**EXHIBIT 10.77**

 

**CONTRACT OF EMPLOYMENT**

 

 

THIS AGREEMENT is madethe   22    day ofJune    1999 B E T W E E N:

 

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

 

- and -

 

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

 

IT IS HEREBY AGREED as follows:

 

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

 

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

 

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

 

IN WITNESS WHEREOF this Agreement has been enteredinto 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 youremployment with the Company.

 

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

 

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

 

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

 

(b)                                 any company having an ordinary share capital (as defined in Section832 of the Income and Corporation Taxes Act 1988) of which not less than 25 percent is owned directly or indirectly by the Company (applying the provisions ofSection 838 of the Income and Corporation Taxes Act 1988 in the determinationof 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 arrearson or about the 24th day of each month, and will be deemed to accrue fromday to day.  It will be reviewed fromtime to time during your employment at the discretion of the Company.

 

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

 

2.                                       Bonus Scheme

 

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

 

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 underthe PowerGen Contract Hire Scheme.

 

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

 

4.                                       Private Health Care

 

You will receive free cover for yourselfand your spouse and for any dependant children during the period of youremployment with the Company under the Company’s Private Health Scheme subjectto 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 PensionScheme (“the ESPS”) and you will be entitled to become a member of such otherschemes as the Company may introduce subject to, and in accordance with, theterms of the ESPS and such other schemes from time to time.

 

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

 

5.3                                 You will be required to make contributions in accordance with theterms of the ESPS and the terms of such other relevant schemes as may beintroduced 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 powersas may from time to time be assigned to you by the Company.  You will devote the whole of your attentionand skill to your duties.

 

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

 

2.                                       Places of work

 

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

 

3.                                       Hours of Work

 

You will work such hours as may benecessary or appropriate from time to time to carry out your duties properlyand effectively.

 

4.                                       Notice periods and retirement

 

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

 

4.2                                 Your employment will, in any event, automatically terminate (if notalready terminated) upon your 63rd birthday or on your retirement at anyearlier time.

 

5.                                       Holidays

 

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

 

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

 

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

 

6.                                       Ill Health

 

6.1                                 Provided that you supply the Company with self-certificationsickness forms and/or medical certificates covering the periods of absence asrequired by the Company’s Sick Leave Rules you will be entitled to be paidduring absence from work due to sickness or injury for a period of a total ofup to six months on full salary in any period of twelve months you areemployed by the Company.  Thereafter,you will at the discretion of the Company and, subject to the provisions ofSub-Clause 12.2 below, continue to be paid for a further six months at halfsalary.  In the event that youremployment is terminated either at the end of the aforementioned six monthperiod or under the terms of Sub-Clause 12.2 you will be entitled to receivethe benefits of such health insurance scheme as may from time to time be inforce.

 

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

 

7.                                       Business expenses

 

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

 

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against the production to the Company ofvalid receipts for such expenses, and subject always to the Company’s currentpolicies with regard to business travel, accommodation and expenses.

 

8.                                       Confidential information and other businessinterests and activities

 

8.1.                              During your employment you must not (other than with the writtenconsent of the Company) be directly or indirectly engaged or concerned in theconduct 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 than3% of any class of security in any one Company which is quoted and dealt in onany recognised Stock Exchange.  You mustat all times keep the Chairman, or his nominee, promptly and fully informed ofall matters upon which you are engaged outside your employment with theCompany.  You must also observe Companyrequirements and procedures relating to the impartiality of officers and theacceptance of gifts.

 

8.2                                 You will not, either during your employment (otherwise than in theperformance of your duties) or afterwards, use for your own or for anyoneelse’s benefit, divulge or communicate to anyone any trade or business secretor confidential information concerning the business, finances or affairs of theCompany, or any associated company, without the written consent of the Companyor 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 confidentialinformation 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 anyrecords, written or otherwise, relating to the business of the Company, or anyassociated company, or allow any of these things to be done by anyone else,otherwise than for the benefit of the Company or the relevant associatedcompany, as appropriate.  In any event,upon the termination of your employment you will deliver up to the Company orrelevant associated company any such documents, together with all other Companyor associated company property.  Titleto 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 representyourself as being an officer of, or employed by or connected with, the Companyor 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 thetermination of your employment (without the prior written consent of theCompany or any associated

 

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

 

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

 

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

 

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

 

