Document:

Exhibit 10(s)-2

 

First Amendment
 To
 LG&E Energy Corp. Supplemental Executive Retirement Plan

 

WHEREAS, E.ON U.S. LLC (formerly known as LG&E Energy Corp.) (the “Sponsor”) previously adopted and maintains the LG&E Energy Corp. Supplemental Executive Retirement Plan (the “Plan”); and

 

WHEREAS, Section 6.1 of the Plan provides that the Company may amend the Plan; and

 

WHEREAS, the Board of Directors adopted resolution to amend the Plan.

 

NOW, THEREFORE, the Plan is hereby amended effective January 1, 2009 as follows:

 

This amended Plan is intended to conform to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder and shall be implemented and administered in a manner consistent therewith. Prior to January 1, 2009, the Plan was administered in good faith compliance with Section 409A of the Code and guidance issued thereunder, including actions permitted by transition relief provided in Notices 2005-1, 2006-79 and 2007-86 and proposed and final regulations published under Section 409A of the Code.

 

1. Article 1 shall be deleted and replaced in its entirety to read as follows:

 

“ARTICLE 1 - DEFINITIONS

 

Section 1.1              DEFINITIONS

 

As used herein, the capitalized words shall have the meanings specified in E.ON U.S. LLC Retirement Plan as it exists on the date of the adoption of this amended (hereinafter referred to as the “Qualified Plan”), except as specifically set forth herein.

 

Section 10.1      Affiliated Company means any corporation which is a member of a controlled group of corporations of which the Company is a member, or any unincorporated trade or business which is under the common control of or with the Company, which are required to be aggregated with the Company under Section 414(b) or 414(c) of the Code, without substitution of a lower percentage for 80% in applying Section 1563(a)(1), (2) and (3) of the Code as permitted in Section 1.409A-1(h)(3) of the Regulations with regard to whether or not a Participant experiences a Separation from Service.

 

Section 1.2        Average Monthly Compensation shall mean the average of Compensation as determined for any thirty-six (36) consecutive months preceding the

 

 

Member becoming Totally and Permanently Disabled or the Member’s Early or Normal Retirement Date that yield the highest average. If the Member has fewer than 36 months of continuous employment, his Monthly Compensation shall be the average of Compensation for all consecutive months of continuous employment.

 

Section 1.3             Board of Directors means the Board of Directors of E.ON U.S. LLC.

 

Section 1.4             Committee means the Benefit Committee appointed pursuant to Article 6 of the Qualified Plan.

 

Section 1.5             Company means E.ON U.S. LLC, a Kentucky limited liability company with principal offices located at Louisville, Kentucky.

 

Section 1.6             Compensation means the Employee’s total cash compensation (base salary plus short term incentive pay) prior to any deferrals under any qualified or non- qualified deferred compensation plan. Effective on the date of the merger between KU Energy Corporation and LG&E Energy a Transferred Participant’s Compensation means the Employee’s base compensation for the months prior to said date which are included in Average Monthly Compensation.

 

Section 1.7             Early Retirement Date means, in the case of a Member who has been credited with at least five (5) years of Service and whose age is at least fifty (50), the first day of the month coincident with or otherwise immediately following the later of the date the Member shall experience a Separation from Service or the date the Member reaches age fifty-five (55). Prior to December 31, 2008, as permitted under Section 409A, a Member may select the first day of any later month as his Early Retirement Date.

 

Section 1.8             Effective Date means May 1, 1987. The effective date of this amended and restated Plan is January 1, 1998.

 

Section 1.9             Employee means any person who is an officer in the regular full-time employ of the Company or a Participating Company, as determined by the personnel rules and practices of the Company or Participating Company.

 

Section 1.10           Employer means E.ON U.S. LLC and any Affiliate.

 

Section 1.11           Identification Date means the date determined by the Benefits Committee in accordance with Section 1.409A-1(i)(3) of the Regulations which is the last day of the twelve (12) month period for determination of Key Employees. Unless otherwise designated, the Identification Date shall be December 31. Furthermore, for purposes hereof, during any twelve (12) month period preceding an Identification Date, no more than 50 employees of all members of the controlled group consisting of the Company and all Affiliated Companies, or if less, the greater of three individuals or ten percent (10%) of such employees of all members of such controlled group, shall be treated as officers hereunder. 

