Exhibit 10.3


 


Draft of February 16, 2006


DPL INC.


 


LONG-TERM INCENTIVE PLAN -
PERFORMANCE SHARES AGREEMENT


 


(Granted Under the 2006 Equity
and Performance Incentive Plan)


 


                This Long-Term
Incentive Plan - Performance Shares Agreement (this “Agreement”) is made as of
__________________, 2006 between DPL Inc., an Ohio corporation (“DPL”) and
_________________, an employee of DPL or its Subsidiaries (the “Grantee”).


 


                WHEREAS, the Board
of Directors of DPL has duly adopted the 2006 Equity and Performance Incentive
Plan (the “Plan”), which authorizes DPL to grant to eligible individuals
performance shares, each such performance share being equal in value to one
share of DPL’s common stock, par value of $0.01 per share (the “Common Shares”);


 


                WHEREAS, the Board
of Directors plans to submit the Plan to DPL’s shareholders for their approval
and this grant of performance shares is in all cases subject to the approval of
the Plan by the affirmative vote of the holders of the requisite number of
outstanding Common Shares at DPL’s 2006 Annual Meeting of Shareholders (“Shareholder
Approval”); and


 


                WHEREAS, the Board
of Directors of DPL has determined that it is desirable and in the best
interests of DPL and its shareholders to approve a long-term incentive program
in 2006 and, in connection therewith, to grant the Grantee a certain number of
performance shares, in order to provide the Grantee with an incentive to
advance the interests of DPL, all according to the terms and conditions set
forth herein and in the Plan.


 


                NOW, THEREFORE, in
consideration of the mutual promises and covenants contained herein, the
parties hereto do hereby agree as follows:


 


ARTICLE
I  — GRANT OF PERFORMANCE SHARES


 


Section 1.1  Performance Shares Granted.  Subject to the terms of the Plan, DPL hereby
grants to the Grantee a targeted number of performance shares equal to
______________ (the “Target Performance Shares”), payment of which depends on
DPL’s performance as set forth in this Agreement and in the Statement of
Performance Goals (the “Statement of Performance Goals”) approved by the
Compensation Committee of DPL’s Board of Directors (the “Committee”).


 


Section 1.2  Performance Measure.  The Grantee’s right to receive all, any
portion of, or more than, the Target Performance Shares will be contingent upon
the 


 

















 


achievement
of specified levels of Total Shareholder Return Relative to Peers (“TSR
Relative to Peers”), as set forth in the Statement of Performance Goals.  The achievement of the levels of TSR Relative
to Peers will be measured over the following periods (each, a “Performance
Period” and, collectively, the “Performance Periods”):


 


(a) 
Payment of __________ of the Target Performance Shares (the “First
Transition Performance Shares”) will be contingent upon the achievement of specified
levels of TSR Relative to Peers during the period from January 1, 2004 through
December 31, 2006 (the “First Transition Period”);


 


(b) 
Payment of __________ of the Target Performance Shares (the “Second
Transition Performance Shares”) will be contingent upon the achievement of
specified levels of TSR Relative to Peers during the period from January 1,
2005 through December 31, 2007 (the “Second Transition Period”);


 


(c) 
Payment of __________ of the Target Performance Shares (the “Regular
Grant Performance Shares”) will be contingent upon the achievement of specified
levels of TSR Relative to Peers during the period from January 1, 2006 through
December 31, 2008 (the “Regular Performance Period”);


 


ARTICLE
II  — EARNING OF PERFORMANCE SHARES


 


Section 2.1  Below Threshold.  If, upon the conclusion of each of the
Performance Periods, TSR Relative to Peers for that Performance Period falls
below the threshold level, as set forth in the Performance Matrix contained in
the Statement of Performance Goals, no performance shares for that Performance
Period shall become earned.


