**Exhibit 10.65**

 

**LG&E ENERGY CORP. LONG-TERM PERFORMANCE UNITPLAN**

 

**EffectiveJanuary 1, 2003**

 

**ARTICLE 1.  ESTABLISHMENT, PURPOSE, AND DURATION**

 

**1.1.         Establishment of the Plan.**

 

LG&E Energy Corp, (hereinafter referred to as the “Company”)establishes as of the date set forth above the “LG&E Energy Corp. Long-TermPerformance Unit Plan” (hereinafter referred to as the “Plan”), which permitsthe grant of Performance Units, as hereinafter defined, to employees ofLG&E Energy Corp. and its Subsidiaries. The Plan was approved by the Boardof Directors of the Company in a consent resolution dated April 25, 2003.

 

**1.2.         Purpose of the Plan.**

 

The purpose of the Plan is to promote the success of the Company andits Subsidiaries by providing incentives to Key Employees that will link theirpersonal interests to the long-term financial success of the Company andits Subsidiaries and to growth in Parent shareholder value.  The Plan is designed to provide flexibilityto the Company and its Subsidiaries in their ability to motivate, attract, andretain the services of Key Employees upon whose judgment, interest, and specialeffort the successful conduct of their operations is largely dependent.  Grants under the Plan may be made in conjunctionwith grants of phantom options under the E.ON Phantom Option Plan in the caseof certain Key Employees.

 

**1.3.         Duration of the Plan.**

 

The Plan is effective as of January 1, 2003.  The Plan shall remain in effect, subject to the right of theBoard of Directors to terminate the Plan at any time pursuant to Article 9herein.

 

**ARTICLE 2.  DEFINITIONS AND CONSTRUCTION**

 

**2.1.         Definitions.**

 

Whenever used in the Plan, the following terms shall have the meaningsset forth below and, when the meaning is intended, the initial letter of theword is capitalized:

 

(a)                                  “Award”means a grant under this Plan of Performance Units.

 

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(b)                                 “BeneficialOwnership” shall have the meaning ascribed to such term in Rule 13d-3 ofthe General Rules and Regulations under the Exchange Act.

 

(c)                                  “Board”or “Board of Directors” means the Board of Directors of the Company.

 

(d)                                 “Cause”shall mean the occurrence of any one of the following:

 

(i)                                     Thewillful and continued failure by a Participant to substantially perform his/herduties (other than any such failure resulting from the Participant’sdisability), after a written demand for substantial performance is delivered tothe Participant that specifically identifies the manner in which the Company orany of its Subsidiaries, as the case may be, believes that the Participant hasnot substantially performed his/her duties, and the Participant has failed toremedy the situation within ten (10) business days of receiving such notice; or

 

(ii)                                  theParticipant’s conviction for committing a felony in connection with theemployment relationship; or

 

(iii)                               thewillful engaging by the Participant in gross misconduct materially anddemonstrably injurious to the Company or any of its Subsidiaries. However, noact, or failure to act, on the Participant’s part shall be considered “willful”unless done, or omitted to be done, by the Participant not in good faith andwithout reasonable belief that his/her action or omission was in the bestinterest of the Company or any of its Subsidiaries.

 

(e)                                  “Changein Control” shall be deemed to have occurred if the conditions set forth in anyone of the following paragraphs shall have been satisfied:

 

(i)                                     Parent is notified by a third party that ithas acquired 25 percent or more of the voting rights of Parent in accordancewith § 21 of the German Securities Trading Act (WpHG), or

 

(ii)                                  a third party on its own or together withvoting rights attributable to him in accordance with § 22 German SecuritiesTrading Act (WpHG) has acquired a share in voting rights which, at Parent’sAnnual Shareholders’ Meeting, would represent or which, at Parent’s last AnnualShareholders’ Meeting, would have represented the majority of the voting rightspresent at such a Meeting, or

 

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(iii)                               an affiliation agreement is concluded withParent as controlled company in accordance with §§ 291 ff. of the German StockCorporation Act (AktG), or

 