 

Section 1.12           Key Employee means a “key employee” of the Company as described in section 416(i)(1)(A)(i), (ii) of the Code (without regard to Section 416(i)(5) of the

 

 

Code) (generally, an officer having annual compensation of more than $160,000 (in 2009), as adjusted; a 5% owner; or a 1% owner having annual compensation of more than $150,000), determined at any time during the twelve (12) month period ending on the Identification Date. A Member who is a Key Employee on an Identification Date shall be treated as a Key Employee for the twelve (12) month period beginning on January 1 (or such other date designated as set forth herein) immediately following such Identification Date. For purposes hereof, the term “officer” shall be determined on the basis of all facts, including the source of his authority, the term for which elected or appointed, and the nature and extent of his duties. Generally, the term “officer” means an administrative executive who is in regular and continued service. An Eligible Employee who merely has the title of an officer, but not the authority of an officer, is not to be considered an officer hereunder. Similarly, an eligible employee who does not have the title of an officer but has the authority of an officer is an officer for this purpose.

 

Section 1.13           Member means any Employee who has satisfied the requirements for membership set forth in Section 2.1 and has been designated as such in the human resources system.

 

Section 1.14           Normal Retirement Date means the first day of the month coincident with or otherwise immediately following the Member’s sixty-fifth (65th) birthday.

 

Section 1.15           Participating Company means any Affiliate of the Company listed in Appendix A.

 

Section 1.16           Plan means the E.ON U.S. LLC Supplemental Executive Retirement Plan.

 

Section 1.17           Plan Year means the twelve (12) month period beginning on the first day of May and ending on the last day of April in the following calendar year.

 

Section 1.18           Separation from Service means the Member’s “separation from service” with the Company and its Affiliates within the meaning of Code Section 409A(a)(2)(A)(i) and applicable regulations and other guidance thereunder.

 

Section 1.19           Service means the number of years of Service (as such term is defined in the Qualified Plan).

 

Section 1.20           Totally and Permanently  Disabled shall mean a Member’s inability to engage in any substantial gainful activity by reason of medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of twelve (12) months or more. For purposes hereof, a Member will be deemed to be subject to a disability if the Member is determined to be totally disabled by the Social Security Administration.

 

Section 1.21           Transferred Participant means a participant who was formerly employed by KU Energy Corporation or its subsidiaries.

 

 

2. Article 3 shall be deleted and replaced in its entirety to read as follows:

 

“RETIREMENT BENEFITS

 

Section 3.1             Benefits at Normal Retirement

 

Upon Separation from Service at or after his Normal Retirement Date, a Member shall be entitled to retire and to receive a monthly retirement income in an amount equal to sixty- four percent (64%) of his Average Monthly Compensation, less (a) one hundred percent (100%) of his qualified retirement benefit payable at age sixty-five (65) as a straight life annuity under the Qualified Plans (without regard to any assignment of benefits under a qualified domestic relations order), (b) one hundred percent (100%) of his Primary Social Security Benefit payable at age sixty-five (65) under the Social Security law in effect at the beginning of the Plan Year in which occurs the earlier of his Normal Retirement Date or date of Separation from Service for any reason, (c) one hundred percent (100%) of any matching contribution or other Employer contribution made on behalf of the Member under a qualified defined contribution plan sponsored by the Employer (provided the defined contribution plan sponsored by the Employer was the Member’s primary retirement vehicle) and (d) effective on the date of the merger of KU Energy Corporation and LG&E Energy Corp., but prior to January 1, 2005, the benefit provided under Article 12 of the LG&E Corp. Nonqualified Savings Plan by converting the lump sum value of the account established under that Article 12 to a life annuity payable at age sixty-five (65) using a six percent (6%) interest rate and the 1983 Group Annuity Mortality Table for the post-age sixty-five (65) time period only, (e) one hundred percent (100%) of his qualified retirement benefit payable at age sixty-five (65) as a straight life annuity under any qualified defined benefit plan or defined contribution plan (provided such qualified defined contribution plan was the employer’s primary vehicle for retirement security) sponsored by an employer by whom the Member was employed at any time prior to the date such Member became employed by the Company (without regard to any assignment of benefits under a qualified domestic relations order). The conversion of the Member’s account balance(s) at date of termination from his prior employer or accrued benefit under any such qualified defined benefit or defined contribution plan to a straight life annuity, payable on or after the Normal Retirement Date, shall be based on the adjustment factors set forth in the E.ON U.S. LLC Retirement Plan (including the factors set forth in Article VI of such Plan to convert an account balance). The Member’s benefit determined under the preceding provisions of this Section shall be multiplied by a fraction not to exceed one (1), the numerator of which is the Member’s years of Service at his Normal Retirement Date, and the denominator of which is fifteen (15).

 

Section 3.2 Forms of Payment

 

The normal form of benefit payment (to which the formula indicated in Section 3.1 applies) shall be a straight life annuity. 

