Document:

Exhibit 10(x)-3

 

SECOND AMENDMENT TO THE

EMPLOYMENT AND SEVERANCE AGREEMENT

OF

JOHN R. McCALL

 

THIS SECOND AMENDMENT TO THE EMPLOYMENT AND SEVERANCE AGREEMENT OF JOHN R. MCCALL (“SECOND AMENDMENT”) is made and entered into this 20 day of May, 2002 by and among (i) LG&E ENERGY CORP., a Kentucky corporation (“Company”), (ii) POWERGEN, PLC, a United Kingdom public limited company (“Parent”), (iii) E.ON AG, an aktiengesellschaft formed under the Federal Republic of Germany (“German Parent”), and (iv) JOHN R. MCCALL (“Executive”), collectively referred to as the “Parties”.

 

WHEREAS, the Executive, the Company and the Parent entered into an Employment and Severance Agreement, dated February 25, 2000 (“Agreement”);

 

WHEREAS, the Agreement was previously amended by the Executive, the Company and the Parent in a document dated December 8, 2000 (“First Amendment”);

 

WHEREAS, the Parent and German Parent have agreed to the terms of a recommended pre-conditional cash offer, whereby German Parent or its subsidiary will acquire ownership of the Parent;

 

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

 

WHEREAS, the Parties have determined that it is now desirable to amend the Agreement to reflect certain changes resulting from the German Parent’s acquisition of the Parent.

 

AGREEMENT:

 

NOW THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows:

 

1.      A new Section 1.4 shall be added to the end of Article 1 to read as follows:

 

“1.4         If the Executive is (i) employed on the day following the second anniversary of the Acquisition Date by the Company, the Parent, the German Parent, or any subsidiary of the Company, the Parent or the German Parent, hereinafter referred to as the

 

 

“Employer”, or (ii) terminated from employment prior to expiration of the twenty-four (24) month period following the Acquisition Date for any reason other than a termination by an Employer for Cause or a termination by the Executive without Good Reason (as hereinafter defined), the Employer shall pay to the Executive on such an anniversary or within 10 days of such termination date a lump sum cash payment in an amount equal to (i) the Executive’s Salary Amount (as hereinafter defined), and (ii) the Executive’s Target Annual Incentive Amount (as hereinafter defined).  For purposes of this Agreement, “Salary Amount” shall mean the Executive’s annual base salary from an Employer in effect at the time of payment, including all amounts of base salary that are deferred under any qualified or non-qualified employee benefit plan of an Employer; provided however, if an Employer has reduced the Executive’s annual base salary, the Salary Amount shall be the annual base salary in effect prior to the reduction.  For purposes of this Agreement, “Target Annual Incentive Amount” shall mean the target annual bonus of the Executive under the annual incentive plan of the Employer at the time of payment; provided however, that if an Employer has reduced the target annual bonus of the Executive, the Target Annual Incentive Amount shall be the target annual bonus in effect prior to the reduction.”

 

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

 

“2.  TERM OF AGREEMENT.  This Agreement shall commence as of the Effective Time, and shall continue in effect until the second anniversary of the Effective Time; provided, however, that commencing on the second anniversary of the Effective Time, and on each anniversary of the Effective Time thereafter, the term of this Agreement shall automatically be extended for one (1) year unless the Company or the Executive shall have given written notice to the other at least ninety days prior thereto (if such notice is given following the second anniversary of the Effective Time, otherwise such notice period shall be one hundred and eighty days) that the term of this Agreement shall not be so extended; and provided, further, however, that notwithstanding any such notice by the Company not to extend, the term of this Agreement shall not expire prior to the expiration of the later of (i) twenty-four (24) months after any Change in Control which occurs while this Agreement is in effect, or (ii) forty-eight (48) months after the Acquisition Date.”

 

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3.      Section 3.4 shall be deleted and replaced in its entirety to read as follows:

 

“3.4.        The Executive will perform his services at the Company’s headquarters in Louisville, Kentucky, with the understanding that he will be required to travel as reasonably required (including travel to the United Kingdom and Germany) for the performance of his duties under this Agreement.”

