EXHIBIT 10.1
EXECUTION COPY
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT is made as of December 14, 2004 among DPL INC.,
an Ohio corporation ("DPL"), The Dayton Power and Light Company, an Ohio
corporation ("DP&L"; and, collectively with DPL, the "Company") and James
Mahoney ("Mr. Mahoney") under the following circumstances:
A. DPL is a holding company headquartered in Dayton, Ohio, having as
its principal subsidiary DP&L.
B. Mr. Mahoney is presently employed by the Company as President of the
Company's DPL Energy business unit ("DPL Energy") and was elected by
the Board of Directors of the Company to be the President and Chief
Executive Officer of the Company.
C. The Company, subject to the terms and conditions set forth herein,
desires to provide for the continued employment of Mr. Mahoney as
President and Chief Executive Officer of DPL, President- DP& L and
President of DPL Energy.
NOW, THEREFORE, the parties agree as follows:
Section 1. Employment and Duties. The Company hereby employs Mr.
Mahoney as President and Chief Executive Officer of the Company and President of
DPL Energy and Mr. Mahoney hereby accepts such employment. In his capacity as
President and Chief Executive Officer of the Company, Mr. Mahoney shall report
directly to the Chairman of the Board of Directors of the Company and shall have
the duties customarily performed by a president and chief executive officer of a
similarly situated company except for those performed by the Company's Executive
Chairman. In his capacity as President of DPL Energy, Mr. Mahoney shall have
primary responsibility for the conduct of DPL Energy's business activities
including the management, marketing, sale and/or other disposition or transfer
of the Company's generation output at wholesale and retail. Mr. Mahoney shall
also perform such other and further duties as may be assigned to him from time
to time by the Board of Directors of DPL and as are consistent with the position
of Chief Executive Officer. During the Term, Mr. Mahoney shall devote his entire
business time and attention to the performance of his duties hereunder and shall
use his best efforts to perform his duties hereunder faithfully and efficiently.
The foregoing shall not preclude Mr. Mahoney from devoting reasonable time to
the supervision of his personal investments, civic, charitable and industry
affairs, provided that such activities do not interfere with the performance of
his duties hereunder or conflict with the business interests of the Company.
Section 2. Term. Subject to the terms of Section 7 hereof, the term of
this Agreement (the "Term") shall be effective as of May 16, 2004 and shall
continue until the first anniversary of such date; provided that the Term shall
automatically renew for successive one-year periods unless either party gives
the other ninety (90) days advance written of its intention to not to renew the
Agreement. In the event the Company issues notice of non-renewal, Mahoney will
be entitled to the benefits provided in either Sections 9(b) or10, as
appropriate, and in the event Mahoney issues notice of non-renewal, Mahoney
shall be entitled to the benefits provided in Sections 9(c) or 10, as
appropriate.
Section 3. Compensation. As compensation for his services hereunder, Mr.
Mahoney shall receive the following:
(a) Base Salary. Mr. Mahoney shall receive a base salary at the annual
rate of $500,000 or such greater amount as the Compensation Committee of the
Board of Directors of DPL (the "Compensation Committee") may determine from time
to time in its sole discretion (the "Base Salary"), to be paid in installments
in accordance with the Company's customary payroll practices.
(b) Participation in MICP. For each calendar year during the Term, Mr.
Mahoney shall have the opportunity to receive an annual bonus under the DPL's
Management Incentive Compensation Plan ("MICP"). For calendar year 2004, Mr.
Mahoney will have the opportunity to earn $250,000 at 100% of the target
performance in accordance with the terms of the MICP, and for subsequent years
the Compensation Committee may in its sole discretion increase the maximum
earning opportunity, but in no case shall it be less than $250,000 at 100% of
the target performance..
(c) Participation in LTIP. For each calendar year during the Term, Mr.
Mahoney shall have the opportunity to participate in the DPL's Long Term
Incentive Plan ("LTIP"). For calendar year 2004, Mr. Mahoney will have the
opportunity to earn $450,000 at 100% of target performance in accordance with
the terms of the LTIP, and for subsequent years the Compensation Committee may
in its sole discretion increase the maximum earning opportunity, but in no case
shall it be less than $450,000 at 100% of the target performance.
(d) Vesting. Any award earned by Mr. Mahoney under the LTIP will vest in
three equal annual installments of one-third each on December 31st of each year
if Mr. Mahoney is in the employ of the Company on such date, commencing with the
year to which the award relates. For example, one-third of the 2004 award under
the LTIP, to the extent earned, will vest on December 31, 2004 if Mr. Mahoney is
in the employ of the Company on such date; and one-third will similarly vest on
December 31st of each year thereafter if Mr. Mahoney is in the employ of the
Company.
