**EXHIBIT10.79**

 

**Termsand Conditions****for Stock Options Issued as part of theE.ON Group’s Stock Options Program- Translation of the German Version -**

 

 

***Preamble***

 

*Internationallyas well as—increasingly—in Germany, executives whose activities are paramount toa company’s performance and success are being offered additional incentives. Inthe United States, it is common practice for companies to offer theirexecutives option rights on the company’s stock (“stock options”). Executives,especially in Anglo-American countries, increasingly expect performance-basedcompensation in the form of stock options. For this reason, E.ON Groupexecutives will also be given the opportunity to share in the benefits of theirsuccessful work by exercising stock options.*

 

*Under therules applying to the E.ON Group’s Stock Option Program, the company will payout the exercise gains directly to the executives at the time that they chooseto exercise their options. The E.ON Group’s Stock Option Program is thereforebased on fictitious stock.*

 

*Options can be exercised in certainexercise windows within the exercise period from the third year until theseventh year after their issue. The minimum holding period of two years is acompromise between the scheme’s intended long-term effect and the interest ofexecutives in obtaining their remuneration as soon as possible. The maximumholding period of seven years and the exercise period of five years is acompromise between, on the one hand, the desire to promote long-termdecision-making by executives, and, on the other hand, the wish to limit thenumber of options held by a single executive.*

 

*As a prerequisite for awarding theoptions, each entitled executive will have to maintain a certain personalinvestment in E.ON stock during the lifetime of the options. Participatingexecutives will be obliged to hold the number of E.ON bearer shares as statedin the Supplementary Terms and Conditions beginning with the allocation oftheir options and ending with the complete exercise or maturity of the options.E.ON shares that are held by the entitled executive due to previously awardedoptions will be set off against the shares to be held for the new series ofoptions.*

 

*Executives are awarded options inwriting, accompanied by the Supplementary Terms and Conditions describing thefeatures of the series concerned, specifying the number of options allotted tothe executive and the number of E.ON shares to be held for the allotment ofoptions. The Terms and Conditions for Stock Options as well as the SupplementaryTerms and Conditions form both integral parts of the options awarded.*

 

*Translationof the Terms and Conditions for Stock Options within the Framework*

*of theE.ON Group’s Stock Option Program, fourth Tranche (2002 – 2008)*

 

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**§ 1**

**OptionRight**

 

(1)          Within the framework ofits Stock Option Program, the company (“Company”) mentioned in theSupplementary Terms and Conditions (“Supplementary Terms”) shall award options(“Options”) on “fictitious” stock of E.ON AG, Düsseldorf, (“E.ON AG”). Pursuantto these Terms and Conditions, the beneficiary of an Option (“OptionBeneficiary”) is entitled to request during the exercise windows stipulated in§ 2 that the Company pays the differential amount (“Differential Amount”) asdetermined in accordance with the provisions of subparagraph (2), provided,however, that the conditions stipulated in subparagraph (3) have beenfulfilled.

 

(2)          The Differential Amountshall be the difference expressed in euros (“EUR”) between the closing price(“Exercise Price”) of the bearer share of E.ON AG (“E.ON Share”) in the XETRAÒelectronic trading system (E**x**change **E**lectronic **Tra­**ding)as determined and published by Deutsche Börse AG on the Exercise Date (asdefined in § 7 subparagraph (2)) and the relevant strike price (“Strike Price”)as stated in the Supplementary Terms, provided, however, that the ExercisePrice exceeds the Strike Price. Each Option shall entitle the OptionBeneficiary to receive the difference relating to one E.ON Share, beingequivalent to a subscription ratio (“Subscription Ratio”) of one E.ON Share perOption.

