by you.  For the purposes of this sub-clause your annual
holiday will be treated as accruing at the rate of two days for each month of
service completed after the beginning of the relevant Holiday year.

 

5.3                                 In addition you will be entitled during the
Holiday Year to holiday with pay on public, bank and other similar holidays.

 

6.                                       Ill Health

 

6.1                                 Provided that you supply the Company with
self-certification sickness forms and/or medical certificates covering the
periods of absence as required by the Company’s Sick Leave Rules you will be
entitled to be paid during absence from work due to sickness or injury for a
period of a total of up to six months on full salary in any period of twelve
months you are employed by the Company.  Thereafter, you will at the discretion
of the Company and, subject to the provisions of Sub-Clause 12.2 below, continue
to be paid for a further six months at half salary.  In the event that your
employment is terminated either at the end of the aforementioned six month
period or under the terms of Sub-Clause 12.2 you will be entitled to receive the
benefits of such health insurance scheme as may from time to time be in force.

 

6.2                                 If the sickness or injury resulting in your
absence from work is, or appears to be caused by the acts or conduct of a third
party you must immediately notify the Company giving full particulars, including
particulars of any relevant claim or legal proceedings.  If required by the
Company, you must also refund to it that part of any damages recoverable
relating to loss of earnings for the period of your absence as the Company may
reasonably determine provided that the amount to be refunded shall not exceed
the amount of damages or compensation actually recovered by you less any costs
borne by you in connection with such recovery and shall not exceed the total
remuneration paid to you in respect of the period of absence.

 

7.                                       Business expenses

 

You will be reimbursed with the amount of all hotel, travelling and other
expenses properly and necessarily incurred in the performance of your duties

 

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against the production to the Company of valid receipts for such expenses, and
subject always to the Company’s current policies with regard to business travel,
accommodation and expenses.

 

8.                                      
Confidential information and other business interests and activities

 

8.1.                              During your employment you must not (other
than with the written consent of the Company) be directly or indirectly engaged
or concerned in the conduct of any other business, trade or occupation (whether
as employee, consultant, director, shareholder or otherwise).  Nevertheless, you
may be or become a shareholder of not more than 3% of any class of security in
any one Company which is quoted and dealt in on any recognised Stock Exchange. 
You must at all times keep the Chairman, or his nominee, promptly and fully
informed of all matters upon which you are engaged outside your employment with
the Company.  You must also observe Company requirements and procedures relating
to the impartiality of officers and the acceptance of gifts.

 

8.2                                 You will not, either during your employment
(otherwise than in the performance of your duties) or afterwards, use for your
own or for anyone else’s benefit, divulge or communicate to anyone any trade or
business secret or confidential information concerning the business, finances or
affairs of the Company, or any associated company, without the written consent
of the Company or relevant associated company, as appropriate.  You will use
your best endeavours to prevent the misuse, disclosure or publication of any
trade or business secret or any confidential information concerning the business
of the Company or any associated company.

 

8.3                                 You will not make use of, make copies or
notes of, or retain any records, written or otherwise, relating to the business
of the Company, or any associated company, or allow any of these things to be
done by anyone else, otherwise than for the benefit of the Company or the
relevant associated company, as appropriate.  In any event, upon the termination
of your employment you will deliver up to the Company or relevant associated
company any such documents, together with all other Company or associated
company property.  Title to and copyright in all such documents will be the
Company’s (or, where appropriate, the associated company’s) throughout.

 

8.4                                 You will not after the termination of your
employment represent yourself as being an officer of, or employed by or
connected with, the Company or any associated company.

 

8.5                                 You will not, for twelve months in respect
of paragraph 8.5(a) and nine months in respect of other paragraphs of this
Sub-Clause, after the termination of your employment (without the prior written
consent of the Company or any associated

 

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company as appropriate) either on your own account or for any person, firm,
company or organisation:-

 

(a)                                  solicit or entice or endeavour to solicit
or entice away from the Company, or from any associated company in relation to
which you held at any time a position of responsibility in the course of your
employment, any person who is or who at any time during the six months prior to
the termination of your employment was an employee or Director of or consultant
to the Company or the relevant associated company and with whom you had personal
contact or dealings in the course of your employment during the period of six
months prior to the termination of your employment.  This restriction applies
whether or not such a person would commit any breach of his contract of
employment by reason of leaving the service of the Company or the associated
company, as appropriate;

 

(b)                                 solicit, or endeavour to solicit business
from any person or organisation with whom or which you had personal contact or
dealings in the course of your employment during the period of twelve months
prior to the termination of your employment, and which business is of the kind
which is undertaken by the Company, or by any associated company in relation to
which you held a position of responsibility in the course of your employment at
any time during the twelve months prior to its termination, and which was
undertaken by the Company or by any such relevant associated company as the case
may be, at any time during that twelve month period;

 

(c)                                  entice, or endeavour to entice, away from
the Company, or from any associated company in relation to which you held a
position of responsibility in the course of your employment at any time during
the twelve months prior to its termination, business of the kind which is
undertaken by the Company, or the relevant associated company, and which was
undertaken by the Company or by any such relevant associated company as the case
may be, during that twelve month period.