 

4.      Subsection 6.5(a) shall be deleted and replaced in its entirety to read as follows:

 

“(a)  For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the events or conditions described in subsections (1) through (10) hereof:

 

(1)      a reduction by the Company in the Executive’s Base Salary or annual target bonus opportunity as in effect prior to such reduction or any failure to pay the Executive any compensation or benefits to which the Executive is entitled within thirty days of the applicable due date, provided that the Company may correct such reduction or failure within thirty (30) days of its commission;

 

(2)      German Parent, Parent or the Company require the Executive to be relocated anywhere in excess of fifty (50) miles of his present office location, except for (i) required travel on German Parent, Parent or Company business consistent with his business travel obligations as in effect prior to the Effective Time and as provided in Section 3.4 of this Agreement; or (ii) a relocation resulting from appointment of Executive to the highest ranking legal position (whether Chief Legal Officer, General Counsel or similar title) of the United States entity primarily responsible for the management of the German Parent’s participation in the United States’ energy industry;

 

(3)      a failure by Parent or the Company to maintain plans providing benefits at least as beneficial in the aggregate as those provided by any benefit or compensation plan, retirement or pension plan, stock option plan, bonus plan, long-term incentive plan, life insurance plan, health and accident plan or disability plan in which the

 

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Executive is participating prior to the Effective Time, the Change in Control, or this Second Amendment, as applicable, or if the Company or Parent has taken any action which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any of such plans or deprive him of any material fringe benefit enjoyed by him prior to the Effective Time, the Change in Control, or this Second Amendment, as applicable, or if the Company or Parent has failed to provide him with the number of paid vacation days to which he would be entitled in accordance with the Company’s normal vacation policy immediately prior to the Effective Time, the Change in Control, or this Second Amendment as applicable;

 

(4)      Parent or the Company materially reduces, individually or in the aggregate, the Executive’s title, job authorities or responsibilities as in effect prior to such reduction;

 

(5)      Parent or the Company fails to obtain the assumption of the obligations contained in this Agreement by any successor as contemplated in Section 11 hereof;

 

(6)      any purported termination of the Executive’s employment by Parent or the Company which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 8, hereof; and, for purposes of this Agreement, no such purported termination shall be effective;

 

(7)      any material breach by Parent or the Company of any provision of this Agreement;

 

(8)      any purported termination of the Executive’s employment for Cause by Parent or the Company which does not comply with the terms of Section 6.2 of this Agreement;

 

(9)      any removal of the Executive from the position of Executive Vice President, General Counsel, and Corporate Secretary of the Company, except for Cause; or

 

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(10)    any failure to appoint Executive to the highest ranking legal position (whether Chief Legal Officer, General Counsel or similar title) of the United Sates entity primarily responsible for the management of the German Parent’s participation in the United States’ energy industry.”

 

4.  The introduction to Section 7.1 shall be deleted and replaced in its entirety to read as follows:

 

“7.1.        If during the Term of this Agreement, the Executive’s employment with the Company shall be terminated within the later of (i) twenty-four months after the effective time of any Change in Control, or (ii) forty-eight months of the Acquisition Date, then the Executive shall be entitled to the following compensation and benefits:”

 

5.             The introduction to Section 7.2 shall be deleted and replaced in its entirety to read as follows:

 

“7.2.        If during the Term of this Agreement, the Executive’s employment with the Company shall be terminated following the later of (i) twenty-four months after the effective time of any Change in Control, or (ii) forty-eight months of the Acquisition Date, then the Executive shall be entitled to the following compensation and benefits:”

 

6.             Section 7.2(c)(ii) shall be deleted and replaced in its entirety to read as follows:

 

“7.2(c)(ii)                The Company shall pay, as a severance amount to the Executive after the Termination Date, an amount equal to the Executive’s (i) Salary Amount, and (ii) Target Annual Incentive Amount;”

 

IN WITNESS WHEREOF, the Company, the German Parent and the Parent have caused this Second Amendment to be executed by its duly authorized representative and the Executive has executed this Second Amendment as of the date set forth below, but which shall

 

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be effective as of the later of (i) the Acquisition Date, provided the Company employs Executive on that date, or (ii) the date the Executive executes a release in the form attached hereto.  Except as provided herein, nothing contained in this Second Amendment shall alter the terms and conditions of the Agreement or the First Amendment.