 

(3)          The payment of theDifferential Amount determined in accordance with subparagraph (2) isconditional upon

 

(i)                                     theExercise Price having exceeded the Strike Price by at least 10 percent on therelevant Exercise Date, and

 

(ii)                                  theprice performance of the E.ON Share having exceeded the price performance ofthe Dow Jones STOXX Utility Suppliers Price Index (“Index”) prior to therelevant Exercise Date during the lifetime of the Options on at least tensucceeding Stock Exchange Business Days (as defined below), calculated inaccordance with the following formula:

 
|  | >   1 |
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*V(t)*:                                                         closingprice of the E.ON Share in the XETRAÒ electronic tradingsystem as determined and published by Deutsche Börse AG on the relevant StockExchange Business Day

*V(0)*:                                                      StrikePrice

*I(t)*:                                                             closingprice of the Index as determined and published by STOXX Limited, Zurich, on therelevant Stock Exchange Business Day

*I(0)*:                                                          priceof the Index as determined in the Supplementary Terms

 

“Stock Exchange Business Day” shall mean a day onwhich the closing price of the E.ON Share in the XETRAÒelectronic trading system as well as the closing price of the Index are determinedand published by Deutsche Börse AG and STOXX Limited, Zurich, respectively.

 

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The Calculation Agent (as defined in § 6) shall notifythe Company of the fulfillment of the condition stipulated in this subparagraph(ii) without undue delay. The Company will inform the Option Beneficiariesaccordingly.

 

(4)          Options are awarded freeof charge.

 

**§ 2**

**Time toMaturity/Exercise Periods**

 

(1)          The Options’ time tomaturity shall begin on the first Business Day in January of the year of issue(year 1), and shall end on the last Business Day of the last Exercise Window(as defined in subparagraph (2)) falling in year 7. For the purposes of theseTerms and Conditions, a “Business Day” shall be every day on which banks inFrankfurt am Main and Düsseldorf are open for general business.

 

(2)          Subject to theprovisions of § 8, Options can be exercised on each Business Day during therespective Exercise Windows in years 3 through 7. “Exercise Windows” shall bethe relevant periods from the first Business Day up to and including thetwentieth Business Day after the publication of the Group financial statementsand/or E.ON AG’s interim reports. The relevant Exercise Windows of each yearduring which exercises of Options are allowed will be notified by the Companyby January 15 of the relevant year, at the latest.

 

(3)          In the case ofextraordinary circumstances, E.ON AG reserves the right to exclude the exerciseof Options during an Exercise Window in its sole discretion even if all theconditions for exercise according to § 1 subparagraph (3) have been fulfilled.The decision will be made by E.ON AG’s Compliance Officer who will inform therelevant Option Beneficiary about the introduction and discontinuation of theexercise restriction.

 

**§ 3**

**Disturbancesof the Market/Substitute Price**

 

(1)          A disturbance of themarket (“Market Disturbance”) takes place if on the relevant Exercise Date

 

a)              no Exercise Pricefor whatever reason is determined, or

 

b)             there has been atrading suspension or a material restriction in the trading of the E.ON Sharein the XETRAÒ electronic trading system within the last 60minutes prior to determination of the Exercise Price.

 

(2)          If there is a MarketDisturbance on an Exercise Date according to subparagraph (1), the DifferentialAmount will be calculated by using the next closing price in the XETRAÒelectronic trading system determined and published by Deutsche Börse AGfollowing the end of the Market Disturbance. Should a Market Disturbance stillcontinue on the fifth Business Day (including) following the Exercise Date, theDifferential Amount will be calculated on the basis of the closing price in theXETRAÒ electronic trading system determined andpublished by Deutsche Börse AG on such fifth Business Day, or, if the closingprice is not being determined, on the basis of a Substitute Price to bedetermined by the Calculation Agent. “Substitute Price” shall mean the pricedetermined by the Calculation Agent in its equitable discretion based uponcommon market conditions and the last closing price in the XETRAÒelectronic trading system determined and published by Deutsche Börse AG.

 

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The determination of aSubstitution Price shall be (in the absence of manifest error) binding on allparties concerned.