 


Section 2.2  Between Threshold and Target.  If, upon the conclusion of the relevant
Performance Period, TSR Relative to Peers equals or exceeds the threshold
level, but is less than the target level, as set forth in the Performance
Matrix contained in the Statement of Performance Goals:


 


(a) 
the First Transition Performance Shares shall become earned based on
performance during the First Transition Period, as determined by mathematical interpolation
between 50% of the targeted First Transition Performance Shares and 100% of the
targeted First Transition Performance Shares and rounded up to the nearest
whole share;


 


(b) 
the Second Transition Performance Shares shall become earned based on
performance during the Second Transition Period, as determined by mathematical
interpolation between 50% of the targeted Second Transition Performance Shares
and 100% of the targeted Second Transition Performance Shares and rounded up to
the nearest whole share; and


 


(c) 
the Regular Grant Performance Shares shall become earned based on
performance during the Regular Performance Period, as determined by
mathematical interpolation between 50% of the targeted Regular Grant
Performance 


 


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Shares
and 100% of the targeted Regular Grant Performance Shares and rounded up to the
nearest whole share.


 


Section 2.3  Between Target and Intermediate.  If, upon the conclusion of the relevant
Performance Period, TSR Relative to Peers equals or exceeds the target level,
but is less than the intermediate level, as set forth in the Performance Matrix
contained in the Statement of Performance Goals:


 


(a) 
the First Transition Performance Shares shall become earned based on performance
during the First Transition Period, as determined by mathematical interpolation
between 100% of the targeted First Transition Performance Shares and 150% of
the targeted First Transition Performance Shares and rounded up to the nearest
whole share;


 


(b) 
the Second Transition Performance Shares shall become earned based on
performance during the Second Transition Period, as determined by mathematical
interpolation between 100% of the targeted Second Transition Performance Shares
and 150% of the targeted Second Transition Performance Shares and rounded up to
the nearest whole share; and


 


(c) 
the Regular Grant Performance Shares shall become earned based on
performance during the Regular Performance Period, as determined by
mathematical interpolation between 100% of the targeted Regular Grant
Performance Shares and 150% of the targeted Regular Grant Performance Shares
and rounded up to the nearest whole share.


 


Section 2.4  Between Intermediate and Maximum.  If, upon the conclusion of the relevant Performance
Period, TSR Relative to Peers equals or exceeds the intermediate level, but is
less than the maximum level, as set forth in the Performance Matrix contained
in the Statement of Performance Goals:


 


(a) 
the First Transition Performance Shares shall become earned based on
performance during the First Transition Period, as determined by mathematical
interpolation between 150% of the targeted First Transition Performance Shares
and 200% of the targeted First Transition Performance Shares and rounded up to
the nearest whole share;


 


(b) 
the Second Transition Performance Shares shall become earned based on
performance during the Second Transition Period, as determined by mathematical
interpolation between 150% of the targeted Second Transition Performance Shares
and 200% of the targeted Second Transition Performance Shares and rounded up to
the nearest whole share; and


 


(c) 
the Regular Grant Performance Shares shall become earned based on
performance during the Regular Performance Period, as determined by
mathematical interpolation between 150% of the targeted Regular Grant
Performance Shares and 200% of the targeted Regular Grant Performance Shares
and rounded up to the nearest whole share.


 


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Section 2.5  Equals or Exceeds Maximum.  If, upon the conclusion of each of the
Performance Periods, TSR Relative to Peers for that Performance Period equals
or exceeds the maximum level, as set forth in the Performance Matrix contained
in the Statement of Performance Goals, 200% of the Targeted Performance Shares
for that Performance Period shall become earned.


 


Section 2.6  Conditions; Determination of Earned Award.  Except as otherwise provided herein, the
Grantee’s right to receive any performance shares is contingent upon (a) his or
her remaining in the continuous employ of DPL or a Subsidiary through the end
of each Performance Period and (b) Shareholder Approval of the Plan.  For purposes of this Agreement, the
continuous employ of the Grantee shall not be considered interrupted or
terminated in the case of sick leave, military leave or any other leave of
absence approved by DPL or in the case of transfers between locations of DPL
and its Subsidiaries.  Following the
Performance Periods, the Committee (or the independent members of the Board of
Directors) shall determine whether and to what extent the goals relating to TSR
Relative to Peers have been satisfied for each Performance Period and shall
determine the number of performance shares that shall have become earned
hereunder.


