Exhibit 10(u)

 

DPL INC.

STOCK OPTION PLAN

 

Management Stock Option Agreement

 

This Agreement is made as of December 29, 2004 (the “Grant Date”), by and
between DPL Inc., an Ohio corporation (the “Company”) and John J. Gillen (the
“Participant”).

 

WHEREAS, the Committee, pursuant to the Company’s Stock Option Plan (the
“Plan”), has made an award to the Participant and authorized and directed the
execution and delivery of this Agreement;

 

NOW, THEREFORE, in consideration of the foregoing, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and the
Participant hereby agree as follows:

 

1.                                     Award.  The Participant is hereby granted
a stock option (an” Option”) to purchase from the Company up to a total of
30,000 Common Shares of the Company at the Fair Market Value, as defined in the
Plan, on the Grant Date, or $25.00 per share (the “Exercise Price”).  The term
of such Option shall be ten years, commencing on the Grant Date (the “Term”).
This Option is not intended to qualify as an incentive stock option under Code
Section 422.

 

2.                                     Vesting and Exercise. The Option may be
exercised only in accordance with the Plan, as supplemented by this Agreement,
and not otherwise.

 

a.                                     Vesting. During its Term and prior to its
earlier termination in accordance with Section 3 of this Agreement, and subject
to Section 4 of this Agreement, the Option shall vest in accordance with the
following schedule:

 

Cumulative Fraction
Of Option

 

Vested as of December 21

 

1/3 (10,000 shares)

 

2005

 

2/3 (20,000 shares)

 

2006

 

3/3 (30,000 shares)

 

2007

 

 

b.                                    Exercise.  Each vested portion of the
Option shall become exercisable on the date of its vesting.  The Option may be
exercised for less than the full number of Shares for which the Option is then
exercisable. To the extent then exercisable, the Option may be exercised by the
Participant by giving written notice of exercise to the Company in such form as
may be

 

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provided by the Committee, specifying the number of Shares with respect to which
the Option is to be exercised and such other

 

information as the Committee may require. Such exercise shall be effective upon
receipt by the Company of such written notice together with the required payment
of the Exercise Price and any applicable withholding taxes. Notwithstanding the
foregoing, in the event a Person acquires beneficial ownership of securities of
the Company representing 15% or more of the combined voting power of the then
outstanding securities of the Company and such acquisition has been approved by
the Board of Directors, the vested portion of the Option shall be exercisable
prior to January 1, 2005 to enable the Participant to sell Shares to the extent
permitted under clause (ii) of Section 5 and for no other purpose.

 

c.                                     Payment of Exercise Price.  Payment of
the Exercise Price may be made by cash, check (subject to collection) or,
provided that the Shares have been owned by the Participant for at least six
months prior to such payment, by the delivery (or attestation of ownership) of
Shares having a Fair Market Value equal to the aggregate Exercise Price and any
applicable withholding taxes. Alternatively, the Participant may make such
payment by authorizing the simultaneous sale of Shares (or a sufficient portion
thereof) acquired upon exercise through a brokerage or similar arrangement
approved in advance by the Committee. Subject to the foregoing and except as
otherwise provided by the Committee before the Option is exercised, the Company
will deliver to the Participant, within a reasonable period of time thereafter,
a certificate or certificates representing the Shares so acquired, registered in
the name of the Participant or in accordance with other delivery instructions
provided by the Participant and acceptable to the Committee.

 

3.                                     Termination. Except as otherwise provided
in this Section 3, the Option shall terminate upon the expiration of its Term.

 

a.                                     If the Participant’s employment or other
service terminates for Cause, the Option, whether or not vested, shall be
forfeited.

 

b.                                    If the Participant’s employment or other
service terminates for any reason other than for Cause, the Participant shall be
entitled to the then vested portion of the Option and the unvested portion shall
be forfeited.

 

c.                                     In no event may the Option be exercised
beyond its Term.

 

4.                                     Change of Control. Notwithstanding the
provisions of Sections 2(a) and 2(b) hereof, in the event of a Change of
Control, the Option shall immediately vest and become exercisable in its
entirety, provided that the Participant’s employment or other service has not
terminated prior to the date of such Change of Control.

 

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5.                                     Restriction on Sale of Shares. If, after
January 1, 2000, a Person acquires beneficial ownership of securities of the
Company representing 15% or more of the combined voting power of the then
outstanding securities of the Company, such acquisition has been approved by the
Board of Directors, and if the Participant exercises the Option at any time
following such acquisition, the Participant may not sell or dispose of the
Shares acquired upon exercise in any manner, whether pursuant to a cashless
exercise or otherwise, except that the Participant (i) may sell such number of
Shares as are necessary to pay the Participant’s income tax liability arising
from the exercise (calculated using the highest federal and state income tax
rates for ordinary income in effect at the time of exercise), (ii) may sell
additional Shares in proportion to any sale of Shares made by the Person who
made such acquisition (e.g., if such Person sells 10% of its Shares, the
Participant may sell pursuant to this clause (ii) 10% of the Shares acquired on
exercise) and (iii) may sell all the Shares following termination of the
Participant’s employment by or other service to the Company or one of its
affiliates.  The restrictions in this Section 5 shall lapse on January 1, 2005.