 

(d)                                 have business dealings with, or accept
business from, any person or organisation with whom you had personal contact or
dealings in the course of your employment during the twelve months prior to the
termination of your employment, and which business is of the kind which is
undertaken by the Company, or by any associated company in relation to which you
held a position of responsibility in the course of your employment at any time
during the twelve months prior to its termination, and which was undertaken by
the Company or by any such relevant associated company as the case may be,
during that twelve month period.

 

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8.6                                 You will not within England, Wales or
Scotland and for the period of nine months after the termination of your
employment without the prior written consent of the Company either alone or
jointly with, or as manager, agent consultant or employee of, any person or
organisation, directly or indirectly, carry on or be engaged or involved in the
Restricted Business (as defined in the Schedule) or in any other business which
competes directly with any business (other than the Restricted Business) of the
Company or any associated company in relation to which you held a position of
responsibility in the course of your employment at any time during the
twelve months prior to its termination.  During any period of restriction which
arises pursuant to this Sub-Clause 8.6, the Company will pay you compensation of
equivalent to nine months of your annual salary determined from Sub-Clause 1.1
of Appendix I, always provided that you have not committed any breach of the
provisions of this Sub-Clause.  This compensation will be payable in nine equal
monthly payments on the last day of each calendar month beginning at the end of
the first complete calendar month after the termination of your employment.

 

8.7                                 If you should at any time seek to leave the
Company’s employment without giving the full period of notice required under
Clause 4 above and in circumstances where you are not entitled to terminate your
contract of employment without giving such notice, the Company will have the
right to require you not to attend at any place of work and otherwise to suspend
you from the performance of your duties without prejudice to your rights to
remuneration and other benefits until such termination is effective.

 

8.8                                 You agree that the restrictions and
obligations contained in Sub-Clauses 8.2, 8.3, 8.4, 8.5 and 8.6 will continue
after the termination of your employment, whether terminated on notice,
summarily, in breach of contract or otherwise and whether terminated by you or
by the Company.

 

8.9                                 For the avoidance of doubt, the restrictions
contained in each of the above Sub-Clauses constitute entire, separate and
independent restrictions.  If any restriction is held to be unenforceable, then
it is intended that the remaining restrictions will remain in force and
unaffected.

 

9.                                       Protection of intellectual property

 

9.1                                 Subject to the Patents Act 1977 and the
Copyright Act 1956 (as amended or consolidated), any invention made by you in
the course of or arising out of your employment belongs to the Company and you
must take all appropriate steps to ensure that the Company obtains the maximum
benefit from such invention by the prompt application for patents at the
Company’s expense and generally.

 

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9.2                                 If you create or make any discovery, design
or other work in the course of or arising out of your employment each such
discovery, design or work belongs to the Company and you should take all
appropriate steps to ensure that the Company obtains the maximum benefit from
such discovery, design or work.

 

10.                                 Compliance with legislation and regulation

 

10.1                           You must observe the relevant requirements of the
Stock Exchange “ Yellow Book”, The Company Securities (Insider Dealing) Act 1985
(as amended or consolidated), and, when applicable, the City Code on Take-overs
and Mergers and the Rules governing Substantial Acquisitions of Shares.

 

10.2                           It is your obligation to ensure you take no
action and make no statement (or omit to take any action or make any statement)
which constitutes unlawful discrimination whether under the Sex Discrimination
Act 1975 or the Race Relations Act 1976 or otherwise.

 

10.3                           You are required to comply with the provisions of
legislation on health and safety and working conditions, and to do your utmost
to ensure that the Company, and any subsidiary company, complies with that
legislation, with the legislation concerning their areas of activity and
generally with all legal obligations affecting the Company and any subsidiary
company or successor company.

 

11.                                 Medical examinations

 

The Company may require you to undergo from time to time a medical examination
by a doctor appointed by the Company.  The Company will be entitled to receive a
report of the examination, a copy of which will be sent to you.

 

12.                                 Termination Provisions

 

12.1                           Your employment may be terminated forthwith by
the Company by summary notice in writing:

 

(a)                                  if you are guilty of any gross default or
gross misconduct in connection with or affecting the business of the Company or
any associated company; or

 

(b)                                 in the event of any serious or repeated
breach of or non-observance by you of any of the stipulations contained in this
agreement; or

 

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(c)                                  if you become unable to pay your debts or a
bankruptcy order is made against you, or if you enter into a deed of arrangement
with your creditors; or

 

(d)                                 if you are convicted of any arrestable
criminal offence (other than an offence under road traffic legislation in the
United Kingdom or elsewhere for which a fine or non-custodial penalty is
imposed); or

 

(e)                                  for any other reason permitting summary
dismissal at law.

 

12.2                           If (owing to sickness, injury or otherwise) you
do not perform your duties for a period of at least six months (whether or not
consecutive) in any period of twelve months the Company will (without prejudice
to any other provision of this agreement) be entitled by summary notice to you
in writing (given at the expiry of such period or at any time thereafter while
you continue not to perform your duties hereunder) to terminate your employment
forthwith.