(e) Stock Options. On the terms provided in the Management Stock Option
Agreement attached hereto as Exhibit A, which Mr. Mahoney and the Company shall
execute immediately after the execution of this Agreement, the Company shall
grant to Mr. Mahoney options to purchase up to 20,000 common shares of DPL,
which option shall be fully vested and exercisable on the first anniversary of
the date of this Agreement, i.e., May 16, 2005. Additional options, if any, may
be granted to Mr. Mahoney in the Company's sole discretion.
(f) DPL's Executive Stock Ownership Plan. Subject to the last sentence of
this Section 3(f), Mr. Mahoney will be required to comply with the provisions of
DPL's Executive Stock Ownership Guidelines which require that Mr. Mahoney
achieve a specified minimum threshold of DPL share ownership within five years
following the effective date of this Agreement and thereafter maintain DPL share
ownership at the requisite minimum level. The minimum threshold of share
ownership applicable to Mr. Mahoney as President and Chief Executive Officer of
the Company and President of DPL Energy will be equal to three (3) times the
Base Salary. The parties agree that Mr. Mahoney's ownership of DPL shares
pursuant to this Section 3(f) will be acquired with proceeds from the LTIP and
any proceeds from the MICP in excess of the 100% "target" payout.
(g) Fringe Benefits. During the Term, Mr. Mahoney shall be entitled to
receive such fringe benefits (including, medical, and disability insurance
benefits and qualified retirement benefits) as are generally made available to
other executive level employees of the Company in accordance with the plans,
practices, programs and policies of the Company in effect from time to time,
including participation in the DP&L's Key Employees Deferred Compensation Plan.
In addition, during the Term Mahoney shall be entitled to the life insurance
benefits currently provided by the Company, or greater.
Section 4. Vacations. During the Term, Mr. Mahoney shall be entitled to
paid vacation time of four weeks annually.
Section 5. Expenses. The Company shall reimburse Mr. Mahoney for all
reasonable out-of-pocket expenses properly incurred by him in connection with
the performance of his duties hereunder in accordance with the policies
established from time to time by the Company.
Section 6. Withholdings. The Company may withhold from any amounts payable
to Mr. Mahoney hereunder such federal, state or local taxes or other amounts as
the Company shall be required to withhold pursuant to applicable law.
Section 7. Termination. (a) This Agreement and Mr. Mahoney's employment
with the Company may be terminated at any time, with or without Cause (as
hereinafter defined), by either the Company or Mr. Mahoney upon 90 days' prior
written notice; provided this Agreement and Mr. Mahoney's employment with the
Company may be terminated by the Company for Cause without prior notice.
(b) In addition, this Agreement and Mr. Mahoney's employment with the
Company shall automatically terminate upon Mr. Mahoney's death or Disability (as
hereinafter defined).
(c) Upon the termination of this Agreement for any reason, this Agreement
shall forthwith be of no further force and effect (except that the provisions of
Sections 8 through 11, and 17 shall continue in full force and effect) and there
shall be no further liability on the part of either party, other than based upon
(i) its obligations under this Agreement arising prior to such termination or
(ii) the obligations of such party contained in Sections 8 through 11, and 17 or
under the agreement attached hereto as Exhibit A.
Section 8. Severance Benefits Generally. Notwithstanding any other
provisions of this agreement to the contrary, upon termination of employment for
any reason at any time, the Company shall pay or provide the following amounts
and benefits (the "Section 8 Amounts") to Mr. Mahoney in compensation for
services previously rendered:
(a) the amount of Mr. Mahoney's unpaid Base Salary earned through the Date
of Termination at the rate in effect at the Date of Termination;
(b) the amounts of any MICP and LTIP awards with respect to any completed
period or periods which, pursuant to the MICP or LTIP (as applicable), have been
earned by Mr. Mahoney and vested, but which have not yet been paid to him; and
(c) all other accrued benefits of any kind to which Mr. Mahoney is, or
would otherwise have been, entitled through the Date of Termination.
Section 9. Severance Benefits Prior to a Change of Control. In the event
of a termination of Mr. Mahoney's employment prior to a Change of Control, the
following provisions shall apply:
(a) Termination for Cause; Death or Disability. If (i) the Company
terminates Mr. Mahoney's employment for Cause; or (ii) Mr. Mahoney's employment
is terminated due to his death or Disability, Mr. Mahoney shall receive the
Section 8 Amounts.
(b) Termination Without Cause. If the Company terminates Mr. Mahoney's
employment without Cause, Mr. Mahoney shall receive:
(i) the Section 8 Amounts;
(ii) the amount of any MICP and LTIP awards earned with
respect to any completed period, but unvested as of the Date
of Termination; and
(iii) continued coverage under the health benefit plan for
executive employees at the same cost and terms as in effect
immediately prior to the date of notice until the earlier of
(A) first anniversary of his Termination Date or (B) the date
an essentially equivalent and no less favorable benefit is
made available to Mr. Mahoney at substantially similar cost.