 

**§ 4**

**AdjustmentMeasures Due to Extraordinary Dividend Paymentsand Equity Measures Taken by E.ON AG**

 

(1)          If E.ON AG (i) pays itsstockholders an extraordinary dividend (as defined below), or (ii) increases itscapital by way of issuance of new shares against contributions while grantingits stockholders direct or indirect subscription rights (“Capital IncreaseAgainst Contributions”), or (iii) increases its capital out of retainedearnings (“Capital Increase out of Retained Earnings”), or (iv) directly orindirectly grants its stockholders a right to subscribe bonds or othersecurities with option or conversion rights on stock (“Issuance of Securitieswith Option or Conversion Rights”), the Strike Price and the SubscriptionRatio, as the case may be, shall be adjusted according to the provisions ofsubparagraphs (2) through (4) with effect as of their respective Cut-off Dates.

 

“Cut-off Date” shall be the first trading day on theFrankfurt Stock Exchange on which the shares are quoted “ex dividend,” “exsubscription right,” or “ex bonus shares.”

 

(2)          In the event of anIncrease of Share Capital Against Contributions, the Strike Price shall bemultiplied and the Subscription Ratio shall be divided by the figure determinedby applying the following formula:

 

 

Where:

B                is thesubscription ratio (number of old shares : number of new shares),

E                 is the issueprice of the new shares,

D               is the disadvantagefor dividends of the new shares (not discounted),

K               is the closingprice in the XETRAÒ electronic trading system determined andpublished by Deutsche Börse AG on the trading day immediately preceding theCut-off Date.

 

(3)          In the event of aCapital Increase out of Retained Earnings, the Strike Price shall be multipliedand the Subscription Ratio shall be divided by the figure determined byapplying the following formula:

 

 

B, D, and K shallhave the same meanings as in subparagraph (2).

 

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(4)          In the event of anIssuance of Securities with Option or Conversion Rights, the Strike Price shallbe reduced by subtracting the value of the subscription right as determined onthe Frankfurt Stock Exchange on the Cut-off Date.

 

(5)          If there is a change inthe number of shares without a change in capital (e.g. stock splits) and thereis a decrease in capital due to a reverse stock split or redemption of stock,the provisions of subparagraph (3) above shall apply *mutatis mutandis*.

 

(6)          In the event of anExtraordinary Dividend, the Strike Price shall be reduced by the value of suchExtraordinary Dividend. “Extraordinary Dividend” shall mean (i) a dividend thatis explicitly resolved by E.ON AG’s Annual Shareholders’ Meeting as “extraordinarydividend” or “special dividend,” or (ii) the amount per share expressed ineuros which corresponds to a dividend yield in percent (without taking intoaccount any corporate tax credit inherent to the dividend) higher than the sumof (a) 5 percent and (b) the average of the dividend yields of the fivebusiness years preceding the business year for which the Extraordinary Dividendwill be paid. Should the Extraordinary Dividend be contributed in the form ofshares of a company, the value of the Extraordinary Dividend shall becalculated on the basis of the first quotation of such shares in the XETRAÒelectronic trading system determined and published by Deutsche Börse AG. Areduction of the Strike Price shall never result in a negative Strike Price.

 

(7)          The Calculation Agentshall immediately inform the Company about the amended Strike Price andSubscription Ratio, as the case may be. The Company shall notify the OptionBeneficiaries accordingly.

 

**§ 5**

**FurtherAdjustments for Economic Reasons**

** **
| (1)    | a)              Should E.ON AG  carry out equity measures other than those mentioned in § 4, or should E.ON  AG undergo a transformation, these Terms and Conditions shall be adjusted so  as to ensure that the Option Beneficiary will be placed on equal economic  terms with the stockholders of E.ON AG.

