Exhibit 10.70
EMPLOYMENT CONTRACT
AMONG
LOUISVILLE GAS AND ELECTRIC COMPANY,
LG&E ENERGY CORP.
AND
XXXXX X. XXXX
WHEREAS, the Louisville Gas and Electric Company and its parent, LG&E
Energy Corp., (collectively the "Company") desire to continue to employ Xxxxx X.
Xxxx (the "Executive") as its Chairman and Chief Executive Officer;
WHEREAS, the Company desires to provide the Executive with compensation
and benefits that are appropriate for its senior executive and desires to create
incentives for the Executive to remain in the employ of the Company;
WHEREAS, the Executive now serves as Chairman and Chief Executive
officer of the Company pursuant to an employment contract which became effective
on May 24, 1989, said contract having been amended from time to time since its
effective date; and
WHEREAS, the Company and the Executive desire that the terms and
conditions of the Executive's continued employment be set forth in a new
employment contract.
NOW, THEREFORE, the Company and Executive, as of the effective date
hereof, agree as follows:
1. Duties. The Company shall employ and the Executive agrees to serve as
Chairman and Chief Executive Officer of the Company. During the Term of the
Contract, the Executive shall devote his full business and professional
time to the Company.
2. Term of Contract. The term of the employment contract shall commence on the
Effective Date hereof, and shall continue in effect until December 31,
2001.
3. Base Salary. The Company shall pay the Executive an annual base salary of
not less than Executive's 1997 salary of $580,000. Said annual salary shall
be reviewed by the Compensation Committee of the Board of Directors as of
January 1 of each year during the term of this agreement.
4. Short-Term Incentives. The Executive shall be eligible to participate in he
Company's short-term incentive program. The short-term incentive program
shall provide the Executive with an annual target award of 60 percent of
his base salary.
5. Long-Term Incentives. The Executive shall be eligible to participate in the
Company's long-term incentive program. The Executive shall have annual
grants with a present value of not less than 110 percent of his base salary
(per outside consultant's present value calculation). The annual grants
will be delivered two-thirds in the form of performance units/shares and
one-third in the form of nonqualified Stock Options.
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6. Retirement Benefits.
a) Pension Benefits. The Company shall provide the Executive with a
pension benefit based on his combined service with the Company and his
prior employers. The total benefit paid to the Executive from the
Company and his prior employers shall not be less than a benefit equal
to the product of (1) and (2), reduced by (3) where--
1) shall be the annual average of the Executive's cash compensation
for the preceding five years (base salary plus short-term
incentive pay);
2) shall be a percent based on service at retirement equivalent to 2
percent for each of the first 20 years of service plus 1.5
percent for each of the next ten years of service plus 1.0
percent for each of any remaining years of service completed
prior to age 65; and
3) shall be the Executive's primary Social Security benefit payable
at age 65.
The Company shall provide a benefit to the Executive that shall not be
less than the benefit calculated in accordance with the formula
described above, less any pension benefits provided to the Executive
from the Executive's prior employers, whether from qualified plans or
SERPS. The company-provided portion shall be paid, to the maximum
extent possible, from the Retirement Income Plan for The Executives of
Louisville Gas and Electric Company Who Are Not Members of a
Bargaining Unit.
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Subject to the terms of the final paragraph of this Section 6, the
Executive may elect to commence payment of his pension benefit as
early as age 50. If the Executive retires before attaining age 65, the
pension benefit shall be reduced in accordance with the following
factors to reflect Executive's age at the date his benefits commence:
Age Percentage Payable
--- ------------------
62-65 One Hundred Percent
61 Ninety-Seven Percent
60 Ninety-Four Percent
59 Ninety-One Percent
58 Eighty-Eight Percent
57 Eighty-Five Percent
56 Eighty-Two Percent
55 Seventy-Nine Percent
54 Seventy-Three Percent
53 Sixty-Seven Percent
52 Sixty-One Percent
51 Fifty-Five Percent
50 Forty-Nine Percent
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In applying these reductions the net benefit from the Company will be
determined first and then those reductions will be applied to the net
amount.
If Executive is terminated prior to age 55 without cause ("cause"
defined as conviction by a court of competent jurisdiction of
commission of a felony; however, a felony conviction derivatively
arising from an environmental violation shall not constitute "cause"
for purposes of this agreement), or if Executive resigns for good
reason (defined as a breach by the Company of a material term of this
Contract), Executive's pension benefit shall be determined as if he
had retired age 55.
For purposes of this Section 6, "prior employers" shall include
BellSouth Corporation and AT&T Corporation.