(c) Termination by Mr. Mahoney. If Mr. Mahoney terminates his employment
for any reason at any time, Mr. Mahoney shall receive the Section 8 Amounts, and
the Company shall pay to Mr. Mahoney a lump sum in cash not later than the Date
of Termination (as hereinafter defined) in an amount equal to Mr. Mahoney's full
Base Salary at the rate in effect on the Date of Termination.
(d) Full Satisfaction. The foregoing payments and benefits under this
Section 9, plus the payments and benefits in Section 3.b. of the Management
Stock Option Agreement, shall be the Company's entire obligation to Mr. Mahoney
in the event of a termination of Mr. Mahoney's employment not related to a
Change of Control, and Mr. Mahoney will execute a full and unconditional release
of any claims which he may have against the Company as a condition to receiving
such payment, except for termination pursuant to Section 9(a).
Section 10. Severance Benefits Related to a Change of Control. In the
event of the occurrence of Change of Control, the following provisions shall
apply:
(a) Termination for Cause; Resignation without Good Reason; Death or
Disability. If, within 12 months following a Change of Control, (i) the Company
terminates Mr. Mahoney's employment for Cause; (ii) Mr. Mahoney terminates his
employment without Good Reason; or (iii) Mr. Mahoney's employment is terminated
due to his death or Disability, Mr. Mahoney shall receive the Section 8 Amounts.
(b) Termination Without Cause; For Good Reason. If, within 12 months
following a Change of Control, (i) the Company terminates Mr. Mahoney's
employment without Cause or (ii) Mr. Mahoney terminates his employment for Good
Reason, Mr. Mahoney shall receive the following:
(i) the Section 8 Amounts;
(ii) an amount equal to 200% of the sum of (1) Mr. Mahoney's
annual Base Salary (which Base Salary is computed before
deduction for any deferred compensation or other employee
deferrals) at the highest of (A) the rate in effect as of Date
of Termination, or (B) the rate in effect at the time of the
Change of Control, plus (2) the average of the award payments
made to him under the MICP and LTIP for the three years
preceding the Date of Termination (or for the number of years
he has participated in such plan, if less than three),
including any portion of any such payments that Mr. Mahoney
elected to defer to his Standard Deferral Account in the
Company's Key Employees Deferred Compensation Plan;
(iii) the amount of any MICP and LTIP awards earned with
respect to any completed period, but unvested as of the Date
of Termination; provided that in the event the Date of
Termination precedes the completion of a period in which,
pursuant to the MICP or LTIP (as applicable), Mr. Mahoney
could have earned compensation thereunder, or in the event the
Date of Termination precedes the determination of compensation
that he has earned for a completed period under the MICP or
LTIP, then, with respect to each such period, Mr. Mahoney
shall be entitled to an amount equal to the average of the
award payments made to him under the MICP or LTIP for the
three years preceding the Date of Termination (or for the
number of years he has participated in such plan, if less than
three), including any portion of any such payments that he
elected to defer to his Standard Deferral Account in the
Company's Key Employees Deferred Compensation Plan;
(iv) the Company shall, at its expense, maintain in full force
and effect for Mr. Mahoney's continued benefit all life
insurance, health and accident, and disability plans in which
he was entitled to participate immediately prior to the Date
of Termination, or, if more favorable to Mr. Mahoney, on the
date of a prior Change of Control, provided that his continued
participation is possible under the terms of such plans and
programs. In the event that the terms of any such plan do not
permit Mr. Mahoney's continued participation or that any such
plan is discontinued or the benefits thereunder materially
reduced, the Company shall arrange to provide, at its expense,
benefits to Mr. Mahoney that are substantially similar to
those that he was entitled to receive under such plan
immediately prior to the Date of Termination. The Company's
obligation under this subsection (iv) shall terminate on the
earlier of: (1) the third anniversary date of the earlier of
the Date of Termination or (2) the date an essentially
equivalent and no less favorable benefit is made available to
Mr. Mahoney at no cost by a subsequent employer. At the end of
the applicable period of coverage set forth above, Mr. Mahoney
shall have the option to have assigned to him, at no cost and
with no apportionment of prepaid premiums, any assignable
insurance owned by the Company and relating specifically to
Mr. Mahoney. In the event that because of their relationship
to Mr. Mahoney, members of his family or other individuals are
covered by a plan described in this subsection (iv)
immediately prior to the Date of Termination, the provisions
set forth in this subsection (iv) shall apply equally to
require the continued coverage of such persons; provided,
however, that if under the terms of any such plan, any such
person would have ceased to be eligible for coverage during
the period in which the Company is obligated to continue
coverage for Mr. Mahoney, nothing set forth herein shall
obligate the Company to continue to provide coverage which
would have ceased even if he had remained an employee of the
Company during such period; and
(v) any gross up amount payable under Section 15 hereof.