 

Prior to the Member’s benefit commencement date, he may elect to receive his benefit in

 

 

the form of an actuarially equivalent (based on the factors set forth in Section 3.1) joint and fifty percent (50%) survivor annuity, which shall provide a reduced monthly benefit payable for the life of the Member and continued thereafter in an amount fifty percent (50%) as large to a beneficiary designated in writing by the Member.

 

Section 3.3             Benefits at Early Retirement

 

Prior to December 31, 2008 a Member may elect to retire as of an Early Retirement Date. Provided that such Member is vested in a benefit hereunder, such benefit shall be paid pursuant to such election or as otherwise provided in the case of death or the Member becoming Totally and Permanently Disabled. Vesting of a benefit is conditioned upon attainment of age fifty (50) and Service of five (5) years. Commencing at his Early Retirement Date, such Member shall be entitled to receive a monthly retirement income calculated under the formula in Section 3.1 with the numerator of the fraction to be the Member’s years of Service at his Early Retirement Date. In applying the formula, the retirement benefit payable under the Qualified Plan will be the benefit payable at age sixty-five (65), based on Average Monthly Compensation and Service to the Member’s Early Retirement Date. The Social Security benefit will be the benefit payable at age sixty-five (65) based on the Employee’s earnings to his Early Retirement Date. The benefit payable under any other qualified or nonqualified plan(s), as referenced in Section 3.1, will be the benefit payable at age sixty-five (65). After December 31, 2008, a Member who has met the vesting requirements specified above and who does not have a valid Early Retirement Date election on file as of December 31, 2008, shall automatically commence payments at the later of (i) attainment of age fifty-five (55), or (ii) the Member’s Separation from Service. The amount so determined under this Section 3.3 shall be reduced in accordance with the following factors to reflect the Member’s age at the date his benefits commence:

 

	
Age at
    	
 
    	
Percentage of
    	
 
    
	
Commencement
    	
 
    	
Benefit Payable
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
62 – 65
    	
 
    	
100
    	
%
    
	
61
    	
 
    	
96
    	
%
    
	
60
    	
 
    	
92
    	
%
    
	
59
    	
 
    	
86
    	
%
    
	
58
    	
 
    	
80
    	
%
    
	
57
    	
 
    	
74
    	
%
    
	
56
    	
 
    	
68
    	
%
    
	
55
    	
 
    	
62
    	
%
    

 

 

A Member who has a Separation from Service prior to satisfying the vesting requirements above, but was previously a Member of the E.ON U.S. LLC Non-Officer Senior Management Pension Restoration Plan, shall become eligible for the benefit, if any, payable under its terms and conditions.

 

Section 3.4             Disability Benefits

 

In the event a Member who has completed five (5) or more years of Service becomes Totally and Permanently Disabled before reaching age sixty-five (65), he shall be entitled to a deferred benefit beginning at, but not prior to, his attainment of age 65 computed in accordance with Section 3.1 but based on the assumptions that his Compensation in effect at date of disability continued without change and that the Member continued to earn Service to his attainment of age 65. A Member who accrues benefits pursuant to this Section 3.4 and returns to active employment with as Employer, shall nevertheless commence benefits at age sixty-five (65).

 

Section 3.5             Pre-retirement Death Benefit

 

A.             Eligibility: If a Member whose age is at least fifty (50) and who has been credited with five (5) years or more of Service or a Member who has been fully vested pursuant to Section 12.2, dies after September 2, 1998 but prior to commencing benefits under Section 3.1, Section 3.3 or Section 3.4 herein, then the Member’s Beneficiary shall be entitled to a pre-retirement death benefit, pursuant to this Section.

 

B.              Amount of Benefit: The Pre-retirement Death Benefit shall equal fifty percent (50%) of the Member’s accrued benefit calculated in accordance with Section 3.1 at the time of the Member’s death or if later when the Member would have attained age 55.

 

C.              Form of Distribution. The Pre-retirement Death Benefit shall be payable as a monthly annuity over the life expectancy of the Beneficiary.

 

D.            Section 3.6             Required Delays in Commencement

 

Notwithstanding anything in this Article 3 to the contrary, distributions must be consistent with the provisions of Section 409A of the Internal Revenue Code and related Treasury Regulations. To the extent required by Section 409A a distribution made because of Separation from Service to a Participant who is a Key Employee as of the date of his Separation from Service shall not occur before the date which is six (6) months after the Separation from Service. For this purpose, a Participant who is a Key Employee on anIdentification Date shall be treated as Key Employee for the twelve (12) month period beginning on the January 1 immediately following such Identification Date. The Benefits Committee may designate another date for commencement of this twelve (12) month period, provided that such date must follow the Identification Date and occur no later than the first day of the fourth month thereafter, provided that such designation is made in accordance with Regulations under Section 409A and is the same for all nonqualified deferred compensation plans of the Company or any Affiliated Company.”