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

 

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8.6                                 You will not within England, Wales or Scotland and for the period ofnine months after the termination of your employment without the priorwritten consent of the Company either alone or jointly with, or as manager,agent consultant or employee of, any person or organisation, directly orindirectly, carry on or be engaged or involved in the Restricted Business (asdefined in the Schedule) or in any other business which competes directly withany business (other than the Restricted Business) of the Company or anyassociated company in relation to which you held a position of responsibilityin the course of your employment at any time during the twelve months priorto its termination.  During any periodof restriction which arises pursuant to this Sub-Clause 8.6, the Company willpay you compensation of equivalent to nine months of your annual salarydetermined from Sub-Clause 1.1 of Appendix I, always provided that you have notcommitted any breach of the provisions of this Sub-Clause.  This compensation will be payable in nineequal monthly payments on the last day of each calendar month beginning at theend of the first complete calendar month after the termination of youremployment.

 

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

 

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

 

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

 

9.                                       Protection of intellectual property

 

9.1                                 Subject to the Patents Act 1977 and the Copyright Act 1956 (asamended or consolidated), any invention made by you in the course of or arisingout of your employment belongs to the Company and you must take all appropriatesteps to ensure that the Company obtains the maximum benefit from suchinvention by the prompt application for patents at the Company’s expense andgenerally.

 

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9.2                                 If you create or make any discovery, design or other work in thecourse of or arising out of your employment each such discovery, design or workbelongs to the Company and you should take all appropriate steps to ensure thatthe 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 orconsolidated), and, when applicable, the City Code on Take-overs and Mergersand the Rules governing Substantial Acquisitions of Shares.

 

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

 

10.3                           You are required to comply with the provisions of legislation onhealth and safety and working conditions, and to do your utmost to ensure thatthe Company, and any subsidiary company, complies with that legislation, withthe legislation concerning their areas of activity and generally with all legalobligations affecting the Company and any subsidiary company or successorcompany.

 

11.                                 Medical examinations

 

The Company may require you to undergo fromtime to time a medical examination by a doctor appointed by the Company.  The Company will be entitled to receive areport 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 bysummary notice in writing:

 

(a)                                  if you are guilty of any gross default or gross misconduct in connectionwith 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-observanceby 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 madeagainst 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 thanan offence under road traffic legislation in the United Kingdom or elsewherefor 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 yourduties for a period of at least six months (whether or not consecutive) inany period of twelve months the Company will (without prejudice to any otherprovision 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 youcontinue not to perform your duties hereunder) to terminate your employmentforthwith.

 

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

 

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

 

a)                                      to reduce any such payment by such amount as the Company’s RemunerationCommittee shall direct if in the opinion of such Committee you have failedproperly 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 youduring any remaining period of notice not worked by you, of such amounts andupon such conditions as the Company’s Remuneration Committee may direct (havingregard in particular to your ability to mitigate any loss occasioned to you byreason of the termination of your employment.)

 

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

 

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someone inyour name and on your behalf to sign any documents and to do any thingsnecessary to give effect to this obligation.

 

13.                                 Grievance/Disciplinary

 

In the eventthat you are dissatisfied with any disciplinary action taken against you, orhave any grievance relating to your employment you should apply in the firstinstance to the Chairman who will either propose a solution or refer the matterto the Company Board for a decision. There is no formal disciplinary procedure relating to your employment.

 

14.                                 Continuous Employment

 

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

 

15.                                 Notices

 

Notice underthese Terms and Conditions will be treated as having been given if sent byordinary first class post, by you to the Company’s registered office or by theCompany to you at your last known address, as appropriate, and will be deemedto be given on the day when it would ordinarily be delivered after suchposting.

 

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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 ofelectricity; and/or

 

•                                          research into or technical evaluation of any process or methodcapable 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 BRANCHOFFICE (“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 ChiefExecutive Officer of LG&E Energy Corporation.

 

1.                                       Title

 

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

 

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 * *costof living adjustment is reviewed annually. As a result of the review, anyadjustments to your overseas remuneration will be made at this time. You shouldbe aware that these adjustments can go down as well as up.

 

The cost of living adjustment is based on the standard index. After oneyear this will be reviewed on the basis that you will be a more informedpurchaser 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 withthe transfer of money to the US will be reimbursed on production of thenecessary documentation.

