THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

DPL Inc. (DPL)

3/17/2006 Proxy Information

No related party transactions or special relationships reported for this company. Director relationships marked "Outside Related" at this firm will most often be former executives of the company. Additional information regarding these relationships will be added during our regular updates.

3/24/2005 Proxy Information

On March 13, 2000, Dayton Ventures, Inc. and Dayton Ventures LLC, affiliates of Kohlberg Kravis Roberts & Co. LLC (KKR), purchased a combination of trust preferred securities issued by a trust established by DPL, voting preferred shares of DPL and warrants to purchase common shares of DPL for an aggregate of $550 million. The trust preferred securities were redeemed at par in 2001 with proceeds of a new issuance of trust preferred securities and DPL Senior Notes. The 6.6 million Series B voting preferred shares had voting power not exceeding 4.9% of the total outstanding voting power of DPL’s voting securities and were purchased by Dayton Ventures LLC for an aggregate purchase price of $68 thousand. The warrants to purchase approximately 31.6 million common shares (representing approximately 19.9% of the common shares then outstanding) have a term of 12 years, an exercise price of $21 per share, and were purchased by Dayton Ventures LLC for an aggregate purchase price of $50 million. In connection with the March 13, 2000 transaction, the Company and KKR also entered into an agreement under which the company paid KKR an annual management, consulting and financial services fee of $1.0 million. The agreement also stated that the Company would provide KKR with an opportunity to provide investment banking services on such terms as the parties may agree and at such time as any such services may be required. The Company also agreed to reimburse KKR and their affiliates for all reasonable expenses incurred in connection with the services provided under this agreement, including travel expenses and expenses of its counsel. The Company and KKR terminated this agreement on January 12, 2005. During December 2004 through January 2005, KKR initiated a series of agreements to transfer all of the warrants to an unaffiliated third party. This transferee subsequently transferred approximately 25 million of the warrants to multiple unrelated third parties. In conjunction with the transactions in 2005, the Company repurchased at par all of the outstanding 6.6 million Series B voting preferred shares.

Under the Securityholders and Registration Rights Agreement among DPL, DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc., KKR had the right to designate one person for election to, and one person to attend as a non-voting observer at all meetings of, the DPL and DP&L Boards of Directors for as long as Dayton Ventures LLC and its affiliates continue to beneficially own at least 12.64 million common shares of DPL, including shares issuable upon exercise of warrants. Scott M. Stuart, a director during fiscal 2003, and George R. Roberts, a non-voting observer, were the KKR designees in 2003 pursuant to this agreement. Mr. Stuart resigned from the Board and Mr. Roberts ceased to be a non-voting observer of the Board as of April 2004. As a result of the transfer of warrants from KKR to an unaffiliated third party during December 2004 through January 2005, KKR no longer owns any warrants or common stock of the Company. Accordingly, KKR no longer has the right to appoint one member and one observer to both the Company and DP&L Boards of Directors and the Securityholders and Registration Rights Agreement was amended to delete these, and other, rights.

In 1996, the Company entered into a consulting contract pursuant to which Peter H. Forster agreed to (i) serve, in a non-employee capacity, as Chairman of the Board of Directors of the Company, DP&L and MVE, and as Chairman of the Executive Committee of the Board of Directors of the Company and (ii) provide advisory and strategic planning consulting services. The terms and conditions of such consulting contract are described in the section entitled “Consulting Contract and Employment Agreements.”

Mr. Forster resigned on May 16, 2004. In connection with Mr. Forster’s resignation, the Company reserved all rights and defenses and Mr. Forster reserved all rights and entitlements under applicable law and under any existing agreement between Mr. Forster, the Company and all of its subsidiaries. Mr. Forster filed a lawsuit against the Company, DP&L and MVE alleging claims against the Company, DP&L and MVE for breach of contract, conversion, promissory estoppel and declaratory judgment relating to his consulting agreement. That lawsuit, filed in Florida, was dismissed in November 2004 for lack of jurisdiction. The Company, DP&L and MVE have filed a lawsuit against Mr. Forster alleging that he breached his fiduciary duties and breached his consulting contract and claim that they no longer owe Mr. Forster any further benefits under his contract. (See “Certain Legal Proceedings.”)