 

 

3. Section 6.2 shall be deleted and replaced in its entirety to read as follows: 

 

“6.2 Plan Obligations

 

In the event the Company terminates the Plan, no action will be taken to terminate any benefit payments to a Member or beneficiary that are in pay status. For those Members who are not receiving benefit payments at the time of Plan termination, the Company shall determine the value of the retirement benefit accrued to the date of termination and shall at that time determine the timing, subject the provisions of this Plan and the requirements of Section 409A, for providing such benefit to the Member or his beneficiary. In the event of Plan termination, all Members shall become fully vested in all benefits accrued to the date of Plan termination.4. Article 13 shall be deleted and replaced in its entirety to read as follows:

 

“Article 13 Claims Procedure

 

13.1.       Filing of Claim. Any Member or Beneficiary under the Plan (“Claimant”) may file a written claim for a Plan benefit with the Administrator or with a person named by the Administrator to receive claims under the Plan. The claim must be filed no later than sixty (60) days after the latest date for payment of the benefit under the terms of the Plan;

 

13.2.       Denial of Claim; Notice and Information to Claimants. In the event of a denial or limitation of any benefit or payment due to or requested by any Claimant, Claimant shall be given a written notification containing specific reasons for the denial or limitation of his or her benefit. The written notification shall contain specific reference to the pertinent Plan provisions on which the denial or limitation of benefits is based. In addition, it shall contain a description of any additional materials or information necessary for the Claimant to perfect a claim and an explanation of why such material or information is necessary. Further, the notification shall provide appropriate information as to the steps to be taken if the Claimant wishes to submit his or her claim for review. This written notification shall be given to a Claimant within sixty (60) days after receipt of his or her claim by the Administrator;

 

13.3.       Right of Review. In the event of a denial or limitation of benefits, the Claimant or his or her duly authorized representative shall be permitted to review pertinent documents and to submit to the Administrator issues and comments in writing. In addition, the Claimant or his or her duly authorized representative may make a written request for a full and fair review of his or her claim and its denial by the Administrator, provided, however, that such written request must be received by the Administrator (or its delegate to receive such requests) within sixty (60) days after receipt by the Claimant of written notification of the denial or limitation of the claim; and

 

13.4.       Decision on Review. A decision shall be rendered by the Administrator within sixty (60) days after the receipt of the request for review, provided that where special circumstances require an extension of time for processing the decision, it may be postponed on written notice to the Claimant (prior to the expiration of the initial sixty-day period), for an additional sixty (60) days, but in no event shall the decision be rendered more than one hundred twenty (120) days after the receipt of such request for review. Any decision by the Administrator shall be furnished to the Claimant in writing and in a manner calculated to be understood by the Claimant and shall set forth the specific reason(s) for the decision and the specific Plan provision(s) on which the decision is based.

 

 

13.5.     Time of Payment. In the event a claim is upheld, the Participant’s or Beneficiary’s benefit shall be paid no later than the last day of the calendar year in which the decision to uphold the claim is made.”

 

IN WITNESS WHEREOF, and as evidence of the adoption of this amendment by the Board of Directors, this instrument is executed this 19th of December, 2008 but effective as of the dates indicated above.

 

	
 
    	
 
    	
E.ON U.S. LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/ Paula H. PottingerExhibit 10(t)

 

RETENTION AND SEVERANCE AGREEMENT

 

THIS RETENTION AND SEVERANCE AGREEMENT (the “Agreement”) is dated as of October 29, 2010, by and between E.ON U.S. LLC, a Kentucky limited liability company (the “Company”), and Chris Hermann (“Executive”).

 

SECTION 1.           Effectiveness of Agreement.  This Agreement shall become effective on the date of the Closing (the “Effective Date”), provided that on such date Executive is employed by the Company or any subsidiary of the Company (collectively referred to in this Agreement as “Employer”).  In the event that the Purchase Agreement is terminated prior to the occurrence of the Closing, this Agreement shall be null and void and shall have no force and effect.  Upon Closing, Executive will receive a divestiture bonus in the amount equal to $733,725.00, less applicable withholding.

 

SECTION 2.           Term of Agreement.  The term of this Agreement shall commence on the Effective Date, and shall continue in effect, except as otherwise provided herein, until the second anniversary of the Effective Date; provided, however, that commencing on the second anniversary of the Effective Date, and on each successive anniversary of the Effective Date, the term of this Agreement shall automatically be extended for one year unless Employer has given written notice to Executive at least ninety days prior to such second anniversary or such other anniversary date, as applicable, that the term of this Agreement shall not be so extended; and provided  further, however, that notwithstanding any such notice by Employer, the term of this Agreement shall not expire prior to the date that is 24 months after the occurrence of a Change in Control while this Agreement is in effect.