The Company shall make the foregoing cash payments to Mr. Mahoney as severance
in a lump sum in cash not later than the Date of Termination (or in the case of
any payments due under clause (v), if, and to the extent the amount of such
payments are not known or calculable as of such due date, as soon as the amount
is known and calculable).
(c) Retention Payment. If a Change of Control occurs and Mr. Mahoney
remains employed with the Company until the first anniversary of the Change of
Control, then the Company shall pay him the amounts set forth under Section
10(b) not later than the date of such anniversary. For purposes of determining
any amounts due under this Section 10(c), the date of the first anniversary of
the Change of Control shall be deemed to be the Date of Termination for purposes
of the calculations under Section 10(b).
(d) Additional Payment. In consideration of Mr. Mahoney agreeing to the
covenants in Section 11 hereof, if Mr. Mahoney receives payments under Section
10(b) or 10(c), Mr. Mahoney shall be paid an additional amount equal to one-half
(1/2) the amount determined under Section 10(b)(ii) payable upon the Date of
Termination.
(e) Anticipatory Termination. If Mr. Mahoney's employment is terminated by
the Company without Cause (other than due to Mr. Mahoney's death or Disability),
and within six (6) months thereof the Company commences discussions with a
potential acquirer relating to a transaction that could result in a Change of
Control and such Change in Control occurs, then the Company shall pay and
provide Mr. Mahoney the amounts and benefits provided for in Section 10(b) above
as if the date of the Change of Control were the Date of Termination.
(f) Enhanced Disability Protection. In addition to the Severance Benefits
provided in Section 10, if Mr. Mahoney's employment is terminated because of a
Disability within twelve (12) months following the occurrence of a Change of
Control, Mr. Mahoney shall be entitled to receive benefits under any Company
employee salary continuation plan or employee disability insurance plan then in
effect in accordance with the then applicable terms thereof; provided that Mr.
Mahoney shall be entitled to receive benefits under any similar plan in effect
as of the date of the occurrence of such Change of Control if such plan shall
result in a higher amount of benefits being paid to Mr. Mahoney as a result of
the Disability in question.
(g) Notice of Termination. Any termination of Mr. Mahoney's employment
subsequent to a Change of Control, unless by Mr. Mahoney without Good Reason or
because of Mr. Mahoney's death, shall be consummated by written Notice of
Termination given to the other party. For purposes of this agreement, "Notice of
Termination" shall mean a notice given by the Company, or by Mr. Mahoney with
Good Reason, which indicates the specific termination provision or provisions in
this agreement relied upon, if any, and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
employment.
(h) Nature of Payments; No Mitigation. The payments and benefits provided
upon termination of employment under this Section 10 shall not be treated as
damages, but rather shall be treated as severance compensation to which Mr.
Mahoney is entitled under the terms and conditions provided herein. Mr. Mahoney
shall not be required to mitigate the amount of any benefit provided under this
agreement by seeking other employment or otherwise.
Section 11. Non-Competition; Non-Solicitation and Confidentiality. In
consideration of the Company's entering into this Agreement and as an inducement
for it to do so, and in consideration of the Company's agreement to pay Mr.
Mahoney the amount set forth under Section 10(d) hereof, in the event and only
in the event that he receives the payment under Section 10(d) hereof, Mr.
Mahoney agrees as follows:
(a) Non-Competition. For a period of two years after termination of Mr.
Mahoney's employment for any reason, he will not, without the Company's prior
written consent, directly or indirectly, (i) solicit for employment with himself
or any firm or entity with which he is associated, any employee of the Company
or otherwise disrupt, impair, damage or interfere with the Company's
relationship with its employees; (ii) solicit for his own behalf or on behalf of
any other person(s), any customer of the Company that has purchased goods from
the Company at any time in the twelve (12) months preceding his date of
termination or that the Company is actively soliciting or has known plans to
solicit, for the purpose of marketing or distributing any product, pricing or
service competitive with any product, pricing or service then offered by the
Company or which the Company has known plans to solicit, (iii) further develop,
on behalf of any person in competition with the Company, any product or pricing
which the Company is in the process of developing on the date of termination of
Mr. Mahoney's employment, or (iv) serve, directly or indirectly, as an agent,
employee, officer, director, manager, consultant, contractor, representative or
in any other capacity of any Prohibited Company (as hereinafter defined) or any
Affiliate thereof.
