**Exhibit10.74**

** **

**THIRD AMENDMENT TO THE**

**EMPLOYMENT AND SEVERANCE AGREEMENT**

**OF**

**VICTOR A. STAFFIERI**

 

 

**                This Third Amendment to the Employment and Severance Agreement ofVictor A. Staffieri (“Third Amendment”)**is made and entered into this 1st day of July, 2002 byand among (i) **LG&E Energy Corp**., a Kentuckycorporation (“Company”), (ii) **Powergen, plc**, aUnited Kingdom public limited company (“Parent”), (iii) **E.ON AG,**ananktiengesellschaft formed under the Federal Republic of Germany (“GermanParent”), and (iv) **Victor A. Staffieri**(“Executive”), collectively referred to as the “Parties”.

 

**                WHEREAS,******theExecutive, the Company and the Parent entered into an Employment and SeveranceAgreement, 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 (“FirstAmendment”);

 

**                WHEREAS,**the Agreement was also amended by the Executive, theCompany and the Parent in a document effective as of April 30, 2001 (“SecondAmendment”);

 

**                WHEREAS,**the Parent and German Parent have agreed to the termsof a recommended pre-conditional cash offer, whereby German Parent or itssubsidiary will acquire ownership of the Parent;

 

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

 

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

 

**AGREEMENT:**

 

**                NOWTHEREFORE****,**in consideration of the respective agreements of theParties contained herein, it is agreed as follows:

 

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

 

“1.4         On the Acquisition Date, the Company,the Parent, the German Parent, or any subsidiary of the Company, the Parent orthe German Parent, hereinafter referred to as the

 

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“Employer”, shall pay tothe Executive a lump sum cash payment in an amount equal to $800,570, providedthat the Executive is employed by an Employer on the Acquisition Date.  Additionally, the Employer shall pay theExecutive, as provided herein, the following: (i) $800,570 on the firstanniversary of the Acquisition Date, (ii) $800,570 on the second anniversary ofthe Acquisition Date, and (iii) $800,570 on the thirty month anniversary of theAcquisition Date, collectively hereinafter referred to as the “AdditionalRetention Payments.”  The AdditionalRetention Payments shall be credited to the Executive’s account under thedeferred compensation plan of the Company on the Acquisition Date and shall bepayable in a lump sum cash payment (including adjustment for any increases inExecutive’s account under the deferred compensation plan), if the Executive soelects, within ten (10) days after the earliest to occur of (i) any terminationof the Executive’s employment with an Employer, other than a termination by theExecutive without Good Reason, (ii) a Change in Control that occurs during thethirty months following the Acquisition Date, so long as the Executive is stillemployed by an Employer immediately prior to such Change in Control, or (iii)the respective first year, second year and thirty month anniversaries of theAcquisition Date, so long as the Executive is still employed by an Employer onsuch dates.  In the event that theExecutive elects to continue to defer the foregoing lump sum payments, suchamounts shall nevertheless vest as set forth above, and shall continue to beheld in the Executive’s deferred compensation plan account, which shallcontinue to be adjusted and shall be distributed in accordance with the termsof the deferred compensation plan.”

 

2.             Section 3.1 shall be deleted and replaced in itsentirety to read as follows:

 

“3.1         TheCompany agrees to employ Executive, and Executive agrees to serve during theterm hereof as Chief Executive Officer of the Company.  Executive shall report to Ulrich Hartmann,or his successor.  In addition, GermanParent shall (i) cause the Executive to be elected as a member of the Board ofDirectors of the Company (the “Board”), (ii) secure Executive’s election as amember of the Board of Directors of Parent (the “Parent Board”), and (iii)secure Executive’s election as a member of the management board or board ofdirectors (as applicable) of E.ON U.S. Verwaltungs GMBH or any other similarentity

 

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the German Parent utilizes to establish its presence,through acquisition or other development activity, in the United States’ energyindustry (“Primary U.S. Acquisition Board”), and Executive agrees to serve insuch capacities.”

 

3.  Section 3.2shall be deleted and replaced in its entirety to read as follows:

 

“3.2         Executiveagrees to devote his full working time and efforts, to the best of his ability,experience and talent, to the performance of services, duties andresponsibilities in connection with the position named above.  Executive shall perform such duties andexercise such powers, commensurate with his position, as Chief Executive Officerof the Company, as Ulrich Hartmann or his successor shall from time to timedelegate to him on such terms and conditions and subject to such restrictionsas******Ulrich Hartmann orhis successor may reasonably from time to time impose.”

 

4.               Section 3.4 shall be deleted and replaced in itsentirety to read as follows:

 

“3.4.        TheExecutive will perform his services at the Company’s headquarters inLouisville, Kentucky, with the understanding that he will be required to travelas reasonably required (including travel to the United Kingdom and Germany) forthe performance of his duties under this Agreement.”