 

 

b)             The term  “Transformation” as used in this § 5 subparagraph (1) above shall comprise  (i) a merger of E.ON AG by way of absorption where E.ON AG is not the  absorbing company, or by way of establishing a new company, (ii) any other transaction  (e.g. split, asset transfer, integration or restructuring, modification, or  exchange of shares) through which or as a result of which all shares of E.ON  AG are irrevocably invalidated, transferred, scheduled to be transferred,  reclassified, or modified in their legal status, and (iii) any other  transaction that has the same economic effects as the aforementioned  transactions. |
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| (2)    | a)              The item  fundamental to the calculation of the Index and the determination of the  Initial Index is the concept of the Index as defined and maintained by STOXX  Limited, Zurich, along with the calculation, determination, and publication  of the Index by STOXX Limited, Zurich, even if future changes or adjustments  are made to the calculation of the Index, the composition and the weighting  of prices and stocks used as a basis to calculate the Index, the manner and  means by which it is published, or if other changes or adjustments are made  or measures are taken that affect the calculation of the Index, unless  otherwise specified in the following provisions.                                                                                                                                                                                                                                                                                                                                                                       |

 

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|   | b)             If (i) the  fundamental design and/or calculation method or the basis of the Index is  changed in a substantial way so that the continuity or comparability of the Index  calculated on the old basis does not exist anymore (e.g., if the Index is  significantly altered as a result of a change, adjustment or other measures  although the prices of the various stocks included in the Index and their  weighting have not changed), or if (ii) the Index is during the Options’  lifetime no longer regularly determined and published by STOXX Limited,  Zurich, or some other legal entity and the conditions stipulated in § 1  subparagraph (3) (ii) are not fulfilled yet, the Terms and Conditions shall  be adjusted so as to ensure that the indexing concept underlying the Options  will be preserved, as much as possible, in terms of its economic effects. |
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| (3)    | Adjustments as  specified in subparagraphs (1) or (2) above shall have to be jointly agreed  upon by the Calculation Agent and the Company and shall be communicated to  the Option Beneficiaries by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

**§ 6**

**CalculationAgent**

 

(1)          HSBC Trinkaus &Burkhardt KGaA, Düsseldorf, shall be the “Calculation Agent.” The Company shallensure that a Calculation Agent is appointed for the entire lifetime of theOptions. The Company shall be entitled to appoint a new Calculation Agent forcompelling reasons. Should the Calculation Agent cease to perform its functionor should it no longer be able or willing to perform this function, the Companyshall be obliged to appoint the head office of another leading bank in thestock options business. The Calculation Agent shall not be entitled toterminate its function without the prior appointment of a successor agent. TheCompany shall immediately inform the Option Beneficiaries of the appointment ofa new Calculation Agent.

 

(2)          All calculation dataprovided and decisions made by the Calculation Agent for the purposes definedin these Terms and Conditions shall (in the absence of manifest error) bebinding upon the Company and the Option Beneficiaries. Option Beneficiariesshall not be entitled to bring forward claims against the Calculation Agent dueto the latter’s performance or non-performance of its rights, duties, ordiscretionary powers as defined in these Terms and Conditions.

 

**§ 7**

**Exercise of Options/Payment of Differential Amount**

 

(1)          The Option shall beexercised in such a way that an Option Beneficiary declares to the Company thathe intends to exercise a series of Options, either fully or partially (but atleast 250 Options per exercise), by returning the completed (including therespective series number of the relevant series of Options, as stated in therespective Supplementary Terms) exercise form (“Option Declaration”) during anExercise Window. Concurrently, the Option Beneficiary shall inform E.ON AGabout his exercise by forwarding a copy of the Option Declaration to E.ON AG.

 

(2)          Option Declarationsreceived by the Company shall be binding and irrevocable. The day of theeffective exercise of the option rights (“Exercise Date”) shall be the BusinessDay during an Exercise Window on which the Company shall have received theOption Declaration prior to 1.00 p.m. (Düsseldorf time). Should the Company nothave received the Option

 

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Declaration in time on aBusiness Day, the Exercise Date shall be the immediately succeeding BusinessDay, provided, such Business Day falls within an Exercise Window.