 

12.3                           If the Company has any grounds to believe it may
have a right to terminate your employment pursuant to Sub-Clause 12.1 above it
shall be entitled (but without prejudice to its right subsequently to terminate
your employment on the same or any other ground) to suspend you on full pay, for
a period of not more than three months for any enquiry or investigation into the
circumstances giving rise to such belief.

 

12.4                           In the event of the Company deciding to pay to
you a sum in lieu of notice (whether whole or in part), the Company reserves the
right:-

 

a)                                      to reduce any such payment by such
amount as the Company’s Remuneration Committee shall direct if in the opinion of
such Committee you have failed properly to discharge your duties as an executive
director of the Company;  and/or

 

b)                                     to discharge any such payment by means of
instalment payments to you during any remaining period of notice not worked by
you, of such amounts and upon such conditions as the Company’s Remuneration
Committee may direct (having regard in particular to your ability to mitigate
any loss occasioned to you by reason of the termination of your employment.)

 

12.5                           Upon termination of your employment for whatever
reason, and whether in breach of contract or otherwise, you will at the request
of the Company or any associated company, immediately resign, in writing and
delivered as a deed, your position as a Director of such associated company,
waiving all compensation for loss of office as Director.  If you fail to resign
your position as Director, all relevant associated companies are hereby
irrevocably authorised to appoint

 

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someone in your name and on your behalf to sign any documents and to do any
things necessary to give effect to this obligation.

 

13.                                 Grievance/Disciplinary

 

In the event that you are dissatisfied with any disciplinary action taken
against you, or have any grievance relating to your employment you should apply
in the first instance to the Chairman who will either propose a solution or
refer the matter to the Company Board for a decision.  There is no formal
disciplinary procedure relating to your employment.

 

14.                                 Continuous Employment

 

Your period of continuous employment with the Company (including any relevant
previous employment with the Central Electricity Generating Board) began on 1
May 1998.

 

15.                                 Notices

 

Notice under these Terms and Conditions will be treated as having been given if
sent by ordinary first class post, by you to the Company’s registered office or
by the Company to you at your last known address, as appropriate, and will be
deemed to be given on the day when it would ordinarily be delivered after such
posting.

 

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THE SCHEDULE

 

 

“Restricted Business” shall mean the businesses of:-

 

•                                          generation, distribution, marketing,
sale or supply of electricity; and/or

 

•                                          distribution, marketing, sale or
supply of gas; and/or

 

•                                          the procurement or sale of fuel for
the generation of electricity; and/or

 

•                                          the construction or erection of power
stations for the generation of electricity; and/or

 

•                                          research into or technical evaluation
of any process or method capable of use in any of the items above; and/or

 

•                                          providing consultancy services in
respect of any of the items above.

 

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SIGNED the day and year first before written.

 

 

SIGNED by

)

for and on behalf of

)

POWERGEN UK PLC

)

 

)

 

)

SIGNED by

)

RICHARD AITKEN-DAVIES

)

 

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TERMS AND CONDITIONS OF ASSIGNMENT TO: POWERGEN KENTUCKY LTD; US BRANCH OFFICE
(“The  Assignment”)

 

WITH POWERGEN UK PLC (“the Company”)

 

NAME:  Mr Richard Aitken-Davies

 

PROPOSED PERIOD: 1 January 2001 - 31 December 2002

 

References in this document to “Chief Executive Officer” mean the Chief
Executive Officer of LG&E Energy Corporation.

 

1.                                       Title

 

You will be assigned as the Chief Financial Officer, LG&E Energy Corp.

 

2.                                       Remuneration

 

Your remuneration package is made up of:

 

Basic Salary

 

£167,104

 

per annum

Cost of living adjustment

 

£3,410

 

per annum (non-taxable)

 

Your salary will be reviewed in July each year.  The  cost of living adjustment
is reviewed annually. As a result of the review, any adjustments to your
overseas remuneration will be made at this time. You should be aware that these
adjustments can go down as well as up.

 

The cost of living adjustment is based on the standard index. After one year
this will be reviewed on the basis that you will be a more informed purchaser
and the efficient purchaser index will be used.

 

Your salary net of hypothetical tax will be paid into your UK bank account.  Any
reasonable bank charges associated with the transfer of money to the US will be
reimbursed on production of the necessary documentation.

 

Your basic salary includes the sum of  £9,504 in lieu of the payment that you
currently receive under your UK contract of employment for an executive level
car.  On your return to the UK, you will continue to receive this payment
consolidated in your basic salary and will not be eligible for a car under the
executive car scheme.

 

Additional Remuneration

 

In addition an overseas service payment (not subject to hypothetical tax) of 5%
of salary will be paid every six months for the duration of the assignment.  The
calculation will be based on the basic salary at the time of payment.

 

Settling-in Allowance (not subject to hypothetical tax)

 

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A lump sum payment of £2000 will be paid as a contribution to the expense of
settling into your US accommodation.

