-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CMwdwPB1TenRuaOVH1wXJGwf7zzM6jNMAa8t60XLIFZ/eS3EwgW9uspnqh3V3mAH Y1knWAcQZsTt3HSlLM+UfQ== 0000912057-01-505710.txt : 20010402 0000912057-01-505710.hdr.sgml : 20010402 ACCESSION NUMBER: 0000912057-01-505710 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DPL INC CENTRAL INDEX KEY: 0000787250 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 311163136 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-09052 FILM NUMBER: 1586485 BUSINESS ADDRESS: STREET 1: PO BOX 8825 CITY: DAYTON STATE: OH ZIP: 45401 BUSINESS PHONE: 5132246000 MAIL ADDRESS: STREET 1: PO BOX 8825 CITY: DAYTON STATE: OH ZIP: 45401 10-K405 1 a2043323z10-k405.txt FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number 1-9052 DPL INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO 31-1163136 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) COURTHOUSE PLAZA SOUTHWEST, DAYTON, OHIO 45402 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: 937-224-6000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: OUTSTANDING AT NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS FEBRUARY 28, 2001 WHICH REGISTERED ------------------- ----------------- ---------------- Common Stock, $0.01 par value and Preferred Share Purchase Rights 127,777,404 New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / X / ---- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------ ------ The aggregate market value of the voting stock held by nonaffiliates of the registrant as of February 28, 2001 was $3,667,211,495 based on a closing price of $28.70 on such date. DOCUMENTS INCORPORATED BY REFERENCE Parts I and II incorporate by reference the registrant's 2000 Annual Report to Shareholders. Portions of the definitive Proxy Statement for the 2001 Annual Meeting of Shareholders of the registrant are incorporated by reference into Part III. DPL Inc. Index to Annual Report on Form 10-K Fiscal Year Ended December 31, 2000
Page No. Part I Item 1 Business............................................................3 Item 2 Properties.........................................................16 Item 3 Legal Proceedings..................................................16 Item 4 Submission of Matters to a Vote of Security Holders................16 Executive Officers.................................................17 Part II Item 5 Market for Registrant's Common Equity and Related Shareholder Matters................................................18 Item 6 Selected Financial Data............................................18 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations..............................................18 Item 7A Quantitative and Qualitative Disclosure about Market Risk..........18 Item 8 Financial Statements and Supplementary Data........................19 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........................................19 Part III Item 10 Directors and Executive Officers of the Registrant.................20 Item 11 Executive Compensation.............................................20 Item 12 Security Ownership of Certain Beneficial Owners and Management.....20 Item 13 Certain Relationships and Related Transactions.....................20 Part IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K....20 Other Signatures.........................................................25
2 PART I Item 1 - BUSINESS - -------------------------------------------------------------------------------- DPL INC. DPL Inc. ("DPL") was organized in 1985 under the laws of the State of Ohio to engage in the acquisition and holding of securities of corporations for investment purposes. The executive offices of DPL are located at Courthouse Plaza Southwest, Dayton, Ohio 45402 - telephone (937) 224-6000. DPL's principal subsidiary is The Dayton Power and Light Company ("DP&L"). DP&L is a public utility incorporated under the laws of Ohio in 1911. DP&L sells electricity to residential, commercial and governmental customers in a 6,000 square mile area of West Central Ohio. Electricity for DP&L's 24 county service area is generated at eight power plants and is distributed to 495,000 retail customers. Principal industries served include electrical machinery, automotive and other transportation equipment, non-electrical machinery, agriculture, paper, and rubber and plastic products. DP&L's sales reflect the general economic conditions and seasonal weather patterns of the area. Subsidiaries of DPL include Miami Valley Resources, Inc. ("MVR"), a natural gas supply management company; Miami Valley Leasing, which leases communications equipment and other miscellaneous equipment and owns real estate; Miami Valley Lighting, Inc., a street lighting business; Miami Valley Insurance Company, an insurance company for DPL and its subsidiaries; Miami Valley Development Company, which has acquired real estate for DP&L; DPL Energy, Inc. ("DPLE"), which has been granted authority to engage in the business of brokering wholesale electric energy; Customer Payment Center, Inc., a payment agent for DP&L and an unaffiliated company; MacGregor Park, Inc., an owner and developer of real estate; DPL Energy Resources, Inc., a competitive retail electric supplier; and Plaza Building, Inc., which owns all the capital stock of MVE, Inc. MVE, Inc. provides financial support services to DPL and its subsidiaries. Miami Valley CTC, Inc., a subsidiary of MVE, Inc., provides transportation services. DPL and its subsidiaries are exempt from registration with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 because its utility business operates solely in the State of Ohio. DPL and its subsidiaries employed 1,820 persons as of December 31, 2000, of which 1,540 were full-time employees and 280 were part-time employees. 3 COMPETITION In October 1999, legislation became effective in Ohio that gave electric utility customers a choice of energy providers as of January 1, 2001. Under the legislation, electric generation, aggregation, power marketing, and power brokerage services supplied to retail customers in Ohio is deemed to be competitive and is not subject to supervision and regulation by the Public Utilities Commission of Ohio ("PUCO"). As required by the legislation, DP&L filed its transition plan at the PUCO on December 20, 1999. DP&L received PUCO approval of its plan on September 21, 2000. The transition plan provides for a three-year transition period, which began on January 1, 2001 and ends on December 31, 2003, at which time DP&L's generation assets will no longer be subject to Ohio regulation and will be able to sell all capacity in the open energy market. The plan also provides for a 5% residential rate reduction on the generation component of the rates, which reduces revenue by approximately $13-14 million per year; rate certainty for the three-year period for customers that continue to purchase power from DP&L; guaranteed rates for a six-year period for transmission and delivery services; and recovery of transition costs of approximately $600 million. Under the plan, DPL has the organizational and financial flexibility to continue its growth initiatives without regulatory restrictions. On September 30, 1996, the FERC conditionally accepted DP&L's market-based sales tariff, which will allow DP&L to sell wholesale generation supply at prices that reflect current market prices. At the same time, the FERC approved the application and authorization of DPLE to sell and broker wholesale electric power and also charge market-based prices for such power. DPL Energy Resources, Inc. and Miami Valley Lighting, Inc. filed at the FERC for market-based rate authority on November 16, 2000 and received FERC authority on December 13, 2000 and December 15, 2000, respectively. DPL Energy Resources, Inc. received approval from the PUCO on December 8, 2000 to provide competitive retail electric service. DPL competes through its principal subsidiary, DP&L, with privately and municipally owned electric utilities and rural electric cooperatives, and other alternate fuel suppliers. DP&L competes on the basis of price and service. Like other utilities, DP&L from time to time may have electric generating capacity available for sale to other utilities. DP&L competes with other utilities to sell electricity provided by such capacity. The ability of DP&L to sell this electricity will depend on how DP&L's price, terms and conditions compare to those of other suppliers. In addition, from time to time, DP&L makes power purchases from other suppliers. The National Energy Policy Act of 1992, which reformed the Public Utilities Holding Company Act of 1935, allows the federal government to mandate access by others to a utility's electric transmission system and may accelerate competition in the supply of electricity. 4 DP&L provides transmission and wholesale electric service to twelve municipal customers, which distribute electricity within their corporate limits. In addition to these municipal customers, DP&L maintains an interconnection agreement with one municipality that has the capability to generate a portion of its energy requirements. Sales to municipalities represented 1.6% of total electricity sales in 2000. The municipal agreements provide, among other things, for the sale of firm power by DP&L to the municipals on specified terms. However, the parties disagreed in their interpretation of this portion of the agreement and DP&L filed suit against the eleven municipals on December 28, 1998. The dispute was subsequently settled in 1999. In December 1999, DP&L filed a second suit against the municipals claiming their failure to pay for certain services rendered under the contract. The municipals filed a complaint at the Federal Energy Regulatory Commission ("FERC") claiming violation of a mediation clause. On June 29, 2000 the FERC Administrative Law Judge issued an initial decision in the case, which was favorable to DP&L; however, the FERC has not yet issued a final order. This dispute is expected to be resolved through the FERC process, and is not expected to result in a material impact on DP&L's financial position or results of operations. On April 24, 1996, the FERC issued orders requiring all electric utilities that own or control transmission facilities to file open-access transmission service tariffs. Open-access transmission tariffs provide third parties with non-discriminatory transmission service comparable to what the utility provides itself. In its orders, the FERC further stated that FERC-jurisdictional stranded costs reasonably incurred and costs of complying with the rules will be recoverable by electric utilities. Both in 1997 and 1998, DP&L reached an agreement in principle with staff and intervenors in these tariff cases. The FERC issued an Order accepting the Stipulation between the parties in DP&L's Open Access Transmission Tariff cases on July 30, 1999 and September 17, 1999. DP&L was not materially impacted by the Order. The FERC issued a final rule on December 20, 1999 specifying the minimum characteristics and functions for Regional Transmission Organizations ("RTO"). The rule required that all public utilities that own, operate or control interstate transmission file a proposal to join a RTO by October 15, 2000 or file a description of efforts taken to participate in an RTO, reasons for not participating in an RTO, any obstacles to participation in an RTO, and any plans for further work towards participation. DP&L filed with the FERC to join the Alliance RTO and expects to transfer operational control of its transmission assets to the Alliance when it is complete. On July 22, 1998, the PUCO approved the implementation of Minimum Electric Service Standards for all of Ohio's investor-owned electric utilities. This Order details minimum standards of performance for a variety of service-related functions, effective July 1, 1999. On December 21, 1999, the PUCO issued additional rules proposed by the PUCO staff, which are designed to guide the electric utility companies as they prepare to enter into deregulation. These rules include certification of providers of competitive retail electric services, minimum competitive retail electric service standards, monitoring the electric utility market, and establishing procedures for alternative dispute resolution. There were also rules issued to amend existing rules for noncompetitive electric service and safety standards and electric companies long-term forecast reporting. DP&L 5 submitted comments on the proposed rules on January 31, 2000. The rules were finalized by the PUCO in June 2000 and did not have a material impact on DP&L's financial position. MVR, established in 1986 as a subsidiary of DPL, acts as a broker in arranging and managing natural gas supplies for business and industry. Deliveries of natural gas to MVR customers can be made through the local gas suppliers' transportation system, or another transportation system, on the same basis as deliveries to customers of other gas brokerage firms. Customers with alternate fuel capability can continue to choose between natural gas and their alternate fuel based upon overall performance and economics. Responding to the new Ohio legislation, DP&L is functionally separating its various business units and is evaluating each unit on a stand-alone basis. Business units not complementing DPL's going-forward strategy may be divested. In October 2000, DP&L completed the sale of its natural gas retail distribution assets and certain liabilities for $468 million in cash. CONSTRUCTION PROGRAM Construction additions were $344 million in 2000 and $167 million in 1999. The capital program for 2001 is approximately $397 million. The major components of the 2001 capital program include the development of natural gas-fired combustion turbine generation peaking units at $223 million and environmental compliance at $64 million. DPL has had an ongoing regional merchant generation expansion program since the mid-1990's with Phase One being completed in 1997. Phase One was the construction of three combustion turbines representing 248 megawatts ("MW") of capacity at an investment of $75 million. In the second quarter of 2000, DPL completed Phase Two with the construction of four combustion turbines representing 224 MW of capacity at an investment of $80 million. In September 2000, DPL announced Phases Three and Four of the construction program representing 320 MW of combustion turbines at an investment of $110 million to be completed during the second half of 2001. In January 2001, DPL announced Phase Five of the program representing an additional 224 MW of combustion turbines at an investment of $80 million to be completed by the summer of 2001. These individual Phases of completed and announced combustion turbines expand DPL's generation capacity by more than 1,000 MW and represent an investment of $345 million. Under this program, DPL plans to have a total of approximately 5,000 MW of generation capacity online by the summer of 2003. 6 Construction plans are subject to continuing review and are expected to be revised in light of changes in financial and economic conditions, load forecasts, legislative and regulatory developments and changing environmental standards, among other factors. DPL's ability to complete its capital projects and the reliability of future service will be affected by its financial condition, the availability of external funds at reasonable cost, and adequate and timely rate recovery. The cost of capital is in part determined by credit ratings assigned by rating agencies. Credit ratings for DPL and DP&L are investment grade. As a result of DPL's December 2000 press release regarding its exploration of strategic alternatives, including the possible sale of all or part of the company, Standard & Poor's placed DPL and DP&L on credit watch with developing implications in January 2001. Developing implications indicate that ratings could be raised, lowered, or affirmed. Also in January, Moody's placed the ratings of DPL and its affiliates under review. The direction of the review is uncertain at this time, and will be refined as additional information becomes available. On February 15, 2001, DPL announced that with the current volatile electric market environment and renewed emphasis on generation capacity and reliability, DPL would pursue its growth strategy as an independent company based on its regional merchant generation expansion plan. DPL will continue to monitor the market for the strategic deployment and/or purchase of assets that provide the most value to shareholders. See ENVIRONMENTAL CONSIDERATIONS for a description of environmental control projects and regulatory proceedings that may change the level of future construction additions. The potential impact of these events on DPL's operations cannot be estimated at this time. ELECTRIC OPERATIONS AND FUEL SUPPLY DPL's present winter generating capability is 3,607,000 KW. Of this capability, 2,843,000 KW (approximately 79%) is derived from coal-fired steam generating stations and the balance consists of combustion turbine and diesel-powered peaking units. Approximately 87% (2,472,000 KW) of the existing steam generating capability is provided by certain units owned as tenants in common with The Cincinnati Gas & Electric Company ("CG&E") or with CG&E and Columbus Southern Power Company ("CSP"). Each company owns a specified undivided share of each of these units, is entitled to its share of capacity and energy output, and has a capital and operating cost responsibility proportionate to its ownership share. The remaining steam generating capability (371,000 KW) is derived from a generating station owned solely by DP&L. DP&L's all-time net peak load was 3,130,000 KW, occurring in 1999. The present summer generating capability is 3,461,000 KW. 7
GENERATING FACILITIES MW Rating ----------- Operating DPL Station Ownership* Company Location Portion Total - -------------------------- ------------- ------------ ------------------- ---------- ------- COAL UNITS - ---------- Hutchings W DP&L Miamisburg, OH 371 371 Killen C DP&L Wrightsville, OH 402 600 Stuart C DP&L Aberdeen, OH 820 2,340 Conesville-Unit 4 C CSP Conesville, OH 129 780 Beckjord-Unit 6 C CG&E New Richmond, OH 210 420 Miami Fort-Units 7 & 8 C CG&E North Bend, OH 360 1,000 East Bend-Unit 2 C CG&E Rabbit Hash, KY 186 600 Zimmer C CG&E Moscow, OH 365 1,300 COMBUSTION TURBINES OR DIESEL - ----------------------------- Hutchings W DP&L Miamisburg, OH 33 33 Yankee Street W DP&L Centerville, OH 138 138 Monument W DP&L Dayton, OH 12 12 Tait W DP&L Dayton, OH 10 10 Sidney W DP&L Sidney, OH 12 12 Tait Gas Turbine 1 W DP&L Moraine, OH 100 100 Tait Gas Turbine 2 W DP&L Moraine, OH 102 102 Tait Gas Turbine 3 W DP&L Moraine, OH 102 102 Killen C DP&L Wrightsville, OH 16 24 Stuart C DP&L Aberdeen, OH 3 10 Greenville W DPLE Greenville, OH 236 236
*W = Wholly-Owned C = Commonly Owned In order to transmit energy to their respective systems from their commonly owned generating units, the companies have constructed and own, as tenants in common, 847 circuit miles of 345,000-volt transmission lines. DP&L has several interconnections with other companies for the purchase, sale and interchange of electricity. In addition, DP&L is in the process of constructing an additional 40.2-mile long, 345,000-volt circuit between CG&E's Foster Substation and DP&L's Bath Substation, with a target in-service date of June 1, 2001. The circuit will be jointly owned by DP&L and CG&E. DP&L generated over 99% of its electric output from coal-fired units in 2000. The remainder was from oil or natural gas-fired units, which were used to meet peak demands. DP&L estimates that up to 75% of its coal requirements for the period 2001-2004 will be obtained through long-term contracts, with the balance to be obtained by spot market purchases. DP&L has been informed by CG&E and CSP for the commonly owned units which they operate that sufficient coal supplies will be available during the same planning horizon. 8 The prices to be paid by DP&L under its long-term coal contracts are subject to adjustment in accordance with various indices. Each contract has features that will limit price escalations in any given year. The average fuel cost per kilowatt-hour ("kWh") generated of fuel burned for electric generation (coal, gas and oil) for the year was 1.18(cent) in 2000 and 1.30(cent) in both 1999 and 1998. With the onset of competition in January 2001, the EFC became part of the Standard Offer Generation Rate. See RATE REGULATION AND GOVERNMENT LEGISLATION and ENVIRONMENTAL CONSIDERATIONS. GAS OPERATIONS AND GAS SUPPLY In October 2000, DP&L completed the sale of its natural gas retail distribution assets and certain liabilities for $468 million in cash. The transaction was valued pursuant to an arms-length negotiation and resulted in a pre-tax gain of $183 million ($121 million net of taxes). Proceeds from the sale were used to finance the regional merchant generation expansion and reduce outstanding short-term debt. RATE REGULATION AND GOVERNMENT LEGISLATION DP&L's sales to retail customers are subject to rate regulation by the PUCO and various municipalities. DP&L's wholesale electric rates to municipal corporations and other distributors of electric energy are subject to regulation by the FERC under the Federal Power Act. Ohio law establishes the process for determining rates charged by public utilities. Regulation of rates encompasses the timing of applications, the effective date of rate increases, the cost basis upon which the rates are based and other related matters. Ohio law also establishes the Office of the Ohio Consumers' Counsel (the "OCC"), which has the authority to represent residential consumers in state and federal judicial and administrative rate proceedings. Ohio legislation extends the jurisdiction of the PUCO to the records and accounts of certain public utility holding company systems, including DPL. The legislation extends the PUCO's supervisory powers to a holding company system's general condition and capitalization, among other matters, to the extent that they relate to the costs associated with the provision of public utility service. Based on existing regulatory authorization, regulatory assets on the Consolidated Balance Sheet include: 9
At December 31, 2000 1999 ---------- ---------- ($ in millions) Income taxes recoverable through future revenues (b)...................... $ 19.8 $168.5 Regulatory transition costs (a).............. 144.8 -- Other costs (b).............................. 1.6 53.3 ------ ------ Total........................................ $166.2 $221.8 ====== ======
(a) As discussed in the COMPETITION section, DP&L received PUCO approval of its transition plan for the deregulation of its generation business. Accordingly, DP&L discontinued the use of its regulatory accounting model for its generation operations. As a result, a $63.7 million before tax benefits ($41.4 million net of taxes) reduction of generation-related regulatory assets was recorded in the third quarter of 2000 as an extraordinary item and other generation-related regulatory assets were reclassified to the "Regulatory transition costs" asset. (b) Certain deferred costs remain authorized for recovery by regulators. These relate primarily to DP&L's electric transmission and distribution operations and are being amortized over the recovery period of the assets involved. Under the legislation passed in 1999, the percentage of income payment plan ("PIPP") for eligible low-income households will be converted to a universal service fund. The universal service program will be administered by the Ohio Department of Development. As part of DP&L's Electric Transition Plan, DP&L was granted authority to recover PIPP arrearages remaining as of December 31, 2000 as part of a transition charge. In 2000, the PUCO amended the rules for Long-Term Forecast Reports for all investor-owned electric transmission and distribution companies in Ohio. Under these rules, each transmission and/or distribution company must annually file a Long-Term Electric Forecast Report, which presents 10-year energy and demand transmission and distribution forecasts. The reports also must contain information on the company's existing and planned transmission and distribution systems, as well as a substantiation of the need for any system upgrades or additions. DP&L filed a combined 2000/2001 Long-Term Electric Forecast Report under these amended rules in March 2001. The PUCO is composed of five commissioners appointed to staggered five-year terms. The current Commission is composed of the following members: 10
NAME Beginning of Term End of Term - ---- ----------------- ----------- Clarence D. Rogers.................. February 2001 April 2006 Rhonda H. Fergus.................... April 1995 April 2005 Chairman Alan R. Schriber........... April 1999 April 2004 Donald L. Mason..................... April 1998 April 2003 Judith A. Jones..................... April 1997 April 2002
See COMPETITION for more detail regarding the impact of legislation passed in October 1999. ENVIRONMENTAL CONSIDERATIONS The operations of DPL and DP&L, including the commonly owned facilities operated by DP&L, CG&E and CSP, are subject to federal, state, and local regulation as to air and water quality, disposal of solid waste and other environmental matters, including the location, construction and initial operation of new electric generating facilities and most electric transmission lines. The possibility exists that current environmental regulations could be revised which could change the level of estimated construction expenditures. See CONSTRUCTION PROGRAM. AIR QUALITY The Clean Air Act Amendments of 1990 (the "Act") have limited sulfur dioxide and nitrogen oxide emissions nationwide. The Act restricts emissions in two phases. Phase I compliance requirements became effective on January 1, 1995 and Phase II requirements became effective on January 1, 2000. DP&L's environmental compliance plan ("ECP") was approved by the PUCO on May 6, 1993, and on November 9, 1995, the PUCO approved the continued appropriateness of the ECP. Phase I requirements were met by switching to lower sulfur coal at several commonly owned electric generating facilities and increasing existing scrubber removal efficiency. Total capital expenditures to comply with Phase I of the Act were approximately $5.5 million. Phase II requirements are being met primarily by switching to lower sulfur coal at all non-scrubbed coal-fired electric generating units. 11 In November 1999, the United States Environmental Protection Agency ("US EPA") filed civil complaints and Notices of Violations ("NOV's") against operators and owners of certain generation facilities for alleged violations of the Clean Air Act ("CAA"). Generation units operated by partners CG&E (Beckjord 6) and CSP (Conesville 4) and co-owned by DP&L were referenced in these actions. Numerous northeast states have filed complaints or have indicated that they will be joining the EPA's action against the partners. DP&L was not identified in the NOVs, civil complaints or state actions. In December 2000, CG&E announced that it had reached an Agreement in Principle with the US EPA and other plaintiffs in an effort to settle the claims. Discussions on the final terms of the settlement are ongoing, and the outcome of these claims or the impact, if any, on DP&L has not been determined. In June 2000, the US EPA issued a NOV to J.M. Stuart Station (co-owned by DP&L, CG&E, and CSP) for alleged violations of the Clean Air Act. The NOV contained allegations consistent with NOV's and complaints that the EPA has recently brought against numerous other coal-fired utilities in the Midwest. DPL will vigorously challenge the NOV. At this time, the outcome of these claims or the impact, if any, on DP&L is unknown. In September 1998, the US EPA issued a final rule requiring states to modify their State Implementation Plans ("SIPs") under the CAA. The modified SIPs are likely to result in further nitrogen oxide ("NOx") reduction requirements placed on coal-fired generating units by 2003. In order to meet these NOx requirements, DP&L's total capital expenditures are estimated to be approximately $175 million over the next three years. Industry groups and others appealed the rules in United States District Court. The requirement for states to submit revised implementation plans has been stayed until the outcome of the litigation. In March 2000, the United States District Court upheld the rule. Industry groups and others have appealed this decision. As a result of the litigation, the Court extended the compliance date of the rule an additional year, until May 31, 2004. In March 2001, the United States Supreme Court refused to hear further appeals of the SIP rules. In December 1999, the US EPA issued final rules granting various CAA Section 126 petitions filed by northeast states. DP&L's facilities were identified, among many others, in the rulemaking. DP&L's current NOx reduction strategy and associated expenditures to meet the SIP call should satisfy the rulemaking reduction requirements. On December 14, 2000, the US EPA issued a determination that coal- and oil-fired electric generating units should be regulated for emissions of mercury and hazardous air pollutants. The US EPA will issue proposed rules by December 2003 and final rules by December 2004. The impact of the regulatory determination cannot be determined at this time. LAND USE DP&L and numerous other parties have been notified by the US EPA or the Ohio Environmental Protection Agency ("Ohio EPA") that it considers them Potentially Responsible Parties ("PRP's") for clean-up at two superfund sites in Ohio: the Sanitary Landfill Site on Cardington Road in Montgomery County, Ohio and the North Sanitary (a.k.a. Valleycrest) Landfill in Dayton, Montgomery County, Ohio. 12 DP&L received notification from the US EPA in July 1987 for the Cardington Road site. DP&L has not joined the PRP group formed at that site because of the absence of any known evidence that DP&L contributed hazardous substances to this site. The Record of Decision issued by the US EPA identifies the chosen clean-up alternative at a cost estimate of $8.1 million. DP&L's settlements with the US EPA and the PRP group are pending for this site. The final resolution is not expected to have a material effect on DP&L's financial position, earnings or cash flow. DP&L and numerous other parties received notification from the Ohio EPA on July 27, 1994 that it considers them PRP's for clean-up of hazardous substances at the North Sanitary Landfill site in Dayton, Ohio. DP&L has not joined the PRP group formed for the site because the available information does not demonstrate that DP&L contributed wastes to the site. The Ohio EPA has not provided an estimated cost for this site. In October 2000, the PRP group brought an action against DP&L and numerous other parties alleging that DP&L and the others are PRP's that should be liable for a portion of clean-up costs at the site. DP&L will vigorously challenge this action. The final resolution is not expected to have a material effect on DP&L's financial position, earnings or cash flow. 13
THE DAYTON POWER AND LIGHT COMPANY OPERATING STATISTICS ELECTRIC OPERATIONS Years Ended December 31 ----------------------------------------------- 2000 1999 1998 -------- -------- -------- Electric Output (millions of kWh) General- Coal-fired units............................. 17,053 16,539 16,854 Other units.................................. 79 189 99 Power purchases.................................. 1,675 1,523 1,475 Company use and line losses...................... (1,284) (1,384) (947) ----------- ---------- ---------- Total........................................ 17,523 16,867 17,481 ========== ========== ========== Electric Sales (millions of kWh) Residential...................................... 4,816 4,725 4,790 Commercial....................................... 3,539 3,390 3,518 Industrial....................................... 4,851 4,876 4,655 Public authorities and railroads................. 1,371 1,305 1,360 Private utilities and wholesale (a).............. 2,946 2,571 3,158 ---------- ---------- ---------- Total........................................ 17,523 16,867 17,481 ========== ========== ========== Electric Customers at End of Period Residential...................................... 444,683 441,468 437,674 Commercial....................................... 46,218 45,470 44,716 Industrial....................................... 1,928 1,917 1,909 Public authorities and railroads................. 6,108 5,994 5,838 Other............................................ 48 46 43 ---------- ---------- ---------- Total........................................ 498,985 494,895 490,180 ========== ========== ========== Operating Revenues (thousands) Residential...................................... $ 422,733 $ 412,808 $ 419,948 Commercial....................................... 245,097 235,309 242,526 Industrial....................................... 236,670 242,410 228,685 Public authorities and railroads................. 74,484 69,777 76,686 Private utilities and wholesale (a).............. 112,328 79,196 86,485 Other............................................ 18,743 18,844 18,651 ---------- ---------- ---------- Total........................................ $1,110,055 $1,058,344 $1,072,981 ========== ========== ==========
NOTE: a) Sales and revenue numbers for private utilities and wholesale include merchant electric peaking generation capacity sales, which are reported in "Other revenues" on the Consolidated Statement of Results of Operations. b) See Note 15 to Consolidated Financial Statements for additional information. 14
THE DAYTON POWER AND LIGHT COMPANY OPERATING STATISTICS GAS OPERATIONS Years Ended December 31 ----------------------------------------------- 2000 1999 1998 -------- -------- -------- Gas Output (thousands of MCF) Direct market purchases........................... 27,723 37,865 36,497 Liquefied petroleum gas........................... 57 2 3 Company use and unaccounted for................... (546) (2,116) (912) Transportation gas received....................... 16,057 19,964 18,125 -------- --------- -------- Total......................................... 43,291 55,715 53,713 ======== ========= ======== Gas Sales (thousands of MCF) Residential....................................... 18,538 24,450 24,877 Commercial........................................ 5,838 7,647 7,433 Industrial........................................ 2,034 2,246 1,916 Public authorities................................ 776 1,182 1,699 Transportation gas delivered...................... 16,105 20,190 17,788 -------- --------- -------- Total......................................... 43,291 55,715 53,713 ======== ========= ======== Gas Customers at End of Period Residential....................................... -- 282,706 279,784 Commercial........................................ -- 22,635 22,491 Industrial........................................ -- 1,303 1,441 Public authorities................................ -- 1,173 1,509 -------- --------- -------- Total......................................... -- 307,817 305,225 ======== ======== ======== Operating Revenues (thousands) Residential....................................... $119,460 $139,545 $138,802 Commercial........................................ 35,262 40,225 38,243 Industrial........................................ 11,114 11,017 9,291 Public authorities................................ 4,466 5,908 8,230 Other............................................. 13,554 18,284 16,640 -------- -------- -------- Total......................................... $183,856 $214,979 $211,206 ======== ======== ========
NOTE: 1) DP&L completed the sale of its natural gas retail distribution assets and certain liabilities in October 2000. 2) See Note 15 to Consolidated Financial Statements for additional information. 15 Item 2 - PROPERTIES ELECTRIC Information relating to DP&L's electric properties is contained in Item 1 - BUSINESS, DPL INC. (page 3), CONSTRUCTION PROGRAM (pages 6 and 7) and ELECTRIC OPERATIONS AND FUEL SUPPLY (pages 7-9) - Notes 4 and 12 of Notes to Consolidated Financial Statements on pages 22 and 25, respectively, of the registrant's 2000 Annual Report, which pages are incorporated herein by reference. GAS Information relating to DP&L's gas properties is contained in Item 1 - BUSINESS, DPL INC. (page 3) and GAS OPERATIONS AND GAS SUPPLY (page 9) - Note 3 of Notes to Consolidated Financial Statements on page 22, which page is incorporated herein by reference. OTHER "Other property" reported on the Consolidated Balance Sheet includes the natural gas-fired combustion turbine generation peaking units. Information relating to these properties is contained in Item 1 - CONSTRUCTION PROGRAM (pages 6 and 7) and ELECTRIC OPERATIONS AND FUEL SUPPLY (pages 7-9), as well as page 14 of the registrant's 2000 Annual Report, which page is incorporated herein by reference. Substantially all property and plant of DP&L is subject to the lien of the Mortgage securing DP&L's First Mortgage Bonds. Item 3 - LEGAL PROCEEDINGS - -------------------------------------------------------------------------------- Information relating to legal proceedings involving DP&L is contained in Item 1 - - BUSINESS, DPL INC. (page 3), COMPETITION (pages 4-6), ELECTRIC OPERATIONS AND FUEL SUPPLY (pages 7-9), GAS OPERATIONS AND GAS SUPPLY (page 9), RATE REGULATION AND GOVERNMENT LEGISLATION (pages 9-11), ENVIRONMENTAL CONSIDERATIONS (pages 11-13) and Note 4 of Notes to Consolidated Financial Statements on page 22 of the registrant's Annual Report, which page is incorporated herein by reference. Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - -------------------------------------------------------------------------------- There were no submissions to the security holders in the fourth quarter. 16 EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF MARCH 1, 2001)
Business Experience, Last Five Years (Positions with Registrant Name Age Unless Otherwise Indicated) Dates - -------------------- --------- --------------------------------- ---------------- Allen M. Hill 55 President and Chief Executive 1/01/97 - 3/01/01 Officer President and Chief Operating 9/26/95 - 1/01/97 Officer President and Chief Executive 9/26/95 - 1/01/97 Officer, DP&L Susan Flanagan 38 Vice President, Mergers and 9/11/00 - 3/01/01 Acquisitions Director, PricewaterhouseCoopers 12/01/95 - 8/31/00 LLP, New York, NY Stephen F. Koziar, Jr. 56 Group Vice President and 1/31/95 - 3/01/01 Secretary, DPL Inc. and DP&L Elizabeth M. McCarthy 41 Vice President and Chief 9/26/00 - 3/01/01 Officer, Chief Accounting Financial Officer, DPL Inc. and DP&L Vice President and Chief 4/01/00 - 9/26/00 Accounting Officer, DPL Inc. and DP&L Accounting Officer Partner, PricewaterhouseCoopers 7/01/94 - 3/31/00 LLP, New York, NY Arthur G. Meyer 50 Vice President, Legal and 11/21/97 - 3/01/01 Corporate Affairs, DP&L Director, Corporate Relations, 5/14/96 - 11/21/97 DP&L Treasurer, DP&L 6/27/95 - 5/14/96 Bryce W. Nickel 44 Assistant Vice President, DP&L 1/01/94 - 3/01/01 H. Ted Santo 50 Group Vice President, DP&L 12/08/92 - 3/01/01 Patricia K. Swanke 41 Vice President, Operations, 9/29/99 - 3/01/01 DP&L Managing Director, DP&L 9/08/96 - 9/29/99 Operations Director, DP&L 7/27/95 - 9/08/96 Judy Wyatt 49 Group Vice President, 1/31/95 - 3/01/01 DPL Inc. and DP&L
17 PART II Item 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - -------------------------------------------------------------------------------- As of December 31, 2000, there were 35,903 holders of record of DPL common equity, excluding individual participants in security position listings. As long as any Preferred Stock is outstanding, DP&L's Amended Articles of Incorporation contain provisions restricting the payment of cash dividends on any of its Common Stock if, after giving effect to such dividend, the aggregate of all such dividends distributed subsequent to December 31, 1946 exceeds the net income of DP&L available for dividends on its Common Stock subsequent to December 31, 1946, plus $1,200,000. As of year-end, all earnings reinvested in the business of DP&L were available for Common Stock dividends. Item 6 - SELECTED FINANCIAL DATA - -------------------------------------------------------------------------------- The information required by this item of Form 10-K is set forth on page 28 of the registrant's 2000 Annual Report, which page is incorporated herein by reference. Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- The information required by this item of Form 10-K is set forth in Note 4 to the Consolidated Financial Statements on page 22 and on pages 1 and 13 through 16 of the registrant's 2000 Annual Report, which pages are incorporated herein by reference. This report contains certain forward-looking statements regarding plans and expectations for the future. Investors are cautioned that actual outcomes and results may vary materially from those projected due to various factors beyond DP&L's control, including abnormal weather, unusual maintenance or repair requirements, changes in fuel costs, increased competition, regulatory changes and decisions, changes in accounting rules, and adverse economic conditions. Item 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- The information required by this item of Form 10-K is set forth in the Market Risk section on page 15 of the registrant's 2000 Annual Report, which page is incorporated herein by reference. 18 Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - -------------------------------------------------------------------------------- The information required by this item of Form 10-K is set forth on pages 17 through 28 of the registrant's 2000 Annual Report, which pages are incorporated herein by reference. REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE ------------------------------- To the Board of Directors of DPL inc. Our audits of the consolidated financial statements referred to in our report dated January 29, 2001 appearing on page 27 of the 2000 Annual Report to Shareholders of DPL Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Dayton, Ohio January 29, 2001 Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - -------------------------------------------------------------------------------- None. 19 PART III Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------------------------------------------------------------------------------- DIRECTORS OF THE REGISTRANT The information required by this item of Form 10-K is set forth in DPL's definitive Proxy Statement relating to the 2001 Annual Meeting of Shareholders ("2001 Proxy Statement"), which is incorporated herein by reference, and on page 17 of this Form 10-K. Item 11 - EXECUTIVE COMPENSATION - -------------------------------------------------------------------------------- The information required by this item of Form 10-K is set forth in the 2001 Proxy Statement, which is incorporated herein by reference. Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------------------------------------------------------------------------------- The information required by this item of Form 10-K is set forth in the 2001 Proxy Statement, which is incorporated herein by reference. Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------------------------------- None. PART IV Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K - --------------------------------------------------------------------------------
Pages of 2000 Form 10-K Incorporated by Reference --------------- Report of Independent Accountants...................... 19
(a) Documents filed as part of the Form 10-K 20
Pages of 2000 Annual Report Incorporated by Reference ----------------------- 1. FINANCIAL STATEMENTS -------------------- Consolidated Statement of Results of Operations for the three years in the period ended December 31, 2000..................................... 17 Consolidated Statement of Cash Flows for the three years in the period ended December 31, 2000.................................................. 18 Consolidated Balance Sheet as of December 31, 2000 and 1999..................... 19 Consolidated Statement of Shareholders' Equity for the three years in the period ended December 31, 2000 .......................................... 20 Notes to Consolidated Financial Statements ..................................... 21-27 Report of Independent Accountants .............................................. 27 The following schedule is filed herewith: Page No. ---------------------- 2. FINANCIAL STATEMENT SCHEDULE ---------------------------- For the three years in the period ended December 31, 2000: Schedule II - Valuation and qualifying accounts................................. 27 The information required to be submitted in schedules I, III, IV and V is omitted as not applicable or not required under rules of Regulation S-X.