 

(3)          The Company shalldeposit the Differential Amount accrued on the full number of Options exercisedto the Option Beneficiary’s payroll account in connection with the nextpossible salary settlement.

 

(4)          Notwithstanding theaforementioned provisions, Option Beneficiaries shall be deemed to haveexercised their Options without further requirements by the last possibleExercise Date, providing that the conditions of § 1 subparagraph (3) have beenfulfilled. Otherwise, the rights arising from the Options shall be null andvoid.

 

(5)          Any (income) taxes,levies and employee social security contributions arising from the payment ofthe Differential Amount shall be borne by the Option Beneficiary.

 

(6)          Should the Companypurchase Options in accordance with § 8 subparagraph (1) (ii), the provisionsof § 7 subparagraphs (1) through (3) and (5) shall apply *mutatis mutandis*.

 

**§ 8**

**Extraordinary Exercise of Options**

 

(1)          Following an Event ofChange-in-Control regarding E.ON AG (as defined below), Option Beneficiariesshall be entitled at their own discretion

 

(i)                                     toexercise their Options during a twelve-month period after the event and withoutfulfillment of the conditions stipulated in § 1 subparagraph (3) and § 2subparagraph (2) being required, or

 

(ii)                                  torequest during a twelve-month period after the event the purchase of theOptions by the Company against payment of a purchase price equivalent to thecalculated value of the Options to be determined by the Calculation Agent, or

 

(iii)                               toexercise their Options in accordance with these provisions of the Terms andConditions.

 

An “Event of Change-in-Control” regarding E.ON AGtakes place, if:

 

a)              E.ON AG is notifiedby a third party that it has acquired 25 percent or more of the voting rightsof E.ON AG in accordance with § 21 of the German Securities Trading Act (WpHG),or

 

b)             a third party on itsown or together with voting rights attributable to him in accordance with § 22German Securities Trading Act (WpHG) has acquired a share in voting rightswhich, at E.ON AG’s Annual Shareholders’ Meeting, would represent or which, atE.ON AG’s last Annual Shareholders’ Meeting, would have represented themajority of the voting rights present at such a Meeting, or

 

c)              an affiliationagreement is concluded with E.ON AG as controlled company in accordance with §§291 ff. of the German Stock Corporation Act (AktG), or

 

d)             E.ON AG is beingintegrated in accordance with §§ 319 ff. of the German Stock Corporation Act(AktG), or

 

e)              E.ON AG changes itslegal status in accordance with §§ 190 ff. of the German Conversion Law (UmwG),or

 

f)                E.ON AG is beingmerged with another legal entity, provided that the enterprise value of suchlegal entity is more than 20 percent of the enterprise value of E.ON AG at thetime

 

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of adopting theresolution by E.ON AG. The methods of valuation acknowledged by theprofessional association of qualified auditors *(Stellungnahme des Hauptfachausschussesdes Instituts der Wirtschaftsprüfer HFA 2/1983 = Grundsätze zur Durchführungvon Unternehmens­bewertungen sowie die neueren Verlautbarungen desBerufsstandes)* shall be used to determine the value of bothentities, to the extent that both enterprise values will be determinedaccording to said methods in connection with the merger. Otherwise, the marketcapitalization of both legal entities at the time the resolution is adopted byE.ON AG will be deemed as their respective enterprise values. If a marketcapitalization can not be determined, the enterprise values agreed upon by bothlegal entities will be deemed as their respective enterprise values.

 

E.ON AG will notify theOption Beneficiaries of an Event of Change-in-Control regarding E.ON AG withoutundue delay.

 

(2)          If the Company ceases tobe an affiliated company of E.ON AG, as defined in § 15 of the German StockCorporation Act (AktG) (Event of Change-in-Control regarding the Company),Option Beneficiaries shall be entitled at their own discretion

 

(i)                                     toexercise their Options during a three-month period after the event and withoutfulfillment of the conditions stipulated in § 1 subparagraph (3) and § 2subparagraph (2) being required, or

 

(ii)                                  torequest during a three months’ period after the event the purchase of theOptions by the Company against payment of a purchase price equivalent to thecalculated value of the Options to be determined by the Calculation Agent, or

 

(iii)                               toexercise their Options in accordance with these provisions of the Terms andConditions.