 

3.                                       US Work Permit

 

It is a condition that you and your wife are in possession of the relevant US
Visa prior to commencing this assignment.

 

4.                                       Taxation

 

The Company agrees to the tax and social security arrangements as set out in
Appendix A which forms part of this contract.  This allows for hypothetical tax
to be deducted from certain components of your overseas package in order to
contribute towards meeting any real UK or US income tax liabilities.

 

On the basis of current UK tax legislation you should be entitled to
non-resident tax status, as your assignment includes a full UK tax year, (that
is, 6 April to 5 April).  You will need to submit a P85 claim form to the
Birmingham tax office via the tax advisors in order to obtain this relief.

 

You will be provided with overseas tax return preparation assistance for filing
tax returns in the US and UK tax return preparation assistance in the year of
departure from, and arrival back in, the UK. You must ensure that all
information requested by the tax advisors is provided in a timely manner to
ensure compliance. Any penalties or interest costs arising from missed deadlines
will be reimbursed by you to the Company.  Any overseas tax repayments made to
you must be signed over to the Company at the time the money is received.

 

The advisors will provide such information to Powergen as is necessary to ensure
tax liabilities arising on employment related income are met by the Company.

 

5.                                       National Insurance

 

The UK has a reciprocal agreement on social security with the USA. Therefore,
Powergen will apply to the relevant authorities to allow you to remain in the UK
National Insurance scheme for the duration of your assignment.  If successful,
you will receive a Certificate of Continuing Liability to UK National Insurance
and Class 1 contributions will continue for the period of the assignment.

 

6.                                       Pension

 

During your assignment in the US you will continue to be entitled to remain a
member of the Electricity Supply Pension Scheme, the Powergen Senior Executive
Pension Scheme (PSEPS) and the Unapproved Schemes and have pension contributions
deducted from your basic salary at the present rate. Should your circumstances
change you should inform the Pensions Manager at Powergen as soon as possible.

 

7.                                       Pre and Post Assignment Leave

 

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You will be entitled to 1 day’s embarkation leave and 2 days’ recuperative leave
at the start of the assignment, and 1 day’s embarkation leave and 1 day’s rest
leave at the end.  This leave is in addition to your annual leave entitlement.

 

8.                                       Travel Costs

 

In order that you may take up your assignment, Powergen will pay travelling
expenses for you and your wife, to and from the US at the beginning and end of
the assignment (except as provided in 24.3 and 24.5).  These expenses will
include payment of an excess baggage allowance of 20kg each on both the outward
and return flights.

 

Travel will be by Business class; flights booked through the Company’s preferred
supplier..

 

For travel from home to the UK airport,, you may wish to use a hire car.
Powergen will pay the cost of a maximum of 2 day’s hire. The same arrangements
will apply for the journey home at the end of your assignment (except as
provided in 24.3 and 24.5).

 

9.                                       Annual Leave

 

Your overall leave entitlement will be 25 days (excluding travelling time) plus
the annual public holidays of the host country.  If you wish to take annual
leave this must be approved by the Chief Executive Officer for the duration of
the assignment.

 

10.                                 Home Leave and Travel Costs

 

You should incorporate home leave with business trips wherever possible. You and
your wife will each be entitled to 4 home leave tickets during the assignment
period excluding the outgoing and final trip home. In addition, you are entitled
to a further 4 tickets each year for your non-accompanying family members.
Travel for home leave will be on the basis of business class airfare booked
through the Company’s preferred supplier.

 

A hire car may be booked for the full period of home leave.  Petrol costs will
be met by the Company.

 

Any days off taken, as part of a home leave will be deducted from your annual
leave entitlement.

 

11.                                 Emergency ‘Home Leave’’

 

Consideration will be given to emergency home leave in the event of the death or
serious illness of an immediate family member in the UK.

 

12.                                 Freight

 

The reasonable costs of shipping personal effects will be paid at the beginning
and at the end of the assignment (except as provided in 24.3 and 24.5).  You and
your wife will have a total surface freight allowance of 3m³ per person net or
equivalent cost airfreight allowance.  When in the UK, you should obtain quotes
from our preferred suppliers and accept the lowest.  Please refer to the notes
of guidance in the enclosures pack. At the end of your assignment you may
contact the preferred supplier or a local recommended organisation.   If you
find the allowance of 3m³ net restrictive, you should provide details of what
you intend to take and the Group HR

 

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Director will give consideration to increasing the allowance on an individual
basis.  We recommend you do not ship antique or fragile goods.

 

Unused freight allowance is not transferable.

 

13.                                 Temporary Accommodation on Arrival in the US

 

Should you and your wife have to stay in a hotel or other temporary
accommodation for the initial period of the assignment, reasonable costs,
including meals, will be reimbursed on production of receipts, within limits
agreed with  the Group HR Director.

 

14.                                 Accommodation – Destination Support

 

Assistance in finding suitable accommodation has been arranged by the Company
with First Choice International based in Louisville, Kentucky.