 

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

 

AdditionalRemuneration

 

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 theassignment.  The calculation will bebased 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 theexpense of settling into your US accommodation.

 

3.                                       US Work Permit

 

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

 

4.                                       Taxation

 

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

 

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

 

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

 

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

 

5.                                       National Insurance

 

The UK has a reciprocal agreement on socialsecurity with the USA. Therefore, Powergen will apply to the relevant authoritiesto allow you to remain in the UK National Insurance scheme for the duration ofyour assignment.  If successful, youwill receive a Certificate of Continuing Liability to UK National Insurance andClass 1 contributions will continue for the period of the assignment.

 

6.                                       Pension

 

During yourassignment in the US you will continue to be entitled to remain a member of theElectricity Supply Pension Scheme, the Powergen Senior Executive Pension Scheme(PSEPS) and the Unapproved Schemes and have pension contributions deducted fromyour basic salary at the present rate. Should your circumstances change youshould 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 embarkationleave 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 paytravelling expenses for you and your wife, to and from the US at the beginningand end of the assignment (except as provided in 24.3 and 24.5**).**  These expenses will include payment of anexcess baggage allowance of 20kg each on both the outward and return flights.

 

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

 

For travel from home to the UK airport,, you may wish to use a hirecar. Powergen will pay the cost of a maximum of 2 day’s hire. The samearrangements 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 overallleave entitlement will be 25 days (excluding travelling time) plus the annualpublic holidays of the host country.  Ifyou wish to take annual leave this must be approved by the Chief ExecutiveOfficer for the duration of the assignment.

 

10.                                 Home Leave and Travel Costs

 

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

 

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

 

Any days offtaken, as part of a home leave will be deducted from your annual leaveentitlement.

 

11.                                 Emergency ‘Home Leave’’

 

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

 

12.                                 Freight

 

The reasonable costs of shipping personal effects will be paid at thebeginning and at the end of the assignment (except as provided in 24.3 and24.5).  You and your wife will have atotal surface freight allowance of 3m3 per person net or equivalentcost airfreight allowance.  When in theUK, you should obtain quotes from our preferred suppliers and accept thelowest.  Please refer to the notes ofguidance in the enclosures pack. At the end of your assignment you may contactthe preferred supplier or a local recommended organisation.   If you find the allowance of 3m3**netrestrictive, you should provide details of what you intend to take and theGroup HR

 

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Director will give consideration to increasing the allowance on anindividual basis.  We recommend you donot 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 temporaryaccommodation for the initial period of the assignment, reasonable costs,including meals, will be reimbursed on production of receipts, within limitsagreed with  the Group HR Director.

 

14.                                 Accommodation – Destination Support

 

Assistance in finding suitable accommodation has beenarranged 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 yourhouse search, the allowance and specification for your accommodation should beagreed with the Senior Vice President and Administrative Officer.  Should you wish to rent a higher pricedproperty, you will be responsible for the additional costs incurred.  the Company will meet the cost of legalfees, rates and estate agent fees.  Youwill be responsible to the Landlord for any accidental damage to the propertyor its contents that occurs during the assignment.  You should note that normally the lease is drawn-up in LG&EEnergy’ Corporations  name subject tolocal arrangements. You and your wife will be entitled to occupy suchaccommodation until your assignment in the US actually ceases.

 

16.                                 UK and US Utilities

 

The overriding principle is that you will remain responsible for oneset of standing charges and units consumed. The table below establishes where the responsibility for payment restsin a range of circumstances***.***

 

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

 

The Companywill pay reasonable business call costs and you should meet the cost of allpersonal telephone calls.  Bills should beitemised 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 = TheCompany    E/PG* = Proportion of 50/50*

 

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17.                                 On-going Commitments in the UK

 

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

 

If you choose (as opposed to business need transfer) to sell your housein the UK any costs incurred in the sale or purchase or rental of anyalternative 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 theassignment, any additional reasonable costs incurred, (e.g. additional housecontents insurance, general property maintenance), will be reimbursed onproduction of receipts. If you choose to rent out your property the Companywill not reimburse any additional costs incurred.  You should note that you have a duty to take every action tomitigate any losses by taking proper security precautions, pursuing claimsagainst third parties etc.  The Companywill not pay for any costs associated with normal wear and tear of theproperty.  You should check the terms ofyour home contents insurance policy to ensure it is not invalidated by anynon-occupancy.