In June 2001, the Company’s subsidiaries, MVE, of which Mr. Forster was Chairman, Miami Valley Development Company (MVDC) and Miami Valley Insurance Company, Inc. (MVIC), each entered into a management services agreement (the MSAs) with Valley Partners, Inc. (Valley) for the provision of ongoing oversight and management of each subsidiary’s financial asset holdings following a change of control of DPL or sale of the financial assets portfolio to an unaffiliated third party. Valley was a Florida corporation the sole stockholders, directors and officers of which were Mr. Forster and Ms. Muhlenkamp.

The MSAs provided for the buyer of DPL or the financial asset portfolio to pay an annual management fee to Valley calculated in the same manner as MVE Payments were calculated under the MVE Incentive Program, except based upon 5% of the net realized profit rather than the 2.75% or 2.25% percentages each for Mr. Forster and Ms. Muhlenkamp, respectively. Subsequent to the entering of the MSAs, Mr. Forster and Ms. Muhlenkamp each signed letter agreements agreeing that their MVE Payments would be paid to Valley as the annual management fee. The payments under the MSAs were to be payable irrespective of whether MVE, MVDC or MVIC or the transferee availed itself of the services, and regardless of whether Mr. Forster and Ms. Muhlenkamp personally performed the services or whether Valley engaged others to do so. Pursuant to the MSAs, certain accounting and administrative software and related hardware used to monitor the financial asset portfolio were to be transferred to Valley without additional consideration on the effective date of the MSAs. The MSAs were signed by Ms. Muhlenkamp on behalf of Valley and Mr. Koziar, MVE Secretary/Treasurer, on behalf of MVE, MVDC and MVIC.

In October 2001, the Company entered into an Administrative Services Agreement (the ASA) with Valley and the individual trustees of certain master trusts which hold the assets of various executive and director compensation plans. The ASA engaged Valley to provide administrative and record keeping functions on behalf of the master trusts upon a change of control of the Company in exchange for a 1.25% administration fee based on the market value of all assets of the master trusts. The ASA also called for Valley to provide investment advice as requested by the trustees. The 1.25% fee payable to Valley under the ASA was in addition to the annual management fee payable to Valley.

In October 2001, the Company and DP&L also entered into a Trustee Fee Agreement (the TFA) with Richard Chernesky, Richard Broock and Frederick Caspar, attorneys at Chernesky, Heyman & Kress P.L.L., a law firm that represented the Company. Upon a change of control of the Company or DP&L, Messrs. Chernesky, Broock and Caspar would become the sole trustees of the master trusts and would succeed to all of the duties of the Company’s Compensation Committee under the compensation plans funded through the master trusts in exchange for an annual fee of $500,000. This fee would not be reduced by payments made to Valley under the ASA.

The MSAs, ASA and TFA (the “Valley Partners Agreements”) were terminated by an agreement executed in January 2004, but effective as of December 15, 2003. The financial assets were not sold or transferred prior to such termination and therefore the agreements never became effective and no compensation was ever paid under them. Mr. Forster’s and Ms. Muhlenkamp’s consulting and compensation arrangements were governed by the terms of the consulting contract between the Company, DP&L and Mr. Forster and the employment agreement between the Company, DP&L and Ms. Muhlenkamp, respectively.

On February 2 and 3, 2004, Mr. Koziar sent letters to Mr. Forster and Ms. Muhlenkamp purporting to amend their consulting and employment agreements to provide change of control protections regarding their MVE payments. In addition, on February 2, 2004, Mr. Koziar sent Mr. Forster a letter purporting to amend his consulting agreement to provide additional terms and to increase his compensation. However, none of those purported amendments had been approved by the Compensation Committee. (See “Executive Compensation – Consulting Contract and Employment Agreements.”)