(b) Confidentiality. At all times, Mr. Mahoney (i) will keep all
confidential, nonpublic and/or proprietary information (including, for example,
trade secrets, financial information, customer information and business and
strategic plans) of the Company (regardless of when he became aware of such
information) in strict confidence and (ii) will not, directly or indirectly, use
or disclose to any person in any manner any of such information, except to the
extent directly related to and required by his performance of the duties
assigned to him by the Company. Mr. Mahoney will take all appropriate steps to
safeguard such information and to protect it against unauthorized disclosure,
misuse, loss or theft. Upon termination of his employment, he will promptly
return to the Company, without retaining any copies, all written or computer
readable material containing any of such information, as well as all other
property and records of the Company, in his possession or control.
Section 12. Certain Definitions. For purposes of this Agreement, the
following terms have the following meanings:
"Affiliate" means, with respect to any Prohibited Company, any Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such Prohibited Company. A Person shall be deemed to
control a Prohibited Company if such Person possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
such Prohibited Company, whether through the ownership of voting securities or
other ownership interests, contract or otherwise.
"Cause" means (a) commission of a felony, (b) embezzlement, (c) the
illegal use of drugs, or (d) if no Change of Control has occurred other than the
commencement of a tender offer and/or the entering into of an agreement referred
to in items (ii) or (iii) of the definition of Change of Control, the willful
and continuous failure by Mr. Mahoney to substantially perform his duties with
the Company (other than any such failure resulting from his physical or mental
illness or other physical or mental incapacity) as determined in good faith by
the Board of Directors. Notwithstanding the foregoing, Cause shall not be deemed
to exist unless and until there shall have been delivered to Mr. Mahoney a copy
of a resolution duly adopted by written consent of not less than three-fourths
of the number of directors then in office (after reasonable notice to him and an
opportunity for him, together with his counsel, to be heard at a meeting of the
Board of Directors called and held for that purpose), finding that in the good
faith opinion of the Board of Directors he was guilty of conduct set forth above
in clauses (a), (b), (c) or (d) of the first sentence of this definition and
specifying the particulars thereof in detail. For purposes of this Section, no
act or failure to act on Mr. Mahoney's part shall be considered "willful" unless
it is done, or omitted to be done, by him in bad faith or without reasonable
belief that his action or omission was in the best interests of the Company.
"Change of Control" means the consummation of any change in control of
DPL, or its principal subsidiary, DP&L, of a nature that would be required to be
reported in response to Item 6 (e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the 'Exchange Act') as
determined by the Board of Directors of DPL in its sole discretion; provided
that, without limitation, such a Change of Control shall be deemed to have
occurred if (i) any 'person' (as such term is defined in Sections 13 (d) and 14
(d) (2) of the Exchange Act; hereafter, a 'Person') other than DPL or DP&L or an
entity then directly or indirectly controlling, controlled by or under common
control with DPL or DP&L is on the date hereof or becomes the beneficial owner,
directly or indirectly, of securities of DPL or DP&L representing (A) 25% or
more of the combined voting power of the then outstanding securities of DPL or
DP&L if the acquisition of such beneficial ownership or such tender offer is not
approved by the Board of Directors of DPL prior to the acquisition or the
commencement of such tender offer or (B) 50% or more of such combined voting
power in all other cases; (ii) DPL or DP&L consummates a merger or
consolidation, or consummates a 'combination' or 'majority share acquisition' in
which it is the 'acquiring corporation' (as such terms are defined in Ohio Rev.
Code ss. 1701.01 as in effect on December 31, 1990) and in which shareholders of
DPL or DP&L, as the case may be, immediately prior to entering into such
agreement, will beneficially own, immediately after the effective time of the
merger, consolidation, combination or majority share acquisition, securities of
DPL or DP&L or any surviving or new corporation, as the case may be, having less
than 50% of the 'voting power' of DPL or DP&L or any surviving or new
corporation, as the case may be, including 'voting power' exercisable on a
contingent or deferred basis as well as immediately exercisable 'voting power',
excluding any merger of DPL into DP&L or of DP&L into DPL; (iii) DPL or DP&L
consummates a sale, lease, exchange or other transfer or disposition of all or
substantially all of its assets to any Person other than to a wholly owned
subsidiary or, in the case of DP&L, to DPL or a wholly owned subsidiary(ies) of
DPL; but not including (A) a mortgage or pledge of assets granted in connection
with a financing or (B) a spin-off or sale of assets if DPL continues in
existence and its common shares are listed on a national securities exchange,
quoted on the automated quotation system of a national securities association or
traded in the over-the-counter market; or (iv) those persons serving as
directors of DPL or DP&L on the date of this Agreement (the 'Original
Directors') and/or their Successors do not constitute a majority of the whole
Board of Directors of DPL or DP&L, as the case may be (the term 'Successors'
shall mean those directors whose election or nomination for election by
shareholders has been approved by the vote of at least two-thirds of the
Original Directors and previously qualified Successors serving as directors of
DPL or DP&L, as the case may be, at the time of such election or nomination for
election).