21
3. EXHIBITS -------- The exhibits filed as a part of this Annual Report on Form 10-K are: Incorporated Herein by Reference as Filed With --------------------------------- 2(a) Copy of the Agreement of Merger among DPL Inc., Holding Sub Inc. and Exhibit A to the 1986 Proxy DP&L dated January 6, 1986........................................... Statement (File No. 1-2385) 2(b) Copy of Asset Purchase Agreement, dated December 14, 1999, between Exhibit 2 to Report on Form 10-Q the Dayton Power and Light Company, Indiana Energy, Inc., and for the quarter ended September Number-3CHK, Inc..................................................... 30, 2000 (File No. 1-9052) 3 Copy of Amended Articles of Incorporation of DPL Inc. dated February Filed herewith as Exhibit 3 on 1, 2000.............................................................. page 28 4(a) Copy of Composite Indenture dated as of October 1, 1935, between DP&L Exhibit 4(a) to Report on Form and The Bank of New York, Trustee with all amendments through the 10-K for the year ended Twenty-Ninth Supplemental Indenture.................................. December 31, 1985 (File No. 1-2385) 4(b) Copy of the Thirtieth Supplemental Indenture dated as of March 1, Exhibit 4(h) to Registration 1982, between DP&L and The Bank of New York, Trustee................. Statement No. 33-53906 4(c) Copy of the Thirty-First Supplemental Indenture dated as of Exhibit 4(h) to Registration November 1, 1982, between DP&L and The Bank of New York, Trustee..... Statement No. 33-56162 4(d) Copy of the Thirty-Second Supplemental Indenture dated as of Exhibit 4(i) to Registration November 1, 1982, between DP&L and The Bank of New York, Trustee..... Statement No. 33-56162 4(e) Copy of the Thirty-Third Supplemental Indenture dated as of Exhibit 4(e) to Report on Form December 1, 1985, between DP&L and The Bank of New York, Trustee..... 10-K for the year ended December 31, 1985 (File No. 1-2385) 4(f) Copy of the Thirty-Fourth Supplemental Indenture dated as of April 1, Exhibit 4 to Report on Form 10-Q 1986, between DP&L and The Bank of New York, Trustee................. for the quarter ended June 30, 1986 (File No. 1-2385) 4(g) Copy of the Thirty-Fifth Supplemental Indenture dated as of December Exhibit 4(h) to Report on Form 1, 1986, between DP&L and The Bank of New York, Trustee.............. 10-K for the year ended December 31, 1986 (File No. 1-9052)
22 4(h) Copy of the Thirty-Sixth Supplemental Indenture dated as of Exhibit 4(i) to Registration August 15, 1992, between DP&L and The Bank of New York, Trustee...... Statement No. 33-53906 4(i) Copy of the Thirty-Seventh Supplemental Indenture dated as of Exhibit 4(j) to Registration November 15, 1992, between DP&L and The Bank of New York, Trustee.... Statement No. 33-56162 4(j) Copy of the Thirty-Eighth Supplemental Indenture dated as of Exhibit 4(k) to Registration November 15, 1992, between DP&L and The Bank of New York, Trustee.... Statement No. 33-56162 4(k) Copy of the Thirty-Ninth Supplemental Indenture dated as of January Exhibit 4(k) to Registration 15, 1993, between DP&L and The Bank of New York, Trustee............. Statement No. 33-57928 4(l) Copy of the Fortieth Supplemental Indenture dated as of February 15, Exhibit 4(m) to Report on 1993, between DP&L and The Bank of New York, Trustee................. Form 10-K for the year ended December 31, 1992 (File No. 1-2385) 4(m) Copy of Forty-First Supplemental Indenture dated as of February 1, Exhibit 4(m) to Report on Form 1999, between DP&L and the Bank of New York, Trustee................. 10-K for the year ended December 31, 1998 (File No. 1-2385) 4(n) Copy of the Credit Agreement dated as of November 2, 1989 between DPL Exhibit 4(k) to DPL Inc.'s Inc., the Bank of New York, as agent, and the banks named therein.... Registration Statement on Form S-3 (File No. 33-32348) 4(o) Copy of the Note Purchase Agreement dated as of April 6, 1999 for Exhibit 4 to Report on Form 10-Q $500 million of 6.32% Senior Notes due 2004.......................... dated June 30, 1999 (File No. 1-9052) 4(p) Copy of Shareholder Rights Agreement between DPL Inc. and The First Exhibit 4 to Report on Form 8-K National Bank of Boston.............................................. dated December 13, 1991 (File No. 1-9052) 4(q) Copy of Securities Purchase Agreement dated as of February 1, 2000 by Exhibit 99(b) to Schedule TO and among DPL Inc. and DPL Capital Trust I, Dayton Ventures LLC and dated February 4, 2000 (File No. Dayton Ventures Inc. and certain exhibits thereto.................... 1-9052) 10(a) Copy of Directors' Deferred Stock Compensation Plan amended December Filed herewith as Exhibit 10(a) 31, 2000............................................................. on page 38
23 10(b) Copy of Directors' Deferred Compensation Plan amended December 31, Filed herewith as Exhibit 10(b) 2000................................................................. on page 50 10(c) Copy of Management Stock Incentive Plan amended December 31, 2000.... Filed herewith as Exhibit 10(c) on page 70 10(d) Copy of Key Employees Deferred Compensation Plan amended December 31, Filed herewith as Exhibit 10(d) 2000................................................................. on page 84 10(e) Form of Change of Control Agreement with Certain Executive Officers.. Filed herewith as Exhibit 10(e) on page 103 10(f) Copy of Stock Option Plan............................................ Filed herewith as Exhibit 10(f) on page 115 13 Copy of DPL's 2000 Annual Report to Shareholders (pages 1 and 13-28). Filed herewith as Exhibit 13 on page 125 18 Copy of preferability letter relating to change Exhibit 18 to Report on Form in accounting for unbilled revenues from 10-K for the year ended Price Waterhouse LLP................................................. December 31, 1987 (File No. 1-9052) 21 List of Subsidiaries of DPL Inc...................................... Filed herewith as Exhibit 21 on page 154 23 Consent of PricewaterhouseCoopers LLP................................ Filed herewith as Exhibit 23 on page 154
Pursuant to paragraph (b) (4) (iii) (A) of Item 601 of Regulation S-K, DPL Inc. has not filed as an exhibit to this Form 10-K certain instruments with respect to long-term debt if the total amount of securities authorized thereunder does not exceed 10% of the total assets of DPL Inc. and its subsidiaries on a consolidated basis, but hereby agrees to furnish to the SEC on request any such instruments. (b) REPORTS ON FORM 8-K None. 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DPL Inc. Registrant March 30, 2001 /s/ Allen M. Hill ---------------------------------- Allen M. Hill President and Chief Executive Officer (principal executive officer) 25 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ T. J. Danis Director March 30, 2001 - ------------------------ (T. J. Danis) Director March 30, 2001 - ------------------------ (J. F. Dicke, II) /s/ P. H. Forster Director and Chairman March 30, 2001 - ------------------------ (P. H. Forster) /s/ E. Green Director March 30, 2001 - ------------------------ (E. Green) /s/ J. G. Haley Director March 30, 2001 - ------------------------ (J. G. Haley) /s/ A. M. Hill Director, President and Chief March 30, 2001 - ------------------------ Executive Officer (A. M. Hill) Director March 30, 2001 - ------------------------ (W. A. Hillenbrand) /s/ D. R. Holmes Director March 30, 2001 - ------------------------ (D. R. Holmes) /s/ B. R. Roberts Director March 30, 2001 - ------------------------ (B. R. Roberts) Director March 30, 2001 - ------------------------ (G. R. Roberts) Director March 30, 2001 - ------------------------ (S. M. Stuart) /s/ E. M. McCarthy Vice President and Chief Financial March 30, 2001 - ------------------------ Officer (principal financial and (E. M. McCarthy) accounting officer) 26 SCHEDULE II
DPL Inc. VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 2000, 1999, and 1998 ($ in thousands) - ---------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------------------------------------------------------------------------------------- Additions ------------------------ Balance at Charged Balance at Beginning of to Deductions End of Description Period Income Other (1) Period - ---------------------------------------------------------------------------------------------------------------------- 2000: Deducted from accounts receivable-- Provision for uncollectible accounts $ 4,355 $ 9,115 $ -- $ 6,619 $ 6,851 1999: Deducted from accounts receivable-- Provision for uncollectible accounts $ 4,744 $ 5,171 $ -- $ 5,560 $ 4,355 1998: Deducted from accounts receivable-- Provisions for uncollectible accounts $ 5,007 $ 8,182 $ -- $ 8,445 $ 4,744
(1) Amounts written off, net of recoveries of accounts previously written off. 27 EX-3 2 a2043323zex-3.txt EXHIBIT 3 EXHIBIT 3 AMENDED ARTICLES OF INCORPORATION OF DPL INC. ---------------- FIRST: The name of the Corporation is DPL Inc. SECOND: The place in the State of Ohio where its principal office is to be located is the City of Dayton, Montgomery County, Ohio. THIRD: The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be formed under Section 1701.01 to 1701.98, inclusive, of the Ohio Revised Code. FOURTH: The authorized number of shares of the Corporation is 258,000,000, which shall be classified as follows: 8,000,000 Preferred Shares, without par value (hereinafter called "Preferred Shares"); and 250,000,000 Common Shares, with a par value of $.01 per Share (hereinafter called "Common Shares"). SECTION 1. Preferred Shares. The express terms and provisions of the Preferred Shares are as follows: I. Preferred Shares may be issued in series from time to time. Within the limitations and restrictions set forth in this Article Fourth, the Board of Directors is expressly authorized, at one time or from time to time, to adopt amendments to the Articles of Incorporation in respect of any authorized and unissued Preferred Shares to fix or alter the division of such shares into series, the designation and number of shares of each series, the dividend rates, redemption rights, redemption prices, liquidation prices, sinking fund requirements, conversion rights, and restrictions on issuance of shares of the same series or of any other class or series. The express terms and provisions of Preferred Shares of different series shall be identical except that there may be variations in respect of any or all of the particulars hereinbefore set forth in this subsection I. In case the stated dividends or the amounts payable on dissolution, liquidation, or sale of assets of the Corporation are not paid in full, all Preferred Shares of all series shall participate ratably in the payment of dividends, including accumulations, if any, in proportion to the sums which would be payable thereon if all dividends thereon were paid in full, and, in any distribution of assets other than by way of dividends, in proportion to the sums which would be payable on such distribution if all sums payable thereon to holders of Preferred Shares were discharged in full. II. The holders of Preferred Shares shall be entitled to receive when and as declared out of the surplus of the Corporation, subject to any limitations prescribed by statute, cash dividends at the respective rates and on the respective dates fixed by the Board of Directors for the shares 28 of the several series of Preferred Shares, and no more. Dividends on each Preferred Share shall be cumulative from the date fixed therefor by the Board of Directors. III. Except as otherwise expressly provided in this Article Fourth, the Corporation shall have the right to redeem the Preferred Shares of any one or more series at any time, either in whole or in such portions, as, from time to time, the Board of Directors may determine, upon the payment to the respective holders thereof of the "General Redemption Price" thereof. The General Redemption Price for shares of each series shall be an amount equal to the sum of (a) the redemption price fixed by the Board of Directors for the shares of such series prior to the initial issuance of the first shares of such series; and (b) an amount equivalent to all accumulated and unpaid dividends on the shares to be redeemed to the date fixed for redemption (hereinafter referred to as the "Redemption Date"), whether or not such dividends shall have been earned or declared. In lieu of such payment the Corporation may deposit the General Redemption Price of the shares to be redeemed on or prior to the Redemption Date, with such responsible bank or trust company as may be designated by the Board of Directors, in trust, for payment on or after the date of such deposit (without awaiting the Redemption Date) to the holders of Preferred Shares then to be redeemed. If less than the whole amount of outstanding Preferred Shares of any particular series shall be redeemed at any time, the shares thereof to be redeemed shall be selected by lot. Notice of any such redemption, in whole or in part, and of any such deposit made or to be made of such General Redemption Price, shall be mailed to each holder of Preferred Shares so to be redeemed, at his address registered with the Corporation, not less than thirty days prior to the Redemption Date, and, if less than all of such shares owned by such shareholders are to be redeemed, the notice shall specify the number of shares thereof which are to be redeemed. Such notice having been so given, or irrevocable written authority to the depository having been given at the time of making the deposit provided for herein forthwith to give such notice, all rights of the respective holders of such shares as shareholders of the Corporation by reason of the ownership of such shares, except the right to receive the General Redemption Price of such shares upon presentation and surrender of their respective certificates representing such shares, shall cease from and after the Redemption Date (unless default shall be made by the Corporation in providing moneys for the payment of the General Redemption Price), or, if the General Redemption Price shall have been deposited on or prior to the Redemption Date as above permitted, from and after the date of such deposit; provided, however, that in lieu of the right to receive the General Redemption Price, any rights of conversion or exchange may be exercised up to the close of business on the Redemption Date. If after such deposit any Preferred Shares so called shall be so converted or exchanged, the amount theretofore deposited with the depository for the redemption thereof shall forthwith be paid over by it to the Corporation. Any other moneys so deposited which shall remain unclaimed by the holders of Preferred Shares so called for redemption at the end of two years after the Redemption Date shall be paid by such depository to the Corporation, after which the holders of such Preferred Shares shall look only to the Corporation for payment of the General Redemption Price thereof, without interest. IV. Upon the dissolution, liquidation or sale of all or substantially all the assets of the Corporation, the holders of Preferred Shares shall be entitled to receive the following sums, before any payment shall be made to the holders of Common Shares with respect to payment upon dissolution, liquidation or sale of assets: 29 (a) in case of any involuntary dissolution or liquidation or forced sale of all or substantially all of the assets of the Corporation, each Preferred Share of each series shall be entitled to receive the amount fixed for such contingency by the Board of Directors for the shares of such series prior to the issuance of the first shares of such series, together with a sum, whether or not earned or declared, equivalent to all accumulated and unpaid dividends thereon to the date of such payment; or (b) in case of any voluntary dissolution or liquidation or voluntary sale of all or substantially all of the assets of the Corporation, each Preferred Share of each series shall be entitled to receive the amount fixed for such contingency by the Board of Directors for the shares of such series prior to the initial issuance of the first shares of such series, together with a sum, whether or not earned or declared, equivalent to all accumulated and unpaid dividends thereon to the date of such payment. After all sums payable on the Preferred Shares as herein provided upon a particular contingency shall have been paid in full, but not prior thereto, the Common Shares shall be entitled to payment of all other sums then distributable. For the purposes of this subsection IV, a consolidation or merger of the Corporation with or into any other corporation, or a consolidation or merger of any other corporation with or into the Corporation shall not be deemed a dissolution, liquidation, or sale of assets. V. The holders of Preferred Shares shall be entitled to one vote for each Preferred Share held by them respectively. VI. So long as any of the Preferred Shares shall remain outstanding, no dividend (other than dividends payable in Common Shares) shall be paid, nor shall any distribution (by purchase, redemption, payment to any sinking fund, or otherwise, other than stock splits) be made, on any of the Common Shares unless: (a) all dividends on all outstanding Preferred Shares shall have been paid and full dividends thereon for the then current quarterly dividend period shall have been declared and a sum sufficient for the payment thereof set apart therefor; and (b) the Corporation shall not be in arrears in respect of any sinking fund obligation in respect of any series of Preferred Shares. VII. Preferred Shares acquired by the Corporation through the exercise by the holders thereof of any conversion privilege shall not be re-issued except as hereinafter provided. Such shares and any other Preferred Shares acquired otherwise than through the operation of any sinking fund and not used to reduce the amount of any sinking fund installment shall, upon compliance with such provisions of law relating to the retirement of shares as may be applicable, have the status of authorized and unissued Preferred Shares which are unclassified into any series. Preferred Shares acquired by the Corporation through the operation of any sinking fund or which have been used to reduce the amount of any sinking fund installment shall be cancelled and not re-issued, and the Corporation shall from time to time take appropriate corporate action to reduce the authorized number of Preferred Shares accordingly. 30 VIII. No holder of Preferred Shares of any series, as such holder, shall have any preemptive rights in, or preemptive rights to purchase or subscribe to, any shares of the Corporation, or any bonds, debentures, or other securities convertible into any shares of the Corporation, other than such rights of conversion or exchange as shall be expressly granted by the Board of Directors prior to the initial issuance of the first shares of the series of which such Preferred Shares shall constitute a part. IX. There shall be a series of the Preferred Shares consisting of 1,200,000 shares and designated as "Series A Preferred Shares," which shall have, in addition to the terms set forth elsewhere in these Articles of Incorporation, the following preferences, limitation and relative rights: (a)(1) The holders of Series A Preferred Shares, in preference to the holders of Common Shares, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a Series A Preferred Share or fraction thereof, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $40.50 or (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in Common Shares or a subdivision of the outstanding Common Shares (by reclassification or otherwise), declared on the Common Shares since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any Series A Preferred Share or fraction thereof. In the event the Corporation shall at any time on or after December 3, 1991, declare or pay any dividend on Common Shares payable in Common Shares, or effect a split or subdivision or combination or consolidation of the outstanding Common Shares (by reclassification or otherwise than by payment of a dividend in Common Shares) into a greater or lesser number of Common Shares, then in each such case the amount to which holders of Series A Preferred Shares were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. (2) The Corporation shall declare a dividend or distribution on the Series A Preferred Shares as provided in paragraph (1) of this Subsection IX(a) immediately after it declares a dividend or distribution on the Common Shares (other than a dividend payable in Common Shares); provided that, in the event no dividend or distribution shall have been declared on the Common Shares during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $40.50 per share on the Series A Preferred Shares shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (3) Dividends shall begin to accrue and be cumulative on outstanding Series A Preferred Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such Series A Preferred Shares, unless the date of issue of such shares is prior to the record date for the first 31 Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date, or is a date after the record date for the determination of holders of Series A Preferred Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the Series A Preferred Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of Series A Preferred Shares entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. (b) The amount payable on each Series A Preferred Share upon the voluntary or involuntary dissolution or liquidation or the voluntary or forced sale of all or substantially all the assets of the Corporation shall be an amount equal to the greater of (i) $6,600 or (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount to be distributed to holders of Common Shares, in either case together with an amount equal to accumulated and unpaid dividends as specified in Subsection IV of this Section 1. In the event the Corporation shall at any time on or after December 3, 1991, declare or pay any dividend on Common Shares payable in Common Shares, or effect a split or subdivision or combination or consolidation of the outstanding Common Shares (by reclassification or otherwise than by payment of a dividend in Common Shares) into a greater or lesser number of Common Shares, then in each such case the aggregate amount to which holders of Series A Preferred Shares were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. (c) In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the Common Shares are exchanged for or changed into other shares or securities, cash and/or any other property, then in any such case the Series A Preferred Shares then outstanding shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of shares, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each Common Share is changed or exchanged. In the event the Corporation shall at any time on or after December 3, 1991, declare or pay any dividend on Common Shares payable in Common Shares, or effect a split or subdivision or combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a greater or lesser number of Common Shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series A Preferred Shares shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. (d) The Series A Preferred Shares shall not be redeemable. X. There shall be a series of the Preferred Shares consisting of 6,800,000 shares and designated as "Series B Voting Preferred Shares" (the "Series B Preferred Shares") which shall 32 have, in addition to the terms set forth elsewhere in these Articles of Incorporation, the following preferences, limitations and relative rights: (a) The Series B Preferred Shares shall, with respect to dividends and rights upon liquidation, dissolution or winding up, whether voluntary or involuntary, rank (i) senior to the Common Shares, and, subject to clause (d) of this Subsection X, to each other class of capital shares or series of Preferred Shares or other equity-linked security established after the date on which the first share of Series B Preferred Shares is issued by the Corporation (the "Original Issue Date"), the terms of which do not expressly provide that it ranks senior to or on a parity with the Series B Preferred Shares as to dividends and rights upon liquidation, dissolution or winding up, whether voluntary or involuntary (collectively referred to with the Common Stock as "Junior Securities"), and (ii) on parity only with any shares of Series A Preferred Shares ("Parity Securities") issued by the Corporation in the future. (b)(1) The holders of outstanding shares of Series B Preferred Shares shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation which are, by law, available for such payment, cumulative dividends, payable in cash, at a rate per annum, for each Series B Preferred Share, equal to 8.5% of the sum of (i) $0.01 per share (the "Original Issue Price") and (ii) all compounded accumulated and unpaid dividends on such Series B Preferred Share from the Original Issue Date, in each case, as adjusted for any stock dividends, combinations or splits or similar events with respect to such share. Such dividends shall be paid and compounded quarterly on the first day of March, June, September and December in each year commencing with a payment on March 1, June 1, September 1 or December 1 immediately following the Original Issue Date of dividends accrued from the Original Issue Date. Each such dividend shall be payable to the holders of record of Series B Preferred Shares as they appear on the share register of the Corporation on the corresponding Record Date. As used herein, the term "Record Date" means, with respect to the dividend payable on March 1, June 1, September 1 and December 1, respectively of each year, the preceding February 15, May 15, August 15 and November 15, or such other record date, not more than 60 days or less than 10 days preceding the payment dates thereof, as shall be fixed by the Board of Directors. (2) The amount of dividends payable for each full dividend period for the Series B Preferred Shares shall be computed by dividing the annual 8.5% dividend rate by four. The amount of dividends payable for the initial dividend period, or any other period shorter or longer than a full dividend period, on the Series B Preferred Shares shall be computed on the basis of twelve 30-day months and a 360-day year. (3) Dividends on the Series B Preferred Shares shall accumulate and compound quarterly whether or not the Corporation has earnings or profits, whether or not there are funds legally available for payment of such dividends and whether or not dividends are declared. Dividends will accumulate and compound quarterly to the extent they are not paid. The Corporation shall take all actions required or permitted under the General Corporation Law of Ohio to permit the payment of dividends on the Series B Preferred Shares and shall declare and pay such dividends to the extent there are funds legally available therefor. (4) Except as described in the next succeeding sentence, unless full cumulative dividends on all outstanding Series B Preferred Shares for all past dividends have 33 contemporaneously been declared and paid in full or declared and consideration sufficient for the payment thereof set apart for such payment on the Series B Preferred Shares, then: (A) no dividend shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any shares of Parity Securities; (B) no other distribution shall be declared or made upon, or any sum set apart for the payment of any distribution upon, any shares of Parity Securities; (C) no shares of Parity Securities shall be purchased, redeemed or otherwise acquired or retired for value (except by conversion into or an exchange for shares of Junior Securities) by the Corporation or any entity as to which the Corporation owns, directly or indirectly, more than 50% of such entity's stock (or similar voting interests) entitled to vote generally in the election of directors (or other governing body) (a "Subsidiary"); and (D) no monies shall be paid into or set apart or made available for a sinking or other like fund for the purchase, redemption or other acquisition or retirement for value of any shares of Parity Securities by the Corporation or any of its Subsidiaries. If at any time the Corporation pays less than the total amount of dividends then accrued with respect to the Series B Preferred Shares, such payment shall be distributed ratably among the holders of Series B Preferred Shares based upon the aggregate accrued but unpaid dividends on the Series B Preferred Shares held by each holder. When dividends are not paid in full or consideration sufficient for such payment is not set apart, as aforesaid, all dividends declared upon any other class or series of Parity Securities shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series B Preferred Shares and accumulated and unpaid on such Parity Securities. (5) Unless full cumulative dividends on all outstanding shares of Series B Preferred Shares for all past dividends have been declared and paid in full or declared and consideration sufficient for the payment thereof set apart for such payment on the Series B Preferred Shares, then: (A) no dividend (other than a dividend payable solely in shares of any Junior Securities) shall be declared or paid upon, or any sum set apart for the payment of dividends upon, any shares of Junior Securities; (B) no other distribution shall be declared or made upon, or any sum set apart for the payment of any distribution upon, any shares of Junior Securities; (C) no shares of Junior Securities shall be purchased, redeemed or otherwise acquired or retired for value (excluding an exchange for shares of other Junior Securities) by the Corporation or any of its Subsidiaries; and (D) no monies shall be paid into or set apart or made available for a sinking or other like fund for the purchase, redemption or other acquisition or retirement for value of any shares of Junior Securities by the Corporation or any of its Subsidiaries. (c)(1) Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Junior Securities, the holders of Series B Preferred Shares shall be entitled to be paid out of the remaining assets of the Corporation legally available for distribution with respect to each Series B Preferred Share an amount in cash equal to (A) $0.01 plus (B) any accumulated but unpaid dividends thereon (whether or not declared and whether or not funds of the Corporation are legally available for the payment of dividends), in each case as adjusted for any stock dividends, combinations or splits or similar events with respect to such share (the "Liquidation Preference"). (2) If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be insufficient to pay the full Liquidation Preference with respect to the Series B Preferred Shares and the full liquidation preference plus accumulated and unpaid dividends with respect to all other Parity Securities, the holders of the 34 Series B Preferred Shares and the Parity Securities shall share equally and ratably in any distribution of assets of the Corporation in proportion to the full Liquidation Preference in the case of the Series B Preferred Shares and the full liquidation preference plus accumulated and unpaid dividends in the case of any Parity Securities to which each is entitled. (d) The Corporation shall not, without the prior approval of the holders of a majority of the outstanding Voting Preferred Shares, issue any other preferred shares of the Corporation (other than the Series A Preferred Shares authorized as of the date hereof) (i) of the same class as the Series B Preferred Shares, or (ii) ranking senior to the Voting Preferred Shares. (e)(1) Except as set forth below in this clause (e), the Series B Preferred Shares shall not be redeemable. (2) The Corporation shall, from time to time, at the option of the Equity Purchaser (as defined in the Securities Purchase Agreement dated as of February 1, 2000 by and among the Corporation, DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc. (the "Securities Purchase Agreement"), redeem such number of Series B Preferred Shares so that at no time shall the Equity Purchaser, together with its Affiliates (as defined in the Securities Purchase Agreement), own Common Shares and Series B Preferred Shares representing in excess of 4.9% of the voting power of the Corporation in the election of directors. The redemption price shall be $0.01 per share plus accumulated and unpaid dividends up to the date of redemption (the "Redemption Price."). The Corporation shall pay the Redemption Price promptly, and in any event within two (2) business days, upon receipt of a notice from the Equity Purchaser exercising the above option (the "Redemption Notice"). The Redemption Price may be paid: (i) in cash; (ii) by certified check made out to the Equity Purchaser or its designee; or (iii) by wire transfer of immediately available funds to an account designated by the Equity Purchaser in the Redemption Notice. (3) In the event a holder of a Warrant (as defined in the Securities Purchase Agreement) (the "Exercising Holder") wishes to exercise any Warrants that are not Excess Warrants (as defined in the Securityholders and Registration Rights Agreement, dated as of the date of Closing under the Securities Purchase Agreement, by and among the Corporation, DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc. (the "Securityholders Agreement")), the Corporation shall redeem simultaneously with the exercise of such Warrants an equal number of the Exercising Holders' Series B Preferred Shares for the Redemption Price. The Redemption Price may be paid: (i) in cash; (ii) by certified check made out to the Exercising Holder or its designee; or (iii) by wire transfer of immediately available funds to an account designated by the Exercising Holder. (4) If upon any redemption as set forth in this clause (e) above, the assets of the Corporation available for redemption are insufficient to pay the holders of the shares subject to redemption the full amounts to which they are entitled, all Series B Preferred Shares will be redeemable for cash upon demand. The Series B Preferred Shares not so redeemed shall remain outstanding and be entitled to all the powers, preferences and rights provided herein. At any time thereafter when additional funds of the Corporation are legally available for the redemption of Series B Preferred Shares, such funds will immediately be used to redeem the balance of the shares which the Corporation has become obligated to redeem in accordance with this clause (e) which it has not redeemed. 35 (5) The Corporation will not enter into any contract or agreement (whether verbal or written) restricting or impairing its ability to redeem Series B Preferred Shares in accordance with this clause (e). (f) ISSUANCES OF ADDITIONAL SECURITIES. Prior to the declaration, issuance or consummation of any dividend, spin-off or other distribution or similar transaction by the Corporation of the capital stock of any of its Subsidiaries to the shareholders of the Corporation, the Corporation shall cause (i) additional shares of voting preferred stock of such Subsidiary with substantially similar terms as the Series B Preferred Shares to be issued to each holder of Series B Preferred Shares so that after giving effect to such transaction each such holder shall have the same percentage voting interest in the Series B Preferred Shares and in such shares of voting preferred stock in such Subsidiary as it had in the Corporation immediately prior to such transaction and (ii) any such Subsidiary to enter into with each such holder a securityholders and registration rights agreement with substantially similar terms, conditions, covenants and governance provisions as are provided for in the Securityholders Agreement. SECTION 2. Common Shares. The express terms and provisions of the Common Shares are as follows: I. The rights and preferences of the Common Shares shall be subject in all respects to the rights and preferences of the Preferred Shares in the manner and to the extent provided in this Article Fourth. II. The Common Shares shall rank junior to the Preferred Shares with respect to the payment of dividends. Out of the assets of the Corporation available for dividends remaining after there shall have been paid or declared and set apart for payment full dividends of the Preferred Shares, and subject to the restrictions or limitations contained in the express terms and provisions of any series of Preferred Shares, dividends may be declared and paid upon the Common Shares, but only when and as determined by the Board of Directors. III. The Common Shares shall rank junior to the Preferred Shares with respect to payment upon dissolution, liquidation or sale of assets of the Corporation. Upon the dissolution, liquidation or sale of all or substantially all the assets of the Corporation, after there shall have been paid to or set apart for holders of the Preferred Shares the full preferential amounts to which they are entitled, the holders of Common Shares shall be entitled to receive pro rata all of the remaining assets of the Corporation available for distribution to its shareholders. IV. The holders of Common Shares shall be entitled to one vote for each Common Share held by them respectively. V. No holder of Common Shares, as such holder, shall have any preemptive rights in, or preemptive rights to purchase or subscribe to, any shares of the Corporation, or any bonds, debentures, or other securities convertible into any shares of the Corporation. FIFTH: When authorized by the affirmative vote of the Board of Directors of the Corporation, without the action or approval of the shareholders of the Corporation, the Corporation may, to the extent not otherwise prohibited by law, purchase, or contract to purchase 36 at any time and from time to time, shares of any class issued by the Corporation, voting trust certificates for shares, bonds, debentures, notes, scrip, warrants, obligations, evidences or indebtedness or any other securities of the Corporation, for such prices and upon and subject to such terms and conditions as the Board of Directors may determine. SIXTH: Unless these Articles of Incorporation or the Regulations of the Corporation provide otherwise, the vote required for the adoption by shareholders of the Corporation of any proposal shall be the affirmative vote of the holders of shares entitling them to exercise two-thirds of the voting power of the Corporation on such proposal if on the date this Article Sixth was adopted by shareholders of the Corporation, the General Corporation Law of Ohio, as then in effect, would have required for adoption of the particular proposal the affirmative vote of the holders of shares entitling them to exercise two-thirds of the voting power of the Corporation on the particular proposal. Whenever the holders of shares of any particular class of shares of the Corporation are entitled to vote as a class on the adoption of a proposal, the affirmative vote of the holders of shares of the particular class required to adopt the proposal shall be determined without regard to the preceding sentence. These Amended Articles of Incorporation supersede the existing Articles of Incorporation and all amendments thereto. 37 EX-10.A 3 a2043323zex-10_a.txt EXHIBIT 10(A) EXHIBIT 10(a) THE DAYTON POWER AND LIGHT COMPANY DIRECTORS' DEFERRED STOCK COMPENSATION PLAN (AS AMENDED THROUGH DECEMBER 31, 2000) 1. GENERAL. The name of the plan shall be the "Directors' Deferred Stock Compensation Plan". The Plan provides Directors of the Company who are not employees of the Company, with deferred payments of stock compensation awards payable for services as a Director. 2. DEFINITIONS. When used herein, the following terms shall have the following meanings: A. "Stock Awards" means Shares issued by DPL Inc. pursuant to this Plan. B. "Board of Directors" means the Board of Directors of DPL Inc. in place from time to time prior to a Change of Control as defined herein. C. "Change of Control" means 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 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 or commences a tender offer to become the beneficial owner, directly or indirectly, of securities of DPL or DP&L representing (A) 15% 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 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 enters into an agreement to merge or consolidate itself, or an agreement to consummate 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 38 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 enters into an agreement to sell, lease, exchange or otherwise transfer or dispose 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 subsidiar(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; (iv) any transaction referred to in (ii) or (iii) above is consummated; or (v) those persons serving as directors of DPL or DP&L on February 1, 2000 (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). D. "CEO" means the Chief Executive Officer of DPL duly installed, from time to time, prior to a Change of Control. However, "Committee" will be substituted for "CEO" in discussing the CEO's rights and benefits in the Plan. E. "Committee" means the Compensation and Management Review Committee of the Board of Directors of DPL Inc. or such other committee(s) as the Board of Directors of DPL Inc. may designate from time to time to administer the Plan. F. "Company" means The Dayton Power and Light Company ("DP&L"), DPL Inc. ("DPL"), and any entity which, prior to a Change of Control is controlling, controlled by or under common control with DP&L or DPL Inc. G. "Election Form" means the form attached hereto as Exhibit A (or such other form as the Committee may designate from time to time) which shall be used for electing the manner and time to receive payment of Stock Awards in accordance with the provisions of the Plan. H. "Participant" means any director of the Company who is not an employee of the Company. I. "Plan" means this Directors' Deferred Stock Compensation Plan. J. "Share" or "Shares" means the common shares of DPL Inc. 39 K. "Stock Deferral Account" means the account established by the Company in the Participant's name to which Shares will be credited in accordance with the Stock Deferral Provisions. L. "Stock Deferral Provisions" means those provisions of the Plan under which: (1) The Committee may, in its discretion, annually determine the number of Shares to be awarded(hereinafter "Stock Awards") for each Participant; (2) Consistent with Sections 3(A) and 3(B) hereof, the Company shall contribute to one or more of the Master Trusts the number of Shares authorized as Stock Awards, on behalf of each Participant; (3) Each Participant's Stock Deferral Account shall be credited with the Shares in the Stock Award; (4) Cash dividends paid on the Shares held by the Master Trusts shall be used by the Trustees to acquire additional Shares from the Company; (5) Each Participant's Stock Deferral Account shall also be credited with Shares received as stock dividends and stock splits, and warrants and other property received with respect to Shares held in the Stock Deferral Account; and (6) Amounts credited to a Participant's Stock Deferral Account (including Shares purchased by the Trustees with cash dividends received on Shares held by the Master Trusts) shall be paid in the form of Shares in accordance with the Participant's election in a lump sum payment or approximately equal annual installments over a period of years commencing on the date specified by the Participant on the Election Form. M. "Trustees" means, as the context may require, the trustees of a Master Trust to the extent that benefits under the Plan are being funded under such Master Trust. 