On April 26, 2004, the Company entered into a new Trustee Fee Agreement (New TFA) with Messrs. Chernesky, Broock and Caspar that would have become effective upon a change of control of the Company or DP&L. If the New TFA became effective, it provided that Messrs. Chernesky, Broock and Caspar would serve as the sole trustees of the master trusts in exchange for an annual fee of $250,000 during the New TFA’s term. On October 14, 2004, at the request of the Company and DP&L, Messrs. Chernesky, Broock and Caspar submitted their resignations to the Company and DP&L.

The Company has reviewed the termination of the Valley Partners Agreements, and the purported amendments and agreements sent to Mr. Forster and Ms. Muhlenkamp on February 2, 2004, and has initiated legal proceedings asserting breach of fiduciary duty by Messrs. Forster and Koziar and Ms. Muhlenkamp, and challenging the propriety and/or validity of those terminations, purported amendments and agreements. (See “Certain Legal Proceedings.”)

On February 13, 2005, MVE and MVIC entered into an agreement to dispose of the private equity fund interests in the financial asset portfolio to an unrelated third party.

CERTAIN LEGAL PROCEEDINGS

On July 9, 2004, Mr. Forster and Ms. Muhlenkamp filed a lawsuit against the Company, DP&L and MVE in the Circuit Court, Fourth Judicial Circuit, in and for Duval County, Florida. The complaint asserts that the Company, DP&L and MVE (i) wrongfully terminated Mr. Forster and Ms. Muhlenkamp by undermining their authority and responsibility to manage the companies and excluding them from discussions on corporate financial issues and strategic planning in connection with the matters raised by a company employee and (ii) breached Mr. Forster’s consulting contract and Ms. Muhlenkamp’s employment agreement by denying them compensation and benefits allegedly provided by the terms of such contract and agreement upon their termination from the Company. Mr. Forster and Ms. Muhlenkamp seek damages of an undetermined amount. On August 9, 2004, the defendants removed the case to the U.S. District Court for the Middle District of Florida, Jacksonville Division. On August 16, 2004, the defendants moved to dismiss the litigation based on the Florida federal court’s lack of jurisdiction over the Company, DP&L and MVE, all of whom are companies based in Dayton, Ohio. In the alternative, the defendants requested that the court transfer the case to the U.S. District Court for the Southern District of Ohio, which has jurisdiction in Dayton, Ohio. On September 17, 2004, Mr. Forster and Ms. Muhlenkamp opposed these motions. On November 10, 2004 the U.S. District Court for the Middle District of Florida, Jacksonville Division, dismissed the case for lack of jurisdiction.

On August 24, 2004, the Company, DP&L and MVE filed a Complaint against Mr. Forster, Ms. Muhlenkamp and Mr. Koziar in the Court of Common Pleas of Montgomery County, Ohio asserting legal claims against them relating to the termination of the Valley Partners Agreements, challenging the validity of the purported amendments to the Company’s deferred compensation plans and to the employment and consulting agreements with Messrs. Forster and Koziar and Ms. Muhlenkamp, and the propriety of the distributions from the plans to Messrs. Forster and Koziar and Ms. Muhlenkamp, and alleging that Messrs. Forster and Koziar and Ms. Muhlenkamp breached their fiduciary duties and breached their consulting and employment contracts. The Company, DP&L and MVE seek, among other things, damages in excess of $25 thousand, disgorgement of all amounts improperly withdrawn by Messrs. Forster and Koziar and Ms. Muhlenkamp from the deferred compensation plans and a court order declaring that the Company, DP&L and MVE have no further obligations under the consulting and employment contracts due to those breaches.

Defendants Forster, Koziar and Muhlenkamp filed motions to dismiss the Complaint and motions to stay discovery. The Company has filed briefs opposing those motions. In addition, pursuant to applicable statutes, regulations and agreements, the Company has been advancing certain of Defendants’ attorneys’ fees and expenses with respect to various matters other than the litigation between Defendants and the Company in Florida and Ohio, and believes that other requested advances are not required. On February 7, 2005, Forster and Muhlenkamp filed a motion in the Company’s Ohio litigation seeking to compel the Company to pay all attorneys’ fees and expenses that it has not advanced to them. The Company has filed a brief opposing that motion. All of the foregoing motions are pending.