 

SECTION 3.           Retention Agreement.  In consideration for Executive’s continued service to the Company, the Company or one of its affiliates shall, no later than 60 days following the Effective Date, provide Executive with a separate retention agreement (the “Retention Agreement”).

 

SECTION 4.           Termination Payments.

 

(a)           Accrued Payments.  Upon termination of Executive’s employment for any reason, Executive shall be entitled to receive all amounts earned or accrued for or on behalf of Executive through the date of termination, but not paid as of such date, including (i) any earned but unpaid base salary as of the date of termination, together with any earned, but unpaid vacation pay and (ii) reimbursement for reasonable and necessary expenses incurred by Executive on behalf of the Company or any subsidiary during the period ending on the date of termination (together, the “Accrued Payments”).

 

(b)           Severance Payment.  If Executive’s employment is terminated (1) by Employer (other than for Cause and other than by reason of Executive’s death or Disability) or (2) by Executive for Good Reason, then, in addition to the Accrued Payments and any amounts due under and in accordance with the Retention Agreement, Employer shall pay to Executive within 30 days following the date of Executive’s termination a lump-sum cash payment (the “Severance Payment”) in the following applicable amount (without duplication):

 

 

(i)            if Executive’s employment is so terminated on or prior to the second anniversary of the Effective Date, the amount equal to 2.99 times the sum of the Base Amount and Bonus Amount;

 

(ii)           if Executive’s employment is so terminated on or following the occurrence of a Change in Control (excluding the transactions contemplated by the Purchase Agreement) but not later than the second anniversary of such Change in Control, 2.99 times the sum of the Base Amount and Bonus Amount; or

 

(iii)          if Executive’s employment is so terminated in any circumstance not described in clauses (i) or (ii) above, the amount equal to the sum of the Base Amount and Bonus Amount.

 

In addition, if Executive’s employment is terminated as described in the foregoing clause (i) or (ii), then Employer shall provide Executive outplacement services in an amount up to 20 percent of the Base Amount.  For purposes of this Agreement, the term “Base Amount” shall mean Executive’s annual base salary in effect at the time of payment, including amounts of annual base salary that are deferred under any qualified or nonqualified employee benefit plan of Employer; provided, however, if Employer has reduced Executive’s annual base salary, the Base Amount shall be the annual base salary in effect prior to the reduction.  The term “Bonus Amount” shall mean Executive’s target annual bonus under the annual incentive plan of Employer at the time of payment; provided, however, that if Employer has reduced Executive’s target annual bonus, the Bonus Amount shall be the target annual bonus in effect prior to the reduction; provided  further, however, that the Bonus Amount shall not be less than Executive’s target annual bonus as in effect immediately prior to the Effective Date.

 

(c)           Benefit Continuation.  If Executive’s employment is terminated as described in clause (i) or (ii) of Section 4(b), then following the date of termination for the number of months equal to the lesser of (A) 24 months or (B) the number of months remaining until Executive’s 65th birthday (the “Continuation Period”), Employer shall at its expense continue on behalf of Executive and his dependents and beneficiaries (to the same extent provided to the dependents and beneficiaries prior to Executive’s termination) the life insurance, disability, medical, dental, and hospitalization benefits provided (x) to Executive by Employer at any time within 90 days preceding the Effective Date or at any time thereafter, or (y) to other similarly situated executives who continue in the employ of Employer during the Continuation Period.  The coverage and benefits (including deductibles, and costs) provided in this Section 4(c) during the Continuation Period shall be no less favorable to Executive and his dependents and beneficiaries, than the most favorable of such coverages and benefits set forth in clauses (x) and (y) above.  Notwithstanding the foregoing provisions of this Section 4(c), if Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, Employer may reduce the coverage of any benefits it is required to provide Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to Executive than the coverages and benefits otherwise required to be provided hereunder.  This Section 4(c) shall not be interpreted so as to limit any benefits to which Executive or his dependents may be entitled under any of the employee benefit plans, programs or practices of Employer following Executive’s termination of employment, including without limitation, retiree medical and life insurance benefits.

 

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(d)           No Mitigation.  Executive shall not be required to mitigate the amount of any payments or benefits provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to Executive in any subsequent employment, except as otherwise expressly set forth in this Agreement.

 

SECTION 5.           Meaning of Certain Terms.