3. MASTER TRUSTS. A. PARTICIPANT'S ACCOUNTS. The Company has established, and may in the future establish, one or more trusts (each such trust, as it may be amended from time to time, is referred to herein as a "Master Trust") for the purposes, among others, of securing the performance by the Company of its obligation to Participants to make the distributions under the Plan and has funded one or more of the Master Trusts in an aggregate amount of cash and/or Shares as the Company has determined to be equal to the value of the benefits of the Participants under the Plan. Pursuant to one or more of the Master Trusts, each Participant has been assigned a separate account as a mechanism for measuring the potential benefits which may be distributed in the future. 40 Subsequent transfers of cash and/or Shares which the Company is required to make to the Master Trusts pursuant to Section 3.B, 4.B or 9.C hereof or otherwise shall be allocated among the Master Trusts as the Committee may determine from time to time. B. SUCCESSIVE TRANSFERS. On or before the twentieth day following the end of each successive calendar quarter, the Company shall transfer to one or more of the Master Trusts such additional amount of cash and/or Shares as the Company shall determine to be necessary to fund the benefits of Participants under the Plan. C. TITLE TO FUNDS. DP&L shall retain beneficial ownership of all cash or Shares transferred to the Master Trusts and such cash or Shares will be subject to the claims of DP&L's creditors. No Participant or beneficiary has or will have any interest in the cash or Shares held in the Master Trusts or in any other specific asset of the Company. 4. STOCK AWARDS AND ACCOUNT DESIGNATION. A. STOCK AWARDS. The Committee may, in its discretion, determine, from time to time, the number of Shares to be awarded as Stock Awards for services to be performed by each Participant. Any such Stock Award to any Participant may, in the Committee's discretion, contain such conditions to the earning and/or vesting of such Stock Award as may be set forth in such Stock Award. The Committee's determinations need not be uniform. The Committee may, in its discretion, waive any of the conditions to the earning or vesting of any Stock Award. Notwithstanding any provision of the Plan to the contrary, in the event of the death or disability of a Participant, then any Stock Award awarded to such Participant which has not as yet been earned and/or vested shall immediately become fully earned and vested and shall be paid in accordance with Section 5. Stock Awards deferred pursuant to this Plan will not prevent a Participant from participating in any other compensation program offered by the Company. B. STOCK DEFERRAL PROVISIONS. When the Committee authorizes a Stock Award for any Participant, the Company shall contribute the authorized number of Shares to the Master Trust(s) pursuant to which benefits under the Plan are being funded. The Shares so contributed shall be credited to the Participant's Stock Deferral Account but shall at all times be registered in the name of the Trustees of the Master Trust to which such Shares were contributed. All cash or Shares credited to a Participant's Stock Deferral Account and held in the Master Trusts will be subject to the claims of DP&L's creditors. No Participant or beneficiary has any property interest in deferred amounts or in any specific assets of the Company. The Trustees shall use cash dividends paid on the Shares held in a Participant's Stock Deferral Account to purchase additional Shares from the Company, except to the extent that such purchase will result in fractional Shares. The Trustees shall credit a Participant's Stock Deferral Account with such 41 additional Shares as well as Shares from stock dividends and stock splits, and warrants and other property received with respect to Shares held in a Participant's Stock Deferral Account. 5. PAYMENTS UNDER THE PLAN. A. TIME AND MANNER OF DISTRIBUTIONS. The amount credited to a Participant's Stock Deferral Account which are earned and vested shall be distributed in a lump sum payment or approximately equal annual installments over a period of years with such lump sum payment being made or such installment payments commencing, unless otherwise determined by the Committee in its discretion, on or prior to the January 31 immediately following: 1) the date that the Participant ceases to be a Director of the Company; 2) the date the Participant reaches an age at which the Participant may earn unlimited amounts without reduction of the benefits under the Social Security Act and the regulations promulgated thereunder; or 3) such other date, either before or after his termination of service, as specified by the Participant on his Election Form; and with subsequent annual installments, if payments are to be made in annual installments, to be paid on or prior to each January 31 thereafter until the Participant's Stock Deferral Account has been paid in full. Within the limitations of this Section 5(A) a Participant shall designate on the Election Form the manner and date of payment of deferred amounts from the Participant's Stock Deferral Account. All distributions pursuant to this Plan shall be made in the form of Shares and a Participant shall be entitled to receive one Share for each earned and vested Share credited to his Stock Deferral Account. If a Participant elects to receive distributions in installments over a period of years, the amount of each installment shall be determined by dividing the number of Shares credited to the Participant's Stock Deferral Account on the date of any payment by the number of remaining installments to be made to Participant on each such date. At the time that each installment distribution is to be made, the Trustees shall distribute Shares to the Participant in accordance with the preceding paragraph. Any cash dividend credited to a Participant's Stock Deferral Account that is not sufficient to acquire Shares shall be distributed with the last installment distribution to such Participant. B. FILING ELECTION FORM TO RECEIVE STOCK AWARDS. On or before December 31 of each year, each Participant will file an 42 Election Form designating the manner and date of payment of the Shares to be contributed by the Company to such Participant's Stock Deferral Account in the immediate succeeding calendar year. Any person who becomes a Director during any calendar year, and who was not a Director of the Company on the preceding December 31, may file an Election Form before his term begins, indicating the manner and date of payment of any Shares to be contributed by the Company to the Master Trusts in such year. Each Election Form shall be delivered to the Secretary of the Company. C. (INTENTIONALLY LEFT BLANK.) D. DESIGNATION OF BENEFICIARY. Each Participant shall designate one or more beneficiaries on the Election Form to whom payments shall be made in the event of the Participant's death. The Participant shall have the right to change the beneficiary or beneficiaries from time to time, provided, however, no change shall become effective until received in writing by the Secretary of the Company. In the event the Participant has not designated a beneficiary or a designated beneficiary is not living at the time of the Participant's death, then payments required to be made by a Master Trust after the Participant's death shall be made to the Participant's estate. E. EARLY DISTRIBUTION. A Participant may in no event receive a distribution of all or a portion of the Shares credited to his account prior to the time that the Participant elected to receive such Shares pursuant to Section 5. Notwithstanding the foregoing: (i) the CEO may, upon receiving a written request from the Participant or his or her beneficiary as provided in Section 5.D. hereof in the event of the death of a Participant, upon determining that a distribution is in the best interest of the Company and the Participant (or his or her beneficiary) taking into account the financial condition of each, distribute all or a portion of the Shares credited to the Participant's account; and (ii) upon written request by a Participant to receive all Shares or amounts credited to his account made at any time after termination of his or her status as a director of the Company, for any reason, after a Change of Control, the amount credited to such Participant's account shall be paid to such Participant in a lump sum within ten (10) days after the date of such written request, provided that the Participant shall be entitled to only 90% of such account balance and shall irrevocably forfeit 10% of such account balance by making the withdrawal. F. WITHHOLDINGS. Any taxes required to be withheld by any Federal, state or local government will be deducted from all deferred payments and paid for the account of the Participant. 6. LACK OF STOCK EXCHANGE LISTING. In the event that the Shares cease to be listed on the New York Stock Exchange, then, unless a Participant's entire Stock Deferral Account is then immediately payable to such Participant in accordance with Section 9(B), such Participant's Standard Deferral Account under the Company's 1991 Amended Directors' 43 Deferred Compensation Plan (the "Deferred Compensation Plan") shall be credited with an amount equal to the Conversion Price multiplied by the number of Shares credited to such Participant's Stock Deferral Account and thereafter payment of the amount so credited to such Participant's Standard Deferral Account shall be in accordance with the Deferred Compensation Plan. For this purpose, (a) "Conversion Price" means: (i) the Fair Market Value of a Share on the date that the Shares cease to be listed on the New York Stock Exchange or (ii) if the Shares cease to be so listed as a result of a Change of Control, the greater of (x) the amount determined in accordance with the foregoing clause (i), (y) the closing sales price of a Share on the New York Stock Exchange--Composite Transaction Tape on the date the Shares cease to be so listed or (z) the closing sales price of a Share on the New York Stock Exchange--Composite Transaction Tape on the date on which a Change of Control occurs and (b) "Fair Market Value" means the average of the closing sale prices of a Share on the last trading day of each of the four calendar months preceding the date the value of a Share is to be determined, as reported on the New York Stock Exchange-Composite Transaction Tape. 7. PAYMENTS IN THE EVENT OF DEATH. In the event that a Participant dies before all payments from the Participant's Stock Deferral Account have been distributed, the amounts credited to the Participant's Stock Deferral Account at the time of the Participant's death shall be paid to the beneficiary designated on the Participant's Election Form, in a lump sum payment in the form of Shares on the first business day of the month following the month in which the Participant dies unless the Participant elects on the Election Form for payments to continue or commence being paid to the Participant's beneficiary in the same method as would have been paid to the Participant, if surviving. 8. VOTING INSTRUCTIONS. The Trustees shall solicit instructions from each Participant regarding the manner in which Shares (other than Shares subject to a Stock Award which is not fully earned and vested) and any related options, conversion privileges, or subscription rights credited to such Participant's Stock Deferral Account shall be voted or exercised. Such solicitation shall inform the Participant of the number of such Shares, options, conversion privileges, or subscription rights credited to his Stock Deferral Account as of the last day preceding such notice, describe the matters to be voted upon or exercised and solicit the Participant's instructions regarding the voting or exercise of such Shares, options, conversion privileges, or subscription rights. The Trustees shall take into consideration the Participant's instructions regarding the voting of such Shares or the exercise of such options, conversion privileges, or subscription rights but shall retain the discretion to vote such Shares or exercise such 44 options, conversion privileges, or subscription rights in a manner other than as instructed by the Participant. If a Participant fails to instruct the Trustees regarding the manner in which such Shares shall be voted or such options, conversion privileges, or subscription rights shall be exercised, such Shares shall be voted or such options, conversion privileges, or subscription rights shall be exercised by the Trustees in their discretion. 9. CHANGE OF CONTROL. A. AUTOMATIC TRANSFER OF AUTHORITY. In the event of a Change of Control, any and all authority and discretion which is exercisable by the Committee, or the CEO, as heretofore or hereafter described in the Plan, shall automatically be transferred to the Trustees of each Master Trust to the extent that benefits under the Plan are being funded under such Master Trust. B. CONVERSION UPON CHANGE OF CONTROL. Upon the termination of a Participant's status as a director of the Company, for any reason, after a Change of Control, and notwithstanding any other provision of this Plan, or of any Stock Award, or in any installment election by the Participant, to the contrary, the Participant's entire Stock Deferral Account shall be immediately converted to cash based on the greater of (i) the closing sales price of a Share on the New York Stock Exchange--Composite Transaction Tape on the date of termination or (ii) the Conversion Price (as determined in accordance with Section 6). As converted, if the Participant's account in the Plan is not payable upon the Participant's termination as a director of the Company pursuant to his or her Election Form, then such amount shall be immediately credited to the Participant's Standard Deferral Account in the Deferred Compensation Plan (as defined in Section 6 hereof), and thereafter payment of the amount so credited shall be in accordance with the Deferred Compensation Plan. C. FUNDING OF MASTER TRUSTS. Upon a Change of Control, the Company shall immediately transfer to one or more of the Master Trusts an aggregate amount of cash and/or Shares which, when combined with the other assets of the Master Trusts contributed or accruing thereto under or by reason of Section 3 hereof, is sufficient to equal the value of benefits of Participants under the Plan accrued through the date of such Change of Control. 10. NOTICES. Any notice, election or any request required or permitted hereunder, which is to be mailed to or requested from the Secretary or the CEO of the Company shall be delivered or mailed, postage prepaid, as follows: (i) Prior to a Change of Control; to the Secretary of DP&L at: 45 The Dayton Power and Light Company MacGregor Park 1065 Woodman Drive Dayton, Ohio 45432 Attention: Corporate Secretary (ii) After a Change of Control; to the Trustees of each Master Trust pursuant to which benefits under the Plan are being funded, at the notice address specified by such Trustees in the applicable trust agreement. The Company or Trustees may from time to time change their addresses for receipt of notices by giving notice of such change to the Participants, but no such change shall be deemed to be effective until notice thereof is actually received by the Participant to whom it is directed. 11. INTERPRETATION, AMENDMENT AND TERMINATION. Prior to a Change of Control, the Plan shall be administered by the Committee. The decision of the Committee with respect to any questions arising in connection with the administration or interpretation of the Plan shall be final, conclusive and binding. The Committee reserves the right prior to a Change of Control, to amend or modify the Plan from time to time or to terminate the Plan; provided, however, that no amendment, modification or termination of the Plan shall void Stock Awards already deferred pursuant to the Stock Deferral provisions for the current calendar year or any preceding calendar year or shall otherwise adversely affect any right or benefit earned or accrued under the Plan by any Participant prior to any such amendment, modification or termination without the prior written consent of such Participant. In the event of a Change of Control, the authority and discretion which, under the Plan is exercisable by the Committee, shall be exercised as provided in Section 9.A hereof, provided, however, that the Trustees shall have no authority to terminate the Plan. 12. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall confer upon any Participant the right to continue as a Director of the Company. 13. NO RIGHTS AS SHAREHOLDERS. Except to the extent permitted by Section 8 hereof, Participants whose Stock Deferral Accounts are credited with Shares under the Plan shall have no right as a shareholder of the Company as a result thereof unless and until the Shares, if any, are distributed to such Participants in accordance with the Plan. 14. NONASSIGNABLLITY. Neither a Participant, nor his beneficiary, nor any other individual shall have any right by way of anticipation or otherwise to alienate, sell, transfer, assign, pledge, charge or 46 otherwise dispose of any benefits which may become payable under this Plan, prior to the time that payment of any such benefit is made, and any attempted anticipation, alienation, sale, transfer, assignment, pledge, charge, or other disposition shall be null and void. Furthermore, none of the benefits payable under this Plan shall be subject to the claim or legal process of the creditors of any Participant or of the beneficiary, spouse or former spouse of any Participant or of any other person or entity. 15. GOVERNING LAW. This Plan shall be construed under and governed by the laws of the State of Ohio. 47 EXHIBIT A DPL INC. DIRECTORS' DEFERRED STOCK COMPENSATION PLAN ELECTION FORM INSTRUCTIONS: This Election Form relates to Stock Awards deferred pursuant to the Stock Deferral Provisions of the Plan. Under the Stock Deferral Provisions, Company shares are credited to a Participant's Stock Deferral Account in a Master Trust or Trusts created by the Company. STOCK DEFERRAL PROVISIONS. 1. PAYMENTS. Payments shall be made or commence from my Stock Deferral Account by no later than the January 31 immediately following (check one): a. _____ a specified date, either before or after termination of services as a director (Specify date: __________). b. _____ at such time as I reach the age at which I can earn unlimited amounts without reduction of benefits under the Social Security Act and the regulations promulgated thereunder. Such payments from my account shall be paid as follows (check one): a. _____ lump sum payment. b. _____ annually over a period of up to twenty years. (Specify number of years _________) Upon my death, payments to my beneficiary shall continue or commence in the same method to be paid to me as elected above. _____ Yes _____ No Please note that all payments under the Plan will be made in the form of DPL Inc. common shares. 48 DESIGNATION OF BENEFICIARIES All payments required to be made under the Plan to my designated beneficiary in the event of my death shall be made to the following person: Name of designated beneficiary: ------------------------------ Address of designated beneficiary: ------------------------------ ------------------------------ ------------------------------ If the above-designated beneficiary does not survive me, the payments will be made to the following successor beneficiary (or to my estate upon failure to designate otherwise): Name of designated beneficiary: ------------------------------ Address of designated beneficiary: ------------------------------ ------------------------------ ------------------------------ ------------------------------- Signature ------------------------------- Date Election Form was received by the Secretary of the Company on _________________________. ------------------------------ Secretary 49 EX-10.(B) 4 a2043323zex-10_b.txt EXHIBIT (B) EXHIBIT 10(b) THE DAYTON POWER AND LIGHT COMPANY 1991 AMENDED DIRECTORS' DEFERRED COMPENSATION PLAN (AS AMENDED THROUGH DECEMBER 31, 2000) 1. GENERAL. The Amended Deferred Compensation Plan for Directors of the Company is amended and restated in its entirety as set forth herein and the name of the amended and restated plan shall be the "1991 Amended Directors Deferred Compensation Plan" (the "Plan"). The Plan provides Directors who are not employed by the Company the opportunity to defer payment of all or a specified portion of Fees payable for services as a Director or otherwise in accordance with the Standard Deferral Provisions of the Plan. 2. DEFINITIONS. When used herein, the following terms shall have the following meanings: A. "Board of Directors" means the Board of Directors of DPL Inc. in place from time to time prior to a Change of Control. B. "CEO" shall mean the Chief Executive Officer of DPL duly installed, from time to time, prior to a Change of Control. However, "Committee" will be substituted for "CEO" in discussing the CEO's rights and benefits in the Plan. C. "Change of Control" means 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 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 or commences a tender offer to become the beneficial owner, directly or indirectly, of securities of DPL or DP&L representing (A) 15% 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 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 enters into an agreement to merge or consolidate itself, or an agreement to consummate 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 50 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 enters into an agreement to sell, lease, exchange or otherwise transfer or dispose 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 subsidiar(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; (iv) any transaction referred to in (ii) or (iii) above is consummated; or (v) those persons serving as directors of DPL or DP&L on February 1, 2000 (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). D. "Committee" means the Compensation and Management Review Committee of the Board of Directors of DPL Inc. or such other committee(s) as the Board of Directors of DPL Inc. may designate from time to time to administer the Plan. E. "Company" means The Dayton Power and Light Company ("DP&L"), DPL Inc. ("DPL"), and any entity which, prior to a Change of Control, is controlling, controlled by or under common control with DP&L or DPL Inc. F. "Dividend Equivalent" means the expression on the Company's books of a dividend with respect to a Stock Unit, each Dividend Equivalent being equal to the cash dividends paid from time to time on one Share. G. "Election Form" means the form attached hereto as Exhibit A (or such other form as the Committee may designate from time to time) which shall be used for deferring payment of Fees in accordance with the provisions of the Plan and shall also include any prior forms used in connection with the Plan for the purpose of deferring payment of Fees. H. "Eligible Director" means any Director who is serving as a Director as of January 1, 1996 or at any time thereafter. I. "Fair Market Value" means the average of the closing sale prices of a Share on the last trading day of each of the 51 four calendar months preceding thedate the value of a Share is to be determined, as reported on the New York Stock Exchange-Composite Transaction Tape. J. "Fees" means amounts payable by the Company to a Director for services as a member of the Board of Directors or a committee of the Board of Directors and any other amounts (including, without limitation, consulting fees and the like) payable by the Company to a Director who is not employed by the Company for services rendered to the Company in any capacity. K. "Other Director" means any Director who has ceased to serve as a Director prior to January 1, 1996. L. "Share" or "Shares" means the Common Shares of DPL Inc. M. "Standard Deferral Account" means the account established by the Company in the Director's name to which deferrals made in accordance with the Standard Deferral Provisions of the Plan are credited. N. "Standard Deferral Provisions" means generally those provisions of the Plan under which: (1) a Director may elect annually to defer payment of Fees; (2) the deferred amounts are credited to the Standard Deferral Account; (3) earnings are credited to the Standard Deferral Account in accordance with Section 3(D), Section 3(E) or Section 3(F); and (4) amounts credited to the Director's Standard Deferral Account together with accumulated earnings are paid in accordance with the Director's application requesting that the Director be paid the amounts credited to his/her Standard Deferral Account and specifying which date the requested amounts should be paid; provided the CEO of the Company consents to such payment. O. "Stock Unit" means the expression on the Company's books of a unit which is equivalent to one Share. P. "Unreimbursed Amount" means, at any time as to any Eligible Director who, either directly or through any affiliate, including through a trust established by such Eligible Director, has entered into a split-dollar life insurance arrangement with the Company, the amount of such Eligible Director's or affiliate's then obligation to reimburse the Company under such split-dollar arrangement for life insurance premiums paid by the Company; provided, however, that, for purposes of the Plan, the Unreimbursed Amount of any Eligible Director shall be reduced to the extent that such Unreimbursed Amount is being taken into account for purposes of calculating such Eligible Director's 52 benefits under the Company's Key Employees Deferred Compensation Plan. 3. ELECTION TO DEFER AND ACCOUNT DESIGNATION. A. ELECTION TO DEFER. A Director may elect, on or before December 31 of any year, to defer payment of all or a specified part of the Director's Fees during the succeeding calendar years until the Director ceases to be a Director of the Company. Any person who shall become a Director during any calendar year, and who was not a Director of the Company on the preceding December 31, may elect, before the Director's term begins, to defer payment of all or a specified part of the Director's Fees for the remainder of such calendar year and for succeeding calendar years. Any such elections shall be made by delivering an Election Form to the Secretary of the Company. Prior to January 31, 2000, Supplementary Deferral Accounts had been established under the Plan for certain Directors. Effective as of January 31, 2000, the present value, as determined by the Committee, of a Director's Supplementary Deferral Account was credited to the Standard Deferral Account of such Director. Accordingly, effective as of January 31, 2000, the Supplementary Deferral Accounts were terminated and no amounts are credited thereto. Moreover, as provided in Sections 6 and 9.B. of The Dayton Power and Light Company Directors' Deferred Stock Compensation Plan, upon the Shares ceasing to be listed on the New York Stock Exchange, or upon termination of a Participant's status as a director of the Company after a Change of Control, additional amounts may be credited to a Participant's Standard Deferral Account from such plan. B. STANDARD DEFERRAL ACCOUNT. All deferred amounts shall be credited to each Director's Standard Deferral Account. The Directors' Standard Deferral Accounts are established only as a mechanism for measuring the potential amount of cash or Shares which may be distributed under the Plan. The Company shall retain title to, and beneficial ownership of, all amounts credited to Directors' Standard Deferral Accounts and such deferred amounts will be subject to the claims of the Company's creditors. No Director or beneficiary has any property interest in deferred amounts or in any specific assets of the Company. C. (INTENTIONALLY LEFT BLANK.) D. INTEREST ON STANDARD DEFERRAL ACCOUNTS. Other than with respect to amounts credited to a Directors' Standard Deferral Account which were deemed invested in Shares pursuant to Section 3(E), for periods prior to January 1, 2001, the Company credited interest to the Standard Deferral Account of each Other Director, on a quarterly basis, calculated by multiplying the balance in such account (including interest) on the first day of each month of the preceding quarter by one-twelfth of the simple average yield of the annualized AA utility bond averages as published monthly in Moody's Bond Survey for the preceding quarter. With respect to all amounts credited to an Other Directors' Standard Deferral Account as of January 1, 2001 or at any time thereafter, such Standard 53 Deferral Account shall be deemed invested in the Vanguard Total Bond Index Fund, or a comparable fund designated by the Committee in its sole discretion (the "Bond Fund"), and all dividends, interest, distributions and other amounts paid with respect to the Bond Fund shall be credited to the Standard Deferral Account of each Other Director and shall be deemed reinvested in the Bond Fund. E. STOCK UNITS. Each Eligible Director shall have the option to elect to have any portion of his/her "Investment Amount" (as hereinafter defined) deemed invested in Shares as of each such date (on or after January 1, 1996) as the Committee may specify from time to time for such purpose, by delivering to the Secretary of the Company a Stock Unit Investment Election Form in the form attached hereto as Exhibit B (or such other form as the Committee may designate from time to time). In such event, the Company shall credit to such Eligible Directors' Standard Deferral Account a number of Stock Units equal to the amount which is deemed invested in Shares pursuant to this Section 3(E) divided by the Fair Market Value of a Share as of the date of such deemed investment and shall thereafter credit to such Eligible Directors' Standard Deferral Account, on each dividend payment date with respect to the Shares, a Dividend Equivalent for each Stock Unit then credited to such Standard Deferral Account. On any such dividend payment date, to the extent that the value of the accumulated Dividend Equivalents credited to such Eligible Director's Standard Deferral Account equals the Fair Market Value of one or more full Shares on such date, such Dividend Equivalents shall be converted into, and credited to such Standard Deferral Account as, additional Stock Units. Once an Eligible Director has elected to have any amount of such Eligible Director's Standard Deferral Account deemed invested in Shares pursuant to this Section 3(E), such Eligible Director may not revoke or otherwise change such election with respect to such amount without the prior approval of the Committee. The Company shall not be required to purchase, hold or dispose of any Shares for purposes of funding benefits which may be payable as a result of this Section 3(E). To the extent that the Company does, in its discretion, purchase or hold any Shares for purposes of funding such benefits or otherwise, the same shall remain the sole and exclusive property of the Company, subject to the claims of its general creditors, and shall not be deemed to form a part of any Eligible Director's Standard Deferral Account, and no Eligible Director shall have any claim in, or right to, any such Shares (or any Stock Units or Dividend Equivalents). In the event of a change in the outstanding Shares by reason of a Share dividend, recapitalization, merger, consolidation, split-up, combination or exchange of shares, or the like, the number of Stock Units credited to an Eligible Director's Standard Deferral Account shall be adjusted by the Committee (whose determination in each case shall be conclusive) to give effect as 54 may be appropriate to any increase or decrease in the number of issued and outstanding Shares as a result thereof. In the event that the Shares cease to be listed on the New York Stock Exchange for any reason, the Standard Deferral Account of each Eligible Director shall be credited with a cash amount equal to the number of Stock Units then credited to such Eligible Director's Standard Deferral Account multiplied by the greater of (i) the Fair Market Value of a Share as of the date the Shares cease to be so listed or (ii) the closing sales price of a Share on the New York Stock Exchange-Composite Transaction Tape on the date the Shares cease to be so listed and the cash amount so credited shall thereafter be deemed to be part of such Eligible Director's "Investment Amount" for all purposes of the Plan. After the Shares cease to be so listed on the New York Stock Exchange, no Eligible Director shall have the option to have any amounts credited to his/her Standard Deferral Account deemed invested in Shares pursuant to this Section 3(E). F. EARNINGS ON STANDARD DEFERRAL ACCOUNTS OF ELIGIBLE DIRECTORS. For purposes of measuring the amounts which may be distributed under the Plan to Eligible Directors, each Eligible Director's "Investment Amount" shall be deemed invested, on and after January 1, 1997, in such "Eligible Investment Options" as such Eligible Director may designate from time to time as provided herein. For purposes of the Plan, "Investment Amount" means, at any time on and after January 1, 1997 with respect to each Eligible Director, the amount then credited to such Eligible Director's Standard Deferral Account (including any dividends, interest, distributions or other amounts credited to such Standard Deferral Account pursuant to this Section 3(F)) less the amount then credited to such Standard Deferral Account which is deemed invested in Shares pursuant to Section 3(E), and "Eligible Investment Options" means those securities, mutual funds or other investment vehicles set forth on Schedule I hereto, as such Schedule I may be modified from time to time by the Committee upon at least 30 days' prior written notice to the Eligible Directors. Subject to Section 3(G) hereof, each Eligible Director shall have the option, by delivering to the Secretary of Company a completed Investment Option Election Form in the form attached hereto as Exhibit C (or such other form as the Committee may designate from time to time) on or prior to each such date (on or after December 31, 1996) as the Committee may specify from time to time for such purpose (each such date, an "Election Date") to designate or change, in a percentage equal to at least 10%, the portions of his/her Investment Amount which shall be deemed invested in each Eligible Investment Option as of such Election Date. Any such designation by an Eligible Director shall remain in effect until changed in accordance with the preceding sentence or as provided in Section 3(G) hereof. Subject to Section 3(G) hereof, any increase in the percentage of an Eligible Director's Investment Amount deemed invested in an Eligible Investment Option effected on any 55 Election Date shall be deemed to be a purchase of such Eligible Investment Option and any decrease in the percentage of an Eligible Director's Investment Amount deemed invested in an Eligible Investment Option effected on any Election Date shall be deemed to be a sale of such Eligible Investment Option, and any such purchase or sale shall be deemed to have occurred as of the last business day immediately prior to such Election Date at the closing price of such Eligible Investment Option on such date. In the absence of any such designation by an Eligible Director with respect to all or any portion of his/her Investment Amount, the Standard Deferral Account of such Eligible Director shall be deemed invested in the Bond Fund (as defined in Section 3(D) above), and the Bond Fund shall be an Eligible Investment Option for such Eligible Director. All dividends, interest, distributions and other amounts paid or distributed from time to time with respect to any Eligible Investment Option in which all or any portion of an Eligible Director's Investment Amount is deemed invested shall be credited to such Eligible Director's Standard Deferral Account and shall be deemed reinvested in such Eligible Investment Option. The Company shall not be required to purchase, hold or dispose of any Eligible Investment Options designated by Eligible Directors. To the extent that the Company does, in its discretion, purchase or hold any of the Eligible Investment Options designated by Eligible Directors, the same shall remain the sole property of the Company, subject to the claims of its general creditors, and shall not be deemed to form a part of any Eligible Director's Standard Deferral Account, and no Eligible Director shall have any property interest therein or claim thereto. G. INVESTMENT IN PRIVATE EQUITY INVESTMENTS. In its sole discretion the Committee may designate one or more Eligible Investment Options which, if purchased, may not be immediately saleable; such Eligible Investment Options may include interests in partnerships or other entities which are not readily tradable on an established securities market including, for purposes of illustration, interests in partnerships investing in private equity investments (collectively referred to herein as "Private Equity Investments"). The Committee may, in its sole discretion, establish procedures to regulate the ability of an Eligible Director's designation of an Private Equity Investment as one of his or her Eligible Investment Options pursuant to Section 3(F) hereof. Without limitation, these procedures may include the following: (i) Limiting the right of an Eligible Director to designate an Private Equity Investment to those Eligible Directors (a) who have a Standard Deferral Account balance greater than a specified minimum amount, and (b) whose payment dates, as specified in their Election Form, in the sole and unrestricted discretion of the Committee, are sufficiently deferred to allow for any Private Equity Investment to fully mature prior to payment of such Eligible Director's Standard Deferral Account in the event the Company does choose to purchase such Eligible Investment Option; (ii) Requiring a minimum dollar allocation to any Private Equity Investment; 56 (iii) Restricting or eliminating an Eligible Director's right to reallocate that portion of his Standard Deferral Account allocated to such Private Equity Investment until it has fully matured; (iv) Reallocation, by the Committee, to an Private Equity Investment previously designated by the Eligible Director, of all or a portion of an Eligible Director's Standard Deferral Account not so invested to the extent necessary to fully cover any capital calls made with respect to such Private Equity Investment (which reallocation shall proportionately reduce the amount which is deemed invested in each of the Eligible Director's other Eligible Investment Options); (v) Establishing the date on which an Eligible Director's Standard Deferral Account is deemed invested in an Private Equity Investment following such designation by the Eligible Director. In addition, notwithstanding anything in Section 4 hereof to the contrary, and notwithstanding any payment election specified in such Eligible Director's Election Form, the Committee may, in its sole discretion, defer payment of any amounts credited to an Eligible Director's Standard Deferral Account which have been deemed invested in a Private Equity Investment until any such Private Equity Investment has fully matured, and, in the case of partial distributions from an Eligible Director's Standard Deferral Account, the Committee may reduce the amount which is deemed invested in each Eligible Investment Option other than such Private Equity Investment. H. UNREIMBURSED AMOUNTS. Notwithstanding any other provision of the Plan, in the event that there exists an Unreimbursed Amount as to any Eligible Director, the Unreimbursed Amount of such Eligible Director in effect from time to time shall reduce the amount of such Eligible Director's Standard Deferral Account which would otherwise be deemed invested in Eligible Investment Options pursuant to Section 3(F) in the manner designated by such Eligible Director in the Investment Option Form most recently delivered to the Secretary of the Company or, failing such designation, shall proportionately reduce the amount which would otherwise be deemed invested in each Eligible Investment Option pursuant to Section 3(F). 