 

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

 

18.                                 Provision of US Transport

 

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

 

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

 

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

 

19.                                 Luncheon Club

 

You will bereimbursed invitation fees and dues at a luncheon club of your choice subjectto club provisions of nondiscrimination.

 

20.                                 Occupational Health

 

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You and your wife have received the necessary medical clearance from DrVidia Kisnah, (Powergen’s Chief Medical Advisor) related to your stay in the USand have been provided with appropriate medical advice and guidance andequipment. 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 homeleave visits.  If you should requiresuch checks overseas or glasses/contact lenses, Powergen will meet anysignificantly greater cost than that incurred in the UK upon production ofreceipts.

 

21.                                 Insurance

 

Contents insurance applying to your possessions in the host countrywill be provided through Ergon Insurance Ltd. You should refer to the overseas home insurance schedule for details ofcover and complete an insurance proposal form and return to Risk Managementbased at Westwood.

 

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

 

You and your wife will be eligible to participate in the medical planprovisions 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 berequired to make business visits during the course of your assignment.  Travel will be on the basis of Businessclass and a hire car may be booked for the full period of the visit.

 

All reasonablevisits to the UK to perform your current role with the Association of CharteredCertified Accountants will be treated as business trips.

 

23.                                 Business Expenses

 

Business expensesshould be claimed in accordance with the Company arrangements.  They should be authorised by the ChiefExecutive Officer.

 

24.                               Trips to the UK

 

For tax reasons you must notify the Group HR Manager ofany 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 willdiscuss the experience you have gained from the assignment in the US andconsider future career possibilities.

 

26.                                 Termination of Assignment

 

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26.1                           The Company is entitled to terminateyour employment immediately by notice in writing to you pursuant to Clause12.1(a), (b) (c), (d) (e) and 12.2 in your U.K Contract of Employment.

 

26.2                           The Company may terminate theassignment at any time without indemnity, compensation or notice save as setout in 26.4. The following list provides examples of reasons for terminationbut it is not to be regarded as exhaustive:-

 

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

 

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

 

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

 

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

 

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

 

26.5                           In the event that you choose to resignfrom the Company before the end of the assignment, you will not be eligible toreceive the overseas service payment nor will the Company pay for any returntravel or freight costs.

 

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

 

26.7**                          **If you can demonstrate on reasonablegrounds that you are unable to pursue the objectives of this assignment in theUS in the interests of the Company (or your own personal interests) andfollowing consultation with the Chief Executive Officer and Group HR Directorthe 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 tobe mutually agreed or in default of agreement upon three months notice fromyou.

 

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

 

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27.                                 British Consulate

 

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

 

26.                                 Jurisdiction

 

This agreement shall be governed by and interpreted inaccordance with the laws of England and each of the parties submit to thejurisdiction of the English courts as regards any claim or matter arising underthis agreement.

 

27.                                 Contract of Employment

 

Except as stated in these terms and conditions yourcontract of employment with Powergen UK plc dated 23 June 1999 remainsunchanged.

 

Signed for and on behalf of Powergen UK plc:

 

 
| /signed/ |   |   | 19 March, 01 |   |
|----------|--------|--------|--------------|--------|
|     |   |   |
| J A HART |   | Date   |

 

 

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

 

 
| /signed/              |   |   | 26th March 2001 |   |
|-----------------------|--------|--------|-----------------|--------|
|                  |   |   |
| Richard Aitken-Davies |   | Date   |

 

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Appendix A

 

TAX AND SOCIAL SECURITY EQUALISATION

 

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

 

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

 

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

 

1.  Any hostcountry liability arising from an initial grant/award (as opposed to exerciseor disposal under a Powergen share based plan will be covered by taxequalisation.

 

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

 

3.  Any home orUS tax liability arising as a result of any voluntary exercise is for theindividual’s account.  Further:

 

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

 

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

 

4.  Thedisposal of any shares acquired through any Powergen share based plan (unlessthere is a “forced disposal”) is a personal investment decision and any home orUS taxes arising on such a disposal are therefore not covered by taxequalisation.