 

(a)           Cause.  For purposes of this Agreement, the term “Cause” shall mean the repeated gross negligence by Executive in performing, or the commission by Executive of a felony committed in the course of performing, the reasonably assigned duties on behalf of Employer required by and in accordance with his employment by Employer; provided, however, that no act, or failure to act, on the part of Executive shall be deemed to be “repeated” unless (i) Executive shall have received written notice from Employer setting forth in detail the particulars of the act, or the failure to act, which Employer contends would constitute Cause when repeated, and (ii) Executive then repeats such act or failure to act; provided further, however, that Cause shall not exist for purposes of this Agreement unless and until a resolution is duly adopted at a special meeting of the Board of Directors of the Company (the “Board”) by the affirmative vote of three-quarters of the members of the Board, stating the good faith opinion of the Board that circumstances constituting Cause for such purposes exist.

 

(b)           Change in Control.  For purposes of this Agreement, the term “Change in Control” means the occurrence after the Effective Date of any of the following events:

 

(i)            any Person becomes the “Beneficial Owner” (as defined Rule 13d-3 under the Securities and Exchange Act of 1934, as modified), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors, unless PPL Corporation and its affiliates continue also to be the Beneficial Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s voting securities;

 

(ii)           there is consummated a merger or consolidation of the Company or any direct or indirect parent (excluding PPL Corporation or any parent of PPL Corporation from time to time) or subsidiary of the Company with any other corporation or other entity, other than (A) a merger or consolidation which would result in the voting securities of the Company or such direct or indirect parent of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary or parent of the Company, at least 50% of the combined voting power of the securities of the Company or at least 50% of the combined voting power of the securities of such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (excluding in

 

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the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates) representing more than 50% of the combined voting power of the Company’s then outstanding securities;

 

(iii)          the shareowners of the Company approve a plan of complete liquidation or dissolution of the Company, unless PPL Corporation and its affiliates continue to be the Beneficial Owner, directly or indirectly, of securities of the successor(s) to the assets and liabilities of the Company representing more than 50% of the combined voting power of such successor(s)’ then outstanding securities entitled to vote generally in the election of directors; or

 

(iv)          the sale or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any Person, excluding in connection with a transaction in which all or substantially all of the assets of PPL Corporation and its subsidiaries, taken as a whole, are sold or disposed.

 

“Person” shall have the meaning given in Section 3(a)(9) of the Securities and Exchange Act of 1934, as modified and used in Sections 13(d) and 14(d) thereof; provided, however, a Person shall not include (i) PPL Corporation or any of its affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of PPL Corporation or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareowners of PPL Corporation in substantially the same proportions as their ownership of stock of PPL Corporation.

 

(c)           Good Reason.  For purposes of this Agreement, the term “Good Reason” shall mean (i) at any time, Executive’s base salary, annual target bonus or long term target bonus opportunity is reduced, or (ii) within two years following the Effective Date or, after the Effective Date, the occurrence of a Change in Control (or which occurs prior to a Change in Control but which Executive reasonably demonstrates arose in connection with or in anticipation of a Change in Control which actually occurs), (A) Executive’s present place of employment is relocated in excess of 100 miles of Executive’s present office location, except for required travel on Company business consistent with Executive’s travel obligations or (B) Executive’s authorities or responsibilities are materially reduced, or there is any other action or inaction that constitutes a material breach by Employer of the Agreement; provided, however, that prior to any termination by Executive for Good Reason Executive shall within 90 days of the occurrence of the foregoing have provided notice to Employer of the existence of Good Reason and, following which Employer shall have had a period to cure the existence of Good Reason of not less than 30 days.

 

(d)           Disability.  For purposes of this Agreement, the term “Disability” shall mean (i) a physical or mental infirmity which has been determined to be total and permanent disability under and in accordance with the provisions of the group long-term disability policy of Employer in which Executive is eligible for benefits or (ii) in the event the Company does not maintain such plan at the time of the determination of Executive’s Disability, a physical or mental infirmity which impairs Executive’s ability to substantially perform his duties with an Employer which continues for a period of at least 180 consecutive days.

 

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(e)           Purchase Agreement.  For purposes of this Agreement, the terms “Closing” and “Purchase Agreement” shall have the meanings given to them in that certain Purchase and Sale Agreement, dated as of April 28, 2010, by and between E.ON US Investments Corp., PPL Corporation and E.ON AG (solely for purposes of Articles VI, IX and X thereof).

 

SECTION 6.           Certain Additional Payments.