 

The Company will notify the Option Beneficiaries of anEvent of Change-in-Control regarding the Company without undue delay.

 

(3)          Option Beneficiariesshall be entitled to exercise their Options at their own discretion (i) duringa three-month period after either of the events specified in subparagraphs (a)through (c) below occurs and without fulfillment of the conditions stipulatedin § 1 subparagraph (3) and § 2 subparagraph (2) being required, (ii) or inaccordance with the provisions of these Terms and Conditions, if and when:

 

a)              the employmentcontract of the relevant Option Beneficiary is terminated by the Company or itruns out upon expiration of its term, provided, however, that the employmentcontract is not extraordinarily terminated by the Company due to materialreason in accordance with § 626 subparagraph (1) German Civil Code (BGB), or

 

b)             the employmentcontract between the relevant Option Beneficiary and the Company is terminatedbecause the former reaches his or her retirement age or becomes an invalid; or

 

c)              the Option Beneficiaryhas received the rights resulting from the Options by inheritance.

 

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**§ 9**

**Transferability/Expiration**

** **

(1)          Rights resulting fromthe Options may not be assigned or pledged. It shall also be prohibited todispose of the rights resulting from the Options in any other form, to grantsub-participation or to establish a trust. Option Beneficiaries are not allowedto conduct any back-to-back transactions that are economically tantamount toselling the rights from the Options. Any violations of these provisions willlead to the expiration of Options granted with no compensation.

 

(2)          If Option Beneficiaries,for whatever reason, terminate their employment contract with the Companyduring years 1 and 2 of the lifetime of the Options, the Options granted tothem shall become null and void without compensation. If Option Beneficiariesterminate their employment contract after these first two years, they canexercise their Options as of the immediately following Exercise Date, provided,however, that the conditions of § 1 subparagraph (3) have been fulfilled. Ifthey fail to exercise their Options as of the immediately following ExerciseDate, their Options shall become null and void with no compensation. This subparagraphshall also apply in the event that the employment contract is extraordinarilyterminated by the Company due to material reason in accordance with § 626subparagraph (1) of the German Civil Code (BGB).

 

(3)          If the employmentcontract between the Option Beneficiary and the Company is terminated and theOption Beneficiary subsequently concludes an employment contract with anaffiliated company of E.ON AG, as defined in § 15 of the German StockCorporation Act (AktG), this shall not affect the Option Beneficiary’s rightsresulting from the Options, except as otherwise provided for in the OptionBeneficiary’s employment contract.

 

(4)          Option Rights may betransferred by way of inheritance.

 

**§ 10**

**WrittenForm**

 

Amendments and supplements to these Terms and Conditions must be madein writing. This also applies to amendments to this § 10.

 

**§ 11**

**ApplicableLaw/Place of Performance and Jurisdiction**

** **

(1)          Form and substance ofthe Options as well as all rights and duties of the Option Beneficiaries andthe Company shall be governed in every respect by the laws of the FederalRepublic of Germany.

 

(2)          Place of performance forall obligations arising from these Terms and Conditions for OptionBeneficiaries and the Company shall be Düsseldorf, Germany.

 

(3)          Place of jurisdictionfor all proceedings relating to matters covered by these Terms and Conditionsshall be Düsseldorf, Germany.

 

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**§ 12**

**PartialInvalidity**

 

Should any of the provisions of these Terms and Conditions be or becomein whole or in part invalid or impracticable, this shall not affect thevalidity of the other provisions. Any deficiency resulting from the invalidityor impracticability of a provision of these Terms and Conditions shall befilled by way of a supplementary interpretation of the terms of contract byanalogy, taking into consideration the interests of the parties involved.

 

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