 

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Note:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The total tax liability for the overseas assignment ismet by Powergen utilizing the hypothetical tax policies plus its ownfunding.  Arthur Andersen are engaged tosupport the process.  Any UK tax refundsin the year of departure from and arrival in the UK arising as a result of theoverseas assignment, including refunds due to unused personal allowances, butexcluding refunds relating to non-employment income not covered above must berepaid to Powergen.  Further any underor over payment of actual UK or overseas tax, in respect of employment relatedincome or that identified above only, will be met by Powergen or collected fromthe individual, respectively.   In theunlikely event of your being declared redundant whilst overseas, our taxequalisation policy will apply to the severance payments.

 

It is important to note that hypothetical tax is notreal income tax and uses standard allowances rather than actual tax codes.  As in the UK, tax relief on ElectricitySupply Pension Scheme contributions (ESPS) including additional voluntarycontributions to the ESPS is maintained. The basis of calculation of hypothetical tax is further outlined below.  Where the assignment commences or terminatespart way through the UK tax year, the lower and basic rate bands and personalallowances will be pro-rated in the hypothetical tax calculation.

 

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On the basis of current UK tax legislation, if yourassignment includes a full UK tax year (that is 6 April to 5 April) you will bedeemed 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 returnsduring the period of the Assignment. Arthur Andersen have been appointed as Powergen’s international taxadvisers 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 independentfinancial advice in relation to your personal investment income.

 

Prior to commencing your US assignment, you arerequired to meet with Arthur Andersen who will clarify your taxation positionand complete the necessary exit documentation for submission to the InlandRevenue.  Failure to do this may resultin considerable tax complications for you.

 

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

 

Social Security Equalisation

 

National Insurance helps to pay for some SocialSecurity benefits including retirement pensions.  Whilst employed in the UK Class 1 contributions, up to a maximumrate are deducted from salary.  Powergenalso pays employer NI contributions for you.

 

For assignments to the US, the UK has a reciprocalagreement.  Subject to various qualificationsyou will remain subject to UK National Insurance only and therefore both youand Powergen will remain liable for Class 1 contributions.

 

 

December 2000

 

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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 tomaximum 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 andassociated expenses

Powergen share based plan — grant/award

Powergen share based plan — “forced exercise” of UKapproved option

Powergen share based plan —  “forced disposal”

“Registered” portfolio of personal/investment income

 

December 2000

 

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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&EENERGY CORP. OF RICHARD AITKEN-DAVIES (“AMENDMENT”)** is made and entered into this 27th day of June, 2002 byand 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 ofEmployment, dated June 22, 1999 (“Agreement”).

 

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

 

**WHEREAS**, the Parent and E.ON AG, an aktiengesellschaft formed under theFederal Republic of Germany (“German Parent”) have agreed to the terms of arecommended pre-conditional cash offer, whereby German Parent or its subsidiarywill acquire ownership of the Parent.

 

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

 

**WHEREAS**, the Parties have determined that it is now desirable to amend theAssignment to reflect certain changes necessitated by the German Parent’sacquisition of the Parent.

 

**AGREEMENT**:

 

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

 

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

 

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

 

 

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"26.9 If the Executive is (i) employed on the day following the secondanniversary of the Acquisition Date by the Company, the Parent, the GermanParent, 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 asprovided for in Sections 12.1 or 12.2 of Appendix II to the Agreement) or bythe Executive for Good Reason (as hereinafter defined), the Employer shall payto the Executive on such an anniversary or within 10 days of such termination datea 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 IncentiveAmount (as hereinafter defined).  Forpurposes of this Agreement, "Good Reason" shall mean a reduction byan Employer in the Executive's base salary or annual target bonus percentage asin effect prior to such reduction, or any failure to pay the Executive anycompensation or benefits to which the Executive is entitled within thirty (30)days of its commission.  For purposes ofthis Agreement, "Salary Amount" shall mean the Executive's annualbase salary from an Employer in effect at the time of payment;, providedhowever, if an Employer has reduced the Executive's annual base salary, theSalary Amount shall be the annual base salary in effect prior to thereduction.  For purposes of thisAgreement, "Target Annual Incentive Amount" shall mean the targetannual bonus of the Executive under the annual incentive plan of the Employerat the time of payment; provided however, that if an Employer has reduced thetarget annual bonus of the Executive, the Target Annual Incentive Amount shallbe the target annual bonus in effect prior to the reduction."

 

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

 

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

 

 

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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:                     |   |
|   |   |   |                      |   |
|   |   |   |                      |   |

 

 

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