 

	
E. ON. AG
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   Ulrich Hartmann
    	
 
    
	
 
    	
Name   
    	
 
    	
 
    
	
 
    	
Title   
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:   
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
LG&E ENERGY CORP.
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   Victor A. Staffieri
    	
 
    
	
 
    	
Name   
    	
 
    	
 
    
	
 
    	
Title   
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:   
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
POWERGEN, PLC
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   David Jackson
    	
 
    
	
 
    	
Name   
    	
 
    	
 
    
	
 
    	
Title   
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:   
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
EXECUTIVE
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   John R. McCall
    	
 
    
	
 
    	
John   R. McCall
    	
 
    
	
 
    	
 
    	
 
    
	
Date   
    	
20   May 2002
    	
 
    

 

6Exhibit 10(y)

 

RETENTION AND SEVERANCE AGREEMENT

AMONG

LG&E ENERGY CORP.

E.ON AG

AND

[EXECUTIVE]

 

[Date]

 

 

TABLE OF CONTENTS

 

	
Section
    
	
 
    
	
1.    Effectiveness, Effect on Prior Agreements
    
	
 
    
	
2.    Term
    
	
2.1 Termination for Cause
    
	
2.2 Death or Disability
    
	
2.3 Other Termination
    
	
 
    
	
3.    Retention Bonus
    
	
 
    
	
4.    Payment Upon Termination of Employment
    
	
4.1 Accrued Compensation Payment
    
	
4.2 Severance Payment
    
	
4.3 Timing of Payments
    
	
 
    
	
5.    Tax Withholding and Tax Payments
    
	
 
    
	
6.    Notices
    
	
 
    
	
7.    Governing Law
    
	
 
    
	
8.    Entire Agreement
    
	
 
    
	
9.    Amendment
    
	
 
    
	
10    Assignment
    
	
 
    
	
11.Binding   Effect
    
	
 
    
	
12.Headings;   Section References
    
	
 
    
	
13.Construction
    
	
 
    
	
14.Survival
    
	
 
    
	
15.Acceptance
    

 

II

 

GLOSSARY OF DEFINED TERMS

 

	
Defined Term
    	
 
    	
Section
    
	
 
    	
 
    	
 
    
	
Acquisition Date
    	
 
    	
Recitals
    
	
Agreement
    	
 
    	
Preamble
    
	
Base Amount
    	
 
    	
3
    
	
Bonus Amount
    	
 
    	
3
    
	
Cause
    	
 
    	
2.1
    
	
CIC   Agreement
    	
 
    	
Recitals
    
	
Company
    	
 
    	
Preamble
    
	
Corporation
    	
 
    	
Recitals
    
	
Disabled
    	
 
    	
2.2
    
	
Employer
    	
 
    	
1
    
	
Executive
    	
 
    	
Preamble
    
	
Good   Reason
    	
 
    	
2.3(b)
    
	
Letter   Agreement
    	
 
    	
Recitals
    
	
Parent
    	
 
    	
Preamble
    
	
Prior   Agreements
    	
 
    	
1
    
	
Retention   Payment
    	
 
    	
3
    
	
Term
    	
 
    	
2
    

 

III

 

RETENTION AND SEVERANCE AGREEMENT

 

THIS RETENTION AND SEVERANCE AGREEMENT (“Agreement”) is made and entered into as of the      day of                   by and among (i) LG&E ENERGY CORP., a Kentucky corporation (“Company”), (ii) E.ON AG, an aktiengesellschaft formed under the Federal Republic of Germany (“Parent”), and                           (“Executive”).

 

 

RECITALS:

 

A.   WHEREAS, the Parent and Powergen, plc, a United Kingdom public limited company (“Corporation”), have agreed to the terms of a recommended pre-conditional cash offer, whereby Parent or its subsidiary will acquire ownership of the Corporation;

 

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

 

C.   WHEREAS, the Company and the Executive previously entered into a Change in Control Agreement dated February 6, 2001, (“CIC Agreement”);

 

D.   WHEREAS, the Company and the Executive previously entered into a letter agreement dated November 29, 2000, which provided for certain retention and severance payments (“Letter Agreement”);

 

E.   WHEREAS, the Parent, and the Company have determined that it is in their best interests to retain the services of the Executive following the Acquisition Date; and

 

F.   WHEREAS, the Parent, the Company and the Executive desire to provide for certain additional severance and retention payments upon the occurrence of certain events.