4. PAYMENTS UNDER THE PLAN. A. STANDARD DEFERRAL ACCOUNT. Subject to Section 3(G) hereof, amounts credited to a Director's Standard Deferral Account, together with accumulated earnings, shall be distributed in a lump sum payment or over a period of years, up to twenty, in such installments as specified in the Election Form, with such lump sum payment being made or such installment payments commencing, unless otherwise determined by the Committee in its discretion, on or prior to the January 31 immediately following: (1) the date the Director ceases to be a Director; 57 (2) the date the Director reaches an age at which the Director may earn unlimited amounts without reduction of the benefits under the Social Security Act and the regulations promulgated thereunder; or (3) such other date, either before or after his termination of service, as specified by the Director on his Election Form; and with subsequent annual installments, if payments are to be made in annual installments, to be paid on or prior to each January 31 thereafter until all amounts credited to the Director's Standard Deferral Account have been paid in full. For purposes of any distribution pursuant to this Section 4, the amount credited to an Eligible Director's Standard Deferral Account on any date shall be equal to (i) in the case of any Stock Units credited to such Eligible Director's Standard Deferral Account, the aggregate Fair Market Value as of such date of a number of Shares equal to the number of Stock Units then credited to such Standard Deferral Account and (ii) in the case of any Eligible Investment Options in which such Eligible Director's Standard Deferral Account is deemed invested, the value (determined on the basis of the closing prices on the last business day immediately preceding such date) of all Eligible Investment Options in which such Eligible Director's Standard Deferral Account is deemed to be invested on such date pursuant to Section 3(F) and, in the case of a partial distribution from an Eligible Director's Standard Deferral Account, the amount of such distribution shall proportionately reduce the amount which is deemed invested in Shares pursuant to Section 3(E) and invested in each Eligible Investment Option pursuant to Section 3(F). Notwithstanding any other provision of the Plan, all payments under the Plan with respect to Stock Units credited to an Eligible Director's Standard Deferral Account shall be made in the form of Shares and an Eligible Director shall be entitled to receive one Share for each Stock Unit credited to his Standard Deferral Account (with a cash payment being made for any fractional shares). B. ELECTION TO BE PAID IN SHARES. At least thirty days before the first installment (or lump sum payment, if the Director so elects) is to be paid pursuant to the Standard Deferral Provisions, the Director or the Director's beneficiary shall elect whether the amounts credited to such Director's Standard Deferral Account (other than the Stock Units credited to such Director's Standard Deferral Account which, in accordance with the last paragraph of Section 4(A) shall be paid in the form of Shares) shall be paid in cash or in Shares. At least thirty days before any subsequent installment is to be paid, the Director or the Director's beneficiary may change such election. In the case of payment in Shares, such Shares shall be valued at their Fair Market Value as of the date a cash payment would otherwise have been paid. As soon as practical thereafter, the 58 Company shall cause to be issued and delivered that number of Shares (which may be either authorized and unissued shares or treasury shares or both) which is equal to the amount of the payment divided by the determined price, provided however, that the Company shall not be obligated to issue and deliver fractional Shares and in lieu thereof, the Director shall be paid in cash. C. DESIGNATION OF BENEFICIARY. Each Director participating in the Plan shall designate on the Election Form one or more beneficiaries to whom payments shall be made in the event of the Director's death. The Director shall have the right to change the beneficiary or beneficiaries from time to time, provided, however, no change shall become effective until received in writing by the Committee (or its delegate). In the event the Director has not designated a beneficiary or a designated beneficiary is not living at the time of the Director's death, then payments required to be made by the Company after the Director's death to the designated beneficiary shall be made to the Director's estate. D. EARLY DISTRIBUTION. A Director may in no event receive a distribution of all or a portion of amounts of cash or Shares credited to his Standard Deferral Account prior to the time that the Director elected to receive such amounts pursuant to the Plan. Notwithstanding the foregoing: (i) the CEO may, upon receiving a written request from the Director or his or her beneficiary as provided in Section 4.C. hereof in the event of the death of the Director, upon determining that a distribution is in the best interest of the Company and the Director (or his or her beneficiary) taking into account the financial condition of each, distribute all or a portion of the amounts credited to the Director's Standard Deferral Account and (ii) upon written request by a Participant to receive his entire Standard Deferral Account made at any time after termination of his or her status as a director of the Company, for any reason, after a Change of Control, the amount credited to such Participant's account shall be paid to such Director in a lump sum within ten (10) days after the date of such written request, provided that the Director shall be entitled to only 90% of such account balance and shall irrevocably forfeit 10% of such account balance by making the withdrawal. E. WITHHOLDINGS. Any taxes required to be withheld by any Federal, state, or local government will be deducted from all deferred payments and paid for the account of the Director. F. PAYMENTS IN KIND. Notwithstanding any other provision of the Plan, after a Change of Control, any portion of a distribution to be made from an Eligible Director's Standard Deferral Account may, at the request of such Eligible Director at least 30 days prior to the scheduled date of such distribution, be made by the Trustees of the Master Trust(s) pursuant to which benefits under the Plan are being funded, in the sole and absolute discretion of such Trustees, in the form of any Eligible Investment Options actually held by such Master Trust(s) for purposes of funding such distribution to such Eligible Director under the Plan. For purposes of making any such distribution, 59 any Eligible Investment Option so distributed shall be valued at its closing price on the last business day immediately preceding the date of such distribution and such distribution shall be net of any applicable federal, state or local withholding taxes unless the Eligible Director makes a cash payment, concurrently with such distribution, to the Master Trust(s) making such distribution for the purpose of paying such withholding taxes. Nothing contained in this Section 4(F) shall require the Company (or any of the Master Trusts) to purchase, hold or dispose of any Eligible Investment Options designated by Eligible Directors. To the extent that any Master Trust holds any Eligible Investment Options, the same shall remain the sole property of the Company, subject to the claims of its general creditors, and shall not be deemed to form a part of any Eligible Director's Standard Deferral Account and no Director shall have any property interest therein or claim thereto. G. UNREIMBURSED AMOUNTS. Notwithstanding any other provision of the Plan, in the event that there exists an Unreimbursed Amount as to any Eligible Director, then (a) no distribution of the amount credited to such Eligible Director's Standard Deferral Account shall be made pursuant to Section 4(A) or otherwise to the extent that, after giving effect to any such proposed distribution, the amount then credited to such Eligible Director's Standard Deferral Account would be less than the Unreimbursed Amount of such Eligible Director and (b) any amounts which are not distributed from such Eligible Director's Standard Deferral Account by reason of the foregoing clause (a) shall be paid to such Eligible Director promptly after the date of, and only to the extent of, any reimbursement of such Unreimbursed Amount. 5. PAYMENTS IN THE EVENT OF DEATH. A. STANDARD DEFERRAL ACCOUNT. In the event a Director shall die either before payments from the Director's Standard Deferral Account have commenced or after such payments have commenced, all amounts credited to the Director's Standard Deferral Account at the time of the Director's death shall be paid to the beneficiary designated by the Director on the Director's Election Form, in a lump sum payment on the first business day of the month following the month in which the Director died unless the Director has elected on the Election Form that payments continue or commence to the Director's beneficiary in the same method to be paid to the Director pursuant to Section 4(A). 6. TERMINATION OF ELECTION. In any year, a Director may terminate or modify, for that year, his/her deferred election by written notice delivered to the Secretary of the Company. Any such notice will become effective on the last day of the month it is given and will apply only to Fees payable after such effective date. Amounts credited to a Director's accounts prior to the effective date of any termination or modification will not be affected and will be paid in accordance with the provisions of the Plan. 60 7. MASTER TRUSTS. A. DIRECTOR'S ACCOUNTS. The Company has established, and may in the future establish, one or more trusts (each such trust, as it may be amended from time to time, is referred to herein as a "Master Trust") for the purpose, among others, of securing the performance by the Company of its obligation to Directors to make the distributions under the Plan and has funded one or more of the Master Trusts in an aggregate amount of cash and/or Shares as the Company has determined to be equal to the value of all currently vested or earned benefits of the Directors under the Plan. Pursuant to one or more of the Master Trusts, each Director has been assigned a separate account as a mechanism for measuring the potential benefits which may be distributed in the future. Subsequent transfers of cash and/or Shares which the Company is required to make to the Master Trusts pursuant to Section 5.B, 7.B or 8.C hereof or otherwise shall be allocated among the Master Trusts as the Committee may determine from time to time. B. SUCCESSIVE TRANSFERS. On or before the twentieth day following the end of each successive calendar quarter, the Company shall transfer to one or more of the Master Trusts an aggregate amount of cash and/or Shares as it shall determine to be equal to the value of benefits of Directors under the Plan which benefits have vested or have been earned during such calendar quarter. C. TITLE TO FUNDS. DP&L shall retain beneficial ownership of all cash or shares transferred to the Master Trusts and such cash or shares will be subject to the claims of the DP&L's creditors. No Director or beneficiary has or will have any property interest in the cash or shares held in the Master Trusts or in any other specific asset of the Company. 8. CHANGE OF CONTROL. A. AUTOMATIC TRANSFER OF AUTHORITY. In the event of a Change of Control, any and all authority and discretion which is exercisable by the Committee, or the CEO, as heretofore or hereafter described in the Plan, including, without limitation, the authority to change the Eligible Investment Options as provided in Section 3.F. hereof, shall automatically be transferred to the Trustees of each Master Trust to the extent benefits under the Plan are being funded under such Master Trust. B. (INTENTIONALLY LEFT BLANK.) C. FUNDING OF MASTER TRUSTS. Upon a Change of Control, the Company shall immediately transfer to one or more of the Master Trusts an aggregate amount of cash which, when combined with the other assets of the Master Trusts contributed or accruing thereto under or by reason of Section 7 hereof, is equal to all amounts credited to the Directors' Standard Deferral Account, including accumulated earnings. 9. NOTICES. 61 Any notice, election or any request required or permitted hereunder, which is to be mailed to or requested from the Secretary or the CEO of the Company, shall be delivered or mailed, postage prepaid, as follows: (i) Prior to a Change of Control; to the Secretary of DP&L at: The Dayton Power and Light Company MacGregor Park 1065 Woodman Drive Dayton, Ohio 45432 Attention: Corporate Secretary (ii) After a Change of Control; to the Trustees of each Master Trust pursuant to which benefits under the Plan are being funded, at the notice address specified by such Trustees in the applicable trust agreement. The Company or Trustees may from time to time change their addresses for receipt of notices by giving notice of such change to the Directors, but no such change shall be deemed to be effective until notice thereof is actually received by the Director to whom it is directed. 10. NONASSIGNABILITY. Neither a Director, nor his beneficiary, nor any other individual shall have any right by way of anticipation or otherwise to alienate, sell, transfer, assign, pledge, charge or otherwise dispose of any benefits which may become payable under this Plan, prior to the time that payment of any such benefit is made, and any attempted anticipation, alienation, sale, transfer, assignment, pledge, charge, or other disposition shall be null and void. Furthermore, none of the benefits payable under this Plan shall be subject to the claim or legal process of the creditors of any Director or of the beneficiary, spouse or former spouse of any Director or of any other person or entity. 62 11. INTERPRETATION AND AMENDMENT. The Plan shall be administered by the Committee. The decision of the Committee with respect to any questions arising in connection with the administration or interpretation of the Plan, shall be final, conclusive and binding. The Committee reserves the right to amend or modify the Plan from time to time or to terminate the Plan, provided, however, that no amendment, modification or termination of the Plan shall void an election to defer payments already in effect for the current calendar year or any preceding calendar year or shall otherwise adversely affect any right or benefit earned or accrued under the Plan by any Director prior to any such amendment, modification or termination without the prior written consent of such Director. In the event of a Change of Control, the authority and discretion given the Committee under this Section 11 shall be exercised as provided in Section 8.A hereof; provided, however, that the Trustee shall have no authority to terminate the Plan. 12. GENDER AND NUMBER. Except when indicated by the context, any masculine terminology used herein shall also include the feminine, and the use of any term herein in the singular may also include the plural. 13. NO RIGHTS AS SHAREHOLDERS. Directors whose accounts are credited with amounts under the Plan shall have no rights as shareholders of the Company as a result thereof unless and until the Shares, if any, are distributed to the respective Directors. 14. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall confer upon any Director the right to a continued Directorship with the Company. 15. GOVERNING LAW. This Plan shall be construed, rendered and governed by the laws of the State of Ohio. 63 EXHIBIT A THE DAYTON POWER AND LIGHT COMPANY 1991 AMENDED DIRECTORS' DEFERRED COMPENSATION PLAN ELECTION FORM INSTRUCTIONS: This Election Form relates to fees deferred pursuant to the 1991 Amended Directors' Deferred Compensation Plan (the "Plan"). Under the Plan, deferred fees are credited to a Participant's Standard Account in a Master Trust or Trusts created by DP&L. STANDARD DEFERRAL PROVISIONS. 1. ELECTION TO PARTICIPATE. I elect to defer _____________ of my [insert date] fees pursuant to ________________________ the Standard Deferral Provisions of the Plan. 2. PAYMENTS. Payments shall be made or commence from my Standard Deferral Account by no later than the January 31 immediately following (check one): a. ___ the date I cease to serve as a director; b. ___ a specified date, either before or after termination of services as a director (Specify date: ___________); or c. ___ at such date as I reach the age at which I can earn unlimited amounts without reduction of benefits under the Social Security Act and the regulations promulgated thereunder. Such payments from my account shall be paid as follows (check one): a. ___ lump sum payment. b. ___ annually over a period of up to twenty years. (Specify number of years __________). I request that such payments shall be made in the form of DPL Inc. shares, rather than cash. ____ Yes ____ No (Please note that amounts deemed invested in DPL Inc. common shares pursuant to Section 3(E) of the Plan will be paid in the form of DPL Inc. common shares, rather than cash.) Upon my death (check one): ____ payments to my beneficiary shall continue or commence in the same method to be paid to me as elected above. 64 ____ payments are to be made to my beneficiary in a lump sum. DESIGNATION OF BENEFICIARIES All payments required to be made under the Plan to my designated beneficiary in the event of my death shall be made to the following person: Name of designated beneficiary: _______________________________________ Address of designated beneficiary: _______________________________________ _______________________________________ _______________________________________ 65 If the above-designated beneficiary does not survive me, the payments will be made to the following successor beneficiary (or to my estate upon failure to designate otherwise): Name of designated beneficiary: _______________________________________ Address of designated beneficiary: _______________________________________ _______________________________________ _______________________________________ _______________________________________ Signature _______________________________________ Date This Election Form was received by the Secretary of DPL on __________________. _______________________________________ Secretary 66 EXHIBIT B THE DAYTON POWER AND LIGHT COMPANY 1991 AMENDED DIRECTORS' DEFERRED COMPENSATION PLAN STOCK UNIT INVESTMENT ELECTION FORM I hereby irrevocably elect to have $__________ of the amount credited to my Standard Deferral Account under the Plan to be deemed invested, effective as of [insert date], in Shares in accordance with Section 3(E) of the Plan. Amounts which are deemed invested in Shares under the Plan will be paid in the form of Shares, rather than cash. _______________________________________ Signature of Director _______________________________________ Date This Stock Unit Option Election was received by the Secretary of the Company on ________________. _______________________________________ Secretary 67 EXHIBIT C THE DAYTON POWER AND LIGHT COMPANY 1991 AMENDED DIRECTORS' DEFERRED COMPENSATION PLAN INVESTMENT OPTION ELECTION FORM I elect to have amounts credited to my Investment Amount under the Plan to be deemed invested, effective [insert date], in the following Eligible Investment Options, as provided in Section 3(F) of the Plan: Percentage of Investment Amount Invested (whole percentage, not less than ELIGIBLE INVESTMENT OPTION 10% - -------------------------- ------------------------- Vanguard Index Trust - 500 Portfolio _____% Vanguard Index Trust - Small Cap Stock _____% Portfolio Vanguard Index Trust - Total International _____% Portfolio Vanguard Index Trust - Total Bonds _____% (Note: In the absence of any designation with respect to all or any portion of your Investment Amount, your Investment Amount (or such portion) will be deemed invested in the Vanguard Index Trust - Total Bonds as provided in Section 3(F) of the Plan.) If the Company and I have entered into a split-dollar life insurance arrangement, then the Unreimbursed Amount (as defined in the Plan) shall reduce the amount which would otherwise be deemed invested in Eligible Investment Options pursuant to Section 3(F) of Plan in the following percentages of the Unreimbursed Amount: PERCENTAGE OF UNREIMBURSED AMOUNT ---------------------------- Vanguard Index Trust - 500 Portfolio _____% Vanguard Index Trust - Small Cap Stock _____% Portfolio Vanguard Index Trust - Total International _____% Portfolio Vanguard Index Trust - Total Bonds _____% ____________________________ Signature of Director 68 ____________________________ Date This Investment Option Election was received by the Secretary of the Company on ________________. ____________________________ Secretary SCHEDULE I ELIGIBLE INVESTMENT OPTIONS Vanguard Index Trust - 500 Portfolio Vanguard Index Trust - Small Cap Stock Portfolio Vanguard Index Trust - Total International Portfolio Vanguard Index Trust - Total Bonds 69 EX-10.(C) 5 a2043323zex-10_c.txt EXHIBIT 10(C) EXHIBIT 10(c) THE DAYTON POWER AND LIGHT COMPANY MANAGEMENT STOCK INCENTIVE PLAN (AS AMENDED THROUGH DECEMBER 31, 2000) SECTION 1. PURPOSES. The purposes of the Plan are (i) to attract and retain in the employment of the Company executives of experience and ability by providing incentives to those who contribute to the successful operation of the business and affairs of the Company, (ii) to increase the identity of interests of such key employees with those of the Company's shareholders, (iii) to encourage achievement of the Company's long term goals and objectives, and (iv) to prevent frustration of the goals of this Plan in the event of a Change of Control. SECTION 2. DEFINITIONS. The following terms as used herein shall have the following meanings: (a) "BOARD OF DIRECTORS" means the Board of Directors of DPL Inc. in place from time to time prior to a Change of Control. (b) "CHANGE OF CONTROL" means 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 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 or commences a tender offer to become the beneficial owner, directly or indirectly, of securities of DPL or DP&L representing (A) 15% 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 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 enters into an agreement to merge or consolidate itself, or an agreement to consummate 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, 70 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 enters into an agreement to sell, lease, exchange or otherwise transfer or dispose 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 subsidiar(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; (iv) any transaction referred to in (ii) or (iii) above is consummated; or (v) those persons serving as directors of DPL or DP&L on February 1, 2000 (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). (c) "CEO" means the Chief Executive Officer of DPL, duly installed, from time to time, prior to a Change of Control. However, "Committee" will be substituted for "CEO" in discussing the CEO's rights and benefits under the Plan. (d) "COMMITTEE" means the Management Review and Compensation Committee of the Board of Directors of DPL Inc. or such other committee(s) as may be designated by the Board of Directors of DPL Inc. from time to time to administer the Plan. (e) "COMPANY" means The Dayton Power and Light Company ("DP&L"), DPL Inc. ("DPL") and any entity which, prior to a Change of Control, is controlling, controlled by or under common control with DP&L or DPL Inc. (f) "DEFERRED COMPENSATION PLAN" means the Company's Key Employees Deferred Compensation Plan, as the same may be amended, modified or supplemented from time to time. (g) "DIVIDEND EQUIVALENT" means the expression on the Company's books of a dividend with respect to a Stock Incentive Unit; each Dividend Equivalent being equal to the cash dividends paid from time to time on one Share. (h) "EARNED STOCK INCENTIVE UNITS" means Stock Incentive Units which have been awarded and have been earned in accordance with Section 6, together with all Dividend Equivalents with respect to such Earned Stock Incentive Units in accordance with Section 6 (including any Stock Incentive Units credited to the 71 Participant's account as the result of the conversion of such Dividend Equivalents into Stock Incentive Units). (i) "FAIR MARKET VALUE" means the average of the closing sale price of a Share on the last trading day of each of the four calendar months preceding the date the value of a Share is to be determined, as reported on the New York Stock Exchange--Composite Transactions Tape. (j) "INCENTIVE PERIOD" means the period established by the Committee with respect to each Stock Incentive Award, over which period the Stock Incentive Units included in such award are to be earned as provided in Section 6(d) of the Plan. The Incentive Period shall be specified by the Committee in and with respect to each Stock Incentive Award made. If the Incentive Period is not so specified then it shall be the calendar plan year to which the Stock Incentive Award relates. (k) "PLAN" means this Management Stock Incentive Plan. (l) "SHARE" means a Common Share of DPL Inc. (m) "STOCK INCENTIVE AWARD" means an award made under the Plan with respect to a specified Incentive Period. (n) "STOCK INCENTIVE UNIT" means the expression on the Company's books of a unit which is equivalent to one Share. (o) "TERMINATION OF EMPLOYMENT" means, when used with respect to the payments to be made to a Participant pursuant to Section 8 of the Plan, (i) the date such Participant's employment with the Company terminates, if such termination occurs on or after such Participant's 55th birthday or (ii) if such Participant's employment with the Company terminates prior to such Participant's 55th birthday, the date of such Participant's 55th birthday. SECTION 3. ADMINISTRATION. (a) COMMITTEE. The Plan shall be administered by the Committee. No director shall serve as a voting member of the Committee if he is then, or was at any time within one year prior to his appointment, eligible to participate in the Plan or eligible for selection as a person to whom Shares may be allocated or to whom stock options may be granted pursuant to any other plan of the Company or any of its affiliates, other than the DP&L Directors' Deferred Stock Compensation Plan and the Directors' Deferred Compensation Plan, entitling the participants therein to acquire Shares, options or stock appreciation rights of the Company or any of its affiliates. (b) AUTHORITY AND DISCRETION. Prior to a Change of Control, the Committee shall have the power to interpret the Plan and, subject to the provisions herein set forth, to prescribe, amend and rescind rules and regulations and make all other determinations necessary or desirable for the administration of the Plan. The decision of the Committee on any questions 72 concerning or involved in the interpretation or administration of the Plan shall be final and conclusive, and nothing in the Plan shall be deemed to give any officer or employee, his legal representatives or assigns, any right to participate in the Plan except to such extent, if any, as the Committee may have determined or approved pursuant to the provisions of the Plan. SECTION 4. ELIGIBILITY. Employees eligible to participate in the Plan shall be those full-time salaried employees of the Company or any entity comprising the Company who, in the opinion of the Committee, serve in key executive, administrative, professional or technical capacities with the Company or any entity comprising the Company and have made a significant contribution to the successful operation of the Company or any entity comprising the Company. SECTION 5. PARTICIPANTS. From the employees eligible to participate in the Plan, the Committee may annually choose those who shall actually participate for that year in the Plan (the "Participants"), and shall determine the number of Stock Incentive Units to comprise each Participant's Stock Incentive Award. In choosing the Participants and in determining the number of Stock Incentive Units comprising a Stock Incentive Award, the Committee shall consider, after consulting with the CEO concerning his recommendations on these matters, the positions and responsibilities of the eligible employees, their accomplishments during recent periods, the corporate and individual objectives jointly established with the CEO, the value of such accomplishments to the Company, and such other factors as the Committee deems pertinent. The Company may determine in any year during the term of the Plan not to make any Stock Incentive Awards with respect to such year. SECTION 6. OPERATION OF THE PLAN. (a) STOCK INCENTIVE AWARDS. Stock Incentive Awards shall be made by the Committee at such time or times as it may determine; however, Stock Incentive Awards shall generally be made in the year preceding commencement of the next plan year. At the time the Committee makes a Stock Incentive Award, it shall determine the aggregate number of Stock Incentive Units which may be earned by each Participant over the Incentive Period. Except as expressly provided in a Stock Incentive Award, the terms and conditions of the Plan shall be deemed to be incorporated in and shall control all Stock Incentive Awards. However, to the extent inconsistent with any provision of this Plan (including, without limitation, Section 10), the terms of a Stock Incentive Award (other than a Stock Incentive Award applicable to Previously Earned Units) shall control this Plan. (b) PREVIOUSLY AWARDED STOCK INCENTIVE UNITS. Previously awarded Stock Incentive Units shall be deemed to have been earned or, in the future, will be earned to the extent to which they would have been earned if Section 6(d) had been in effect at the 73 time they previously were awarded and based on the Incentive Period applicable to the related Stock Incentive Award previously awarded. (c) CREDITING OF STOCK INCENTIVE UNITS AND DIVIDEND EQUIVALENTS. Earned Stock Incentive Units for each year following the effective date of the Plan accrue and shall be credited to a Participant's separate account under the Plan on the first day of the month following the date on which they are earned. On each dividend payment date a Dividend Equivalent shall be credited to such account for each Earned Stock Incentive Unit (or, if and to the extent that the related Stock Incentive Award otherwise provides, for Stock Incentive Units awarded, whether or not such units are Earned Stock Incentive Units) credited to the Participant's account. On any dividend payment date when the value of accumulated Dividend Equivalents on Stock Incentive Units as provided above in a Participant's account equals the Fair Market Value of a full Share on such date, such Dividend Equivalents shall, subject to the terms of the Stock Incentive Award, the terms of which shall control this Plan to the extent inconsistent herewith, be credited to the Participant's account as an Earned Stock Incentive Unit. Such separate accounts are established only as a mechanism for measuring the potential number of Shares which may be distributed under the Plan. The Company shall retain beneficial ownership of all Stock Incentive Units and Dividend Equivalents credited to the accounts and such Stock Incentive Units and Dividend Equivalents will be subject to the claims of DP&L's creditors. No Participant or beneficiary has or will have any property interest in any Stock Incentive Units or Dividend Equivalents credited to such Participant's account or in any specific assets of the Company. (d) EARNING OF STOCK INCENTIVE UNITS. Awarded Stock Incentive Units shall be earned as specified in the related Stock Incentive Award or as otherwise determined by the Committee. Subject to such Stock Incentive Award and any determinations by the Committee, the terms of which shall control this Plan to the extent inconsistent herewith, the maximum number of Stock Incentive Units which may be earned in any one year shall be equal to the product obtained by multiplying the total number of Stock Incentive Units included in a Stock Incentive Award by a fraction, the numerator of which is one and the denominator of which is the number of calendar years in the Incentive Period. For example, in the case of a Stock Incentive Award for which a one-year Incentive Period applies, all of the Stock Incentive Units may be earned in the calendar year to which the Stock Incentive Award relates, and in the case of a Stock Incentive Award for which a three year Incentive Period has been fixed by the Committee, up to one-third of the Stock Incentive Units included in the Stock Incentive Award may be earned each year. Unless the related Stock Incentive Award otherwise provides, by its terms or by implication, prior to or as soon as practicable after the end of each calendar year the Committee will review with each Participant his or her achievement of the related performance goals and will specify the number of Stock Incentive Units which have been earned for that year by the Participant. 74 SECTION 7. PAYMENTS UNDER THE PLAN. (a) RIGHT TO PAYMENT OF EARNED STOCK INCENTIVE UNITS. A Participant shall be entitled to receive payment for an awarded Stock Incentive Unit in a given year of the Incentive Period only if such Stock Incentive Unit shall have been earned under the provisions of Section 6(d) and, except as provided under Section 10 and Section 7(d) hereof, or in the Stock Incentive Award, a Stock Incentive Unit, though earned, only becomes vested (and, thus, ultimately payable in accordance with Section 8) if the Participant is employed by the Company on the last day of the year of the Incentive Period in which the Participant could earn a portion of the particular Stock Incentive Units awarded. All Stock Incentive Units which do not become so vested shall be forfeited. The CEO or the Committee may, however, accelerate the earning and vesting of any Stock Incentive Units awarded whether or not earned or vested, if he or it determines in his or its sole opinion that such action is warranted. Notwithstanding any provision of the Plan to the contrary, in the event of the death of a Participant, then all of such Participant's awarded Stock Incentive Units (other than to the extent related to a completed Incentive Period for which the determination of the number of Earned Stock Incentive Units has already been made; and not to exceed the number of Stock Incentive Units comprising the target award under the applicable Stock Incentive Award regardless of the potential to earn more than such target award if and as provided in such Stock Incentive Award) shall be deemed to be Earned Stock Incentive Units and shall immediately become fully vested and shall be paid in accordance with the provisions of Section 8. (b) TIME OF PAYMENT OF EARNED STOCK INCENTIVE UNITS. Payment for Earned Stock Incentive Units which have been vested under Section 7(a) and Section 7(d) shall be made in accordance with the provisions of Section 8 hereof. (c) WITHHOLDINGS. There shall be deducted from all payments any taxes required by an Federal, state, or local government to be withheld and paid over to the government for the account of the Participant. (d) SPECIAL PROVISION FOR VESTING OF CERTAIN EARNED STOCK INCENTIVE UNITS. All Earned Stock Incentive Units comprising the 1997 award (which covers the period 1998-2000) and the 1998 award (which covers the period 1999-2001) ("Previously Earned Units") will vest in three equal annual installments commencing on December 31, 2000 and December 31 of each year thereafter. The Participant must be employed by the Company on the date of an installment in order to become vested in and be entitled to payment with respect to the Previously Earned Units vesting on that date. Notwithstanding the above sentence, in the event a Participant is entitled to benefits pursuant to paragraph 3 (or successor provision) of the Participant's severance letter agreement with the Company (or, if the Participant is not then a 75 party to a severance letter agreement, pursuant to paragraph 3 (or successor provision) of the most restrictive severance letter agreement between the Company and any employee [in terms of triggering the Company's obligation to pay benefits to the employee]), then all Previously Earned Units which have not yet vested shall immediately become fully vested and shall be paid in accordance with the provisions of Section 10 of the Plan. SECTION 8. DEFERRAL PROVISIONS. (a) FILING OF ELECTION FORM. Under the Plan, a Participant must elect to defer payment of any amounts payable under the Plan by providing the Company with a written Election Form, in the form attached hereto as Exhibit A or such other form as the Committee may designate from time to time (the "Deferral Election Form"), prior to the commencement of the Incentive Period which the Committee uses as a basis for determining what portion of the particular annual installment of his Stock Incentive Award may be earned. For example, if a Participant were to elect to defer payment of Stock Incentive Units which would be deemed to be earned on December 31, 2000, the Election Form must be received by the Company prior to January 1, 2000. (b) PAYMENT OF AMOUNTS DEFERRED UNDER THE PLAN. Payment of a Participant's deferred Stock Incentive Units which become earned and vested shall be made in the form of Shares in a lump sum or in annual installments over a period of up to twenty years, as the Participant may elect in his Deferral Election Form, and shall be made, or commence, unless otherwise determined by the Committee in its discretion, on or prior to the January 31 immediately following the date specified by the Participant in his Deferral Election Form, provided such date is after his termination of employment, and with subsequent annual installments, if payments are to be made in annual installments, to be paid on or prior to each January 31 thereafter. All payments under the Plan with respect to earned and vested Stock Incentive Units shall be in the form of Shares and a Participant shall be entitled to receive one Share for each earned and vested Stock Incentive Unit credited to his account (with a cash payment being made for any fractional shares). After termination of a Participant's employment, such Participant's account shall continue to be credited with Dividend Equivalents as provided in Section 6(c) with respect to any unpaid earned and vested Stock Incentive Units. Notwithstanding any other provision of the Plan (other than Sections 8(d) and 10(b)) or any election made by a Participant under the Plan or in any Deferral Election Form, no Participant who has been granted stock options under the DPL Inc. Stock Option Plan (the "Stock Option Plan") shall be entitled to receive any payment under the Plan prior to January 1, 2005 with respect to that number of earned and vested Stock Incentive Units which is equal to 1/3 of the aggregate number of stock options which have been granted to such Participant under the Stock Option Plan. Notwithstanding the foregoing, any Participant may receive 76 payment of his earned and vested Stock Incentive Units in accordance with Sections 8(d) and 10(b). (c) EARNED STOCK INCENTIVE UNITS CREDITED AS CASH. Prior to December 31, 1999, certain Participants (the "Electing Participants") elected to convert a portion of their Earned Stock Incentive Units to cash. The amount each Electing Participant so elected to convert to cash was credited to the Standard Deferral Account of such Electing Participant under the Deferred Compensation Plan. Since February 2, 1999, no further conversion of any Earned Stock Incentive Units into cash has been permitted under the Plan and payment of the Earned Stock Incentive Units previously converted into cash shall be in accordance with the Deferred Compensation Plan. (d) EARLY PAYMENT. A Participant may in no event receive a distribution of all or a portion of the Stock Incentive Units which are earned and vested and credited to his account prior to the time that the Participant elected to receive such distribution pursuant to Section 8(a). Notwithstanding the foregoing: (i) the Committee may, upon receiving a written request from the Participant, or his or her beneficiary in the event of the death of a Participant, upon determining that a distribution is in the best interest of the Company and the Participant (or his or her beneficiary) taking into account the financial condition of each, distribute all or a portion of the Participant's account; and (ii) upon written request by a Participant to receive his entire account balance in the Plan made at any time after termination of his or her employment (or consultation arrangement) with DP&L or DPL Inc., for any reason, after a Change of Control, the amount credited to such Participant's account shall be paid to such Participant in a lump sum within ten (10) days after the date of such written request, provided that the Participant shall be entitled to only 90% of such account balance and shall irrevocably forfeit 10% of such account balance by making the withdrawal. (e) LACK OF STOCK EXCHANGE LISTING. In the event that the Shares cease to be listed on the New York Stock Exchange, then, unless a Participant's Earned Stock Incentive Units are then immediately payable to such Participant in accordance with Section 10(b), such Participant's Standard Deferral Account under the Deferred Compensation Plan shall be credited with an amount equal to the Conversion Price multiplied by the number of Earned Stock Incentive Units credited to his account (or if the Participant does not have a Standard Deferral Account the Company shall establish such an account for him), and thereafter payment of the amount so credited to such Participant's Standard Deferral Account shall be in accordance with the Deferred Compensation Plan. For this purpose, "Conversion