The Company continues to evaluate all of these matters and is considering other claims against Defendants Forster, Koziar and/or Ms. Muhlenkamp that include, but are not limited to, breach of fiduciary duty or other claims relating to personal and Company investments, the calculation of benefits under the SERP and financial reporting with respect to such benefits, and, with respect to Mr. Koziar, the fulfillment of duties owed to the Company as its legal counsel. Cumulatively through December 31, 2004 the Company has accrued for accounting purposes obligations of approximately $40 million to reflect claims regarding deferred compensation, estimated MVE incentives and/or legal fees that Defendants assert are payable per contracts. The Company disputes Defendants’ entitlement to any of those sums and, as noted above, is pursuing litigation against them contesting all such claims. The Company cannot currently predict the outcome of that litigation.

On or about June 24, 2004, the SEC commenced a formal investigation into the previously disclosed matters raised by a Company employee. The Company is cooperating with the investigation.

On April 7, 2004, the Company received notice that the staff of the PUCO is conducting an investigation into the financial condition of DP&L as a result of the previously disclosed matters raised by a Company employee. On May 27, 2004, the PUCO ordered DP&L to file a plan of utility financial integrity that outlines the actions the Company has taken or will take to insulate DP&L utility operations and customers from its unregulated activities. DP&L timely filed its plan of utility financial integrity with the PUCO on February 4, 2005.

On May 20, 2004, the staff of the SEC notified the Company that it was conducting an inquiry covering the exempt status of the Company under the Public Utility Holding Company Act of 1935. The staff of the SEC has requested the Company provide certain documents and information on a voluntary basis. The Company is cooperating with the inquiry. On October 8, 2004, DPL received a notice from the SEC that a question exists as to whether such exemption from the Public Utility Holding Company Act may be detrimental to the public interest or the interests of investors or consumers. Under applicable rules, DPL would lose its exemption 30 days following this notice, be required to register as a holding company under the Public Utility Holding Company Act and become subject to additional regulation thereunder. However, on November 5, 2004, DPL delayed the requirement to become registered by filing a good faith application seeking an order of exemption from the Securities and Exchange Commission. DPL will remain exempt pending a decision from the SEC on that application. DPL cannot predict what action the SEC may take in connection with its application or whether it will be able to remain an exempt holding company.

On May 28, 2004, the U.S. Attorney’s Office for the Southern District of Ohio, assisted by the Federal Bureau of Investigation, notified the Company that it has initiated an inquiry involving the subject matters covered by the Company’s internal investigation in connection with the previously disclosed issues raised by a Company employee. The Company is cooperating with this investigation.

Commencing on or about June 24, 2004, the Internal Revenue Service (IRS) issued a series of data requests to the Company regarding the previously disclosed matters raised by a Company employee. The staff of the IRS has requested that the Company provide certain documents including, but not limited to, matters concerning executive/director deferred compensation plans, management stock incentive plans and MVE financial statements. The Company is cooperating with these requests.

On March 3, 2005, DP&L received a notice that the FERC had instituted an operational audit of DP&L regarding its compliance with its Code of Conduct within the transmission and generation areas. The FERC has provided DP&L with a data request and DP&L is cooperating in the furnishing of requested information. DP&L cannot predict the outcome of this operational audit.