 

5.               Section 4.1 shall be deleted and replaced in itsentirety to read as follows:

 

“4.1.        SALARY. The Company shall pay Executive an annual base salary (“Base Salary”) ofnot less than******$630,000.  The Base Salary shall be payable inaccordance with the ordinary payroll practices of the Company.  The Base Salary shall be reviewed by UlrichHartmann or his successor in December of each year during the term of thisAgreement and may be increased in the discretion of Ulrich Hartmann or hissuccessor at that or any other time and, as so increased, shall constitute“Base Salary” hereunder.   At no timeshall Ulrich Hartmann or his successor be able to decrease the Base Salary.”

 

6.     Subsection 6.5(a) shall be deleted and replaced in its entiretyto read as follows:

 

“(a)         For purposes of this Agreement, “GoodReason” shall mean the occurrence of any of 

 

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the events or conditions described in subsections (1)through (10) hereof:

 

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

 

                (2)           German Parent, Parent or the Companyrequire the Executive to be relocated anywhere in excess of fifty (50) miles ofhis present office location, except for required travel on German Parent,Parent or Company business consistent with his business travel obligations asin effect prior to the Effective Time and as provided in Section 3.4 of thisAgreement;

 

                (3)           a failure by Parent or the Company tomaintain plans providing benefits at least as beneficial in the aggregate asthose 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 Executive isparticipating prior to the Effective Time, the Change in Control, the SecondAmendment, or this Third Amendment, as applicable, or if the Company or Parent hastaken any action which would adversely affect the Executive’s participation inor materially reduce the Executive’s benefits under any of such plans ordeprive him of any material fringe benefit enjoyed by him prior to theEffective Time, the Change in Control, the Second Amendment or this ThirdAmendment, as applicable, or if the Company or Parent has failed to provide himwith the number of paid vacation days to which he would be entitled inaccordance with the Company’s normal vacation policy immediately prior to theEffective Time, the Change in Control, the Second Amendment, or this ThirdAmendment as applicable;

 

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                (4)           Parent or the Company materiallyreduces, individually or in the aggregate, the Executive’s title, jobauthorities or responsibilities as in effect prior to such reduction;

 

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

 

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

 

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

 

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

 

                (9)           any removal of the Executive from theposition of Chief Executive Officer of the Company, except for Cause; or

 

                (10)         any removal of Executive from, theBoard, the Parent Board, or the Primary U.S. Acquisition Board, except for Cause.”

 

7.               The introduction to Section 7.1 shall be deleted andreplaced in its entirety to read as follows:

 

“7.1         If,during the term of this Agreement, the Executive’s employment with the Companyshall be terminated within twenty-four months after the effective time of anyChange in Control occurring after the Acquisition Date, then the Executiveshall be entitled to the following compensation and benefits:”

 

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8.               The introduction to Section 7.2 shall be deleted andreplaced in its entirety to read as follows:

 

“7.2.        If, during the termof this Agreement, but not during a twenty-four month period following theeffective time of any Change in Control occurring after the Acquisition Date,the Executive’s employment with the Company shall be terminated, the Executiveshall be entitled to the following:”

 

                **IN WITNESS WHEREOF**, the Company, the GermanParent, and the Parent have caused this Third Amendment to be executed by itsduly authorized representative and the Executive has executed this ThirdAmendment as of the date set forth below, but which shall be effective as ofthe later of (i) the Acquisition Date, provided the Company employs Executiveon that date, or (ii) the date the Executive executes a release in the formattached hereto.  Except as providedherein, nothing contained in this Third Amendment shall alter the terms andconditions of the Agreement, the First Amendment, or the Second Amendment.

 
| **E. ON. AG**             |                |                                         |
|---------------------------|---------------------|----------------------------------------------|
|                      |                |                                         |
| By:                       | /s/ Ulrich Hartmann |                                         |   |
|                      | Name                |                                         |   |   |
|                      | Title               |                                         |   |   |
|                      |                |                                         |
| Date:                     | 1/7/2002            |                                         |   |
|                      |                |                                         |
| **LG&E ENERGY CORP.** |                |                                         |
|                      |                |                                         |
| By:                       | /s/ John R. McCall  |                                         |   |
|                      | Name                | John R. McCall                               |   |   |
|                      | Title               | EVP, General Counsel and Corporate Secretary |   |   |
|                      |                |                                         |
| Date:                     |                |                                         |   |
|                      |                |                                         |
| **POWERGEN, plc**         |                |                                         |
|                      |                |                                         |
| By:                       | /signed/            |                                         |   |
|                      | Name                |                                         |   |   |
|                      | Title               |                                         |   |   |
|                      |                |                                         |
| Date:                     |                |                                         |   |

 

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| **EXECUTIVE** |                    |   |
|---------------|-------------------------|--------|
|          |                    |   |
| By:           | /s/ Victor A. Staffieri |   |   |
|          | VICTOR A. STAFFIERI     |   |   |
|          |                    |   |
| Date:         |                    |   |   |

 

 

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