Notwithstanding the above, if Executive resigns for other than good
reason and elects early retirement prior to age 55, Executive shall
not be entitled to receive the prescribed early retirement benefits if
Executive shall accept a senior executive position with a
publicly-traded company or its subsidiary within one year of his
election of early retirement under this Section 6. Should such event
occur, Executive shall notify the Company and return any retirement
benefits so received. Executive thereafter shall be entitled to
receive retirement benefits at age 55, consistent with the reduction
factors set forth above, but shall receive no credit for years of
service between the time of resignation from the Company and age 55.
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7. Other Benefits. During the term of his employment, the Executive shall be
entitled to participate in the employee welfare benefit, savings, thrift,
and vacation plans or programs of the Company on a basis which is
consistent with other senior corporate officers of the Company. In
addition, Executive shall be provided, at the Company's expense, with not
less than $2,000,000 in life insurance until age 75, regardless of
employment status. The Company shall also pay Executive an additional
payment such that, after payment by Executive of all taxes imposed as a
result of the life insurance benefit, the Executive retains an amount equal
to the taxes imposed upon the Executive as a result of the life insurance
benefit.
The Company shall reimburse Executive's reasonable legal fees and expenses
in connection with any dispute under this agreement, without regard to
which party prevails.
8. Perquisites. The Company shall provide the Executive with the following
perquisites during the term of his employment:
a) an automobile and all related maintenance and insurance expenses;
b) initiation fees and dues at a luncheon club and a country club;
c) the preparation of the Executive's income tax returns by the
Company's independent accounting firm; and,
d) reasonable costs for annual financial planning by an independent
financial planner of the Executive's choice.
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To the extent required by law, the Executive may incur taxable income
related to some of these perquisites.
9. Reimbursement of Expenses. The Company shall reimburse the Executive for
all authorized and approved expenses incurred and paid by him in the course
of the performance of his duties and consistent with policies and rules of
the Company relating to the reimbursement of such business expenses.
10. Termination by the Company. The Board of Directors of the Company may, in
its sole and absolute discretion, terminate the Executive's employment at
any time. Such action shall require a majority vote of the entire Board of
Directors and shall become effective upon written notice to the Executive
or at such time as may be specified in such notice. Upon such termination
or resignation for good reason, all rights, duties, and obligations of both
parties shall cease, except as provided under Section of this agreement. In
such event, the Company shall--
a) continue to pay the Executive his then current annual base salary plus
his target short-term compensation award for the remaining term of the
employment contract, but not less than two years. At the Executive's
option, payments under this Section 10(a) shall be made (1) on a lump
sum basis within 30 days from effective date of termination with
payment equal to the present value of future payments discounted at
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the prime interest rate then in effect or (2) on a monthly basis for
the remaining term of this agreement but in no event less than two
years.
b) provide the Executive with continued health insurance benefits to the
extent required by law.
The payments described in subparagraph (a), however, shall not be made if
the Executive is terminated for cause, or Executive resigns for other than
good reason during the term of the employment contract.
11. Interpretation with Other Agreements. Furthermore, if any Company payment
either pursuant to this agreement the agreement dated March 4, 1993,
between the Executive and the Company, or any other agreement, is subject
to an excise tax pursuant to Section 4999 of the code (the "Excise Tax"),
then the Company shall pay Executive an additional amount (the "Gross-Up
Payment") such that, after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any
Excise Taxes imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
original payment triggering the Excise Tax.
12. Permanent and Total Disability. In the event the Executive becomes totally
disabled during the term of the contract, he shall be entitled to a benefit
equal to 60 percent of current annual base salary less 100 percent of the
Social Security disability benefit should he become
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qualified for such benefit. Benefits will begin after Executive has been
totally disabled for 22 weeks and will continue for as long as the
Executive remains totally disabled or until age 65. Upon attaining age 65,
the Executive shall be entitled to the pension benefits described in
Section 6 based on service that includes the period of disability and
compensation paid up to the point of disability.
During the first 24 months in which the Executive receives benefits in
accordance with this provision, total disability means an on or off the job
injury or illness that makes it impossible for the Executive to engage in
his present occupation. After 24 months, total disability means an on or
off job illness or injury that makes it impossible for the Executive to
engage in an occupation or profession for which he is reasonably qualified
by reason of education, experience, capability, and training.
11. Successors and Assigns. This agreement shall be binding upon the Company
and its successors and assigns.
12. Effective Date. _______________________________
________________ _____________________________________________________
Date XXXXX X. XXXX
Chairman and Chief Executive Officer
________________ _____________________________________________________
Date J. XXXXX XXXXXXX
Chairman, Compensation Committee
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