Exhibit
10.74


 


THIRD AMENDMENT TO THE


EMPLOYMENT AND SEVERANCE AGREEMENT


OF


VICTOR A. STAFFIERI


 


 


                This Third Amendment to the Employment and Severance Agreement of
Victor A. Staffieri (“Third Amendment”) is made and entered into this 1st day of July, 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
anktiengesellschaft formed under the Federal Republic of Germany (“German
Parent”), and (iv) Victor A. Staffieri
(“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 Agreement was also amended by the Executive, the
Company and the Parent in a document effective as of April 30, 2001 (“Second
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         On the Acquisition Date, the Company,
the Parent, the German Parent, or any subsidiary of the Company, the Parent or
the German Parent, hereinafter referred to as the


 


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


 


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


 


“3.1         The
Company agrees to employ Executive, and Executive agrees to serve during the
term hereof as Chief Executive Officer of the Company.  Executive shall report to Ulrich Hartmann,
or his successor.  In addition, German
Parent shall (i) cause the Executive to be elected as a member of the Board of
Directors of the Company (the “Board”), (ii) secure Executive’s election as a
member 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 of
directors (as applicable) of E.ON U.S. Verwaltungs GMBH or any other similar
entity


 


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


 


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


 


“3.2         Executive
agrees to devote his full working time and efforts, to the best of his ability,
experience and talent, to the performance of services, duties and
responsibilities in connection with the position named above.  Executive shall perform such duties and
exercise such powers, commensurate with his position, as Chief Executive Officer
of the Company, as Ulrich Hartmann or his successor shall from time to time
delegate to him on such terms and conditions and subject to such restrictions
as  Ulrich Hartmann or
his successor may reasonably from time to time impose.”


 


4.               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.”


 


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


 


“4.1.        SALARY. 
The Company shall pay Executive an annual base salary (“Base Salary”) of
not less than  $630,000.  The Base Salary shall be payable in
accordance with the ordinary payroll practices of the Company.  The Base Salary shall be reviewed by Ulrich
Hartmann or his successor in December of each year during the term of this
Agreement and may be increased in the discretion of Ulrich Hartmann or his
successor at that or any other time and, as so increased, shall constitute
“Base Salary” hereunder.   At no time
shall Ulrich Hartmann or his successor be able to decrease the Base Salary.”


 


6.     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 


 


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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 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;


 


                (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 Executive is
participating prior to the Effective Time, the Change in Control, the Second
Amendment, or this Third 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, the Second Amendment or this Third
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, the Second Amendment, or this Third
Amendment as applicable;


 


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                (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 Chief Executive Officer of the Company, except for Cause; or


 


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


 


7.               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 twenty-four months after the effective time of any
Change in Control occurring after the Acquisition Date, then the Executive
shall be entitled to the following compensation and benefits:”


 


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8.               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, but not during a twenty-four month period following the
effective time of any Change in Control occurring after the Acquisition Date,
the Executive’s employment with the Company shall be terminated, the Executive
shall be entitled to the following:”


 


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