"Date of Termination" means:
(a) if Mr. Mahoney's employment is terminated by the Company for
Cause, the date specified in the Notice of Termination;
(b) if Mr. Mahoney terminates his employment for Good Reason, the
date specified in his Notice of Termination; or
(c) if Mr. Mahoney's employment is terminated by the Company or by
him for any other reason, the date of such termination.
"Disability" means, for the purposes of this agreement, Mr. Mahoney's
inability to perform the duties required of him on a full-time basis for a
period of six consecutive months because of physical or mental illness or other
physical or mental disability or incapacity, followed by the Company giving him
thirty days' written notice of its intention to terminate his employment by
reason thereof, and Mr. Mahoney's failure because of physical or mental illness
or other physical or mental disability or incapacity to resume the full-time
performance of his duties within such period of thirty days and thereafter
perform the same for a period of two consecutive months.
"Good Reason" means:
(a) The assignment to Mr. Mahoney, without his express consent, of
any duties inconsistent with the duties of CEO and/or written
objectives approved by the Company with respect to his
position, duties, responsibilities and status with the Company
in effect immediately prior to a Change of Control, or a
change in his reporting responsibilities, titles or offices as
described in the Company's written objectives in effect
immediately prior to a Change of Control, or his removal from
or any failure to re-elect him to any of such positions or
offices, except in connection with the termination of his
employment for Disability or Cause, or by him other than for
Good Reason, or as a result of Mr. Mahoney's death.
(b) Failure by the Company to increase Mr. Mahoney's annual Base
Salary, at the time when salary adjustments were historically
made by the Company prior to the Change of Control, by an
amount that at least equals on a percentage basis the average
percentage increase in his Base Salary during the three (3)
full calendar years immediately preceding the Change of
Control (or for the number of years he has been employed by
the Company, if less than three).
(c) A reduction by the Company of Mr. Mahoney's Base Salary as in
effect on the date hereof or as the same may be increased from
time to time.
(d) Failure by the Company to continue in effect any benefit or
compensation plan (including but not limited to the Company's
MICP, Key Employees Deferred Compensation Plan or any other
pension, employee stock ownership, life insurance, medical,
health and accident, or disability plan) in which Mr. Mahoney
is participating at the time of a Change of Control or plans
providing Mr. Mahoney with substantially similar benefits; or
the taking of any action by the Company which would adversely
affect Mr. Mahoney's participation in or materially reduce his
benefits under any of such plans or deprive him of any
material fringe benefit enjoyed by him at the time of the
Change of Control; or the failure by the Company to provide
Mr. Mahoney with the number of paid vacation days to which he
would then be entitled in accordance with the Company's
vacation policy in effect at the time of the Change of
Control.
(e) The relocation of the Company's principal executive offices to
a location outside Montgomery County, Ohio, if at the time of
a Change of Control Mr. Mahoney is based at the Company's
principal executive offices.
(f) The Company's requiring Mr. Mahoney to be based anywhere more
than fifty miles from the location where he is based at the
time of a Change of Control (except for required travel on the
Company's business to an extent substantially consistent with
Mr. Mahoney's business travel obligations as they existed at
the time of a Change of Control); or, in the event Mr. Mahoney
consents to being based anywhere more than fifty miles from
such location, the failure by the Company to pay (or reimburse
him for) all reasonable moving expenses incurred by him
relating to a change of his principal residence in connection
with such relocation and to indemnify him against any loss
(defined as the difference between the actual sale price of
such residence after the deduction of all real estate
brokerage charges and related selling expenses and the higher
of (1) Mr. Mahoney's aggregate investment in such residence or
(2) the fair market value of such residence as determined by a
real estate appraiser designated by him and reasonably
satisfactory to the Company realized upon the sale of such
residence in connection with any such change of residence.
(g) The Company's requiring Mr. Mahoney to perform duties or
services which necessitate absence overnight from his place of
residence, because of travel involving the business or affairs
of the Company, to a degree not substantially consistent with
the extent of such absence necessitated by such travel during
the period of twelve months immediately preceding a Change of
Control.
(h) The failure of the Company to obtain the assumption of this
agreement by any successor as provided in Section 14 hereof.
(i) The Company's termination of Mr. Mahoney's employment without
satisfying any applicable requirements in connection with
termination for Cause or sending a Notice of Termination.