(iv)                              Parent is being integrated in accordance with§§ 319 ff. of the German Stock Corporation Act (AktG), or

 

(v)                                 Parent changes its legal status in accordancewith §§ 190 ff. of the German Conversion Law (UmwG), or

 

(vi)                              Parent is being merged with another legalentity, provided that the enterprise value of such legal entity is more than 20percent of the enterprise value of Parent at the time of adopting theresolution by Parent.  The methods ofvaluation acknowledged by the professional association of qualified auditors(Stellungnahme des Hauptfachausschusses des Instituts der Wirtschaftsprüfer HF2/1983 = Grundsätze zur Durchführung von Untemehmensbewertungen sowie dieneueren Verlautbarungen des Berufsstandes) shall be used to determine the valueof both entities, to the extent that both enterprise values will be determinedaccording to said methods in connection with the merger.  Otherwise, the market capitalization of bothlegal entities at the time the resolution is adopted by Parent will be deemedas their respective enterprise values. If a market capitalization cannot be determined, the enterprise valuesagreed upon by both legal entities will be deemed as their respective values.

 

(vii)                           Company ceases to be an affiliated company ofParent as defined in § 15 of the German Stock Corporation Act or where thefollowing apply:

 

(a)                                  A complete liquidation or dissolution of theCompany unless, the Parent continues to own directly or indirectly all orsubstantially all of the Company’s assets;

 

(b)                                 An agreement for the sale or otherdisposition of all or substantially all of the assets of the Company to anyperson or entity (other than a subsidiary of the Parent);

 

(c)                                  A merger or other combination involving theCompany as a result of which Parent ceases to beneficially own more that 50% ofthe outstanding Voting Stock, of the successor to the Company, unless theParent or its subsidiary continues to own directly or indirectly all or substantiallyall of the Company’s assets; or

 

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(d)                                 Any person or entity acquires BeneficialOwnership of a greater percentage of the Voting Stock of the Company than thepercentage or such Voting Stock then held, directly or indirectly by Parent.

 

(f)                                    “Committee”means the Senior Vice President, Group Corporate Officer Resources -of theParent and any other person, if any, designated by the Chairman and ChiefExecutive Officer of the Parent to administer the Plan pursuant to Article 3herein.

 

(g)                                 “Company”means LG&E Energy Corp., a Kentucky corporation, or any successor theretoas provided in Article 11 herein.

 

(h)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended from timeto time.

 

(i)                                     “KeyEmployee” means (i) an employee of the Company or any of its Subsidiaries,including an employee who is an officer or a director of the Company or any ofits Subsidiaries, who, in the opinion of the Committee, can contributesignificantly to the growth and profitability of the Company and its Subsidiaries,(ii) may include employees who are members of the Board who are employees, or(iii) any other employee, identified by the Committee, in special situationsinvolving extraordinary performance, promotion, retention, or recruitment.  The granting of an Award under this Planshall be deemed a determination by the Committee that such employee is a KeyEmployee, but shall not create a right to remain a Key Employee.

 

(j)                                     “Parent”means E.ON AG, an anktiengesellschaft formed under the Federal Republic ofGermany, or any successor thereto as provided in Article 11 herein.

 

(k)                                  “Participant”means a Key Employee who has been granted an Award under the Plan.

 

(l)                                     “PerformanceUnit” means an Award, designated as a performance unit, granted to aParticipant pursuant to Article 5 herein.

 

(m)                               “Person”shall have the meaning ascribed to such term in Section 3(a) (9) of theExchange Act and used in Sections 13(d) and 14(d) thereof, including a “group”as defined in Section 13(d) thereof.

 

(n)                                 “Plan”means this LG&E Energy Corp. Long-Term Performance Unit Plan, asherein described and as hereafter from time to time amended.

 

(o)                                 “Subsidiary”shall mean any corporation of which more than 50% (by number of votes) of theVoting Stock at the time outstanding is owned, directly or indirectly, 

 

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by the Company.

 

(p)                                 “VotingStock” shall mean securities of any class or classes of stock of a corporation,the holders of which are ordinarily, in the absence of contingencies, entitledto elect a majority of the corporate directors.