Price" means: (i) the Fair Market Value of a Share on the date that the Shares cease to be listed on the New York Stock Exchange or (ii) if the Shares cease to be so listed as a result of a Change of Control, the greater of (x) the amount determined in accordance with the foregoing clause (i), (y) the closing sales price of a Share on the New York Stock Exchange--Composite Transaction Tape on the date the Shares cease to be so listed or (z) the closing sales price of a 77 Share on the New York Stock Exchange--Composite Transaction Tape on the date on which a Change of Control occurs. SECTION 9. MASTER TRUSTS. (a) PARTICIPANT'S ACCOUNT. The Company has established, and may in the future establish, one or more trusts (each such trust, as it may be amended from time to time, is referred to herein as a "Master Trust") for the purpose, among others, of securing the performance by the Company of its obligations to Participants under the Plan and has funded one or more of the Master Trusts in an aggregate amount of Shares and/or cash as the Company has determined to be equal to the value of all Earned Stock Incentive Units and other currently vested or earned benefits of the Participants under the Plan. Pursuant to one or more of the Master Trusts, each Participant has been assigned a separate account as a mechanism for measuring the potential benefits which may be distributed in the future. Subsequent transfers of Shares and/or cash which the Company is required to make to the Master Trusts pursuant to Section 9(b) or 10(d) hereof or otherwise shall be allocated among the Master Trusts as the Committee may determine from time to time. (b) SUCCESSIVE TRANSFERS. On or before the twentieth day following the end of each successive calendar quarter, the Company shall transfer to one or more of the Master Trusts an aggregate amount of Shares and/or cash as it shall determine to be equal to the value of benefits of Participants under the Plan which benefits have vested or have been earned (I.E., all Earned Stock Incentive Units) during such calendar quarter. (c) TITLE TO FUNDS. DP&L shall retain beneficial ownership of all assets transferred to the Master Trusts and such assets will be subject to the claims of DP&L's creditors. No Participant or beneficiary has or will have any property interest in the assets held in the Master Trusts or in any other specific asset of the Company. SECTION 10. CHANGE OF CONTROL. (a) AUTOMATIC TRANSFER OF AUTHORITY. In the event of a Change of Control, any and all authority and discretion which is exercisable by the Committee, or the CEO, as heretofore or hereafter described in the Plan, shall automatically be transferred to the Trustees of each Master Trust to the extent that benefits under the Plan are being funded under such Master Trust. (b) ACCELERATION UPON CHANGE OF CONTROL. In the event any Participant who is a party to a Severance Contract (as defined in the Master Trust or as otherwise determined by the Committee) is entitled to benefits pursuant to paragraph 3 (or successor provision) of such Severance Contract, any and all of his awarded Stock Incentive Units (other than to the extent related to a completed Incentive Period for which the determination of the number of Earned Stock Incentive Units has already been made; and not to exceed the number of Stock Incentive Units comprising the 78 target award under the applicable Stock Incentive Award regardless of the potential to earn more than such target award if and as provided in such Stock Incentive Award) shall be deemed to be Earned Stock Incentive Units which are vested and, notwithstanding the second paragraph of Section 8(b) hereof, all such Earned Stock Incentive Units (including, without limitation, Previously Earned Units), shall be payable to such Participant as the Participant has elected on his Deferral Election Form. For purposes of any payment to a Participant pursuant to the foregoing sentence, all Earned Stock Incentive Units shall be valued as at the date of termination of employment at an amount equal to the greater of (i) an amount based on the higher of the closing sales price on the New York Stock Exchange--Composite Transaction Tape on the date of termination or the date on which a Change of Control occurs, whichever is greater, of Common Shares of DPL Inc. or (ii) the Conversion Price (as determined in accordance with Section 8(e)). If such Earned Stock Incentive Units are not payable in a lump sum upon termination of employment in accordance with the Participant's Deferral Election Form, the value of such Earned Stock Incentive Units shall be immediately credited to the Standard Deferral Account of such Participant under the Deferred Compensation Plan (or if the Participant does not have such an account, the Company shall establish such an account for him or her), and thereafter payment of the amount so credited shall be in accordance with the Deferred Compensation Plan. (c) (Intentionally left blank.) (d) FUNDING OF MASTER TRUSTS. Upon a Change of Control, the Company shall immediately transfer to one more of the Master Trusts an aggregate amount of Shares and/or cash which, when combined with the other assets of the Master Trusts contributed or accruing thereto under or by reason of Section 9 hereof, is equal to the value of benefits of Participants under the Plan (I.E., the value of all Earned Stock Incentive Units) accrued through the date of occurrence of the Change of Control event, determined after application of Section 10(b). SECTION 11. NOTICES. Any notice, election or any request required or permitted hereunder, which is to be mailed or requested from the Secretary or the CEO of the Company, shall be delivered or mailed, postage prepaid, as follows: (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, P.O. Box 1247 Dayton, Ohio 45432 Attention: Corporate Secretary (b) After a Change of Control, to the Trustees of each Master Trust pursuant to which benefits under the Plan 79 are being funded, at the notice address specified by such Trustees in the applicable trust agreement. The Company or Trustees may from time to time change their addresses for receipt of notices by giving notice of such change to the Participants, but no such change shall be deemed to be effective until notice thereof is actually received by the Participant to whom it is directed. SECTION 12. CONDITIONS UPON AWARDS AND PAYMENTS. No provision of the Plan or any Stock Incentive Award shall be binding upon the Company or enforceable against the Company to the extent that it would cause the Company not to comply with all relevant provisions of state and federal law. SECTION 13. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall confer upon any Participant or other eligible employee the right to continue in the employment of the Company or affect any right the Company may have to terminate the employment of any Participant or other eligible employee. SECTION 14. NO RIGHTS AS SHAREHOLDERS. No Participant who receives a Stock Incentive Award under the Plan shall have any rights as a shareholder of the Company as a result thereof unless and until Shares are issued to such Participant in accordance with the Plan. SECTION 15. NON-UNIFORM DETERMINATIONS. The Committee's determination under the Plan (including, without limitation, its selection of Participants to receive Stock Incentive Awards, the length of Incentive Periods, and the amount of timing of awards) need not be uniform, and may be made by it selectively among persons who receive, or are eligible to receive Stock Incentive Awards under the Plan, whether or not such persons are similarly situated. SECTION 16. NON-TRANSFERABILITY. Neither a Participant, nor his beneficiary, nor any other individual shall have any right by way of anticipation or otherwise to alienate, sell, transfer, assign, pledge, charge or otherwise dispose of any benefits which may become payable under this Plan, prior to the time that payment of any such benefit is made, and any attempted anticipation, alienation, sale, transfer, assignment, pledge, charge, or other disposition shall be null and void. Furthermore, none of the benefits payable under this Plan shall be subject to the claim or legal process of the creditors of any Participant or of the beneficiary, spouse or former spouse of any Participant or of any other person or entity. SECTION 17. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. 80 In the event of a share dividend, a stock split, recapitalization, merger, consolidation, reorganization, split-up, combination or exchange of shares, spin-off, extraordinary dividend in property or in kind, or other similar corporate changes (each of the foregoing, an "Extraordinary Transaction") the number and/or kind of Stock Incentive Units allocated to a Participant's account shall be appropriately adjusted by the Committee (whose determination in each case shall be conclusive) as the Committee may determine to be necessary to ensure equitable treatment to each Participant as a result of the consummation of any Extraordinary Transaction. SECTION 18. INTERPRETATION AND AMENDMENT. This Plan will be administered by the Committee. The decision of the Committee with respect to the administration or interpretation of the Plan will be final and binding. The Committee reserves the right, prior to a Change in Control, to amend, modify or terminate the Plan; provided, however that (i) no amendment, modification or termination of the Plan shall affect an election to defer payments already in effect for the current calendar year or any preceding calendar year or shall otherwise adversely affect any right or benefit earned or accrued under the Plan by any Participant prior to any such amendment, modification or termination without the prior written consent of such Participant, and (ii) following a Change of Control the Committee's discretion will be exercised as provided in Section 10(a) hereof; provided further that the Trustees shall have no authority to terminate the Plan. SECTION 19. GENDER AND NUMBER. Except when indicated by the context, any masculine terminology used herein shall also include the feminine, and the use of any term herein in the singular may also include the plural. SECTION 20. CHOICE OF LAW. This Plan shall be construed, rendered and governed by the laws of the State of Ohio. 81 EXHIBIT A THE DAYTON POWER AND LIGHT COMPANY MANAGEMENT STOCK INCENTIVE PLAN DEFERRAL ELECTION FORM INSTRUCTIONS: This Election Form relates to Stock Incentive Units deferred pursuant to the Management Stock Incentive Plan (the "Plan"). Under the Plan, deferred Stock Incentive Units are credited to a Participant's Account in a Master Trust or Trusts created by DP&L. PAYMENTS. Payments shall be made from the Plan in the form of DPL Inc. common shares after termination -------- of employment (check one): a. ___ in a lump sum payment; b. ___ annually over a period of up to twenty years. (Specify number of years _____.) Such payment(s) shall be made or commence by no later than the January 31 immediately following: __________________ (specify date). Upon my death (check one): ___ payments to my beneficiary shall continue or commence in the same method to be paid to me as elected above. ___ payments are to be made to my beneficiary in a lump sum. DESIGNATION OF BENEFICIARY In the event of my death all payments required to be made under the Plan shall be made to the following person: Name of designated beneficiary: ___________________________________ Address of designated beneficiary: ___________________________________ ___________________________________ 82 ___________________________________ If the above-designated beneficiary does not survive me, payments will be made to the following successor beneficiary (or to my estate on failure to designate otherwise): Name of designated beneficiary: ___________________________________ Address of designated beneficiary: ___________________________________ ___________________________________ ___________________________________ ___________________________________ Signature ___________________________________ Date This Election Form was received by the Secretary of the Company on ______________________. ___________________________________ Secretary 83 EX-10.(D) 6 a2043323zex-10_d.txt EXHIBIT 10(D) EXHIBIT 10(d) THE DAYTON POWER AND LIGHT COMPANY KEY EMPLOYEES DEFERRED COMPENSATION PLAN (As Amended Through December 31, 2000) 1. GENERAL. Effective January 1, 1991, this document ("Plan"), which supersedes the Deferred Compensation Plan for Key Employees of The Dayton Power and Light Company as in effect on September 1, 1985, as amended effective January 1, 1989 (the "Prior Plan"), continues a program established for the purpose of providing deferred compensation for a select group of management employees. 2. DEFINITIONS. A. "Board of Directors" means The Board of Directors of DPL Inc. in place from time to time prior to a Change of Control. B. "CEO" means the Chief Executive Officer of DPL duly installed, from time to time, prior to a Change of Control. However, "Committee" will be substituted for "CEO" in discussing the CEO's rights and benefits in the Plan. C. "Change of Control" means 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 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 or commences a tender offer to become the beneficial owner, directly or indirectly, of securities of DPL or DP&L representing (A) 15% 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 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 enters into an agreement to merge or consolidate itself, or an agreement to consummate 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, 84 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 enters into an agreement to sell, lease, exchange or otherwise transfer or dispose 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 subsidiar(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; (iv) any transaction referred to in (ii) or (iii) above is consummated; or (v) those persons serving as directors of DPL or DP&L on February 1, 2000 (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). D. "Committee" means the Compensation and Management Review Committee of the Board of Directors of DPL Inc. or such other committee(s) as the Board of Directors of DPL Inc. may designate from time to time to administer the Plan. E. "Company" means The Dayton Power and Light Company ("DP&L"), DPL Inc. ("DPL") and any entity which, prior to a Change of Control, is controlling, controlled by or under common control with DP&L or DPL Inc. F. "Compensation" means amounts payable by the Company to a Participant in the form of salary and/or incentive awards. G. "Deferral Form" means the form attached hereto as Exhibit A (or such other form as the Committee may designate from time to time) or any forms filed under the Prior Plan pursuant to which a Participant (hereinafter defined) may elect to defer his/her Compensation. H. "Election Form" means the form attached hereto as Exhibit A (or such other form as the Committee may designate from time to time) pursuant to which a Participant may elect the form and timing of payments under this Plan. I. "Eligible Participant" means any Participant who is employed by the Company as of October 1, 1996 or at any time thereafter. 85 J. "Other Participant" means any Participant whose employment with the Company terminated (by reason of retirement or otherwise) prior to October 1, 1996. K. "Participant" means any officer or management key employee of the Company designated by the CEO prior to a Change of Control. L. "Unreimbursed Amount" means, at any time as to any Eligible Participant who, either directly or through any affiliate, including through a trust established by such Eligible Participant, has entered into a split-dollar life insurance arrangement with the Company, the amount of such Eligible Participant's or affiliate's then obligation to reimburse the Company under such split-dollar arrangement for life insurance premiums paid by the Company. 3. ELECTION TO DEFER AND ACCOUNT DESIGNATION. A. ELECTION TO DEFER. The Company has established a Standard Deferral Account for each Participant to which (i) deferred Compensation has been or will be credited from time to time pursuant to Section 3(B) hereof and (ii) in the case of certain of the Participants, amounts have been credited pursuant to the second, third and fourth paragraphs of this Section 3(A). By delivering a Deferral Form to the Secretary of the Company on or before December 31 preceding the calendar year such election is to be effective, a Participant may elect to defer Compensation relating to all future services, until such election is terminated in accordance with Section 6. Prior to December 31, 1999, Supplementary Deferral Accounts had been established under the Plan for certain Participants. Effective as of December 31, 1999, the present value, as determined by the Committee, of a Participant's Supplementary Deferral Account was credited to the Standard Deferral Account of such Participant. Accordingly, effective as of December 31, 1999, the Supplementary Deferral Accounts were terminated and no amounts are credited thereto. In addition, effective as of January 1, 2000, the participation in the Company's Supplemental Executive Retirement Plan (the "SERP") by certain of the Participants (the "Former SERP Participants") was terminated and, in connection therewith, the present value, as determined by the Committee, of a Former SERP Participant's accrued benefits under the SERP was credited to the Standard Deferral Account of such Former SERP Participant (the amount so credited to the Standard Deferral Account of a Former SERP Participant is hereinafter referred to as the "SERP Amount"). Moreover, prior to December 31, 1999, certain participants (the "Electing Participants") in the Company's Management Stock Incentive Plan (the "MSIP") elected, as permitted by the MSIP, to convert a portion of their Earned Stock Incentive Units under the MSIP into cash and the amount each Electing Participant so elected to convert to cash was credited to the Standard Deferral Account of such Electing Participant 86 under the Plan; further, as provided in Sections 8(e) and 10(b) of the MSIP, in the event the common shares of DPL Inc. cease to be listed on the New York Stock Exchange, or upon termination of a Participant's employment after a Change of Control, additional amounts may be credited to a Participant's Standard Deferral Account from the MSIP. B. STANDARD DEFERRAL ACCOUNT. All deferred amounts will be credited to each Participant's Standard Deferral Account. The Participants' Standard Deferral Accounts are established only as a mechanism for measuring the potential amount of cash or shares of DPL Inc. common stock which may be distributed under the Plan. DP&L shall retain beneficial ownership of all amounts credited to Participants' Standard Deferral Accounts and such deferred amounts will be subject to the claims of DP&L's creditors. No Participant or beneficiary has any property interest in deferred amounts or in any specific assets of the Company. C. INTEREST ON STANDARD DEFERRAL ACCOUNTS. For purposes of measuring the amounts which may be distributed under the Plan to the Participants, for periods prior to January 1, 2001, the Company credited interest to the Standard Deferral Account of each Other Participant on a quarterly basis, calculated by multiplying the balance in such account (including interest) on the first day of each month of the preceding quarter by one-twelfth of the simple average yield of the annualized AA utility bond averages as published monthly in Moody's Bond Survey for the preceding quarter. With respect to all amounts credited to the Standard Deferral Account of each Other Participant as of January 1, 2001 or at any time thereafter, such Standard Deferral Account shall be deemed invested in the Vanguard Total Bond Index Fund, or a comparable fund designated by the Committee in its sole discretion (the "Bond Fund"), and all dividends, interest, distributions and other amounts paid with respect to the Bond Fund shall be credited to the Standard Deferral Account of each Other Participant and shall be deemed reinvested in the Bond Fund. D. EARNINGS ON STANDARD DEFERRAL ACCOUNTS OF ELIGIBLE PARTICIPANTS. For purposes of measuring the amounts which may be distributed under the Plan to Eligible Participants, all amounts credited to the Standard Deferral Account of an Eligible Participant as of January 1, 1997 and all amounts thereafter credited to the Standard Deferral Account of an Eligible Participant pursuant to Section 3(A), together with the amount of any dividends, interest, distributions or other amounts credited to such Standard Deferral Account pursuant to this Section 3(D), shall be deemed invested in such "Eligible Investment Options" as such Eligible Participant may designate from time to time as provided herein. For purposes of the Plan, "Eligible Investment Options" means those securities, mutual funds or other investment vehicles set forth on Schedule I hereto, as such Schedule I may be modified from time to time by the Committee upon at least 30 days' prior written notice to the Eligible Participants. Subject to Section 3(E) hereof, each Eligible Participant shall have the option, by delivering to the Secretary 87 of Company a completed Investment Option Election Form in the form attached hereto as Exhibit B (or such other form as the Committee may designate from time to time) on or prior to each such date as the Committee may specify from time to time for such purpose (each such date, an "Election Date"), to designate or change, in a percentage equal to at least 10%, the portions of such Eligible Participant's Standard Deferral Account which shall be deemed invested in each Eligible Investment Option as of such Election Date. Any such designation by an Eligible Participant shall remain in effect until changed in accordance with the preceding sentence or as provided in Section 3(E) hereof. Subject to Section 3(E) hereof, any increase in the percentage of an Eligible Participant's Standard Deferral Account deemed invested in an Eligible Investment Option effected on any Election Date shall be deemed to be a purchase of such Eligible Investment Option and any decrease in the percentage of an Eligible Participant's Standard Deferral Account deemed invested in an Eligible Investment Option effected on any Election Date shall be deemed to be a sale of such Eligible Investment Option, and any such purchase or sale shall be deemed to have occurred as of the last business day immediately prior to such Election Date at the closing price of such Eligible Investment Option on such date. In the absence of any such designation by an Eligible Participant with respect to all or any portion of his Standard Deferral Account, such Standard Deferral Account (or such portion) shall be deemed invested in the Bond Fund (as defined in Section 3(C) above), and the Bond Fund shall be an Eligible Investment Option for such Eligible Participant. All dividends, interest, distributions and other amounts paid or distributed from time to time with respect to any Eligible Investment Option in which all or any portion of an Eligible Participant's Standard Deferral Account is deemed invested shall be credited to such Eligible Participant's Standard Deferral Account and shall be deemed reinvested in such Eligible Investment Option. The Company shall not be required to purchase, hold or dispose of any Eligible Investment Options designated by Eligible Participants. To the extent that the Company does, in its discretion, purchase or hold any of the Eligible Investment Options designated by Eligible Participants, the same shall remain the sole property of the Company, subject to the claims of its general creditors, and shall not be deemed to form a part of any Eligible Participant's Standard Deferral Account, and no Participant shall have any property interest therein or claim thereto. E. INVESTMENT IN PRIVATE EQUITY INVESTMENTS. In its sole discretion the Committee may designate one or more Eligible Investment Options which, if purchased, may not be immediately saleable; such Eligible Investment Options may include interests in partnerships or other entities which are not readily tradable on an established securities market including, for purposes of illustration, interests in partnerships investing in private equity investments (collectively referred to herein as "Private Equity Investments"). The Committee may, in its sole discretion, establish procedures to regulate the ability of an Eligible Participant's designation of an Private Equity Investments as one of his or her Eligible Investment Options pursuant to Section 88 3(D) hereof. Without limitation, these procedures may include the following: (i) Limiting the right of an Eligible Participant to designate a Private Equity Investment to those Eligible Participants (a) who have a Standard Deferral Account balance greater than a specified minimum amount, and (b) whose payment dates, as specified in their Election Form, in the sole and unrestricted discretion of the Committee, are sufficiently deferred to allow for any Private Equity Investment to fully mature prior to payment of such Eligible Participant's Standard Deferral Account in the event the Company does choose to purchase such Eligible Investment Option; (ii) Requiring a minimum dollar allocation to any Private Equity Investment; (iii) Restricting or eliminating an Eligible Participant's right to reallocate that portion of his Standard Deferral Account allocated to such Private Equity Investment until it has fully matured; (iv) Reallocation, by the Committee, to an Private Equity Investment previously designated by the Eligible Participant, of all or a portion of an Eligible Participant's Standard Deferral Account not so invested to the extent necessary to fully cover any capital calls made with respect to such Private Equity Investment (which reallocation shall proportionately reduce the amount which is deemed invested in each of the Eligible Participant's other Eligible Investment Options); (v) Establishing the date on which an Eligible Participant's Standard Deferral Account is deemed invested in a Private Equity Investment following such designation by the Eligible Participant. In addition, notwithstanding anything in Section 4 hereof to the contrary, and notwithstanding any payment election specified in such Eligible Participant's Election Form, the Committee may, in its sole discretion, defer payment of any amounts credited to an Eligible Participant's Standard Deferral Account which have been deemed invested in a Private Equity Investment until any such Private Equity Investment has fully matured, and, in the case of partial distributions from an Eligible Participant's Standard Deferral Account, the Committee may reduce the amount which is deemed invested in each Eligible Investment Option other than such Private Equity Investment. F. UNREIMBURSED AMOUNTS. Notwithstanding any other provision of the Plan, in the event that there exists an Unreimbursed Amount as to an Eligible Participant, the Unreimbursed Amount of such Eligible Participant in effect from time to time shall reduce the amount of such Eligible Participant's Standard Deferral Account which would otherwise be deemed invested in Eligible Investment Options pursuant to 89 Section 3(D) in the manner designated by such Eligible Participant in the Investment Election Form most recently delivered to the Secretary of the Company or, failing such designation, shall proportionately reduce the amount which would otherwise be deemed invested in each Eligible Investment Option pursuant to Section 3(D). 4. PAYMENTS UNDER THE PLAN. A. STANDARD DEFERRAL ACCOUNT. Subject to Section 3(E) hereof, amounts credited to a Participant's Standard Deferral Account, together with accumulated earnings, will be distributed in a lump sum or over a period of years, up to twenty, in such installments as specified in the Election Form, with such lump sum payment being made or such installment payments commencing, unless otherwise determined by the Committee in its discretion, on or prior to the January 31 immediately following: (i) The date, either before or after the termination of the Participant's employment, specified by the Participant in the Election Form; or (ii) Notwithstanding any provision to the contrary, no later than the date a Participant reaches an age at which the Participant may earn unlimited amounts without reduction of benefits under the Social Security Act and the regulations promulgated thereunder; and with subsequent annual installments, if payments are to be made in annual installments, to be paid on or prior to each January 31 thereafter until all amounts credited to the Participant's Standard Deferral Account have been paid in full. For purposes of any distribution pursuant to this Section 4(A), the amount credited to an Eligible Participant's Standard Deferral Account on any date shall be equal to the value (determined on the basis of the closing prices on the last business day immediately preceding such date) of all Eligible Investment Options in which such Eligible Participants' Standard Deferral Account is deemed to be invested on such date pursuant to Section 3(D) and, in the case of a partial distribution from an Eligible Participant's Standard Deferral Account, the amount of such distribution shall proportionately reduce the amount which is deemed invested in each Eligible Investment Option pursuant to Section 3(D). Notwithstanding any other provision of the Plan (other than Section 4(C)) or any election made by a Former SERP Participant under the Plan or in any Election Form, no Former SERP Participant shall in any event be entitled to receive any payment under the Plan with respect to such Former SERP Participant's SERP Amount (or any earnings thereon) if, at the time of any such payment, and after giving effect thereto, the aggregate amount paid to such Former SERP Participant under the Plan with respect to such SERP Amount (and earnings) would exceed the aggregate amount which would have been paid to such Former 90 SERP Participant if such SERP Amount had been paid to such Former SERP Participant in three equal annual installments commencing on January 1, 2001. Notwithstanding the foregoing, any Former SERP Participant may receive payment of his SERP Amount (and earnings thereon) in accordance with Section 4(C). B. PAYMENT IN CASH OR STOCK. All distributions from a Participant's Standard Deferral Account will be paid in cash unless, within 30 days before each scheduled date for distribution of benefits, such Participant files an election with the Secretary of the Company to have benefits payable in the form of shares of DPL Inc.'s common stock. Subsequent installments, if any, will be paid annually or quarterly, as elected by the Participant, as specified in the Election Form, until the entire amount credited to his/her accounts are paid. Shares of DPL Inc.'s common stock will be valued at their closing sales price on the New York Stock Exchange Composite Transaction Tape on the date a cash payment would otherwise have been paid. (If no sale occurs on such date, the common shares shall be valued on the next preceding date on which a sale occurs). As soon as practical thereafter, DPL Inc. will issue and deliver that number of shares of DPL Inc.'s common stock equal in value to the amount of the payment, divided by the determined price of such common shares; provided, however, that DPL Inc. will not be obligated to issue and deliver fractional shares and, in lieu thereof, the Participant shall receive cash. C. EARLY DISTRIBUTION. A Participant may in no event receive a distribution of all or a portion of amounts credited to his Standard Deferral Account prior to the time that the Participant elected to receive such amounts pursuant to the Plan. Notwithstanding the foregoing: (i) the CEO may, upon receiving a written request from the Participant or his or her beneficiary as provided in Section 5 hereof in the event of the death of a Participant, upon determining that a distribution is in the best interest of the Company and the Participant (or his or her beneficiary) taking into account the financial condition of each, distribute all or a portion of the amount credited to the Participant's Standard Deferral Account; and (ii) upon written request by a Participant to receive his entire account balance in the Plan made at any time after termination of his or her employment (or consultation arrangement) with DP&L or DPL Inc., for any reason, after a Change of Control, the amount credited to such Participant's Standard Deferral Account shall be paid to such Participant in a lump sum within ten (10) days after the date of such written request, provided that the Participant shall be entitled to only 90% of such account balance and shall irrevocably forfeit 10% of such account balance by making the withdrawal. D. WITHHOLDINGS. Any taxes required to be withheld by any Federal, state, or local government will be deducted from all deferred payments and paid for the account of the Participant. E. PAYMENTS IN KIND. Notwithstanding any other provision of the Plan, after a Change of Control, any portion of a distribution to be made from an Eligible Participant's Standard 91 Deferral Account may, at the request of such Eligible Participant at least 30 days prior to the scheduled date of such distribution, be made by the Trustees of the Master Trust(s) pursuant to which benefits under the Plan are being funded, in the sole and absolute discretion of such Trustees, in the form of any Eligible Investment Options actually held by such Master Trust(s) for purposes of funding such distribution to such Eligible Participant under the Plan. For purposes of making any such distribution, any Eligible Investment Option so distributed shall be valued at its closing price on the last business day immediately preceding the date of such distribution and such distribution shall be net of any applicable federal, state or local withholding taxes unless the Eligible Participant makes a cash payment, concurrently with such distribution, to the Master Trust(s) making such distribution for the purpose of paying such withholding taxes. Nothing contained in this Section 4(F) shall require the Company (or any of the Master Trusts) to purchase, hold or dispose of any Eligible Investment Options designated by Eligible Participants. To the extent that any Master Trust holds any Eligible Investment Options, the same shall remain the sole property of the Company, subject to the claims of its general creditors and shall not be deemed to form a part of any Eligible Participant's Standard Deferral Account and no Participant shall have any property interest therein or claim thereto. F. UNREIMBURSED AMOUNTS. Notwithstanding any other provision of the Plan, in the event that there exists an Unreimbursed Amount as to an Eligible Participant, then (a) no distribution of the amount credited to such Eligible Participant's Standard Deferral Account shall be made pursuant to Section 4(A) or otherwise to the extent that, after giving effect to any such proposed distribution, the amount then credited to such Eligible Participant's Standard Deferral Account would be less than the Unreimbursed Amount of such Eligible Participant and (b) any amounts which are not distributed from such Eligible Participant's Standard Deferral Account by reason of the foregoing clause (a) shall be paid to such Eligible Participant promptly after the date of, and only to extent of, any reimbursement of such Unreimbursed Amount. G. LUMP SUM DISTRIBUTION IN CERTAIN CIRCUMSTANCES. Notwithstanding any other provision of the Plan or any election made by a Participant in an Election Form, in the event that, at the time of the termination of a Participant's employment or at any time thereafter, the amount then credited to such Participant's Standard Deferral Account is less than $100,000, then the Company may, at its option, distribute to such Participant in a single lump sum payment the entire amount then credited to such Participant's Standard Deferral Account. 5. PAYMENTS IN THE EVENT OF DEATH. A. DESIGNATION OF BENEFICIARY. On his/her Election Form, each Participant will designate one or more beneficiaries to whom payments will be made in the event of his/her death. The Participant may change the beneficiary without the beneficiary's consent; however, no change will be effective until received in writing by the Committee (or its delegate) or, in the event of a 92 Change of Control, by the Trustees of the Master Trust(s) pursuant to which benefits under the Plan are being funded. If a beneficiary survives the Participant, all amounts credited to such Participant's account will be paid to the designated beneficiary or his estate as provided below. If a Participant has not designated a beneficiary, or the designated beneficiary does not survive the Participant, then the unpaid deferred amounts will be paid to the Participant's estate. B. PAYMENT TO DESIGNATED BENEFICIARY. If a Participant dies before payment of all deferred amounts credited to his/her Standard Deferral Account, amounts so credited will be paid as directed by the Participant on his/her Election Form. 6. TERMINATION OR MODIFICATION OF ELECTION. In any year, a Participant may terminate or modify, for that year, his/her deferred election by written notice delivered to the Secretary of the Company. Any such notice will become effective on the last day of the month it is given and will apply only to compensation payable after such effective date. Amounts credited to a Participant's accounts prior to the effective date of any termination or modification will not be affected and will be paid in accordance with Sections 4 and 5. 7. MASTER TRUSTS. A. PARTICIPANT'S ACCOUNTS. The Company has established, and may in the future establish, one or more trusts (each such trust, as it may be amended from time to time, is referred to herein as a "Master Trust") for the purpose, among others, of securing the performance by the Company of its obligation to Participants to make the distributions under the Plan and has funded one or more of the Master Trusts in an aggregate amount of cash and/or DPL Inc.'s common shares as the Company has determined to be equal to the value of all currently vested or earned benefits of the Participants under the Plan. Pursuant to one or more of the Master Trusts, each Participant has been assigned a separate account as a mechanism for measuring the potential benefits which may be distributed in the future. Subsequent transfers of cash and/or DPL Inc.'s common shares which the Company is required to make to the Master Trusts pursuant to Section 7.B or 8.C hereof or otherwise shall be allocated among the Master Trusts as the Committee may determine from time to time. B. SUCCESSIVE TRANSFERS. On or before the twentieth day following the end of each successive calendar quarter, the Company shall transfer to one or more of the Master Trusts an aggregate amount of cash and/or shares of DPL Inc.'s common stock as it shall determine to be equal to the value of benefits of Participants under the Plan which benefits have vested or have been earned during such calendar quarter. C. TITLE TO FUNDS. DP&L shall retain beneficial ownership of all cash or shares transferred to the Master Trusts and such cash or shares will be subject to the claims of DP&L's creditors. No Participant or beneficiary has or will have any 93 property interest in the cash or shares held in the Master Trusts or in any other specific asset of the Company. 8. CHANGE OF CONTROL. A. AUTOMATIC TRANSFER OF AUTHORITY. In the event of a Change of Control, any and all authority and discretion which is exercisable by the Committee, or the CEO, as heretofore or hereafter described in the Plan, including, without limitation, the authority to change the Eligible Investment Options as provided in Section 3.D. hereof, shall automatically be transferred to the Trustees of each Master Trust to the extent that benefits under the Plan are being funded under such Master Trust. B. (Intentionally left blank.) C. FUNDING OF MASTER TRUSTS. Upon a Change of Control, the Company shall immediately transfer to one or more of the Master Trusts an aggregate amount of cash which, when combined with the other assets of the Master Trusts contributed or accruing thereto under or by reason of Section 7 hereof, is equal to all amounts credited to the Participants' Standard Deferral Accounts, including accumulated earnings. 9. NOTICES. Any notice, election or any request required or permitted hereunder, which is to be mailed or requested from the Secretary or the CEO of the Company shall be delivered or mailed, postage prepaid, as follows: (i) Prior to a Change of Control; to the Secretary of DP&L at: The Dayton Power and Light Company MacGregor Park 1065 Woodman Drive Dayton, Ohio 45432 Attention: Corporate Secretary (ii) After a Change of Control; to the Trustees of each Master Trust pursuant to which the benefits under the Plan are being funded, at the notice address specified by such Trustees in the applicable trust agreement. The Company or Trustees may from time to time change their addresses for receipt of notices by giving notice of such change to the Participants, but no such change shall be deemed to be effective until notice thereof is actually received by the Participant to whom it is directed. 10. NONASSIGNABILITY. Neither a Participant, nor his beneficiary, nor any other individual shall have any right by way of anticipation or otherwise to alienate, sell, transfer, assign, pledge, charge 94 or otherwise dispose of any benefits which may become payable under this Plan, prior to the time that payment of any such benefit is made, and any attempted anticipation, alienation, sale, transfer, assignment, pledge, charge, or other disposition shall be null and void. Furthermore, none of the benefits payable under this Plan shall be subject to the claim or legal process of the creditors of any Participant or of the beneficiary, spouse or former spouse of any Participant or of any other person or entity. 