 

AGREEMENT:

 

NOW, THEREFORE, the parties hereby agree as follows:

 

1.             EFFECTIVENESS, EFFECT ON PRIOR AGREEMENTS.  This Agreement shall become effective at the Acquisition Date, provided that on such date, the Executive is employed by the Company, the Parent, the Corporation, or any subsidiary of the Company, the Parent or the Corporation, hereinafter collectively referred to as “Employer”.  The CIC and the Letter Agreement, collectively referred to as the “Prior Agreements”, shall continue in full force and effect in accordance the terms contained therein. Nothing contained in this Agreement shall amend or modify the terms of the Prior Agreements.  Further, nothing contained in this Agreement shall constitute a failure or breach of an Employer under the Prior Agreements, or give rise to a condition that would constitute “Good Reason” under Section 2.6 of the CIC Agreement, as defined therein.

 

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2.     TERM.  The term of this Agreement shall commence on the Acquisition Date, and shall continue in effect, except as otherwise provided herein, until the fourth anniversary of the Acquisition Date; provided, however, that commencing on the fourth anniversary of the Acquisition Date, and on each anniversary of the Acquisition Date thereafter, the term of this Agreement shall automatically be extended for one year unless the Employer has given written notice to the Executive at least ninety days prior thereto that the term of this Agreement shall not be so extended (“Term”).  In addition to the foregoing termination by notice not to extend this Agreement, the Term shall cease, in the event of:

 

2.1   Termination for Cause.  By a vote of a seventy-five percent of the Board of Directors of the Company(“Board”), the Executive’s employment by an Employer may be  terminated for Cause (as hereinafter defined).  For purposes of this Agreement, the term “Cause” shall mean:

 

(a)  The repeated gross negligence by the Executive in performing the reasonably assigned duties on behalf of an Employer required by and in accordance with his employment by such Employer.

 

(b)   The commission by the Executive of a felony in the course of performing his duties on behalf of an Employer required by and in accordance with his employment by such Employer.

 

2.2   Death or Disability.  If the  Executive dies or becomes Disabled (as hereinafter defined), the Term shall cease.  For purposes of this Agreement, the Executive shall be considered “Disabled” if he is so considered under a disability insurance policy maintained by the Employer, if any, or, if no such disability insurance policy is in effect, on the date that the Board determines, in its reasonable discretion, but based upon competent medical advice, that the Executive is, or will be, unable by reason of illness or accident to perform his duties hereunder for a continuous period of 180 days, or for a period of more than 180 days in any 270-day period.

 

2.3   Other Termination

 

(a) Employer.  The Executive acknowledges that no representations or promises have been made concerning the grounds for termination or the future of the Employer’s business, and that nothing contained herein or otherwise stated by or on behalf of the Employer modifies or amends the right of the Employer to terminate Executive at any time, with or without Cause.

 

(b) Executive.  The Executive may terminate employment for any reason by giving the Employer, not less than 14 days but not  more than 90 days prior written notice of such termination. Termination by the Executive shall be for “Good Reason” if:  (i) the Executive’s base salary, annual target bonus percentage, or long term target bonus percentage is reduced by an Employer, or (ii) prior to the fourth anniversary of the Acquisition Date an Employer relocates the Executive’s present place of employment in excess of one hundred miles.

 

3.     RETENTION BONUS  If the Executive is employed on the day following the second anniversary of the Acquisition Date by an Employer, the Employer shall pay to the Executive a lump sum cash payment “Retention Payment” in an amount equal to the Executive’s Base Amount (as hereinafter defined) and Bonus Amount (as hereinafter defined).  For purposes of

 

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this Agreement, “Base Amount” shall mean the Executive’s annual base salary from an Employer in effect at the time of payment, including all amounts of annual base salary that are deferred under any qualified or non-qualified employee benefit plan of an Employer; provided, however, if an Employer has reduced the Executive’s annual base salary, the Base Amount shall be the annual base salary in effect prior to the reduction.  For purposes of this Agreement, “Bonus Amount” shall mean the target annual bonus of the Executive under the annual incentive plan of the Employer at the time of payment; provided however, that if an Employer has reduced the target annual bonus of the Executive, the Bonus Amount shall be the target annual bonus in effect prior to the reduction.  If on or prior to the second anniversary of the Acquisition Date, the Executive’s employment with the Employer is terminated (i) by the Employer for other than Cause, death or Disability or (ii) by the Executive for Good Reason, the Employer shall pay to the Executive the Retention Payment within 10 business days of the termination date; provided however, that if an Accounting Firm (as defined in the CIC Agreement) determines pursuant to Section 6(b) of the CIC Agreement that such Retention Payment creates or increases an Excise Tax (as defined in the CIC Agreement),  such Retention Payment shall be reduced in whole or in part, to the extent necessary to reduce to zero the Excise Tax resulting from the Retention Payment.  For purposes of the foregoing calculation of Excise Tax, if any, the Retention Payment shall be deemed to be the last item taken into consideration.