 

**2.2.         Gender and Number.**

 

Except where otherwise indicated by the context, any masculine termused herein also shall include the feminine, the plural shall include thesingular, and the singular shall include the plural.

 

**2.3.         Severability.**

 

In the event any provision of the Plan shall be held illegal or invalidfor any reason, the illegality or invalidity shall not affect the remainingparts of the Plan, and the Plan shall be construed and enforced as if theillegal or invalid provision had not been included.

 

 

**ARTICLE 3.  ADMINISTRATION**

 

**3.1.         The Committee.**

 

The Plan shall be administered by the Committee as permitted by law andArticle 3.5.

 

**3.2.         Authority of the Committee.**

 

Subject to the provisions of the Plan, the Committee shall have fullpower to construe and interpret the Plan; to establish, amend or waive rulesand regulations for its administration; to accelerate the end of a performanceperiod or the termination of any award agreement; and (subject to theprovisions of Article 9 herein) to amend the terms and conditions of anyoutstanding Award to the extent such terms and conditions are within thediscretion of the Committee as provided in the Plan. The Committee shall nothave authority to resolve disputed claims under the Plan.

 

**3.3.         Selection of Participants.**

 

The Committee shall have the authority to grant Awards under the Plan,from time to time, to such Key Employees (including officers and directors whoare employees) as may be selected by it. The Committee shall select Participants from among those whom they haveidentified as being Key Employees.

 

**3.4.         Decisions and Appeals.**

 

All determinations and decisions made by Committee pursuant to theprovisions of the Plan may be reviewed by the Chairman and Chief ExecutiveOfficer of the Parent, upon

 

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the written request of either the Committee or a Participant.  Any determination made by the Chairman andChief Executive Officer of the Parent, pursuant to this section shall be final,conclusive and binding on all persons, including the Company and itsSubsidiaries, its shareholders, employees, and Participants and their estatesand beneficiaries, and such determinations and decisions shall not be subjectto review.

 

**3.5.         Delegation of CertainResponsibilities.**

 

The Committee may delegate to an appropriate party any of itsresponsibilities under the Plan.

 

**3.6.         Procedures of the Committee.**

 

To the extent the Committee is comprised of more than one member, alldeterminations of the Committee or any delegates shall be made by not less thana majority of members present at any meeting (in person or otherwise) at whicha quorum is present.  A majority of theentire Committee or the number of delegates at a given time shall constitute aquorum for the transaction of business. Any action required or permitted to be taken at a meeting of theCommittee or the delegates may be taken without a meeting if a unanimouswritten consent, which sets forth the action, is signed by each member of theCommittee and filed with the minutes for proceedings of the Committee ordelegates.

 

**3.7.         Award Agreements.**

 

Each Award under the Plan shall be evidenced by an award agreementwhich shall be signed by an authorized officer of the Company and by theParticipant, and shall contain such terms and conditions as may be approved bythe Committee.  Such terms andconditions need not be the same in all cases.

 

**ARTICLE 4.  ELIGIBILITY AND PARTICIPATION**

 

**4.1.         Eligibility.**

 

Persons eligible to participate in this Plan include all employees ofthe Company and its Subsidiaries who, in the opinion of the Committee, are KeyEmployees.

 

**4.2.         Actual Participation.**

 

Subject to the provisions of the Plan, the Committee may from time totime select those Key Employees to whom Awards shall be granted and determinethe nature and amount of each Award.  Noemployee shall have any right to be granted an Award under this Plan even ifpreviously granted an Award.

 

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**ARTICLE 5.  PERFORMANCE UNITS**

 

**5.1.         Grant of Performance Units.**

 

Subject to the terms and provisions of the Plan, Performance Units maybe granted to Participants at any time and from time to time as shall bedetermined by the Committee or any delegate who shall have complete discretionin determining the number of Performance Units granted to each Key Employee.