11. INTERPRETATION AND AMENDMENT. This Plan will be administered by the Committee. The decision of the Committee with respect to the administration or interpretation of the Plan will be final and binding. The Committee reserves the right, prior to a Change in Control, to amend, modify or terminate the Plan; provided, however, that (i) no amendment, modification or termination of the Plan shall affect an election to defer payments already in effect for the current calendar year or any preceding calendar year or shall otherwise adversely affect any right or benefit earned or accrued under the Plan by any Participant prior to any such amendment, modification or termination without the prior written consent of such Participant, and (ii) following a Change of Control the Committee's discretion will be exercised as provided in Section 8.A hereof; provided further that the Trustees shall have no authority to terminate the Plan. 12. GENDER AND NUMBER. Except when indicated by the context, any masculine terminology used herein shall also include the feminine, and the use of any term herein in the singular may also include the plural. 13. NO RIGHTS AS SHAREHOLDERS. Participants whose accounts are credited with amounts under the Plan shall have no rights as shareholders of the Company as a result thereof unless and until the shares of DPL Inc. common stock, if any, are distributed to the respective Participants. 14. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall confer upon any Participant the right to continued employment with the Company, nor shall it interfere with the rights of the Company to discharge any person and/or to treat him without regard to the effect which such treatment might have upon him as a person covered by this Plan. 15. GOVERNING LAW. This Plan shall be construed, rendered and governed by the laws of the State of Ohio. 95 EXHIBIT A THE DAYTON POWER AND LIGHT COMPANY KEY EMPLOYEES DEFERRED COMPENSATION DEFERRAL AND ELECTION FORM DEFERRAL INSTRUCTIONS: A key employee may defer compensation pursuant to the provisions of the Key Employees Deferred Compensation Plan (the "Plan"). Amounts deferred under the Plan will be paid in accordance with the Participant's Election as provided below to the extent that it is consistent with the terms and conditions of the Plan. STANDARD DEFERRAL ACCOUNT ELECTION TO PARTICIPATE: I elect to defer the following percentage or dollar amount of my [insert date] compensation pursuant to the Standard Deferral Provisions of the Plan. Base Salary $_____________ or ______________% Incentive Compensation $_____________ or ______________% ELECTION (PAYMENT) INSTRUCTIONS: STANDARD DEFERRAL ACCOUNT 1. PAYMENTS. Payments shall be made or commence from my Standard Deferral Account by no later than the January 31 immediately following (check one): a. ___ a specified date either before or after termination of employment (Specify Date: ___________); or b. ___ at such date as I reach the age at which I can earn unlimited amounts without reduction of benefits under the Social Security Act and the regulations promulgated thereunder. Such payments from my account shall be paid as follows (check one): a. ___ lump sum payment; or 96 b. ___ annually over a period of up to twenty years. (Specify number of years ___________). I request that such payments be made in the form of DPL Inc. shares, rather than cash. ___ Yes ___ No Upon my death (check one): ____ payments to my beneficiary shall continue or commence in the same method to be paid to me as elected above. ____ payments are to be made to my beneficiary in a lump sum DESIGNATION OF BENEFICIARIES All payments required to be made under the Plan to my designated beneficiary in the event of my death shall be made to the following person: Name of designated beneficiary: ______________________________ Address of designated beneficiary: ______________________________ ______________________________ ______________________________ If the above-designated beneficiary does not survive me, the payments will be made to the following successor beneficiary (or to my estate on failure to designate otherwise): Name of designated beneficiary: ______________________________ Address of designated beneficiary: ______________________________ ______________________________ ______________________________ ______________________________ Signature of Executive ______________________________ Date 97 This Deferral and Election Form was received by the Secretary of the Company on _______________________. ______________________________ Secretary 98 EXHIBIT B THE DAYTON POWER AND LIGHT COMPANY KEY EMPLOYEES DEFERRED COMPENSATION PLAN INVESTMENT OPTION ELECTION FORM I elect to have amounts credited to my Standard Deferral Account under the Plan to be deemed invested, effective [insert date], in the following Eligible Investment Options, as provided in Section 3(D) of the Plan: Percentage of Standard Deferral Account Invested (whole percentages, not ELIGIBLE INVESTMENT OPTION less than 10%) - -------------------------- ------------------------------------ Vanguard Index Trust - 500 Portfolio _____% Vanguard Index Trust - Small Cap Stock _____% Portfolio Vanguard Index Trust - Total International _____% Portfolio Vanguard Index Trust - Total Bonds _____% (Note: In the absence of any designation with respect to all or any portion of your Standard Deferral Account, your Standard Deferral Account (or such portion) will be deemed invested in the Vanguard Index Trust - Total Bonds as provided in Section 3(D) of the Plan). If the Company and I have entered into a split-dollar life insurance arrangement, then the Unreimbursed Amount (as defined in the Plan) shall reduce the amount which would otherwise be deemed invested in the following Eligible Investment Options in the following percentages of the Unreimbursed Amount: Percentage of Unreimbursed Eligible Investment Option Amount - -------------------------- ------------- Vanguard Index Trust - 500 Portfolio _____% Vanguard Index Trust - Small Cap Stock _____% Portfolio Vanguard Index Trust - Total International _____% Portfolio Vanguard Index Trust - Total Bonds _____% 99 ______________________________ Signature of Executive ______________________________ Date This Investment Option Election was received by the Secretary of the Company on ________________. ______________________________ Secretary 100 154 SCHEDULE I ELIGIBLE INVESTMENT OPTIONS Vanguard Index Trust -- 500 Portfolio Vanguard Index Trust -- Small Cap Stock Portfolio Vanguard Index Trust -- Total International Portfolio Vanguard Index Trust -- Total Bonds 101 EX-10.(E) 7 a2043323zex-10_e.txt EXHIBIT 10(E) EXHIBIT 10(e) FORM OF CHANGE OF CONTROL AGREEMENT [Date:____________________________] [Name: __________________] [Title: _________________] The Dayton Power and Light Company MacGregor Park 1065 Woodman Park Dayton, OH 45432 Dear_____________________: DPL Inc. ("DPL") and its subsidiary, The Dayton Power and Light Company ("DP&L") hereinafter collectively referred to as the "Company", considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a Change of Control (as defined in paragraph 2) can raise distracting and disrupting uncertainties and questions among management personnel, can interfere with their whole-hearted attention and devotion to the performance of their duties, and can even lead to their departure, all to the detriment of the best interests of the Company and its shareholders. Accordingly, the Board of Directors of DPL (the "Board of Directors") and the Board of Directors of DP&L have determined that the best interests of the Company and its shareholders would be served by assuring to certain executives of the Company, including yourself, the protection provided by an agreement which defines the respective rights and obligations of the Company and the executive in the event of a Change of Control. In order to effect the foregoing, this letter agreement sets forth the Company's agreement to extend to you the benefits of its 1986 medical plan and certain other benefits upon a termination of employment whenever occurring and to set forth the benefits which the Company agrees will be provided to you in the event of a Change of Control as described in paragraph 3 below. 1. OPERATION AND TERM OF AGREEMENT. This agreement, which amends and restates in its entirety the existing letter agreement between the Company and you dated [__________], as amended by letter agreement dated [__________], shall become effective immediately upon the execution hereof. This agreement shall continue until May 1, 2002, and shall automatically renew for each consecutive twelve month period thereafter (I.E., May 1st to April 30th), unless either the Company provides you or you provide the Company a one (1) year prior written notice of its or your intention not to renew this agreement. Notwithstanding the foregoing, the term of this agreement shall continue in effect for a period of not less than thirty-six (36) months after each Change of Control occurring 102 during the term of this agreement; and any benefit that accrues to you pursuant to the terms of this agreement shall continue to be an obligation of the Company and enforceable by you until paid in full, notwithstanding the subsequent termination of this agreement; provided however that if the event constituting a Change of Control is either the commencement of a tender offer, or the entering into of an agreement referred to in item (ii) or (iii) of paragraph 2, and such tender offer is still pending or such agreement has not been consummated at the end of the thirty-six month period applicable to such Change of Control, then without limitation of the other provisions of this paragraph, such thirty-six month period shall be extended through the date on which the tender offer or agreement is either (a) terminated or abandoned or (b) consummated, whichever occurs first, and the thirty-six month period provided for in paragraph 3.B. shall also be so extended. If more than one Change of Control occurs during the term of this agreement, the provisions of this agreement shall be applicable to each such Change of Control. 1.A. TERMINATION FOR ANY REASON. Notwithstanding any other provisions of this agreement to the contrary, upon termination of employment for any reason at any time, the following shall be paid or made available to you in compensation for services previously rendered: (i) Benefits under, or benefits substantially equivalent to benefits under, the standard medical plan which was available to management and professional employees of the Company in 1986 will be provided to you and your spouse for life, and to your dependents for as long as, and to the extent that, your dependents would otherwise be covered under such plan. (ii) The Company shall pay to you in a lump sum in cash not later than the fifteenth day following the Date of Termination (as defined in paragraph 4) your full base salary through the Date of Termination at the rate in effect at the Date of Termination; and also the amount of the award or awards, if any, with respect to any completed period or periods which, pursuant to the Management Incentive Compensation Program or any other Company incentive compensation plan in which you are then participating (other than any deferred compensation plan in which a contrary installment payment election has been made), has been determined to have been earned by you but which has not yet been paid to you. (iii) The Company shall pay or make available to you all other accrued benefits of any kind to which you are, or would otherwise have been, entitled through the Date of Termination. 2. CHANGE OF CONTROL. Except as provided in paragraph 1.A. above, no benefits shall be payable hereunder unless there shall have been a Change of Control, as defined below, and you are eligible for benefits under paragraph 3 below. For purposes of this agreement, a `Change of Control' means 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 103 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 or commences a tender offer to become the beneficial owner, directly or indirectly, of securities of DPL or DP&L representing (A) 15% 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 enters into an agreement to merge or consolidate itself, or an agreement to consummate 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 enters into an agreement to sell, lease, exchange or otherwise transfer or dispose 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; (iv) any transaction referred to in (ii) or (iii) above is consummated; or (v) those persons serving as directors of DPL or DP&L on February 1, 2000 (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). 3. ENTITLEMENT TO BENEFITS FOLLOWING CHANGE OF CONTROL. A. Upon a Change of Control (other than a Change of Control consisting only of the commencement of a tender offer or the entering into of an agreement referred to in item (ii) or (iii) of paragraph 2 above), if immediately prior thereto, you were employed by the Company, you shall be entitled to the benefits set forth in paragraph 5.A. B. Upon a Change of Control consisting only of the commencement of a tender offer or the entering into of an agreement referred to in item (ii) or (iii) of paragraph 2 above, then upon any subsequent termination of your employment at any time within thirty-six months following the occurrence of any such event and prior to a Change of Control referred to in item (iv) or (v) or the consummation of a tender offer referred to in item (i) of paragraph 2 above, you shall be entitled to the benefits set forth in paragraph 5.B., unless such termination is (i) by the Company because of your Disability or for Cause; (ii) by you; or 104 (iii) because of your death. Notwithstanding the foregoing sentence and any other provision herein to the contrary, if (a) the event constituting the Change of Control is only the commencement of a tender offer or the entering into of an agreement referred to in item (ii) or (iii) of paragraph 2 above, (b) the tender offer or agreement is abandoned or terminated, and (c) a majority of the Original Directors and/or their Successors (as defined in paragraph 2 above) of DPL Inc. determine that the tender offer or agreement will not effectuate or otherwise result in a subsequent Change of Control and gives you written notice of such determination, then, as to that particular event only, a subsequent termination of your employment will not entitle you to the benefits set forth in paragraph 5. For purposes of this agreement, termination of your employment shall be deemed to have occurred within thirty-six months following the occurrence of a Change of Control if a Notice of Termination (as defined in paragraph 4) with respect thereto is given within such three year period. C. As used in this agreement, the terms "Disability", "Cause" and "Entitlement Date" shall have the meaning set forth below: (i) DISABILITY. "Disability" shall mean, for the purposes of this agreement, your inability to perform the duties required of you 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 you thirty days' written notice of its intention to terminate your employment by reason thereof, and your failure because of physical or mental illness or other physical or mental disability or incapacity to resume the full-time performance of your duties within such period of thirty days and thereafter perform the same for a period of two consecutive months. (ii) CAUSE. "Cause" shall mean (a) commission of a felony, (b) embezzlement, (c) the illegal use of drugs, or (d) the failure by you to substantially perform your duties with the Company (other than any such failure resulting from your physical or mental illness or other physical or mental incapacity) as determined by the Board of Directors. Notwithstanding the foregoing, Cause shall not be deemed to exist unless and until there shall have been delivered to you 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 you and an opportunity for you, together with your 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 you were guilty of conduct set forth above in clauses (a), (b), (c) or (d) of the first sentence of this subparagraph and specifying the particulars thereof in detail. (iii) ENTITLEMENT DATE. "Entitlement Date" shall mean the date of the Change of Control entitling you to benefits under paragraph 3.A. above (except that if you are entitled to benefits under paragraph 3.B. above, the 105 "Entitlement Date" shall mean the "Date of Termination" as defined in paragraph 4 below). 4. NOTICE UPON TERMINATION. A. Any termination of your employment by the Company subsequent to a Change of Control shall be consummated by written Notice of Termination given to you. For purposes of this agreement, "Notice of Termination" shall mean a notice given by the Company, 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 your employment. B. "Date of Termination" shall mean (i) if your employment is terminated by the Company for Cause, the date specified in the Notice of Termination; (ii) if your employment is terminated for any other reason, the date of such termination. 5. COMPENSATION FOLLOWING CHANGE OF CONTROL. A. If you are entitled to benefits under paragraph 3.A., then the Company shall pay to you in a lump sum in cash not later than the fifteenth day following the Entitlement Date (or in the case of payments under (ii), 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), the amounts determined as provided below: (i) An amount (the "Additional Compensation Payment") equal to 300% of the sum of (1) your annual base salary (which base salary is computed before deduction for any deferred compensation or other employee deferrals) at the rate in effect as of the Entitlement Date plus (2) the average of the last three annual award payments made to you under the Company's Management Incentive Compensation Plan prior to the Entitlement Date (or for the years you have participated in the Plan if less than three), including any portion of any such payments which you elected to defer to your Standard Deferral Account in the Company's Key Employees Deferred Compensation Plan. Notwithstanding the above, you may elect to defer payment of all or a portion of the Additional Compensation Payment by executing and delivering to the Company prior to December 31, 2000 a Deferral Election Form in the form attached as Exhibit A, in which event the portion of the Additional Compensation Payment so deferred shall be credited to your Standard Deferral Account in the Company's Key Employees Deferred Compensation Plan. (ii) Any amount payable under paragraph 9 hereof. In addition, upon any subsequent termination of your employment within 12 months after the Entitlement Date, you shall be entitled to the benefits set forth in items (i) through (iv) 106 of paragraph 5.B. unless such termination is under any of the circumstances set forth in items (i) through (iii) of paragraph 3.B. B. If you are entitled to benefits under paragraph 3.B., then the Company shall pay you the amounts specified under paragraph 5.A. above plus the following: (i) In the event the Date of Termination precedes the completion of a period in which, pursuant to the Management Incentive Compensation Plan or any other Company incentive compensation plan in which you are then participating or have participated (except for the MSIP), you could have earned compensation thereunder had your employment not been terminated prior to the completion of such period, or in the event the Date of Termination precedes the determination of compensation that you have earned for a completed period under the Management Incentive Compensation Plan or other incentive plan (except for the MSIP), then, with respect to each such period, you shall be entitled to an amount equal to the average of the last three annual award payments made to you under the Management Incentive Compensation Plan or other incentive plan (except for the MSIP) prior to the Date of Termination (or for the years you have participated in the Plan if less than three), including any portion of any such payments which you elected to defer to your Standard Deferral Account in the Company's Key Employees Deferred Compensation Plan. Any amount due under this subparagraph (i) shall be paid in a lump sum not later than the fifteenth day following the Date of Termination, subject however to any contrary deferral election you may have made with respect thereto. (ii) Anything in the Management Incentive Compensation Plan or any action taken by the Board of Directors or any committee of the Board of Directors pursuant thereto to the contrary notwithstanding, any awards, whether in cash or Company shares, made under such plan prior to the Date of Termination which have been credited to your account but the payment of which has been deferred (except that any deferral election that you have made with respect thereto shall remain in force). (iii) The Company shall, at its expense, maintain in full force and effect for your continued benefit all life insurance, health and accident, and disability plans, programs and arrangements in which you were entitled to participate immediately prior to the Date of Termination, or, if more favorable to you, on the date of a prior Change of Control, provided that your continued participation is possible under the terms of such plans, programs and arrangements. In the event that the terms of any such plan, program or arrangement do not permit your continued participation or that any such plan, program or arrangement is discontinued or the benefits thereunder materially reduced, the Company shall arrange to provide, at its expense, benefits to you which are substantially similar to those which you were entitled to receive under such plan, program or arrangement immediately prior to the Date of Termination. The Company's obligation 107 under this subparagraph (iii) shall terminate on the earliest of the following dates: (a) the third anniversary date of the Date of Termination (except for medical coverage); or (b) the date an essentially equivalent and no less favorable benefit is made available to you at no cost by a subsequent employer. At the end of the applicable period of coverage set forth above, you shall have the option to have assigned to you, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned by the Company and relating specifically to you. (iv) In the event that because of their relationship to you, members of your family or other individuals are covered by a plan, program, or arrangement described in subparagraph (iii) above immediately prior to the Date of Termination, the provisions set forth in the above subparagraph shall apply equally to require the continued coverage of such persons; provided, however, that if under the terms of any such plan, program or arrangement, any such person would have ceased to be eligible for coverage during the period in which the Company is obligated to continue coverage for you, nothing set forth herein shall obligate the Company to continue to provide coverage which would have ceased even if you had remained an employee of the Company during such period. C. In the event of termination of your employment for any reason after a Change of Control, the Company shall enable you to purchase the automobile, if any, which the Company was providing for your use at the Date of Termination at the wholesale value of such automobile at such time, or to assume the lease obligation on any such Company automobile leased by the Company. D. All Earned Stock Incentive Units (as defined in the Management Stock Incentive Plan; herein "MSIP") which you earned during the period from the inception of the MSIP in 1984 through 1991 have accrued to your plan account and vested in four equal annual installments beginning in 1991. Upon a Change of Control except for a Change of Control consisting only of the commencement of a tender offer or the entering into of an agreement referred to in items (ii) or (iii) of paragraph 2 above, any and all awarded Stock Incentive Units (other than to the extent related to a completed Incentive Period for which the determination of the number of Earned Stock Incentive Units has already been made; and not to exceed the number of Stock Incentive Units comprising the target award under the applicable Stock Incentive Award regardless of the potential to earn more than such target award if and as provided in such Stock Incentive Award), shall be deemed to be Earned Stock Incentive Units which are vested, and all such Earned Stock Incentive Units including, without limitation, the 1997 award (which covers the period 1998-2000) and the 1998 award (which covers the period 1999-2001) shall be payable to you as provided in Section 10(b) (or successor provision) of the MSIP. All capitalized terms in this paragraph D shall have the same meaning as in the MSIP. 108 E. The benefits provided under this agreement shall not be treated as damages, but rather shall be treated as severance or other compensation to which you are entitled under the terms and conditions provided herein. You shall not be required to mitigate the amount of any benefit provided under this agreement by seeking other employment or otherwise. 6. RIGHTS AS FORMER EMPLOYER. Nothing contained in this agreement shall be construed as preventing you, and shall not prevent you, following any termination of your employment whether pursuant to this agreement or otherwise, from thereafter participating in any benefit or insurance plans, programs or arrangements (including, without limitation thereto, any retirement plans or programs) in the same manner and to the same extent that you, as a former employee of the Company, would have been entitled to participate had this agreement not have been entered into. 7. SUCCESSORS. 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 you to compensation from the Company in the same amount and on the same terms as you would be entitled to under paragraph 3.A. above as if a Change of Control had taken place, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Entitlement Date. The above provisions of this paragraph 7 shall not apply to a) a spin-off or sale of assets, or b) a transaction described in item (ii) of paragraph 2 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. This agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid to such beneficiary or beneficiaries as you shall have designated by written notice delivered to the Company prior to your death or, failing written notice, to your estate. 109 8. LEGAL FEES. The Company shall reimburse you in full for all legal fees and expenses reasonably incurred by you in connection with this agreement (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 you or in your name, a court finally determines that such action was not brought in good faith by you). 9. 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 you an additional amount (the "Gross-Up Payment") such that the net amount retained by you after deduction of any Excise Tax on such payments (excluding payments pursuant to this paragraph 9), and after deduction for any federal, state and local income tax and Excise Tax upon the payment provided for by this paragraph, shall be equal to the amount of such payments (excluding payments pursuant to this paragraph 9) 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 you in connection with a Change of Control or your 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 you such payments or benefits do not constitute parachute payments or excess parachute payments. For purposes of determining the amount of the Gross-Up Payment, you 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 your residence on the Entitlement Date, 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 Entitlement Date, you 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 Entitlement Date, 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 fifteenth day following the Entitlement Date, 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. 110 10. AGREEMENT TO PROVIDE SERVICES. In the event that (i) a Person commences a tender offer to become the beneficial owner, directly or indirectly, of securities of DPL or DP&L representing fifteen percent (15%) or more of the combined voting power of the then outstanding securities of DPL or DP&L, as the case may be, or (ii) a Change of Control occurs consisting of the entering into of an agreement referred to in item (ii) or (iii) of paragraph 2 above, you agree that you will perform services for the Company and that you will not voluntarily terminate your employment with the Company until the first to occur of the following: (i) the abandonment or termination of such tender offer or the transaction that is the subject of the agreement; or (ii) the occurrence of a Change of Control (other than the commencement of the tender offer or the entering into of an agreement referred to in item (ii) or (iii) of paragraph 2 above). 11. 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 you hereunder if your employment was terminated on the date of the Change of Control under circumstances in which payments under paragraph 5.B. hereof would become due and payable to you, including, without limitation, cash in an amount sufficient to fund payments of all future medical, life insurance, accident and disability plans as provided in paragraphs 1.A(i), 5.B. (iii) and (iv) hereof, and the Gross-Up Payment as defined in paragraph 9 above, in each case based on reasonable estimates. 12. 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: Trust Department Bank One, Dayton, National Association Kettering Tower 111 Dayton, Ohio 45401 and Chernesky, Heyman & Kress P.L.L. Suite 1100 10 Courthouse Plaza, S.W. Dayton, Ohio 45402 Attn: Richard J. Chernesky, Esq. Richard A. Broock, Esq. Frederick J. Caspar, Esq. and if to you, addressed to [Name:_____________________________________] [Home Address:_____________________________] [__________________________________________] 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 paragraph. 13. MISCELLANEOUS. No provision of this agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by you and such officer of the Company as may be specifically designated by the Board of Directors. No waiver by any party hereto at any time of any breach by any other party hereto of, or of compliance by such other party with, any condition or provision of this agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this agreement. 14. GOVERNING LAW. The validity, interpretation, construction and performance of this agreement shall be governed by the laws of the State of Ohio, without giving effect to the principles of conflicts of law thereof. 15. VALIDITY. The provisions of this agreement are divisible; if any provision of this agreement is ruled invalid or unenforceable by any court, such invalidity or enforceability, shall not affect the validity or enforceability of any other provision, which shall remain in full force and effect; and such provision shall be modified by such court consistent with the intent of the parties to the extent necessary to render it valid and enforceable, if possible. 16. NO RIGHT TO EMPLOYMENT. 112 Nothing in this agreement shall confer upon you the right to continue employment with the Company, or obligate you to continue employment with the Company (except as provided in paragraph 10); nor shall it interfere with the rights of the Company to discharge you or take other action with respect to you, subject to the Company's providing the benefits specified herein in accordance with the terms hereof. If this letter correctly sets forth our agreement on the subject matter hereof, please so confirm by signing and returning the enclosed copy. Very truly yours, DPL INC. By: ___________________________________ Its: ___________________________________ THE DAYTON POWER AND LIGHT COMPANY By: ___________________________________ Its: ___________________________________ Confirmed and agreed to: ________________________________ Date: _________________________ 113 EX-10.(F) 8 a2043323zex-10_f.txt EXHIBIT 10(F) EXHIBIT 10(f) DPL INC. STOCK OPTION PLAN Section 1. Purpose The purpose of the Plan is to promote the interests of the Company and its shareholders by (i) attracting and retaining individuals eligible to participate in the Plan; (ii) motivating such individuals by providing incentive to contribute to the Company's future success; and (iii) aligning the interests of such individuals with the interests of the Company's shareholders. Section 2. Definitions The following terms, as used in the Plan, shall have the meaning specified below. Other capitalized terms shall have the meaning specified in the Plan. a. "BOARD OF DIRECTORS" means the Board of Directors of the Company, as it may be comprised from time to time. b. "CHANGE OF CONTROL" means Change of Control as defined in Section 10. c. "CODE" means the Internal Revenue Code of 1986, and any successor statute, as it or they may be amended from time to time. d. "COMMITTEE" means the Compensation and Management Review Committee of the Board of Directors or such other committee as may be designated by the Board of Directors. e. "COMPANY" means DPL Inc., and any successor thereto. f. "COVERED EMPLOYEE" means a covered employee within the meaning of Code Section 162(m)(3). g. "CONSULTANT" means a consultant of the Company or a Subsidiary. h. "DIRECTOR" means a member of the Board of Directors of the Company or of a Subsidiary, whether or not an Employee. i. "EMPLOYEE" means an officer or other key employee of the Company or of a Subsidiary. The term also includes any person who, in connection with the hiring of such person, has been granted an Option prior to the date such person first performs services for the Company or a Subsidiary, provided that no Option granted to such a person shall become vested prior to the date that such person first performs such services. j. "EXCHANGE ACT" means the Securities Exchange Act of 1934, and any successor statute, as it may be amended from time to time. 114 k. "FAIR MARKET VALUE" means (i) the average of the highest and lowest sale prices of the Shares as reported on the New York Stock Exchange Composite Transaction Tape on the relevant date (or if the Shares are not then so traded, the average of the highest and lowest sale prices of the Shares on the stock exchange or over-the-counter market on which the Shares are principally trading on such date), or if no sale of the Shares is reported for such date, the next preceding day for which there is a reported sale or (ii) if there is no public market for the Shares on such date, fair market value as determined by the Committee. l. "INSIDER" means any person who is subject to Section 16 of the Exchange Act, and any successor statutory provision, as it may be amended from time to time. m. "OPTION" means an option granted pursuant to Section 4. n. "OPTION AGREEMENT" means a document described in Section 6 setting forth the terms and conditions applicable to an Option granted to a Participant. o. "PARTICIPANT" means any Employee, Director or Consultant who has been granted an Option. p. "SHARES" means common shares of the Company or any security of the Company issued in substitution, exchange or lieu thereof. q. "SUBSIDIARY" means (i) any corporation or other entity in which the Company, directly or indirectly, controls 50% or more of the total combined voting power of such corporation or other entity and (ii) any other corporation or other entity in which the Company has a significant equity interest, in either case as determined by the Committee. Section 3. Eligibility The Committee may grant one or more Options to any Employee, Director or Consultant designated by it to receive an Option. Section 4. Options The Committee may grant options to purchase a specific number of Shares exercisable at such time or times and subject to such terms and conditions as the Committee may determine subject to the Plan, provided that the term of an Option shall not exceed ten years. a. The exercise price of an Option shall not be less than 100% of the Fair Market Value of the Shares on the date the Option is granted. b. The exercise price of an Option shall be paid in cash or check (subject to collection); provided that, at the discretion of the Committee, the exercise price may also be paid by the tender, by either actual delivery or attestation, of Shares acceptable to the Committee and valued at their Fair Market Value on the date of exercise; through a combination of Shares and cash; or 115 through such other means as the Committee may determine. Without limiting the foregoing, to the extent permitted by applicable law: (i) The Committee may, on such terms and conditions as it may determine, agree to accept as full or partial payment of the exercise price the proceeds of a loan from the Company to the Participant. The loan shall be evidenced by the Participant's promissory note, which promissory note shall (A) be payable as determined by the Committee, (B) be secured by a pledge of the Shares acquired upon exercise of the Option, (C) be full recourse with respect to the Participant and (D) bear interest at a rate, established by the Committee, not less than needed to avoid the imputation of income under the Code; and (ii) The Committee may, on such terms and conditions as it may determine, permit a Participant to elect to pay the exercise price by authorizing a third party, pursuant to a brokerage or similar arrangement approved in advance by the Committee, to simultaneously sell all (or a sufficient portion) of the Shares acquired upon exercise of the Option and to remit to the Company a sufficient portion of the proceeds from the sale to pay the entire exercise price of the Option and any required tax withholding resulting therefrom. c. No fractional Shares will be issued or accepted. The Committee may impose such other conditions, restrictions and contingencies with respect to Shares delivered pursuant to the exercise of an Option as it deems desirable. d. Options granted under the Plan are not intended to be incentive stock options under Section 422 of the Code. e. The Committee may require or permit Participants to defer the issuance or vesting of Shares under such rules and procedures as it may establish under the Plan. The Committee may also provide that deferred settlements include the payment of, or crediting of interest on, the deferral amounts or the payment or crediting of dividend equivalents on deferred settlements denominated in Shares. Section 5. Shares Available under Plan a. Subject to the adjustment provisions of Section 9, the number of Shares with respect to which Options may be granted under the Plan shall not exceed 8,000,000 Shares; provided that with respect to the unexercised portion of any terminated or forfeited Option and Shares tendered or withheld to pay the exercise price of an Option and/or any required tax withholding with respect to an Option shall be available for further Option grants. Additional rules for determining the number of Shares granted under the Plan may be adopted by the Committee, as it deems necessary and appropriate. b. Subject to the adjustment provisions of Section 9, no single Participant shall receive Options with respect to more than 2,500,000 Shares. 116 c. The Shares that may be issued pursuant to an Option under the Plan may be treasury or authorized but unissued Shares, or Shares may be acquired, subsequently or in anticipation of the transaction, in the open market to satisfy the requirements of the Plan. Section 6. Option Agreements Each Option under the Plan shall be evidenced by an Option Agreement. Each Option Agreement shall set forth the terms and conditions applicable to the Option, as determined by the Committee subject to the Plan, including but not limited to provisions describing the treatment of an Option in the event of the termination of a Participant's status as an Employee, Director or Consultant. Section 7. Amendment and Termination The Board of Directors may at any time amend, suspend or terminate the Plan, in whole or in part, and the Committee may, subject to the Plan, at any time alter or amend any or all Option Agreements to the extent permitted by applicable law; provided that no such action shall impair the rights of any holder of an Option without the holder's consent. Notwithstanding the foregoing, neither the Board of Directors nor the Committee shall (except pursuant to Section 9) amend the Plan or any Option Agreement without the approval of the shareholders of the Company to (i) increase the number of Shares available for Options in total and to each Participant as set forth in Section 5, (ii) decrease the exercise price of any Option or (iii) change the definition of Employee. Section 8. Administration a. The Plan and all Options shall be administered by the Committee. In the absence of the Committee, or to the extent determined by the Board of Directors, any action that could be taken by the Committee may be taken by the Board of Directors, provided that any such action may be taken with respect to Covered Employees only by those members of the Board of Directors who are considered "outside directors" within the meaning of Treasury Reg. ss.1.162-27(e)(3). A majority of the members of the Committee shall constitute a quorum. The vote of a majority of a quorum shall constitute action by the Committee. b. The Committee shall have full and complete authority, in its sole and absolute discretion, (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret and implement the Plan and any related document, (iii) to prescribe, amend and rescind rules relating to the Plan, (iv) to make all determinations necessary or advisable in administering the Plan and (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan. The actions and determinations of the Committee on all matters relating to the Plan and any Options will be final and conclusive. The Committee's determinations under the Plan need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, Options under the Plan, whether or not such persons are similarly situated. 