 

15.                                 Permanent Accommodation

 

The Company will pay up to an agreed limit for reasonable accommodation
(including management and car parking/garage fees). Prior to commencing your
house search, the allowance and specification for your accommodation should be
agreed with the Senior Vice President and Administrative Officer.  Should you
wish to rent a higher priced property, you will be responsible for the
additional costs incurred.  the Company will meet the cost of legal fees, rates
and estate agent fees.  You will be responsible to the Landlord for any
accidental damage to the property or its contents that occurs during the
assignment.  You should note that normally the lease is drawn-up in LG&E Energy’
Corporations  name subject to local arrangements. You and your wife will be
entitled to occupy such accommodation until your assignment in the US actually
ceases.

 

16.                                 UK and US Utilities

 

The overriding principle is that you will remain responsible for one set of
standing charges and units consumed.  The table below establishes where the
responsibility for payment rests in a range of circumstances.

 

Powergen will reimburse the total cost of initial connection charges for gas,
electricity, water and telephone and any subsequent disconnection charges
incurred in the US.

 

The Company will pay reasonable business call costs and you should meet the cost
of all personal telephone calls.  Bills should be itemised accordingly.

 

 

 

UK

 

US

 

 

 

Standing
Charges

 

Units
Consumed

 

Maintenance
Costs Units

 

Standing
Charges

 

Units
Consumed

 

UK property occupied by family

 

E

 

E

 

E

 

PG

 

PG

 

UK property rented-out

 

E

 

E

 

E

 

E

 

E/PG*

 

UK property empty

 

E

 

—

 

PG

 

PG

 

E/PG*

 

 

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E = Employee    PG = The Company    E/PG* = Proportion of 50/50

 

4

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17.                                 On-going Commitments in the UK

 

During the period of your assignment you will continue to be responsible for
payment of any such items as mortgage, house insurance, council tax, etc related
to any property owned/leased by you in the UK.

 

If you choose (as opposed to business need transfer) to sell your house in the
UK any costs incurred in the sale or purchase or rental of any alternative
property will not be met by Powergen that  is, at the commencement or end of an
assignment.

 

Should you retain your house and leave it unoccupied during the assignment, any
additional reasonable costs incurred, (e.g. additional house contents insurance,
general property maintenance), will be reimbursed on production of receipts. If
you choose to rent out your property the Company will not reimburse any
additional costs incurred.  You should note that you have a duty to take every
action to mitigate any losses by taking proper security precautions, pursuing
claims against third parties etc.  The Company will not pay for any costs
associated with normal wear and tear of the property.  You should check the
terms of your home contents insurance policy to ensure it is not invalidated by
any non-occupancy.

 

Any reasonable costs arising from the redirection of mail from your home to a
nominated forwarding address will be reimbursed on production of receipts.

 

18.                                 Provision of US Transport

 

As you have a UK entitlement to a contract car you will be provided with a lease
vehicle in the US in accordance with the senior executive car programme in LG&E.
You should discuss arrangements with the Group HR Director.  Actual petrol
expenses incurred by business mileage and private mileage will be met by the
Company.  You will be entitled to company paid parking.

 

You will need to obtain an International Driving Permit by taking your British
Licence and a passport photograph to one of the national motoring organisations
(AA, RAC, National Breakdown), prior to your departure.  When applicable the
cost of any additional insurance above the leasing arrangements, any road fund
licence, together with any costs associated with driving tests for you/your wife
will be met by the Company.

 

As a resident in Kentucky you will also need to obtain a local driving licence.

 

19.                                 Luncheon Club

 

You will be reimbursed invitation fees and dues at a luncheon club of your
choice subject to club provisions of nondiscrimination.

 

20.                                 Occupational Health

 

5

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You and your wife have received the necessary medical clearance from Dr Vidia
Kisnah, (Powergen’s Chief Medical Advisor) related to your stay in the US and
have been provided with appropriate medical advice and guidance and equipment.
Arrangements will be made by Dr Kisnah for a review in May 2001.

 

It is advisable for you and your wife to have full health checks e.g. optician
and dental checks, routine GP visits, prior to departure and on home leave
visits.  If you should require such checks overseas or glasses/contact lenses,
Powergen will meet any significantly greater cost than that incurred in the UK
upon production of receipts.

 

21.                                 Insurance

 

Contents insurance applying to your possessions in the host country will be
provided through Ergon Insurance Ltd.  You should refer to the overseas home
insurance schedule for details of cover and complete an insurance proposal form
and return to Risk Management based at Westwood.

 

Personal accident, and travel insurance will be provided for you and your wife
through AIG.

 

You and your wife will be eligible to participate in the medical plan provisions
which cover LG&E Energy Corporation employees in Kentucky. Arrangements will be
made to take you through the plan provisions.

 

22.                                 Business Visits

 

You may be required to make business visits during the course of your
assignment.  Travel will be on the basis of Business class and a hire car may be
booked for the full period of the visit.

 

All reasonable visits to the UK to perform your current role with the
Association of Chartered Certified Accountants will be treated as business
trips.