 


ARTICLE
III  — CHANGE OF CONTROL


                If a Change of Control (as
defined in the Plan) occurs following Shareholder Approval of the Plan and
during the Performance Periods, but before the payment of any performance
shares as set forth in Article VII below, DPL shall pay to the Grantee, as soon
as practicable following the Change of Control, a pro rata number of the Target
Performance Shares based on the number of full months that have elapsed during
each Performance Period prior to the Change of Control and the remaining
performance shares will be forfeited.


 


ARTICLE
IV  — DISABILITY OR DEATH


 


                If the Grantee’s employment with
DPL or a Subsidiary terminates following Shareholder Approval of the Plan and
during the Performance Periods, but before the payment of any performance
shares as set forth in Article VII below due to (a) “disability” (as defined in
DPL’s long-term disability plan) or (b) death, DPL shall pay to the Grantee or
his or her executor or administrator, as the case may be, as soon as
practicable following such termination of employment, a pro rata number of the
Target Performance Shares based on the number of full months during the
Performance Period during which the Grantee was employed by DPL and the
remaining performance shares will be forfeited.


 


ARTICLE
V  — RETIREMENT


 


                If the Grantee’s employment with
DPL or a Subsidiary terminates following Shareholder Approval of the Plan and
during any Performance Period, but before the payment of any performance shares
as set forth in Article VII below due to the Grantee’s retirement approved by
the Committee or the Board, DPL shall pay to the 


 


 


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Grantee, as soon
as practicable following the end of each Performance Period, the performance shares
to which the Grantee would have been entitled under Article II above, had the
Grantee remained employed by DPL through the end of each of the Performance
Periods, prorated based on the number of full months during the Performance
Period during which the Grantee was employed by DPL and the remaining
performance shares will be forfeited.


 


ARTICLE
VI  — FORFEITING OF PERFORMANCE SHARES


 


                If the Grantee’s employment with
DPL or a Subsidiary terminates before the end of the applicable Performance
Period for any reason other than as set forth in Articles IV and V above or if
Shareholder Approval of the Plan is not obtained, the performance shares will
be forfeited.


 


ARTICLE
VII  — PAYMENT OF PERFORMANCE SHARES


 


                Payment of any performance
shares that become earned as set forth herein will be made in the form of
Common Shares.  Except as otherwise
provided in Articles III, IV and V, payment will be made as soon as practicable
after the last fiscal year of each Performance Period and the determination by
the Committee (or the independent members of the Board of Directors) of the
level of attainment of TSR Relative to Peers, but in no event shall such
payment occur after two and a half months from the end of the applicable
Performance Period.  Performance shares
will be forfeited if they are not earned at the end of the applicable
Performance Period and, except as otherwise provided in this Agreement, if the
Grantee ceases to be employed by DPL or a Subsidiary at any time prior to such
shares becoming earned at the end of each Performance Period.  To the extent that DPL or any Subsidiary is
required to withhold any federal, state, local or foreign tax in connection
with the payment of earned performance shares pursuant to this Agreement, it
shall be a condition to the receipt of such performance shares that the Grantee
make arrangements satisfactory to DPL or such Subsidiary for payment of such
taxes required to be withheld.  This tax
withholding obligation shall be satisfied by DPL withholding performance shares
otherwise payable pursuant to this award.


 


ARTICLE
VIII  — DIVIDENDS


 


                Except as provided in Section 11.5 below, no dividends
shall be accrued or earned with respect to the performance shares until such
performance shares are earned by the Grantee as provided in Article II hereof.


 


ARTICLE
IX  — NON-ASSIGNABILITY


 


                The performance shares and the
Common Shares subject to this grant are personal to the Grantee and may not be
sold, exchanged, assigned, transferred, pledged, encumbered or otherwise
disposed of by the Grantee until they become earned as provided in this
Agreement; provided, however, that the Grantee’s rights with
respect to such performance shares and Common Shares may be transferred by will
or pursuant to the laws of descent and distribution.  Any purported transfer or 


 


 


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encumbrance in
violation of the provisions of this Article IX shall be void, and the other
party to any such purported transaction shall not obtain any rights to or
interest in such performance shares or Common Shares.