12/7/2004 Proxy Information

On March 13, 2000, Dayton Ventures, Inc. and Dayton Ventures LLC, affiliates of Kohlberg Kravis Roberts & Co. LLC (KKR), purchased a combination of trust preferred securities issued by a trust established by DPL, voting preferred shares of DPL and warrants to purchase common shares of DPL for an aggregate of $550 million. The trust preferred securities were redeemed at par in 2001 with proceeds of a new issuance of trust preferred securities and DPL Senior Notes. The 6.6 million Series B voting preferred shares have voting power not exceeding 4.9% of the total outstanding voting power of DPL’s voting securities and were purchased by Dayton Ventures LLC for an aggregate purchase price of $68 thousand. The warrants to purchase 31.6 million common shares (representing approximately 19.9% of the common shares then outstanding) have a term of 12 years, an exercise price of $21 per share, and were purchased by Dayton Ventures LLC for an aggregate purchase price of $50 million. DPL has agreed to pay KKR an annual management, consulting and financial services fee of $1.0 million. The agreement also states that the Company will provide KKR with an opportunity to provide investment banking services on such terms as the parties may agree and at such time as any such services may be required. The Company has agreed to reimburse KKR and their affiliates all reasonable expenses incurred in connection with the services provided under this agreement, including travel expenses and expenses of its counsel. At December 31, 2003, DPL had paid KKR the annual $1.0 million management, consulting and financial services fee, paid $2.0 million in fees relating to managing KKR-sponsored investment funds, and subscribed to invest up to $190 million over time in KKR-sponsored investment funds.

The Securityholders and Registration Rights Agreement among DPL, DPL Capital Trust I, Dayton Ventures LLC and Dayton Ventures, Inc. gives affiliates of KKR the right to designate one person for election to, and one person to attend as a non-voting observer at all meetings of, the DPL and DP&L Boards of Directors for as long as Dayton Ventures LLC and its affiliates continue to beneficially own at least 12.64 million common shares of DPL, including shares issuable upon exercise of warrants. Scott M. Stuart, a director during fiscal 2003, and George R. Roberts, a non-voting observer, were the KKR designees in 2003 pursuant to this agreement. Mr. Stuart resigned from the Board and Mr. Roberts ceased to be a non-voting observer of the Board as of April 2004.

In 1996, the Company entered into a consulting contract pursuant to which Peter H. Forster agreed to (i) serve, in a non-employee capacity, as Chairman of the Board of Directors of the Company, DP&L and MVE, and as Chairman of the Executive Committee of the Board of Directors of the Company and (ii) provide advisory and strategic planning consulting services. The terms and conditions of such consulting contract are described in the section entitled “Consulting Contract and Employment Agreements.”

Mr. Forster resigned on May 16, 2004. In connection with Mr. Forster’s resignation, the Company reserved all rights and defenses and Mr. Forster reserved all rights and entitlements under applicable law and under any existing agreement between Mr. Forster, the Company and all of its subsidiaries. Mr. Forster filed a lawsuit against the Company, DP&L and MVE alleging claims against the Company, DP&L and MVE for breach of contract, conversion, promissory estoppel and declaratory judgment relating to his consulting agreement. The Company, DP&L and MVE have filed a lawsuit against Mr. Forster alleging that he breached his fiduciary duties and breached his consulting contract and claim that they no longer owe Mr. Forster any further benefits under his contract. (See “Certain Legal Proceedings.”) In those proceedings, Mr. Forster claimed that he is entitled to rights and benefits under purported agreements with the Company. The Company has confirmed that only certain of these purported agreements were properly approved.

In June 2001, the Company’s subsidiaries, MVE, of which Mr. Forster was Chairman, Miami Valley Development Company (MVDC) and Miami Valley Insurance Company, Inc. (MVIC), each entered into a management services agreement (the MSAs) with Valley Partners, Inc. (Valley) for the provision of ongoing oversight and management of each subsidiary’s financial asset holdings following a change of control of DPL or sale of the financial assets portfolio to an unaffiliated third party. Valley was a Florida corporation the sole stockholders, directors and officers of which were Mr. Forster and Ms. Muhlenkamp.