 

23.                                 Business Expenses

 

Business expenses should be claimed in accordance with the Company
arrangements.  They should be authorised by the Chief Executive Officer.

 

24.                               Trips to the UK

 

For tax reasons you must notify the Group HR Manager of any time spent in the UK
either on business or pleasure.

 

25.                                 Assignment Completion

 

Three months before the end of the assignment you and the Chairman will discuss
the experience you have gained from the assignment in the US and consider future
career possibilities.

 

26.                                 Termination of Assignment

 

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26.1                           The Company is entitled to terminate your
employment immediately by notice in writing to you pursuant to Clause 12.1(a),
(b) (c), (d) (e) and 12.2 in your U.K Contract of Employment.

 

26.2                           The Company may terminate the assignment at any
time without indemnity, compensation or notice save as set out in 26.4. The
following list provides examples of reasons for termination but it is not to be
regarded as exhaustive:-

 

a)                                      termination of or a change to the
Company’s activities in the country or specific venture or project to which you
have been assigned or a change in the requirements of your role;

 

b)                                     if the Company receives advice that your
continued employment in the USA would be likely to endanger your health;

 

c)                                      domestic/compassionate and other
discretionary reasons requiring your return to the UK.

 

26.3                           If the assignment is terminated under the
provisions of paragraphs 26.1 above, at the discretion of the Chairman, you will
not be reimbursed the cost of you and your wifes repatriation to the UK.  The
Company will not be liable for any loss of future income (from whatever source)
allowance or benefits in kind that would have been earned but for the
termination.

 

26.4                           If the Company terminates the assignment under
the provisions of paragraphs 26.2 above or 26.7 below, then you will be
reimbursed for all reasonable transfer costs arising directly out of the
termination of your assignment.  The overseas service payment will be paid on a
pro-rata basis upon termination of the assignment.

 

26.5                           In the event that you choose to resign from the
Company before the end of the assignment, you will not be eligible to receive
the overseas service payment nor will the Company pay for any return travel or
freight costs.

 

26.6                           Tax equalisation will be applied until the date
of termination of the assignment.

 

26.7                           If you can demonstrate on reasonable grounds that
you are unable to pursue the objectives of this assignment in the US in the
interests of the Company (or your own personal interests) and following
consultation with the Chief Executive Officer and Group HR Director the position
can not be resolved then you will return to your role as Director – Group
Performance or an equivalent position agreeable to you at the time to be
mutually agreed or in default of agreement upon three months notice from you.

 

26.8                           In the event that the company is taken over and
completion of the takeover occurs during the first twelve months of your
assignment, then for a period of twelve months from the date of the takeover,
the relevant notice period to terminate your employment would be the remainder
of  your assignment period plus the notice period as set out in your UK contract
of employment.  In all other circumstances, the notice period set out in your UK
contract of employment will apply.

 

7

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27.                                 British Consulate

 

You should register yourself and your wife at the local British Consulate Office
soon after arrival in the US.

 

26.                                 Jurisdiction

 

This agreement shall be governed by and interpreted in accordance with the laws
of England and each of the parties submit to the jurisdiction of the English
courts as regards any claim or matter arising under this agreement.

 

27.                                 Contract of Employment

 

Except as stated in these terms and conditions your contract of employment with
Powergen UK plc dated 23 June 1999 remains unchanged.

 

Signed for and on behalf of Powergen UK plc:

 

 

/signed/

 

 

19 March, 01

 

 

 

 

J A HART

 

Date

 

 

I have read the terms and conditions of assignment and understand and agree to
abide by the tax and social security equalisation arrangement (Appendix A).  I
accept the assignment on the basis of these terms and conditions.

 

 

/signed/

 

 

26th March 2001

 

 

 

 

Richard Aitken-Davies

 

Date

 

8

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Appendix A

 

TAX AND SOCIAL SECURITY EQUALISATION

 

In order to ensure a fair and consistent approach to its international
assignees, Powergen (Powergen UK plc and its subsidiaries) having regard to the
practices adopted by other international companies, have applied a tax and
social security equalisation policy on all basic UK pay and benefits elements,
except healthcare.  Tax liability arising from receiving allowances or other
benefits, e.g. “free” accommodation is met by Powergen.

 

Tax equalisation on personal income is not usual Powergen policy however taking
into account your circumstances, arrangements will be made for your to meet with
representatives from Arthur Andersen so that you can identify your current
personal income/investment portfolio (‘register’ the portfolio). Powergen will
then undertake to reimburse any incremental tax liability incurred on that
portfolio as a result of the assignment to the US.  This commitment is subject
to you adopting the tax filing basis recommended by Arthur Andersen’s.

 

Taking into account your circumstances, Powergen’s tax equalisation position
with regards to income arising under Powergen’s share based plans is based on
the following four basic principles:

 

1.  Any host country liability arising from an initial grant/award (as opposed
to exercise or disposal under a Powergen share based plan will be covered by tax
equalisation.

 

2. Any “forced” exercise which creates a US tax liability will be tax
equalized.  Where such an event would “ordinarily” create a UK tax liability
(i.e. exercise of an unapproved option), hypothetical taxes will be deducted,
with the company meting any actual UK and UK taxes.