 

**5.2.         Value of Performance Units .**

 

The Committee shall set performance goals over certain periods to bedetermined in advance by the Committee (“Performance Periods”).  The initial value for each Performance Unitshall be one dollar.  With regard toeach grant of Performance Units, the Committee in consultation with the SeniorVice President Controlling of the Parent shall set the performance goals thatwill be used to determine the extent to which the Participant receives apayment of the value of the Performance Units awarded for such PerformancePeriod.  These goals will be based onthe attainment, by the Parent, Company, or its Subsidiaries, of certainobjective performance measures.  Withrespect to each such performance measure utilized during a Performance Period,the Committee shall assign percentages to various levels of performance whichshall be applied to determine the extent to which the Participant shall receivea payout of the value of Performance Units.

 

**5.3.         Payment of Performance Units.**

 

After a Performance Period has ended, the holder of a Performance Unitshall be entitled to receive the value thereof as determined by theCommittee.  The Committee shall makethis determination by first determining the extent to which the performancegoals set pursuant to Section 5.2 have been met.  It will then determine the applicable percentage (which may begreater or lesser than 100%) to be applied to, and will apply such percentageto, the value of Performance Units to determine the payout to be received bythe Participant.  In addition, withrespect to Performance Units granted to any Key Employee, no payout shall bemade hereunder except upon written certification by the Committee that theapplicable performance goal or goals have been satisfied to a particularextent.

 

**5.4.         Discretion to Adjust Awards.**

 

The Committee shall have the authority to modify, amend, or adjust theterms and conditions of any Performance Unit award, at any time or from time totime, including but not limited to the performance goals.

 

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**5.5.         Form and Timing of Payment.**

 

The payment described in Section 5.3 herein shall be made in a cashlump sum as soon as administratively practical upon the determination by theCommittee provided for in Section 5.3, unless the Participant has previouslyelected to defer such payment in a manner prescribed by the Committee.  If any payment is permitted by the Committeeto be made on a deferred basis, the Committee may provide for earnings to becredited on such amount in a manner they determine.

 

**5.6.         Termination of Employment Due toDeath, Disability, or Retirement.**

 

In the case of death, disability, or retirement (each of disability andretirement as defined under the established rules of the Company or any of itsSubsidiaries, as the case may be), the holder of a Performance Unit shallreceive a prorated payment based on the Participant’s number of full months ofservice during the Performance Period, further adjusted based on theachievement of the performance goals during the entire Performance Period, ascomputed by the Committee.  Paymentshall be made at the time payments are made to Participants who did notterminate service during the Performance Period.

 

**5.7.         Termination of Employment for OtherReasons.**

 

In the event that a Participant terminates employment with the Companyor any of its Subsidiaries for any reason other than death, disability, orretirement, prior to the end of the Performance Period all Performance Unitsshall be forfeited; provided however, in the case of any termination not forCause, the Committee in its sole discretion may waive the automatic forfeitureprovisions and make a prorated payment to the holder of a PerformanceUnit.  Payment made pursuant to thisSection shall be made at the time payments are made to Participants who did notterminate service during the Performance Period.  In the event of a Participant’s termination of employmentpursuant to this Section after completion of the respective Performance Periodof a Performance Unit, but prior to payment pursuant to Section 5.5, theParticipant shall be entitled to payment without proration.

 

**5.8.         Nontransferability.**

 

No Performance Units granted under the Plan may be sold, transferred,pledged, assigned, or otherwise alienated or hypothecated, other than by willor by the laws of descent and distribution until the termination of theapplicable performance period.  Allrights with respect to Performance Units granted to a Participant under thePlan shall be exercisable during his lifetime only by such Participant.

 

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**ARTICLE 6.  BENEFICIARY DESIGNATION**

 

Each Participant under the Plan may, from time to time, name anybeneficiary or beneficiaries (who may be named contingently or successively andwho may include a trustee under a will or living trust) to whom any benefitunder the Plan is to be paid in case of his death before he receives any or allof such benefit.  Each designation willrevoke all prior designations by the same Participant, shall be in a formprescribed by the Committee, and will be effective only when filed by theParticipant in writing with the Committee during his lifetime.  In the absence of any such designation or ifall designated beneficiaries predecease the Participant, benefits remainingunpaid at the Participant’s death shall be paid to the Participant’s estate.