 


ARTICLE
X  — ADJUSTMENTS


 


                In the event of any change in
the number of Common Shares by reason of a merger, consolidation,
reorganization, recapitalization, or similar transaction, or in the event of a
stock dividend, stock split, or distribution to shareholders (other than normal
cash dividends), the Committee shall adjust the number and class of shares
subject to outstanding Target Performance Shares and Deferred Units (as defined
below) and other value determinations applicable to outstanding Target
Performance Shares and Deferred Units. 
No adjustment provided for in this Article X shall require DPL to issue
any fractional share.


 


ARTICLE
XI  — DEFERRAL


 


Section 11.1  Ability to Defer.  The Grantee may elect to defer receipt of all
or any portion of the earned performance shares, which will be credited to a
bookkeeping account in the Grantee’s name.


 


Section 11.2  Elections.  An election pursuant Section 11.1 must be
made in writing and delivered to DPL within 30 days of the date of grant of
such performance shares, provided that the election is made at least one year
in advance of the earliest date on which the performance shares could be
earned.  If the Grantee does not file an
election form by the specified date, he or she will receive the performance
shares when they otherwise would have been paid pursuant to Article VII.


 


Section 11.3  Crediting to Accounts.  If a Grantee elects to defer receipt of the
earned performance shares, there will be credited to the Grantee’s account as
of the day such Common Shares underlying the earned performance shares would
have been paid, a number of deferred units (the “Deferred Units”) equal to the
number of Common Shares that would otherwise have been delivered to the Grantee
pursuant to Article VII on such date. 
The Deferred Units credited to the Grantee’s account (plus any
additional shares credited pursuant to Section 11.5 below) will represent the
number of Common Shares that DPL will issue to the Grantee at the end of the deferral
period.  All Deferred Units will be 100%
vested at all times.


 


Section 11.4  Deferral Period.  The Deferred Units will be subject to a
deferral period beginning on the date of crediting to the Grantee’s account and
ending upon such period as the Grantee may have elected.  The period of deferral will be for a minimum
period of one year, except in the case where the Grantee elects a deferral
period determined by reference to his or her termination of employment.  The Grantee may elect payment in a lump sum
or payment in equal installments.  The
Grantee may change the period of deferral by filing a subsequent election with
DPL at least twelve months before the date of the previously elected payment
date and the newly elected payment date (or payment commencement date) must be
at least five years after the 


 


 


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previously
elected payment date (or the previously elected payment commencement date); provided,
however, that such modification shall not be effective unless the
Grantee remains an employee for at least twelve months after the date on which
such modification was made.  During the
deferral period, the Grantee will have no right to transfer any rights under
his or her Deferred Units and will have no other rights of ownership therein.


 


Section 11.5  Dividend Equivalents.  The Grantee’s account will be credited as of
the last day of each calendar quarter with that number of additional Deferred
Units equal to the amount of cash dividends paid by DPL during such quarter on
the number of Common Shares equivalent to the number of Deferred Units in the
Grantee’s account from time to time during such quarter divided by the Market
Value per Share of one Common Share on the day immediately preceding the last
business day of such calendar quarter. 
Such dividend equivalents, which will likewise be credited with dividend
equivalents, will be deferred until the end of the deferral period for the
Deferred Units with respect to which the dividend equivalents were credited.


 


Section 11.6  Early Payment.  Notwithstanding the foregoing provisions, (i)
if, upon the Grantee’s termination of employment, the value of the Grantee’s
account is less than $500, the amount of the Grantee’s account will be
immediately paid to the Grantee in Common Shares, (ii) if a Change of Control
occurs, the amount of the Grantee’s account will immediately be paid to the
Grantee in full in Common Shares and (iii) in the event of an unforeseeable
emergency, as defined in Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), that is caused by an event beyond the control of the
Grantee and that would result in severe financial hardship to the Grantee if
acceleration was not permitted, the Committee will accelerate the payment of Common
Shares to the Grantee in the Grantee’s account, but only up to the amount
necessary to meet the emergency.