 

(a)           Notwithstanding anything in this Agreement to the contrary, in the event that it is determined (as hereafter provided) that any payment or distribution by Employer to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (individually and collectively a “Payment”), would be subject to the excise tax imposed by Section 4999 (or any successor provision thereto) of the Internal Revenue Code of 1986, as amended (the “Code”) by reason of being considered “contingent on a change in ownership or control” of the Company or Parent within the meaning of Section 280G of the Code (or any successor provision thereto), or to any similar tax imposed by state or local law, or any interest or penalties with respect to any such taxes (such taxes, together with any such interest and penalties, being hereafter collectively referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment or payments (individually and collectively, a “Gross Up Payment”).  The Gross-Up Payment with respect to any Payment shall be in an amount such that, after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

 

(b)           Subject to the provisions of Section 6(f), all determinations required to be made under this Section 6, including whether an Excise Tax is payable by Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid to the Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized accounting firm (the “Accounting Firm”) selected by Executive in his sole discretion.   Executive shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both Employer and Executive within 30 calendar days after the date of Executive’s termination of employment, if applicable, and any such other time or times as may be requested by Executive or Employer.  If the Accounting Firm determines that any Excise Tax is payable by Executive, Employer shall pay or cause to be paid the required Gross-Up Payment in cash to Executive within five business days after receipt of such determination and calculations with respect to any Payment to Executive.  If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall, at the same time as it makes such determination, furnish Employer and Executive an opinion that Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return.  As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) at the time of any determination by the Accounting Firm hereunder, it is possible that a Gross-Up Payment (or portion thereof) which will not have been made by Employer should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder.  In the event that Employer exhausts or fails to pursue its remedies pursuant to Section 6(f) and

 

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Executive thereafter is required to make a payment of any Excise Tax, Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both Employer and Executive as promptly as possible.  Any such Underpayment shall be promptly paid by Employer in cash to, or for the benefit of, Executive within five business days after receipt of such determination and calculations.

 

(c)           Employer and Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of Employer or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 6(b).  Any determination by the Accounting Firm as to the amount of the Gross-Up Payment will be binding on Employer and Executive.

 

(d)           The federal, state, and local income or other tax returns filed by Executive will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by Executive.  Executive will make proper payment of the amount of any Excise Payment and, at the request of Employer, provide to Employer true and correct copies (with any amendments) of Executive’s federal income tax return as filed with the Internal Revenue Service (“IRS”) and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by Employer, evidencing such payment.  If prior to the filing of Executive’s federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, Executive will within five business days pay to Employer the amount of such reduction.

 

(e)           The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Section 6(b) shall be borne by Employer.  If such fees and expenses are initially paid by Executive, Employer shall reimburse Executive the full amount of such fees and expenses within five business days after receipt from Executive of a statement therefor and reasonable evidence of his payment thereof.

 

(f)            Executive shall notify Employer in writing of any claim by the IRS or any other taxing authority that, if successful, would require the payment by Employer of a Gross-Up Payment.  Such notification shall be given as promptly as practicable but no later than ten business days after Executive actually receives notice of such claim and Executive shall further apprise Employer of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by Executive).  Executive shall not pay such claim prior to the earlier of (i) the expiration of the 30 calendar-day period following the date on which he gives such notice to Employer and (ii) the date that any payment of amount with respect to such claim is due.  If Employer notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall:

 

(i)            provide Employer with any written records or documents in his possession relating to such claim reasonably requested by Employer;

 

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(ii)           take such action in connection with contesting such claim as Employer shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by Employer;

 

(iii)          cooperate with Employer in good faith in order effectively to contest such claim; and

 

(iv)          permit Employer to participate in any proceedings relating to such claim;

 

provided, however, that Employer shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses.  Without limiting the foregoing provisions of this Section 6(f), Employer shall control all proceedings taken in connection with the contest of any claim contemplated by this Section 6(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that Executive may participate therein at his own cost and expense) and may, at its option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as Employer shall determine; provided, however, that if Employer directs Executive to pay the tax claimed and sue for a refund, Employer shall advance the amount of such payment to Executive on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided  further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, Employer’s control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the IRS or any other taxing authority.

 

(g)           If, after the receipt by Executive of an amount advanced by Employer pursuant to Section 6(f), Executive receives any refund with respect to such claim, Executive shall (subject to Employer’s complying with the requirements of Section 6(f)) promptly pay Employer the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto).  If, after the receipt by Executive of an amount advanced by Employer pursuant to Section 6(f), a determination is made that Executive shall not be entitled to any refund with respect to such claim and Employer does not notify Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by to Executive pursuant to this Section 6.