 

6.                                     Withholding. The Company shall withhold
all applicable taxes required by law from all amounts paid in respect of the
Option. A Participant may satisfy the withholding obligation (i) by paying the
amount of any such taxes in cash or check (subject to collection), (ii) by the
delivery (or attestation of ownership) of Shares or (iii) with the approval of
the Committee, by having Shares deducted from the payment. Alternatively, the
Participant may satisfy such obligation by authorizing the simultaneous sale of
Shares (or a sufficient portion thereof) acquired upon exercise through a
brokerage or similar arrangement approved in advance by the Committee. The
amount of the withholding and, if applicable, the number of Shares to be
delivered or deducted, as the case may be, shall be determined by the Committee
as of when the withholding is required to be made, provided that the number of
Shares so delivered or withheld shall not exceed the minimum required amount of
such withholding.

 

7.                                     Non-Assignability.  Except as otherwise
provided in this Section, the Option is not assignable or transferable other
than by will or by the laws of descent and distribution and, during the
Participant’s life, may be exercised only by the Participant.  The Participant,
with the approval of the Committee, which approval may be withheld in its sale
discretion, may transfer the Option for no consideration to or for the benefit
of any member or members of the Participant’s Immediate Family (including,
without limitation, to a trust for the benefit of any member or members of the
Participant’s Immediate Family or to a partnership or limited liability company
for one or more members of the Participant’s Immediate Family) subject to such
limits as the Committee may establish, and the transferee shall remain subject
to all the terms and conditions applicable to the Option prior to such transfer.
The foregoing right to transfer the Option shall apply to the right to consent
to amendments to this Agreement

 

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and, in the discretion of the Committee, shall also apply to the right to
transfer ancillary rights associated with the Option.

 

8.                                     Rights as a Shareholder. A Participant
shall have no rights as a shareholder with respect to any Shares subject to this
award until the date the Participant becomes the holder of record of the Shares.

 

9.                                     No Right to Continued Service. Nothing
herein shall obligate the Company or any Subsidiary to continue the
Participant’s employment or other service for any particular period or on any
particular basis of compensation.

 

10.                               Burden and Benefit. The terms and provisions
of this Agreement shall be binding upon, and shall inure to the benefit of, the
Participant and his or her executors or administrators, heirs, and personal and
legal representatives.

 

11.                               Execution. This Option is not enforceable
until this Agreement has been signed by the Participant and the Company. By
executing this Agreement, the Participant shall be deemed to have accepted and
consented to any action taken or to be taken under the Plan by the Committee,
the Board of Directors or their delegates.

 

12.                               Governing Law. This Agreement shall be
construed and enforced in accordance with the laws of the State of Ohio, without
regard to the conflict of laws principles thereof.

 

13.                               Modifications. Except for alterations and
amendments permitted under the Plan without the consent of the Participant, no
change or modification of this Agreement shall be valid unless it is in writing
and signed by the parties hereto.

 

14.                               Entire Agreement. This Agreement, together
with the Plan, sets forth all of the promises, agreements, conditions,
understandings, warranties and representations between the parties hereto with
respect to the Option, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, express or
implied, between them with respect to the Option other than as set forth herein
or therein. The terms and conditions of the Plan, a copy of which has been
furnished to the Participant, are incorporated by reference herein, and to the
extent that any conflict may exist

between any term or provision of this Agreement and any term or provision of the
Plan, the term or provision of the Plan shall control.

 

15.                               Additional Definitions. Any capitalized term
to the extent not defined below or elsewhere in this Agreement shall have the
same meaning as set forth in the Plan.

 

a.                                     “Cause” means (i) the commission of a
felony, (ii) embezzlement, (iii) the illegal use of drugs or (iv) if no Change
of Control has occurred other than the entering into of an agreement referred to
in items (ii) or

 

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(iii) of the definition of Change of Control, the failure by the Participant to
substantially perform his duties with the Company or any Subsidiary (other than
any such failure resulting from his Disability) as determined by the Committee.
Notwithstanding the foregoing, “Cause” shall not be deemed to exist unless and
until there shall have been delivered to the Participant a copy of a resolution
duly adopted by the written consent of not less than three-fourths of the number
of directors of the Company then in office (after reasonable notice to the
Participant and an opportunity for the Participant, together with his counsel,
to be heard at a meeting of the Board of Directors called and held for that
purpose), finding that in the good faith opinion of such directors the
Participant was guilty of conduct set forth in clauses (i), (ii), (Hi) or (iv)
of the preceding sentence and specifying the particulars thereof in detail.

 

b.                                    “Immediate Family” means the Participant’s
spouse, parents, parents-in-law, children, stepchildren, adoptive relationships,
sisters, brothers and grandchildren (and, for this purpose, shall also include
the Participant) .

 

16.                             Construction. The use of any gender herein shall
be deemed to include the other gender and the use of the singular herein shall
be deemed to include the plural and vice versa, wherever appropriate.

 

17.                               Notices. Any and all notices required herein
shall be addressed: (i) if to the Company, to the principal executive offices of
the Company; and (ii) if to the Participant, to his or her address as reflected
in the records of the Company.

 

18.                               Invalid or Unenforceable Provisions. The
invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if the invalid or unenforceable provisions were
omitted.

 

IN WITNESS WHEREOF, the Company and the Participant have executed this Agreement
as of the date first above written.

 

 

 

 

 

 

DPL INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

James V. Mahoney

 

 

 

 

 

 

 

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John J. Gillen

 

 

 

 

 

 

 

Participant

 

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