 

**ARTICLE 7.  RIGHTS OF EMPLOYEES**

 

**7.1.         Employment.**

 

Nothing in the Plan shall interfere with or limit in any way the rightof the Company or any of its Subsidiaries to terminate any Participant’semployment at any time, nor confer upon any Participant any right to continuein the employ of the Company or any of its Subsidiaries.

 

**7.2.         Participation.**

 

No employee shall have a right to be selected as a Participant, or,having been so selected, to be selected again as a Participant.

 

**7.3.         No Implied Rights; Rights onTermination of Service.**

 

Neither the establishment of the Plan nor any amendment thereof shallbe construed as giving any Participant, beneficiary, or any other person anylegal or equitable right unless such right shall be specifically provided forin the Plan or conferred by specific action of the Committee in accordance withthe terms and provisions of the Plan. Except as expressly provided in this Plan, neither the Company nor anyof its Subsidiaries shall be required or be liable to make any payment underthe Plan.

 

**7.4.         No Right to Company Assets.**

 

Neither the Participant nor any other person shall acquire, by reasonof the Plan, any right in or title to any assets, funds or property of theParent, Company or any of its Subsidiaries whatsoever including, withoutlimiting the generality of the foregoing, any specific funds, assets, or otherproperty which the Parent, Company or any of its Subsidiaries, in its solediscretion, may set aside in anticipation of a liability hereunder.  Any benefits which become payable hereundershall be paid from the general assets of the Parent, Company or the applicablesubsidiary.  The Participant shall haveonly a contractual right to the amounts, if any, payable hereunder unsecured byany asset of the Company or any of its Subsidiaries.  Nothing contained in the Plan constitutes a guarantee by theCompany or any of its Subsidiaries that the assets of the Company or theapplicable subsidiary shall be sufficient to pay any benefit to any person.

 

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**ARTICLE 8.  CHANGE IN CONTROL**

 

Notwithstanding any other provisions of the Plan, in the event of aChange in Control, all Performance Unit awards granted under this Plan shall beimmediately paid out in cash.  Theamount of the payout shall be based on the higher of:

 

(i)**           **the extent, as determinedby the Committee, to which performance goals, established for the PerformancePeriod then in progress have been met up through and including the effectivedate of the Change in Control or

 

(ii)**          **100% of the value on thedate of grant of the Performance Units.

 

**ARTICLE 9.  AMENDMENT, MODIFICATION, ANDTERMINATION**

 

**9.1.         Amendment, Modification, andTermination.**

 

At any time and from time to time, the Board, upon recommendation bythe Committee, may terminate, amend, or modify the Plan.

 

**9.2.         Awards Previously Granted.**

 

No termination, amendment, or modification of the Plan shall in anymanner adversely affect any Award theretofore granted under the Plan, withoutthe written consent of the Participant.

 

**ARTICLE 10.  TAX WITHHOLDING**

 

The Company and any of its Subsidiaries shall have the power and theright to deduct or withhold, or require a Participant to remit to the Companyor any of its Subsidiaries, an amount sufficient to satisfy taxes (includingthe Participant’s FICA obligation) required by law to be withheld with respectto any grant, exercise, or payment made under or as a result of this Plan.

 

**ARTICLE 11.  PARENT AND SUCCESSORS**

 

All obligations of the Company under the Plan, with respect to Awardsgranted hereunder, shall be binding on the Parent and any successor to theCompany, whether the existence of such successor is the result of a direct orindirect purchase, merger, consolidation or otherwise, of all or substantiallyall of the business and/or assets of the Company.

 

**ARTICLE 12.  REQUIREMENTS AND GOVERNING LAW**

 

**12.1.       Requirements of Law.**

 

The granting of Awards under this Plan shall be subject to allapplicable laws, rules, and regulations, and to such approvals by anygovernmental agencies or national securities exchanges as may be required.

 

**12.2.       Governing Law.**

 

The Plan, and all agreements hereunder, shall be construed inaccordance with and governed by the laws of the Commonwealth of Kentucky.

 

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