 

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SECTION 7.           Notices.  Any notice or communication given by either party hereto to the other shall be in writing and personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the following addresses:

 

If to the Company:

 

E.ON U.S. LLC
 220 West Main Street
 Louisville, KY 40202-1377
 Attention:  General Counsel

 

If to Executive:

 

Chris Hermann
 220 West Main Street
 Louisville, KY 40202-1377

 

Any notice shall be deemed given when actually delivered to such address, or two days after such notice has been mailed or sent by Federal Express, whichever comes earliest.  Any person entitled to receive notice may designate in writing, by notice to the other, such other address to which notices to such person shall thereafter be sent.

 

SECTION 8.           Section 409A.

 

(a)           In General.  This Agreement is intended to meet the requirements of Section 409A(a) of the Code (“Section 409A”) with respect to amounts subject to Section 409A, and shall be interpreted and construed consistent with that intent and, furthermore, it is intended that, with respect to any right to a payment or benefit (or portion thereof) that does not otherwise provide for a deferral of compensation within the meaning of Section 409A, including, without limitation, as applicable, the Severance Payment and other payments and benefits under Section 4, the Agreement does not so provide.  For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments or benefits to the fullest extent allowed under Section 409A.

 

(b)           Reimbursements.  Except as expressly provided otherwise herein, no reimbursement payable to Executive or his dependents or beneficiaries pursuant to any provisions of this Agreement or pursuant to any plan or arrangement of Employer shall be paid later than the last day of the calendar year following the calendar year in which the related expense was incurred.  No such expenses eligible for reimbursement, or in-kind benefits to be provided, during any calendar year shall affect the amounts eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, except, in each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” as defined in Section 409A.  The right to reimbursement or in-kind benefits is not subject to liquidation or exchange for any other benefits.

 

(c)           Six-Month Delay.  Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A, Executive shall not be entitled to any payments or benefits the right to which provides for a deferral of

 

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compensation within the meaning of Section 409A, and with respect to which the payment or provision is triggered by termination of employment (whether such payments or benefits are provided under this Agreement or under any other plan, program or arrangement of employer), including as a result of Disability, until the earlier of (i) the first business day occurring on or after the date that is six months following Executive’s “separation from service” as defined in Section 409A for any reason other than death and (ii) Executive’s date of death, and such payments or benefits that, if not for the six-month delay described in this Section 8(c), would be due and payable prior to such date shall be made or provided on such date.

 

SECTION 9.           Miscellaneous.

 

(a)           Entire Agreement.  This Agreement constitutes the entire agreement between the parties and their affiliates and related parties and supersedes all prior agreements, understandings and arrangements, oral or written, between such persons with respect to the subject matter of the Agreement, including, without limitation (i) the Change in Control Agreement between Executive and LG&E Energy Corp. (“LG&E”) dated as of February 6, 2001, and (ii) the Retention and Severance Agreement dated as of April 29, 2002, by and among E.ON AG, Executive and LG&E.

 

(b)           Fees and Expenses.  Employer shall pay legal fees and related expenses (including the cost of experts, evidence and counsel) incurred by Executive as they become due as a result of (a) Executive’s termination of employment, if such termination occurs on or prior to the second anniversary of the Effective Date or on or prior to the second anniversary of a Change in Control that occurs after the Effective Date (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), or (b) Executive seeking to obtain or enforce any right or benefit provided by this Agreement.

 

(c)           Successors; Binding Effect.  This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns and, at the time of any such succession or assignment, the Company shall require any successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place.  The term “Company” as used herein shall include such successors and assigns.  The term “successors and assigns” as used herein shall mean a corporation or other entity acquiring ownership, directly or indirectly, of all or substantially all the assets and business of Company whether by operation of law or otherwise.  Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by Executive, his beneficiaries or legal representatives, except by will or by the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by Executive’s legal personal representative.

 

(d)           Non-Exclusivity of Rights.  Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by Employer and for which Executive may qualify, nor shall anything herein limit or reduce such rights as Executive may have under any other agreements with Employer, other than as provided for in Section 8 herein.  Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program shall be payable in accordance with such plan or program.

 

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(e)           Settlement of Claims.  Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which Employer may have against Executive or others.

 

(f)            Amendment; Waiver.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.  No additional compensation provided under any benefit or compensation plans to Executive shall be deemed to modify or otherwise affect the terms of this Agreement or any of Executive’s entitlements hereunder.

 

(g)           Headings.  The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

 

(h)           Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

 

(i)            Withholding Taxes.  All payments hereunder shall be subject to any and all applicable federal, state, local and foreign withholding taxes.

 

(j)            Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Kentucky.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

	
 
    	
E.ON   U.S. LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   John R. McCall
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
/s/   Chris Hermann
    
	
 
    	
Name:   Chris Hermann
    

 

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