The MSAs provided for the buyer of DPL or the financial asset portfolio to pay an annual management fee to Valley calculated in the same manner as MVE Payments were calculated under the MVE Incentive Program, except based upon 5% of the net realized profit rather than the 2.75% or 2.25% percentages each for Mr. Forster and Ms. Muhlenkamp, respectively. Subsequent to the entering of the MSAs, Mr. Forster and Ms. Muhlenkamp each signed letter agreements agreeing that their MVE Payments would be paid to Valley as the annual management fee. The payments under the MSAs were to be payable irrespective of whether MVE, MVDC or MVIC or the transferee availed itself of the services, and regardless of whether Mr. Forster and Ms. Muhlenkamp personally performed the services or whether Valley engaged others to do so. Pursuant to the MSAs, certain accounting and administrative software and related hardware used to monitor the financial asset portfolio were to be transferred to Valley without additional consideration on the effective date of the MSAs. The MSAs were signed by Ms. Muhlenkamp on behalf of Valley and Mr. Koziar, MVE Secretary/Treasurer, on behalf of MVE, MVDC and MVIC.

In October 2001, the Company entered into an Administrative Services Agreement (the ASA) with Valley and the individual trustees of certain master trusts which hold the assets of various executive and director compensation plans. The ASA engaged Valley to provide administrative and recordkeeping functions on behalf of the master trusts upon a change of control of the Company in exchange for a 1.25% administration fee based on the market value of all assets of the master trusts. The ASA also called for Valley to provide investment advice as requested by the trustees. The 1.25% fee payable to Valley under the ASA was in addition to the annual management fee payable to Valley.

In October 2001, the Company and DP&L also entered into a Trustee Fee Agreement (the TFA) with Richard Chernesky, Richard Broock and Frederick Caspar, attorneys at Chernesky, Heyman & Kress P.L.L., a law firm that represented the Company. Upon a change of control of the Company or DP&L, Messrs. Chernesky, Broock and Caspar would become the sole trustees of the master trusts and would succeed to all of the duties of the Company’s Compensation Committee under the compensation plans funded through the master trusts in exchange for an annual fee of $500,000. This fee would not be reduced by payments made to Valley under the ASA.

The MSAs, ASA and TFA (the “Valley Partners Agreements”) were terminated by an agreement executed in January 2004, but effective as of December 15, 2003. The financial assets have not been sold or transferred and therefore the agreements never became effective and no compensation was ever paid under them. Mr. Forster’s and Ms. Muhlenkamp’s consulting and compensation arrangements were governed by the terms of the consulting contract between the Company, DP&L and Mr. Forster and the employment agreement between the Company, DP&L and Ms. Muhlenkamp, respectively.

On February 2 and 3, 2004, Mr. Koziar sent letters to Mr. Forster and Ms. Muhlenkamp purporting to amend their consulting and employment agreements to provide change of control protections regarding their MVE payments. In addition, on February 2, 2004, Mr. Koziar sent Mr. Forster a letter purporting to amend his consulting agreement to provide additional terms and to increase his compensation. However, none of those amendments had been approved by the Compensation Committee.

On April 26, 2004, the Company entered into a new Trustee Fee Agreement (New TFA) with Messrs. Chernesky, Broock and Caspar that will become effective upon a change of control of the Company or DP&L. If the New TFA becomes effective, then it provides that Messrs. Chernesky, Broock and Caspar will serve as the sole trustees of the master trusts in exchange for an annual fee of $250,000 during the New TFA’s term. On October 14, 2004, at the request of the Company and DP&L, Messrs. Chernesky, Broock and Caspar submitted their resignations to the Company and DP&L.

The Company has reviewed the termination of the Valley Partners Agreements, and the amendments and agreements sent to Mr. Forster and Ms. Muhlenkamp on February 2, 2004, and has initiated legal proceedings asserting breach of fiduciary duty by Messrs. Forster and Koziar and Ms. Muhlenkamp, and challenging the propriety and/or validity of those terminations, amendments and agreements.

3/15/2003 Proxy Information

No related party transactions or special relationships reported for this company. Director relationships marked "Outside Related" at this firm will most often be former executives of the company. Additional information regarding these relationships will be added during our regular updates.