"Person" means any individual, corporation, association, partnership,
firm, limited liability company, trust or other entity or enterprise.
"Prohibited Company" means each of Firstenergy Corp., Cinergy Corp., and
American Electric Power Company, Inc.
Section 13. Rights As Former Employee. Nothing contained in this agreement
shall be construed as preventing Mr. Mahoney, and shall not prevent him,
following any termination of his employment whether pursuant to this agreement
or otherwise, from thereafter participating in any benefit or insurance plans
(including, without limitation thereto, any retirement plans) in the same manner
and to the same extent that he, as a former employee of the Company, would have
been entitled to participate had this agreement not have been entered into.
Section 14. Successors. (a) The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement to expressly and unconditionally assume and agree to perform this
agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of such succession
shall be a breach of this agreement and shall entitle Mr. Mahoney to
compensation from the Company in the same amount and on the same terms as he
would be entitled hereunder if he terminated his employment for Good Reason
regardless of whether he in fact has done so, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. The foregoing provisions of
this Section 14(a) shall not apply to (i) a spin-off or sale of assets, or (ii)
a transaction described in item (ii) of the definition of Change of Control
above involving only DP&L if in each case DPL continues in existence and its
common shares are listed on a national securities exchange, quoted on the
automated quotation system of a national securities association or traded in the
over-the-counter market.
(b) This Agreement shall inure to the benefit of and be enforceable by Mr.
Mahoney's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Mr. Mahoney should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid to such beneficiary or beneficiaries as he shall have designated by written
notice delivered to the Company prior to his death or, failing written notice,
to his estate.
Section 15. Gross-Up Payment. In the event that any payment pursuant to
this agreement or any other agreement will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Internal Revenue Code of 1986 ("Code") or
any successor or similar provision, the Company shall pay Mr. Mahoney an
additional amount (the "Gross-Up Payment") such that the net amount retained by
Mr. Mahoney after deduction of any Excise Tax on such payments (excluding
payments pursuant to this Section 15), and after deduction for any federal,
state and local income tax and Excise Tax upon the payment provided for by this
Section 15, shall be equal to the amount of such payments (excluding payments
pursuant to this Section 15) before payment of any Excise Tax (hereinafter the
"Excise Tax Compensation Net Payment"). For purposes of determining whether any
of such payments will be subject to the Excise Tax and the amount of such Excise
Tax, any payments or benefits received or to be received by Mr. Mahoney in
connection with a Change of Control or his termination of employment shall be
treated as "parachute payments" within the meaning of Section 280G of the Code,
and all "excess parachute payments" within the meaning of Section 280G of the
Code shall be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Company's independent auditors and acceptable to Mr.
Mahoney such payments or benefits do not constitute parachute payments or excess
parachute payments. For purposes of determining the amount of the Gross-Up
Payment, Mr. Mahoney shall be deemed to pay all federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation in the state and locality of his residence on
the Date of Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of Mr. Mahoney's
employment, Mr. Mahoney shall repay to the Company, at the time that the amount
of such reduction in Excise Tax is finally determined, an amount necessary so
that the total payments hereunder equal the Excise Tax Compensation Net Payment,
plus interest on the amount of such repayment at a rate equivalent to the rate
described in Section 280G (d) (4) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time of
the termination of his employment, the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest payable with respect to
such excess) at the time that the amount of such excess is finally determined.
The Gross-Up Payment shall be paid not later than the Date of Termination or, if
and to the extent such payment is not known or calculable as of such date, as
soon as the amount is known and calculable.
Section 16. Funding of Master Trust. Upon a Change of Control, the Company
shall immediately transfer to the Amended and Restated Master Trust dated
February 1, 1995, as amended (or to an Other Trust as defined in such Trust)
previously established to secure the Company's obligations to participants under
various Company deferred and incentive compensation plans, cash in an amount
sufficient to fund all payments which would be made to Mr. Mahoney hereunder if
his employment was terminated on the date of the Change of Control under
circumstances in which payments under Section 10 hereof would become due and
payable to him, including, without limitation, cash in an amount sufficient to
fund payments of all future medical, life insurance, accident and disability
plans as provided in Sections 10 hereof, and the Gross-Up Payment as defined in
Section 15 herein, in each case based on reasonable estimates.
Section 17. Legal Fees. The Company shall reimburse Mr. Mahoney in full
for all legal fees and expenses reasonably incurred by him in connection with a
termination of his employment (including, without limitation, all such fees and
expenses, if any, incurred in contesting or disputing any termination of your
employment subsequent to a Change of Control or in seeking to obtain or enforce
any right or benefit provided by this agreement, regardless of the outcome,
unless, in the case of a legal action brought by him or in his name, a court
finally determines that such action was not brought in good faith by him). The
Company shall pay the reasonable attorneys fees, costs and expenses incurred by
Mr. Mahoney in connection with the negotiation, execution and delivery of this
Agreement.