 


ARTICLE
XII  — COMPLIANCE WITH SECTION 409A OF
THE CODE


 


                To the extent applicable, it is
intended that this Agreement and the Plan comply with the provisions of Section
409A of the Code, so that the income inclusion provisions of Section 409A(a)(1)
of the Code do not apply to the Grantee. 
This Agreement and the Plan shall be administered in a manner consistent
with this intent, and any provision that would cause the Agreement or the Plan
to fail to satisfy Section 409A of the Code shall have no force and effect
unless and until amended to comply with Section 409A of the Code (which
amendment may be retroactive to the extent permitted by Section 409A of the
Code and may be made by DPL without the consent of the Grantee).  In particular, to the extent the Grantee has
a right to receive payment pursuant to Article III or IV and the event
triggering the right to payment does not constitute a permitted distribution
event under Section 409A(a)(2) of the Code, then notwithstanding anything to
the contrary in Article III, IV or VII above, issuance of the Common Shares
will be made, to the extent necessary to comply with Section 409A of the Code,
to the Grantee on the earlier of (a) the Grantee’s “separation from service”
with DPL (determined in accordance with Section 409A); provided, however,
that if the Grantee is a “specified employee” (within the meaning of Section
409A), the Grantee’s date of issuance of the 


 


 


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Common Shares
shall be the date that is six months after the date of the Grantee’s separation
of service with DPL; (b) the date the payment would otherwise occur under this
Agreement (to the extent it constitutes a permitted distribution event); or (c)
the Grantee’s death.  References to
Section 409A of the Code will also include any proposed, temporary or final
regulations, or any other guidance, promulgated with respect to such Section by
the U.S. Department of the Treasury or the Internal Revenue Service.


 


ARTICLE
XIII  — MISCELLANEOUS


 


Section 13.1  Interpretation.  The contents of this Agreement are subject in
all respects to the terms and conditions of the Plan as approved by the Board
of Directors and the shareholders of DPL, which are controlling.  The interpretation and construction by the
Board and/or the Committee of any provision of the Plan or this Agreement shall
be final and conclusive upon the Grantee, the Grantee’s estate, executor,
administrator, beneficiaries, personal representative and guardian and DPL and
its successors and assigns.  Unless
otherwise indicated, the capitalized terms used in this Agreement shall have
the same meanings as set forth in the Plan.


 


Section 13.2  Fractional Shares.  Any fractional share earned under this
Agreement will be rounded up or down to the nearest whole share.


 


Section 13.3  No Right to Employment.  The grant of the performance shares is
discretionary and will not be considered to be an employment contract or a part
of the Grantee’s terms and conditions of employment or of the Grantee’s salary
or compensation.


 


Section 13.4  Successors and Assigns.  This Agreement, and the terms and conditions
of the Plan, shall bind, and inure to the benefit of the Grantee, the Grantee’s
estate, executor, administrator, beneficiaries, personal representative and
guardian and DPL and its successors and assigns.


 


Section 13.5  Governing Law.  This Agreement shall be governed by the laws
of the State of Ohio (but not including the choice of law rules thereof).


 


Section 13.6  Amendment.  Any amendment to the Plan shall be deemed to
be an amendment to this Agreement to the extent that the amendment is
applicable hereto.  The terms and
conditions of this Agreement may not be modified, amended or waived, except by
an instrument in writing signed by a duly authorized executive officer at
DPL.  Notwithstanding the foregoing, no
amendment shall adversely affect the Grantee’s rights under this Agreement
without the Grantee’s consent.


 


ARTICLE
XIV  — NOTICES


                All notices under this Agreement
to DPL must be delivered personally or mailed to DPL at its principal office,
addressed to the attention of the Corporate Secretary.  DPL’s address may be changed at any time by
written notice of such change to the Grantee. 
All notices under this Agreement to the Grantee will be delivered
personally or 


 


 


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mailed to the
Grantee at his or her address as shown from time to time in DPL’s records.


 


IN WITNESS
WHEREOF, the parties hereto have duly executed this Long Term Incentive Plan -
Performance Shares Agreement, or caused this Long-Term Incentive Plan -
Performance Shares Agreement to be duly executed on their behalf, as of the day
and year first above written.


 


	
   

  	
  DPL
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: James V. Mahoney

  
	
   

  	
  Title: President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Grantee

  
	
   

  	
   

  



 


 


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