117 c. The Committee and others to whom the Committee has allocated or delegated authority or duties shall keep a record of all their proceedings and actions and shall maintain all such books of account, records and other data as shall be necessary for the proper administration of the Plan. d. The Company shall pay all reasonable expenses of administering the Plan, including, but not limited to, the payment of professional fees. e. It is the intent of the Company that this Plan and Options hereunder satisfy, and be interpreted in a manner that satisfy, (i) in the case of Participants who are or may be Insiders, the applicable requirements of Rule 16b-3 of the Exchange Act so that such persons will be entitled to the benefits of Rule 16b-3, or other exemptive rules under Section 16, and will not be subjected to avoidable liability thereunder and (ii) the applicable requirements of Code Section 162(m). If any provision of this Plan or of any Option Agreement would otherwise frustrate or conflict with the intent expressed in this Section 8(e), that provision, to the extent possible, shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with such intent, such provision shall be deemed void as applicable to Insiders and/or Covered Employees, as applicable. f. The Committee may appoint such accountants, counsel and other experts as it deems necessary or desirable in connection with the administration of the Plan. g. Except to the extent prohibited by applicable law or otherwise, the Committee may from time to time allocate to one or more of its members and delegate to one or more Employees or Directors all or any portion of its authority and duties, provided that the Committee may not allocate or delegate any discretionary authority with respect to substantive decisions or functions regarding the Plan or Options to the extent inconsistent with the intent expressed in Section 8(e). Section 9. Adjustment Provisions a. In the event of any change in the outstanding Shares by reason of a stock dividend or stock split, the number of Shares then remaining subject to this Plan, and the maximum number of Shares that may be issued to any single Participant pursuant to this Plan, including those that are then covered by outstanding Options, shall (i) in the event of an increase in the number of outstanding Shares, be proportionately increased and the price for each Share then covered by an outstanding Option shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding Shares, be proportionately reduced and the price for each Share then covered by an outstanding Option shall be proportionately increased. b. In the event of any change in the outstanding Shares by reason of a recapitalization, merger or consolidation (whether or not the Company is the surviving corporation), reorganization, combination or exchange of shares or other similar corporate changes or an extraordinary dividend in cash or 118 property, but not including the repurchase or issuance of Shares by the Company unrelated to any such corporate change or extraordinary dividend, the number and kind of shares subject to this Plan, the maximum number of shares that may be issued to any single Participant, the number and kind of shares subject to outstanding Options and the exercise price thereof shall be adjusted by the Committee as it deems appropriate to prevent dilution or enlargement of the rights and benefits intended to be conveyed by an Option. c. The Committee shall make any further adjustments as it deems necessary to help ensure equitable treatment of any holder of an Option as the result of any transaction affecting the securities subject to the Plan not described in Section 9(a) or (b), or as is required or authorized under the terms of any applicable Option Agreement, provided the Committee shall not be permitted under this Section 9(c) to increase the number of Shares available for Options in total or to each Participant as set forth in Section 5. d. The existence of the Plan and the Options granted hereunder shall not affect or restrict in any way the right or power of the Board of Directors or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other capital structure of its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference shares ahead of or affecting the Shares or the rights thereof, the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding. Section 10. Change of Control a. In the event of a Change of Control, in addition to any action required or authorized by the terms of an Option Agreement, the Committee may, in its sole discretion, take any of the following actions as a result, or in anticipation, of any such event to assure fair and equitable treatment of Participants: (i) accelerate time periods for purposes of vesting in, or realizing gain from, any outstanding Option granted pursuant to this Plan; (ii) offer to purchase any outstanding Option granted pursuant to this Plan from the holder for its equivalent cash value, as determined by the Committee, as of the date of the Change of Control; or (iii)make adjustments or modifications to outstanding Options as the Committee deems appropriate to maintain and protect the rights and interests of Participants following such Change of Control. Notwithstanding the foregoing provisions of this section or any provision in an Option Agreement to the contrary, in no event shall the Committee be deemed to have discretion to accelerate or not accelerate or make other changes in or to any or all Options, in respect of a transaction, if such action or inaction would be inconsistent with or would 119 otherwise frustrate the intended accounting for a proposed transaction as a pooling of interest under generally accepted accounting principles. b. A "Change of Control" means any change in control of the Company, or its principal subsidiary, The Dayton Power and Light Company ("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 Exchange Act as determined by the Board of Directors 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 the Company or DP&L or an entity then directly or indirectly controlling, controlled by or under common control with the Company or DP&L is on the effective date hereof, or becomes the beneficial owner, directly or indirectly, of securities of the Company or DP&L representing (A) 15% or more of the combined voting power of the then outstanding securities of the Company or DP&L if the acquisition of such beneficial ownership is not approved by the Board of Directors prior to the acquisition or (B) 50% or more of such combined voting power in all other cases; (ii) the Company or DP&L enters into an agreement to merge or consolidate itself, or an agreement to consummate a "combination" or "majority share acquisition" in which it is the "acquiring corporation" (as such terms are defined in Ohio Rev. Codess.1701.01 as in effect on December 31, 1990) and in which shareholders of the Company 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 the Company or DP&L or any surviving or new corporation, as the case may be, having less than 50% of the "voting power" of the Company 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 the Company into DP&L or of DP&L into the Company; (iii) the Company or DP&L enters into an agreement to sell, lease, exchange or otherwise transfer or dispose 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 the Company; 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 the Company 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; (iv) any transaction referred to in (ii) or (iii) above is consummated; or (v) those persons serving as directors of the Company or DP&L on the date this Plan is effective (the "Original Directors") and/or their Successors do not constitute a majority of the whole Board of Directors of the Company 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 the Company or DP&L, as the case may be, at the time of such election or nomination for election). 120 Section 11. Miscellaneous a. NONASSIGNABILITY. Except as otherwise provided in this Plan or by the Committee, no Option or benefit or right related thereto shall be assignable or transferable except by will or by the laws of descent and distribution. b. OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company or a Subsidiary from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect. c. PAYMENTS TO OTHER PERSONS. To the extent permitted by law, none of the benefits payable under or relating to the Plan shall be subject to the claims or legal process of the creditors of a Participant or of his or her beneficiary, spouse, prior spouse, or other persons or entity. Any payment legally required to be made to any person other than the person to whom any amount is made available under the Plan shall be a complete discharge of the liability with respect thereto. d. UNFUNDED PLAN. The Plan shall be unfunded. No provision of the Plan or any Option Agreement shall require the Company or a Subsidiary, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company or a Subsidiary maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company or a Subsidiary, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under generally applicable law. e. LIMITS OF LIABILITY. Any liability of the Company or a Subsidiary to any Participant with respect to an Option shall be based solely upon contractual obligations created by the Plan and the Option Agreement. Neither the Company or its Subsidiaries, nor any member of the Board of Directors or of the Committee, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken, or not taken, in good faith under the Plan. f. RIGHTS OF PARTICIPANTS. Status as an eligible Employee, Director or Consultant shall not be construed as a commitment that any Option shall be granted under this Plan to such eligible Employee, Director or Consultant or to eligible Employees, Directors and Consultants generally. Nothing contained in this Plan or in any Option Agreement shall confer upon any Participant any right to continue in the employ or other service of the Company or a Subsidiary or constitute any contract or limit in any way the right of the Company or a Subsidiary to change such person's compensation or other benefits or to terminate the employment or other service of such person with or without cause. 121 Except as provided otherwise in an Option Agreement, a Participant's (i) transfer from the Company to a Subsidiary or affiliate of the Company, whether or not incorporated, or vice versa, or from one Subsidiary to another; (ii) change in status to or from Employee, Director or Consultant; or (iii) leave of absence, duly authorized in writing by the Company or a Subsidiary, shall not be deemed a termination of such Participant's employment or other service. g. RIGHTS AS A SHAREHOLDER. A Participant shall have no rights as a shareholder with respect to any Shares covered by an Option until the date the Participant becomes the holder of record of such Shares. Except as provided in Section 9, no adjustment shall be made for dividends or other rights, unless the Option Agreement specifically requires such adjustment. h. WITHHOLDING. Applicable taxes, to the extent required by law, shall be withheld in respect of all Options. A Participant may satisfy the withholding obligation by paying the amount of any taxes in cash, check (subject to collection) or Shares, or with the approval of the Committee, Shares may be deducted from the payment to satisfy the obligation in full or in part. The amount of the withholding and the number of Shares to be paid or deducted in satisfaction of the withholding requirement shall be determined by the Committee with reference to the Fair Market Value of the Shares when the withholding is required to be made. i. SECTION HEADINGS. The section headings contained herein are for the purpose of convenience only, and in the event of any conflict, the text of the Plan, rather than the section headings, shall control. j. CONSTRUCTION. In interpreting the Plan, the masculine gender shall include the feminine, the neuter gender shall include the masculine or feminine, and the singular shall include the plural unless the context clearly indicates otherwise. k. INVALIDITY. If any term or provision contained herein or in any Option Agreement shall to any extent be invalid or unenforceable, such term or provision will be reformed so that it is valid, and such invalidity or unenforceability shall not affect any other provision or part hereof or thereof. l. APPLICABLE LAW. The Plan, the Option Agreements and all actions taken hereunder or thereunder shall be governed by, and construed in accordance with, the laws of the State of Ohio without regard to the conflict of law principles thereof. m. COMPLIANCE WITH LAWS. Notwithstanding anything contained herein or in any Option Agreement to the contrary, the Company shall not be required to sell or issue Shares hereunder or thereunder if the issuance would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange; and as a condition of any sale or issuance, the Company may require such agreements or undertakings, if any, as the Company may deem necessary or advisable to assure compliance with any such law or regulation. 122 n. EFFECTIVE DATE AND TERM. The Plan was adopted by the Board of Directors effective as of February 1, 2000, subject to approval by the Company's shareholders. The Committee may grant Options prior to shareholder approval, provided, however, that Options granted prior to such shareholder approval are automatically cancelled if shareholder approval is not obtained at or prior to the period ending 12 months after the date the Plan is effective and provided further that no Option may be exercisable prior to the date shareholder approval is obtained. The Plan shall remain in effect until all Options granted under the Plan have been exercised or terminated under the terms of the Plan and applicable Option Agreements. 123 EX-13 9 a2043323zex-13.txt EXHIBIT 13 EXHIBIT 13 FINANCIAL & OPERATING HIGHLIGHTS
2000 1999 % change ---- ---- -------- Financial Performance: Earnings per share of common stock before non-recurring and extraordinary items Basic $ 1.56 1.35 16 Diluted $ 1.50 1.35 11 Cash provided by operating activities (millions) $ 214.7 397.2 (46) Market value per share at December 31 $ 33.19 17.31 92 Financial assets (millions) $ 1,308.0 1,094.4 20 Investment income (millions) $ 88.8 50.8 75 Unrealized gains before tax (millions) $ 165.4 168.9 (2) Return on shareholders' equity (Basic) % 20.8 14.7 Return on total capital (Basic) % 13.5 11.8 Dividends paid per share $ 0.94 0.94 -- Book value per share at December 31 $ 7.43 9.65 (23) Total electric and natural gas utility revenues (millions) $ 1,273.5 1,271.0 -- Taxes per share $ 2.24 1.75 28 Average number of common shares outstanding (millions) Basic 127.7 151.4 (16) Diluted 132.9 151.4 (12) Operating Performance: Construction additions (millions) $ 343.9 166.5 107 Construction expenditures paid from internal funds % 62 100 Electric -- Average price per kWh-retail and wholesale customers (calendar year) (cent) 6.25 6.19 1 Fuel efficiency -- Heat rate-- Btu per kWh 9,918 9,969 (1) Industry average 10,242 10,316 (1) System peak load- MW (calendar year) 2,866 3,130 (8)
124 OVERVIEW DPL Inc. reported record earnings per share for 2000 of $1.56 per share before non-recurring and extraordinary items, an increase of 16% over 1999 earnings per share of $1.35. This growth came primarily from increased wholesale sales and sales of capacity from DPL Inc.'s merchant peaking generation capacity that was added in the summer of 2000 and increased earnings from the financial asset portfolio. 1999 earnings per share increased 9% over 1998 earnings per share of $1.24 due to strong cost control efforts and increased earnings from the financial asset portfolio. Several events occurred in 2000 for DPL Inc. as it prepared for the deregulation of the energy markets. In the first quarter, DPL Inc. completed its leveraged recapitalization and realigned its compensation programs more fully with shareholders' interests. In the third quarter, DP&L received an order from the Public Utilities Commission of Ohio ("PUCO") approving its deregulation transition plan, which resulted in the elimination of regulatory accounting for the generation business. In the fourth quarter, DPL Inc. completed the sale of its natural gas retail distribution operations. Each of these non-recurring events affected 2000 financial results as outlined below:
2000 1999 1998 -------------- --------------- ----------------- Earnings per Share -- Basic, after non-recurring and extraordinary items $1.91 $1.35 $1.24 Recapitalization 0.26 Compensation program 0.02 Deregulation order 0.32 Gas operations -- gain on sale (0.95) -------------- --------------- ----------------- Earnings per Share -- Basic, before non-recurring and extraordinary items $1.56 $1.35 $1.24
INCOME STATEMENT HIGHLIGHTS
$ in millions 2000 1999 1998 - --------------------------------------------------------------------- -------------- --------------- ----------------- ELECTRIC: Revenues (a) $1,108.0 $1,056.0 $1,070.7 Fuel and purchased power 268.2 263.2 257.0 -------------- --------------- ----------------- Net revenues 839.8 792.8 813.7 GAS UTILITY (b): Revenues 183.8 215.0 211.2 Gas purchased for resale (c) 116.9 129.9 127.8 -------------- --------------- ----------------- Net revenues 66.9 85.1 83.4 Other revenues, net 13.9 13.6 11.7
(a) INCLUDES ELECTRIC PEAKING GENERATION CAPACITY SALES. (b) THE NATURAL GAS RETAIL DISTRIBUTION OPERATIONS WERE SOLD IN OCTOBER 2000. (c) EXCLUDES GAS PURCHASES BY A NON-UTILITY SUBSIDIARY OF $131.2, $54.3, AND $58.6 MILLION IN 2000, 1999, AND 1998, RESPECTIVELY. 125 In 2000, net electric revenues increased $47.0 million or 6% due to higher wholesale and retail sales, and the addition of capacity sales from the merchant peaking generation capacity. Wholesale revenues increased due to increased volume and higher average prices. Colder than normal temperatures in the fourth quarter contributed to the increased retail sales despite unusually mild temperatures throughout the summer. The effect of these increased sales on fuel and purchased power costs were offset by lower fuel expense used in generation (cents per net kilowatt-hour generated decreased 6%). In 1999, net electric revenues decreased 3% due to lower wholesale sales and increased purchased power costs. Net gas utility revenues decreased $18.2 million or 21% in 2000 compared to 1999 due to the sale of the natural gas retail distribution operations, which was completed on October 31, 2000. Net gas utility revenues increased 2% in 1999 due to higher sales to business customers. Other revenues, net which primarily consist of revenues from DPL Inc.'s natural gas supply management subsidiary, were essentially flat in 2000. The 16% increase in 1999 was primarily due to lower gas costs. Operation and maintenance expense increased 3% in 2000 as a result of higher costs for insurance, claims, uncollectibles, power production and a loss from natural gas supply management contracts. These increases were partially offset by lower benefits costs and gas retail distribution system expense. Operation and maintenance expense decreased 18% in 1999 due to lower costs for insurance, claims, labor, benefits, and line clearance. Year to year variances in insurance and claims costs result primarily from adjustments to actuarially-determined reserve requirements for risks insured through a wholly-owned captive insurance company. Depreciation and amortization expense decreased 1% in 2000 as a result of the sale of the natural gas retail distribution operations, partially offset by the effect of increased electric production assets. Depreciation and amortization expense increased 7% in 1999 primarily as a result of increased depreciable assets. Investment income increased 75% in 2000 and more than doubled in 1999 as a result of increased realized gains. Interest expense increased 27% in 2000 primarily due to increased long-term debt and higher long-term debt interest rates. Interest expense increased 20% in 1999 primarily due to increased long-term debt. Other income (deductions) in 2000 includes the $182.5 million gain on the sale of the natural gas retail distribution operations, partially offset by the elimination of certain compensation programs, property donations, stock compensation expense and investment management fees. Pursuant to deregulation legislation enacted in Ohio and the Order issued in September 2000 by the PUCO, DP&L discontinued the use of its regulatory accounting model for its generation operations. As a result, a $63.7 million before tax benefits ($41.4 million net of taxes) reduction of generation-related regulatory assets was recorded in the third quarter of 2000 as an extraordinary item in accordance with FASB Statement of Accounting Standards No. 101, "Regulated Enterprises-Accounting for the Discontinuation of Application of FASB Statement No. 71." (See Note 4 to the Consolidated Financial Statements.) 126 CONSTRUCTION PROGRAM AND FINANCING Construction additions were $344 million in 2000. The capital program for 2001 consists of construction costs of approximately $397 million. The major components of the capital program include the development of natural gas-fired combustion turbine generation peaking units at $223 million and environmental compliance at $64 million. The first phase of the peaking capacity expansion was completed in December 1998, with DP&L investing $75 million in three units adding 250 megawatts ("MW") of capacity. Phase Two was completed in June 2000 and added four units totaling 224 MW of capacity at an investment of $80 million. Phases Three and Four include four units totaling 320 MW at an investment of $110 million and are expected to be online during the second half of 2001. Phase Five, which was announced in January 2001, includes four units totaling 224 MW at an investment of $80 million and is expected to be online for the summer of 2001. Under its merchant generation expansion program, DPL Inc. plans to have a total of approximately 5,000 MW of generation capacity online by the summer of 2003. During 2000, total cash provided by operating activities was $215 million. At year-end, cash and temporary cash investments were $137 million. Financial assets, a highly diversified portfolio of public and private debt and equity securities, were $1,308 million at December 31, 2000. Publicly traded securities comprise approximately 20% of the financial assets. This portfolio is broadly diversified, both in industry and geographic coverage, and is available to be invested in the energy sector when that market has favorable investment conditions. In February 2000, DPL Inc. entered into a series of recapitalization transactions including the issuance of $550 million of a combination of voting preferred and trust preferred securities and warrants to an affiliate of investment company Kohlberg Kravis Roberts & Co. ("KKR"). The trust preferred securities sold to KKR have an aggregate face amount of $550 million, were issued at an initial discounted aggregate price of $500 million, have a maturity of 30 years (subject to acceleration to six months after the exercise of the warrants) and pay distributions at a rate of 8.5% of the aggregate face amount per year. The 6.8 million shares of mandatorily redeemable voting preferred securities, par value of $0.01 per share, were issued at an aggregate purchase price of $68,000 and carry voting rights for up to 4.9% of DPL Inc.'s total voting rights and the nomination of one Board seat. The 31.6 million warrants, representing approximately 25% of DPL Inc.'s shares currently outstanding, have a term of 12 years, an exercise price of $21 per share and were sold for an aggregate purchase price of $50 million. DPL Inc. recognized the entire trust preferred securities original issue discount of $50 million in 2000. The proceeds from this recapitalization, combined with the March 2000 issuance of $425 million of 8.25% Senior Notes due 2007, were used to finance the regional merchant generation expansion, repurchase 30.0 million shares of DPL Inc.'s common shares, and reduce outstanding short-term debt. In March 2000, DPL Inc. purchased, through a tender offer, 25 million common shares at a price of $23 per share. An additional 5.0 million shares have been repurchased at a cost of $121.4 million under an authorized share repurchase program of up to 6.6 million shares. In 1999, DPL Inc. purchased 3.5 million shares at a cost of $61 million. 127 Issuance of additional amounts of first mortgage bonds by DP&L is limited by provisions of its mortgage. The amounts and timing of future financings will depend upon market and other conditions, rate increases, levels of sales and construction plans. DP&L currently has sufficient capacity to issue first mortgage bonds to satisfy its requirements in connection with the financing of its construction and refinancing programs during the five-year period 2001-2005. At year-end 2000, DPL Inc.'s and DP&L's senior debt credit ratings were as follows: DPL INC. DP&L
-------- ---- Fitch A- AA Standard & Poor's Corp. BBB BBB+ Moody's Investors Service Baa1 A2
The credit ratings for DPL Inc. and DP&L are investment grade. As a result of DPL Inc.'s December 2000 press release regarding its exploration of strategic alternatives (see Issues and Financial Risks - Other Matters), Standard & Poor's placed DPL Inc. and DP&L on credit watch with developing implications in January 2001. Developing implications indicate that ratings could be raised, lowered, or affirmed. Also in January, Moody's placed the ratings of DPL Inc. and its affiliates under review. The direction of the review is uncertain at this time, and will be refined as additional information becomes available. MARKET RISK The carrying value of DPL Inc.'s debt was $1,766 million at December 31, 2000, consisting of DP&L's first mortgage bonds, guaranteed air quality development obligations, and notes. The fair value of this debt was $1,795 million, based on current market prices or discounted cash flows using current rates for similar issues with similar terms and remaining maturities. The following table presents the principal cash repayments and related weighted average interest rates by maturity date for long-term, fixed-rate debt at December 31, 2000.
Long-term Debt ------------------------------- Expected Maturity Amount Date ($ in millions) Average Rate - ------------------------------- ---------------- ------------- 2001 $ 7 7.8% 2002 8 7.8% 2003 9 7.8% 2004 511 6.7% 2005 13 7.8% Thereafter 1,218 7.6% ----- Total $1,766 7.4% ===== Fair Value $1,795
At December 31, 2000, DPL Inc. had no short-term debt outstanding, and therefore, no exposure to short-term interest rate risk. 128 The fair value of available-for-sale securities was $1,337 million at December 31, 2000. The equity price risk related to these securities was estimated as the potential increase/decrease in fair value of $134 million at December 31, 2000, resulting from a hypothetical 10% increase/decrease in the value of the underlying securities. ISSUES AND FINANCIAL RISKS This report contains certain forward-looking statements regarding plans and expectations for the future. Investors are cautioned that actual outcomes and results may vary materially from those projected due to various factors beyond DPL Inc.'s control, including abnormal weather, unusual maintenance or repair requirements, changes in fuel costs, increased competition, regulatory changes and decisions, changes in accounting rules and adverse economic conditions. ELECTRIC RESTRUCTURING LEGISLATION In October 1999, legislation became effective in Ohio that gave electric utility customers a choice of energy providers starting January 1, 2001. Under the legislation, electric generation, aggregation, power marketing and power brokerage services supplied to retail customers in Ohio are deemed competitive and are not subject to supervision and regulation by the PUCO. As required by the legislation, DP&L filed its transition plan at the PUCO on December 20, 1999. DP&L received PUCO approval of its plan on September 21, 2000. The transition plan provides for a three year transition period, which began on January 1, 2001 and ends on December 31, 2003, at which time DP&L's generation assets will be fully merchant. The plan also provides for a 5% residential rate reduction on the generation component of the rates, which reduces revenue by approximately $13-14 million per year; rate certainty for the three year period for customers that continue to purchase power from DP&L; guaranteed rates for a six year period for transmission and delivery services; and recovery of transition costs of approximately $600 million. Under the plan, DPL Inc. has the organizational and financial flexibility to continue its corporate realignment initiatives without regulatory restrictions. In 1996 and 1997, the Federal Energy Regulatory Commission ("FERC") issued orders requiring all electric utilities to file open-access transmission service tariffs. DP&L's resulting tariff case proceedings with FERC staff and intervenors in 1997 and 1998 culminated in 1999 with the FERC issuing an Order approving DP&L's settlement with no material adverse effect to DP&L. On October 16, 2000 DP&L filed with the FERC to join the Alliance Regional Transmission Organization. DP&L expects to transfer operational control of its transmission assets to the Alliance when it is complete. BUSINESS UNIT EVALUATION Responding to the new Ohio Legislation, DP&L is functionally separating its various business units and is evaluating each unit on a stand-alone basis. Business units not complementing DPL Inc.'s going-forward strategy may be divested. 129 In October 2000, DP&L completed the sale of its natural gas retail distribution assets and certain liabilities for $468 million in cash. The transaction was valued pursuant to an arms-length negotiation and resulted in a pre-tax gain of $183 million ($121 million net of tax), which is reflected in "other income (deductions)" on the Consolidated Statement of Results of Operations. Proceeds from the sale were used to finance the regional merchant generation expansion and reduce outstanding short-term debt. ENVIRONMENTAL In November 1999, the United States Environmental Protection Agency ("US EPA") filed civil complaints and Notices of Violations ("NOV's") against operators and owners of certain generation facilities for alleged violations of the Clean Air Act ("CAA"). Generation units operated by partners Cincinnati Gas & Electric Company (Beckjord 6) and Columbus Southern Power Company (Conesville 4) and co-owned by DP&L were referenced in these actions. Numerous northeast states have filed complaints or have indicated that they will be joining the US EPA's action against the partners. DP&L was not identified in the NOV's, civil complaints or state actions. In December 2000, Cincinnati Gas & Electric Company announced that it had reached an Agreement in Principle with the US EPA and other plaintiffs in an effort to settle the claims. Discussions on the final terms of the settlement are ongoing. Therefore, it is not possible to determine the outcome of these claims or the impact, if any, on DP&L. In June 2000, the US EPA issued a NOV to J.M. Stuart Station (co-owned by DP&L, Cincinnati Gas & Electric Company, and Columbus Southern Power Company) for alleged violations of the CAA. The NOV contained allegations consistent with NOV's and complaints that the US EPA has recently brought against numerous other coal-fired utilities in the Midwest. DP&L will vigorously challenge the NOV. At this time, it is not possible to determine the outcome of these claims or the impact, if any, on DP&L. The United States and Ohio EPA's have notified numerous parties, including DP&L, that they are considered Potentially Responsible Parties ("PRP's") for clean up of two hazardous waste sites in Ohio. The US EPA has estimated total costs of under $10 million for its preferred clean-up plans at one of these sites. DP&L's settlements with the US EPA and the PRP group are pending for the site. The Ohio EPA has not provided an estimated cost for the second site. In October 2000, the PRP group at the second site brought an action against DP&L and numerous other parties to recover a portion of the clean-up costs. DP&L will vigorously challenge this action. During 1998, DP&L settled its potential liability for two other sites at a minimal cost. The final resolution of the remaining investigations is not expected to have a material effect on DP&L's financial position, earnings or cash flow. In September 1998, the US EPA issued a final rule requiring states to modify their State Implementation Plans ("SIP's") under the CAA. The modified SIP's are likely to result in further Nitrogen Oxide ("NOx") reduction requirements placed on coal-fired generating units by 2003. In order to meet these NOx requirements, DP&L's total capital expenditures are estimated to be approximately $175 million over the next three years. Industry groups and others appealed the rules in the United States District Court. The requirement for states to submit revised implementation plans has been stayed until the outcome of the litigation. In March 2000, the United States District Court upheld the rule. Industry groups and others have appealed this decision. As a result of the litigation, the Court extended the compliance date of the rules an additional year, until May 31, 2004. In December 1999, the US EPA issued final rules granting various CAA Section 126 petitions filed by northeast states. DP&L's facilities were identified, among many others, in the rulemaking. DP&L's current NOx reduction strategy to meet the SIP call is expected to satisfy the rulemaking reduction requirements. On December 14, 2000, the US EPA issued a determination that coal- and oil-fired electric generating units should be regulated for emissions of mercury and hazardous air pollutants. The US EPA will issue proposed rules by December 2003 and final rules by December 2004. The impact of the regulatory determination cannot be determined at this time. OTHER MATTERS On December 29, 2000, DPL Inc. announced that it had retained the investment banking firm of Morgan Stanley & Co. Incorporated to explore a range of strategic options to maximize shareholder value, including the possible sale of all or part of the company. On February 15, 2001, DPL Inc. announced that with the current volatile electric market environment and renewed emphasis on generation capacity and reliability, DPL Inc. would pursue its growth strategy as an independent company based on its merchant generation expansion plan. DPL Inc. will continue to monitor the market for the strategic deployment and/or purchase of assets that provide the most value to shareholders. 130 On January 1, 2001, DPL Inc. adopted the provisions of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended ("SFAS No. 133"). The impact of adopting SFAS No. 133 was not material to DPL Inc.'s financial position or results of operations. The FASB's Derivative Implementation Group is currently evaluating the application of SFAS No. 133 to certain electricity contracts. On January 1, 2001, DPL Inc. was party to such contracts of which the fair value on that date was not material. Conclusions ultimately reached by the FASB could, however, result in future earnings volatility which may be material. 131 Consolidated Statement of Results of Operations DPL Inc.
For the years ended December 31, $ in millions except per share amounts 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- REVENUES Utility service revenues -- Electric $ 1,089.7 $ 1,056.0 $ 1,070.7 Gas (Note 3) 183.8 215.0 211.2 Other revenues 163.4 67.9 70.3 --------- --------- --------- Total revenues 1,436.9 1,338.9 1,352.2 --------- --------- --------- EXPENSES Fuel and purchased power 268.2 263.2 257.0 Gas purchased for resale (Note 3) 248.1 184.2 186.4 Operation and maintenance 194.8 188.4 229.8 Depreciation and amortization (Note 1) 135.6 136.5 127.1 Amortization of regulatory assets, net (Note 4) 16.3 24.9 33.4 General taxes 129.2 136.6 136.5 --------- --------- --------- Total expenses 992.2 933.8 970.2 --------- --------- --------- OPERATING INCOME 444.7 405.1 382.0 Investment income 88.8 50.8 21.3 Interest expense (140.3) (110.5) (92.4) Other income (deductions) (Note 3) 135.6 (13.2) (1.4) Trust preferred distributions by subsidiary (Note 8) (87.3) -- -- --------- --------- --------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 441.5 332.2 309.5 Income taxes (Notes 1 and 5) 156.6 128.0 120.4 --------- --------- --------- INCOME BEFORE EXTRAORDINARY ITEM 284.9 204.2 189.1 Extraordinary item, net of tax (Note 4) (41.4) -- -- --------- --------- --------- NET INCOME $ 243.5 $ 204.2 $ 189.1 ========= ========= ========= Average Number of Common Shares Outstanding (millions) Basic 127.7 151.4 152.8 Diluted 132.9 151.4 152.8 Earnings Per Share of Common Stock -- Basic Income before extraordinary item $ 2.23 $ 1.35 $ 1.24 Extraordinary item (0.32) -- -- --------- --------- --------- Net income $ 1.91 $ 1.35 $ 1.24 ========= ========= ========= Earnings Per Share of Common Stock -- Diluted Income before extraordinary item $ 2.14 $ 1.35 $ 1.24 Extraordinary item (0.31) -- -- --------- --------- --------- Net income $ 1.83 $ 1.35 $ 1.24 ========= ========= ========= Dividends Paid Per Share of Common Stock $ 0.94 $ 0.94 $ 0.94
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 132 CONSOLIDATED STATEMENT OF CASH FLOWS DPL INC.
For the years ended December 31, $ in millions 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Cash received from utility customers $1,295.3 $1,277.8 $1,255.7 Other operating cash receipts 188.1 98.3 88.3 Cash paid for: Fuel and purchased power (252.3) (263.8) (266.5) Purchased gas (Note 3) (287.6) (190.1) (197.2) Operation and maintenance labor (83.8) (75.1) (85.4) Nonlabor operating expenditures (196.0) (106.5) (136.5) Interest (160.1) (97.4) (89.6) Income taxes (149.0) (109.0) (135.5) General taxes (139.9) (137.0) (131.3) -------- -------- -------- Net cash provided by operating activities (Note 14) 214.7 397.2 302.0 -------- -------- -------- INVESTING ACTIVITIES Capital expenditures (329.3) (170.6) (106.7) Purchases of available-for-sale financial assets (344.6) (479.8) (359.5) Sales of available-for-sale financial assets 188.5 200.3 101.4 Proceeds from sale of natural gas retail distribution operations 468.2 -- -- -------- -------- -------- Net cash used for investing activities (17.2) (450.1) (364.8) -------- -------- -------- FINANCING ACTIVITIES Issuance of long-term debt 421.0 497.4 98.5 Issuance (retirement) of short-term debt, net (294.1) 99.2 79.2 Retirement of long-term debt (5.4) (241.6) (3.4) Dividends paid on common stock (121.3) (142.5) (143.6) Purchase of treasury stock (698.9) (61.4) -- Issuance of common stock -- -- 19.7 Issuance of trust preferred securities by subsidiary 478.8 -- -- Issuance of warrants 47.6 -- -- -------- -------- -------- Net cash provided by (used for) financing activities (172.3) 151.1 50.4 -------- -------- -------- CASH AND TEMPORARY CASH INVESTMENTS -- Net change 25.2 98.2 (12.4) Balance at beginning of year 111.9 13.7 26.1 -------- -------- -------- Balance at end of year $ 137.1 $ 111.9 $ 13.7 ======== ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 133 Consolidated Balance Sheet DPL Inc.
At December 31, $ in millions 2000 1999 - --------------------------------------------------------------------------------------- ASSETS PROPERTY Electric property $3,522.6 $3,438.6 Gas property (Note 3) -- 332.9 Other property 330.8 128.8 -------- -------- Total property 3,853.4 3,900.3 Accumulated depreciation and amortization (1,586.4) (1,633.5) -------- -------- Net property 2,267.0 2,266.8 -------- -------- CURRENT ASSETS Cash and temporary cash investments 137.1 111.9 Accounts receivable, less provision for uncollectible accounts of $6.8 and $4.3, respectively 241.6 218.1 Inventories, at average cost 46.0 93.1 Prepaid taxes 65.4 94.6 Other 45.5 71.7 -------- -------- Total current assets 535.6 589.4 -------- -------- OTHER ASSETS Financial assets . 1,308.0 1,094.4 Income taxes recoverable through future revenues (Notes 1 and 4) 19.8 168.5 Other regulatory assets (Note 4) 146.4 53.3 Other 159.2 168.0 -------- -------- Total other assets 1,633.4 1,484.2 -------- -------- TOTAL ASSETS $4,436.0 $4,340.4 ======== ======== CAPITALIZATION AND LIABILITIES CAPITALIZATION Common shareholders' equity (Note 7) Common stock $ 1.3 $ 1.6 Other paid-in capital, net of treasury stock 19.5 739.0 Warrants 50.0 -- Common stock held by employee plans (100.0) (90.7) Accumulated other comprehensive income 107.5 109.8 Earnings reinvested in the business 814.1 691.9 -------- -------- Total common shareholders' equity 892.4 1,451.6 Preferred stock (Note 8) 22.9 22.9 Preferred stock subject to mandatory redemption (Note 8) 0.1 -- Company obligated mandatorily redeemable trust preferred securities of subsidiary holding 550.0 -- solely parent debentures (Note 8) Long-term debt (Note 9) 1,758.5 1,336.6 -------- -------- Total capitalization 3,223.9 2,811.1 -------- -------- CURRENT LIABILITIES Short-term debt (Note 10) -- 294.1 Accounts payable 140.2 130.4 Accrued taxes 223.6 170.6 Accrued interest 42.4 33.1 Other 22.9 66.6 -------- -------- Total current liabilities 429.1 694.8 -------- -------- DEFERRED CREDITS AND OTHER Deferred taxes (Note 5) 414.8 471.9 Unamortized investment tax credit 60.3 66.4 Insurance and claims costs 130.9 140.0 Other 177.0 156.2 -------- -------- Total deferred credits and other 783.0 834.5 -------- -------- TOTAL CAPITALIZATION AND LIABILITIES $4,436.0 $4,340.4 ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 134 Consolidated Statement of Shareholders' Equity DPL Inc.