 

4.     PAYMENT UPON TERMINATION OF EMPLOYMENT

 

4.1   Accrued Compensation Payment.    If the Executive’s employment is terminated for any reason by the Employer or by the Executive, the Executive shall be entitled to receive any earned but unpaid base salary as of the date of termination, together with any earned, but unpaid (i) vacation and (ii) annual bonus for the prior performance year, as determined pursuant to the terms of the plan.

 

4.2   Severance Payment.    In addition to the payment provided in Section 4.1, if the Executive’s employment is terminated after the second anniversary of the Acquisition Date (i) by the Employer for other than Cause, death or Disability, or (ii) by the Executive for Good Reason, the Executive shall be entitled to receive a lump sum cash payment in an amount equal to the Executive’s Base Amount and Bonus Amount.  Notwithstanding the foregoing, if the Executive becomes entitled to a payment of severance benefits pursuant to Section 3.1 of the CIC Agreement, no benefit shall be payable pursuant to this Section 4.2.

 

4.3   Timing of Payments.  All of the amounts provided for above shall be paid to the Executive (or his successor-in-interest in the event of his death) no later than 10 days following his termination of employment.

 

5.     TAX WITHHOLDING AND TAX PAYMENTS.  Executive acknowledges that amounts paid or deferred pursuant to this Agreement may be subject to federal, state and local tax payments and withholdings.  All amounts paid to the Executive shall be net of such withholding.  In the case of amounts deferred pursuant to this Agreement, Executive hereby agrees to timely provide the Company with sufficient funds to enable it to meet its withholding and deposit obligations with respect to such taxes.

 

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6.     NOTICES.  Any notices required or permitted to be given under this Agreement shall be in writing and be personally delivered against a written receipt, delivered to a reputable messenger service (such as Federal Express, DHL Courier, United Parcel Service, etc.) for overnight delivery, transmitted by confirmed telephonic transmission (fax) or transmitted by registered, certified or express mail, return receipt requested, postage prepaid, addressed to the residence of the Executive as shown on the Employer’s records, or the principal place of business of the Employer, respectively.  All notices shall be effective and shall be deemed given upon being personally delivered against a written receipt, when delivered to a reputable messenger service, upon transmission of a confirmed fax or upon being deposited in the United States mail in the manner provided in this Section.

 

7.     GOVERNING LAW.  This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Kentucky without regard to its conflict of laws rules.

 

8.     ENTIRE AGREEMENT  This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof.

 

9.     AMENDMENT.  This Agreement may not be amended orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

 

10.   ASSIGNMENT.  The rights and obligations of the Executive under this Agreement are personal and may not be assigned or delegated.  The Employer may not assign their rights and obligations under this Agreement, by operation of law or otherwise, without the prior written consent of the Executive.

 

11.   BINDING EFFECT.  This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective executors, administrators, heirs, successors and assigns.

 

12.   HEADINGS; SECTION REFERENCES.  The Section headings contained in this Agreement are for convenience only and shall not be deemed a part of this Agreement in construing or interpreting the provisions hereof.  All Section references herein shall refer to Sections of this Agreement unless the context otherwise requires.

 

13.   CONSTRUCTION.  Each of the parties acknowledge that they and their respective counsel have negotiated and drafted this Agreement jointly and that the rule of construction that ambiguities are to be resolved against the drafting party shall not apply in the interpretation or construction of this Agreement.

 

14.   SURVIVAL.  The terms of Section 4 shall survive the termination of this Agreement regardless of who terminates this Agreement or the reasons therefor.

 

15.   ACCEPTANCE OF AGREEMENT.  The benefits contained in this Agreement are conditioned upon acceptance of this Agreement by the Executive.  Executive shall indicate such acceptance of this Agreement by returning an executed copy to the Senior Vice President and Chief Administrative Officer of the Company by 5:00 p.m. on May 6, 2002.  Failure by the Executive

 

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to accept the Agreement as provided in this Section 15 shall result in a loss of eligibility for the benefits contained herein.

 

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

 

	
 
    	
LG&E ENERGY CORP.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
(“Company”)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
E.ON AG
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
(“Parent”)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(“Executive”)
    

 

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