 

3.  Any home or US tax liability arising as a result of any voluntary exercise
is for the individual’s account.  Further:

 

a)  where the plan is approved and therefore non taxable in the UK, it will be
the individual’s responsibility to meet the US liability.

 

b)  where the plan is unapproved and therefore “ordinarily” taxable in the UK,
either in part or whole, the company will deduct hypothetical tax and pay all
home and US taxes to a maximum of the hypothetical tax deduction.  Any actual
taxes in excess of this amount will be for the individual’s account.

 

4.  The disposal of any shares acquired through any Powergen share based plan
(unless there is a “forced disposal”) is a personal investment decision and any
home or US taxes arising on such a disposal are therefore not covered by tax
equalisation.

 

9

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Note:

 

The term “exercise” includes both an exercise of an option or a request for plan
shares to be released from trust.

 

The term “forced exercise” is defined as an exercise which either:

 

a)  occurs within the last seven days up to and including the expiry dates of
the specified vesting periods applicable to each of Powergen’s share based
plans; or

 

b)  occurs within the last seven days up to and including the start of a closed
period where the normal expiry date falls within the closed period; or

 

c)  occurs as a result of a change to Powergen’s corporate existence.

 

The term “voluntary exercise” is defined as any exercise which is not forced.

 

The term “forced disposal” is defined as where the individual is obliged at
“forced exercise” to fund the actual/hypothetical tax arising by disposing of a
proportion of the exercised shareholding.

 

The term “closed period” is defined as a specified period, during the normal
vesting period applicable to each of Powergen’s based plans, in which an
individual is prevented from exercising due to stock exchange or other statutory
restrictions.

 

The total tax liability for the overseas assignment is met by Powergen utilizing
the hypothetical tax policies plus its own funding.  Arthur Andersen are engaged
to support the process.  Any UK tax refunds in the year of departure from and
arrival in the UK arising as a result of the overseas assignment, including
refunds due to unused personal allowances, but excluding refunds relating to
non-employment income not covered above must be repaid to Powergen.  Further any
under or over payment of actual UK or overseas tax, in respect of employment
related income or that identified above only, will be met by Powergen or
collected from the individual, respectively.   In the unlikely event of your
being declared redundant whilst overseas, our tax equalisation policy will apply
to the severance payments.

 

It is important to note that hypothetical tax is not real income tax and uses
standard allowances rather than actual tax codes.  As in the UK, tax relief on
Electricity Supply Pension Scheme contributions (ESPS) including additional
voluntary contributions to the ESPS is maintained.  The basis of calculation of
hypothetical tax is further outlined below.  Where the assignment commences or
terminates part way through the UK tax year, the lower and basic rate bands and
personal allowances will be pro-rated in the hypothetical tax calculation.

 

10

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On the basis of current UK tax legislation, if your assignment includes a full
UK tax year (that is 6 April to 5 April) you will be deemed to be a non-resident
in the UK.  If not, it is likely you will be taxable both in the UK and US.

 

You will be required to submit UK and UK tax returns during the period of the
Assignment.  Arthur Andersen have been appointed as Powergen’s international tax
advisers who will assist with the preparation of returns (as detailed below) and
the calculation of actual tax payable.  You may wish to supplement Arthur
Andersen’s advise with independent financial advice in relation to your personal
investment income.

 

Prior to commencing your US assignment, you are required to meet with Arthur
Andersen who will clarify your taxation position and complete the necessary exit
documentation for submission to the Inland Revenue.  Failure to do this may
result in considerable tax complications for you.

 

It should be noted that you retain ultimate responsibility for the returns and
must ensure that all information requested by the tax advisers is proved in a
timely manner to ensure compliance.  Any penalties or interest costs arising
from missed deadlines will need to be reimbursed to Powergen.

 

Social Security Equalisation

 

National Insurance helps to pay for some Social Security benefits including
retirement pensions.  Whilst employed in the UK Class 1 contributions, up to a
maximum rate are deducted from salary.  Powergen also pays employer NI
contributions for you.

 

For assignments to the US, the UK has a reciprocal agreement.  Subject to
various qualifications you will remain subject to UK National Insurance only and
therefore both you and Powergen will remain liable for Class 1 contributions.

 

 

December 2000

 

11

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EXPATRIATE TAX EQUALISATION

 

 

Components of Package

 

Taxable — equalised back to UK

 

Base Salary

Any Bonus payments

Car/transport allowance (personal use)

“Forced exercise” of the unapproved option

Exercise of approved option in an unapproved manner

“Voluntary exercise” of unapproved option subject to maximum referred to in
point 3.b above

 

Non Taxable — Tax Paid by Powergen

 

Cost of living allowance

Overseas service payment

Location allowance

Settling in allowance

Accommodation costs

Home leave

Travel costs

Overseas relocation costs

Travel/accident insurance

UK garden and property maintenance costs

Overseas utility charges (where paid)

Private medical insurance

US lease car (senior executive car programme and associated expenses

Powergen share based plan — grant/award

Powergen share based plan — “forced exercise” of UK approved option

Powergen share based plan —  “forced disposal”

“Registered” portfolio of personal/investment income

 

December 2000

 

12

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AMENDMENT TO THE TERMS AND CONDITIONS

OF ASSIGNMENT TO: LG&E ENERGY CORP.