Common Common Stock (a) Stock Accumulated Earnings --------------------- Other Held by Other Reinvested Outstanding Paid-in Employee Comprehensive in the $ in millions Shares Amount Capital Warrants Plans Income Business Total - ----------------------------------------------------------------------------------------------------------------------------------- 1998: Beginning balance 160,202,949 $1.6 $777.3 $-- $(98.0) $19.9 $585.2 $1,286.0 Comprehensive income: Net income 189.1 Unrealized gains on financial assets, net of reclassification 27.3 adjustments, after tax (b) Total comprehensive income 216.4 Common stock dividends (143.6) (143.6) Dividend reinvestment plan 1,070,430 19.8 19.8 Employee stock plans 1.9 3.6 5.5 Other (8,775) (0.4) (0.4) ----------- ---- ----- ---- ----- ----- ------- ------- Ending balance 161,264,604 1.6 799.0 -- (94.4) 47.2 630.3 1,383.7 1999: Comprehensive income: Net income 204.2 Unrealized gains on financial assets, net of reclassification 62.6 adjustments, after tax (b) Total comprehensive income 266.8 Common stock dividends (142.5) (142.5) Treasury stock (c) (3,463,200) (61.4) (61.4) Employee stock plans 1.3 3.7 5.0 Other 0.1 (0.1) -- ----------- ---- ----- ---- ----- ----- ------- ------- Ending balance 157,801,404 1.6 739.0 -- (90.7) 109.8 691.9 1,451.6 2000: Comprehensive income: Net income 243.5 Unrealized losses on financial assets, net of reclassification (2.3) adjustments, after tax (b) Total comprehensive income 241.2 Common stock dividends (121.3) (121.3) Issuance of securities (23.6) 50.0 26.4 Treasury stock (c) (30,027,000) (0.3) (698.6) (698.9) Employee stock plans 2.6 (9.3) (6.7) Other 0.1 0.1 ----------- ---- ----- ----- -------- ------ ------ ------ Ending balance 127,774,404 $1.3 $19.5 $50.0 $(100.0) $107.5 $814.1 $892.4 =========== ==== ===== ===== ======== ====== ====== ======
(a) $0.01 PAR VALUE, 250,000,000 SHARES AUTHORIZED. (b) NET OF TAXES OF $14.7, $33.7, AND $(1.2) MILLION IN 1998, 1999 AND 2000, RESPECTIVELY. (c) TREASURY STOCK IS RECORDED AT COST WITH THE EXCESS OVER PAR VALUE SHOWN AS A REDUCTION TO OTHER PAID-IN CAPITAL. THE TOTAL SHARES HELD IN TREASURY AT DECEMBER 31, 2000 WERE 35,949,807. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 135 Notes to Consolidated Financial Statements DPL Inc. - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounts of DPL Inc. and its wholly-owned subsidiaries are included in the accompanying consolidated financial statements. The Dayton Power and Light Company ("DP&L") is the principal subsidiary. These statements are presented in accordance with accounting principles generally accepted in the United States, which require management to make estimates and assumptions related to future events. Reclassifications have been made in certain prior years' amounts to conform to the current reporting presentation. REVENUES AND FUEL Revenues include amounts charged to customers through fuel and gas recovery clauses, which were adjusted periodically for changes in such costs. Related costs that were recoverable or refundable in future periods were deferred along with the related income tax effects. As of February 2000, DP&L's Electric Fuel Component ("EFC") was fixed at 1.30(cent) per kilowatt-hour through the end of the year and the deferral of over/under-recovered fuel costs was no longer permitted. All remaining deferred fuel balances were amortized to expense in 2000. All gas deferred amounts were included in the sale of the natural gas retail distribution operations (see Note 3). Beginning January 1, 2001, the EFC rate of 1.30(cent) will become part of the base generation rate. Also included in revenues are amounts charged to customers through a surcharge for recovery of arrearages from certain eligible low-income households. DP&L records revenue for services provided but not yet billed to more closely match revenues with expenses. Accounts receivable on the Consolidated Balance Sheet includes unbilled revenue of $53.5 million in 2000 and $76.2 million in 1999. Other revenues include sales by DPL Inc.'s natural gas supply management subsidiary. These revenues are recorded in the period when the gas is delivered. Effective with the year 2000, other revenues also include sales by DPL Inc.'s wholesale merchant energy subsidiary. PROPERTY, MAINTENANCE AND DEPRECIATION Property is shown at its original cost. Cost includes direct labor and material and allocable overhead costs. For the majority of the depreciable property, when a unit of property is retired, the original cost of that property plus the cost of removal less any salvage value is charged to accumulated depreciation. Depreciation expense is calculated using the straight-line method, which depreciates the cost of property over its estimated useful life, at an average rate of 3.5%. 136 DPL Inc. and its subsidiaries lease office equipment and office space under operating leases with varying terms. Future minimum rental payments under these operating leases at December 31, 2000 are not material. REPAIRS AND MAINTENANCE Costs associated with all planned major work and maintenance activities, primarily power plant outages, are recognized at the time the work is performed. Outage costs include labor, materials and supplies and outside services required to maintain DPL Inc. and DP&L equipment and facilities. These costs are either capitalized or expensed based on DPL Inc. and DP&L defined criteria identifying specific units of property to be capitalized. INCOME TAXES Deferred income taxes are provided for all temporary differences between the financial statement basis and the tax basis of assets and liabilities using the enacted tax rate. For rate-regulated business units, additional deferred income taxes and offsetting regulatory assets or liabilities are recorded to recognize that the income taxes will be recoverable/refundable through future revenues. Investment tax credits, previously deferred, are being amortized over the lives of the related properties. CONSOLIDATED STATEMENT OF CASH FLOWS Temporary cash investments consist of liquid investments with an original maturity of three months or less. INSURANCE AND CLAIMS COSTS A wholly-owned captive subsidiary of DPL Inc. provides certain property and liability insurance coverage to DPL Inc. and its other subsidiaries and business interruption and specific risk coverage for DP&L. Insurance and claims costs on the Consolidated Balance Sheet represent insurance reserves of the captive subsidiary. These reserves are provided based on actuarial methods and loss experience data. Such liabilities are determined, in the aggregate, based on a reasonable estimation of probable insured events occurring throughout each period. There is uncertainty associated with the loss estimates, and actual results could differ from the estimates. Modification of these loss estimates based on experience and changed circumstances are then reflected in the period in which the estimate is reevaluated. FINANCIAL ASSETS DPL Inc. accounts for its investments in debt and equity securities by classifying the securities into different categories (held-to-maturity and available-for-sale). Available-for-sale securities are carried at fair market value and unrealized gains and losses, net of deferred income taxes, are presented as a separate component of shareholders' equity for those investments. Investments classified as held-to-maturity are carried at amortized cost. The value of equity security investments and fixed maturity investments is based upon market quotations or investment cost that is believed to approximate market. The cost basis for equity security and fixed maturity investments is average cost and amortized cost, respectively. 137 - -------------------------------------------------------------------------------- 2. RECENT ACCOUNTING STANDARD On January 1, 2001, DPL Inc. adopted the provisions of the Financial Accounting Standard Board's ("FASB") Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended ("SFAS No. 133"). The impact of adopting SFAS No. 133 was not material to DPL Inc.'s financial position or results of operations. The FASB's Derivative Implementation Group is currently evaluating the application of SFAS No. 133 to certain electricity contracts. On January 1, 2001, DPL Inc. was party to such contracts of which the fair value on that date was not material. Conclusions ultimately reached by the FASB could, however, result in future earnings volatility which may be material. - -------------------------------------------------------------------------------- 3. SALE OF THE GAS BUSINESS In October 2000, DP&L sold its natural gas retail distribution assets and certain liabilities for $468 million in cash. The transaction was valued pursuant to an arms-length negotiation and resulted in a pre-tax gain of $183 million ($121 million net of tax), which is reflected in "other income (deductions)" on the Consolidated Statement of Results of Operations. Proceeds from the sale were used to finance the regional merchant generation expansion and reduce outstanding short-term debt. - -------------------------------------------------------------------------------- 4. REGULATORY MATTERS DP&L applies the provisions of the FASB Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS No. 71") to its regulated operations. This accounting standard provides for the deferral of costs authorized for future recovery by regulators. Based on existing regulatory authorization, regulatory assets on the Consolidated Balance Sheet include:
At December 31, $ in millions 2000 1999 - -------------------------------------------------------------------------------- Income taxes recoverable through future revenues (b) $ 19.8 $168.5 Regulatory transition costs (a) 144.8 -- Other costs (b) 1.6 53.3 ------ ------ Total $166.2 $221.8 ====== ======
(a) During 1999, legislation was enacted in Ohio, which restructures the state's electric utility industry ("the Legislation"). Beginning in 2001, electric generation, aggregation, power marketing and power brokerage services supplied to Ohio retail customers are not subject to regulation by the Public Utilities Commission of Ohio ("PUCO"). As required by the Legislation, DP&L filed its transition plan ("the Plan") at the PUCO in 1999, which included an application for DP&L to receive transition revenues to recover regulatory assets and other potentially stranded costs. Final PUCO approval of the plan was received in September 2000. 138 The Plan, which began in January 2001, provides for a three-year transition period ("the transition period") ending December 31, 2003, at which time DP&L's generation business unit will be fully merchant. As a result of the PUCO final approval of the transition plan and tariff schedules, the application of SFAS No. 71 was discontinued for generation-related assets. Transmission and distribution services, which continue to be regulated based on PUCO-approved cost based rates, continue to apply SFAS No. 71. The plan, as approved, provides for the recovery of a portion of DP&L's transition costs, including generation-related regulatory assets, during the transition period. Based on DP&L's assessment of recoveries of regulatory assets during the transition period, a $63.7 million before tax benefits ($41.4 million net of taxes) reduction of generation-related regulatory assets was recorded in the third quarter of 2000 as an extraordinary item in accordance with FASB Statement of Accounting Standards No. 101, "Regulated Enterprises-Accounting for the Discontinuation of Application of FASB Statement No. 71" and other generation-related regulatory assets were reclassified to the "Regulatory transition costs" asset. (b) Certain deferred costs remain authorized for recovery by regulators. These relate primarily to DP&L's electric transmission and distribution operations and are being amortized over the recovery period of the assets involved. - -------------------------------------------------------------------------------- 5. INCOME TAXES
For the years ended December 31, $ in millions 2000 1999 1998 - ------------------------------------------------------------------------------- COMPUTATION OF TAX EXPENSE Federal income tax (a) $155.0 $116.5 $108.6 Increases (decreases) in tax from - Regulatory assets -- 4.4 4.0 Depreciation 6.5 13.1 12.5 Investment tax credit amortized (6.1) (3.0) (3.0) Other, net 1.2 (3.0) (1.7) ------ ------ ------ Total tax expense $156.6 $128.0 $120.4 ====== ====== ====== For the years ended December 31, 2000 1999 1998 - ------------------------------------------------------------------------------- COMPONENTS OF TAX EXPENSE Taxes currently payable $236.1 $112.6 $136.1 Deferred taxes-- Regulatory assets (13.3) (5.8) (8.3) Liberalized depreciation and amortization (28.2) 8.6 6.7 Fuel and gas costs (7.2) 9.2 (5.8) Insurance and claims costs 1.2 5.2 (1.1) Recapitalization (16.8) -- -- Other (9.1) 1.2 (4.2) Deferred investment tax credit, net (6.1) (3.0) (3.0) ------ ------ ------ Total tax expense $156.6 $128.0 $120.4 ====== ====== ======
139 (A) THE STATUTORY RATE OF 35% WAS APPLIED TO PRE-TAX INCOME BEFORE PREFERRED DIVIDENDS. COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES
At December 31, $ in millions 2000 1999 - -------------------------------------------------------------------------------- NON-CURRENT LIABILITIES Depreciation/property basis $(406.8) $(429.7) Income taxes recoverable (17.3) (58.9) Regulatory assets (50.6) (16.3) Investment tax credit 21.1 23.2 Other 38.8 9.8 ------ ------ Net non-current liability $(414.8) $(471.9) ====== ====== NET CURRENT ASSET (LIABILITY) $ 11.1 $(10.0) ====== ======
- -------------------------------------------------------------------------------- 6. PENSIONS AND POSTRETIREMENT BENEFITS PENSIONS Substantially all DP&L employees participate in pension plans paid for by DP&L. Employee benefits are based on their years of service, age, compensation and year of retirement. The plans are funded in amounts actuarially determined to provide for these benefits. The following tables set forth the plans' obligations, assets and amounts recorded in Other assets on the Consolidated Balance Sheet at December 31:
$ in millions 2000 1999 - -------------------------------------------------------------------------------- CHANGE IN PROJECTED BENEFIT OBLIGATION Benefit obligation, January 1 $272.8 $269.2 Service cost 5.1 5.9 Interest cost 18.9 16.2 Amendments 21.1 -- Curtailment (a) (3.1) -- Actuarial (gain) loss (26.6) (3.8) Benefits paid (14.5) (14.7) ------ ------ Benefit obligation, December 31 273.7 272.8 ------ ------ CHANGE IN PLAN ASSETS Fair value of plan assets, January 1 421.3 358.9 Actual return on plan assets (45.5) 77.0 Benefits paid (14.5) (14.6) ------ ------ Fair value of plan assets, December 31 361.3 421.3 ------ ------ Plan assets in excess of projected benefit obligation 87.6 148.5 Actuarial gain (45.8) (101.8) Unamortized prior service cost 23.2 9.8 Unamortized transition obligation -- (2.8) ------ ------ Net pension assets $ 65.0 $ 53.7 ====== ======
140 (A) THE CURTAILMENT WAS RECOGNIZED AS A RESULT OF THE SALE OF THE NATURAL GAS RETAIL DISTRIBUTION OPERATIONS ON OCTOBER 31, 2000 (SEE NOTE 3). Assumptions used in determining the projected benefit obligation were as follows:
2000 1999 1998 ------- ------- ------- Discount rate for obligations 7.25 % 6.25% 6.25% Expected return on plan assets 9.00 % 7.50% 7.50% Average salary increases 5.00 % 5.00% 5.00%
The following table sets forth the components of pension expense (portions of which were capitalized):
$ in millions 2000 1999 1998 - -------------------------------------------------------------------------------- EXPENSE FOR YEAR Service cost $ 5.1 $ 5.9 $ 5.9 Interest cost 18.9 16.2 15.9 Expected return on plan assets (33.9) (25.3) (23.3) Amortization of unrecognized: Actuarial (gain) loss (5.0) (0.5) 1.2 Prior service cost 4.2 2.1 2.1 Transition obligation (2.8) (4.3) (4.2) ----- ----- ----- Net pension cost (13.5) (5.9) (2.4) Curtailment (a) 2.1 -- -- ----- ----- ----- Net pension cost after curtailment $(11.4) $(5.9) $(2.4) ===== ===== =====
(a)THE CURTAILMENT WAS RECOGNIZED AS A RESULT OF THE SALE OF THE NATURAL GAS RETAIL DISTRIBUTION OPERATIONS ON OCTOBER 31, 2000 (SEE NOTE 3). POSTRETIREMENT BENEFITS Qualified employees who retired prior to 1987 and their dependents are eligible for health care and life insurance benefits. DP&L has funded the union-eligible health benefit using a Voluntary Employee Beneficiary Association Trust. The following tables set forth the accumulated postretirement benefit obligation ("APBO"), assets and funded status amounts recorded in Other Deferred Credits on the Consolidated Balance Sheet at December 31:
$ in millions 2000 1999 - ------------------------------------------------------------------------------- CHANGE IN APBO Benefit obligation, January 1 $32.4 $32.9 Interest cost 2.2 2.0 Curtailment (a) (0.1) -- Actuarial (gain) loss (1.0) 0.2 Benefits paid (2.7) (2.7) ----- ----- Benefit obligation, December 31 30.8 32.4 ----- ----- 141 CHANGE IN PLAN ASSETS Fair value of plan assets, January 1 10.9 12.4 Actual return on plan assets 1.0 (0.3) Company contributions 1.7 1.4 Benefits paid (2.7) (2.6) ----- ----- Fair value of plan assets, December 31 10.9 10.9 ----- ----- APBO in excess of plan assets 19.9 21.5 Unamortized transition obligation (6.9) (10.0) Actuarial gain 21.8 22.7 ----- ----- Accrued postretirement benefit liability $34.8 $34.2 ===== =====
Assumptions used in determining the projected benefit obligation were as follows:
2000 1999 1998 - ------------------------------------------------------------------------------- Discount rate for obligations 7.25% 6.25% 6.25% Expected return on plan assets 7.00% 5.70% 5.70%
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 7.5% and 8.0% for 2000 and 1999, respectively, and decreases to 5.0% by 2005. A one percentage point change in the assumed health care trend rate would affect the service and interest cost by $0.1 million. A one percentage point increase in the assumed health care trend rate would increase the postretirement benefit obligation by $2.0 million; and a one percentage point decrease would decrease the benefit obligation by $1.6 million. The following table sets forth the components of postretirement benefit expense:
$ in millions 2000 1999 1998 - -------------------------------------------------------------------------------- EXPENSE FOR YEAR Interest cost $2.2 $2.0 $2.0 Expected return on plan assets (0.7) (0.7) (1.0) Amortization of unrecognized: Actuarial (gain) loss (2.2) (2.4) (2.2) Transition obligation 2.9 3.0 3.0 ---- ---- ---- Postretirement benefit cost 2.2 1.9 1.8 Curtailment (a) 0.1 -- -- ---- ---- ---- Postretirement benefit cost after curtailment $2.3 $1.9 $1.8 ==== ==== ====
(a) THE CURTAILMENT WAS RECOGNIZED AS A RESULT OF THE SALE OF THE NATURAL GAS RETAIL DISTRIBUTION OPERATIONS ON OCTOBER 31, 2000 (SEE NOTE 3). - -------------------------------------------------------------------------------- 7. COMMON SHAREHOLDERS' EQUITY DPL Inc. has a leveraged Employee Stock Ownership Plan ("ESOP") to fund matching contributions to DP&L's 401(k) retirement savings plan and certain other payments to full-time employees. Common shareholders' equity is reduced for the cost of 4,918,537 unallocated shares held by the trust and for 2,813,354 shares related to another employee plan. These shares reduce the number of common shares used in the calculation of earnings per share. 142 Dividends received by the ESOP are used to repay the loan to DPL Inc. As debt service payments are made on the loan, shares are released on a pro-rata basis. Dividends on the allocated shares are charged to retained earnings, and dividends on the unallocated shares reduce interest and principal on the loan. Cumulative shares allocated to employees and outstanding for the calculation of earnings per share were 2,143,871 in 2000, 1,933,653 in 1999, and 1,646,780 in 1998. Compensation expense, which is based on the fair value of the shares allocated, amounted to $3.8 million in 2000, $3.5 million in 1999 and $4.0 million in 1998. DPL Inc. had 902,490 authorized but unissued shares reserved for its dividend reinvestment plan at December 31, 2000. The plan provides that either original issue shares or shares purchased on the open market may be used to satisfy plan requirements. DPL Inc. purchased 25 million shares of its common stock in a Dutch Auction self-tender in March 2000. Through December 31, 2000, DPL Inc. repurchased an additional 5.0 million shares under an authorized share repurchase program of up to 6.6 million shares. These shares are held as treasury stock and represent authorized but unissued shares. DPL Inc. has a Shareholder Rights Plan pursuant to which four-ninths of a Right is attached to and trades with each outstanding DPL Inc. Common Share. The Rights would separate from the Common Shares and become exercisable in the event of certain attempted business combinations. As part of DPL Inc.'s recapitalization transaction (see Note 8), 31.6 million warrants were issued, representing approximately 25% of DPL Inc. shares currently outstanding, with a term of 12 years, and an exercise price of $21 per share. These warrants were sold for an aggregate purchase price of $50 million. Pursuant to the warrant agreement, DPL Inc. has reserved out of its authorized shares of common stock a number of shares sufficient to provide for the exercise in full of all outstanding warrants. - -------------------------------------------------------------------------------- 8. PREFERRED STOCK DPL Inc.: o No par value, 8,000,000 shares authorized, 6,800,000 shares outstanding. o As part of DPL Inc.'s recapitalization, 6.8 million shares of mandatorily redeemable voting preferred securities, redeemable par value of $0.01 per share, were issued at an aggregate purchase price of $68,000. These preferred securities carry voting rights for up to 4.9% of DPL Inc.'s total voting rights and the nomination of one Board seat. DP&L: o $25 par value, 4,000,000 shares authorized, no shares outstanding; and $100 par value, 4,000,000 shares authorized, 228,508 shares without mandatory redemption provisions outstanding. Current Redemption Current Shares Par Value at December 31, Series/Rate Price Outstanding 2000 and 1999 ($ in millions) - -------------------------------------------------------------------------------- A 3.75% $102.50 93,280 $9.3 B 3.75% $103.00 69,398 7.0 C 3.90% $101.00 65,830 6.6 -------- ------ Total 228,508 $22.9 ======== ====== 143 The shares may be redeemed at the option of DP&L at the per share prices indicated, plus cumulative accrued dividends. In February 2000, DPL Inc. entered into a series of recapitalization transactions including the issuance of $550 million of a combination of voting preferred and trust preferred securities and warrants to an affiliate of investment company Kohlberg Kravis Roberts & Co. ("KKR"). The trust preferred securities sold to KKR have an aggregate face amount of $550 million, were issued at an initial discounted aggregate price of $500 million, have a maturity of 30 years (subject to acceleration six months after the exercise of the warrants), and pay distributions at a rate of 8.5% of the aggregate face amount per year. DPL Inc. recognized the entire trust preferred securities original issue discount of $50 million in 2000. The proceeds from this recapitalization were used to finance the regional merchant generation expansion, repurchase 30.0 million shares of DPL Inc. common shares, and reduce outstanding short-term debt. - -------------------------------------------------------------------------------- 9. LONG-TERM DEBT
At December 31, $ in millions 2000 1999 - -------------------------------------------------------------------------------- First mortgage bonds maturing: 2024-2026 8.01% (a) $446.0 $446.0 Pollution control series maturing through 2027 6.43% (a) 106.0 106.4 -------- -------- 552.0 552.4 Guarantee of Air Quality Development Obligations 6.10% Series due 2030 110.0 110.0 Senior Notes 6.25% Series due 2008 100.0 100.0 Senior Notes 8.25% Series due 2007 425.0 -- Senior Notes 6.67% Series due 2004 (b) 500.0 500.0 Notes maturing through 2007 - 7.83% 70.0 76.0 Obligation for capital lease 4.9 -- Unamortized debt discount and premium (net) (3.4) (1.8) -------- -------- Total $1,758.5 $1,336.6 ======== ========
(a) WEIGHTED AVERAGE INTEREST RATES FOR 2000 AND 1999. (b) IN MARCH 2000, THE INTEREST RATE ADJUSTED FROM 6.32% TO 6.67% The amounts of maturities and mandatory redemptions for first mortgage bonds, notes, and the capital lease are (in millions) $7.0 in 2001, $8.0 in 2002, $9.0 in 2003, $511.0 in 2004, and $13.0 in 2005. Substantially all property of DP&L is subject to the mortgage lien securing the first mortgage bonds. During 2000, $425 million of a series of Senior Notes due 2007 were issued with an interest rate of 8.25%. The proceeds were used to finance the regional merchant generation expansion, repurchase 30.0 million shares of DPL Inc. common shares, and reduce outstanding short-term debt. 144 During 1999, DPL Inc. completed a private placement issuance of $500 million of Senior Notes due 2004, with an interest rate of 6.32%. The proceeds were used for the redemption of DP&L's $225 million 8.40% Series of First Mortgage Bonds, the reduction of short-term debt and for general corporate purposes. - -------------------------------------------------------------------------------- 10. NOTES PAYABLE AND COMPENSATING BALANCES DPL Inc. and its subsidiaries have up to $300 million available through revolving credit agreements with a consortium of banks. A $200 million agreement expires in 2001 and the other, for up to $100 million, also expires in 2001. Facility fees are approximately $500,000 per year. The primary purpose of the revolving credit facilities is to provide back-up liquidity for the commercial paper program. At December 31, 2000 and 1999, DPL Inc. had no outstanding borrowings under these credit agreements. DP&L has $75.0 million available in short-term informal lines of credit. The commitment fees are immaterial. Borrowings at December 31, 2000 and 1999 were zero. DPL Inc. had no outstanding commercial paper balances at year-end 2000 and $171.0 million outstanding at a weighted average interest rate of 6.0% at December 31, 1999. DP&L had no outstanding commercial paper balances at year-end 2000 and $123.1 million in commercial paper outstanding at a weighted average interest rate of 5.9% at December 31, 1999. - -------------------------------------------------------------------------------- 11. EMPLOYEE STOCK PLANS In 2000, DPL Inc.'s Board of Directors adopted and its shareholders approved The DPL Inc. Stock Option Plan. On February 1, 2000, options were granted at an exercise price of $21.00, which was above the market price of $19.06 per share on that date. The exercise price of options granted after that date approximated the market price of the stock on the date of grant. Options granted represent three-year awards, vest five years from the grant date, and expire ten years from the grant date. At December 31, 2000, there were 390,000 options available for grant. Summarized stock option activity was as follows:
2000 ------------ Options granted at beginning of year Granted 7,610,000 Exercised -- Expired -- Outstanding at year-end 7,610,000 Exercisable at year-end -- - -------------------------------------------------------------------------------- Weighted average option prices per share: At beginning of year $ -- Granted 22.10 Exercised -- Expired -- Outstanding at year-end 22.10 Exercisable at year-end $ --
145 The weighted-average fair value of options granted was $3.65 per share in 2000. The fair values of options were estimated as of the date of grant using a Black-Scholes option pricing model. The weighted averages for the assumptions used in determining the fair values of options granted in 2000 were as follows: expected lives of 5.1 years, expected volatility of 18.5%, a dividend yield of 3.5%, and a risk-free interest rate of 6.8%. DPL Inc. has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations in accounting for its employee stock options. Under APB 25, compensation expense of $2.3 million was recorded for grants issued prior to the measurement date for accounting purposes. If DPL Inc. had used a fair-value method of accounting for stock-base compensation cost, reported net income for 2000 would have been $242.1 million. Basic earnings per share and diluted earnings per share for 2000 would have been $1.90 and $1.82, respectively. The following table reflects information about stock options outstanding at December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE Weighted-Average Range of Exercise Contractual Life Weighted-Average Prices Number Outstanding (in years) Exercise Price Number Weighted-Average Exercisable Exercise Price - --------------------------------------------------------------------------------------------------------------------- $21.00-$29.63 7,610,000 9.2 $22.10 -- --
- -------------------------------------------------------------------------------- 12. OWNERSHIP OF FACILITIES DP&L and other Ohio utilities have undivided ownership interests in seven electric generating facilities and numerous transmission facilities. Certain expenses, primarily fuel costs for the generating units, are allocated to the owners based on their energy usage. The remaining expenses, as well as investments in fuel inventory, plant materials and operating supplies, and capital additions, are allocated to the owners in accordance with their respective ownership interests. As of December 31, 2000, DP&L had $47 million of construction in progress at such facilities. DP&L's share of the operating cost of such facilities is included in the Consolidated Statement of Results of Operations, and its share of the investment in the facilities is included in the Consolidated Balance Sheet. The following table presents DP&L's undivided ownership interest in such facilities at December 31, 2000: 146 DP&L DP&L Share INVESTMENT ---------------------------------------------- Production Gross Plant Ownership Capacity in Service (%) (MW) ($ in millions) - -------------------------------------------------------------------------------- Production Units: Beckjord Unit 6 50.0 210 $ 56 Conesville Unit 4 16.5 129 31 East Bend Station 31.0 186 152 Killen Station 67.0 418 381 Miami Fort Units 7&8 36.0 360 125 Stuart Station 35.0 823 256 Zimmer Station 28.1 365 993 Transmission (at varying percentages) 70 - ---------------------------------------------------- --------------------------- 13. EARNINGS PER SHARE Basic earnings per share are based on the weighted-average number of common shares outstanding during the year. Diluted earnings per share are based on the weighted-average number of common and common equivalent shares outstanding during the year. The following illustrates the reconciliation of the numerators and denominators of the basic and diluted EPS computations for income before extraordinary item (prior year periods are not presented because no potentially dilutive securities were outstanding in the prior year): 2000 ----------------------------------------- In millions except Income(a) Shares Per Share per share amounts (Numerator) (Denominator) Amount ------------ ------------ ------------ BASIC EPS $284.9 127.7 $2.23 ===== EFFECT OF DILUTIVE SECURITIES Warrants -- 4.5 Stock Option Plan -- 0.7 ------ ---- DILUTED EPS $284.9 132.9 $2.14 ====== ===== ====== (A) INCOME BEFORE EXTRAORDINARY ITEM 147 - -------------------------------------------------------------------------------- 14. RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES For the years ended December 31, $ in millions 2000 1999 1998 - ------------------------------------------------------------------------------- Net income $243.5 $204.2 $189.1 Adjustments: Depreciation and amortization 135.6 136.5 127.1 Amortization of trust preferred discount 50.0 -- -- Income from investing activities (52.1) (31.2) (8.0) Non-cash extraordinary item, net of tax 41.4 -- -- Gain on sale of natural gas retail distribution operations (182.5) -- -- Amortization of regulatory assets, net 16.3 25.8 33.0 Operating expense provisions 17.8 (21.0) 9.1 Deferred income taxes (79.5) 15.4 (15.7) Other deferred credits 29.0 2.3 15.4 Accounts receivable (45.8) 9.6 (16.3) Accounts payable (4.6) 26.5 (24.1) Accrued taxes payable 60.7 5.4 6.6 Inventory (6.1) 19.3 (24.9) Other (9.0) 4.4 10.7 ------ ------ ------ Net cash provided by operating activities $214.7 $397.2 $302.0 ====== ====== ====== - -------------------------------------------------------------------------------- 15. BUSINESS SEGMENT REPORTING DPL Inc.'s principal subsidiary, DP&L, sells and distributes electricity to residential, commercial, industrial and governmental customers within a 6,000 square mile service territory. DP&L also sold and distributed natural gas until October 31, 2000, at which time DP&L sold its natural gas retail distribution assets and certain liabilities (see Note 3). For purposes of the segment disclosure required by the FASB Statement of Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information," DPL Inc.'s results are classified in two reportable segments, electric and natural gas. Amounts attributed to segments below the quantitative thresholds for separate disclosure are primarily for a natural gas supply management subsidiary, a wholesale merchant energy subsidiary, street lighting services, insurance, and financial support services. 148
SEGMENT INFORMATION For the years ended December 31, $ in millions 2000 1999 1998 - ---------------------------------------------------------------------------------------- ELECTRIC Revenues from external customers $1,089.7 $1,056.0 $1,070.7 Intersegment revenues 2.4 4.5 4.8 Depreciation and amortization 122.9 125.9 118.0 Earnings before interest, taxes, and extraordinary item 389.4 352.7 336.2 Segment assets 2,516.1 2,584.0 2,702.1 Expenditures - construction additions 117.8 69.9 101.1 NATURAL GAS (a) Revenues from external customers 183.8 215.0 211.2 Intersegment revenues 4.0 3.9 2.8 Depreciation and amortization 7.4 8.1 7.5 Earnings before interest, taxes, and extraordinary item 24.2 27.2 23.9 Segment assets -- 321.7 322.7 Expenditures - construction additions 7.1 9.6 9.7 OTHER Revenues from external customers 163.4 67.9 70.3 Intersegment revenues 8.9 12.6 20.9 Depreciation and amortization 5.3 2.5 1.6 Earnings before interest, taxes, and extraordinary item 31.1 25.2 21.9 Segment assets 365.7 114.6 25.7 Expenditures - construction additions 219.0 87.0 0.6 TOTAL Revenues from external customers 1,436.9 1,338.9 1,352.2 Intersegment revenues 15.3 21.0 28.5 Depreciation and amortization 135.6 136.5 127.1 Earnings before interest, taxes, and extraordinary item 444.7 405.1 382.0 Segment assets 2,881.8 3,020.3 3,050.0 Expenditures - construction additions 343.9 166.5 111.4
149
RECONCILIATION (b) For the years ended December 31, $ in millions 2000 1999 1998 - ------------------------------------------------------------------------------------------------- PROFIT OR LOSS Total earnings before interest, taxes, and extraordinary item $ 444.7 $ 405.1 $ 382.0 Investment income 88.8 50.8 21.3 Other income and deductions 135.6 (13.2) (1.4) Interest expense (140.3) (110.5) (92.4) Trust preferred distributions by subsidiary (87.3) -------- -------- -------- Income before income taxes and extraordinary item $ 441.5 $ 332.2 $ 309.5 ======== ======== ======== ASSETS Total segment assets $2,881.8 $3,020.3 $3,050.5 Unallocated corporate assets 1,554.2 1,320.1 805.4 -------- -------- -------- Total Assets $4,436.0 $4,340.4 $3,855.9 ======== ======== ========
(a) DP&L SOLD ITS NATURAL GAS RETAIL DISTRIBUTION ASSETS AND CERTAIN LIABILITIES ON OCTOBER 31, 2000 (SEE NOTE 3). (b) FOR CATEGORIES NOT RECONCILED ABOVE, SEGMENT TOTALS EQUAL CONSOLIDATED TOTALS. - -------------------------------------------------------------------------------- 16. FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 2000 1999 ---------------------------------------------------------------------------------------- Gross Unrealized Gross Unrealized -------------------- ------------------ $ in millions Fair Value Gains Losses Cost Fair Value Gains Losses Cost - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Available-for-sale equity $1,336.9 $ 199.4 $ (33.2) $1,170.7 $1,113.1 $ 182.1 $ (13.2) $ 944.2 securities Held-to-maturity securities: Debt securities (a) 50.2 0.8 -- 49.4 45.8 -- (1.1) 46.9 Temporary cash investments 112.3 -- -- 112.3 83.3 -- -- 83.3 -------- -------- -------- -------- -------- -------- -------- -------- Total $1,499.4 $ 200.2 $ (33.2) $1,332.4 $1,242.2 $ 182.1 $ (14.3) $1,074.4 Liabilities (b) Debt $1,795.0 $1,765.5 $1,605.0 $1,636.0 Capitalization Unallocated stock in ESOP $ 163.1 $ 62.7 $ 88.7 $ 65.3
(a) MATURITIES RANGE FROM 2001 TO 2010. (b) INCLUDES CURRENT MATURITIES. Gross realized gains (losses) were $56.6 and $(5.2) million in 2000, $31.7 and $(1.2) million in 1999, $19.5 and $(1.0) million in 1998, respectively. 150 Report of Independent Accountants PRICEWATERHOUSECOOPERS LLP To the Board of Directors and Shareholders of DPL Inc. In our opinion, the accompanying Consolidated Balance Sheet and the related Consolidated Statements of Results of Operations, of Shareholders' Equity, and of Cash Flows present fairly, in all material respects, the financial position of DPL Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion. /s/ PricewaterhouseCoopers LLP Dayton, Ohio January 29, 2001 151 Financial and Statistical Summary DPL Inc.
2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ FOR THE YEARS ENDED DECEMBER 31, DPL INC.: Earnings per share of common stock $ 2.23(a) 1.35 1.24 1.20 1.15 Dividends paid per share $ 0.94 0.94 0.94 0.91 0.87 Dividend payout ratio % 42.2(a) 69.6 75.8 75.8 75.7 Income before extraordinary item $ 284.9 204.2 189.1 181.4 172.9 (millions) Utility service revenues (millions) $1,273.5 1,271.0 1,281.9 1,252.2 1,256.1 Construction additions (millions) $ 343.9 166.5 111.4 110.6 115.5 Market value per share at December 31 $ 33.19 17.31 21.63 19.19 16.19 DP&L: Electric sales (millions of kWh) - (b) Residential 4,816 4,725 4,790 4,788 4,924 Commercial 3,539 3,390 3,518 3,408 3,407 Industrial 4,851 4,876 4,655 4,749 4,540 Other 4,317 3,876 4,518 3,664 3,443 ------ ------ ------ ------ ------ Total 17,523 16,867 17,481 16,609 16,314 Gas sales (thousands of MCF) -- (c) Residential 18,538 24,450 24,877 29,277 31,087 Commercial 5,838 7,647 7,433 9,567 9,424 Industrial 2,034 2,246 1,916 2,520 3,404 Other 776 1,182 1,699 2,153 2,829 Transported gas 16,105 20,190 17,788 18,523 16,953 ------ ------ ------ ------ ------ Total 43,291 55,715 53,713 62,040 63,697 AT DECEMBER 31, DPL INC.: Book value per share $ 7.43 9.65 9.01 8.45 7.97 Total assets (millions) $4,436.0 4,340.4 3,855.9 3,585.2 3,418.7 Long-term debt (millions) $1,758.5 1,336.6 1,065.9 971.0 1,014.3 DP&L: First mortgage bond ratings -- Fitch AA AA AA AA AA Standard & Poor's Corporation BBB+ AA- AA- AA- AA- Moody's Investors Service A2 Aa3 Aa3 Aa3 Aa3 NUMBER OF SHAREHOLDERS DPL INC.: Common 35,903 39,399 41,791 43,689 46,532 DP&L: Preferred 471 509 559 625 684
(a) Represents Basic Earnings Per Share before extraordinary item. Basic EPS and the dividend payout ratio for 2000 were $1.56 and 60.3%, respectively, before non-recurring (see Notes 3 and 8) and extraordinary items (see Note 4). (b) Electric sales include electric peaking generation capacity sales. (c) On October 31, 2000, DP&L completed the sale of its natural gas retail distribution assets and certain liabilities (see Note 3). Selected Quarterly Information (Unaudited)
For the Three Months Ended $ in millions except per share March 31, June 30, September 30, December 31, amounts 2000 1999 2000 1999 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Utility service revenues $ 360.3 $ 362.4 $ 292.0 $ 276.6 $ 320.7 $ 319.2 $ 300.5 $ 312.8 Income before income taxes and extraordinary item 82.8 117.4 23.5 59.3 83.3 90.8 251.9 64.6 Income before extraordinary item 50.1 72.5 15.8 37.4 53.2 53.6 165.8 40.7 Net income 50.1 72.5 15.8 37.4 11.8 53.6 165.8 40.7 Earnings per share of common stock: BASIC Before extraordinary item 0.34 0.47 0.13 0.25 0.44 0.36 1.38(b) 0.27 Net income 0.34 0.47 0.13 0.25 0.10(a) 0.36 1.38(b) 0.27 DILUTED Before extraordinary item 0.34 0.47 0.12 0.25 0.41 0.36 1.27 0.27 Net income 0.34 0.47 0.12 0.25 0.09 0.36 1.27 0.27 Dividends paid per share 0.235 0.235 0.235 0.235 0.235 0.235 0.235 0.235 Common stock market price - High 22.31 21.69 24.38 19.88 30.71 19.63 33.69 20.31 - Low 16.63 16.50 21.94 16.38 22.75 16.94 26.69 16.63
(a) Results include extraordinary item associated with the deregulation order (see Note 4). (b) Results include the gain on the sale of the natural gas retail distribution operations (see Note 3). 152 EX-21 10 a2043323zex-21.txt EXHIBIT 21 EXHIBIT 21 Subsidiaries of DPL Inc. DPL Inc. had the following wholly-owned subsidiaries on February 28, 2001:
STATE OF INCORPORATION The Dayton Power and Light Company............................... Ohio Miami Valley Insurance Company................................... Vermont Miami Valley Leasing, Inc........................................ Ohio Miami Valley Resources, Inc...................................... Ohio Miami Valley Lighting, Inc....................................... Ohio Miami Valley Development Company................................. Ohio Miami Valley CTC, Inc............................................ Ohio DPL Energy, Inc.................................................. Ohio Plaza Building, Inc.............................................. Ohio DPL Capital Trust I.............................................. Delaware DPL Energy Resources, Inc........................................ Ohio Customer Payment Center, Inc..................................... Ohio MacGregor Park, Inc.............................................. Ohio
153 EX-23 11 a2043323zex-23.txt EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 33-34316 and 33-44370), the Registration Statement on Form S-4 (Registration No. 33-2551) and the Registration Statement on Form S-8 (Registration No. 333-39982) and, of our report dated January 29, 2001 relating to the financial statements, which appears in the 2000 Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated January 29, 2001 relating to the financial statement schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Dayton, Ohio March 30, 2001 154 -----END PRIVACY-ENHANCED MESSAGE-----