Section 18. Notices. All notices required or permitted to be given under
this agreement shall be in writing and shall be mailed (postage prepaid by
either registered or certified mail) or delivered, if to the Company, addressed
to
(a) Prior to a Change of Control, to the Corporate Secretary of the
Company at:
The Dayton Power and Light Company
MacGregor Park
1065 Woodman Drive
Dayton, Ohio 45432
Attention: Corporate Secretary
(b) After a Change of Control, to the Trustees at:
Bank of America
50 North Laura St., Suite 3200
FL9-001-32-04
Jacksonville, FL 32202
and
Bank One Trust Company
P. O. Box 710634
Columbus, OH 43271-0634
and if to Mr. Mahoney, addressed to
Mr. James Mahoney
3600 Wood Hollow Road
Kettering, OH 45429
Any party may change the address to which notices to such party are to be
directed by giving written notice of such change to the other parties in the
manner specified in this Section.
Section 19. Parties in Interest. This Agreement is for the sole benefit of
the parties and shall not create any rights to any person not a party. This
Agreement is personal and may not be assigned by any party without the prior
written consent of the other party. Subject to the foregoing, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
respective successors and assigns of the parties, but on assignment shall, of
itself, relieve any party of its obligations hereunder.
Section 20. Entire Agreement. This Agreement, including the agreement
attached hereto as Exhibit A and the Deferral Election Form attached hereto as
Exhibit B, sets forth the entire agreement and understandings of the parties in
respect to the subject matter hereof and supersedes all prior agreements,
arrangements and understandings relating to the subject matter hereof.
Section 21. Interpretation. The Section and other headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Words used in this Agreement in
the singular number shall include the plural, and vice versa, unless the context
requires otherwise. Words of gender used in this Agreement may be read as
masculine, feminine or neuter as the context may require. The terms "this
Agreement", "hereto" "herein", "hereby", "hereof" and similar expressions refer
to this Agreement in its entirety and not to any particular provision or portion
of this Agreement. When a reference is made to Sections, such reference shall be
to a Section of this Agreement, unless otherwise indicated. Whenever the words
"include", "includes" or "including" are used herein, they shall be deemed to be
followed by the words "without limitation".
Section 22. Law Governing. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Ohio without
regard to its conflicts of laws rules.
Section 23. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which taken together shall constitute one and the same instrument.
Section 24. Amendment. Any amendment to this Agreement or any waiver of
rights or any consent hereunder shall not be operative unless it is in writing
and signed by the party sought to be charged.
Section 25. Equitable Relief. Mr. Mahoney acknowledges that the Company
may be irreparably injured by any breach of Section 11. Accordingly, the Company
shall be entitled to specific performance and other injunctive relief as
remedies for any breach (or threatened breach) of such Sections, in addition to
all other remedies available at law or in equity.
Section 26. Severability. If any provision of this Agreement or the
application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to another party or circumstance shall not be affected thereby
and such provision shall be enforced to the greatest extent permitted by
applicable law.
Section 27. Waiver. The failure or delay on the part of any party to
insist upon strict performance of any of the terms or conditions of this
Agreement will not constitute a waiver of any of its rights hereunder. No right
or remedy herein conferred upon or reserved to any party is intended to be
exclusive of any other right or remedy and all such rights and remedies shall be
cumulative.
Section 28. No Right to Employment. Nothing in this agreement shall confer
upon Mr. Mahoney the right to continue employment with the Company, or obligate
Mr. Mahoney to continue employment with the Company; nor shall it interfere with
the rights of the Company to discharge Mr. Mahoney or take other action with
respect to Mr. Mahoney, subject to the Company's providing the benefits
specified herein in accordance with the terms hereof.
Section 29. Insurance and Indemnification. To the extent that Company
provides directors and officers liability insurance or similar indemnification
for its officers and directors, the Company shall provide the same coverage or
indemnification to Mr. Mahoney, in accordance with and subject to the same terms
and conditions.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DPL Inc.
By: /s/ Robert D. Biggs
------------------------------
Robert D. Biggs
Executive Chairman
By: /s/ W August Hillenbrand
------------------------------
W August Hillenbrand
Vice Chairman of the Board
The Dayton Power and Light Company
By: /s/ Robert D. Biggs
------------------------------
Robert D. Biggs
Executive Chairman
By: /s/ W August Hillenbrand
------------------------------
W August Hillenbrand
Vice Chairman of the Board
James V. Mahoney
/s/ James V. Mahoney
------------------------------