OF

RICHARD AITKEN-DAVIES

 

THIS AMENDMENT TO THE TERMS AND CONDITIONS OF ASSIGNMENT TO: LG&E ENERGY CORP.
OF RICHARD AITKEN-DAVIES (“AMENDMENT”) is made and entered into this 27th day of
June, 2002 by and among (i) LG&E ENERGY CORP., a Kentucky corporation
(“Company”), (ii) POWERGEN, PLC, a United Kingdom public limited company
(“Parent”) and, (iii) RICHARD AITKEN-DAVIES (“Executive”), collectively referred
to as the “Parties”.

 

WHEREAS, the Executive and the Parent entered into a Contract of Employment,
dated June 22, 1999 (“Agreement”).

 

WHEREAS, the Agreement was modified by the Terms and Conditions of Assignment
To: LG&E Energy Corp. in a document dated December 19, 2000 (“Assignment”).

 

WHEREAS, the Parent and E.ON AG, an aktiengesellschaft formed under the Federal
Republic of Germany (“German Parent”) have agreed to the terms of a recommended
pre-conditional cash offer, whereby German Parent or its subsidiary will acquire
ownership of the Parent.

 

WHEREAS, the Parent and the German Parent have determined that the acquisition
of the Parent by the German Parent shall be completed by way of a scheme of
arrangement, whereby the acquisition will become effective in accordance with
the terms of the scheme (“Acquisition Date”).

 

WHEREAS, the Parties have determined that it is now desirable to amend the
Assignment to reflect certain changes necessitated by the German Parent’s
acquisition of the Parent.

 

AGREEMENT:

 

NOW THEREFORE, in consideration of the respective agreements of the parties
contained herein, it is agreed that the Assignment shall be amended as follows:

 

1.  The Proposed Period of the Assignment shall be extended until the second
anniversary of the Acquisition Date.

 

2.  A new Section 26.9 shall be added to the end of Article 26 of the Assignment
to read as follows:

 

 

13

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"26.9  If the Executive is (i) employed on the day following the second
anniversary of the Acquisition Date by the Company, the Parent, the German
Parent, or any subsidiary of the Company, the Parent or the German Parent,
hereinafter collectively referred to as the "Employer", or (ii) terminated from
employment prior to the expiration of the twenty-four (24) month period
following the Acquisition Date by an Employer (other than as provided for in
Sections 12.1 or 12.2 of Appendix II to the Agreement) or by the Executive for
Good Reason (as hereinafter defined), the Employer shall pay to the Executive on
such an anniversary or within 10 days of such termination date a cash lump sum
payment in an amount equal to (i) the Executive's Salary Amount (as hereinafter
defined), and (ii) the Executive's Target Annual Incentive Amount (as
hereinafter defined).  For purposes of this Agreement, "Good Reason" shall mean
a reduction by an Employer in the Executive's base salary or annual target bonus
percentage as in effect prior to such reduction, or any failure to pay the
Executive any compensation or benefits to which the Executive is entitled within
thirty (30) days of its commission.  For purposes of this Agreement, "Salary
Amount" shall mean the Executive's annual base salary from an Employer in effect
at the time of payment;, provided however, if an Employer has reduced the
Executive's annual base salary, the Salary Amount shall be the annual base
salary in effect prior to the reduction.  For purposes of this Agreement,
"Target Annual Incentive Amount" shall mean the target annual bonus of the
Executive under the annual incentive plan of the Employer at the time of
payment; provided however, that if an Employer has reduced the target annual
bonus of the Executive, the Target Annual Incentive Amount shall be the target
annual bonus in effect prior to the reduction."

 

3.             Except as provided in this Amendment, the temrs and conditions of
the Agreement and the Assignment shall remain in full force and effect.

 

                IN WITNESS WHEREOF, the Company, the Parent have caused this
Amendment to be executed by its duly authorized representative and the Executive
has executed this Amendment as of the date set forth below, but which shall
become effective as of the Acquisition Date, provided the Executive is employed
by the Company on that date.

 

 

14

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LG&E ENERGY CORP.

 

 

 

 

 

 

 

 

By:

/s/ John R. McCall

 

 

 

 

Name

 

 

 

 

 

Title

EVP, General Counsel, Corp. Sec.

 

 

 

 

 

 

 

 

Date:

6/21/02

 

 

 

 

 

 

 

 

 

 

 

 

 

POWERGEN, PLC

 

 

 

 

 

 

 

 

By:

/signed/

 

 

 

 

Name

 

 

 

 

 

Title

 

 

 

 

 

 

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

 

 

 

 

/s/ Richard Aitken-Davies

 

 

 

 

 

Richard Aitken-Davies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

15

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